SECOND AMENDED AND RESTATED FOSSIL, INC. AND AFFILIATES DEFERRED COMPENSATION PLAN

 

TABLE OF CONTENTS

 

			Page
SECTION  I. DEFINITIONS			1
1.1.	Addendum		1
1.2.	Account		1
1.3.	Applicable Interest Rate		1
1.4.	Beneficiary		1
1.5.	Benefit		1
1.6.	Board		1
1.7.	Business Day		2
1.8.	Change in Control		2
1.9.	Code		3
1.10.	Committee		3
1.11.	Company		3
1.12.	Contributions		3
1.13.	Deferred Payments		3
1.14.	Deferred Payment Date		3
1.15.	Designated Affiliate		3
1.16.	Earnings		3
1.17.	Effective Date		3
1.18.	Election Form		3
1.19.	Eligible Employee		4
1.20.	Employee		4
1.21.	Employer		4
1.22.	Employer Account		4
1.23.	Employer Contribution		4
1.24.	Entry Date		4
1.25.	ERISA		4
1.26.	Grandfathered Benefit		4
1.27.	Installment Payment		4
1.28.	Investment Date		4
1.29.	Lump Sum		4
1.30.	Measurement Preference		4
1.31.	Participant		5
1.32.	Plan		5
1.33.	Plan Year		5
1.34.	Quarter		5
1.35.	Rules of General Application		5
1.36.	Salary		5
1.37.	Salary Deferral Account		5
1.38.	Salary Deferral Contributions		5
1.39.	Separation from Service		5
1.40.	Specified Employee		6
1.41.	Third-Party Record Keeper		6
1.42.	Trust		6
1.43.	Valuation Date		6
1.44.	Vest, Vesting or Vested		6

 

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TABLE OF CONTENTS

 

Page

 

SECTION  II. ADMINISTRATION		7
2.1.	Appointment of Committee	7
2.2.	Employer Duties	7
2.3.	Authority of Committee	7
2.4.	Action by Committee	7
2.5.	Meetings of Committee	7
2.6.	Powers of Committee and Company	7
2.7.	Indemnification	8
2.8.	Bond and Expenses	8
2.9.	Reliance on Tables	8
SECTION  III. PARTICIPATION		8
SECTION  IV. CONTRIBUTIONS		8
4.1.	Election Dates	8
4.2.	Salary Deferral Contributions	9
4.3.	Crediting of Salary Deferral Contributions	9
4.4.	Employer Contributions	9
4.5.	Disposition of Contributions	9
SECTION  V. PARTICIPANT’S ACCOUNTS AND INVESTMENTS		10
5.1.	Establishment of Account	10
5.2.	Earnings Credited to Accounts	10
5.3.	Investment Direction	10
5.4.	Statements	10
SECTION  VI. VESTING		10
6.1.	Salary Deferral Account	10
6.2.	Employer Account	10
SECTION  VII. DISTRIBUTION OF BENEFIT		11
7.1.	Form and Timing of Distribution	11
7.2.	Special Rules for Specified Employees	11
7.3.	Election of Deferred Payments	11
7.4.	Installment Payments	12
7.5.	Change in Control	12
7.6.	Hardship Distribution	12
7.7.	Grandfathered Benefits	13
7.8.	Source of Distribution	13
SECTION  VIII. DESIGNATION OF BENEFICIARIES		13
8.1.	Designation by Participant	13
8.2.	Lack of Designation	14
SECTION  IX. AMENDMENT AND TERMINATION		14

 

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TABLE OF CONTENTS

 

Page

 

SECTION  X. CLAIMS PROVISIONS		15
10.1.	Presentation of Claim	15
10.2.	Notification of Decision	15
10.3.	Review of a Denied Claim	16
10.4.	Decision on Review	16
10.5.	Legal Action	16
SECTION  XI. GENERAL PROVISIONS		17
11.1.	No Assignment	17
11.2.	Incapacity	17
11.3.	Final Resolution of Disputes Relating to Plan	17
11.4.	Information Required	17
11.5.	Communications by, and Information from, Participant	17
11.6.	No Rights Implied	18
11.7.	Communications by Committee or Employer	18
11.8.	Interpretations and Adjustments	18
11.9.	No Liability for Good Faith Determinations	18
11.10.	No Employment Rights	18
11.11.	Withholding of Taxes	18
11.12.	Waivers	18
11.13.	Records	19
11.14.	Securities Laws	19
11.15.	Severability	19
11.16.	Captions and Gender	19
11.17.	Choice of Law	19
11.18.	Effective Date and Termination Date	19

 

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SECOND AMENDED AND RESTATED
FOSSIL, INC. AND AFFILIATES
DEFERRED COMPENSATION PLAN

 

Effective January 1, 2005, Fossil, Inc. amended and restated the Fossil, Inc. and Affiliates Deferred Compensation Plan (the “Predecessor Plan”) and established the First Amended and Restated Fossil, Inc. and Affiliates Deferred Compensation Plan to allow for a select group of highly compensated employees to defer a portion of their compensation and possibly receive deferred employer contributions.  Effective January 1, 2009, Fossil, Inc. amends and restates the First Amended and Restated Fossil, Inc. and Affiliates Deferred Compensation Plan and renames it the Second Amended and Restated Fossil, Inc. and Affiliates Deferred Compensation Plan (the “Plan”) in the form provided herein in order to comply with the Final Treasury Regulations of Section 409A of the Code.

 

For purposes of the Code, the Company intends this Plan to be an unfunded, unsecured promise to pay on the part of each Employer.  For purposes of ERISA, the Company intends 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  I.

DEFINITIONS

 

1.1.                               Addendum .  Addendum 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 4.4.

 

1.2.                               Account .  Account shall mean, collectively, the Salary Deferral Account, and the Employer Account, maintained for each Participant.

 

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

 

1.4.                               Beneficiary .  Beneficiary shall mean the person or persons, entity or entities designated by the Participant and in accordance with the requirements set forth in Section VIII as the beneficiary of the Participant’s Benefit.

 

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

 

1.6.                               Board .  Board shall mean the Board of Directors of the Company.

 

 

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

 

1.8.                               Change in Control .  Change in Control shall mean the first to occur of the following events, which shall be deemed to have occurred:

 

(a)                                    A change in ownership of the Company .  On the date any “Person” (as defined in subparagraph (d) below) acquires ownership of stock of the Company that, together with stock held by such Person, constitutes more than fifty percent (50%) of the total fair market value or total voting power of the stock of the Company; provided, however, that there shall be no Change in Control and this subparagraph (a) shall not apply if such acquiring Person is a corporation and a majority of the Board of Directors of the acquiring Person 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 fair market value or total voting power; and provided, further, that if any Person is considered to own more than fifty percent (50%) of the total fair market value or total voting power of the stock of the Company, the acquisition of additional stock by the same Person is not considered to be a Change in Control; or

 

(b)                                   A change in the effective control of the Company .  On the date that either:

 

(i)                                      Any Person acquires (or has acquired during the twelve (12)-month period ending on the date of the most recent acquisition by such Person) ownership of stock of the Company possessing thirty-five percent (35%) or more of the total voting power of the stock of the Company; or

 

(ii)                                   On the date a majority of members of the Board is replaced during any twelve (12)-month period by directors whose appointment or election is not endorsed by a majority of the Board before the date of the appointment or election; provided, however, that any such director shall not be considered to be endorsed by the Board if his or her initial assumption of office occurs as a result of an actual or threatened solicitation of proxies or consents by or on behalf of a Person other than the Board.

 

(c)                                    A change in the ownership of a substantial portion of the Company’s assets .  On the date any Person acquires (or has acquired during the twelve (12)-month period ending on the date of the most recent acquisition by such Person) assets from the Company that have a total gross fair market value equal to or more than forty percent (40%) of the total gross fair market value of all of the assets of the Company immediately before such acquisition or acquisitions.  For this purpose, gross fair market value means the value of the assets of the Company or the value of the assets being disposed of, determined without regard to any liabilities associated with such assets.  However, there is no Change in Control when there is such a sale or transfer to (i) a shareholder of the Company (immediately before the asset transfer) in exchange for or with respect to the Company’s then outstanding stock; (ii) an entity, at least fifty percent (50%) of the total value or voting power of the stock of which is owned, directly or indirectly, by the Company; (iii) a Person that owns directly or indirectly, at least fifty percent (50%) of the

 

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total value or voting power of the outstanding stock of the Company; or (iv) an entity, at least fifty percent (50%) of the total value or voting power of the stock of which is owned, directly or indirectly, by a Person that owns, directly or indirectly, at least fifty percent (50%) of the total value or voting power of the outstanding stock of the Company.

 

(d)                                   For purposes of subparagraphs (a),(b) and (c) above, “Person” shall have the meaning given in Section 7701(a)(1) of the Code.  Person shall include more than one Person acting as a group as defined by the Final Treasury Regulations issued under Section 409A of the Code.

 

1.9.                               Code .  Code shall mean the Internal Revenue Code of 1986, as amended.

 

1.10.                         Committee .  Committee shall mean those persons designated to administer the Plan pursuant to Section II.

 

1.11.                         Company .  Company shall mean Fossil, Inc., a Delaware corporation, and its successors and assigns.

 

1.12.                         Contributions .  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.

 

1.13.                         Deferred Payments .  Deferred Payments shall mean the payment of a Participant’s Benefits as described in Section 7.3.

 

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

 

1.15.                         Designated Affiliate .  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.

 

1.16.                         Earnings .  Earnings shall mean the notated credits or debits 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.

 

1.17.                         Effective Date .  Effective Date shall mean December 30, 1998.  The Effective Date of the Second Amended and Restated Plan shall be January 1, 2009.

 

1.18.                         Election Form .  Election Form shall mean an election in such form as specified by the Committee by which the Participant may specify his: (a) Salary Deferral Contribution for

 

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the Plan Year, (b) Measurement Preferences, (c) form and timing of distribution of his Benefit, and (d) such other matters as shall be determined by the Committee at the time of reference.

 

1.19.                         Eligible Employee .  Eligible Employee shall mean an Employee of an Employer who is: (a) a member of a select group of management or a highly compensated Employee and after December 31, 2004, is at the level of vice president or above, and (b) designated by the Committee as eligible to participate in the Plan.

 

1.20.                         Employee .  Employee shall mean any person on the U.S. payroll of the Employer.

 

1.21.                         Employer .  Employer shall mean, collectively, the Company and each Designated Affiliate.

 

1.22.                         Employer Account .  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.

 

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

 

1.24.                         Entry Date .  Entry Date shall mean January 1 ^st for each Plan Year; except that for any Employee who first became an Eligible Employee on or between January 1 ^st and June 30 ^th   of a Plan Year, the Entry Date shall mean  July 1 ^st of that same Plan Year.

 

1.25.                         ERISA .  ERISA shall mean the Employee Retirement Income Security Act of 1974, as amended.

 

1.26.                         Grandfathered Benefit.  Grandfathered Benefit shall mean the Benefit earned and Vested and credited to the Account of any Participant as of December 31, 2004, plus any Earning credited to the Account on and after January 1, 2005 relating to the such Benefit.

 

1.27.                         Installment Payment .  Installment Payment shall mean each of a series of annual distributions, in cash, of the Participant’s Account balance.  A series of Installment Payments will be treated as a single payment for purposes of Section 409A of the Code.

 

1.28.                         Investment Date .  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.

 

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

 

1.30.                         Measurement Preference .  Measurement Preference shall mean the preference described in Section 5.3.

 

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1.31.                         Participant .  Participant shall mean an Eligible Employee who participates in the Plan pursuant to Section 3.

 

1.32.                         Plan .  Plan shall mean the Second Amended and Restated Fossil, Inc. and Affiliates Deferred Compensation Plan, as set forth in this document and subsequent amendments.

 

1.33.                         Plan Year .  Plan Year shall mean calendar year.

 

1.34.                         Quarter .  Quarter shall mean calendar quarter.

 

1.35.                         Rules of General Application .  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 consistent manner to similarly situated Participants.

 

1.36.                         Salary .  Salary shall mean Participant’s base salary determined as of December 31 preceding the effective date of the election to defer Salary.  Salary shall include 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.

 

1.37.                         Salary Deferral Account .  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.

 

1.38.                         Salary Deferral Contributions .  Salary Deferral Contributions shall mean the amounts described in Section 4.2.

 

1.39.                         Separation from Service .  Separation from Service means a termination of services provided by a Participant to an Employer, whether voluntarily or involuntarily, as determined by the Committee in accordance with Treas. Reg. §1.409A-1(h).  In determining whether a Participant has experienced a Separation from Service, the following provisions shall apply:

 

(a)                                    For a Participant who provides services to an Employer as an Employee, a Separation from Service shall occur when such Participant has experienced a termination of employment with such Employer.  A Participant shall be considered to have experienced a termination of employment when the facts and circumstances indicate that the Participant and an Employer reasonably anticipate that either (i) no further services will be performed for such Employer after a certain date, or (ii) that the level of bona fide services the Participant will perform for such Employer after such date (whether as an Employee or as an independent contractor) will permanently decrease to no more than twenty percent (20%) of the average level of bona fide services performed by such Participant (whether as an Employee or an independent contractor) over the immediately preceding thirty-six (36)-month period (or the full period of services to such Employer if the Participant has been providing services to such Employer less than thirty-six (36) months).

 

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(b)                                   If a Participant is on military leave, sick leave, or other bona fide leave of absence, the employment relationship between the Participant and an Employer shall be treated as continuing intact, provided that the period of such leave does not exceed six (6) months; or if longer, so long as the Participant retains a right to reemployment with such Employer under an applicable statute or by contract.  If the period of a military leave, sick leave, or other bona fide leave of absence exceeds six (6) months and the Participant does not retain a right to reemployment under an applicable statute or by contract, the employment relationship shall be considered to be terminated for purposes of the Plan as of the first day immediately following the end of such six (6)-month period.  In applying the provisions of this paragraph, a leave of absence shall be considered a bona fide leave of absence only if there is a reasonable expectation that the Participant will return to perform services for an Employer.

 

1.40.                         Specified Employee .  Specified Employee means any Participant who is determined to be a “key employee” (as defined under Section 416(i) of the Code without regard to paragraph (5) thereof) for the applicable period, as determined annually by the Committee in accordance with Treas. Reg. §1.409A-1(i).  In determining whether a Participant is a Specified Employee, the following provisions shall apply:

 

(a)                                    Identification of the individuals who fall within the definition of “key employee” under Section 416(i) of the Code (without regard to paragraph (5) thereof) shall be based upon the twelve (12)-month period ending on each December 31st (referred to below as the “identification date”).  In applying the applicable provisions of Section 416(i) of the Code to identify such individuals, “compensation” shall be determined in accordance with Treas. Reg. §1.415(c)-2(a) without regard to (i) any safe harbor provided in Treas. Reg. §1.415(c)-2(d), (ii) any of the special timing rules provided in Treas. Reg. §1.415(c)-2(e), and (iii) any of the special rules provided in Treas. Reg. §1.415(c)-2(g); and

 

(b)                                   Each Participant who is a “key employee” in accordance with part (a) of this Section shall be treated as a Specified Employee for purposes of this Plan if such Participant experiences a Separation from Service during the twelve (12)-month period that begins on the April 1st following the applicable identification date.

 

1.41.                         Third-Party Record Keeper .  Third-Party Record Keeper shall mean the person or entity selected by the Committee to maintain the records necessary to the administration of the Plan.

 

1.42.                         Trust .  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 .  Valuation Date shall mean the last Business Day of each Quarter.

 

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

 

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SECTION  II.

ADMINISTRATION

 

2.1.                               Appointment of Committee .  The Board shall appoint the Committee comprised of one or more persons who may or may not be Employees.  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.

 

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: (a) to interpret or construe the Plan, (b) to make rules and regulations for the administration of the Plan, (c) to determine all questions of eligibility, status and other rights of Participants, beneficiaries and other persons, (d) to confirm or reject each Participants selection of Measurement Preferences, and (e) 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 such member’s own rights or benefits under this Plan.  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 only with regard to such specific matters.

 

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2.7.                               Indemnification .  Without limitation, including Section 11.9, 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 otherwis