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.


 

















 


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.


 


[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,

  
	
   

  	
   

  	
  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

  



 

















 


	
   

  	
  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