Exhibit 10.1

 

SECOND AMENDMENT TO LOAN AGREEMENT

 

THIS SECOND AMENDMENT TO LOAN AGREEMENT (this “Amendment”) is made and entered
into as of February 20, 2006 (the “Amendment Closing Date”), to be effective
with respect to certain provisions herein as of September 22, 2005 (the
“Amendment Effective Date”), by and among WELLS FARGO BANK, NATIONAL
ASSOCIATION, a national banking association (the “Bank”), FOSSIL PARTNERS, L.P.
(the “Borrower”), FOSSIL, INC. (the “Company”), FOSSIL INTERMEDIATE, INC.
(“Fossil Intermediate”), FOSSIL TRUST (“Fossil Trust”), FOSSIL STORES I, INC.
(“Fossil I”), ARROW MERCHANDISING, INC. (“Arrow Merchandising”) and FOSSIL
HOLDINGS, LLC (“Fossil Holdings”) (the Company, Fossil Intermediate, Fossil
Trust, Fossil I, Arrow Merchandising and Fossil Holdings are sometimes referred
to herein individually as a “Guarantor” and collectively as the “Guarantors”).

 

RECITALS

 

WHEREAS, the Bank, the Borrower and the Guarantors are parties to that certain
Loan Agreement, dated as of September 23, 2004 (as amended, modified or
supplemented, from time to time, the “Agreement”); and

 

WHEREAS, the parties to the Agreement entered into that certain First Amendment
to Loan Agreement as of September 22, 2005 whereby, among other things, current
liabilities for the purposes of the Quick Ratio in Section 14(a) of the
Agreement were expanded to include all indebtedness of the Borrower under all
Documentary or Stand-by Letters of Credit; and

 

WHEREAS, the parties hereto acknowledge and agree that in conjunction with
increasing the current liabilities included in the calculation of the Quick
Ratio, the Quick Ratio should have also been amended to 0.8 to 1.0 from 1.0 to
1.0, but was inadvertently not so amended; and

 

WHEREAS, the Bank, the Borrower and the Guarantors desire to amend the Agreement
and the other Loan Documents as herein set forth to correct the Quick Ratio
effective as of the date of the First Amendment to Loan Agreement.

 

NOW, THEREFORE, in consideration of the premises herein contained and other good
and valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties, intending to be legally bound, agree as follows:

 

ARTICLE I

Definitions

 

1.01                           Capitalized terms used in this Amendment are
defined in the Agreement, as amended hereby, unless otherwise stated.

 

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ARTICLE II

Amendments

 

2.01                           Amendment to Section 14(a). Effective as of the
Amendment Effective Date, Section 14(a) of the Agreement is hereby deleted in
its entirety and replaced with the following:

 

“(A)                            QUICK RATIO. MAINTAIN, AT ALL TIMES, A RATIO OF
(I) (A) CASH, PLUS (B) CASH EQUIVALENTS, PLUS (C) ACCOUNT RECEIVABLES TO
(II) CURRENT LIABILITIES OF NOT LESS THAN 0.80 TO 1.00. CASH, CASH EQUIVALENTS,
ACCOUNTS RECEIVABLE AND CURRENT LIABILITIES ARE DEFINED ACCORDING TO GENERALLY
ACCEPTED ACCOUNTING PRINCIPLES, WITH THE EXCEPTION THAT CURRENT LIABILITIES WILL
INCLUDE ALL INDEBTEDNESS OF THE BORROWER UNDER THE REVOLVING NOTE AND ALL
DOCUMENTARY OR STAND-BY LETTERS OF CREDIT.”

 

ARTICLE III

Conditions Precedent

 

3.01                           Conditions to Effectiveness. The effectiveness of
this Amendment is subject to the satisfaction of the following conditions
precedent, unless specifically waived in writing by the Bank:

 

(a)                                  The Bank shall have received this
Amendment, duly executed by the Borrower and each Guarantor, in form and
substance satisfactory to the Bank and its counsel;

 

(b)                                 There shall have been no material adverse
change in the business or financial condition of the Borrower or any Guarantor;

 

(c)                                  There shall be no material adverse
litigation, either pending or threatened, against the Borrower or any Guarantor
that could reasonably be expected to have a material adverse effect on the
Borrower or such Guarantor;

 

(d)                                 The representations and warranties contained
herein and in the Agreement and the other Loan Documents, as each is amended
hereby, shall be true and correct as of the date hereof, as if made on the date
hereof;

 

(e)                                  No default or Event of Default under the
Agreement, as amended hereby, shall have occurred and be continuing, unless such
default or Event of Default has been specifically waived in writing by the Bank;

 

(f)                                    All requisite corporate, partnership or
trust proceedings, as appropriate, shall have been taken by the Borrower and
each Guarantor to authorize the execution, delivery and performance of this
Amendment, and such proceedings and other legal matters incident thereto shall
be satisfactory to the Bank and its legal counsel; and

 

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(g)                                 The Bank shall have received from the
Company or the Borrower, as appropriate, all fees and expenses (if any) required
to be paid to the Bank pursuant to the Agreement, as amended hereby.

 

ARTICLE IV

No Waiver

 

4.01                           Nothing contained herein shall be construed as a
waiver by the Bank of any covenant or provision of the Agreement, the other Loan
Documents, this Amendment, or of any other contract or instrument between the
Borrower and/or the Guarantors and the Bank, and the failure of the Bank at any
time or times hereafter to require strict performance by the Borrower and/or any
Guarantor of any provision thereof shall not waive, affect or diminish any right
of the Bank to thereafter demand strict compliance therewith. The Bank hereby
reserves all rights granted under the Agreement, the other Loan Documents, this
Amendment and any other contract or instrument between the Borrower and/or the
Guarantors and the Bank.

 

ARTICLE V

Ratifications, Representations and Warranties, Covenants

 

5.01                           General Ratifications. The terms and provisions
set forth in this Amendment shall modify and supersede all inconsistent terms
and provisions set forth in the Agreement and the other Loan Documents, and,
except as expressly modified and superseded by this Amendment, the terms and
provisions of the Agreement and the other Loan Documents are ratified and
confirmed and shall continue in full force and effect. The parties hereto agree
that the Agreement and the other Loan Documents, as amended hereby, shall
continue to be legal, valid, binding and enforceable in accordance with their
respective terms.

 

5.02                           Ratification of Guaranties. Each of the
Guarantors hereby acknowledges and consents to all of the terms and conditions
of this Amendment and the Revolving Note and hereby ratifies and confirms the
Guaranty Agreement to which it is a party to or for the benefit of the Bank.
Each of the Guarantors hereby represents and acknowledges that it has no claims,
counterclaims, offsets, credits or defenses to the Loan Documents or the
performance of its obligations thereunder. Furthermore, each Guarantor agrees
that nothing contained in this Amendment or the Revolving Note shall adversely
affect any right or remedy of the Bank under the Guaranty Agreement to which
such Guarantor is a party. Each Guarantor hereby agrees that with respect to the
Guaranty Agreement to which it is a party, all references in such Guaranty
Agreement to the “Guaranteed Obligations” shall include, without limitation, the
obligations of the Borrower to the Bank under the Agreement, as amended hereby.
Finally, each of the Guarantors hereby represents and acknowledges that the
execution and delivery of this Amendment and the other Loan Documents executed
in connection herewith shall in no way change or modify its obligations as a
guarantor, debtor, pledgor, assignor, obligor and/or grantor under its
respective Guaranty Agreement (except as specifically provided in this Section
5.02) and shall not constitute a waiver by the Bank of any of the Bank’s rights
against such Guarantor.

 

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5.03                           Ratification of Security Interests. The Company
hereby agrees that the Stock Pledge Agreement is hereby expressly amended such
that the definition of “Secured Obligations” contained therein includes, without
limitation, all indebtedness and other obligations of the Borrower now or
hereafter existing hereunder the Agreement, as amended hereby. Furthermore, the
Company hereby ratifies and reaffirms its obligations under the Stock Pledge
Agreement, as the same is amended hereby, and represents and acknowledges that
the Stock Pledge Agreement is not subject to any claims, counterclaims, defenses
or offsets. Finally, the Company hereby represents and acknowledges that the
execution and delivery of this Amendment and the other Loan Documents executed
in connection herewith shall in no way change or modify its obligations as a
debtor, pledgor, assignor, obligor and/or grantor under the Stock Pledge
Agreement (except as specifically provided this Section 5.03) and shall not
constitute a waiver by the Bank of any of the Bank’s rights against the Company.

 

5.04                           Representations and Warranties. The Borrower and
each of the Guarantors hereby jointly and severally represent and warrant to the
Bank that (a) the execution, delivery and performance of this Amendment and any
and all other Loan Documents executed and/or delivered in connection herewith
have been duly authorized by all requisite corporate, partnership or trust
proceedings, as appropriate, and will not contravene, or constitute a default
under, any provision of applicable law or regulation or of the Agreement of
Limited Partnership, Articles of Incorporation, By-Laws or Trust Agreement, as
applicable, of the Borrower or any Guarantor, or of any mortgage, indenture,
contract, agreement or other instrument, or any judgment, order or decree,
binding upon the Borrower or any Guarantor; (b) the officer(s) of the Borrower
and each Guarantor executing and delivering this Amendment and any and all other
Loan Documents executed and/or delivered in connection herewith are duly elected
and are authorized, by resolution of the board of directors, board of managers
or trustees (or other applicable governing body) of the Borrower and each such
Guarantor, to execute on behalf of each such entity this Amendment and any and
all other Loan Documents executed and/or delivered in connection herewith; (c)
the representations and warranties contained in the Agreement and the other Loan
Documents, as amended hereby, are true and correct on and as of the date hereof
and on and as of the date of execution hereof as though made on and as of each
such date; (d) no default or Event of Default under the Agreement, as amended
hereby, has occurred and is continuing, unless such default or Event of Default
has been specifically waived in writing by the Bank; and (e) the Borrower and
the Guarantors are in full compliance with all covenants and agreements
contained in the Agreement and the other Loan Documents, as amended hereby.

 

ARTICLE VI

Miscellaneous Provisions

 

6.01                           Survival of Representations and Warranties. All
representations and warranties made in the Agreement or any other Loan
Documents, including, without limitation, any document furnished in connection
with this Amendment, shall survive the execution and delivery of this Amendment
and the other Loan Documents to be executed in connection herewith, and no
investigation by the Bank or any closing shall affect the representations and
warranties or the right of the Bank to rely upon them.

 

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6.02                           Reference to Agreement. Each of the Agreement and
the other Loan Documents, and any and all other agreements, documents or
instruments now or hereafter executed and delivered pursuant to the terms hereof
or pursuant to the terms of the Agreement, as amended hereby, are hereby amended
so that any reference in the Agreement and such other Loan Documents to the
Agreement, shall mean a reference to the Agreement, as amended hereby.

 

6.03                           Expenses of the Bank. As provided in the
Agreement, the Borrower agrees to pay on demand all reasonable costs and
expenses incurred by the Bank in connection with the preparation, negotiation,
and execution of this Amendment and the other Loan Documents executed pursuant
hereto and any and all amendments, modifications, and supplements hereto or
thereto, including, without limitation, the costs and fees of the Bank’s legal
counsel, and all costs and expenses incurred by the Bank in connection with the
enforcement or preservation of any rights under the Agreement or any other Loan
Document, in each case as amended hereby, including, without, limitation, the
costs and fees of the Bank’s legal counsel.

 

6.04                           Severability. Any provision of this Amendment
held by a court of competent jurisdiction to be invalid or unenforceable shall
not impair or invalidate the remainder of this Amendment and the effect thereof
shall be confined to the provision so held to be invalid or unenforceable.

 

6.05                           Successors and Assigns. This Amendment is binding
upon and shall inure to the benefit of the Borrower, the Guarantors and the Bank
and their respective successors and assigns.

 

6.06                           Counterparts. This Amendment may be executed in
one or more counterparts, each of which when so executed shall be deemed to be
an original, but all of which when taken together shall constitute one and the
same instrument.

 

6.07                           Effect of Waiver. No consent or waiver, express
or implied, by the Bank to or for any breach of or deviation from any covenant
or condition by the Borrower or any Guarantor shall be deemed a consent to or
waiver of any other breach of the same or any other covenant, condition or duty.

 

6.08                           Headings. The headings, captions and arrangements
used in this Amendment are for convenience only and shall not affect the
interpretation of this Amendment.

 

6.09                           Applicable Law. THIS AMENDMENT AND ALL OTHER
AGREEMENTS EXECUTED PURSUANT HERETO SHALL BE DEEMED TO HAVE BEEN MADE AND TO BE
PERFORMABLE IN AND SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE
LAWS OF THE STATE OF TEXAS.

 

6.10                           Final Agreement. THE AGREEMENT AND THE OTHER LOAN
DOCUMENTS, EACH AS AMENDED HEREBY, REPRESENT THE ENTIRE EXPRESSION OF THE
PARTIES WITH RESPECT TO THE SUBJECT MATTER HEREOF ON THE DATE THIS AMENDMENT IS
EXECUTED. THE AGREEMENT AND THE OTHER LOAN DOCUMENTS, AS AMENDED HEREBY, MAY NOT
BE CONTRADICTED BY EVIDENCE

 

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OF PRIOR, CONTEMPORANEOUS OR SUBSEQUENT ORAL AGREEMENTS OF THE PARTIES. THERE
ARE NO UNWRITTEN ORAL AGREEMENTS BETWEEN THE PARTIES. NO MODIFICATION,
RESCISSION, WAIVER, RELEASE OR AMENDMENT OF ANY PROVISION OF THIS AMENDMENT
SHALL BE MADE, EXCEPT BY A WRITTEN AGREEMENT SIGNED BY THE BORROWER, THE
GUARANTORS AND THE BANK.

 

6.11                           AGREEMENT FOR BINDING ARBITRATION. The parties
agree to be bound by the terms and provisions of the Bank’s current Arbitration
Program which is incorporated herein by reference and is acknowledged as
received by the parties pursuant to which any and all disputes shall be resolved
by mandatory binding arbitration upon the request of any party.

 

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IN WITNESS WHEREOF, this Amendment has been executed and is effective as of the
date first above-written.

 

 

“BANK”

 

 

 

 

WELLS FARGO BANK,

 

NATIONAL ASSSOCIATION

 

 

 

 

 

 

By:

/s/ Susan K. Nugent

 

 

Susan K. Nugent,

 

 

Vice President

 

 

 

 

“BORROWER”

 

 

 

 

FOSSIL PARTNERS, L.P.

 

 

 

 

By:

Fossil, Inc., its general partner

 

 

 

 

 

 

 

By:

/s/ Randy S. Hyne

 

 

Randy S. Hyne,

 

 

Vice President, General Counsel and Secretary

 

 

 

 

 

 

 

“GUARANTORS”

 

 

 

 

FOSSIL, INC.

 

 

 

 

 

 

By:

/s/ Randy S. Hyne

 

 

Randy S. Hyne,

 

 

Vice President, General Counsel and Secretary

 

 

 

 

 

 

 

FOSSIL INTERMEDIATE, INC.

 

 

 

 

 

 

By:

/s/ Kosta N. Kartsotis

 

Name: Kosta N. Kartsotis

 

Title: President

 

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FOSSIL TRUST

 

 

 

 

 

 

By:

/s/ Kosta N. Kartsotis

 

Name: Kosta N. Kartsotis

 

Title: President and General Manager

 

 

 

 

 

 

 

FOSSIL STORES I, INC.

 

 

 

 

 

 

 

By:

/s/ Mike L. Kovar

 

 

Mike L. Kovar, Treasurer

 

 

 

 

 

 

 

ARROW MERCHANDISING, INC.

 

 

 

 

 

 

By:

/s/ Mike L. Kovar

 

 

Mike L. Kovar, Treasurer

 

 

 

 

 

 

 

FOSSIL HOLDINGS, LLC

 

 

 

 

 

 

By:

/s/ Mike L. Kovar

 

 

Mike L. Kovar, Manager

 

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