AMENDMENT NO. 1 TO AMENDED AND RESTATED LOAN AND SECURITY AGREEMENT

WHEREAS, Borrowers, Lenders and Agent have entered into an Amended and Restated Loan and Security Agreement, dated as of July 17, 2009 (as amended or otherwise modified, extended or renewed from time to time, the “Loan Agreement”), and the other Loan Documents (as defined in the Loan Agreement); and

WHEREAS, Borrowers have requested that Lenders and Agent agree to amend certain provisions of the Loan Agreement, and Lenders and Agent are willing to agree to such amendments, subject to the terms and conditions set forth herein.

NOW, THEREFORE, in consideration of the foregoing, and for other good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, the parties hereto hereby agree as follows:

Capitalized terms used in this Amendment (including in the recitals above) and not otherwise defined shall have the meanings ascribed to such terms in the Loan Agreement.

2.1  Acknowledgment of Obligations.  The parties hereby acknowledge, confirm and agree that as of the opening of business on April 5, 2011, Borrowers are indebted to Lenders and Agent in respect of Revolver Loans in the aggregate principal amount of $ 0 and in respect of LC Obligations in the aggregate principal amount of $670,870.54.  Such amounts, together with interest accrued and accruing thereon (to the extent applicable), and fees, costs, expenses and other charges relating thereto, each in accordance with the terms of the Loan Agreement, are unconditionally owing by Borrowers to Agent and Lenders in accordance with the terms of the Loan Documents, without offset, defense or counterclaim of any kind, nature or description whatsoever.

2.2  Acknowledgment of Security Interests.  Borrowers hereby acknowledge, confirm and agree that Agent, for the benefit of Secured Parties, has and shall continue to have valid, enforceable and perfected first priority Liens in the Collateral.  Such Liens are the only Liens upon the Collateral, except Permitted Liens.

“Applicable Margin: with respect to any Type of Loan, the margin set forth below, as determined by average Availability for the Fiscal Quarter then most recently ended (as determined by Agent):

If, by the first day of a month, any financial statements and Compliance Certificate due in the preceding month have not been received, then the margins shall be determined as if Level I were applicable, from such day until the first day of the calendar month following actual receipt.”

“LIBOR: for any Interest Period with respect to a LIBOR Loan, the per annum rate of interest (rounded upward, if necessary, to the nearest 1/8th of 1%), determined by Agent at approximately 11:00 a.m. (London time) two Business Days prior to commencement of such Interest Period, for a term comparable to such Interest Period, equal to (a) the British Bankers Association LIBOR Rate (“BBA LIBOR”), as published by Reuters (or other commercially available source reasonably designated by Agent); or (b) if BBA LIBOR is not available for any reason, the interest rate at which Dollar deposits in the approximate amount of such LIBOR Loan would be offered by Bank of America’s London branch to major banks in the London interbank Eurodollar market.  If the Board of Governors imposes a Reserve Percentage with respect to LIBOR deposits at any time in which LIBOR is calculated pursuant to the immediately preceding sentence, then LIBOR shall be the foregoing rate set forth in the immediately preceding sentence, divided by 1 minus the Reserve Percentage.”

 

“3.2.1        Unused Line Fee.  Borrowers shall pay to Agent, for the Pro Rata benefit of Lenders, a fee equal to 0.375% per annum times the amount by which the Revolver Commitments exceed the average daily balance of Revolver Loans and stated amount of Letters of Credit during any month; provided, that such percentage rate shall be increased to 0.50% per annum for any month in which the average daily balance of Revolver Loans and stated amount of Letters of Credit is less than 50% of the Revolver Commitments.  Such fee shall be payable in arrears, on the first day of each month and on the Commitment Termination Date.”

“(b)           Reimburse Agent for all reasonable charges, costs and expenses of Agent in connection with (i) examinations of any Obligor’s books and records or any other financial or Collateral matters as Agent deems appropriate, up to three times per Loan Year; and (ii) appraisals of Inventory up to two times per Loan Year; provided, however, that, in the event (A) the Consolidated Fixed Charge Coverage Ratio is greater than 1.0 to 1.0, (B) Availability for the immediately preceding period of ninety (90) consecutive days has been greater than $25,000,000 and (C) the aggregate outstanding balance of the Obligations is less than $15,000,000, each Borrower shall, and shall cause each Subsidiary to, reimburse Agent for all reasonable charges, costs and expenses of Agent in connection with (i) such examinations, up to one time per Loan Year; and (ii) such appraisals up to one time per Loan Year; provided, further, that if an examination or appraisal is initiated during an Event of Default, all reasonable charges, costs and expenses therefor shall be reimbursed by Borrowers without regard to such limits.  Subject to and without limiting the foregoing, Borrowers specifically agree to pay Agent’s then standard charges for each day that an employee of Agent or its Affiliates is engaged in any examination activities, and shall pay the standard charges of Agent’s internal appraisal group.  This Section shall not be construed to limit Agent’s right to conduct examinations or to obtain appraisals (i) at any time in its sole discretion in the event that internal transfer pricing increases by more than ten percent (10%), at Borrowers’ expense, and (ii) at any other time in its reasonable determination, nor to use third parties for such purposes.”

“10.2.4.     Distributions; Upstream Payments.  Declare or make any Distributions, except Upstream Payments, pro rata Distributions to holders of Equity Interests in non-wholly owned Subsidiaries and the acquisition of Equity Interests of Group in connection with the cashless exercise of stock options, unless, (a) at the time of the declaration and making of any such Distribution, no Event of Default has occurred and is continuing and (b) upon giving effect to the making of any such Distribution, for the four (4) Fiscal Quarter period most recently ended prior to the proposed date of such Distribution for which financial statements and a Compliance Certificate have been delivered to Agent in accordance with Section 10.1.2(a), (b) or (d), as applicable, the Consolidated Fixed Charge Coverage Ratio (including, for this purpose, such proposed Distribution) is greater than 1.25 to 1.0, Domestic EBITDA is greater than $0 and pro forma Availability is greater than the product of (i) 0.25, multiplied by (ii) the lesser of (A) the aggregate amount of Revolver Commitments or (B) the sum of the Accounts Formula Amount, plus the Inventory Formula Amount, minus the Availability Reserve.  Notwithstanding anything to the contrary contained herein, Group may make (a) open market purchases of its own Equity Interests substantially contemporaneously with its receipt of the proceeds of Upstream Payments from its Foreign Subsidiaries, in an amount not to exceed $15,000,000 in the aggregate during the term of this Agreement and (b) Distributions during any four (4) Fiscal Quarter period in an

aggregate amount not to exceed $4,000,000, provided, that, Distributions during the period from February 1, 2011 through July 17, 2012 shall not exceed $5,500,000 in the aggregate and, provided further, that, in the case of this clause (b), (i) at the time of the declaration and making of any such Distribution, no Event of Default has occurred and is continuing and (ii) upon giving effect to the making of any such Distribution, for the four (4) Fiscal Quarter period most recently ended prior to the proposed date of such Distribution for which financial statements and a Compliance Certificate have been delivered to Agent in accordance with Section 10.1.2(a), (b) or (d), as applicable, the Consolidated Fixed Charge Coverage Ratio (including, for this purpose, such proposed Distribution, and excluding, for this purpose, (x) the charge of not more than $23,800,000 related to the closure of Borrowers’ 31 boutique stores in June 2010 and (y) an Inventory writedown of not more than $25,000,000 in the Fiscal Quarter ending January 31, 2012 related to Borrowers’ melting down of approximately $30,000,000 of watch Inventory and discontinuation of the manufacture of watch movements) is greater than 1.25 to 1.0 and pro forma Availability is greater than $12,500,000.”

4.1  Representations in Loan Documents.  Each of the representations and warranties made by or on behalf of Borrowers to Agent and Lenders in any of the Loan Documents was true and correct when made and in all material respects is true and correct on and as of the date of this Amendment with the same full force and effect as if each of such representations and warranties had been made by or on behalf of Borrowers on the date hereof and in this Amendment (other than such representations and warranties that relate solely to a specific prior date).