Document:

Exhibit 10.1

 

SEPARATION AND RELEASE
AGREEMENT

 

This Separation and Release Agreement (the “Agreement”)
is entered this 26th day of October, 2004 by and between GEORGE W.
MCGEENEY (“McGeeney”) and AFFORDABLE RESIDENTIAL COMMUNITIES INC., a Maryland
corporation (“Parent”) and ARC MANAGEMENT SERVICES, INC., a Delaware
corporation, on behalf of themselves and their affiliated entities ARC (Parent
and its affiliates collectively hereinafter sometimes referred to as “ARC”).

WHEREAS, McGeeney has served as ARC’s President
and Chief Operating Officer; and

WHEREAS, the parties have reached certain
mutual agreements and understandings with respect to the termination of
McGeeney’s employment and desire to fully and finally settle any matters of
employment, claims, disputes and obligations relating to McGeeney’s employment
with ARC and the termination thereof.

In exchange for the mutual promises set forth
below, and intending to be legally bound, McGeeney and ARC agree as follows:

1.             ­Separation Date.  McGeeney hereby irrevocably resigns from his
employment and all positions with ARC as of October 26, 2004 (the “Separation
Date”).  As of the Separation Date,
McGeeney’s Employment Agreement dated February 18, 2004 shall terminate,
McGeeney shall be relieved of all duties, and shall no longer be authorized to
represent ARC or incur any obligations on behalf of ARC.

2.             ­Payments.

(a)                           Compensation.    Provided that McGeeney has complied with
the terms of this Agreement and provided further that McGeeney has provided to
ARC the necessary transition services as ARC may, until November 1, 2006, from
time to time require, McGeeney will be compensated in the amount of $
670,000.00 on the following schedule:

(i)                                                     On the first business day
following the Full Acceptance of this Agreement by McGeeney and the expiration
of the revocation period as provided for in paragraph 12 herein, $ 120,000.00;

(ii)                                                  On the 18th day of January,
2005, $ 200,000.00; and

From January 31 1, 2005 through November 3, 2006, the balance of  $ 350,000.00 shall be paid in approximately
equal installments in accordance with ARC’s payroll practices; 

less all amounts required to be withheld by law including any applicable
federal, state and local withholding taxes and deductions.

 

(b)                           Outplacement
Services.  At his request, McGeeney
shall be entitled to receive, beginning on the first business day following the
Full Acceptance of this Agreement by McGeeney and the expiration of the
revocation period as provide for in paragraph 12 herein, at ARC’s expense,
outplacement services through the Executive program offered by Drake, Beam and
Morin for a period of up to twelve (12) months.

(c)                           Continued
Payment of Health Insurance Benefits. During the Payment Period, McGeeney
shall be entitled to continued health benefits as if he were an employee of the
ARC, subject to the same terms, conditions, costs and deductibles as are
available to ARC employees during that time and subject to any rules,
regulations or requirements imposed by ARC’s insurance carrier.

(d)                           Stock.  McGeeney shall forfeit to ARC any  shares of the stock in ARC awarded to him under
the 2003 Equity Incentive Plan that are not vested as of the Separation Date.

(e)                           No
Other Payments.  Except as
specifically provided in this Agreement, McGeeney shall not be eligible to
participate or continue to participate in any employee benefit plans or
compensation arrangements of ARC as of the Separation Date and shall not be
entitled to any further payments, benefits, compensation or remuneration of any
kind or nature by ARC.

(f)                            Note.   On or before the first business day
following expiration of the revocation period as provided for in paragraph 12
herein, McGeeney shall pay to ARC the entire balance of principal and interest
due on his note with ARC Management Services, Inc. dated July 30, 2002.

3.                             ­Release.  McGeeney
knowingly, voluntarily and willingly releases and forever discharges ARC, and
all of its past and present affiliates, mem­bers, managers, trustees,
directors, officers, partners, employees, agents, attorneys, servants,
predecessors, successors and assigns (collectively, the “ARC Releasees”) from
any and all claims, charges, complaints, promises, agreements, controversies,
liens, demands, causes of action, obligations, damages and liabili­ties of any
nature whatsoever, known or unknown, suspected or unsuspected, which against
them,  McGeeney or his executors,
administrators, successors or assigns ever had, now have, or may hereafter
claim to have against any of the ARC Releasees by reason of any matter, cause
or thing whatsoever arising on or before the date this Agreement is executed by
McGeeney, and whether or not previously asserted before any state or federal
court or before any state or federal agency or governmental entity (the “
Release”).  This Release includes,
without limitation, any rights or claims relating in any way to McGeeney’s
employment relationship with any of the ARC Releasees, or the termination
thereof, or arising under any statute or regulation, including the federal Age
Discrimination in Employment Act of 1967, Title VII of the Civil Rights Act of
1964, the Civil Rights Act of 1991, the Americans with Disabilities Act of
1990, the Employee  Retirement Income
Security Act of 1974, and the Family Medical Leave Act of 1993, each as amended,
the State of  Colorado
anti-discrimination law, or any other federal, state or local law, regulation,
ordinance, or common law, or under any policy, agreement, understanding or
promise, written or oral, formal or informal, between McGeeney and any of the
ARC Releasees.  McGeeney represents that
he has not com­menced or joined in any claim, charge, action or proceeding
whatsoever against any of the ARC Releasees arising out of or relating to any
of the matters set forth in this paragraph. 
McGeeney further repre­sents and agrees that he will not seek or be enti­tled
to any personal recovery in any claim, charge, action or pro­ceeding that may
be com­menced on McGeeney’s be­half arising out of the mat­ters released
hereby.

 

 

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4.             Non-Compete.  For a period of four years following the
Separation Date, McGeeney shall not engage in Competition (as hereinafter
defined) with ARC.  For purposes of this
Agreement, “Competition” by McGeeney shall mean McGeeney’s engaging in, or
otherwise directly or indirectly being employed by or acting as a consultant or
lender to, or being a director, officer, employee, principal, agent,
stockholder, member, owner or partner of, or permitting his name to be used in
connection with the activities of any other business or organization anywhere
in the United States which competes, directly or indirectly, with the Business
of ARC (as hereinafter defined), or otherwise participates in any way in the
manufactured housing industry.  For
purposes of this Agreement, “Business of ARC” means the business, conduct or
activity related to the ownership, finance, operation or management of
manufactured home communities, the acquisition, refurbishment, transportation,
sale or finance of manufactured homes, the manufacturing of manufactured homes,
the sale of insurance for manufactured homes or manufactured home communities,
the sale of or providing services to entities or persons who engage in any of
the foregoing, or any other activity related thereto.

5.             Confidentiality.

(a)           McGeeney agrees not to disclose any
Confidential Information (as defined below) about ARC obtained by McGeeney
during his association with ARC or, except as set forth in paragraph 6 (b)
below, any information about the circumstances surrounding his separation from
ARC.  “Confidential Information” shall
mean ARC information not generally known by or available to the public,
including, without limitation, personnel information, financial information,
trade secrets, reports, documents, knowledge, data, products, processes,
customer lists, research, business and pricing models or plans, terms of
contracts and negotiations, infor­mation regarding operations, background
information on publicly available information that is otherwise not known to or
generally available to the public, systems and services, computer and any other
processed or collated data, computer programs, marketing data and all other
subject matter pertaining to the actual or anticipated business of ARC or of
any of its clients, customers, consultants, licensees or affiliates, which
McGeeney produced, obtained or acquired during McGeeney’s employment with
ARC.  In addition, McGeeney shall
not  engage in any conversation with any
past or present employee, officer, director or agent of ARC about matters
related to ARC except at the request of the CEO or the CEO’s designee in accordance
with paragraph 8 herein.

(b)           The parties agree that the
negotiation of this Agreement shall remain confidential and shall not be
disclosed to any person, except (i) by McGeeney to his immediate family
and as may be required for obtaining legal or tax advice in connection with
this Agreement; (ii) by ARC, to members of the Board of Directors or staff as
may be required for business purposes; (iii) for the preparation and/or
filing of securities filings,  income tax
returns or required financial disclosures. 
In the case of any disclosure to immediate family or a legal or tax
advisor, McGeeney shall require any person receiving such information to
maintain its confidentiality and shall be liable for any damages that arise as
a result of the failure of such person to maintain such confidentiality.

(c)           Notwithstanding any provision of this
Agreement to the contrary, each party shall be permitted to respond to any subpoena
or other lawful process, provided, that such party gives notice to the other
party sufficiently in advance of disclosure for such party to seek a protective
order limiting or precluding any such requested disclosure.

 

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6.             Non-Disparagement.

(a)           McGeeney agrees that he will not make
any comments relating to any of the ARC Releasees, that are critical,
derogatory or which may tend to injure the reputation or business of ARC or any
of the other ARC Releasees.

(b)           Reference inquiries from prospective
employers will be handled by the Human Resources Department and by only verifying
McGeeney’s dates of employment and last position held.

7.             Non-Solicitation.  For a period of four years following the
Separation Date, McGeeney, or any person or entity acting on McGeeney’s behalf
or at his direction, shall not directly or indirectly solicit any person
employed by ARC for employment by McGeeney, or at any company or entity of
which McGeeney is a director, officer, employee, principal, agent, stockholder,
member, owner or partner of, or permits his name to be used in connection with
the activities of said business or organization.

8.             Cooperation.   McGeeney agrees that as a result of his
former position with ARC, he may have information and/or knowledge of dealings,
sales, transactions and the like related to ARC.  In consideration of this Agreement, McGeeney
shall make himself and his services reasonably available to ARC, at the request
and sole discretion of the Chief Executive Officer of ARC or any person or
entity designated by the CEO for (a) general consultation relating to McGeeney’s
duties while employed by ARC or (b) to provide such information for interviews,
and, if necessary, for any preparation, 
depositions or testimony in any 
arbitral, judicial, regulatory or similar proceeding.  The CEO of ARC shall only request Mr. McGeeney’s
services if, in his opinion, Mr. McGeeney’s information and knowledge are
reasonably required by ARC.

9.             Return of ARC Property.  McGeeney represents and agrees that he has
returned or shall immediately return to ARC all laptops, blackberry, reports,
files, memoranda, documents, records and software, credit cards, cardkey
passes, door and file keys, computer access codes or disks and instructional
manuals, and other physical property that McGeeney received and/or prepared or
helped to prepare in connection with McGeeney’s employment with ARC, and that
he has not retained and shall not retain any copies, dupli­cates, reproductions
or excerpts thereof.

10.           Disclaimer.  The parties agree that this Agreement shall
not be construed as an admis­sion by McGeeney or ARC of any unlawful act
against the other, or that McGeeney or ARC has acted wrongfully towards the
other.  McGeeney and ARC specifically
disclaim and deny any unlawful or wrongful act towards the other.

11.           Legal Counsel.  McGeeney acknowledges and agrees that ARC has
advised him to seek legal advice regarding this Agreement; that he fully
understands his right to discuss all aspects of this Agreement with his private
attorney(s); that he is voluntarily entering into this Agreement; and that upon
executing this Agreement, he will not and cannot sue ARC for any claims
associated with his employment with or separation from ARC except as stated in
this Agreement.

12.           Full Acceptance.  McGeeney received this Agreement on the
Separation Date and has twenty one (21) calendar days from such date to review,
discuss and seek legal counsel although he may sign it prior to the expiration
of such period if he so chooses.  Upon
accepting the terms of the Agreement and signing it, he has the right to revoke
the Agreement within seven (7) calendar days after signing it.  McGeeney represents and agrees that if he
wishes to revoke this Agreement, McGeeney will immediately notify the CEO of
ARC, Scott D. Jackson, at 600 

 

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Grant Street, Suite 900, Denver, CO 80203, phone (303)
383-7501, by telephone and in writing, signed by McGeeney, by no later than
5:00 p.m. Mountain Time on the seventh (7) day of the revocation period.  If no such revocation occurs, Full Acceptance
of this Agreement will occur on the eighth day after Mr. McGeeney signs his
Agreement.  McGeeney represents and
agrees that in executing this Agreement he will not rely on any statement not
set forth herein which may have been made by any ARC Releasees with respect to
the subject matter, basis or effect of this Agreement.  McGeeney shall not be entitled to receive any
payments or benefits under this Agreement until Full Acceptance.  McGeeney agrees that changes made to this
Agreement since the Separation Date do not cause the twenty-one day review
period to restart and he waives any additional twenty-one day review period
beyond the initial review period that began on the Separation Date.  Unless accepted by the twenty first (21) day
after the Separation Date, the offer of this Agreement shall be withdrawn, and
McGeeney shall have no right to receive any payments or benefits under this
Agreement.

13.           Entire Agreement.  This Agreement sets forth the entire
agreement and under­standing between McGeeney and ARC and merges and supersedes
all prior discussions, agreements, arrangements, negotiations, discussions,
representations and understandings of every kind and nature, written or oral,
between McGeeney and ARC.  No provision
of this Agreement may be modified or discharged unless such modification or
discharge is authorized and agreed to in writing, signed by McGeeney and ARC.

14.           Severability.  The provisions of this Agreement are
severable, and if any part of it is found unenforceable, the other paragraphs,
sections and provisions shall remain full, valid and enforceable.  In addition, if any one or more of the provisions
contained in this Agreement shall be held to be excessively broad as to
duration, geographic scope, activity or subject matter, such provision shall be
construed by limiting and reducing it so as to be enforceable to the maximum extent
allowed by law.

15.           Governing Law.  This Agreement and all rights, duties and
remedies hereunder shall be governed by and construed and enforced in
accordance with the laws of the State of Colorado, without reference to its
conflict of law rules.  This Agreement
may be executed in two or more counterparts, each of which shall be deemed an
original but all of which together shall constitute one and the same
instrument.

16.           Jurisdiction.  The parties agree (a) to submit to the
jurisdiction of the federal and state courts of the State of Colorado, which
shall be the exclusive jurisdictions, in connection with any dispute which may
arise between the parties including, without limitation, any dispute relating
this Agreement and (b) not to assert improper or inappropriate venue as a defense
to any such action.

17.           Counterparts.  This Agreement may be executed in one or more
counterparts, each of which shall be deemed to be an original but all of which
together will constitute one and the same instrument.

 

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  AFFORDABLE
  RESIDENTIAL COMMUNITIES INC.,

  	
   

  	
  ARC
  MANAGEMENT SERVICES, INC.,

  
	
  a
  Maryland Corporation

  	
   

  	
  a
  Delaware corporation

  

 

	
   

  	
   

  	
   

  	 

	
  By:

  	
  /s/
  Scott D. Jackson

  	
   

  	
  By:

  	
  /s/
  Scott D. Jackson

  	 

	
  Its:

  	
  Chairman
  and Chief Executive Officer

  	
   

  	
  Its:

  	
  Manager
  

  	 

	
   

  	
   

  	
   

  	 

	
  Agreed
  to and Accepted:

  	
   

  	 

	
   

  	
   

  	
   

  	 

	
  /s/
  George W. McGeeney

  	
   

  	
  October
  26, 2004

  
	
  GEORGE
  W. MCGEENEY

  	
   

  	
  Date

  
										

 

 

 

 

6Exhibit 10.1

 

EMPLOYMENT AGREEMENT

 

This AGREEMENT is
entered into by and between Fossil, Inc., a Delaware corporation (the
“Company”), and Harold S. Brooks (the “Executive”), dated as of the 31st
day of October 2004 (the “Effective Date”).

 

WHEREAS,
the Company has determined that it is in the best interests of the Company to
employ the Executive as the President, Watch Division of the Company and the
Executive desires to serve the Company in that capacity pursuant to the terms
set forth herein.

 

NOW, THEREFORE,
IT IS HEREBY AGREED AS FOLLOWS:

 

1.             Employment
Period.  The Company shall employ the Executive, and
the Executive shall serve the Company, on the terms and conditions set forth in
this Agreement, during the employment period which shall begin on the Effective
Date and continue for two (2) years from the Effective Date unless terminated
earlier pursuant to the terms of this Agreement (the “Employment Period”).  Upon the expiration of the Employment Period,
Executive’s continued employment by the Company, if any, shall be as an
employee-at-will.

 

2.             Position
and Duties. The Executive shall serve
as President, Watch Division of the Company and in appropriate positions in the
subsidiaries and affiliates of the Company, with the duties, functions,
responsibilities and authority customarily associated with such positions. The
Executive will devote all of his working attention and time to the business and
affairs of the Company, excluding any periods of vacation and sick leave to
which Executive is entitled; provided, however, that Executive may devote a
reasonable amount of time to service in respect to charitable and/or community
service organizations and projects, to the extent that such service does not
materially interfere with Executive’s fulfillment of his duties hereunder or
otherwise violate this Agreement.

 

3.             Compensation.

 

(a)  Salary.  From the Effective Date through the end of
the Employment Period, the Executive shall receive an annual base salary (the
“Salary”) of $390,000, less lawful withholding, payable in accordance with the Company’s normal payroll
practices for executives. Executive will receive an annual performance review
in accordance with the Company’s standard practice and may receive a
corresponding Salary increase at such time, as well as additional stock options
and restricted stock, all in the Company’s sole discretion. Any new salary due
to any such increase will thereafter be deemed the “Salary” for purposes of
this Agreement.

 

(b)  Signing Bonus.  Executive shall receive a signing bonus in
the amount of $125,000 payable on or about the Effective Date.

 

(c)  Options.  On the Effective Date, the Executive shall be
granted an option (the “Options) to acquire up to 60,000 shares of common stock
of the Company (the “Common Stock”) with a strike price equal to the closing
price of the Common Stock on the date of the grant.  The Options shall vest with respect to 20% of
the Options per year over a five year period, cumulatively, subject, however,
to the terms and conditions of the 2004 Fossil Long-Term 

 

 

Incentive
Plan, attached hereto as Exhibit A, and the stock option award agreement with
respect to such Options substantially in the form attached hereto as Exhibit B.

 

(d) 
Restricted Stock.  On the
Effective Date, the Executive shall receive a grant of 30,000 shares of Common
Stock (the “Restricted Stock”).  The
Restricted Stock shall bear a legend restricting transfer of the
certificate until the Restricted Stock has vested.  The Restricted Shares granted pursuant to
this Agreement shall vest and become transferable with respect to 20% of the
total number of Restricted Shares as of each of the first through the fifth
anniversaries of the date of the grant, cumulatively, subject, however, to the
terms and conditions of the the 2002 Restricted Stock Plan, attached hereto as
Exhibit C, and the Restricted Stock Award Agreement substantially in the form
attached hereto as Exhibit D.

 

(e)           Other Benefits.  Executive shall be entitled to
participate in the Company’s 401-k Plan, applicable fringe benefit programs and
other benefit plans, policies and programs of the Company applicable to
Executive, as may be amended in the sole discretion of the Company from time to
time. Executive shall be entitled to four weeks of vacation, effective and vested
immediately, and four weeks of vacation effective and vested as of each
anniversary of the Effective Date.

 

(f)            Relocation Expenses.  Relocation expenses shall be
governed by the Relocation Agreement between Company and Executive attached
hereto as Exhibit E.

 

(g)           Cobra Reimbursement.  The Company shall reimburse the
Executive the cost of COBRA less the cost of the Company’s health plan
selection until the Executive is eligible to participate in the Company’s
health plan.

 

(h)           Programs, Procedures and Policies.   Executive
will comply with and be bound by the Company’s applicable current and future
programs, procedures, plans and policies, including the 2002 Restricted Stock
Plan and 2004 Long- Term Incentive Plan, all of which may be amended in the
sole discretion of the Company from time to time, except to the extent such
programs, procedures, plans or policies are contrary to the terms and
conditions of this Agreement.

 

4.             Termination
of Employment.

 

(a)  By the Company with Cause.  The Company may terminate the Executive’s
employment during the Employment Period with Cause at any time, upon written
notice to the Executive setting forth in reasonable detail the nature of such
Cause.  For purposes of this Agreement, “Cause”
means:

 

(i)  the willful and continued failure by
Executive substantially to perform his duties with the Company (other than any
such failure resulting from disability or other causes beyond Executive’s
reasonable control) or willful and continued violation,  disregard or failure to carry out reasonable
instructions or policies established by the CEO and/or Board of Directors of
Company with respect to the operation of the 

 

2

 

Company’s
business and affairs after 30 days written notice and reasonable opportunity to
cure such matter; or

 

(ii)  the
willful engaging by Executive in conduct that is demonstrably and materially
injurious to the Company, monetarily or otherwise or intentional dishonesty,
including, but not limited to, fraud or falsification of records, or dishonesty
in dealing with Company’s customers or vendors that is demonstrably and
materially injurious to the Company.  To
the extent such matters are capable of being cured, the Company shall first
give the Executive notice and a reasonable opportunity to cure; provided,
however, the repayment of embezzled funds shall not be considered a cure; or

 

(iii)  the
material failure of Executive to comply with the terms and conditions of this
Agreement after notice and a reasonable opportunity to cure such matter; or

 

 (iv)  the breach of Executive’s fiduciary duty
and/or duty of loyalty to Company, after notice and a reasonable opportunity to
cure such matter, which is demonstrably and materially injurious to the
Company.

 

(b)           Termination by the Company Without Cause. 
The Company may terminate the Executive’s employment without Cause upon
30 days’ written notice provided; however, if the Company terminates the
Executive’s employment without Cause, the Company shall have the obligations set
forth in Section 5 of this Agreement.

 

(c)           Voluntarily by the Executive.  The Executive may voluntarily terminate his
employment at any time during the Employment Period by giving not less than 90
days prior written notice thereof to the Company.  The Executive may also terminate his
employment hereunder after giving the Company written notice of not less than
90 days after an occurrence or an event which constitutes Good Reason.  Good Reason shall mean:

 

(i)  a reduction in annual base salary;

 

(ii)  a failure by the Company to provide fringe
benefits comparable to those offered the Executive’s peer executives at the
Company;

 

(iii)  the failure of the Company to obtain by
operation of law or otherwise the assumption of its obligations to perform this
Agreement from any successor to the Company or to all or substantially all of
the assets of the Company; or

 

(iv)  a relocation of the Executive’s worksite by
the Company to a location which increases the distance from the Executive’s
home to his worksite by more than 50 miles.

 

(d)           Noncompetition
Agreement.  Without the prior written
consent of the Company, Executive shall not, for so long as he is employed by
Employer and thereafter for a period of two (2) years, directly or indirectly,
either as an individual, a partner or a joint venturer, or in any other
capacity, in the continental United States, (i) invest (other than investments
in publicly-owned companies which constitute not more than 1% of the voting
securities of any such company) or engage in any business that is competitive
with the business of Company, (ii) accept 

 

3

 

employment with or render
services to a competitor of Company as a director, officer, agent, employee or
consultant, (iii) contact, solicit or attempt to solicit or accept business
from any (a) customers of Company with respect to products that Company offers
now or anytime during the Executive’s employment with the Company or (b) person
or entity whose business Company is soliciting with respect to products that
Company offers now or anytime during the Executive’s employment with the
Company, or (iv) take any action inconsistent with the fiduciary relationship
of Executive and Company.  Executive
expressly agrees that the scope of Company’s trade area presently encompasses
the continental United States and that the restrictions contained herein are
reasonable under the circumstances.  A
business shall be competitive with that of Company if such business involves
primarily the design, manufacturing or marketing of any fashion accessories,
including but not limited to, watches, handbags, belts, sunglasses, small
leather goods, or any other product that is designed, manufactured or marketed
by Company at the time of termination of Executive’s employment by the Company.

 

The Company and Executive agree and stipulate that the agreements and
covenants not to compete contained in this Section 4 hereof are fair and
reasonable in light of all of the facts and circumstances of the relationship
between Executive and the Company; however, Executive and the Company are aware
that in certain circumstances courts have refused to enforce certain terms of
agreements not to compete.  Therefore, in
furtherance of, and not in derogation of the provisions of this Section 4, the
Company and Executive agree that in the event a court should decline to enforce
any terms of any of the provisions of this Section 4, that Section 4 shall be
deemed to be modified or reformed to restrict Executive’s competition with the
Company to the maximum extent, as to time, geography and business scope, which
the court shall find enforceable; provided, however, in no event shall the
provisions of this Section 4 be deemed to be more restrictive to Executive than
those contained herein.

 

5.             Obligations of the Company on
Termination.

 

(a)  If the
Executive’s employment is terminated during the Employment Period (i) by the
Company without Cause, or (ii) due to Executive resigning because of Good
Reason or (iii) the Company materially fails to comply with the terms and
conditions of this Agreement after notice from Executive and a reasonable
opportunity to cure such matter, upon execution by Executive of the Company’s
settlement agreement and general release, (A) the Company shall pay to the
Executive within 10 days after the Date of Termination (“Date of Termination”
shall be defined as the date on which Executive’s employment with the Company
is terminated by Executive or Company), an amount equal to the sum of any
portion of the Salary and any other compensation earned for the period up to
the Date of Termination that has not yet been paid and the cash equivalent of
any accrued but unused vacation, (B) the Company shall continue to pay the
Executive Salary on regular Company pay dates for the balance of the two year
Employment Period or one year from Date of Termination, whichever period is
greater and provide medical, life and disability coverage, under the same
conditions as exist at the time of termination, for a six (6) month period beginning
on the Date of Termination, (C) notwithstanding anything set forth in any
Restricted Stock Plan or Restricted Stock Award Agreement, ownership in the
30,000 shares of Restricted Stock described in this Agreement, shall vest only
to the extent such ownership is vested on the Date of Termination or shall vest
20% , whichever amount is greater,

 

4

 

and (D)
notwithstanding anything to the contrary in any stock option agreement, plan or
Stock Option Award Agreement, the stock options to acquire 60,000 shares
granted to the Executive described in this Agreement shall vest only to the
extent such ownership is vested on the Date of Termination or shall vest 20% ,
whichever amount is greater.

 

(b)           Cause; Voluntary
Termination.  If the Executive’s
employment is terminated (i) for Cause by the Company, or (ii) by the Executive
voluntarily during the Employment Period, the Company shall pay the Executive,
within 10 days after the Date of Termination, only a lump-sum cash amount equal
to the sum of any portion of the Salary and any other compensation earned for
the period up to the Date of Termination that has not yet been paid, plus the
cash equivalent of any accrued but unused vacation, and the Options and Restricted
Stock shall cease to vest upon such termination under this Section 5(b).

 

(c)           In addition to
the payments and benefits to which the Executive or the Executive’s estate may
be entitled hereunder, the Executive shall be entitled to receive any vested or
other benefits to which he may be entitled pursuant to the terms and conditions
of the Company’s 401-k Plan and any Company Life, Disability or Health
Insurance Plan in which he may participate, and any other amounts due under
this Agreement.

 

(d)           Death or Disability.  In the event
the Executive’s employment is terminated due to the Executive’s Death or
Disability (Disability shall be occur if Executive shall become, because
of illness or incapacity, unable to perform the essential functions of his job
under this Agreement with or without reasonable accommodation for a continuous
period of ninety (90) days during the Employment Period), (i) the Company shall pay the Executive or Executive’s estate 10 days
after the Date of Termination a lump-sum cash amount equal to the sum of any
portion of the Salary and any other compensation earned for the period up to
the Date of Termination that has not yet been paid, plus the cash equivalent of
any accrued but unused vacation; (ii) the Executive’s interest in the Company’s
2002 Restricted Stock Plan, 2004 Long-Term Incentive Plan and other plans, if
any, shall be governed by the respective plan documents and/or award agreements
then in effect as appropriate. In addition to the foregoing, in the event of
termination of employment due to Disability, the Company shall continue to pay
the Executive Salary for one year from the Date of Termination under this
Section 5(d) and provide medical, life, and disability coverage, under the same
conditions as exist at the time of termination, for a 6 month period beginning
on the Date of Termination;

 

6.             Confidential
Information.

(a)           Company
Information, Training and Goodwill. 
Concurrently upon the commencement of Executive’s employment, the
Company agrees and covenants to: 
(1) provide to Executive Confidential Information of the Company
that will enable Executive to optimize the performance of Executive’s duties to
the Company; (2) provide Executive with specialized training; and
(3) provide Executive with goodwill support such as expense reimbursements
in accordance with Company policy limits, Confidential Information, and/or
contact with clients, customers or business associates, in order to help
Executive develop goodwill for the Company. 
The foregoing is not contingent upon Executive’s continued employment
for any length of time, but is contingent upon Executive’s full compliance with
the restrictions contained herein.  

 

5

 

Executive
agrees at all times during the term of Executive’s employment and thereafter to
hold in strictest confidence, and not to use, except for the benefit of the
Company, or to disclose to any person, firm or corporation without written
authorization of the Company’s Board of Directors, any of the Company’s Confidential
Information.  Executive understands that
“Confidential Information” means any information that relates to the
Company’s actual or anticipated business or research and development, technical
data, trade secrets or know-how, including, but not limited to, research,
product plans or other information regarding the Company’s products or services
and markets therefor, customer lists and customers (including, but not limited
to, the Company’s customers on whom Executive called or with whom Executive became
acquainted during the term of Executive’s employment), software, developments,
inventions, processes, formulas, technology, designs, drawings, engineering,
hardware configuration information, marketing, finances or other business
information.  Executive further
understands that Confidential Information does not include any of the foregoing
items that is or becomes publicly known through no wrongful act or omission of
Executive or of others who were under confidentiality obligations as to the
item or items involved.  Executive acknowledges that the Company would
not employ him or provide him with access to its Confidential Information but
for his covenants or promises contained in this Section.

 

(b)           Third-Party
Information.  Executive acknowledges
that Company has received and in the future will receive from third parties
their confidential information subject to a duty on Company’s part to maintain
the confidentiality of this information and to use it only for certain limited
purposes.  Executive agrees that he owes
Company and these third parties, during his mployment with the Company and
thereafter, a duty to hold all such confidential information in the strictest
confidence and not to disclose or use it, except as necessary to perform his
obligations hereunder and as is consistent with Company’s agreement with third
parties.

 

7.             Inventions.

(a)           Inventions
Retained and Licensed.  Executive has
attached hereto as Exhibit F a list describing all inventions,
original works of authorship, developments, improvements and trade secrets that
(i) were made by Executive prior to his employment with the Company,
(ii) belong to Executive, (iii) relate to the Company’s proposed
business, products or research and development, and (iv) are not assigned
to the Company hereunder (collectively, “Prior Inventions”); or, if no
such list is attached, Executive represents that there are no such Prior
Inventions.  Executive agrees that he
will not incorporate, or permit to be incorporated, any Prior Invention owned
by Executive or in which he has an interest into a Company product, process or
service without the Company’s prior written consent.  Notwithstanding the foregoing sentence, if,
in the course of Executive’s employment with the Company, Executive
incorporates into a Company product, process or service a Prior Invention owned
by Executive or in which Executive has an interest, Executive hereby grants to
the Company a nonexclusive, royalty-free, fully paid-up, irrevocable,
perpetual, worldwide license to make, have made, modify, use and sell such
Prior Invention as part of or in connection with such product, process or
service, and to practice any method related thereto.

 

(b)           Assignment
of Inventions.  Executive agrees that
he will promptly make full written disclosure to the Company, will hold in
trust for the sole right and benefit of the Company, and hereby assign to the
Company, or its designee, all his right, title, and interest in 

 

6

 

and to
any and all inventions, original works of authorship, developments, concepts,
improvements, designs, discoveries, ideas, trademarks or trade secrets, whether
or not patentable or registrable under copyright or similar laws, which
Executive may solely or jointly conceive or develop or reduce to practice, or
cause to be conceived or developed or reduced to practice, during the period of
time he is in the employ of the Company (collectively, “Inventions”),
except as provided in Section 7(f) below.  Executive further acknowledges that all original
works of authorship which are made by Executive (solely or jointly with others)
within the scope of and during the period of his employment with the Company
and which are protectable by copyright are “works made for hire” as that term
is defined in the United States Copyright Act. 
Executive understands and agrees that the decision whether or not to
commercialize or market any Invention is within the Company’s sole discretion
and for the Company’s sole benefit and that no royalty will be due to Executive
as a result of the Company’s efforts to commercialize or market any such
Invention.

 

(c)           Inventions
Assigned to the United States. 
Executive agrees to assign to the United States government all his
right, title, and interest in and to any and all Inventions whenever such full
title is required to be in the United States by a contract between the Company
and the United States or any of its agencies.

 

(d)           Maintenance
of Records.  Executive agrees to keep
and maintain adequate and current written records of all Inventions during the
term of his employment with the Company. 
The records will be in the form of notes, sketches, drawings and any
other format that may be specified by the Company.  The records will be available to and remain
the Company’s sole property at all times.

 

(e)           Patent
and Copyright Registrations. 
Executive agrees to assist the Company, or its designee, at the
Company’s expense, in every proper way to secure the Company’s rights in any
Inventions and any copyrights, patents, mask work rights or other intellectual
property rights relating thereto in any and all countries, including, but not
limited to, the disclosure to the Company of all pertinent information and data
with respect thereto, the execution of all applications, specifications, oaths,
assignments and all other instruments that the Company deems necessary in order
to apply for and obtain such rights and in order to assign and convey to the
Company, its successors, assigns, and nominees the sole and exclusive rights,
title and interest in and to such Inventions, and any copyrights, patents, mask
work rights or other intellectual property rights relating thereto.  Executive further agrees that his obligation
to execute or cause to be executed, when it is in Executive’s power to do so,
any such instrument or papers shall continue after the termination of this
Agreement.  If the Company is unable
because of Executive’s mental or physical incapacity or for any other reason
after a reasonable attempt to obtain his signature to apply for or to pursue
any application for any United States or foreign patents or copyright
registrations covering any Inventions or original works of authorship assigned
to the Company as above, then Executive hereby irrevocably designates and
appoints the Company and its duly authorized officers and agents as Executive’s
agent and attorney in fact, to act for and in his behalf and stead to execute
and file any such applications and to do all other lawfully permitted acts to
further the prosecution and issuance of letters patent or copyright
registrations thereon with the same legal force and effect as if executed by
Executive.

 

7

 

(f)            Exception
to Assignments.  Executive
understands that the provisions of this Agreement requiring assignment of
Inventions to the Company do not apply to any Invention that Executive has
developed entirely on his own time without using the Company’s equipment,
supplies, facilities, trade secret information or Confidential Information (an
“Other Invention”) except for those Other Inventions that either
(i) relate at the time of conception or reduction to practice of such
Other Invention to the Company’s business, or actual or demonstrably
anticipated research or development of the Company, or (ii) result from
any work that Executive performed for the Company.  Executive will advise the Company promptly in
writing of any Invention that Executive believes constitutes an Other Invention
and is not otherwise disclosed on Exhibit F.  Executive agrees that he will not
incorporate, or permit to be incorporated, any Other Invention owned by
Executive or in which Executive has an interest into a Company product, process
or service without the Company’s prior written consent.  Notwithstanding the foregoing sentence, if,
in the course of Executive’s employment with the Company, Executive
incorporates into a Company product, process or service an Other Invention
owned by Executive or in which Executive has an interest, Executive hereby
grants to the Company a nonexclusive, royalty-free, fully paid-up, irrevocable,
perpetual, worldwide license to make, have made, modify, use and sell such
Other Invention as part of or in connection with such product, process or
service, and to practice any method related thereto.

 

8.             Solicitation
of Executives.  Executive agrees that for
a period of twelve (12) months immediately following the termination of
Executive’s relationship with the Company for any reason (whether with or
without Cause, for Good Reason, at the option either of the Company or
Executive, with or without notice), Executive will not, either directly or
indirectly, solicit, induce, recruit or encourage any of the Company’s
Executives to leave their employment or contractors to terminate their
relationship with the Company, or hire or take away such Executives or
contractors, or attempt to solicit, induce, recruit, encourage, hire or take
away Executives or contractors of the Company, either for Executive or for any
other person or entity.

 

9.             Miscellaneous.

 

(a)           The captions of this Agreement are not part of the
provisions hereof and shall have no force or effect.  This Agreement may not be amended or modified
except by a written agreement executed by the parties hereto or their
respective successors and legal representatives.

 

(b)           This Agreement is
personal to the Executive and, without the prior written consent of the
Company, shall not be assignable by the Executive otherwise than by will or the
laws of descent and distribution. This Agreement shall inure to the benefit of
and be enforceable by the Executive’s legal representatives.  This Agreement shall inure to the benefit of
and be binding upon the Company and its successors and assigns. The Company
shall not assign this Agreement, except to a successor, without the prior
written consent of the Executive, which consent shall not be unreasonably
withheld.

 

(c)           The
invalidity or unenforceability of any provision of this Agreement shall not
affect the validity or enforceability of any other provision of this Agreement.
If any provision of this Agreement shall be held invalid or unenforceable in
part, the remaining portion of such 

 

8

 

provision, together with all other provisions of this Agreement, shall
remain valid and enforceable and continue in full force and effect to the
fullest extent consistent with law.

 

(d)           Notwithstanding
any other provision of this Agreement, the Company may withhold from amounts
payable under this Agreement all federal, state, local and foreign taxes that
are required to be withheld by applicable laws or regulations.

 

(e)           The
Executive’s or the Company’s failure to insist upon strict compliance with any
provision of, or to assert any right under, this Agreement shall not be deemed
to be a waiver of such provision or right or of any other provision of or right
under this Agreement.

 

(f)            The Executive
and the Company acknowledge that this Agreement, the Restricted Stock Award
Agreement and the Stock Option Award Agreement supersede any other agreement,
whether written or oral, between them concerning the subject matter hereof,
including any prior employment agreement, severance agreement or plan, and
change of control agreement or plan.

 

(g)           This Agreement
may be executed in several counterparts, each of which shall be deemed an
original, and said counterparts shall constitute but one and the same
instrument.

 

(h)           GOVERNING LAWS AND VENUE.  THE RIGHTS AND OBLIGATIONS OF THE PARTIES
HEREUNDER SHALL BE INTERPRETED, CONSTRUED AND ENFORCED IN ACCORDANCE WITH THE
LAWS OF THE STATE OF TEXAS, WITHOUT REGARD TO ITS CHOICE OF LAW
PRINCIPLES.  ALL MATTERS LITIGATED BY,
AMONG OR BETWEEN ANY OF THE PARTIES THAT INVOLVE THIS AGREEMENT OR ANY RELATED
MATTER HEREUNDER SHALL BE BROUGHT ONLY IN A COURT OF COMPETENT JURISDICTION IN
DALLAS COUNTY, TEXAS.

 

(i)            This
Agreement constitutes the entire agreement between the parties with respect to
the matters contained herein.

 

(j)            Executive
represents and warrants that he has not as of the execution of this Agreement
assumed any obligations inconsistent with those contained herein.

 

(k)           Executive Acknowledgment.  Executive acknowledges that he has had the
opportunity to consult legal counsel in regard to this Agreement, that he has
read and understands this Agreement, that he is fully aware of its legal
effect, and that he has entered into it freely and voluntarily and based on his
own judgment and not on any representations or promises other than those
contained in this Agreement.

 

(l)            Notices.  Any notice or other communication under this
Agreement must be in writing and shall be effective upon delivery by hand or
three (3) business days after deposit in the United States mail, postage
prepaid, certified or registered, and addressed to Company or to Executive at the
corresponding address below.  Executive
shall be obligated to notify Company 

 

9

 

in writing of any change in his address.  Notice of change of address shall be
effective only when done in accordance with this Section 9.

 

	
   

  	
  Company’s Notice Address:

  
	
   

  	
   

  	
  Fossil

  
	
   

  	
   

  	
  2280
  N. Greenville Ave.

  
	
   

  	
   

  	
  Richardson,
  Texas 75082

  
	
   

  	
   

  	
  Attention:
  General Counsel

  
	
   

  	
   

  	
   

  
	
   

  	
  Executive’s
  Notice Address:

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  At
  the address listed in Company’s payroll records

  
	
   

  	
   

  	
   

  
	
   

  	
  With
  a copy to:

  
	
   

  	
  Ronald
  A. Dweck, Esquire

  
	
   

  	
  Paley,
  Rothman, Goldstein, Rosenberg, Eig & Cooper, Chtd.

  
	
   

  	
  4800
  Hampden Lane, Seventh Floor

  
	
   

  	
  Bethesda,
  Maryland 20814

  

 

(m)          This Agreement shall not be construed for or
against either party as a result of the initial preparation or drafting by a
party of any provision hereof.

 

IN
WITNESS WHEREOF, the Executive has hereunto set the Executive’s hand, and the
Company has caused this Agreement to be executed in its name on its behalf, all
as of the day and year first above written.

 

 

	
   

  	
   

  	
   

  
	
  Harold
  S. Brooks, Executive

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
  FOSSIL,
  INC.

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
  By:

  	
   

  	
   

  	
   

  
	
   

  	
  Kosta
  Kartsotis, President and CEO

  	
   

  
					

 

10

 

Exhibit “A”

 

11

 

Exhibit “B”

 

12

 

Exhibit “C”

 

13

 

Exhibit “D”

 

14

 

Exhibit “E”

 

15

 

Exhibit “F”

 

16

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