Exhibit 10.9
EXECUTIVE EMPLOYMENT
AGREEMENT
This EXECUTIVE
EMPLOYMENT AGREEMENT (the “Agreement”), made as of
January 1, 2007 (the “Effective Date”), between Guess?,
Inc., a Delaware corporation (the “Company”), and Paul
Marciano (the “Executive”).
W I T N
E S S E T H :
WHEREAS , the Executive is a co-founder
of the Company and is acting as its Co-Chairman and Co-Chief
Executive Officer.
WHEREAS, the
Executive has heretofore been employed by the Company pursuant to
an employment agreement made effective as of August 13, 1996 (the
“Prior Agreement”).
WHEREAS, the
Company recognizes that the Executive’s talents and abilities
are unique and have been integral to the success of the
Company.
WHEREAS, the
Executive has agreed to focus his time and energy primarily as the
Company’s sole Chief Executive Officer, and is willing to
commit himself to serve the Company, on the terms and conditions
herein provided.
WHEREAS, the
Company wishes to retain the services of the Executive and
anticipates that the Executive’s contribution to the growth
and success of the Company will continue to be
substantial.
WHEREAS, the
Company and the Executive wish to amend and restate the Prior
Agreement as evidenced by this Agreement effective as of the date
hereof in order to provide for the modification of certain
provisions of the Prior Agreement.
NOW THEREFORE , in
consideration of the foregoing, of the mutual promises contained
herein and of other good and valuable consideration, the receipt
and sufficiency of which are hereby acknowledged, the parties
hereto hereby agree as follows:
1.
POSITION/DUTIES .
(a)
During the Employment Term (as defined in Section 2 below), the
Executive shall serve as the Company’s Chief Executive
Officer and as Vice Chairman of the Board of Directors.
In this capacity the Executive shall have such
duties, authorities and responsibilities commensurate with the
duties, authorities and responsibilities of persons in similar
capacities in similarly sized companies and such other duties and
responsibilities as the Board of Directors of the Company (the
“Board”) shall designate that are consistent with the
Executive’s position as Chief Executive Officer. The
Executive shall report exclusively to the Board. The
Executive shall have authority as is appropriate to carry out his
duties and responsibilities as set forth in this
Agreement.
(b)
During the Employment Term (as defined below), the Executive shall
use the Executive’s best reasonable efforts to perform
faithfully and efficiently the duties and responsibilities assigned
to the Executive hereunder and shall devote substantially all of
the
Executive’s
business time (excluding periods of vacation and other approved
leaves of absence) as is reasonably necessary to such performance
of the Executive’s duties with the Company. Subject to
Board approval, Executive may serve on the board of directors or
advisory boards of other for profit companies provided that such
service does not create a potential business conflict or the
appearance thereof. Nothing in this Agreement shall prevent
Executive from managing his family’s personal investments so
long as such activities do not materially interfere with the
performance of the Executive’s duties hereunder or create a
potential business conflict or the appearance thereof.
(c)
During the Employment Term, the Board shall nominate the Executive
for re-election as a member of the Board at the expiration of the
Executive’s then-current term.
(d)
The Company shall not relocate the Executive’s principal
place of business outside of the Los Angeles metropolitan area
without the Executive’s written consent.
(e)
The Executive shall be provided with appropriate office and
secretarial facilities in each of the Company’s principal
executive offices and any other location that the Executive
reasonably deems necessary to have an office and support services
in order for the Executive to perform his duties to the
Company.
2.
EMPLOYMENT TERM . The Executive’s term of
employment under this Agreement (such term of employment, as it may
be extended or terminated, is herein referred to as the
“Employment Term”) shall be for a term commencing on
the Effective Date and, unless terminated earlier as provided in
Section 7 hereof, ending on the last day of the fifth whole Fiscal
Year of the Company commencing on or after the Effective Date (the
“Original Employment Term”), provided that the
Employment Term shall be automatically extended, subject to earlier
termination as provided in Section 7 hereof, for successive
additional one (1) Fiscal Year periods (the “Additional
Terms”), unless, on or before 90 days prior to the expiration
of the Original Employment Term or of any Additional Term, the
Company or the Executive has notified the other in writing that the
Employment Term shall terminate at the end of the then-current
term.
3.
BASE SALARY . The Company agrees to pay the Executive
a base salary (the “Base Salary”) at an annual rate of
not less than One Million Dollars ($1,000,000), payable in
accordance with the regular payroll practices of the Company, but
not less frequently than monthly. The Executive’s Base
Salary shall be subject to annual review by the Board (or a
committee thereof) after 2007 and may be increased, but not
decreased, from time to time by the Board. No increase to
Base Salary shall be used to offset or otherwise reduce any
obligations of the Company to the Executive hereunder or
otherwise. The base salary as determined herein from time to
time shall constitute “Base Salary” for purposes of
this Agreement.
4.
ANNUAL INCENTIVE BONUS AND OTHER BONUSES . During the
Employment Term, the Executive shall be eligible to participate in
the Company’s annual bonus and other incentive compensation
plans and programs for the Company’s senior executives at a
level commensurate with the Executive’s position. For
each whole fiscal year (“Fiscal Year”) that begins on
or after January 1, 2007 and ends not later than the expiration of
the Employment Term, the Executive shall be eligible to earn an
annual cash bonus (the “Bonus”) under the
Company’s Annual Incentive Bonus Plan, as amended from time
to time (the “Bonus Plan”),
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and, if appropriate,
the Company’s 2004 Equity Incentive Plan, as amended from
time to time (the “Equity Plan”), based upon the
achievement by the Company and its subsidiaries of performance
goals under the Bonus Plan and under the Equity Plan for each such
Fiscal Year established by the Compensation Committee of the Board
of Directors (the “Compensation Committee”). The
Compensation Committee shall establish objective criteria to be
used to determine the extent to which such performance goals have
been satisfied. The range of the Bonus opportunity for each
Fiscal Year will be as determined by the Compensation Committee
based upon the extent to which such performance goals are achieved,
provided that the annual target Bonus opportunity shall be at least
200% of the Executive’s Base Salary (for each such year, the
“Target Bonus”), the threshold Bonus for a Fiscal Year
shall be one-half the Target Bonus for such year and the maximum
Bonus payable pursuant to this Section 4 for any Fiscal Year shall
not exceed the amount that is 300% of the Executive’s Base
Salary for such year. The Bonus, if any, payable to the
Executive in respect of any Fiscal Year will be paid at the same
time that bonuses are paid to other executives of the Company, but
in any event within seventy-five days after the conclusion of such
Fiscal Year. After the expiration of the Bonus Plan and the
Equity Plan, Executive’s right to receive future Bonus
opportunities under such plan is subject to approval by the
stockholders of the Company of a similar successor plan under which
such opportunity may be granted. In addition to the Bonus,
the Executive shall retain the special bonus opportunity (the
“Licensing Bonus”) awarded by the Compensation
Committee to the Executive on September 27, 2005, as modified by an
action by written consent of the Compensation Committee dated as of
November 1, 2005, with respect to the performance of the
Company’s licensing segment. The Compensation Committee
may, in its sole discretion, award additional bonuses to
Executive.
5.
EQUITY BASED INCENTIVE AWARDS .
(a)
EMPLOYMENT INDUCEMENT AWARD. The Company shall grant the
Executive under the Equity Plan as of January 1, 2007 a Restricted
Stock Award (“Restricted Stock”) equal to 500,000
shares of the Company’s common stock subject to the following
terms and conditions:
(i)
If in any whole Fiscal Year commencing on or after January 1, 2007
and during the Employment Term, the Company shall record earnings
per share (“Earnings per Share”) growth of greater than
the Applicable Annual Target as compared to the immediately
preceding Fiscal Year, then 20% of the Restricted Stock shall
become vested as of the first business day following the issuance
of the Company’s financial statement for such year, provided
the Executive is then employed by the Company. If the
Earnings per Share growth requirement is not met for any such year,
all of the shares of the Restricted Stock eligible for vesting for
that year shall vest on the first business day following the
issuance of the Company’s financial statement for any
subsequent Fiscal Year during the Original Employment Term if the
cumulative compound average Earnings per Share growth after the
2006 Fiscal Year through such subsequent Fiscal Year is more than
the Applicable Cumulative Target for such subsequent Fiscal
Year. The “Applicable Annual Target” for each of
the first, second and third whole Fiscal Years that commences on or
after January 1, 2007 is a growth in Earnings per Share of 15% or
more as compared to the immediately preceding Fiscal Year.
The “Applicable Cumulative Target” for each of the
first, second and third whole Fiscal Years that
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commences on or after
January 1, 2007 is a 15% rate of cumulative compound average
Earnings per Share growth. The “Applicable Annual
Target” and the “Applicable Cumulative Target”
for each of the fourth and fifth whole Fiscal Years that commences
on or after January 1, 2007 will be a rate of Earnings per Share
growth and cumulative compound average Earnings per Share growth,
respectively, determined by the Compensation Committee of the Board
in its sole discretion not later than the end of the first quarter
of such Fiscal Year.
(ii)
For purposes of this Agreement, Earnings per Share shall be equal
to the basic earnings per share calculated in accordance with
accounting principles generally accepted in the United States and
as reported in the Company’s financial statements as filed
with the Securities and Exchange Commission, except that certain
adjustments may be made for certain non-recurring or unusual
non-cash items recognized in accordance with accounting principles
generally accepted in the United States including, but not limited
to, any write-offs of unamortized deferred financing costs and any
asset impairment write-downs, which the Committee determines in its
sole discretion to exclude for purposes of this
Agreement.
(iii)
The Executive shall have the right to vote the shares of the
Restricted Stock, and shall have dividend rights as to such shares,
before any forfeiture of the shares of the Restricted Stock and
while such shares are restricted. The number of shares
credited to the Executive shall be subject to adjustment in
accordance with the provisions of the Equity Plan (for example, in
connection with the payment of a stock dividend by the
Company).
(iv)
The shares of the Restricted Stock not yet vested or forfeited
shall become 100% vested in the event that the Executive dies or
becomes Disabled (within the meaning of Section 7(a)) or there is a
Change in Control, in each case while employed by the Company or an
affiliate during the Employment Term. For this purpose, the
term “Change in Control” is used as defined in the
Equity Plan except that in no event shall a “Change in
Control” be triggered pursuant to clause (A) of such term as
so defined unless the Acquiring Person becomes the Beneficial Owner
of twenty percent (20%) or more of the then outstanding shares of
Common Stock or the Combined Voting Power of the Company (except
pursuant to an offer for all outstanding shares of Common Stock at
a price and upon such terms and conditions as a majority of the
Continuing Directors determine to be in the best interests of the
Company and its shareholders (other than an Acquiring Person on
whose behalf the offer is being made)) in one or more bona fide
transactions and such level of ownership of such Common Stock or
Combined Voting Power, as applicable, exceeds the aggregate level
of ownership of the Marcianos of such Common Stock or Combined
Voting Power, respectively. For purposes of the preceding
sentence, “Marcianos” means Maurice Marciano, Paul
Marciano, and any trust established in whole or in part for the
benefit of one or more of them or their family members, or any
other entity controlled by one or more of them, and any other
capitalized term used in such sentence is used as defined in the
Equity Plan if not otherwise defined in this Agreement. If
the Executive terminates his employment with the Company for
“Good Reason” (as defined in Section 7(e) of this
Agreement), or is terminated by the Company without
“Cause” (as defined in Section 7(c) of this
4
Agreement) or for
Disability, the shares of the Restricted Stock not yet vested or
forfeited shall become 100% vested.
(v)
In all events other than those previously addressed in Section
5(a)(iv), if the Executive ceases to be an employee of the Company
or an affiliate, the Executive shall be vested only as to that
percentage of shares of the Restricted Stock which are vested at
the time of the termination of his employment and the Executive
shall forfeit the right to the shares of the Restricted Stock which
are not yet vested on the termination date. Further, any
Restricted Stock which is unvested at the conclusion of the
Original Employment Term shall be forfeited and terminate.
Unvested shares of the Restricted Stock that are forfeited shall be
immediately transferred to the Company without any payment by the
Company, and the Company shall have the full right to cancel any
evidence of the Executive’s ownership of such forfeited
shares.
(vi)
The Restricted Stock Award shall be granted pursuant to and, to the
extent not contrary to the terms of this Agreement, shall be
subject to all of the terms and conditions imposed upon such awards
granted under the Equity Plan.
(b)
PERFORMANCE SHARE AWARDS . The Company shall grant the
Executive under the Equity Plan at the completion of each whole
Fiscal Year commencing on and after January 1, 2007 and during the
Employment Term shares of the Company’s common stock
(“Performance Shares”) based upon the achievement by
the Company and its subsidiaries of performance goals under the
Equity Plan for each such Fiscal Year established by the
Compensation Committee. The Compensation Committee shall
establish objective criteria to be used to determine the extent to
which such performance goals have been satisfied. Performance
Shares will be granted for each whole Fiscal Year during the
Employment Term at “target” and “stretch”
levels of 55% (i.e., $550,000 for 2007) and 82.5% (i.e., $825,000
for 2007) of the Executive’s Base Salary for such Fiscal
Year. Performance Shares granted in any particular Fiscal
Year will be subject to the standard vesting schedule established
by the Compensation Committee for Performance Share grants in that
year (the current vesting schedule is a 4-year vesting
schedule). After the expiration of the Equity Plan,
Executive’s right to receive future grants of Performance
Shares is subject to approval by the stockholders of the Company of
a similar successor plan under which such awards may be
granted.
(c)
STOCK OPTION AWARDS . The Company shall grant the
Executive under the Equity Plan at the completion of each whole
Fiscal Year commencing on or after January 1, 2007 and during the
Employment Term stock options to purchase the Company’s
common stock at an exercise price of not less than the fair market
value of such stock on the grant date (“Stock Options”)
based upon the achievement by the Company and its subsidiaries of
performance goals under the Equity Plan for each such Fiscal Year
established by the Compensation Committee. The Compensation
Committee shall establish objective criteria to be used to
determine the extent to which such performance goals have been
satisfied. Stock Options for each whole Fiscal Year during
the Employment Term will be granted at a grant-date Black-Scholes
value of 55% of the Executive’s Base Salary for such Fiscal
Year (i.e., $550,000 for 2007). Stock Options granted in any
particular Fiscal Year will be subject to the standard vesting
schedule established by the Compensation Committee for Stock Option
grants in that year (the current vesting schedule is a 4-year
vesting schedule). After the expiration of the
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Equity Plan,
Executive’s right to receive future grants of Stock Options
is subject to approval by the stockholders of the Company of a
similar successor plan under which such awards may be
granted.
(d)
DISCRETIONARY GRANTS . In addition to the Employment
Inducement, Performance Share and Stock Option Awards under Section
5(a), (b) and (c) above, at the sole discretion of the Board or the
Committee, the Executive shall be eligible to participate
throughout the Employment Term in such long-term incentive plans
and programs as may be in effect from time to time in accordance
with the Company’s compensation practices and the terms and
provisions of any such plans or programs.
6.
EMPLOYEE BENEFITS .
(a)
BENEFIT PLANS . The Executive shall be entitled to
participate in all employee benefit plans of the Company including,
but not limited to, equity, pension, thrift, Section 401(k), profit
sharing, medical coverage, education, or other retirement
(including without limitation supplemental executive retirement
plans) or welfare benefits that the Company has adopted or may
adopt, maintain or contribute to for the benefit of its senior
executives at a level commensurate with the Executive’s
positions subject to satisfying the applicable eligibility
requirements. The Executive shall at all times during the
Employment Term be entitled to participate in the Guess?, Inc.
Supplemental Executive Retirement Plan, as in effect on
January 1, 2006, and any deferred compensation plan which may
be maintained by the Company from time to time.
(b)
VACATION . The Executive shall be entitled to accrue
annual paid vacation in accordance with the Company’s policy
applicable to senior executives, but in no event less than twenty
business days per calendar year (as prorated for partial years),
which vacation may be taken at such times as the Executive elects
with due regard to the needs of the Company. Executive shall
not be permitted to accrue more than a total of twenty five (25)
vacation days at any time. Once Executive reaches the maximum
accrual, Executive shall not accrue any additional vacation days
until a portion of Executive’s accrued vacation time is
used.
(c)
AUTOMOBILE . The Company shall continue to provide the
Executive with an automobile during the Employment Term in a manner
consistent with its past practice.
(d)
PERQUISITES . The Company shall provide to the
Executive, at the Company’s cost, all perquisites which other
senior executives of the Company are generally entitled to receive
in accordance with Company policy as set by the Board from time to
time.
(e)
LIFETIME RETIREE MEDICAL BENEFIT . The Company
shall provide the Executive and his eligible family members with
Post-Retirement Health Benefits at its expense commencing upon
expiration of the Employment Term for any reason other than a
termination for Cause, in which case the Company shall have no
obligation to provide Post-Retirement Health Benefits. The
term “Post-Retirement Health Benefits” means the
following:
(i)
health benefits (including medical, prescription, dental and vision
coverage, if and to the extent applicable) for the remainder of the
Executive’s life under the plans provided to the
Company’s executive officers and their eligible
family
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members, as in effect
from time to time; provided that the Post-Retirement Health
Benefits may be made secondary to any other benefits to which the
Executive may be entitled under another employer-provided plan or a
governmental plan such as Medicare; or
(ii)
if the Company is unable, at any point, to provide such coverage
under any such plans, the Company will pay the Executive a lump-sum
cash payment that will equal the present value of the cost of such
coverage based on the actuarial equivalent assumptions set forth in
the Guess?, Inc. Supplemental Executive Retirement Plan and a
reasonable forecast of increases in the cost of such coverage for
that portion of the period following the expiration of the
Employment Term for which such coverage could not be provided (in
either case, such benefits are referred to as the
“Post-Retirement Health Benefits”).
(f)
LIFE INSURANCE BENEFIT . The Company will purchase,
and will pay the premiums for, life insurance coverage on the
Executive’s life with the Executive (or his assignee) as the
owner of the policy and with the right to designate the beneficiary
of the death benefit. The premiums paid on the policy shall
be imputed as income to the Executive. Such insurance
coverage shall be structured to comply with the requirements of the
Sarbanes-Oxley Act and similar legal requirements. The
Executive’s rights pursuant to this Section 6(f) shall be
fully vested and non-forfeitable at all times. The Company
shall be obligated in all events to pay all scheduled premium
payments unless the Executive dies prior to the end of the last
scheduled premium payment. The Executive’s rights to
the policy and any premium payments by the Company shall not be
subject to attachment, garnishment, alienation or other similar
action by any person to the maximum extent permitted by law.
The Compensation Committee and the Executive will negotiate the
other terms and conditions of such insurance coverage in good
faith.
(g)
BUSINESS AND ENTERTAINMENT EXPENSES . Upon
presentation of appropriate documentation, the Executive shall be
reimbursed in accordance with the Company’s expense
reimbursement policy for all reasonable and necessary business and
entertainment expenses incurred in connection with the performance
of the Executive’s duties hereunder.
(h)
CHANGE IN CONTROL . In the event there is a
“Change in Control” (as such term is defined for
purposes of Section 5(a)(iv)), the Company shall establish a
“rabbi trust” for the benefit of the Executive and fund
it with cash or cash equivalents sufficient to fully pay when due
and payable all payments that potentially would be required to be
made under Section 8(d) hereof if the Executive were to be
terminated without cause.
7.
TERMINATION . The Executive’s employment and the
Employment Term shall terminate on the first of the following to
occur:
(a)
DISABILITY . Upon written notice by the Company to the
Executive of termination due to Disability, while the Executive
remains Disabled. For purposes of this Agreement,
“Disabled” and “Disability” shall (i) have
the meaning defined under the Company’s then-current
long-term disability insurance plan, policy, program or contract as
entitles the Executive to payment of disability benefits
thereunder, or (ii) if there shall be no such plan,
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policy, program or
contract, mean permanent and total disability as defined in Section
22(e)(3) of the Internal Revenue Code of 1986, as amended (the
“Code”).
(b)
DEATH . Automatically on the date of death of the
Executive.
(c)
CAUSE . Immediately upon written notice by the Company
to the Executive of a termination for Cause.
“Cause” shall mean (i) Executive’s conviction or
plea of nolo contendere to a felony or any crime involving moral
turpitude; (ii) a willful act of theft, embezzlement or
misappropriation from the Company; or (iii) a determination by the
Board that Executive has willfully and continuously failed to
perform substantially the Executive’s duties (other than any
such failure resulting from the Executive’s Disability or
incapacity due to bodily injury or physical or mental illness),
after (A) a written demand for substantial performance is delivered
to the Executive by the Board which specifically identifies the
manner in which the Board believes that the Executive has not
substantially performed the Executive’s duties and provides
the Executive with the opportunity to correct such failure if, and
only if, such failure is capable of cure; and (B) the
Executive’s failure to correct such failure which is capable
of cure within 30 days of receipt of the demand for
performance. For the avoidance of doubt, the parties
expressly agree that only Cause pursuant to Section 7(c)(iii) shall
be deemed capable of cure. Notwithstanding the foregoing,
“Cause” shall not include any act or omission that the
Executive believes in good faith to have been in or not opposed to
the interest of the Company (without intent of Executive to gain
therefrom, directly or indirectly, a profit to which he was not
legally entitled). The Company may only terminate the
Executive’s employment for Cause if (A) a determination that
Cause exists is made and approved by three fourths of the
independent directors of the Company’s Board, (B) for a
termination for Cause under Section 7(c)(iii), the Executive is
given at least five (5) days’ written notice of the Board
meeting called to make such determination, and (C) for a
termination for Cause under Section 7(c)(iii), the Executive and
his legal counsel are given the opportunity to address such
meeting. In the event
