Exhibit 10.3


 


STOCK PLEDGE AGREEMENT


 


THIS
STOCK PLEDGE AGREEMENT (this “Agreement”) is entered into as of September 23,
2004, between FOSSIL, INC., a
Delaware corporation (“Pledgor”), and WELLS
FARGO BANK, NATIONAL ASSOCIATION, a national banking association (“Pledgee”).


 


1.             In consideration of any extension of credit heretofore
or hereafter made by Pledgee to Fossil Partners, L.P., a Texas limited
partnership (“Borrower”), and as collateral security for and to secure
the prompt payment and performance in full of all obligations of Pledgor to
Pledgee under that certain Guaranty Agreement, dated as of September 23,
2004 (as hereinafter amended, modified and/or restated from time to time),
pursuant to which Pledgor has absolutely and unconditionally guaranteed to
Pledgee the prompt payment and performance in full of all now existing or
hereafter arising obligations, liabilities and indebtedness of Borrower to
Pledgee under that certain Loan Agreement dated as of September 23, 2004
by and among Pledgee, Borrower, Pledgor and the subsidiaries and/or affiliates
of Pledgor from time to time a party thereto, as guarantors (as hereinafter
amended, modified and/or restated from time to time, the “Loan Agreement”),
Pledgor hereby assigns to Pledgee and grants to Pledgee a continuing security
interest in sixty-five percent (65%) of all issued and outstanding shares of
capital stock (including, without limitation, all shares of common stock
represented by the stock certificates identified on Schedule I
attached hereto) of each of Fossil Europe B.V. and Fossil (East) Limited (each
individually, a “Subsidiary” and collectively, the “Subsidiaries”),
whether now or hereafter issued by the Subsidiaries, together with all
proceeds, products and increases thereof and substitutions and replacements
therefor (collectively, the “Collateral”).  The obligations referenced above, together with any subsequent
renewals, extensions, modifications or increases thereof, are collectively
referred to as the “Secured Obligations.”


 


2.             Pledgor represents and warrants that (i) Pledgor holds
absolute ownership of the Collateral, free and clear of all liens and
encumbrances; (ii) there are no restrictions upon the transfer of any of the
Collateral, other than as may appear and may be referenced on the face of the
certificates or other than arising under applicable state or federal securities
laws or laws of the jurisdiction in which such Subsidiaries are incorporated;
(iii) Pledgor owns directly or indirectly (A) 70% of the issued and outstanding
capital stock of Fossil Europe B.V., and (B) 100% of the issued and outstanding
capital stock of Fossil (East) Ltd; (iv) there are no existing obligations to
issue capital stock or securities convertible into capital stock of any
Subsidiary and in no event will Pledgor permit any such stock or securities to
be issued prior to payment in full of the Secured Obligations; and (v) there
are no existing securities or obligations of any Subsidiary the amount of which
obligation is based, in whole or in part, on the value of any Subsidiary’s
capital stock or any increase thereof, nor will Pledgor permit any such
securities or obligations to exist prior to payment in full of the Secured
Obligations.


 


3.             In furtherance of Pledgee’s security interest in the
Collateral, Pledgor agrees to deliver to Pledgee, on the date hereof (to the
extent not previously delivered to Pledgee), the stock certificates identified
on Schedule I attached hereto, together with stock powers duly executed in
blank by Pledgor.  Pledgee acknowledges
that notwithstanding Pledgor’s delivery to Pledgee of stock certificates
representing in excess of sixty-five percent (65%) of the issued and


 

















 


outstanding
shares of capital stock of the Subsidiaries, Pledgee’s security interest
hereunder shall be limited to sixty-five percent (65%) of the issued and
outstanding shares of capital stock of the Subsidiaries.


 


4.             With respect to the Collateral and all proceeds,
products and increases thereof and substitutions therefor, Pledgor hereby
appoints Pledgee its attorney-in-fact, to arrange for the transfer of the
Collateral on the books of the Subsidiaries to the name of Pledgee subsequent
to the occurrence and during the continuance of any Event of Default (as
hereinafter defined) hereunder. 
However, Pledgee shall be under no obligation to do so.


 


5.             During the term of this Agreement, provided no Event
of Default has occurred and then exists hereunder, Pledgor shall have the
right, where applicable, to vote the Collateral on all corporate questions, and
Pledgee shall, if necessary, execute due and timely proxies in favor of Pledgor
for this purpose; provided, however, that Pledgor will not be
entitled to exercise any such right if the result thereof could reasonably be
expected to materially and adversely affect the rights inuring to Pledgee
hereunder or the rights and remedies of Pledgee under this Agreement or the
ability of Pledgee to exercise the same.


 


6.             Upon the occurrence of any Event of Default and during
the continuance thereof, Pledgee may exercise all of the rights and privileges
in connection with the Collateral (including, without limitation, voting
rights) to which a transferee may be entitled as the record holder thereof,
together with the rights and privileges otherwise granted hereunder.  Pledgee shall be under no obligation to
exercise any of such rights or privileges.


 


7.             If, with the consent of Pledgee, Pledgor shall
substitute or exchange other securities in place of those herein mentioned, all
of the rights and privileges of Pledgee and all of the obligations of Pledgor
with respect to the securities originally pledged or held as Collateral
hereunder shall be forthwith applicable to such substituted or exchanged
securities.


 


8.             Upon the occurrence of any Event of Default and during
the continuance thereof, Pledgee shall be authorized to collect all dividends,
interest payments, and other amounts (including amounts received or receivable
upon redemption or repurchase) that may be, or become, due on any of the
Collateral.  If Pledgor receives any such
dividends, payments or amounts after the occurrence and during the continuance
of an Event of Default, it shall immediately endorse and deliver the same to
Pledgee in the form received.  All such
amounts which Pledgee receives and retains in accordance with the terms of this
paragraph 8 shall be applied to reduce the principal amount outstanding on the
Secured Obligations in inverse order of maturity.  Pledgee is, furthermore, authorized to give receipts in the name
of Pledgor for any amounts so received. 
Pledgee shall be under no obligation to collect any such amounts.


 


9.             In the event that, during the term of this Agreement,
subscription warrants or any other rights or options shall be issued in
connection with the Collateral, such warrants, rights, or options shall be
immediately assigned, if necessary, by Pledgor to Pledgee.  If any such warrants, rights, or options are
exercised by Pledgor, all new securities so acquired by Pledgor shall be
immediately assigned to Pledgee, shall become part of the Collateral and shall
be endorsed to, delivered to and held by Pledgee under the terms of this
Agreement in the same manner as the securities originally pledged.


 


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10.           In the event that, during the term of this Agreement,
any share, dividend, reclassification, readjustment or other change is declared
or made in the capital structure of any Subsidiary, all new, substituted and
additional shares, or other securities and related stock certificates, issued by
reason of any such change shall become part of the Collateral and shall be
endorsed to, delivered to and held by Pledgee under the terms of this Agreement
in the same manner as the securities originally pledged hereunder (except to
the extent that any such pledge by Pledgor to Pledgee would cause more than
sixty-five percent (65%) of the issued and outstanding shares of capital stock
of any Subsidiary to become subject to Pledgee’s security interest hereunder).


 


11.           Pledgor authorizes Pledgee, without notice or demand,
and without affecting the liability of Pledgor hereunder, from time to time to:


 


(A)          hold security in addition to and other than the
Collateral for the payment of the Secured Obligations or any part thereof, and
exchange, enforce, waive and release any Collateral or any part thereof, or any
other such security, or part thereof;


 


(B)           release any of the endorsers or guarantors of the
Secured Obligations secured hereunder or any part thereof, or any other person
whomsoever liable for or on account of such Secured Obligations;


 


(C)           on the transfer of all or any part of the Secured
Obligations secured hereunder, Pledgee may assign all or any part of Pledgee’s
security interest in the Collateral and shall be fully discharged thereafter
from all liability and responsibility with respect to the Collateral so
transferred, provided that in no event shall Pledgee be liable for any act or
omission or negligent act or negligent omission with respect to the Collateral,
other than acts or omissions constituting gross negligence, willful misconduct
or tortious breach of contract.  The
transferee of the Collateral shall be vested with the rights, powers and
remedies of Pledgee hereunder, and with respect to any Collateral not so
transferred, Pledgee shall retain all rights, powers and remedies hereby given;
and


 


(D)          Pledgor hereby waives any right to require Pledgee to
proceed against Pledgor, Borrower or any other person whomsoever, to proceed
against or exhaust any collateral or any other security held by Pledgee, or to
pursue any other remedy available to Pledgee. 
Pledgor further waives any defense arising by reason of any liability or
other defense of Pledgor or of any other person.  Pledgor shall have no right to require Pledgee to marshal
collateral.


 


12.           It shall not be necessary for Pledgee to inquire into
the powers of Pledgor or the officers, directors or agents acting or purporting
to act on behalf of Pledgor, and any obligations made or created in reliance on
the professed exercise of such powers shall be secured hereunder.


 


13.           To the extent permitted by applicable law and in the
Loan Agreement, Pledgee shall be under no duty or obligation whatsoever to make
or give any presentments, demands for performance, notices of non-performance,
protests, notices of protest, or notices of dishonor in connection with the
Secured Obligations.


 


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14.           The occurrence of an event of default under and as
defined in the Loan Agreement shall, at the option of Pledgee, constitute an “Event
of Default” under this Agreement.


 


15.           Upon the occurrence and during the continuance of any
Event of Default, the Secured Obligations shall, at the option of Pledgee,
become immediately due and payable, and Pledgee shall have all rights and
remedies as a secured party under any UCC (as hereinafter defined), and such
additional rights and remedies to which a secured party is entitled under the
laws in effect in all relevant jurisdictions, and, in this connection, subject
to applicable regulatory and legal requirements, Pledgee may sell the
Collateral, or any part thereof, at public or private sale or at any broker’s
board or on any securities exchange or electronic trading facility, for cash,
upon credit or for future delivery as Pledgee shall deem appropriate.  Pledgee shall be authorized at any such sale
(if it deems it advisable to do so) to restrict the prospective bidders or
purchasers to persons who will represent and agree that they are purchasing the
Collateral for their own account for investment and not with a view to the
distribution or sale thereof, and upon consummation of any such sale Pledgee
shall have the right to assign, transfer and deliver to the purchaser or
purchasers thereof the Collateral so sold. 
Each such purchaser at any such sale shall hold the property sold
absolutely free from any claim or right on the part of Pledgor, and, to the
extent permitted by applicable law, Pledgor hereby waives all rights of
redemption, stay, valuation and appraisal Pledgor now has or may at any time in
the future have under any rule of law or statute now existing or hereafter
enacted.  Pledgee shall give each person
entitled to notice of such sale under Section 9-611(c) of the UCC ten (10)
days prior written notice (which Pledgor agrees is reasonable notice within the
meaning of Section 9-612 of the UCC) of Pledgee’s intention to make any
sale of Collateral.  Such notice shall
conform to the requirements of Section 9-613 of the UCC.  Any such public sale shall be held at such
time or times within ordinary business hours and at such place or places as
Pledgee may fix and state in the notice of such sale.  At any such sale, the Collateral, or portion thereof, to be sold
may be sold in one lot as an entirety or in separate parcels, as Pledgee may
(in its sole and absolute discretion) determine.  Pledgee shall not be obligated to make any sale of any Collateral
if it shall determine not to do so, regardless of the fact that notice of sale
of such Collateral shall have been given. 
Pledgee may, without notice or publication, adjourn any public or
private sale or cause the same to be adjourned from time to time by
announcement at the time and place fixed for sale, and such sale may, without
further notice, be made at the time and place to which the same was so
adjourned.  In case any sale of all or
any part of the Collateral is made on credit or for future delivery, the
Collateral so sold may be retained by Pledgee until the sale price is paid in
full by the purchaser or purchasers thereof, but Pledgee shall not incur any
liability in case any such purchaser or purchasers shall fail to take up and
pay for the Collateral so sold and, in case of any such failure, such
Collateral may be sold again upon like notice. 
At any public (or, to the extent permitted by applicable law, private)
sale made pursuant to this Section, Pledgee may bid for or purchase, free from
any right of redemption, stay or appraisal on the part of Pledgor (all said
rights being also hereby waived and released), the Collateral or any part
thereof offered for sale and may make payment on account thereof by using any
claim then due and payable to it from Pledgor as a credit against the purchase
price, and it may, upon compliance with the terms of sale, hold, retain and
dispose of such property without further accountability to Pledgor
therefor.  For purposes hereof, (a) a
written agreement to purchase the Collateral or any portion thereof shall be
treated as a sale thereof, (b) Pledgee shall be free to carry out such sale
pursuant to such agreement, and (c) Pledgor shall not be entitled to the return
of the Collateral or any portion


 


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thereof
subject thereto, notwithstanding the fact that after Pledgee shall have entered
into such an agreement, all Events of Default shall have been remedied and the
Obligations paid in full.  As an
alternative to exercising the power of sale herein conferred upon it, Pledgee
may proceed by a suit or suits at law or in equity to foreclose upon the
Collateral and to sell the Collateral or any portion thereof pursuant to a
judgment or decree of a court or courts having competent jurisdiction or
pursuant to a proceeding by a court-appointed receiver.  Any sale pursuant to the provisions of this
Section shall be deemed to be a commercially reasonable disposition as
provided in Section 9-610 of the UCC. 
Pledgee shall receive the proceeds of any such sale or sales, and, after
deducting therefrom any and all reasonable costs and expenses incurred in
connection with the sale thereof, apply the net proceeds toward the payment of
the Secured Obligations secured hereunder, including interest, reasonable
attorneys’ fees, and all other reasonable costs and expenses incurred by
Pledgee hereunder and under any other agreement between Pledgor and
Pledgee.  If such proceeds be more than
sufficient to pay the same, then in case of a surplus, such surplus shall be
accounted for and paid over to Pledgor, provided Pledgor be not then indebted
to Pledgee otherwise under this Agreement or any Other Agreement or for any
cause whatsoever.  As used herein, the
term “UCC” shall mean (i) the Uniform Commercial Code as in effect from time to
time in the State of Texas and (ii) in any case where mandatory choice or law
rules in the Texas Uniform Commercial Code require the application of the
Uniform Commercial Code of another jurisdiction, the Uniform Commercial Code of
such other jurisdiction as in effect from time to time.


 


16.           In view of the position of Pledgor in relation to the
Collateral, or because of other current or future circumstances, a question may
arise under the Securities Act of 1933, as now or hereafter in effect, or any
similar statute in any other jurisdiction or hereafter enacted analogous in
purpose or effect (such Act and any such similar statute as from time to time
in effect being called the “Securities Laws”) with respect to any
disposition of the Collateral permitted hereunder.  Pledgor understands that compliance with the Securities Laws
might very strictly limit the course of conduct of Pledgee if Pledgee were to
attempt to dispose of all or any part of the Collateral, and might also limit
the extent to which or the manner in which any subsequent transferee of any
Collateral could dispose of the same. 
Similarly, there may be other legal restrictions or limitations
affecting Pledgee in any attempt to dispose of all or part of the Collateral
under applicable blue sky or other state securities laws or similar laws
analogous in purpose or effect.  Pledgor
recognizes that in light of such restrictions and limitations Pledgee may, with
respect to any sale of the Collateral, limit the purchasers to those who will
agree, among other things, to acquire such Collateral for their own account,
for investment, and not with a view to the distribution or resale thereof.  Pledgor acknowledges and agrees that in
light of such restrictions and limitations, Pledgee, in its sole and absolute
discretion, (a) may proceed to make such a sale whether or not a registration
statement for the purpose of registering such Collateral or part thereof shall
have been filed under the Securities Laws and (b) may approach and negotiate
with a single potential purchaser or a limited number of potential purchasers
to effect such sale.  Pledgor
acknowledges and agrees that any such sale might result in prices and other
terms less favorable to the seller than if such sale were a public sale without
such restrictions.  In the event of any
such sales, Pledgee shall incur no responsibility or liability for selling all
or any part of the Collateral at a price that Pledgee, in its sole and absolute
discretion, may in good faith deem reasonable under the circumstances,
notwithstanding the possibility that a substantially higher price might have
been realized if the sale were deferred until after registration under the
Securities Laws or if more than a single purchaser or a limited number of


 


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purchasers
were approached.  The provisions of this
Section will apply notwithstanding the existence of a public or private
market upon which the quotations or sales prices may exceed substantially the
price at which Pledgee sells.


 


17.           Pledgor agrees to execute and deliver to Pledgee such
financing statements, continuation statements or amendments of financing
statements, each in form reasonably acceptable to Pledgee, as Pledgee may from
time to time reasonably request, or as are necessary or desirable in the
opinion of Pledgee to establish and maintain a valid, enforceable, first
priority perfected security interest in the Collateral as provided herein, and
the other rights and security contemplated hereby, all in accordance with the
UCC as enacted in any and all relevant jurisdictions, or any other relevant
law.  Pledgor hereby authorizes Pledgee
to file any such financing statements without the signature of Pledgor where
permitted by law.  Pledgee is herby
authorized to make filings with such recording offices and such other
governmental authorities as Pledgee may consider necessary or appropriate for
the purpose of perfecting, confirming, continuing, enforcing or protecting the
security interests and liens granted to Pledgor by Pledgee.  Pledgor will pay any applicable filing fees,
recordation taxes and related expenses relating to the Collateral.


 


18.           Pledgor hereby constitutes and appoints Pledgee its
true and lawful attorney, irrevocably, with full power after the occurrence of
and during the continuance of an Event of Default (in the name of Pledgor or
otherwise) (i) to act, require, demand, receive, compound and give acquittance
for any and all moneys and claims for moneys due or to become due to Pledgor
under or arising out of the Collateral, (ii) to endorse any checks or other
instruments or orders in connection therewith, (iii) to file any claims or take
any action or institute any proceedings which Pledgee may deem to be necessary
or advisable to protect its interests and (iv) to execute, deliver, record or
file any other document or instrument and take such other actions as it
considers appropriate in connection with the perfection, protection or
enforcement of its security interest in the Collateral, the possession,
maintenance, preparation for sale, foreclosure, sale, lease, exchange or other
disposition or release of any Collateral or the exercise of any rights or
remedies provided in this Agreement, which appointment as attorney is coupled
with an interest.


 


19.           Upon indefeasible repayment in full in cash of the
Secured Obligations, Pledgee will promptly, at Pledgor’s expense, deliver all
of the Collateral to Pledgor along with all instruments of assignment executed
in connection therewith, and execute and deliver to Pledgor such documents as
Pledgor shall reasonably request to evidence Assignor’s release of Pledgee’s security
interest hereunder.


 


20.           Choice of Law.  This
Agreement is being executed and delivered, and is intended to be performed in
the State of Texas.  Except to the
extent that the laws of the United States may apply to the terms hereof, the
substantive laws of the State of Texas shall govern the validity, construction,
enforcement and interpretation of this Agreement.  In the event of a dispute involving this Agreement or any other
instruments executed in connection herewith, the undersigned irrevocably agrees
that venue for such dispute shall lie in any court of competent jurisdiction in
Dallas County, Texas to the extent such dispute is not resolved by binding
arbitration pursuant to Pledgee’s current Arbitration Program described in Section 22
below.


 


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21.           Loan Agreement.  This
Agreement is executed in connection with the Loan Agreement and Pledgee is
entitled to all the benefits provided therein and in the other agreements,
documents, instruments and certificates entered into in connection with the
Loan Agreement.


 


22.           AGREEMENT
FOR BINDING ARBITRATION. 
The parties agree to be bound by the terms and provisions of Pledgee’s
current Arbitration Program which is incorporated by reference herein 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, Pledgor and Pledgee have executed this Agreement as
of the date first above written.


 


	
   

  	
  PLEDGOR:

  
	
   

  	
   

  
	
   

  	
  FOSSIL, INC.

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  
	
   

  	
   

  	
  Randy S. Kercho, Executive Vice President

  
	
   

  	
   

  
	
   

  	
  PLEDGEE:

  
	
   

  	
   

  
	
   

  	
  WELLS FARGO BANK, NATIONAL ASSOCIATION

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  
	
   

  	
   

  	
  Susan K. Nugent, Assistant Vice President

  
						



 

















 


SCHEDULE I


 


(See attached)