Document:

2002 RESTRICTED STOCK PLAN

OF

FOSSIL, INC.

 

 

ARTICLE I.  GENERAL

 

                WHEREAS, the 2002
Restricted Stock Plan of Fossil, Inc. is being fully funded with treasury
shares contributed to the Company from a shareholder; and

 

                WHEREAS, the
Company has received a determination letter from NASDAQ that, consequently, no
stockholder approval of the Plan is required;

 

                NOW, THEREFORE,
the Plan is as follows:

 

SECTION 1.1.  Purpose
of the Plan.  The Plan is intended to
advance the best interests of the Company, its Subsidiaries and its
stockholders in order to attract, retain and motivate key employees by
providing them with additional incentives through the award of shares of
Restricted Stock.

 

SECTION 1.2.  Definitions.  For purposes of this Plan, the following
definitions shall apply:

 

                “1934 Act” means
the Securities Exchange Act of 1934, as amended.

 

                “Award” means a
grant under this Plan in the form of Restricted Stock.

 

                “Award Agreement”
means an agreement governing the Award entered into between the Company and the
Participant pursuant to Section 1.8.

 

                “Board” means the
Board of Directors of the Company.

 

                “Change in Control” 
means the occurrence of any of the following events:

 

                (i)            Any “person” (as such term is used in Sections 13(d) and
14(d)(2) of the Securities Exchange Act of 1934, as amended) becomes the
beneficial owner, directly or indirectly, of voting securities representing
thirty percent (30%) or more of the combined voting power of the Company’s then
outstanding voting securities or, if a person is the beneficial owner, directly
or indirectly, of voting securities representing thirty percent (30%) or more
of the combined voting power of the Company’s outstanding voting securities as
of the date the particular Award is granted, such person becomes the beneficial
owner, directly or indirectly, of additional voting securities representing ten
percent (10%) or more of the combined voting power of the Company’s then
outstanding voting securities;

 

                (ii)           During
any period of twelve (12) months, individuals who at the beginning of such
period constitute the Board cease for any reason to constitute a majority of
the Directors unless the election, or the nomination for election by the
Company’s stockholders, of each new Director was approved by a vote of at least
a majority of the Directors then still in office who were Directors at the
beginning of the period;

 

                (iii)          The
stockholders of the Company approve (A) any consolidation or merger of the
Company or any Subsidiary that results in the holders of the Company’s voting
securities immediately prior to the consolidation or merger having (directly or
indirectly) less than a majority ownership interest

 

 

 

in the outstanding voting
securities of the surviving entity immediately after the consolidation or
merger, (B) any sale, lease, exchange or other transfer (in one transaction or
a series of related transactions) of all or substantially all of the assets of
the Company or (C) any plan or proposal for the liquidation or dissolution of
the Company;

 

 

                (iv)          The stockholders of the Company accept a share exchange,
with the result that stockholders of the Company immediately before such share
exchange do not own, immediately following such share exchange, at least a
majority of the voting securities of the entity resulting from such share
exchange in substantially the same proportion as their ownership of the voting
securities outstanding immediately before such share exchange; or

 

                (v)           Any tender or exchange offer is made to acquire thirty
percent (30%) or more of the voting securities of the Company, other than an
offer made by the Company, and shares are acquired pursuant to that offer.

 

                For
purposes of this definition, the term “voting securities” means equity
securities, or securities that are convertible or exchangeable into equity
securities, that have the right to vote generally in the election of Directors.

 

                “Code” means the
Internal Revenue Code of 1986, as amended.

 

                “Committee” means a committee of
at least two (2) members of the Board. 
If it is intended that the Committee satisfy the requirements of Rule
16b-3 under the 1934 Act and Section 162(m) of the Code, then all of the
members of the Committee, at the time of service on the Committee hereunder,
should be “Non-Employee Directors,” as defined in Rule 16b-3(b)(3) under the
1934 Act and “Outside Directors,” as defined in Treasury Regulation Section
162-27(e)(3), under the Code.  If no
Committee has been designated to administer the Plan, references to the
Committee shall be deemed to be references to the Board, whose members shall
not be required to meet the qualifications of this definition.

 

                “Common Stock”
means the common stock, par value $0.01 per share, of the Company.

 

                “Company” means
Fossil, Inc. and its successors and assigns.

 

                “Date of Termination”
of a Participant means the first day occurring on or after the date on which a
Participant is granted an Award on which the Participant is not employed by the
Company or any Subsidiary, regardless of the reason for the termination of
employment; provided, however, that a termination of employment
shall not be deemed to occur by reason of a transfer of the Participant between
the Company and a Subsidiary or between two Subsidiaries; and, further, provided,
that the Participant’s employment shall not be considered terminated while the
Participant is on a leave of absence from the Company or a Subsidiary approved
by the Participant’s employer.  If, as a
result of a sale or other transaction, the Participant’s employer ceases to be
a Subsidiary (and the Participant’s employer is or becomes an entity that is
separate from the Company), the occurrence of such transaction shall be treated
as the Participant’s Date of Termination caused by the Participant being
discharged by the employer.

 

                “Disability” with respect
to any Participant has the meaning given that term or any substantially
comparable term or usage in any employment or severance arrangement applicable
to the Participant and approved by the Board or the Committee, or in the
absence of any such arrangement or term, means, except as otherwise determined
by the Committee, a condition that renders the Participant unable, by reason of
a medically determinable physical or mental impairment, to engage in any
substantial gainful

 

 

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activity, which condition, in the opinion of a physician selected by
the Committee, is expected to have a duration of not less than one hundred
twenty (120) days.

 

                “Eligible Participant” has the
meaning given in Section 1.4.

 

 

                “Expiration Date”
with respect to an Award means the date established as the Expiration Date by
the Committee at the time of the grant; provided, however, that
the Expiration Date shall not be later than the earliest to occur of: (a) if
the Participant’s Date of Termination occurs by reason of death or Disability,
the one-year anniversary of such Date of Termination; or (b) if the Participant’s
Date of Termination occurs for reasons other than death or Disability, ninety
(90) days after such Date of Termination.

 

                “Fair Market Value” of a share
of Common Stock on any date of reference means the closing price on the
business day immediately preceding such date, unless the Committee in its sole
discretion shall determine otherwise in a fair and uniform manner.  For purposes of this Plan, the “Closing Price”
of the Common Stock on any business day shall be: (a) if the Common Stock is
listed or admitted for trading on any United States national securities
exchange or included in the National Market System of the National Association
of Securities Dealers Automated Quotation System (“NASDAQ”), the last reported
sale price of Common Stock on such exchange or system, as reported in any
newspaper of general circulation; (b) if the Common Stock is quoted on NASDAQ,
or any similar system of automated dissemination of quotations of securities
prices in common use, the mean between the closing high bid and low asked
quotations for such day of the Common Stock on such system; (c) if neither
clause (a) nor (b) is applicable, the mean between the high bid and low asked
quotations for Common Stock as reported by the National Quotation Bureau,
Incorporated if at least two (2) securities dealers have inserted both bid and
asked quotations for Common Stock on at least five (5) of the ten (10)
preceding days; or, (d) in lieu of the above, if actual transactions in the
Common Stock are reported on a consolidated transaction reporting system, the
last sale price of the Common Stock for such day and on such system.

 

                “Participant” means
any Eligible Participant that is granted an Award under the Plan.

 

                “Plan” means this
2002 Restricted Stock Plan of Fossil, Inc.

 

                “Restricted Stock
Award” means an Award of stock of the Company that is granted pursuant to Article
II that is subject to the restrictions imposed by Article II.

 

                “Subsidiary” of
the Company means any corporation, partnership or other entity that is
designated by the Board as a participating employer under the Plan, provided
that the Company directly or indirectly owns at least twenty percent (20%) of
the combined voting power of all classes of stock of such entity or at least
twenty percent (20%) of the ownership interests in such entity.

 

                “Withholding Tax”
means any federal, state or local withholding tax liability.

 

SECTION 1.3.  Administration
of the Plan.

 

                (a)           The Plan shall be administered by the
Committee.  The Committee shall have
authority to interpret conclusively the provisions of the Plan, to adopt such
rules and regulations for carrying out the Plan as it may deem advisable, to
decide conclusively all questions of fact arising in the application of the
Plan, to establish performance criteria in respect of Awards under the Plan, to
certify that Plan requirements have been met for any Participant in the Plan,
to submit such matters as it may deem advisable to the Company’s stockholders
for their approval, and to make all other determinations and take all other
actions necessary or desirable for the administration of the Plan.  The Committee is

 

 

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expressly
authorized to adopt rules and regulations limiting or eliminating its
discretion with respect to certain matters as it may deem advisable to comply
with, or obtain preferential treatment under, any applicable tax or other law,
rule, or regulation.  All decisions and
acts of the Committee shall be final and binding upon all affected Eligible
Participants.

 

                (b)
          The Committee shall designate
the Eligible Participants, if any, to be granted Awards and the amount of such
Awards and the time when Awards will be granted.  All Awards granted under the Plan shall be on
the terms and subject to the conditions determined by the Committee consistent
with the Plan.

 

SECTION 1.4.  Eligible
Participants.  Key employees of the
Company and its Subsidiaries shall be eligible for Awards under the Plan.

 

SECTION 1.5.  Awards
Under the Plan.  Awards to Eligible
Participants shall be in the form of shares of Restricted Stock.

 

SECTION 1.6.  Shares Subject to the Plan.

 

                (a)
          General Limitation.  The aggregate number of shares of Common
Stock that may be issued under the Plan shall be Five Hundred Thousand
(500,000) shares. If any Award under the Plan shall expire, terminate or be
canceled for any reason without having been vested in full, or if any Award
shall be forfeited to the Company, the unexercised or forfeited Award shall not
count against the above limits and shall again become available for grants
under the Plan (unless the holder of such Award received dividends or other
economic benefits with respect to such Award, which dividends or other economic
benefits are not forfeited, in which case the Award shall count against the
above limits).  Shares of Common Stock
that are withheld in order to satisfy federal, state or local tax liability,
shall not count against the above limits.

 

                (b)           Additional Limitations.  No more than Five Hundred Thousand (500,000)
shares of Common Stock may be subject to Restricted Stock Awards that are
intended to be “performance based compensation” (as that term is used in
Section 162(m) of the Code) may be granted.

 

SECTION 1.7.  Other
Compensation Programs.  Nothing
contained in the Plan shall be construed to preempt or limit the authority of
the Board to exercise its corporate rights and powers, including, but not by
way of limitation, the right of the Board (a) to grant incentive awards for
proper corporate purposes otherwise than under the Plan to any employee,
officer, director or other person or entity; or (b) to grant incentive awards
to, or assume incentive awards of, any person or entity in connection a change
of control of the Company.

 

SECTION 1.8.  Award
Agreements.  Each Award shall be
evidenced by an agreement that may contain any term deemed necessary or
desirable by the Committee, provided such terms are not inconsistent with this
Plan or applicable law.  Each Award
Agreement shall contain the agreement of the Participant not to compete with
the business of the Company during the term of the Participant’s employment
with the Company and for a period of two years thereafter.

 

ARTICLE II.  RESTRICTED STOCK

 

SECTION 2.1.  Terms
and Conditions of Restricted Stock Awards. 
Subject to the following provisions, all Awards of Restricted Stock
under the Plan to an Eligible Participant shall be in such form and shall have
such terms and conditions as the Committee, in its discretion, may from time to
time determine consistent with the Plan.

 

 

4

 

                (a)           Restricted Stock Award.  The Restricted Stock Award shall specify the
number of shares of Restricted Stock subject to the Award, the price, if any,
to be paid by the Participant receiving the
Restricted Stock Award, and the date or dates on which the Restricted Stock
will vest.  The vesting and number of
shares of Restricted Stock may be conditioned upon the completion of a
specified period of service with the Company or its Subsidiaries.  Unless otherwise provided in the grant
relating to the Restricted Stock Award, the shares of Restricted Stock shall
fully vest on the fifth anniversary of the date of the Award.

 

                (b)           Restrictions on Transfer.  Unless otherwise provided in the grant
relating to the Restricted Stock Award, stock certificates representing the
Restricted Stock granted to a Participant shall be registered in the
Participant’s name.  Prior to the shares
of Restricted Stock becoming vested, such certificates shall either be held by
the Company on behalf of the Participant, or delivered to the Participant
bearing a legend to restrict transfer of the certificate until the Restricted
Stock has vested, as determined by the Committee.  The Participant shall have the right to vote
and/or receive dividends on the Restricted Stock before it has vested.  Except as may otherwise be expressly
permitted by the Committee, no share of Restricted Stock may be sold,
transferred, assigned, or pledged by the Participant until such share has
vested in accordance with the terms of the Restricted Stock Award.  Unless the grant of a Restricted Stock Award
specifies otherwise, in the event of a Participant’s termination of employment
before all the Participant’s Restricted Stock has vested, or in the event other
conditions to the vesting of Restricted Stock have not been satisfied prior to
any deadline for the satisfaction of such conditions set forth in the Award,
the shares of Restricted Stock that have not vested shall be forfeited and any
purchase price paid by the employee shall be returned to the Participant.  At the time Restricted Stock vests (and upon
the return of such certificates to the Company), a certificate for such vested
shares shall be delivered to the Participant (or the beneficiary designated by
the Participant in the event of death), free of all restrictions.

 

                (c)           Accelerated Vesting.  Notwithstanding the vesting conditions set
forth in the Restricted Stock Award, unless the Restricted Stock Award grant or
other agreement with the Participant thereof specifies otherwise:

 

(i)            the Committee may in its discretion
at any time accelerate the vesting of Restricted Stock or otherwise waive or
amend any conditions of a grant of a Restricted Stock Award;

 

(ii)           all the shares of Restricted Stock
shall vest upon a Change of Control of the Company; and

 

(iii)          all the shares of Restricted Stock
shall vest upon the death of the Participant.

 

SECTION 2.2.        Section 83(b) Election.  If a Participant receives Restricted Stock
that is subject to a “substantial risk of forfeiture,” such Participant may
elect under Section 83(b) of the Code to include in his or her gross income,
for the taxable year in which the Restricted Stock is received, the excess of
the Fair Market Value of such Restricted Stock on the Date of Grant (determined
without regard to any restriction other than one which by its terms will never
lapse), over the amount paid for the Restricted Stock.  If the Participant makes the Section 83(b)
election, the Participant shall (a) make such election in a manner that is
satisfactory to the Committee, (b) provide the Company with a copy of such
election, (c) agree to promptly notify the Company if any Internal Revenue
Service or state tax agent, on audit or otherwise, questions the validity or
correctness of such election or of the amount of income reportable on

 

 

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account of such election and (d) agree to such federal and state income
tax withholding as the Committee may reasonably require in its sole discretion.

 

ARTICLE III. 
ADDITIONAL PROVISIONS

 

SECTION 3.1.  General Restrictions.  Each Award under the Plan shall be subject to
the requirement that, if at any time the Committee shall determine that (a) the
listing, registration or qualification of the shares of Common Stock subject or
related thereto upon any securities exchange or under any state or federal law;
(b) the consent or approval of any government regulatory body; or (c) an
agreement by the recipient of an Award with respect to the disposition of
shares of Common Stock, is necessary or desirable (in connection with any
requirement or interpretation of any federal or state securities law, rule or
regulation) as a condition of, or in connection with, the granting of such
Award or the issuance, purchase or delivery of shares of Common Stock
thereunder, such Award may not be consummated in whole or in part unless such
listing, registration, qualification, consent, approval or agreement shall have
been effected or obtained free of any conditions not acceptable to the
Committee.

 

SECTION 3.2.  Adjustments
for Changes in Capitalization.  In
the event of any stock dividends, stock splits, recapitalizations,
combinations, exchanges of shares, mergers, consolidations, liquidations,
split-ups, split-offs, spin-offs or other similar changes in capitalization, or
any distributions to stockholders, including a rights offering, other than
regular cash dividends, changes in the outstanding stock of the Company by
reason of any increase or decrease in the number of issued shares of Common
Stock resulting from a split-up or consolidation of shares or any similar
capital adjustment or the payment of any stock dividend, any share repurchase
at a price in excess of the market price of the Common Stock at the time such
repurchase is announced or other increase or decrease in the number of such
shares, the Committee shall make appropriate adjustment in the number and kind
of shares authorized by the Plan, in the number, price or kind of shares
covered by the Awards and in any outstanding Awards under the Plan.  In the event of any adjustment in the number
of shares covered by any Award, any fractional shares resulting from such
adjustment shall be disregarded and each such Award shall cover only the number
of full shares resulting from such adjustment.

 

SECTION 3.3.  Amendments.  The Committee shall have the authority to
amend any Award to include any provision that, at the time of such amendment,
is authorized under the terms of the Plan; provided, however, no
outstanding Award may be revoked or altered in a manner unfavorable to the
holder without the written consent of the holder.

 

SECTION 3.4.  Cancellation
of Awards.  Any Award granted under
the Plan may be canceled at any time with the consent of the holder and a new
Award may be granted to such holder in lieu thereof, which award may, in the
discretion of the Committee, be on more favorable terms and conditions than the
canceled Award.

 

SECTION 3.5.  Beneficiary.  A Participant may file with the Company a
written designation of beneficiary, on such form as may be prescribed by the
Committee, to receive any shares of Restricted Stock that become deliverable to
the Participant pursuant to the Plan after the Participant’s death.  A Participant may, from time to time, amend
or revoke a designation of beneficiary. 
If no designated beneficiary survives the Participant, the executor or
administrator of the Participant’s estate shall be deemed to be the Participant’s
beneficiary.

 

SECTION 3.6.  Withholding.  Whenever the Company proposes or is required
to issue or transfer shares of Common Stock under the Plan, the Company shall
have the right to require the holder to pay an amount in cash or to retain or
sell without notice, or demand surrender of, shares of Common Stock in value
sufficient to satisfy any Withholding Tax prior to the delivery of any certificate
for such shares (or

 

 

6

 

remainder of shares if Common Stock is retained to satisfy such
Withholding Tax). Whenever Common Stock is so retained, sold or surrendered to
satisfy Withholding Tax, the value of shares of Common Stock so retained, sold
or surrendered shall be determined by the Committee, and the value of shares of
Common Stock so sold shall be the net proceeds (after deduction of commissions)
received by the Company from such sale, as determined by the Committee.

 

SECTION 3.7.  Transferability.  Except as expressly provided in the Plan or
as may be permitted by the Committee, no Award under the Plan shall be
assignable or transferable by the holder thereof except by will or by the laws
of descent and distribution.  Except as
expressly provided in the Plan or as may be permitted by the Committee, during
the life of the holder, Awards under the Plan shall be exercisable only by such
holder or by the guardian or legal representative of such holder.

 

SECTION 3.8.  Non-uniform
Determinations.  Determinations by
the Committee under the Plan (including, without limitation, determinations of
the persons to receive Awards; the form, amount and timing of such Awards; the
terms and provisions of such Awards and the agreements evidencing same; and provisions
with respect to termination of employment) need not be uniform and may be made
by it selectively among persons who receive, or are eligible to receive, Awards
under the Plan, whether or not such persons are similarly situated.

 

SECTION 3.9.  No
Guarantee of Employment.  The grant
of an Award under the Plan shall not constitute an assurance of continued
employment for any period.

 

SECTION 3.10.  Deferred
Compensation and Trust Agreements. 
The Committee may authorize and establish deferred compensation
agreements and arrangements in connection with Awards under the Plan and may
establish trusts and other arrangements, including “rabbi trusts,” with respect
to such agreements and appoint one or more trustees for such trusts.  Shares of Common Stock under the Plan may
also be acquired by one or more trustees from the Company, in the open market
or otherwise.

 

SECTION 3.11.  Duration
and Termination.

 

                (a)           The Plan shall terminate on December
31, 2011.  Notwithstanding the foregoing,
Awards granted prior to such date may extend beyond such date, and the terms of
this Plan shall continue to apply to all Awards granted hereunder.

 

                (b)           The Board may suspend, discontinue or
terminate the Plan at any time.  Such
action shall not impair any of the rights of any holder of any Award
outstanding on the date of the Plan’s suspension, discontinuance or termination
without the holder’s written consent.

 

SECTION 3.12.  Effective
Date.  The Plan shall be effective as
of January 1, 2002.

 

                Executed to
evidence the Plan and the adoption thereof by the Board of Directors.

 

 

 

	
  FOSSIL, INC.

  	
   

  
	
   

  	
   

  
	
  By:

  	
   

  
	
  Print Name:

  	
   

  
	
  Title:

  	
   

  
					

 

 

7

 

FORM OF RESTRICTED STOCK
AWARD AGREEMENT

 

           This RESTRICTED STOCK  AWARD AGREEMENT
(the “Agreement”), entered into as of «Grant_Date»,
between Fossil, Inc., a Delaware corporation (the “Company”), and «FirstName» «LastName»
(the “Employee”).

 

           WHEREAS,
the Company has adopted the 2002 Restricted Stock Plan of Fossil, Inc. (the “Restricted
Stock Plan”) effective as of the Effective Date with the objective of advancing
the best interests of the Company, its Subsidiaries and its stockholders in
order to attract, retain and motivate key employees with additional incentives
through the award of shares of Restricted Stock;

 

           WHEREAS,
the Restricted Stock Plan provides that Eligible Participants of the Company or
its Subsidiaries, as determined in the judgment of the Committee, may be
granted an Award which may consist of grants of restricted shares of common
stock, par value $.01 per share (“Common Stock”), of the Company; and

 

           WHEREAS, the
Employee holds a position of responsibility within the Company and the
Committee has determined that the Employee is an Eligible Participant under the
Restricted Stock Plan;

 

           NOW, THEREFORE, in consideration of
the premises, the terms and conditions set forth herein, the mutual benefits to
be gained by the performance thereof and other good and valuable consideration,
the receipt and sufficiency of which are hereby acknowledged, the parties
hereto agree as follows:

 

1.             Grant of Restricted Stock.  Subject to the
terms and conditions set forth herein and in the Restricted Stock Plan, the
Company hereby grants to the Employee an Award of  «Shares»
shares of Common Stock (the “Restricted Stock”), such number of shares being
subject to adjustment from time to time as provided in Section 3.2 of the
Restricted Stock Plan and paragraph 12 hereof.

 

2.             Restrictions on Transfer.
Stock certificates representing the Restricted Stock granted hereunder shall be
registered in the Employee’s name.  Prior
to the shares of Restricted Stock becoming vested, such certificates shall be
held by the Company on behalf of the Employee and shall bear a legend to
restrict transfer of the certificate until the Restricted Stock has vested, as
set forth in Paragraph 3 hereof.  The
Employee shall have the right to vote and/or receive dividends on the
Restricted Stock before it has vested. Except as may otherwise may be expressly
permitted by the Committee, no share of Restricted Stock may be sold,
transferred, assigned, or pledged by the Employee until such share has vested
in accordance with the terms hereof.  In
the event of Employee’s termination of employment before all the Employee’s
Restricted Stock has vested, or in the event other conditions to the vesting of
Restricted Stock have not been satisfied prior to any deadline for the
satisfaction of such conditions set forth herein, the shares of Restricted
Stock that have not vested shall be forfeited and any purchase price paid by
the Employee shall be returned to the Employee. 
At the time Restricted Stock vests (and upon the return of such
certificates to the Company), a certificate for such vested shares shall be
delivered to the Participant (or the beneficiary designated by the Participant
in the event of death), free of all such restrictions.

 

3.             Option Period and Vesting.  The Restricted
Shares granted pursuant to this Agreement shall vest and become transferable
with respect to «Vesting» of the date
hereof (it being understood that the right to transfer the Restricted Shares
shall be cumulative, so that the Employee may transfer on or after any such
anniversary that number of Restricted Shares which the Employee was entitled to
transfer but did not transfer during any preceding period or periods).

 

4.             Termination in Event of
Nonemployment.  In the event that the Employee ceases to be

 

 

8

 

employed by the Company
or any of its Subsidiaries for any reason other than death, the Restricted
Shares granted pursuant to this Agreement shall be forfeited, except to the
extent that they have vested and become transferable in accordance with the
provisions of paragraph 3 on the date the Employee ceases to be so employed.

 

5.             Accelerated Vesting. Notwithstanding the vesting conditions set forth herein:
(i) the Committee may in its discretion at any time accelerate the vesting of
Restricted Stock or otherwise waive or amend any conditions of a grant of a
Restricted Stock Award; (ii) all the shares of Restricted Stock shall vest upon
a Change of Control of the Company; and (iii) all the shares of Restricted
Stock shall vest upon the death of the Employee.

 

6.             Assignability.  The rights granted
pursuant hereto shall not be assignable or transferable by the Employee other
than in accordance with Section 3.7 of the Restricted Stock Plan.  No assignment of the rights herein granted
shall be effective to bind the Company unless the Company shall have been
furnished with written notice thereof and a copy of such documents and evidence
as the Company may deem necessary to establish the validity of the assignment
and the acceptance by the assignee or assignees of the terms and conditions
hereof.

 

7.             Section 83(b) Election.  If Employee is
subject to a “substantial risk of forfeiture” of the Restricted Shares granted
hereunder, such Employee may elect under Section 83(b) of the Internal Revenue
Code of 1986, as amended, to include in his gross income, for the taxable year
in which the Restricted Stock is received, the excess of the Fair Market Value
of such Restricted Stock on the date of grant (determined without regard to any
restriction other than one which by its terms will never lapse), over the
amount paid for the Restricted Stock.  If
the Employee makes the Section 83(b) election, the Employee shall (a) make such
election in a manner that is satisfactory to the Committee, (b) provide the
Company with a copy of such election, (c) agree to promptly notify the Company
if any Internal Revenue Service or state tax agent, on audit or otherwise,
questions the validity or correctness of such election or of the amount of
income reportable on account of such election, and (d) agree to such federal
and state income tax withholding as the Committee may reasonably require in its
sole discretion.

 

8.             Restrictions and Related
Representations. Upon the
acquisition of any Restricted Shares hereunder, the Employee may be required to
enter into such written representations, warranties and agreements as the
Company may reasonably request in order to comply with applicable securities
laws, the Restricted Stock Plan or with this Agreement.  In addition, the certificate or certificates
representing any Restricted Shares issued hereunder will be stamped or
otherwise imprinted with a legend in such form as the Company may require with
respect to any applicable restrictions on sale or transfer, and the stock
transfer records of the Company will reflect stop-transfer instructions,
as appropriate, with respect to such Restricted Shares.

 

9.             Notices.  Unless otherwise
provided herein, any notice or other communication hereunder shall be in
writing and shall be given by registered or certified mail. All notices by the Employee
hereunder shall be directed to Fossil, Inc., Attention: Secretary, at the
Company’s then current address. Any notice given by the Company to the Employee
hereunder shall be directed to him at his address on file with the
Company.  The Company shall be under no
obligation whatsoever to advise or notify the Employee of the existence,
maturity or termination of any rights hereunder and the Employee shall be
deemed to have familiarized himself with all matters contained herein and in
the Restricted Stock Plan which may affect any of the Employee’s rights or
privileges hereunder.

 

10.           Scope of Certain Terms.  Whenever the term “Employee”
is used herein under circumstances applicable to any other person or persons to
whom this Award may be assigned in accordance with the provisions of Paragraph
6 of this Agreement, the term “Employee” shall be deemed

 

 

9

 

to include such person or
persons.  The term “Restricted Stock Plan”
as used herein shall be deemed to include the 2002 Restricted Stock Plan of
Fossil, Inc. and any subsequent amendments thereto, together with any
administrative interpretations which have been adopted thereunder by the
Committee pursuant to Section 1.3 of the Restricted Stock Plan. Unless otherwise
indicated, defined terms herein shall have the meaning ascribed to them in the
Restricted Stock Plan.

 

11.           General Restrictions.  This Award is subject to the requirement
that, if at any time the Committee shall determine that (a) the listing, registration
or qualification of the shares of Common Stock subject or related thereto upon
any securities exchange or under any state or federal law; (b) the consent or
approval of any government regulatory body; or (c) an agreement by the
recipient of an Award with respect to the disposition of shares of Common
Stock, is necessary or desirable (in connection with any requirement or
interpretation of any federal or state securities law, rule or regulation) as a
condition of, or in connection with, the granting of such Award or the
issuance, purchase or delivery of shares of Common Stock thereunder, such Award
may not be consummated in whole or in part unless such listing, registration,
qualification, consent, approval or agreement shall have been effected or obtained
free of any conditions not acceptable to the Committee.

 

12.           Adjustments for Changes in
Capitalization.  In the
event of any stock dividends, stock splits, recapitalizations, combinations,
exchanges of shares, mergers, consolidations, liquidations, split-ups,
split-offs, spin-offs or other similar changes in capitalization, or any
distributions to stockholders, including a rights offering, other than regular
cash dividends, changes in the outstanding stock of the Company by reason of
any increase or decrease in the number of issued shares of Common Stock
resulting from a split-up or consolidation of shares or any similar capital
adjustment or the payment of any stock dividend, any share repurchase at a
price in excess of the market price of the Common Stock at the time such
repurchase is announced or other increase or decrease in the number of such
shares, the Committee shall make appropriate adjustment in the number and kind
of shares authorized by the Restricted Stock Plan, in the number, price or kind
of shares covered by the Awards and in any outstanding Awards under the
Restricted Stock Plan.  In the event of
any adjustment in the number of shares covered by any Award, any fractional
shares resulting from such adjustment shall be disregarded and each such Award
shall cover only the number of full shares resulting from such adjustment.

 

13.           Amendments.  The Committee shall have the authority to
amend any Award to include any provision that, at the time of such amendment,
is authorized under the terms of the Restricted Stock Plan; provided, however,
no outstanding Award may be revoked or altered in a manner unfavorable to the
holder without the written consent of the holder.

 

14.           Incorporation of
Restricted Stock Plan. This
Agreement is subject to the Restricted Stock Plan, a copy of which has been
furnished to the Employee herewith and for which the Employee acknowledges
receipt. The terms and provisions of the Restricted Stock Plan are incorporated
by reference herein.  In the event of a
conflict between any term or provision contained herein and a term or provision
of the Restricted Stock Plan, the applicable terms and provisions of the
Restricted Stock Plan shall govern and prevail.

 

 

10

 

IN WITNESS WHEREOF, this Agreement has been executed as of «Grant_Date».

 

 

	
  COMPANY:

  
	
   

  
	
  FOSSIL, INC.

  
	
   

  
	
  By:

  	
   

  
	
   

  	
   

  
	
  «FirstName» «LastName»

  
	
   

  
	
   

  
			

 

 

 

 

 

Enclosure:  2002 Restricted Stock Plan of Fossil, Inc.

 

 

11<PAGE>

                                                                    EXHIBIT 10.4

                           [MERRILL LYNCH LETTERHEAD]

Coffee Holding Co., Inc.                                      January 27, 2005
4401 First Avenue
Brooklyn, NY 11232

         RE: AMENDMENT TO LOAN DOCUMENTS

Mr. Gordon:

This Letter Agreement will serve to confirm certain agreements of Merrill Lynch
Business Financial Services Inc. ("MLBFS") and Coffee Holding Co., Inc
("Customer") with respect to: (i) that certain WCMA LOAN AND SECURITY AGREEMENT
NO. 208-07517 between MLBFS and Customer (including any previous amendments and
extensions thereof), and (ii) all other agreements between MLBFS and Customer or
any party who has guaranteed or provided collateral for Customer's obligations
to MLBFS (a "Guarantor") in connection therewith (collectively, the "Loan
Documents"). Capitalized terms used herein and not defined herein shall have the
set meaning set forth in the Loan Documents.

Subject to the terms hereof, effective as of the "Effective Date" (as defined
below), the Loan Documents are hereby amended as follows:

(a) The term "Maximum WCMA Line of Credit" shall mean $3,500,000.00

(b) Subject to any further change in the WCMA Line of Credit and/or other
amendments of terms, if the WCMA Line of Credit is renewed beyond the current
Maturity Date, the annual Line Fee during the renewal period shall be
$30,000.00.

(c) The term "Interest Rate" shall mean a variable per annum rate of interest
equal to the sum of 2.15% and the One-Month LIBOR. "One-Month LIBOR" shall mean,
as of the date of any determination, the interest rate then most recently
published in the "Money Rates" section of The Wall Street Journal as the
one-month London Interbank Offered Rate. The Interest Rate will change as of the
date of publication in The Wall Street Journal of a One-Month LIBOR that is
different from that published on the preceding Business Day. In the event that
The Wall Street Journal shall, for any reason, fail or cease to publish the
One-Month LIBOR, MLBFS will choose a reasonably comparable index or source to
use as the basis for the Interest Rate.

(d) The term "Obligations" shall mean all liabilities, indebtedness and other
obligations of Customer to MLBFS, howsoever created, arising or evidenced,
whether now existing or hereafter arising, whether direct or indirect, absolute
or contingent, due or to become due, primary or secondary or joint or several,
and, without limiting the foregoing, shall include interest accruing after the
filing of any petition in bankruptcy, and all present and future liabilities,
indebtedness and obligations of Customer under the Loan Documents and under that
certain Reducing Revolver Loan and Security Agreement No. 208-07273.

<PAGE>

Coffee Holding Co., Inc.
January 27, 2005
Page No. 2

(e) Subject to the terms of the Loan Documents (including the Letter of Credit
Supplement included therein), MLBFS has approved letter of credit availability
for Customer under the WCMA Line of Credit, limited to the lesser of: (i)
$310,300.00 or (ii) the then remaining availability under Customer's WCMA Line
of Credit. Each letter of credit will be issued by a corresponding bank after
approval both by MLBFS and that bank as to the terms of the requested letter of
credit and execution by Customer of all documents required by MLBFS and that
bank. Each letter of credit will be subject to the approval of MLBFS and the
issuing bank, and when issued will reduce the remaining availability under
Customer's WCMA Line of Credit by the amount of such letter of credit and its
related fees. In connection with said letter of credit availability, Customer
acknowledges and agrees:

(i) Concurrently with its acceptance hereof, Customer will pay to MLBFS by check
a non-refundable Letter of Credit Commitment Fee in the amount of $775.75, or
Customer hereby authorizes and directs MLBFS to charge Letter of Credit
Commitment Fee to WCMA Account No. 208-07517.

(ii) All other fees will be charged in accordance with the terms of the Letter
of Credit Supplement included in the Loan Documents.

(iii) No letter of credit expiry date shall extend beyond the Maturity Date.

Additional fees may apply under certain circumstances. All fees (except for the
Letter of Credit Commitment Fee) will be charged to the Customer's WCMA Account
at the applicable time. Please be advised, generally a letter of credit takes a
minimum of 72 hours to be issued from the date the required documents are
returned and accepted by MLBFS.

Except as expressly amended hereby, the Loan Documents shall continue in full
force and effect upon all of their terms and conditions.

By their execution of this Letter Agreement, the below-named Guarantors hereby
consent to the foregoing modifications to the Loan Documents, and hereby agree
that the "Obligations" under their respective Unconditional Guaranty and/or
agreements providing collateral shall extend to and include the Obligations of
Customer under the Loan Documents, as amended hereby.

Customer and said Guarantors acknowledge, warrant and agree, as a primary
inducement to MLBFS to enter into this Agreement, that: (a) no Default or Event
of Default has occurred and is continuing under the Loan Documents; (b) each of
the warranties of Customer in the Loan Documents are true and correct as of the
date hereof and shall be deemed remade as of the date here; (c) neither Customer
nor any of said Guarantors have any claim against MLBFS or any of its affiliates
arising out of or in connection with the Loan Documents or any other matter
whatsoever; and (d) neither Customer nor any of said Guarantors have any defense
to payment of any amounts owing, or any right of counterclaim for any reason
under, the Loan Documents.

<PAGE>

Coffee Holding Co., Inc.
January 27, 2005
Page No. 3

THE OBLIGATIONS OF MLBFS UNDER THIS LETTER AGREEMENT ARE SUBJECT TO ITS RECEIPT
(WHERE APPLICABLE) AND SATISFACTION WITH THE FOLLOWING:

                 A COPY OF CUSTOMER'S 10K REPORT FOR FISCAL YEAR
                            ENDING DECEMBER 31, 2004.

Provided that no Event of Default, or event which with the giving of notice,
passage of time, or both, would constitute an Event of Default, shall then have
occurred and be continuing under the terms of the Loan Documents, and each of
the conditions specified above shall have been met to our satisfaction, the
amendments and agreements in this Letter Agreement will become effective on the
date (the "Effective Date") upon which: (a) Customer and the Guarantors shall
have executed and returned the duplicate copy of this Letter Agreement and the
other documents enclosed herewith; and (b) an officer of MLBFS shall have
reviewed and approved this Letter Agreement and such other documents as being
consistent in all respects with the original internal authorization hereof.

Notwithstanding the foregoing, if Customer and the Guarantors do not execute and
return the duplicate copy of this Letter Agreement and such other documents
within 14 days from the date hereof, or if for any other reason (other than the
sole fault of MLBFS) the Effective Date shall not occur within said 14-day
period, then all of said amendments and agreements will, at the sole option of
MLBFS, be void.

Very truly yours,

MERRILL LYNCH BUSINESS FINANCIAL SERVICES INC.

By: /s/ David Smoller
    ---------------------
    David Smoller
    Senior Credit Manager

Accepted:

COFFEE HOLDING CO., INC.
By: /s/ David Gordon
    -----------------------
Printed Name:  David Gordon
Title:  Vice President

Approved:

/s/ Andrew Gordon
------------------
ANDREW GORDON

/s/ David Gordon
------------------
DAVID GORDON

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