FOSSIL INC - FOSL Proxy Statement (definitive) (DEF 14A) SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

The Company’s only outstanding class of equity securities is its Common Stock. Unless otherwise indicated, all share and price figures contained in the Proxy Statement have been adjusted to reflect a three-for-two stock split, paid as a stock dividend, effective April 8, 2004. The following table sets forth information regarding the beneficial ownership of Common Stock as of the Record Date by (i) each Named Executive Officer (as defined in “Election of Directors—Compensation of Executive Officers”); (ii) each director of the Company; (iii) all present executive officers and directors of the Company as a group; and (iv) each other person known to the Company to own beneficially more than five percent (5%) of the Common Stock as of the Record Date. Unless otherwise noted, the persons named below have sole voting and investment power with respect to the shares shown as beneficially owned by them.

	Shares Beneficially Owned(1)(2)
Name of Beneficial Owner	Number		Percent
Michael W. Barnes	197,087	(3)		*
Steve Bock	64,749	(4)		*
Kosta N. Kartsotis	8,875,539			12.47	%
Tom Kartsotis	11,813,087	(5)		16.61	%
Randy S. Kercho	506,970	(6)		*
Mark D. Quick	133,699	(7)		*
Jal S. Shroff	1,151,631	(8), (9)		1.61	%
Kenneth W. Anderson	104,623	(10)		*
Andrea Camerana	6,750	(11)		*
Alan J. Gold	123,824	(12)		*
Michael Steinberg	31,125	(13)		*
Donald J. Stone	92,186	(14)		*
All executive officers and Directors as a group (14 persons)(3)(4)(5)(6)(7)(8)(10)(11)(12)(13)(14)	23,189,144			32.02	%
FMR Corp.	7,737,300	(15)		10.87	%
Royce & Associates, LLC	3,588,450	(16)		5.04	%

* Less than 1%

(1) Beneficial ownership as reported in the above table has been determined in accordance with Rule 13d-3 under the Securities Exchange Act of 1934, as amended (the “Exchange Act”). The persons and entities named in the table have sole voting and investment power with respect to all shares shown as beneficially owned by them, except as noted below. Amounts shown include shares of Common Stock issuable upon exercise of certain outstanding options within 60 days after the Record Date.

(2) Except for the percentage of certain parties that are based on presently exercisable options, which are indicated in the following footnotes to the table, the percentages indicated are based on 71,179,517 shares of Common Stock issued and outstanding on the Record Date. In the case of parties holding presently exercisable options, the percentage ownership is calculated on the assumption that the shares presently held or purchasable within the next 60 days underlying such options are outstanding.

(3) Includes 36,000 shares issuable pursuant to the exercise of stock options within 60 days of the Record Date. Also includes indirect ownership of 1,518 shares over which Mr. Barnes has voting control as independent administrator pursuant to letters testamentary, 2,038 shares held indirectly through a 401(k) plan account and 73,300 shares of restricted stock subject to a vesting schedule.

(4) Includes 18,925 shares issuable pursuant to the exercise of stock options within 60 days of the Record Date. Also includes 40,000 shares of restricted stock subject to a vesting schedule.

(5) Includes 2,679,580 shares of Common Stock owned of record by Lynne Stafford Kartsotis, wife of Mr. Tom Kartsotis, as to which Mr. Kartsotis disclaims beneficial ownership, 32,980 shares owned by Mr. Kartsotis as custodian for his minor daughter, and 2,074,757 shares held in retained annuity trusts.

(6) Includes 454,660 shares issuable pursuant to the exercise of stock options within 60 days of the Record Date. Also includes 31,875 shares of restricted stock subject to a vesting schedule, 6,935 shares held indirectly through a 401(k) plan account and 13,500 shares owned by Mr. Kercho as custodian for his minor son.

(7) Includes 73,690 shares issuable pursuant to the exercise of stock options within 60 days of the Record Date, 58,500 shares of restricted stock subject to a vesting schedule and 1,509 shares held indirectly through a 401(k) plan account.

(8) Mr. Shroff and his wife, Pervin J. Shroff, share voting and investment power with respect to 794,732 of the shares shown.

(9) Includes 170,013 shares issuable pursuant to the exercise of stock options within 60 days of the Record Date. Also includes indirect ownership of 186,886 shares issuable pursuant to the exercise of stock options within 60 days of the Record Date, which are owned by Mrs. Shroff.

(10) Includes 82,311 shares issuable pursuant to the exercise of stock options within 60 days of the Record Date. Also includes 17,812 shares owned by the K.W. Anderson Family Limited Partnership. Mr. Anderson is managing general partner of the partnership and has sole voting and investment power with respect to those shares.

(11) Consists of shares issuable pursuant to the exercise of stock options within 60 days of the Record Date.

(12) Includes 67,124 shares issuable pursuant to the exercise of stock options within 60 days of the Record Date. Also includes 10,000 shares owned by the Gold Family Foundation. Mr. Gold is the President of the foundation and has sole voting and investment power with respect to those shares.

(13) Consists of shares issuable pursuant to the exercise of stock options within 60 days of the Record Date.

(14) Includes 67,124 shares issuable pursuant to the exercise of stock options within 60 days of the Record Date.

(15) Based on Amendment No. 9 to Schedule 13G, dated February 14, 2005, filed by FMR Corp. (“FMR”), 82 Devonshire Street, Boston, Massachusetts 02109, with the Securities and Exchange Commission (the “SEC”). The Amendment No. 9 discloses that FMR has the sole power to vote or direct the vote of 0 shares of the 7,737,300 shares of Common Stock it beneficially owns, and sole power to dispose or to direct the disposition of the 7,737,300 shares. The Amendment No. 9 additionally discloses that Edward C. Johnson, III and Abigail P. Johnson beneficially own and have sole dispositive power over the 7,737,300 shares.

(16) Based on a Schedule 13G, dated January 27, 2005, filed by Royce & Associates, LLC (“Royce”), 1414 Avenue of the Americas, New York, New York 10019, with the SEC. The Schedule 13G discloses that Royce beneficially owns, has the sole power to vote or direct the vote of, and has the sole power to dispose or direct the disposition of 3,588,450 share of Common Stock.

ELECTION OF DIRECTORS
(Proposal 1)

The Board of Directors currently consists of nine members and is classified into three classes. The term of one class of directors expires each year. By resolution of the Board of Directors at its meeting on March 25, 2005, the number of directors composing the Board of Directors has been set at nine. The persons whose names are listed below (“Director Nominees”) have been nominated for election as directors by the Board of Directors to serve for a term of office to expire at the Annual Meeting of Stockholders in 2008, with each to hold office until his successor has been duly elected and qualified. Stockholders will not be able to vote the proxies held by them for more than three persons. To be elected a director, each Director Nominee must receive a plurality of the votes cast at the Meeting for the election of directors. Should any Director Nominee become unable or unwilling to accept nomination or election, the proxy holders may vote the proxies for the election, in his or her stead, of any other person the Board of Directors may recommend. Each Director Nominee has expressed his intention to serve the entire term for which election is sought.

Directors and Nominees

The following table and text set forth the name, age and positions of each Director Nominee and director:

Name	Age	Position
Kenneth W. Anderson	73	Director
Michael W. Barnes	44	Director and President, International and Special Markets Division
Andrea Camerana	35	Director
Alan J. Gold	71	Director
Kosta N. Kartsotis	52	Director, President and Chief Executive Officer
Tom Kartsotis	45	Director and Chairman of the Board
Jal S. Shroff	68	Director and Managing Director of Fossil (East) Limited
Michael Steinberg	76	Director
Donald J. Stone	76	Director

The Director Nominees for election to the Board of Directors at the 2005 Annual Meeting of Stockholders are as follows:

Kenneth W. Anderson has been a director of the Company since April 1993. Mr. Anderson was a co-founder of Blockbuster Entertainment Corporation, a video rental company, and served as its President from 1985 until 1987. From 1987 to 1991, Mr. Anderson served in various positions with Amtech Corporation, a remote electronic identification technology company, which he co-founded, including the position of Chairman of its Executive Committee.

Michael W. Barnes has served as President, International and Special Markets Division since October 2000. Mr. Barnes served as Executive Vice President from 1995 until October 2000 and has been a director of the Company since his election to the Board of Directors in February 1993.

Andrea Camerana has been a director of the Company since September 2003. Mr. Camerana serves as Vice President of Marketing and Licensing for the Armani Group based in Milan, Italy. Mr. Camerana oversees all of the Armani Group’s licensing activities, including the licenses with the Company for the worldwide production and distribution of EMPORIO ARMANI watches and jewelry. Mr. Camerana joined the Armani Group in 2000 from the Danone Group.

Unless otherwise directed in the enclosed proxy, it is the intention of the persons named in such proxy to nominate and to vote the shares represented by such proxy for the election of the Director Nominees for the office of director of the Company. Each of the Director Nominees is presently a director of the Company.

The Board of Directors does not contemplate that any of the above-named Director Nominees will refuse or be unable to accept election as a director of the Company, or be unable to serve as a director of the Company. Should any of them become unavailable for nomination or election or refuse to be nominated or to accept election as a director of the Company, then the persons named in the enclosed form of proxy intend to vote the shares represented in such proxy for the election of such other person or persons as may be nominated or designated by the Board of Directors.

THE BOARD OF DIRECTORS RECOMMENDS THAT
STOCKHOLDERS VOTE FOR EACH DIRECTOR NOMINEE
FOR THE BOARD OF DIRECTORS.

Directors Serving Terms To Expire At The 2006 Annual Meeting Of Stockholders:

Alan J. Gold has been a director of the Company since April 1993. Mr. Gold was the founder of Accessory Lady, a women’s fashion accessory retail chain, and served as its President until 1992. Mr. Gold is currently President of Goldcor Investments.

Kosta N. Kartsotis has served as President and Chief Executive Officer since October 2000 and served as President and Chief Operating Officer from December 1991 until October 2000. Mr. Kosta Kartsotis joined the Company in 1988. He has been a director of the Company since 1990.

Michael Steinberg has been a director of the Company since March 2000. Mr. Steinberg served as Chairman and Chief Executive Officer of Macy’s West, a Division of Federated Department Stores, Inc., from a date prior to 1996 until his retirement in January 2000.

Directors Serving Terms To Expire At The 2007 Annual Meeting Of Stockholders:

Tom Kartsotis has served as Chairman of the Board since December 1991. Mr. Tom Kartsotis founded the Company in 1984 and served as its President until December 1991 and as Chief Executive Officer until October 2000. He has been a director of the Company since 1984.

Jal S. Shroff has served as Managing Director of Fossil (East) Limited (“Fossil East”) since January 1991 and has been a director of the Company since April 1993.

Donald J. Stone has been a director of the Company since April 1993. Mr. Stone served as Vice Chairman of Federated Department Stores until February 1988, at which time he retired.

Mr. Tom Kartsotis and Mr. Kosta N. Kartsotis are brothers. There are no other family relationships among any of the directors, Director Nominees or executive officers of the Company.

Board Committees and Meetings

The Board of Directors has established two standing committees: the Audit Committee and the Compensation Committee. Messrs. Anderson, Gold, Steinberg, and Stone serve on the Audit Committee and the Compensation Committee.

Audit Committee. The functions of the Audit Committee are to recommend to the Board of Directors the appointment of independent registered public accounting firms, to review the plan and scope of any audit of the Company’s financial statements and to review the Company’s significant accounting policies and other related matters. Deloitte & Touche LLP, the Company’s independent registered public

accounting firm, reports directly to the Audit Committee. The Audit Committee, consistent with the Sarbanes-Oxley Act of 2002 and the rules adopted thereunder, meets with management and the Company’s independent registered public accounting firm prior to the filing of officers’ certifications with the Securities and Exchange Commission (the “SEC”) to receive information concerning, among other things, significant deficiencies in the design or operation of internal control over financial reporting. The Audit Committee has adopted a procedure that enables confidential and anonymous reporting to the Audit Committee of concerns regarding questionable accounting or auditing matters. The Company’s internal audit group reports directly to the Audit Committee on a quarterly basis. The Audit Committee held a total of 12 meetings during the fiscal year ended January 1, 2005.

The Audit Committee operates under a formal charter adopted by the Board of Directors that governs its duties and conduct. The charter is reproduced as Appendix 1 to this Proxy Statement. Copies of the charter can be obtained free of charge from the Company’s web site, www.fossil.com , or by contacting the Company at the address appearing on the first page of this proxy statement to the attention of Investor Relations or by telephone at (972) 234-2525.

Compensation Committee. The functions of the Compensation Committee are to make recommendations to the Board of Directors regarding the compensation of senior officers and to administer the 2004 Long-Term Incentive Plan (the “Incentive Plan”) and the 2002 Restricted Stock Plan (the “Restricted Stock Plan”). The Compensation Committee held two meetings during the fiscal year ended January 1, 2005. The Compensation Committee operates under a formal charter adopted by the Board of Directors that governs its duties and standards of performance.

The Board of Directors held four meetings during the fiscal year ended January 1, 2005. During 2004, each director attended 91% or more of the meetings of the Board of Directors and the meetings held by all committees of the Board on which such director served. The Board of Directors strongly encourages that directors make a reasonable effort to attend the Company’s Annual Meeting of Stockholders. Eight of the nine members of the Board of Directors attended the Company’s 2004 Annual Meeting of Stockholders.

Report of the Audit Committee

The Audit Committee members are Messrs. Anderson, Gold, Steinberg and Stone. The Board of Directors believes that all of these directors are independent as defined by the Nasdaq National Market and the SEC. The Audit Committee includes at least one independent director who has been determined by the Board of Directors to meet the qualifications of an “audit committee financial expert” in accordance with SEC rules. Kenneth W. Anderson is the independent director who has been determined to be an audit committee financial expert.

The following is the report of the Audit Committee with respect to the Company’s audited financial statements for the fiscal year ended January 1, 2005, which includes the consolidated balance sheets of the Company as of January 1, 2005 and January 3, 2004, and the related consolidated statements of income and comprehensive income, stockholders’ equity and cash flows for each of the three years in the period ended January 1, 2005, and the notes thereto. The information contained in this report shall not be deemed to be “soliciting material” or to be “filed with the SEC”, nor shall such information be incorporated by reference into any future filing under the Securities Act of 1933, as amended, or the Securities Exchange Act of 1934, as amended, except to the extent that the Company specifically incorporates it by reference in such filing.

Review and Discussions with Management.

The Audit Committee has reviewed and discussed the Company’s audited financial statements with management.