Exhibit 10.1

 

FIRST AMENDMENT TO LOAN AGREEMENT

 

THIS FIRST AMENDMENT TO LOAN AGREEMENT (this “Amendment”) is made and entered
into as of the 22nd day of September, 2005 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”), INTERMEDIATE LEASING, INC. (“Intermediate
Leasing”), ARROW MERCHANDISING, INC. (“Arrow Merchandising”) and FOSSIL
HOLDINGS, LLC (“Fossil Holdings”) (the Company, Fossil Intermediate, Fossil
Trust, Fossil I, Intermediate Leasing, 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”);

 

WHEREAS, the Bank, the Borrower and the Guarantors desire to amend the Agreement
and the other Loan Documents as herein set forth.

 

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.

 

ARTICLE II

Amendments

 

2.01                           Amendment to Section 1.  Effective as of the date
hereof, Section 1 of the Agreement is hereby deleted in its entirety and
replaced with the following:

 

“1.                                 The Line of Credit.  Subject to, and upon
the terms, conditions, covenants and agreements contained herein and in the
Revolving Note (as hereinafter defined), the Bank agrees to loan the Borrower,
at any time, and from

 

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time to time prior to the maturity of the Revolving Note, such amounts as the
Borrower may request, up to but not exceeding at any time, the aggregate
principal amount of $100,000,000 (the “Total Commitment”); within such limits
and during such period, the Borrower may borrow, repay, and re-borrow hereunder
(the “Line of Credit”).  All loans under the Line of Credit shall be evidenced
by the a Revolving Line of Credit Note (as amended, modified or supplemented
from time to time, the “Revolving Note”), substantially in form and substance
satisfactory to the Bank, executed by the Borrower and payable to the order of
the Bank, and bearing interest upon the terms provided therein (but in no event
to exceed the maximum non-usurious interest rate permitted by law).  The
principal of, and interest on, the Revolving Note shall be due and payable as
provided in the Revolving Note.  Notation by the Bank on its records shall
constitute prima facie evidence of the amount and date of any payment or
borrowing thereunder.

 

(a)                                  Renewals and Extensions.  All renewals,
extensions, modifications and rearrangements of the Revolving Note, if any,
shall be deemed to be made pursuant to this Agreement, and accordingly, shall be
subject to the terms and provisions hereof, and the Borrower and the Guarantors
shall be deemed to have ratified, as of such renewal, extension, modification or
rearrangement date, all of the representations, covenants and agreements herein
set forth.

 

(b)                                 Letters of Credit.  Advances under the Line
of Credit may be utilized by the Borrower to fund drawings under any Documentary
or Stand-by Letters of Credit (as hereinafter defined) that are issued by the
Bank for the account of the Borrower.  In the event the Borrower fails to
reimburse the Bank for any such drawings, the Bank may, in its own discretion,
advance funds under the Line of Credit to fund such drawings and all such
advances shall be added to the principal amount of the Revolving Note.”

 

2.02                           Amendment to Section 2.  Effective as of the date
hereof, the reference to “$50,000,000” contained in Section 2 of the Agreement
is hereby deleted and “$100,000,000” is substituted in lieu thereof.

 

2.03                           Amendment to Section 12(m).  Effective as of the
date hereof, Section 12(m) of the Agreement is hereby deleted in its entirety
and replaced with the following:

 

“(m)                         Domestic/Foreign Subsidiary Guarantees/Stock
Pledges.  (i) cause each majority-owned subsidiary of the Company or the
Borrower which is incorporated or formed in the United States of America and
which owns or holds tangible assets having an aggregate book value of
$50,000,000 or more (each, a “Significant Domestic Subsidiary”) to execute a
Guaranty Agreement in the form of Exhibit A attached hereto, and (ii) pledge to
the Bank, as collateral security for the Borrower’s obligations to the Bank
hereunder, a security interest in sixty-five percent (65%) of the stock of each
majority owned subsidiary of the Company

 

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which is incorporated or formed outside of the United States and which owns or
holds tangible assets having an aggregate book value of $50,000,000 or more
(each a “Significant Foreign Subsidiary”)  by executing a Stock Pledge Agreement
in the form of Exhibit B attached hereto.”

 

2.04                           Amendment to Section 13(b).  Effective as of the
date hereof, Section 13(b) of the Agreement is hereby deleted in its entirety
and replaced with the following:

 

“(B)                           LIABILITIES.  ASSUME, GUARANTEE, ENDORSE, SUFFER
TO EXIST OR OTHERWISE BECOME LIABLE UPON, OR AGREE TO PURCHASE OR OTHERWISE
FURNISH FUNDS FOR THE PAYMENT OF, THE OBLIGATIONS OF ANY PERSON, FIRM OR
CORPORATION, EXCEPT FOR

 

(I)                                     THE OBLIGATIONS HEREUNDER;

 

(II)                                  ENDORSEMENT OF NEGOTIABLE INSTRUMENTS FOR
DEPOSIT OR COLLECTION OR SIMILAR TRANSACTIONS IN THE ORDINARY COURSE OF
BUSINESS;

 

(III)                               OBLIGATIONS UNDER OPERATING LEASES;

 

(IV)                              OBLIGATIONS FOR INDEBTEDNESS SECURED BY
PURCHASE MONEY LIENS NOT TO EXCEED $10,000,000 IN THE AGGREGATE AT ANY TIME
OUTSTANDING;

 

(V)                                 OBLIGATIONS UNDER FOREIGN CURRENCY EXCHANGE
CONTRACTS, SO LONG AS SUCH OBLIGATIONS ARE INCURRED IN THE ORDINARY COURSE OF
ITS BUSINESS;

 

(VI)                              INDEBTEDNESS TO SHAREHOLDERS, OFFICERS OR
PARTNERS, SO LONG AS SUCH INDEBTEDNESS IS UNSECURED, FULLY SUBORDINATED TO THE
INDEBTEDNESS OWING TO THE BANK IN FORM AND SUBSTANCE SATISFACTORY TO THE BANK,
AND EVIDENCED BY DEBT INSTRUMENTS SATISFACTORY IN FORM AND SUBSTANCE TO THE
BANK;

 

(VII)                           OBLIGATIONS UNDER GUARANTIES SECURING
INDEBTEDNESS NOT TO EXCEED $10,000,000 IN THE AGGREGATE AT ANY TIME OUTSTANDING;

 

(VIII)                        ANY OTHER UNSECURED INDEBTEDNESS OWING BY BORROWER
TO THE TRADE BANK, A JOINT-VENTURE OF THE BANK AND HSCB; AND

 

(IX)                                ANY OTHER UNSECURED INDEBTEDNESS WHICH IS
SUBORDINATED TO THE INDEBTEDNESS OWING TO THE BANK PURSUANT TO A WRITTEN
SUBORDINATION AGREEMENT IN FORM AND SUBSTANCE SATISFACTORY TO THE BANK.”

 

2.05                           Amendment to Section 14(a).  Effective as of the
date hereof, 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 1.0 TO 1.0.  CASH, CASH EQUIVALENTS,
ACCOUNTS RECEIVABLE AND CURRENT LIABILITIES

 

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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.”

 

2.06                           Amendment to Section 14(c).  Effective as of the
date hereof, Section 14(c) of the Agreement is hereby deleted in its entirety
and replaced with the following:

 

“(c)                            Fixed Charge Coverage Ratio.  Maintain a Fixed
Charge Ratio of not less than 2.0 to 1.0 throughout the term hereof.  “Fixed
Charge Ratio” shall be defined as net profit after taxes, plus depreciation,
plus amortization, plus or minus net distributions divided by the current
portion of long term debt, plus twenty-five percent of the outstanding amount of
the Line of Credit, plus capitalized lease obligations.  The Fixed Charge Ratio
shall be determined as of the end of the immediately preceding fiscal quarter
for the twelve-month period ended as of the end of such fiscal quarter for which
the determination is being made (i.e., on a rolling four-quarter basis).”

 

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 the following
documents, each in form and substance satisfactory to the Bank and its counsel:

 

(i)                                     This Amendment, duly executed by the
Borrower and the Guarantors; and

 

(ii)                                  An Amended and Restated Revolving Line of
Credit Note in the form of Exhibit A to this Amendment (hereinafter, the
“Revolving Note”), duly executed by the Borrower;

 

(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 Bank shall have received and be
satisfied the results of its credit investigation with respect to certain
executives of Borrower;

 

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(e)                                  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;

 

(f)                                    No default or Event of Default shall have
occurred and be continuing, unless such default or Event of Default has been
specifically waived in writing by the Bank;

 

(g)                                 All corporate proceedings taken in
connection with the transactions contemplated by this Amendment and all
documents, instruments and other legal matters incident thereto shall be
satisfactory to the Bank and its legal counsel; and

 

(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

 

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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 Borrower to
Bank under the Agreement, as amended hereby, and under the Revolving Note, 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.

 

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 Borrower now or hereafter
existing hereunder the Agreement, as amended hereby, the Revolving Note and the
other Loan Documents, 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 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; (c) 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 (d) 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.

 

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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.

 

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.

 

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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 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.

 

 

[Remainder of page intentionally left blank.]

 

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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,

 

 

Assistant Vice President

 

 

 

 

“BORROWER”

 

 

 

 

FOSSIL PARTNERS, L.P.

 

 

 

 

By:

Fossil, Inc., its general partner

 

 

 

 

 

 

 

By:

  /s/ Randy S. Kercho

 

 

Randy S. Kercho,

 

 

Executive Vice President

 

 

 

 

 

 

 

“GUARANTORS”

 

 

 

 

FOSSIL, INC.

 

 

 

 

 

 

 

By:

/s/ Randy S. Kercho

 

 

Randy S. Kercho,

 

 

Executive Vice President

 

 

 

 

 

 

 

FOSSIL INTERMEDIATE, INC.

 

 

 

 

 

By:

/s/ Randy S. Hyne

 

Name:

Randy S. Hyne

 

Title:

Secretary

 

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FOSSIL TRUST

 

 

 

 

 

By:

/s/ Randy S. Hyne

 

Name:

Randy S. Hyne

 

Title:

 Secretary

 

 

 

 

 

FOSSIL STORES I, INC.

 

 

 

 

 

By:

/s/ Mike L. Kovar

 

Mike L. Kovar, Treasurer

 

 

 

 

 

INTERMEDIATE LEASING, 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

 

Exhibit:

 

A - Revolving Note

 

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EXHIBIT A

 

FORM OF REVOLVING NOTE

 

(See Attached)

 

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