Document:

AMENDMENT NUMBER TWO

TO THE

1993 LONG-TERM INCENTIVE PLAN

OF

FOSSIL, INC.

 
The following Amendment to the 1993 Long-Term Incentive Plan of Fossil, Inc. (The “Incentive Plan”), as authorized by the Board of Directors of Fossil, Inc. (the “Company”), is adopted as of the effective date specified herein:
 
The first sentence of paragraph 4 of the Incentive Plan is amended to read as follows:
 
“Common Stock Available for Award.  There shall be available for Awards granted wholly or partly in Common Stock  (including rights or options which may be exercised for or settled in Common Stock) during the term of this Plan an aggregate of 3,525,000 shares of Common Stock.”
 
This amendment shall become effective immediately upon the approval of the Amendment by the Stockholders of the Company at the 1998 Annual Meeting of Stockholders.

 

	 
	Adopted this 3rd day of March 1998.

	 
	 

	 
	 

	 
	Fossil, Inc.

	 
	 

	 
	 

	 
	By:
	               /s/ T.R. Tunnell
	 

	 
	 
	               T.R. Tunnell

	 
	 
	        Senior Vice President, Development,

       Chief Legal Officer & SecretaryAMENDMENT NUMBER ONE

TO THE

1993 NONEMPLOYEE DIRECTOR STOCK OPTION PLAN

OF

FOSSIL, INC.

 

The following
Amendment to the 1993 Nonemployee Director Stock Option Plan of Fossil, Inc.
(the “Plan”), as authorized by the Board of Directors of Fossil, Inc. (the
“Company”), is adopted as of the effective date specified herein:

 

Notwithstanding
the provisions of paragraph 13 of the Plan, grants of Options under the Plan
commencing on January 1, 1999, shall not be adjusted for the 3-for-2
split of the Common Stock of the Company effected as a stock dividend on April 8,
1998 to all stockholders of record on March 25, 1998.

 

All other
terms and conditions of the Plan shall remain in full force and effect.

 

This amendment
shall become effective as of December 31, 1998

	
   

  
	
  Fossil, Inc. 

  
	 
	 

	 
	 

	
  By:

  	
  /s/ Tom
  Kartsotis

  	
   

  
	
   

  	
  Tom
  Kartsotis

  
	
   

  	
  Chairman and
  Chief Executive OfficerFOSSIL, INC. AND
AFFILIATES

DEFERRED COMPENSATION
PLAN

 

 

TABLE OF CONTENTS

 

	
  SECTION ONE

  	
  DEFINITIONS

  	
   

  
	
  1.1

  	
  “Addendum(s)”

  	
   

  
	
  1.2

  	
  “Account(s)”

  	
   

  
	
  1.3

  	
  “Installment Payment”

  	
   

  
	
  1.4

  	
  “Applicable Interest
  Rate”

  	
   

  
	
  1.5

  	
  “Beneficiary”

  	
   

  
	
  1.6

  	
  “Benefit”

  	
   

  
	
  1.7

  	
  “Board”

  	
   

  
	
  1.8

  	
  “Bonus”

  	
   

  
	
  1.9

  	
  “Business
  Day”

  	
   

  
	
  1.10

  	
  “Change of Control”

  	
   

  
	
  1.11

  	
  “Code”

  	
   

  
	
  1.12

  	
  “Committee”

  	
   

  
	
  1.13

  	
  “Company”

  	
   

  
	
  1.14

  	
  “Contributions”

  	
   

  
	
  1.15

  	
  “Deferred Payments”

  	
   

  
	
  1.16

  	
  “Deferred Payment Date”

  	
   

  
	
  1.17

  	
  “Designated Affiliate”

  	
   

  
	
  1.18

  	
  “Earnings”

  	
   

  
	
  1.19

  	
  “Effective
  Date”

  	
   

  
	
  1.20

  	
  “Election
  Form”

  	
   

  
	
  1.21

  	
  “Eligible Individual”

  	
   

  
	
  1.22

  	
  “Employee”

  	
   

  
	
  1.23

  	
  “Employer”

  	
   

  
	
  1.24

  	
  “Employer Contribution”

  	
   

  
	
  1.25

  	
  “Employer Account”

  	
   

  
	
  1.26

  	
  “Entry Date”

  	
   

  
	
  1.27

  	
  “ERISA”

  	
   

  
	
  1.28

  	
  “Final Deferral
  Filing Date”

  	
   

  
	
  1.29

  	
  “Investment Date”

  	
   

  
	
  1.30

  	
  “Lump Sum”

  	
   

  
	
  1.31

  	
  “Measurement
  Preferences”

  	
   

  
	
  1.32

  	
  “Participant”

  	
   

  
	
  1.33

  	
  “Plan”

  	
   

  
	
  1.34

  	
  “Plan Year”

  	
   

  
	
  1.35

  	
  “Quarter”

  	
   

  
	
  1.36

  	
  “Rules of
  General Application”

  	
   

  
	
  1.37

  	
  “Third-Party
  Recordkeeper”

  	
   

  
	
  1.38

  	
  “Salary”

  	
   

  
	
  1.39

  	
  “Salary Deferral
  Contributions”

  	
   

  
	
  1.40

  	
  “Salary Deferral
  Account”

  	
   

  
	
  1.41

  	
  “Separates” or
  “Separation”

  	
   

  
	
  1.42

  	
  “Trust”

  	
   

  

 

 

	
  1.43

  	
  “Valuation
  Date”

  	
   

  
	
  1.44

  	
  “Vest” or “Vesting”

  	
   

  
	
   

  	
   

  	
   

  
	
  SECTION TWO

  	
  ADMINISTRATION

  	
   

  
	
  2.1

  	
  Appointment of Committee.

  	
   

  
	
  2.2

  	
  Employer
  Duties

  	
   

  
	
  2.3

  	
  Authority of Committee.

  	
   

  
	
  2.4

  	
  Action by Committee.

  	
   

  
	
  2.5

  	
  Meetings of Committee.

  	
   

  
	
  2.6

  	
  Powers of
  Committee and Company.

  	
   

  
	
  2.7

  	
  Indemnification.

  	
   

  
	
  2.8

  	
  Bond and Expenses.

  	
   

  
	
  2.9

  	
  Reliance on Tables

  	
   

  
	
   

  	
   

  	
   

  
	
  SECTION THREE

  	
  PARTICIPATION

  	
   

  
	
   

  	
   

  	
   

  
	
  SECTION FOUR

  	
  CONTRIBUTIONS

  	
   

  
	
  4.1

  	
  Salary Deferral
  Contributions.

  	
   

  
	
  4.2

  	
  Crediting
  of Salary Deferral Contributions.

  	
   

  
	
  4.3

  	
  Employer Contributions.

  	
   

  
	
  4.4

  	
  Disposition of
  Contributions.

  	
   

  
	
   

  	
   

  	
   

  
	
  SECTION FIVE

  	
  PARTICIPANT’S
  ACCOUNTS AND INVESTMENTS

  	
   

  
	
  5.1

  	
  Establishment of Account.

  	
   

  
	
  5.2

  	
  Earnings Credited to
  Accounts.

  	
   

  
	
  5.3

  	
  Investment Direction.

  	
   

  
	
  5.4

  	
  Statements.

  	
   

  
	
   

  	
   

  	
   

  
	
  SECTION SIX

  	
  VESTING

  	
   

  
	
  6.1

  	
  Salary Deferral Account.

  	
   

  
	
  6.2

  	
  Employer Account.

  	
   

  
	
   

  	
   

  	
   

  
	
  SECTION SEVEN

  	
  DISTRIBUTION
  OF BENEFIT

  	
   

  
	
  7.1

  	
  Form and
  Timing of Distribution.

  	
   

  
	
  7.2

  	
  Election of Deferred
  Payments.

  	
   

  
	
  7.3

  	
  Installment Payments.

  	
   

  
	
  7.4

  	
  Change in Control.

  	
   

  
	
  7.5

  	
  Hardship Distribution.

  	
   

  
	
  7.6

  	
  In-Service Withdrawal.

  	
   

  
	
  7.7

  	
  Source of Distribution.

  	
   

  
	
   

  	
   

  	
   

  
	
  SECTION EIGHT

  	
  DESIGNATION
  OF BENEFICIARIES

  	
   

  
	
  8.1

  	
  Designation by
  Participant

  	
   

  
	
  8.2

  	
  Lack of Designation.

  	
   

  

 

 

	
  SECTION NINE

  	
  AMENDMENT
  AND TERMINATION

  	
   

  
	
   

  	
   

  	
   

  
	
  SECTION TEN

  	
  GENERAL PROVISIONS

  	
   

  
	
  10.1

  	
  No
  Assignment.

  	
   

  
	
  10.2

  	
  Incapacity.

  	
   

  
	
  10.3

  	
  Claims Procedure.

  	
   

  
	
  10.4

  	
  Final
  Resolution of Disputes Relating to Plan

  	
   

  
	
  10.5

  	
  Information Required.

  	
   

  
	
  10.6

  	
  Communications
  by, and Information from, Participant.

  	
   

  
	
  10.7

  	
  No Rights Implied.

  	
   

  
	
  10.8

  	
  Communications
  by Committee or Employer.

  	
   

  
	
  10.9

  	
  Interpretations
  and Adjustments.

  	
   

  
	
  10.10

  	
  No
  Liability for Good Faith Determinations.

  	
   

  
	
  10.11

  	
  No Employment Rights.

  	
   

  
	
  10.12

  	
  Withholding of Taxes.

  	
   

  
	
  10.13

  	
  Waivers.

  	
   

  
	
  10.14

  	
  Records.

  	
   

  
	
  10.15

  	
  Securities Laws.

  	
   

  
	
  10.16

  	
  Severability.

  	
   

  
	
  10.17

  	
  Captions and Gender.

  	
   

  
	
  10.18

  	
  CHOICE
  OF LAW.

  	
   

  
	
  10.19

  	
  Effective
  Date and Termination Date.

  	
   

  

 

 

FOSSIL, INC. AND AFFILIATES

DEFERRED
COMPENSATION PLAN

 

Fossil, Inc. hereby
establishes the Fossil, Inc. And Affiliates Deferred Compensation Plan to
give a select group of highly compensated employees the opportunity to defer a
portion of their compensation and possibly receive deferred employer
contributions.  For purposes of the Code,
the Employers intend this Plan to be an unfunded, unsecured promise to pay on
the part of each Employer.  For purposes
of ERISA, the Employers intend this Plan to be an unfunded plan solely for the
benefit of a select group of management or highly compensated employees of the
Employers for the purpose of qualifying the Plan for the “top hat” plan
exception under sections 201(2), 301(a)(3) and 401(a)(1) of ERISA.

 

SECTION ONE            DEFINITIONS

 

1.1           “Addendum(s)” shall mean, collectively, the pages which
are attached to this Plan document, and incorporated by reference, on which
shall be reflected the information described in Section 4.3.

 

1.2           “Account(s)” shall mean, collectively, the
Salary Deferral Account, and the Employer Account, maintained for each
Participant, except that when it shall be appropriate to refer to a particular
Account, reference shall be to that Account.

 

1.3           “Installment Payment” shall mean an annual distribution,
in cash, of the Participant’s Account balance over a period of years as
provided for in Subsections 7.2 and 7.3.

 

1.4           “Applicable Interest Rate” shall mean, for each day during a
period of reference (but computed without compounding), a percentage equal to
the product of (i), (ii) and (iii), where (i) is the sum of the one (1) year
London Interbank Offered Rate (“LIBOR”) as reported in the Wall Street Journal
as of (x) the first Business Day, plus (y) the last Business Day, occurring
during such period of reference, (ii) is fifty percent (50%), and (iii) is
a quotient of 1 divided by 360.

 

1.5           “Beneficiary” shall mean the person(s), entity or
entities designated by the Participant as the beneficiary of balance of his
Benefit.

 

1.6           “Benefit” shall mean the Vested amount
credited to the Participant’s Account at the time of reference.

 

1.7           “Board” shall mean the Board of Directors
of the Company.

 

1.8           “Bonus” shall mean amounts of compensation
paid by an Employer which is not regular salary, wages or commissions, and which
is determined to be a Bonus by the Committee.

 

 

1.9           “Business Day” shall mean, with respect to each
Measurement Preference, a day on which the exchange on which it is traded is
operating.

 

1.10         “Change of Control” shall mean the first to occur of
the following:

 

(a)           a dissolution or liquidation of the
Company; or

 

(b)           a merger or consolidation (other than
a merger effecting a re-incorporation of the Company in another state or any
other merger or a consolidation in which the shareholders of the surviving
corporation and their proportionate interests therein immediately after the
merger or consolidation are substantially identical to the shareholders of the
Company and their proportionate interests therein immediately prior to the
merger or consolidation) in which the Company is not the surviving corporation
(or survives only as a subsidiary of another corporation as a result of a
transaction in which the shareholders of the parent of the Company and their
proportionate interests therein immediately after the transaction are not
substantially identical to the shareholders of the Company and their
proportionate interests therein immediately prior to the transaction; provided,
however, that the Board may at any time prior to such a merger or consolidation
provide by resolution that there has been no Change in Control and that the
foregoing provisions of this parenthetical shall not apply if a majority of the
Board of Directors of such parent immediately after the transaction consists of
individuals who constituted a majority of the Board immediately prior to the
transaction);

 

(c)           a transaction in which any person
becomes the owner of fifty percent (50%) or more of the total combined voting
power of all classes of stock of the Company (provided, however, that the Board
may at any time prior to such transaction provide by resolution that there has
been no Change in Control and that this subparagraph (c) shall
not apply if such acquiring person is a corporation and a majority of the Board
of Directors of the acquiring corporation immediately after the transaction
consists of individuals who constituted a majority of the Board immediately
prior to the acquisition of such fifty percent (50%) or more total combined
voting power); or

 

(d)           any other transaction or series of
transactions which the Board determines has the effect of a Change in Control.

 

1.11         “Code” shall mean the Internal Revenue
Code of 1986, as amended.

 

1.12         “Committee” shall mean those persons designated
to administer the Plan pursuant to Section Two.

 

1.13         “Company” shall mean Fossil, Inc., a
Delaware corporation, and its successors and assigns.

 

 

1.14         “Contributions” shall mean, collectively, the
Salary Deferral Contributions, and the Employer Contributions, with respect to
each Participant, except that when it shall be appropriate to refer to a
particular Contribution, reference shall be to that Contribution.

 

1.15         “Deferred Payments” shall mean the payment of a
Participant’s Benefits as described in Section 7.2.

 

1.16         “Deferred Payment Date” shall mean the date as of which a
Participant’s Deferred Payments are made or commenced.

 

1.17         “Designated Affiliate” shall mean Fossil Partners, L.P.,
and each other entity of which fifty percent (50%) or more of its value or, in
the case of a corporation, of the total combined voting power of all classes of
stock, are held by the Company or another subsidiary, whether or not such
entity now exists or is hereafter organized or acquired by the Company or
another subsidiary, and which has been designated for participation herein by
the Committee.

 

1.18         “Earnings” shall mean the amounts notationally
credited or debited to a Participant’s Account based on changes in the value
(including, without limitation, unrealized appreciation or depreciation) of the
Participant’s Measurement Preferences, plus the amount, if any, attributable to
the crediting of the Applicable Interest Rate, all determined in accordance
with Rules of General Application.

 

1.19         “Effective Date” shall mean December 30, 1998.

 

1.20         “Election Form” shall mean a written form on which
the Participant may specify his  (i) Salary
Deferral Contribution for the Plan Year, (ii) Measurement Preferences, (iii) form
and timing of distribution of his Benefit, and (iv) such other matters as
shall be determined by the Committee at the time of reference.

 

1.21         “Eligible Individual” shall mean an employee of an
Employer who is (i) a member of a select group of management or highly
compensated employees, and (ii) designated by the Committee as eligible to
participate in the Plan.

 

1.22         “Employee” shall mean a common law employee of
the Employer.

 

1.23         “Employer” shall mean, collectively, the
Company and each of its Designated Affiliates.

 

1.24         “Employer Contribution” shall mean the amount, if any,
credited under the Plan by an Employer to an Eligible Participant, and
evidenced by an Addendum.

 

1.25         “Employer Account” shall mean the account maintained
for each Participant who has received an Employer Contribution, and which will
reflect the amount of such Employer Contribution and appropriate adjustments as
provided herein.

 

 

1.26         “Entry Date” shall mean February 1, 1999
for the 1999 Plan Year, and January 1st for each subsequent Plan Year;
except that, where the Employee is not an Eligible Individual on such February 1,
1999 or a later January 1st, it also shall mean July 1st; provided,
without limitation, that each Eligible Individual shall have a single Entry
Date with respect to each Plan Year.

 

1.27         “ERISA” shall mean the Employee Retirement
Income Security Act of 1974, as amended.

 

1.28         “Final Deferral Filing Date” shall mean the date that precedes
the date on which a Participant’s Deferred Payment is scheduled to begin by 24
months.

 

1.29         “Investment Date” shall mean the first Business Day
in each Quarter, except that it also shall mean an Entry Date (except that if
the Entry Date is not a Business Day, then the first Business Day following an
Entry Date) with respect to each Eligible Employee who first becomes a
Participant on such Entry Date.

 

1.30         “Lump Sum” shall mean a single distribution,
in cash, of a Participant’s Benefit.

 

1.31         “Measurement Preferences” shall mean the preferences
described in Subsection 5.3.

 

1.32         “Participant” shall mean an Eligible Individual
who participates in the Plan pursuant to Section Three.

 

1.33         “Plan” shall mean the Fossil, Inc.
and Affiliates Deferred Compensation Plan, as set forth in this document and
subsequent amendments.

 

1.34         “Plan Year” shall mean calendar year.

 

1.35         “Quarter” shall mean calendar quarter.

 

1.36         “Rules of General Application” shall mean those rules promulgated
by the Committee, in its sole discretion, from time to time with respect to the
matter of reference, but which will be applied in a similar manner to
Participants similarly situated.

 

1.37         “Third-Party Recordkeeper” shall mean the person or entity
selected by the Committee to maintain the records necessary to the
administration of the Plan.

 

1.38         “Salary” shall mean Participant’s regular
salary, wages, and commissions paid by an Employer, plus any amounts deferred
under sections 125 or 401(k) of the Code, plus any amounts under this Plan, but
excludes Bonuses, expense reimbursements and fringe benefits.

 

1.39         “Salary Deferral Contributions” shall mean the amounts described in
Subsection 4.1.

 

 

1.40         “Salary Deferral Account” shall mean the amount credited
under the Plan as a result of the Participant’s Salary Deferral Contributions,
and appropriate adjustments as provided herein.

 

1.41         “Separates” or “Separation” or similar shall mean a Participant’s
termination of employment with an Employer for any reason (including death or
disability).

 

1.42         “Trust” shall mean a trust which
substantially conforms to the model rabbi trust provided in section 5 of
the Internal Revenue Service’s Revenue Procedure 92-64, 1992-2 C.B.
422, that may be established between the Company and the trustee(s) named in
the Trust.

 

1.43         “Valuation Date” shall mean the last Business Day of
each Quarter.

 

1.44         “Vest” or “Vesting” or similar, shall mean the portion
of a Participant’s Employer Account which is nonforfeitable at the time of
reference.

 

SECTION TWO          ADMINISTRATION

 

2.1           Appointment of Committee. 
The Board shall appoint the Committee. 
The Board may change Committee membership at any time without cause, and
a member may resign by providing written notice to the Company.  Any vacancy in the membership of the
Committee may be filled by the Board.

 

2.2           Employer Duties. 
An Employer shall, upon request or as may be specifically required under
the Plan, furnish or cause to be furnished all of the information or
documentation in its possession or control that is necessary or required by the
Committee to perform its duties and functions under the Plan.

 

2.3           Authority of Committee. 
The Committee shall have the exclusive authority and responsibility for
administering the Plan in accordance with its terms.  All exercises of authority by the Committee
under this Plan shall be final, conclusive and binding, unless found by a court
of competent jurisdiction to be arbitrary and capricious.

 

2.4           Action by Committee. 
The Committee may elect a chairman who shall be a member of the
Committee and a secretary who may, but need not, be a member of the
Committee.  Any and all acts and
decisions of the Committee shall be by at least a majority of the then members,
but the Committee may delegate to any one or more of its members the authority
to sign notices or other documents on its behalf or to perform ministerial acts
for it, in which event any person may accept such notice, document or act
without questioning its having been authorized by the Committee.

 

2.5           Meetings of Committee. 
The Committee shall hold meetings upon such notice, at such place or
places, and at such time or times as it may from time to time determine;
provided, however, any decisions made or action taken pursuant to written
approval of a majority

 

 

of
the then members shall be sufficient; and provided, further, and without
limitation, that the Committee may take actions which have retroactive effect.

 

2.6           Powers of Committee and Company. The Committee shall have all powers
and discretion as may be necessary to discharge its duties and responsibilities
under this Plan, including, without limitation, the power, exercisable in its
sole discretion, (i) to interpret or construe the Plan, (ii) to make rules and
regulations for the administration of the Plan, (iii) to determine all
questions of eligibility, status and other rights of Participants,
beneficiaries and other persons, (iv) to confirm or reject each
Participants selection of Measurement Preferences, and (v) to resolve any
dispute which may arise under this Plan involving Participants or
beneficiaries.  The Committee may engage
agents to assist it and may engage legal counsel, who may be counsel for the
Company.

 

No member of the
Committee shall vote or act upon any matter which relates exclusively to  his own rights or benefits under this Plan,
and if all members of the Committee shall be disqualified, with regard to one
or more matters, the President of the Company shall appoint one or more
qualifying persons to be the Committee with regard to such matters.

 

2.7           Indemnification. Without limitation, including Section 10.10, the members of the Committee shall be
indemnified by the Company against any and all liabilities arising by reason of
any act, or failure to act, pursuant to the provisions of the Plan, including
expenses reasonably incurred in the defense of any claim relating to the Plan,
even if the same is judicially determined to be due to such member’s
negligence, but not when the same is judicially determined to be due to the
gross negligence or willful misconduct of such member.

 

2.8           Bond and Expenses. 
The Committee shall serve without bond unless state or federal statutes
require otherwise, in which event the Company shall pay the premium.  The expenses of the Committee shall be paid
by the Company.  Such expenses shall
include all expenses incident to the functioning of the Committee, including,
without limitation, litigation costs, fees of accountants, counsel and other
specialists and other costs of administering the Plan.

 

2.9           Reliance on Tables. 
In administering the Plan, the Committee shall be entitled to the extent
permitted by law to rely conclusively on all tables, valuations, certificates,
opinions and reports which are furnished by accountants, legal counsel or other
experts employed or engaged by the Committee.

 

SECTION THREE       PARTICIPATION

 

An Eligible Individual
will become a Participant either by filing an Election Form prior to his
Entry Date, or by being credited with an Employer Contribution, and will remain
a Participant until he receives the payment of his entire Benefit.  Being designated as an Eligible Individual
for one Plan Year does not entitle such Employee to continued status as an
Eligible Individual for subsequent Plan Years, but such person will remain an
Eligible Individual until notified in writing by the Committee of his removal
from that status and, following such removal, such

 

 

Employee shall not be
able to elect Salary Deferral Contributions on any Entry Date on which he is
not an Eligible Individual.

 

SECTION FOUR         CONTRIBUTIONS

 

4.1           Salary Deferral Contributions. 
An Employee who is an Eligible Individual on his Entry Date with respect
to a Plan Year may elect to defer from Salary any amount which is not less than
Five Thousand Dollars ($5,000) (prorated based on the remaining portion of the
Plan Year if the Participant’s Entry Date is not February 1, 1999 or a
subsequent January 1st) and not more than fifty percent (50%) of his
Salary; and may elect to defer from his Bonus up to one hundred percent (100%)
of his Bonus, in each case payable during the portion of the Plan Year
following such Entry Date, by filing an Election Form with the Committee
prior to such Entry Date.  Unless otherwise
determined by the Committee, the election to defer Salary must be designated as
a fixed dollar amount, and the election to defer with respect to the Bonus may
be designated in either a fixed dollar, or a percentage, amount.  Each Election Form shall continue to
apply to each later Entry Date until a new Election Form is filed;
provided, further, that only the last Election Form filed prior to an
Entry Date shall be effective.  If an
Eligible Individual has not filed an Election Form deferring a portion of
his Salary and/or Bonus on or before the Entry Date of reference, such Eligible
Individual shall be deemed to have elected not to defer any portion of his
Salary and/or Bonus with respect to the Plan Year in which such Entry Date
occurs.  Notwithstanding any provision
hereof to the contrary, the Committee may designate a special Entry Date with
respect to one or more Participants solely for purposes of permitting each such
Participant to elect to defer an additional amount from each such Participant’s
Bonus; provided, further, that such special Entry Date shall have no other
effect hereunder.

 

4.2           Crediting of Salary Deferral Contributions. 
The amount of a Participant’s Salary Deferral Contributions will be
deducted (i) from a Participant’s Salary on each payroll date during the
Plan Year of reference in an amount equal to the total Salary Deferral
Contribution divided by the number of payroll dates during the Plan Year of
reference following the Entry Date of reference, and (ii) from a Bonus on
the date of its payment in the full amount of Salary Deferral Contribution
elected to be deducted from such Bonus payments.  The portion of the Salary Deferral
Contribution amount which will be deducted from Salary shall be credited to the
Participant’s Salary Deferral Account as of the first Business Day following
the Entry Date or, if communicated to the Participant in writing on or before
such Entry Date, as of the payroll date on which deducted; and the full amount
of the Salary Deferral Contribution to be deducted from the Bonus shall be
credited to the Participant’s Salary Deferral Account on the date the Bonus is
(or would have been) paid.  In the event
a Participant’s Salary Deferral Account is credited with a Salary Deferral
Contribution before such amount is actually deducted from the Participant’s
Salary, and the Participant terminates employment during the Plan Year of
reference, such Participant shall forfeit an amount from his Salary Deferral
Account equal to the excess of (iii) the amount of Salary Deferral
Contribution credited to his Account with respect to such Plan Year, over (iv) the
aggregate amount of Salary Deferral Contribution actually deducted from his
Salary during such Plan Year, and such forfeited amount shall inure to the
benefit of the Employer in the manner determined by the Committee.

 

 

4.3           Employer Contributions. 
At any time on or after the Effective Date, in addition to the amount
described in Sections 4.1 and 4.2, an Employer may credit a Participant’s Employer Account
with such amount as it shall determine in its sole discretion.  The name of the Participant, the amount to be
credited, the date as of which it is to be credited, the rate of Vesting, and
such other matters as are required to be set forth (as determined by the
Employer in its sole discretion), shall be set forth on an Addendum; provided
that 100% of such amounts contributed for a Participant, and related Earnings,
shall be forfeited on such Participant’s Separation unless otherwise expressly
provided in an Addendum expressly relating to such Employer Contribution.

 

4.4           Disposition of Contributions. 
All Contributions shall be delivered to the Trust; provided, however,
that such delivery may cease, and the funds retained by the Employer,
effective  with respect to Contributions
made with respect to a Plan Year beginning after delivery of written notice of
such change to each Participant.

 

SECTION FIVE            PARTICIPANT’S ACCOUNTS AND
INVESTMENTS

 

5.1           Establishment of Account. 
The Committee shall establish separate Accounts for each Participant, to
which shall be credited or debited the Participant’s share of Contributions and
Earnings, and to which shall be debited the Account’s share of expenses and
distributions.

 

5.2           Earnings Credited to Accounts. 
Earnings on amounts credited to an Account shall be credited or debited
to such Account on each Business Day based on the value of the Account’s
Measurement Preferences on such Business Day, all in the manner determined by
the Committee in accordance with Rules of General Application.

 

5.3           Investment Direction. 
Effective as of each Investment Date, in accordance with Rules of
General Application, each Participant may select investments (“Measurement
Preferences”) from among the different investment alternatives which are made
available by the Committee, for existing balances in his Account and for future
Contributions, such selection of Measurement Preferences to be made in
increments of 5%, and such percentages to apply equally to the amount credited
to the Participant’s Account on the immediately preceding Valuation Date, and
to  Contributions credited to such
Account subsequent to such Valuation Date.  
No actual investments shall be made by Participants.  The Measurement Preferences, and the
Applicable Interest Rate, are only for the purpose of determining the Employer’s
payment obligation under the Plan and such Measurement Preferences do not
control any actual investments made by the Employer or the Trustee.

 

A participant may change
Measurement Preferences on the next Investment Date by contacting the
Third-Party Recordkeeper, either through filing a written Election Form or,
if available under the Rules of General Application, through the
Third-Party Recordkeeper’s voice response system not later than the 15th day of
the month preceding the month in which such Investment Date occurs.  Regardless of the method used to change the
Measurement Preferences, the Third-Party Recordkeeper shall send a confirmation
to the Committee verifying  the new

 

 

Measurement
Preferences.  The final Election Form (or
its equivalent) timely filed by the Participant prior to the Investment Date of
reference shall be controlling with respect to such Investment Date. If a
Participant has not timely filed an Election Form with respect to some or
all of the funds in his Account with respect to an Investment Date, he will be
credited with interest at the Applicable Interest Rate on such amount until the
first Investment Date with respect to which he has filed a timely Election Form with
respect to such amount.

 

Notwithstanding the
forgoing, the Committee shall have the power to reject some or all of the
selections of Measurement Preferences by any one or more Participants by
advising the affected Participant(s) and the Third-Party Recordkeeper in
writing of such rejection within 3 days of being receiving the notice described
in the preceding paragraph.  If the
Committee rejects a selection, notwithstanding any provision hereof to the
contrary, the portion of such Account(s) subject to such rejection shall earn
interest at the Applicable Interest Rate from the date specified in such
written rejection until the date as of which an approved investment in a
Measurement Preference is made.

 

5.4           Statements. 
As soon as administratively practicable following the close of each
Quarter, the Committee shall furnish each Participant with a statement setting
forth (i) the amount in his Account, (ii) the amount of
Contributions, separately showing the Salary Deferral Contributions and
Employer Contributions, credited to his Account during such Quarter, (iii) the
Earnings credited or debited to his Account for such Quarter, and (iv) any
debited charges to, or distributions from, 
his Account during such Quarter.

 

SECTION SIX              VESTING

 

6.1           Salary Deferral Account. 
Participant shall always be 100% Vested in the amounts credited to his
Salary Deferral Account.

 

6.2           Employer Account. 
Participant shall Vest in the amount credited to his Employer Account in
accordance with the Vesting Schedule set forth on the Addendum which
evidences such Employer Contribution, and otherwise shall be zero (0)
Vested.  Notwithstanding any other
provision in this Plan, a Participant’s Employer Account will become one
hundred percent (100%) Vested upon the date of a Change of Control.

 

SECTION SEVEN       DISTRIBUTION OF BENEFIT

 

7.1           Form and Timing of Distribution. 
Unless a Participant is entitled to a Deferred Payment, upon a
Participant’s Separation he shall receive a Lump Sum distribution within a
reasonable period of time, not to exceed sixty (60) days, after the Valuation
Date next following his Separation.  The
amount of such Lump Sum distribution shall be equal to his Benefit determined
as of the Valuation Date preceding the date of distribution.

 

 

7.2           Election of Deferred Payments. 
A Participant shall be entitled to a Deferred Payment if his Separation
is not by reason of his death, and if on his date of Separation (i) he has
attained the age of 55 and completed at least 5 Years of Service, and (ii) has
filed an Election Form on which he has (x) selected a Deferred Payment
Date, and (y) selected a form of payment. 
A Participant’s Deferred Payments may be made or commenced at any time,
after age 55 and prior to the later of age 65 or his Separation, and may be
paid either in a Lump Sum or in 5, 10, or 15 Installment Payments, as the
Participant shall select on the Election Form in effect on his Final
Deferral Filing Date, and only the last Election Form filed on or before
such Final Deferral Filing Date shall be effective.  Installment Payments shall be paid at such
time, during the first 30 days of each Plan Year, as shall be determined by the
Committee. If a Participant receiving an Installment Payment shall be
reemployed, all such Installment Payments shall cease during the period of his
reemployment, and shall resume (iii) during the first 30 days of the Plan
Year following his Separation, and (iv) shall be paid out in the same
number of installments as were remaining to be paid on the date of his
reemployment.

 

7.3           Installment Payments. 
If Participant elects a Deferred Payment in the form of  Installment Payments, each installment shall
be equal to the product of (i) his Benefit on the Valuation Date next
preceding the date of payment, multiplied by (ii) a fraction, the
numerator of which is one (1), and the denominator of which is the total number
of installments originally elected less the number of installments previously
paid.

 

7.4           Change in Control. 
Notwithstanding any other provision to the contrary, upon a Change of
Control, all Benefits hereunder (including, without limitation, Benefits
subject to Deferred Payment elections or which are being paid in Installment
Payments), shall be distributed to Participants in a Lump Sum as soon as
reasonably possible, but not more than 30 days, after such Change of
Control.  Notwithstanding the foregoing,
at any time prior to the date of a Change of Control, or with respect to each
Participant who is not notified in writing of an impending Change of Control at
least 14 days prior to the date of Change in Control, for a period of 14 days
after the date of notice of such Change of Control, a Participant may elect to
waive the provisions of this Section 7.4
with respect to such Change of Control and his Benefits will continue to be
deferred under the Plan as if such Change of Control had not occurred.

 

7.5           Hardship Distribution. Upon the Committee’s determination
(following petition by the Participant) that the Participant has suffered a “severe
financial hardship”, the Committee shall distribute to Participant that portion
of such Participant’s Benefit as requested by the Participant and approved by
the Committee, but in no event shall the Committee approve a distribution which
is greater than is necessary to relieve the financial hardship.  A “severe financial hardship” means an
unforeseeable event resulting from a sudden and unexplained illness or accident
experienced by either the Participant or his dependents, the loss of property
due to casualty, or other similar extraordinary and unforeseeable circumstances
arising as a result of events beyond the Participant’s control, which the
Participant is unable to satisfy through available or attainable assets.  Without limitation, the definition of severe
financial hardship does not include the need to send a child to college or the
desire to purchase a home.

 

 

The Committee shall
evaluate the facts and circumstances of each hardship request and may rely on
the written representations of the Participant unless it has reason to know
such representations are false.  The
Participant shall receive a Lump Sum cash payment of the amount approved by the
Committee as soon as possible following the next succeeding Valuation Date (or,
upon the Participant’s request, on such earlier date and under such rules as
shall be determined by the Committee), and such amount shall be deducted from
his Measurement Preferences in accordance with Rules of General
Application.  If a Participant receives a
hardship distribution he shall be ineligible to elect Salary Deferral
Contributions for the following Plan Year.

 

7.6           In-Service Withdrawal. 
Prior to a Participant’s Separation, in accordance with Rules of
General Application, a Participant may elect to receive a distribution of all
(subject to the forfeiture), or a portion of his Benefit.  If a Participant elects to receive such a
distribution, he shall permanently and irrevocably forfeit from his Benefit an
amount equal to 20 percent (20%) of the amount so distributed and such
Participant shall be ineligible to elect Salary Deferral Contributions for the
following Plan Year.  The amount
forfeited shall inure to the benefit of the Employer in the manner determined
by the Committee, and such amount shall be deducted from his Measurement
Preferences in accordance with Rules of General Application.

 

7.7           Source of Distribution. 
All payments of Benefits shall be in cash from the funds in the Trust
or, in the discretion or the Employer, from the Employer’s funds held outside
of the Trust.  Nothing contained in the
Plan, nor any action taken pursuant to the provisions of the Plan, shall create
or be construed to create a fiduciary relationship between the Company, an
Employer, Participant, Beneficiary, or Employee or other person.  To the extent that any person acquires a
right to be paid Benefits, such right shall be no greater than the right of an
unsecured general creditor of his Employer.

 

SECTION EIGHT        DESIGNATION OF BENEFICIARIES

 

8.1           Designation by Participant. 
Participant’s written designation of one or more persons or entities as
his Beneficiary shall operate to designate the Participant’s Beneficiary under
this Plan.  The Participant shall file
with the Committee a copy of his Beneficiary designation under the Plan.  The last such designation received by the Committee
shall be controlling, and no designation, or change or revocation of a
designation shall be effective unless received by the Committee prior to the
Participant’s death, and in no event shall it be effective as of a date prior
to such receipt.

 

8.2           Lack of Designation. If no Beneficiary designation is in
effect at the time of Participant’s death, if no designated Beneficiary
survives the Participant or if the otherwise applicable Beneficiary designation
conflicts with applicable law, the Participant’s estate shall be the Beneficiary.  The Committee may direct the Employer or
Trustee to retain any unpaid Benefits, without crediting for either Measurement
Preferences or Applicable Interest Rate, until all rights to the unpaid
Benefits are determined.  Alternatively,
the Committee may direct the Employer or Trustee to pay the Benefits  into any court of appropriate
jurisdiction.  Any such

 

 

payment
shall completely discharge each Employer, the Trustee, and the Committee from
any liability under the Plan.

 

SECTION NINE           AMENDMENT AND TERMINATION

 

The Plan, without cause
and without prior notice, may be terminated, in whole or in part, by the Board,
in which case the Employer Account of any affected Participant shall become
100% Vested on such date of termination and, notwithstanding any provisions of
the Plan to the contrary, the Benefits of such affected Participant will be
distributed in a Lump Sum as soon as reasonably possible following such
termination. The Plan may be amended at any time by the Board or the Committee
and, without limiting the generality of any other provision hereof, if the
Committee determines that an amendment to the Plan would result in a
substantial prospective reduction in either the rights or benefits of one or
more Participants with respect to their Benefit determined as of the effective
date of such amendment, the Committee must give each affected Participant
notice of the amendment not less than 5 days prior to the earlier of its
adoption or its effective date, and allow each such Participant to waive the
right to elect an immediate distribution and, in the absence of such timely
waiver, each such Participant shall have the right, for a period of 90 days
commencing on the earlier of the adoption, or the effective date, of such
amendment, to elect, in a writing filed with the Committee, to have all (but
not less than all) of his Benefit distributed to him as soon as reasonably
possible.

 

SECTION TEN             GENERAL PROVISIONS

 

10.1         No Assignment. 
The right of any Participant to Benefits shall not be assigned, transferred,
pledged or encumbered, either voluntarily or by operation of law, except as
provided in Section Eight with respect to
designations of Beneficiaries.

 

10.2         Incapacity. 
If the Committee shall find that any person to whom any Benefit is
payable under the Plan is unable to care for his affairs because of illness or
accident or is a minor, any payment due shall be paid to the duly appointed
guardian, committee or other legal representative for such person.  Any such payment shall be a complete
discharge of the liabilities of each Employer, the Trustee and the Committee as
to the amount paid.

 

10.3         Claims Procedure. 
The Committee will make all determinations as to the rights of any
Employee, Participant, Beneficiary or other person under the terms of this
Plan.  Any Employee, Participant,
Beneficiary, or person claiming under them, may make a claim for benefits under
this Plan by filing written notice with the Committee setting forth the
substance of the claim.  If a claim is
wholly or partially denied, the claimant will have the opportunity to appeal
the denial upon filing with the Committee a written request for review within
60 days after receipt of notice of denial. 
In making an appeal the claimant may examine pertinent Plan documents
and may submit issues and comments in writing. 
Denial of a claim or a decision on review will be made in writing by the
Committee delivered to the claimant within 60 days after receipt of the claim
or request for review, unless special circumstances require an extension of

 

 

time
for processing the claim or review, in which event the Committee’s decision
must be made as soon as possible thereafter but not beyond an additional 60
days.  If no action on an initial claim
is taken within 120 days, the claims will be deemed denied for purposes of
permitting the claimant to proceed to the review stage.  The denial of a claim or the decision on
review will specify the reasons for the denial or decision and will make
reference to the pertinent Plan provisions upon which the denial or decision is
based.  The denial of a claim will also
include a description of any additional material or information necessary for
the claimant to perfect the claim and an explanation of the claim review
procedure herein described.  The
Committee will serve as an agent for service of legal process with respect to
the Plan unless the Employer, through written resolution, appoints another
agent.

 

10.4         Final Resolution of Disputes Relating to Plan   
If, after the exhaustion of the claims procedure set forth in Section 10.3, one or more disputes remain with regard
to the rights under the Plan of any Employee, Participant, Beneficiary or
person claiming under them, such person(s) and the Committee (collectively, “Interested
Parties”) agree to attempt to resolve same by telephone conference with an
agreed mediator.  If the Interested
Parties cannot resolve their differences by such telephone conference, then the
Interested Parties agree to schedule a one day mediation with a mediator
who is mutually agreeable to the Interested Parties, within thirty (30) days to
resolve the disputes and to share equally the costs of such mediation.  If one of the Interested Parties refuses to
mediate, then such Interested Party thereby waives any recovery for attorneys’
fees or costs incurred in any arbitration brought to construe or enforce the
provisions of this Plan.  If the
Interested Parties are unable to resolve their dispute by mediation, the
Interested Parties may institute an arbitration proceeding under the auspices of
the American Arbitration Association to construe or enforce the provisions of
the Plan.  THE
INTERESTED PARTIES HEREBY WAIVE THEIR RIGHT TO INSTITUTE LITIGATION IN A COURT
OF LAW TO RESOLVE A DISPUTE CONCERNING THE CONSTRUCTION OR ENFORCEMENT OF THIS
PLAN.  The Interested Party
prevailing in any such arbitration shall recover from the adverse party its
actual damages and reasonable costs and expenses, including, without
limitation, reasonable attorneys’ fees incurred in connection with such dispute
and arbitration.

 

10.5         Information Required. 
Each Participant shall file with the Committee such pertinent
information concerning himself and his Beneficiary as the Committee may
specify, and no Participant or Beneficiary or other person shall have any
rights or be entitled to any benefits under the Plan, unless such information
is properly filed.

 

10.6         Communications by, and Information from,
Participant.  All elections,
selections, designations, requests, notices, instructions and other
communications to the Committee, Third-Party Recordkeeper, Company, or Employer
required or permitted under the Plan shall be (i) in such form as is
prescribed from time to time by the Committee, (ii) shall be (x) mailed by
first-class mail, or (y) delivered, to such location as shall be specified by
the Committee and shall be deemed to have been given and delivered only on
actual receipt by the person to be charged at such location.  If the 
Committee notifies the Participant or Beneficiary by registered mail
(return receipt requested) at his last known address that he is entitled to a
distribution and also notifies him of the provisions of this paragraph, and the
Participant or Beneficiary fails to claim his benefits under the Plan or
provide  his current address to the

 

 

Committee
within one year after such notification, his Benefit will be forfeited and
inure to the benefit of the Employer in the manner determined by the
Committee.  If the Participant or
Beneficiary is subsequently located, such Benefit will be restored, but without
Earnings being credited subsequent to the date of the forfeiture.

 

10.7         No Rights Implied. 
Without limitation, nothing contained in this Plan, nor any modification
or amendment to the Plan, nor the creation of any Account on the books of the
Company, shall give any Employee or Participant any legal or equitable right
against the Company or any officer, director, or Employee of the Company,
except as expressly provided by the Plan.

 

10.8         Communications by Committee or Employer.
 All notices, statements, reports and other
communications from the Committee or any Employer to any person required or
permitted under the Plan shall be deemed to have been duly given when delivered
to, or when mailed first-class mail, postage prepaid and addressed to, such person
at his address last appearing on the records of the most recent Employer.

 

10.9         Interpretations and Adjustments. 
To the extent permitted by law, each interpretation of the Plan and each
decision on any matter relating to the Plan made by the Board, the Company, or
the Committee, within their scope of their authority hereunder, shall be made
in their sole discretion and shall be binding on all persons.  A misstatement or other mistake of fact shall
be corrected when it becomes known and the person responsible shall make such
adjustment on account thereof as he considers equitable and practicable.

 

10.10       No Liability for Good Faith Determinations.
 Neither the Company, the Board, nor the
Committee shall be liable for any act, omission, or determination taken or made
with respect to the Plan which is not judicially determined to be due to
willful misconduct, and members of the Board, and the Committee, shall be
entitled to indemnification and reimbursement by the Company in respect of any
claim, loss, damage, or expense (including attorneys’ fees, the costs of
settling any suit, provided such settlement is approved by independent legal
counsel selected by the Company, and amounts paid in satisfaction of a
judgment, except a judgment based on a finding of willful misconduct) arising
therefrom to the full extent permitted by law and under any directors’ and
officers’ liability or similar insurance coverage that may from time to time be
in effect.

 

10.11       No Employment Rights. 
Neither the Plan nor any action taken under the Plan shall be construed
as giving to any Employee the right to be retained in the employ of an Employer
or as affecting the right of an Employer to dismiss any Employee at any time,
with or without cause.

 

10.12       Withholding of Taxes. 
An Employer shall deduct from Participant’s Salary or the amount of any
payment made pursuant to this Plan any amounts required to be paid or withheld
by the federal government or any state or local government.  By his participation in the Plan, the
Participant agrees to all such deductions.

 

 

10.13       Waivers. 
Any waiver of any right granted pursuant to this Plan shall not be valid
unless the same is in writing and signed by the party waiving such right.  Any such waiver shall not be deemed to be a
waiver of any other rights.

 

10.14       Records. 
Records of the Company, and of the Committee, as to any matters relating
to this Plan will be conclusive on all persons.

 

10.15       Securities Laws. 
The Plan intends to comply with and be exempt under The Securities Act
of 1933, as amended.  The Participants
under the Plan are final purchasers and not underwriters or conduits to other
beneficial owners or subsequent purchasers.

 

10.16       Severability. 
In case any one or more of the provisions contained in this Plan shall
be invalid, illegal or unenforceable in any respect, the validity, legality and
enforceability of the remaining provisions in this Plan shall not in any way be
affected or impaired.

 

10.17       Captions and Gender. 
The captions preceding the Sections and Subsections of this Plan have
been inserted solely as a matter of convenience and in no way define or limit
the scope or intent of any provisions of this Plan.  Where the context admits or requires, words
used in the masculine gender shall be construed to include the feminine and the
neuter also, the plural shall include the singular, and the singular shall
include the plural.

 

10.18       CHOICE OF LAW. 
THE PLAN AND ALL RIGHTS UNDER THIS PLAN SHALL BE GOVERNED BY AND
CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF TEXAS, EXCEPT TO THE
EXTENT PREEMPTED BY ERISA.

 

10.19       Effective Date and Termination Date. 
The Plan is effective on the Effective Date and shall terminate on the
date no further Benefits are credited hereunder, or on such earlier date as the
Plan is terminated pursuant to Section Nine.

 

IN WITNESS WHEREOF, the
Company has executed this Plan on this the 22nd day of  December, 1998.

 

 

	
   

  	
  FOSSIL, INC.

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Randy Kercho

  	
   

  
	
   

  	
  Its:

  	
  CFO

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