EXHIBIT 10.5
OAKLEY, INC.
DEFERRED COMPENSATION PLAN
          Oakley, Inc. (together with its subsidiaries, the “Company”) hereby
establishes the Oakley, Inc. Deferred Compensation Plan (as amended from time to
time, the “Plan”), effective as of January 1, 1997.
          The purpose of the Plan is to provide an opportunity for certain
officers and other employees of the Company to elect to defer a portion of the
compensation payable to them by the Company. The Plan is intended as a means of
maximizing the effectiveness and flexibility of the Company’s compensation
arrangements, and as an aid in attracting and retaining individuals of
outstanding ability for employment with the Company.
ARTICLE I — DEFINITIONS
          For purposes hereof, unless otherwise clearly apparent from the
context, the following terms shall have the indicated meanings.

1.1   Account Balance: The excess, if any, of (a) (i) the aggregate Deferred
Amounts credited to the Deferred Compensation Account maintained on behalf of a
Participant since the date such Participant began participating in the Plan,
plus (ii) any Additions with respect to such Participant’s Deferred Compensation
Account, over (b) any withdrawals or other charges against the Deferred
Compensation Account (including, without limitation, any withholding or other
applicable taxes or charges for administering the Plan).   1.2   Additions:
Interest credited by the Company to each Participant’s Deferred Compensation
Account as described in Section 2.3.   1.3   Beneficiary: Any person or persons,
as designated pursuant to Article 4, to whom any benefits may be payable
pursuant to Section 3.3 upon the death of a Participant.   1.4   Committee: The
Deferred Compensation Plan Committee or other committee appointed by the Board
of Directors of the Company to administer the Plan.   1.5   Compensation: Total
salary, bonuses and commissions payable or accrued by the Company for services
rendered by a Participant and reportable on Form W-2 or Form 1099 as taxable
income for Federal income tax purposes.

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1.6   Deferred Compensation Account. A memorandum account maintained by the
Company for the benefit of each Participant.   1.7   Deferred Amount: An amount
credited by the Company to a Participant’s Deferred Compensation Account in lieu
of payment of amounts of Compensation to such Participant.   1.8   Effective
Date of the Plan: January l, 1997; provided, that no amounts of Compensation may
be deferred with respect to services rendered by a Participant prior to
February 1, 1997.   1.9   Participant: Any officer or other key employee of the
Company designated by the Committee to be eligible for participation in the Plan
and who has executed an application for participation pursuant to Section 2.1.
Such individual shall first become a Participant as of the effective date of his
or her initial election to defer Compensation in accordance with Section 2.1
hereof and, subject to the terms and conditions of the Plan, such individual’s
status as a Participant shall continue until the date of the last payment made
to or on behalf of such individual pursuant to Section 3 hereof.   1.10   Plan
Year: January l to December 31; provided, that the initial Plan Year shall be
February 1, 1997 to December 31, 1997.   1.11   Termination: The termination of
a Participant’s employment with the Company for any reason (including but not
limited to by reason of death, disability or retirement).   1.12   Termination
Benefit: Has the meaning set forth in Section 3.1 hereof.   1.13   Termination
Benefit Election: Has the meaning set forth in Section 3.1 hereof.

ARTICLE II — DEFERRED COMPENSATION

2.1   Eligibility and Participation: Eligibility to commence participation in
this Plan shall be restricted to those officers and key employees of the Company
selected for participation by the Committee.

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  (a)   Application. Any individual so selected shall become a Participant by
filing with the Company a written application for participation in a form
satisfactory to the Company within thirty (30) days of the date when he or she
is first notified, in writing, that he or she is eligible to participate in the
Plan. If such application is not filed within such thirty (30) day period, such
individual shall not thereafter be permitted to participate in the Plan until
the next opportunity generally available to all Participants to make or change
their deferral elections.     (b)   Deferral Election. The Participant shall
indicate, in a written form satisfactory to the Company, the percentage or
amount of the Compensation otherwise payable to him or her to be deferred
commencing on the first day that the Participant is eligible to defer amounts
under the Plan with respect to a specific Plan Year. An election with respect to
the portion of Compensation to be deferred shall be irrevocable and shall remain
in effect until the earliest of (i) the end of the applicable Plan Year,
(ii) the date of termination of such individual’s participation in the Plan, and
(iii) the date the Plan terminates.     (c)   Deferral Percentage. Such election
with respect to a Participant’s base salary and/or commissions must be a
percentage or amount that would, on a projected basis, equal at least four
thousand dollars ($4000) for the Plan Year with respect to which such election
is being made. A separate election may be made with respect to the deferral of a
portion of the Participant’s annual bonus, if any, which election may be
expressed either as a percentage (which need not be the same as the percentage
chosen with respect to salary and commissions) or as a fixed amount of the
Participant’s annual bonus.     (d)   Deferral Maximum. The Company may
establish a dollar maximum with respect to the total amount which may be
deferred in any Plan Year by each Participant. The Company shall notify
Participants in writing of any such maximum prior to the beginning of each Plan
Year. If no such notification is given, the maximum in effect for the
immediately preceding Plan Year, if any, shall apply for the new Plan Year. The
maximum for the Plan Year from February 1, 1997 to December 31, 1997 shall be
$150,000.     (e)   Deferral Period. Unless specified as an “In Service
Distribution” as described in Section 3.2, the deferral period with respect to
Deferred Amounts and any Additions in respect thereof shall extend until
Termination.

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2.2   No less than six (6) weeks prior to the start of each Plan Year, the
Committee shall provide (i) notice to each Participant of the terms and
conditions upon which deferrals may be made with respect to such Plan Year and
(ii) a deferral form with which to make deferral elections for such Plan Year.
Such election form must be filed at least twenty (20) days prior to the
beginning of the Plan Year to which it pertains and shall be effective on the
first day of the Plan Year following the filing thereof.   2.3   Interest on the
Account Balance (“Additions”) shall accrue and be compounded daily and shall be
credited monthly. Such accruals shall continue until such date as the Account
Balance is zero.       The applicable interest rate used to calculate Additions
shall be based upon an interest rate index (the “Index”) such as the “Prime
Rate.” The Index in effect for a Plan Year shall be determined as of the
December 1st immediately prior to the beginning of such Plan Year and shall
correspond to the index or other measure used to determine the highest rate of
interest paid by the Company under its principal banking agreement in effect as
of such date. Should no principal banking agreement be in effect on the first
day of December preceding any Plan Year, the Committee shall select an Index to
be applied under this Section 2.3. During the 1997 Plan Year, the Index shall be
the “Prime Rate” as published in the Wall Street Journal.       The actual
interest rate used to calculate Additions shall be adjusted, based on the Index
for the Plan Year then in effect, as of the first day of each calendar quarter
of such Plan Year. Notwithstanding the foregoing, the applicable interest rate
shall not at any time not be less than four percent (4%) per annum.   2.4   A
Participant shall continue to be eligible to defer amounts of Compensation under
the Plan until the earliest date on which any of the following events occurs:  
    (a)     The Plan is terminated;       (b)     There occurs a Termination of
the Participant;       (c)     The Committee makes a determination that the
Participant is no longer eligible to continue to defer amounts under the Plan;

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  (d)   The Participant incurs a disability and has received benefits under the
Company’s long-term disability plan for at least six (6) months; or     (e)  
The Participant provides notice to the Company, as provided in Section 2.7, that
he or she does not want to continue participation in the Plan for one or more
years.

2.5   Should a Participant’s eligibility to defer amounts under the Plan be
discontinued under Section 2.4, he or she may not be eligible to re-commence
deferrals under the Plan except upon prior approval by the Committee.   2.6   In
the event a Participant is granted a leave of absence by the Company, no
additional Deferred Amounts shall be credited to the Participant’s Account
Balance for the duration of the period of such leave. However, Additions shall
continue to be so credited during such period. Such leave of absence shall not
entitle the Participant to distribution of his or her Termination Benefit.   2.7
  A Participant may notify the Company, in advance and in writing, that he or
she does not wish to defer any Compensation under the Plan for a period of one
or more years. Such notice shall not entitle the Participant to distribution of
his or her Termination Benefit.

ARTICLE III — PAYMENT OF PLAN BENEFITS

3.1   Termination Benefit: Upon a Participant’s Termination, the Participant
shall be entitled to receive a distribution of the Participant’s Account Balance
(the “Termination Benefit”).       Except as otherwise provided in this
Article III, pursuant to the Participant’s Termination Benefit Election (as
defined below), the Termination Benefit shall be paid either (i) in a lump sum
within thirty (30) days following the Participant’s Termination, (ii) in five
annual installments or (iii) in ten annual installments (each, a “Standard
Distribution Option”). Should annual installments be selected, the first such
payment shall be made within thirty (30) days following Termination.       As of
the date a Participant commences participation in the Plan, the Participant
shall elect a Standard Distribution Option (a “Termination Benefit Election”).
The Termination Benefit Election may only be changed once a year thereafter,
effective as of the first day of the next

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    Plan Year beginning after the date of such election. The Termination Benefit
Election shall not be binding unless made at least one full year prior to the
date of Termination. If the Participant should retire within one year of
commencing participation in the Plan, or if no Termination Benefit Election is
otherwise in effect, the Termination Benefit shall be payable by lump sum,
regardless of any Termination Benefit Election made by the Participant.      
The Company shall furnish to the Participant the appropriate form for making the
Termination Benefit Election. This form shall be furnished at the time the
Participant commences participation in the Plan, and at least thirty (30) days
before the start of each subsequent Plan Year.       In the event the
Participant chooses to receive the Termination Benefit in installments over a
period of five years, the first payment would be equal to one-fifth of the full
value of the Deferred Compensation Account as of the date of such payment. The
installment payment to be made the following year would be equal to one-fourth
of the value of the Deferred Compensation Account as of the date of such payment
(including any Additions credited to the remaining balance since the date of the
first payment), and so forth. A similar payment schedule would apply to a
Termination Benefit payable in installments over a ten-year period. Such method
of payment is referred to herein as the “Installment Method.”   3.2   In Service
Distribution: Notwithstanding Section 3.1, Participants may make an irrevocable
election, at the time specified in Section 2.1 or Section 2.2 for Deferred
Amount elections or changes, to receive all or any part of their Deferred Amount
for any Plan Year, together with Additions with respect thereto, in the form of
an “In Service Distribution” in a lump sum or in installments during a specified
year or term of not more than four years prior to Termination; provided, that
the deferral period for an In Service Distribution must be no less than three
(3) years following the end of the Plan Year as to which the election relates;
and provided, further, that In Service Distributions shall be permitted to
commence only as of the first day of a calendar quarter. Amounts payable in
installments over a specified term of years shall be paid pursuant to the
Installment Method described in Section 3.1.       Notwithstanding the
foregoing, in the event of a Participant’s Termination prior to distribution of
amounts otherwise payable pursuant to an In Service Distribution election, the
Participant’s Termination Benefit Election shall take precedence over the In
Service Distribution election as of the date of Termination.

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3.3   Death Benefit: If a Participant should die at a time when the
Participant’s Account Balance is greater than zero, then, notwithstanding any
prior election by the Participant to receive the Termination Payment in a series
of annual installments, the Participant’s Beneficiary or Beneficiaries shall be
paid an amount equal to the value of the Participant’s Account Balance as of the
date of death, in a lump sum, as soon as administratively feasible in accordance
with Section 6.4.   3.4   Withdrawal: At any time prior to Termination, a
Participant may make a one-time irrevocable election to withdraw all (but not
less than all) of the Participant’s then Account Balance (a “Withdrawal”);
provided, that the amount payable to any Participant making a Withdrawal shall
be reduced by six (6) percent of the Account Balance as of the date of the
Withdrawal, such amount to be forfeited to the Company; and provided, further,
that from and after the date notice of the Withdrawal is provided to the
Company, the Participant making the Withdrawal shall no longer be eligible to
defer amounts under or otherwise participate in the Plan. The date of the
Withdrawal shall be as soon as administratively practicable following the
Company’s receipt of notice from the Participant requesting the Withdrawal.

ARTICLE IV — BENEFICIARIES

4.1   At the time participation in the Plan commences, each Participant shall
designate on a form satisfactory to the Company one or more Beneficiaries to
receive any benefits which may become payable hereunder in the event of the
Participant’s death (“Beneficiary Designation”). A Beneficiary Designation may
be changed by a Participant at any time upon written notice to the Company.  
4.2   If the Participant shall have made more than one Beneficiary Designation,
the Beneficiary Designation most recently filed with the Company prior to the
time of the Participant’s death shall govern.   4.3   If any amounts under the
Plan become payable following the Participant’s death at a time when no
Beneficiary Designation is applicable, such payments shall be made in a lump sum
(a) to the Participant’s then living spouse, if any; or (b) if none, then to
such person or persons, including the Participant’s estate, as the Participant
may designate under his or her last Will, making specific reference hereto; or
(c) if the Participant is not survived by a spouse or shall fail to so designate
such person or persons by Will, then such payments shall be made to the then
living children of the Participant, if any, in equal shares; and (d) if none,
then in one lump sum to the Participant’s estate.

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ARTICLE V — AMENDMENT AND TERMINATION OF PLAN

5.1   Amendment and Termination: The Company reserves the right to amend in
whole or in part, in writing, or to terminate this Plan at any time, with or
without notice; provided, however, that no such action shall reduce the value of
a Participant’s Account Balance accrued prior to the date of any such amendment
or termination.       If the Plan is amended in such a way that the rate of
interest to be credited on the Account Balance or on future Deferred Amounts, as
described in Section 2.3, would be less than four percent (4%) per year, the
Plan shall be terminated as of the date of such amendment and the value of each
Participant’s Account Balance shall be distributed, in a lump sum, within
30 days of any such amendment.       Notwithstanding the foregoing, the Plan
shall not be terminated if, as an alternative means of calculating Additions,
the Plan is amended to permit Participants to select from among one or more
hypothetical investment funds in which their Deferred Amounts or Account
Balances would be deemed to be invested.   5.2   In the event of a Change in
Control of the Company, as described below, the Plan shall be terminated as of
the effective date of such event. The Account Balance of each Participant shall
then be paid, in a lump sum, within 30 days following the date of the Change of
Control unless the successor or surviving corporation shall agree in writing to
continue the Plan on terms at least as favorable to Participants as in effect
immediately prior to the Change in Control.       For the purpose of this Plan,
a “Change in Control” shall be deemed to have occurred if:

     (i) Any “person,” as such term is used in Section 13(d) and 14(d) of the
Securities Exchange Act of 1934, as amended (the “Act”) (other than the Company;
any trustee or other fiduciary holding securities under an employee benefit plan
of the Company; Jim Jannard, Mike Parnell, their affiliates, spouses, widows,
lineal descendants and heirs, devisees and donees, and trusts created by Jim
Jannard or Mike Parnell for the benefit of such persons; or any company owned,
directly or indirectly, by all the stockholders of the Company in substantially
the same

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proportions as their ownership of the Company’s common stock (each such person
an “Excluded Person”)), is or becomes after the Effective Date of the Plan the
“beneficial owner” (as defined in Rule 13d-3 under the Act), directly or
indirectly, of securities of the Company (not including in the securities
beneficially owned by such person any securities acquired directly from the
Company) representing 25% or more of the combined voting power of the Company’s
then outstanding securities; or
     (ii) During any period of two consecutive years (not including any period
prior to the Effective Date of the Plan), individuals who at the beginning of
such period constitute the Board, and any new director (other than a director
designated by a person who has entered into an agreement with the Company to
effect a transaction described in clause (i), (iii) or (iv)) whose election by
the Board or nomination for election by the Company’s stockholders was approved
by a vote of at least two-thirds (2/3) of the directors then still in office who
either were directors at the beginning of the period or whose election or
nomination for election was previously so approved, cease for any reason to
constitute at least a majority thereof; or
     (iii) The stockholders of the Company approve a merger or consolidation of
the Company with any other corporation, other than a merger or consolidation
which would result in the voting securities of the Company outstanding
immediately prior thereto continuing to represent (either by remaining
outstanding or by being converted into voting securities of the surviving
entity), in combination with the ownership of any trustee or other fiduciary
holding securities under an employee benefit plan of the Company at least 75% of
the combined voting power of the voting securities of the Company or such
surviving entity outstanding immediately after such merger or consolidation;
provided, however, that a merger or consolidation effected to implement a
recapitalization of the Company (or similar transaction) in which no person
(other than an Excluded Person) acquires more than 25% of the combined voting
power of the Company’s then outstanding securities shall not constitute a Change
in Control; or
     (iv) The stockholders of the Company approve a plan of complete liquidation
of the Company or an agreement for the sale or disposition by the Company of all
or substantially all of the Company’s assets;
provided, however, that no event shall be deemed to be a Change in Control if,
immediately following such event, Jim Jannard, Mike Parnell, their affiliates,
spouses, widows, lineal descendants and heirs, devisees

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and donees, and trusts created by Jim Jannard or Mike Parnell for the benefit of
such persons shall together be the beneficial owners of 50% or more of the then
outstanding shares of the common stock of the Company or any successors.
ARTICLE VI — MISCELLANEOUS

6.1   Insurance: The Company may purchase one or more insurance policies on the
life of a Participant as a means of providing, in whole or in part, for the
payment of benefits hereunder. However, in such event neither the Participant,
his or her designated Beneficiary nor any other beneficiary shall have any
rights whatsoever therein or in the proceeds therefrom. The Company (or any
“Rabbi Trust” (as described in Section 6.5) formed in connection with this Plan)
shall be the sole owner and beneficiary of any such insurance policy and shall
possess and may exercise all incidents of ownership therein. No such policy,
policies or other property shall be held in any trust for the Participant,
Beneficiary or any other person or as collateral security for any obligation of
the Company hereunder. This Plan shall under no circumstances be deemed to
constitute a contract of insurance.   6.2   No Contract of Employment: The Plan
shall under no circumstances be deemed to have any effect upon the terms or
conditions of employment of any officer or other employee of the Company whether
or not he or she is a Participant hereunder. Neither the offering of the Plan,
the payment of any expenses, costs or benefit amounts associated with the Plan,
nor any documents prepared in connection with the Plan shall be construed as
having created a contract of employment between the Participant and the Company.
  6.3   Benefits Not Transferable: Benefits under this Plan shall not be subject
in any manner to anticipation, alienation, sale, transfer, assignment,
hypothecation, pledge or encumbrance by, or attachment or garnishment by
creditors of, the Participant or any Beneficiary and any attempt to do so shall
be null and void. Benefits under this Plan shall not be subject to or liable for
the debts, contracts, liabilities, engagements or torts of any Participant or
Beneficiary, nor may the same be subject to attachment or seizure by any
creditor of any Participant or Beneficiary under any circumstances.   6.4  
Determination of Benefits: In the event of a Participant’s Termination (or death
following Termination if, at the time of death, a portion of the Participant’s
Account Balance remains unpaid), the Participant or

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applicable Beneficiary, as the case may be, shall notify the Company promptly of
such event, and the Company shall then provide a claimant’s statement form for
completion which must be returned to the Company together with an official death
certificate, if applicable, before Plan benefits may be paid. Within ninety days
after receipt of an application for benefits, the Company shall notify the
applicant of its decision with respect to the payment of benefits under the
Plan. If special circumstances require an extension of time, the Company shall
notify the applicant of such circumstances within ninety days after receipt of
the application, and the Company shall thereafter notify the applicant of its
decision within 180 days after receipt of the application. If the application is
denied in whole or in part, the Company’s notice of denial shall be in writing
and shall state:

  (a)   The specific reasons for denial with specific reference to pertinent
Plan provisions upon which the denial was based;     (b)   A description of any
additional materials or information necessary for the applicant to perfect his
or her claim and an explanation of why the materials or information are
necessary; and     (c)   An explanation of the Plan’s claim review procedure.

During the sixty-day period following an applicant’s receipt of a notice of
denial of any application for benefits, the applicant or his duly authorized
representative shall be given the opportunity to review pertinent documents and
within such sixty (60) day period submit a written request to the Company for
review of the denial.
An applicant submitting a request for review shall be allowed to submit
questions and comments in writing to the Company. The Company shall afford an
applicant who requests a hearing a full and fair review of the decision denying
the application and may, in its sole discretion, hold a hearing to review any or
all issues raised by the applicant, which hearing shall take place within thirty
(30) days of the date of the applicant’s request. Within sixty (60) days after
receipt of the request for review, the Company shall issue a written decision to
the applicant. If special circumstances, such as the need to hold a hearing,
require an extension of time, the Company shall issue a written decision no
later than 120 days after receipt of the request for review. The Company’s
decision shall include specific reasons for the decision, written in a manner
calculated to be understood by the applicant, and contain specific references to
pertinent Plan provisions upon which the decision is based.

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6.5   No Trust: For tax purposes and for purposes of Title I of the Employee
Retirement Income Security Act of 1974, as amended (“ERISA”), this Plan is
intended to qualify as an unfunded plan maintained primarily for the purpose of
providing deferred compensation for a select group of management or highly
compensated employees, and shall be interpreted accordingly.       No action by
the Company or its Board of Directors under this Plan shall be construed as
creating a trust, escrow or other secured or segregated fund or other fiduciary
relationship of any kind in favor of any Participant or Beneficiary or any other
persons otherwise entitled to benefits under the Plan. The status of the
Participant and any Beneficiary with respect to any liabilities assumed by the
Company hereunder shall be solely that of an unsecured creditor of the Company.
The Plan constitutes a mere promise by the Company to make benefit payments in
the future. Any insurance policy or any other asset acquired or held by the
Company in connection with liabilities assumed by it hereunder, shall not be
deemed to be held under any trust, escrow or other secured or segregated fund or
other fiduciary relationship of any kind for the benefit of the Participant or
Beneficiary or to be security for the performance of the obligations of the
Company, but shall be and remain a general, unpledged, unrestricted asset of the
Company at all times subject to the claims of general creditors of the Company.
Notwithstanding the foregoing, the Company may transfer assets, including any
insurance policies, to a grantor trust of the type known as a “Rabbi Trust” with
the Company as grantor and owner of such trust.   6.6   Plan Administration: The
Plan shall be administered by the Committee. The Committee shall have the
exclusive authority and responsibility for all matters in connection with the
operation and administration of the Plan. The Committee’s powers and duties
shall include, but not be limited to, the following: (a) responsibility for the
compilation and maintenance of all records necessary in connection with the
Plan; (b) authorizing the payment of all benefits under and expenses of the
Plan; (c) authority to engage such legal, accounting and other professional
services as it may deem proper; (d) discretionary authority to interpret the
Plan; and (e) discretionary authority to determine eligibility for benefits
under the Plan and to resolve all issues of fact and law in connection with such
determination. Decisions by the Committee shall be final and binding upon all
parties.       The Committee, from time to time, may delegate to other persons
or organizations any of its rights, powers and duties with respect to the
operation and administration of the Plan. Any such allocation shall be

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    reviewed from time to time by the Committee; shall, unless the Committee
specifies otherwise, carry such discretionary authority as the Committee,
possesses regarding the matter; and shall be terminable upon such notice as the
Committee, in its sole discretion, deems reasonable and prudent under the
circumstances.       The expense of administering the Plan shall be borne by the
Company and shall not be charged against amounts payable hereunder.   6.7  
Satisfaction of Claims: Any payment to a Participant or Beneficiary or the legal
representative of either, in accordance with the terms of this Plan, shall to
the extent thereof be in full satisfaction of all claims such person may have
against the Company. The Company may require such payee, as a condition to such
payment, to execute a receipt and release therefor in such form as shall be
determined by the Company.   6.8   Governing Law: The Plan shall be construed,
administered, and governed in all respects in accordance with the laws of the
State of California to the extent not preempted by ERISA.   6.9   Gender and
Number: Words used herein in the masculine, feminine or neuter gender shall be
construed as though they were also used in another gender in all cases where
they would so apply. Words used herein in the singular or plural form shall be
construed as though they were also used in the other form in all cases where
they would so apply.   6.10   Severability: In the event that a court of
competent jurisdiction determines that any provision of the Plan is in violation
of any statute or public policy, only those provisions of the Plan that violate
such statute or public policy shall be stricken. All provisions of the Plan that
do not violate any statute or public policy shall continue in full force and
effect. Further, any court order striking any provision of the Plan shall modify
the stricken terms as narrowly as possible to give as much effect as possible to
the intentions of the Company in establishing the Plan.   6.11   Taxation: If
the Internal Revenue Service finds that Compensation intended to be deferred for
Federal income tax purposes pursuant to the Plan is immediately taxable to a
Participant for Federal income tax purposes, the Company may, but shall not be
required to, amend the Plan to comply with the Internal Revenue Service
requirements necessary to achieve the desired Federal income tax benefits
relating to the Plan. Notwithstanding the foregoing, each Participant or
Beneficiary, as applicable, shall be liable for any tax that may be imposed by
the Internal

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    Revenue Service or any other taxing entity with respect to any payments or
other benefits provided to or on behalf of such Participant or Beneficiary
pursuant to the Plan (including, without limitation, any and all withholding
taxes), irrespective of whether such tax consequences were intended pursuant to
the Plan. In the event amounts of Compensation otherwise intended to be deferred
under the Plan result in immediate taxation to the Participant for Federal
income tax purposes, and the Plan is not amended to achieve the intended
deferral, then the Participant shall be entitled to an immediate distribution of
that portion of the value of his or her Deferred Compensation Account subject to
such taxation.   6.12   Indemnification: The Company agrees to and shall
indemnify and hold harmless each Indemnified Person (as hereinafter defined)
from and against all claims, losses, damages, causes of action, suits, and
liability of every kind, including all expenses of litigation, court costs and
reasonable attorney’s fees, incurred in connection with the Plan. “Indemnified
Person” shall mean each director, officer and employee of the Company acting as
a fiduciary of the Plan. Such indemnity shall apply regardless of whether the
claims, losses, damages, causes of action, suits or liabilities arise in whole
or in part from the negligence or fault on the part of the Indemnified Person,
except to the extent there has been a final adjudication by a court or other
tribunal of competent jurisdiction that the claim or liability is the result of
gross negligence or willful misconduct of the Indemnified Person.   6.13  
Coordination with Other Benefit Plans: Deferrals by the Participant shall be
given effect under the Company’s other benefits plans and/or whenever the
Company is required to verify the employment of a Participant, as follows:

  (a)   Deferrals shall be considered for purposes of determining the
Participant’s total income when verifying a Participant’s employment for credit
grantors, credit reporting agencies, in response to legal process and/or to
other authorized persons or entities.     (b)   Where permitted by the terms of
the applicable plan, and subject to applicable law, amounts deferred under the
Plan shall be taken into account for purposes of determining amounts to be paid
to the Participant under any insurance or salary continuation or replacement
plan maintained by the Company.     (c)   Except where specifically excluded by
the terms of such plans or agreements, deferrals of base salary and other
amounts under the Plan shall be taken into account by the Company when
determining a

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      Participant’s compensation in connection with determining eligibility and
amounts payable under any bonus, incentive or severance pay plans or agreements
maintained by the Company.     (e)   Amounts deferred under the Plan shall not
be treated as compensation for purposes of determining the amount of a
Participant’s deferrals under any qualified pension plan of the Company.

ACKNOWLEDGED:
OAKLEY, INC.

         
By:
  /s/ Link Newcomb
 
   
Its:
  Chief Operating Officer       2/10/97           Date    

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