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                              INDEMNIFICATION AGREEMENT


     This Indemnification Agreement is made as of this ___ day of September, 
1997, by and between OAKLEY, INC., a Washington corporation (the "Company"), 
and William D. Schmidt ("Indemnified Party").

     WHEREAS, as of the date hereof, the Company has provisions for 
indemnification of its directors and officers in Article V of its Amended and 
Restated Articles of Incorporation (the "Articles of Incorporation") and 
Article VII of its Bylaws (the "Bylaws") which provide for indemnification of 
the Company's directors and officers to the fullest extent permitted by law;

     WHEREAS, the indemnification provisions in the Bylaws provide that the 
right of indemnification is a contract right of the covered parties;

     WHEREAS, the Bylaws provide that the Company may maintain, at its 
expense, insurance to protect itself and any of its directors and officers 
against liability asserted against such persons incurred in such capacity 
whether or not the Company has the power to indemnify such persons against 
the same liability under Section 23B.08.510 or .520 of the Act (as defined 
below) or a successor statute; 

     WHEREAS, the Company and the Indemnified Party recognize that the 
officers and directors of publicly owned companies are frequently joined as 
parties to Proceedings (as defined below) against their respective companies 
as a result of their serving in such capacity; and 

     WHEREAS, in order to induce Indemnified Party to serve or continue to 
serve the Company, the Company wishes to confirm the contract indemnification 
rights provided in the Bylaws and agrees to provide Indemnified Party with 
the benefits contemplated by this Agreement and to supplement the provisions 
of this Agreement with directors' and officers' liability insurance 
maintained by the Company.

     NOW, THEREFORE, in consideration of the promises, conditions, 
representations and warranties set forth herein, and other good and valuable 
consideration, the receipt and sufficiency of which are hereby acknowledged, 
the Company and Indemnified Party hereby agree as follows:

     1.   DEFINITIONS.  The following terms, as used herein, shall have the 
following respective meanings; other capitalized terms used and not 
specifically defined in this Section 1 shall have the meanings provided 
elsewhere in the Agreement and in the Bylaws:

          (a)  "Act" means the Washington Business Corporation Act RCW Title 
23B, as amended from time to time.

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          (b)  "Adjudication" shall refer to a final, non-appealable decision 
by a court of competent jurisdiction.  "Adjudged" shall have a correlative 
meaning.

          (c)  "Covered Amount" means any Loss, Fine and Expense, to the 
extent such Loss, Fine or Expense, in type or amount, is not insured under 
the D&O Insurance maintained by the Company from time to time.

          (d)  "Covered Act" means any act or omission of the Indemnified 
Party in his or her capacity as a director, officer, employee, agent, 
fiduciary or consultant of the Company alleged by any claimant or any claim 
against Indemnified Party by reason of him or her serving in such a capacity, 
or by reason of Indemnified Party serving, at the request of the Company, in 
such capacity with another corporation, partnership, employee benefit plan, 
trust or other enterprise, in all cases, whether such alleged act or omission 
occurred before or after the date of this Agreement.

          (e)  "D&O Insurance" means the liability insurance which the 
Company may purchase on behalf of Indemnified Party against liability 
asserted against or incurred by Indemnified Party in connection with claims 
arising from Covered Acts, whether or not the Company would have the power to 
indemnify the individual against the same liability under Section 23B.08.510 
or 23B.08.520 of the Act.  .

          (f)  "Determination" means a determination, based on the facts 
known at the time, made:

               (i)   by the Board of Directors by majority vote of a quorum 
consisting of directors not at the time parties to the Proceeding;

              (ii)   if a quorum cannot be obtained under clause (i), by 
majority vote of a duly designated committee of the Board of Directors, in 
the manner provided by Section 23B.08.550(2)(b) of the Act;

              (iii)  by special legal counsel, selected in the manner 
provided by Section 23B.08.550(2)(c) of the Act, in a written opinion; or

               (iv)  by a majority of the shareholders of the Company, 
excluding shares owned or voted under the control of directors who are at the 
time parties to the Proceeding.

          "Determined shall have a correlative meaning.

          (g)  "Excluded Claim" means any payment for Losses or Expenses in 
connection with any claim relating to or arising out of:

                (i)  acts or omissions of the Indemnified Party Adjudged to 
be intentional misconduct or a knowing violation of law;

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               (ii)  conduct of the Indemnified Party Adjudged to be in 
violation of Section 23B.08.310 of the Act; or

               (iii) any transaction with respect to which it was Adjudged 
that such Indemnified Party personally received a benefit in money, property, 
or services to which the Indemnified Party was not legally entitled.

          (h)  "Expenses" means any reasonable expenses incurred by 
Indemnified Party as a result of a claim or claims made against Indemnified 
Party from Covered Acts, including, without limitation, reasonable counsel 
fees and costs of investigative, judicial or administrative proceedings or 
appeals.

          (i)  "Fines" means any fine or penalty including, with respect to 
an employee benefit plan, any excise tax assessed with respect thereto.

          (j)  "Losses" means amounts, as determined by an Adjudication, 
which the Indemnified Party is legally obligated to pay as a result of a 
claim or claims arising from Covered Acts, including, without limitation, 
Fines, damages and judgments and sums paid in settlement of such claim or 
claims.

          (k)  "Proceeding" means any threatened, pending or completed 
action, suit, proceeding or investigation, whether civil, criminal or 
administrative whether formal or informal.

     2.   MAINTENANCE OF D&O INSURANCE.

          (a)  The Company hereby covenants and agrees that, so long as 
Indemnified Party shall continue to serve as a director or executive officer 
of the Company and thereafter, for so long as Indemnified Party shall be 
subject to any possible Proceeding arising from any Covered Act, the Company, 
subject to Section 2(c), shall maintain in full force and effect D&O 
Insurance.

          (b)  In all policies of D&O Insurance, Indemnified Party shall be 
named as an insured in such a manner as to provide Indemnified Party the same 
rights and benefits, and the same limitations, as are accorded to the 
Company's directors or executive officers most favorably insured by such 
policy.

          (c)  The Company shall have no obligation to maintain D&O Insurance 
if the Company, by majority vote of the Board of Directors, determines in 
good faith that such insurance is not reasonably available, the premium costs 
for such insurance are disproportionate to the amount of coverage provided, 
or the coverage provided by such insurance is limited by exclusions so as to 
provide an insufficient benefit; PROVIDED, HOWEVER, that such decision shall 
not adversely affect coverage of D&O Insurance for periods prior to such 
decision without the unanimous vote of all directors.

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     3.   INDEMNIFICATION.  The Company shall indemnify Indemnified Party up 
to the Covered Amount and shall advance or reimburse the Expenses incurred by 
Indemnified Party in a Proceeding or in connection with any Covered Acts, 
subject, in each case, to the further provisions of this Agreement.  This 
Agreement is made pursuant to and to effectuate the indemnification 
provisions set forth in Article V of the Articles of Incorporation and 
Article VII of the Bylaws.  Notwithstanding any other provision of this 
Agreement, the Company shall indemnify Indemnified Party to the extent 
Indemnified Party is successful, on the merits or otherwise, in the defense 
of any Proceeding to which Indemnified Party was a party because of being a 
director, officer, employee, agent, fiduciary or consultant of the Company, 
against reasonable Expenses incurred by Indemnified Party in connection with 
the Proceeding.

     4.   EXCLUDED COVERAGE.  The Company shall have no obligation to 
indemnify Indemnified Party for any Losses or Expenses which arise from an 
Excluded Claim.

     5.   INDEMNIFICATION PROCEDURES.

          (a)  Promptly after receipt by Indemnified Party of notice of the 
commencement of or the threat of commencement of any Proceeding, Indemnified 
Party shall, if indemnification or advancement or reimbursement of Expenses 
with respect thereto may be sought from the Company under this Agreement, 
notify the Company of the commencement or the threat of commencement thereof.

          (b)  If, at the time of the receipt of such notice, the Company has 
D&O Insurance in effect, the Company shall give prompt notice of the 
commencement or the threat of commencement of such Proceeding to the 
appropriate insurers in accordance with the procedures set forth in the 
respective policies in favor of Indemnified Party.  The Company shall 
thereafter take all necessary or desirable action to cause such insurers to 
pay, on behalf of the Indemnified Party, all amounts (including, without 
limitation, Losses and Expenses) payable as a result of such Proceeding in 
accordance with the terms of such policies.

          (c)  To the extent the Company does not, at the time of the 
commencement of or the threat of commencement of such Proceeding, have 
applicable D&O Insurance, or if a Determination is made that any Loss, Fine 
or Expense of the Indemnified Party arising out of such Proceeding will not 
be payable under the D&O Insurance then in effect, the Company shall be 
obligated to pay the Covered Amount with respect to any Proceeding and 
provide counsel satisfactory to Indemnified Party, upon the delivery to 
Indemnified Party of written notice of the Company's election to do so.  
After delivery of such notice, the Company will not be liable to Indemnified 
Party under this Agreement for any legal or other Expenses subsequently 
incurred by the Indemnified Party in connection with such defense other than 
the reasonable Expenses of investigation of Indemnified Party; PROVIDED, that 
Indemnified Party shall have the right to employ his or her own counsel in 
connection with the defense of any such Proceeding, the fees and expenses of 
such counsel incurred after delivery of notice from the Company of its 
assumption of such defense to be at the Indemnified Party's sole expense.  
Notwithstanding the foregoing, if (i) the employment of counsel by 
Indemnified Party has been 

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previously authorized by the Company, (ii) Indemnified Party shall have been 
advised by counsel that there may be a conflict of interest between the 
Company and Indemnified Party in the conduct of any such defense or (iii) the 
Company shall not, in fact, have employed counsel to assume the defense of 
such Proceeding, in each such case, the fees and expenses of such counsel 
retained by Indemnified Party shall be at the expense of the Company.

          (d)  All payments on account of the Company's indemnification, 
advancement and reimbursement obligations under this Agreement shall be made 
within sixty (60) days of Indemnified Party's written request therefor unless 
a Determination is made that the claims giving rise to Indemnified Party's 
request are Excluded Claims or otherwise not payable under this Agreement; 
PROVIDED, that all payments on account of the Company's obligations under 
Paragraph 5(c) of this Agreement prior to the Adjudication of any Proceeding 
shall be made within 20 days of Indemnified Party's written request therefor 
and such obligation shall not be subject to any such Determination but shall 
be subject to Paragraph 5(e) of this Agreement.

          (e)  Indemnified Party agrees that he or she will reimburse the 
Company for all Losses and Expenses paid by the Company in connection with 
any Proceeding against Indemnified Party in the event and only to the extent 
that it is Adjudged that the Indemnified Party is not entitled to be 
indemnified by the Company for such Losses or Expenses under this Agreement, 
the Articles of Incorporation, the Bylaws or the Act.

     6.   SETTLEMENT.  The Company shall have no obligation to indemnify 
Indemnified Party under this Agreement for any amounts paid in settlement of 
any Proceeding effected without the Company's prior written consent.  The 
Company shall not settle any claim in any manner which would impose any loss 
or expense on Indemnified Party without Indemnified Party's prior written 
consent, unless the Company provides a written undertaking to the Indemnified 
Party to pay for such loss or expense on behalf of the Indemnified Party.  
Neither the Company nor Indemnified Party shall unreasonably withhold their 
consent to any proposed settlement.

     7.   RIGHTS NOT EXCLUSIVE.  The rights provided hereunder shall be in 
addition to any other rights to which Indemnified Party may be entitled under 
the Articles of Incorporation, the Bylaws, the Act, any agreement or vote of 
shareholders or directors or otherwise, both as to action in Indemnified 
Party's official capacity and as to action in any other capacity, and such 
rights shall continue after Indemnified Party ceases to serve the Company as 
a director or officer.

     8.   ENFORCEMENT.

          (a)  Indemnified Party's rights to indemnification or reimbursement 
or advancement of Expenses hereunder shall be enforceable by Indemnified 
Party notwithstanding any adverse Determination, other than a Determination 
which has been made by Adjudication.  In any such action, if a prior adverse 
Determination has been made, the burden of proving that indemnification or 
reimbursement or advancement of Expenses is required under this Agreement, 
the Articles of Incorporation, the Bylaws or the Act shall be on the 
Indemnified Party.  The Company shall have the burden of proving that 
indemnification or reimbursement 

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or advancement of Expenses is not required under this Agreement if no prior 
adverse Determination shall have been made.

          (b)  In the event that any action is instituted by Indemnified 
Party under this Agreement, or to enforce or interpret any of the terms of 
this Agreement, Indemnified Party shall be entitled to be paid all court 
costs and expenses, including reasonable counsel fees, incurred by 
Indemnified Party with respect to such action, unless the court determines 
that each of the material assertions made by Indemnified Party as a basis for 
such action were not made in good faith or were frivolous.

     9.   NO PRESUMPTIONS.  For purposes of this Agreement, the termination 
of any Proceeding by judgment, order, settlement (whether with or without 
court approval) or conviction, or upon a plea of nolo contendre, or its 
equivalent, shall not create a presumption that the Indemnified Party did not 
meet any particular standard of conduct or have any particular belief or that 
a court has determined that indemnification or reimbursement or advancement 
of Expenses by the Company is not permitted hereunder or by applicable law.  
In addition, neither the absence of a Determination as to whether Indemnified 
Party has met any particular standard of conduct or had any particular belief 
or the existence of a Determination that Indemnified Party has not met such 
standard of conduct or did not have such belief, prior to the commencement of 
legal proceedings by Indemnified Party to secure an Adjudication that 
Indemnified Party should be indemnified or advanced or reimbursed Expenses 
hereunder or under applicable law, shall be a defense to Indemnified Party's 
claim or create a presumption that Indemnified Party has not met any 
particular standard of conduct or did not have any particular belief.

     10.  SUBROGATION.  In the event of payment under this Agreement, the 
Company shall be subrogated to the extent of such payment to all of the 
rights of recovery of Indemnified Party, who shall execute all papers 
required and shall do everything that may be necessary to secure such rights, 
including the execution of such documents necessary to enable the Company to 
effectively bring suit to enforce such rights.

     11.  NO DUPLICATION OF PAYMENTS.  The Company shall not be liable under 
this Agreement to make any payment in connection with any Proceeding against 
Indemnified Party to the extent Indemnified Party has otherwise actually 
received payment (under any D&O Insurance , the Articles of Incorporation, 
the Bylaws, the Act or otherwise) of the amounts which may be paid hereunder.

     12.  SEVERABILITY.  In the event that any provision of this Agreement is 
determined by a court of competent jurisdiction to require the Company to do 
or to fail to do an act which is in violation of the Articles of 
Incorporation, the Bylaws or the Act or other applicable law, such provision 
shall be limited or modified in its application to the minimum extent 
necessary to avoid such violation, and, as so limited or modified, such 
provision and the remainder of this Agreement shall be enforceable in 
accordance with the respective terms.

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     13.  CHOICE OF LAW.  This Agreement shall be governed by, construed and 
enforced in accordance with the laws of the State of Washington.

     14.  SUCCESSORS AND ASSIGNS.  This Agreement shall be (i) binding upon 
all successors and assigns of the Company (including any transferee of all or 
substantially all of the Company's assets and any successor by merger or 
otherwise by operation of law) and (ii) binding on and inure to the benefit 
of the heirs, personal representatives and estate of Indemnified Party. 
Indemnified Party may not assign this Agreement or any of Indemnified Party's 
rights hereunder without the prior written consent of the Company.

     15.  AMENDMENT.  No amendment, modification, termination or cancellation 
of this Agreement shall be effective unless made in a writing signed by each 
of the parties hereto.

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     IN WITNESS WHEREOF, the Company and Indemnified Party have executed this 
Indemnification Agreement as of the date first above written.

                                   OAKLEY, INC.


                                   By:
                                      ---------------------------------
                                   Name:
                                        -------------------------------
                                   Title:
                                         ------------------------------


                                   ------------------------------------
                                   William D. Schmidt, Indemnified Party