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Exhibit 10.3    
    

 
 

CORPORATE SERVICES AGREEMENT    
    

        THIS
CORPORATE SERVICES AGREEMENT (this "Agreement") is made as of October 1, 2004 (the "Effective Date") by and between SPY OPTIC, INC., a California corporation (the
"Company"), and NO FEAR, INC., a California corporation ("No Fear"). 

 
 

RECITALS    
    

        WHEREAS, the Company desires to engage No Fear to provide certain management services to the Company from time to time on the terms and subject to the conditions
provided for herein; and 

        WHEREAS,
No Fear is willing to provide to the Company such services on the terms and subject to the conditions provided for herein. 

        NOW,
THEREFORE, in consideration of the mutual promises and undertakings herein contained and for other good and valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, intending to be legally bound hereby, the parties hereto agree as follows: 

 
 

ARTICLE 1
  SERVICES    
    

        At the request of the Company, from time to time, No Fear shall perform such services set forth in  Schedule I of this Agreement as
are requested in writing by the Company and accepted by No Fear (the
"Services"). No Fear agrees to use commercially reasonable efforts to provide the Services in a good, workmanlike and professional manner as if such
entity was performing similar services on its own behalf. Notwithstanding any provision herein to the contrary, the parties agree that there shall be no minimum purchase obligation with respect to any
of the Services under this Agreement. Notwithstanding any provision herein to the contrary, the parties may from time to time amend Schedule I to
add additional Services or modify the fees with respect to Services. Any such modification or amendment shall be in writing and shall be attached to this Agreement. 

        Notwithstanding
any other provision herein to the contrary, the parties agree that in no event shall No Fear be entitled to any payment with respect to the activities related to managing
the investment or holdings of No Fear in the Company (including, without limitation, any activities in connection with filing of any tax returns with respect to No Fear) and such activities shall not
constitute "Services" under this Agreement; provided, however, that this paragraph shall not preclude No
Fear and/or any representative of No Fear from receiving standard and customary director fees or reimbursement of director expenses in connection with a representative of No Fear serving on the Board
of Directors of the Company. 

 
 

ARTICLE 2
  PAYMENTS    
    

        2.1    Service Fees.    No Fear shall invoice the Company for the Services at the respective No Fear Costs with
respect to the Services performed (the "Service Fees"). For purposes of this Agreement, the "No Fear
Costs," with respect to any Service, means the product of 1.05 multiplied by the aggregate of all related costs which No Fear incurs, directly or indirectly, in the provision
of such Service. Each such invoice shall be accompanied by such supporting documentation as the Company reasonably may request. The Company agrees to pay all undisputed invoices with respect to
Services performed in accordance with the terms of this Agreement within thirty (30) days of receipt. 

        2.2    Expenses.    In addition to its obligations to pay Service Fees, the Company shall reimburse No Fear for all
reasonable expenses incurred by such party in connection with the provision of the Services; provided,  however, that all requests for reimbursement of such
expenses shall include supporting documentation reasonably satisfactory to the Company. 

 

 
 

ARTICLE 3
  REPRESENTATIONS AND WARRANTIES    
    

        3.1    Representations and Warranties by the Company.    The Company represents and warrants that: 

        (a)   The
Company is a corporation duly organized and validly existing under the laws of the state of California. The Company has all necessary corporate power and authority
to execute and deliver this Agreement and to perform its obligations hereunder. The execution and delivery of this Agreement, and the performance of the Company's obligations hereunder, have been duly
authorized by all necessary action on the part of the Company and this Agreement constitutes the legal, valid and binding obligation of the Company, enforceable against it in accordance with its
terms. 

        (b)   Neither
the execution and delivery of this Agreement, nor the consummation of the transactions contemplated hereby, will conflict with, or result in a breach or default
of any of the terms, conditions or provisions of the Certificate of Incorporation or Bylaws (or other similar governing documents) of the Company or any law or any regulation, order, writ, injunction,
license, franchise or decree of any court or governmental instrumentality or agency or of any agreement or instrument to which the Company is a party or by which it is bound. 

        3.2    Representations and Warranties by No Fear.    No Fear represents and warrants that: 

        (a)   No
Fear is a corporation duly organized and validly existing under the laws of the state of California. No Fear has all necessary corporate power and authority to
execute and deliver this
Agreement and to perform its obligations hereunder. The execution and delivery of this Agreement, and the performance of the No Fear's obligations hereunder, have been duly authorized by all necessary
corporate action on the part of No Fear and this Agreement constitutes the legal, valid and binding obligation of No Fear, enforceable against it in accordance with its terms. 

        (b)   Neither
the execution and delivery of this Agreement, nor the consummation of the transactions contemplated hereby, will conflict with, or result in a breach or default
of any of the terms, conditions or provisions of the Articles of Incorporation (or other similar governing documents) of No Fear or any law or any regulation, order, writ, injunction, license,
franchise or decree of any court or governmental instrumentality or agency or of any agreement or instrument to which No Fear is a party or by which it is bound. 

 
 

ARTICLE 4
  INDEMNIFICATION    
    

        4.1    Indemnification by the Company.    Subject to  Section 4.6 below, the Company shall indemnify and save and hold No Fear
and its respective officers and directors, employees, consultants and
agents (individually, a "No Fear Indemnified Party" and collectively the "No Fear Indemnified Parties")
harmless from and against any and all damages, liabilities, losses, costs and expenses (including, without limitation, reasonable attorney's fees, court costs and other
out-of-pocket expenses incurred in investigating, preparing or defending the foregoing) (collectively, "Losses") resulting from,
arising out of, or in connection with, this Agreement or the acceptance or performance of any duties or rendering of any Services performed by any No Fear Indemnified Party under this Agreement;  provided, however, that the Company shall have no liability hereunder in respect of any act or omission
of a No Fear Indemnified Party caused by such No Fear Indemnified Party's willful breach of this Agreement in any material respect, reckless disregard of its obligations and duties under this
Agreement, or willful misconduct, gross negligence or willful malfeasance in the performance of or in connection with providing the Services. 

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        4.2    Indemnification by No Fear.    No Fear shall indemnify and save and hold the Company and the officers and
directors, employees, consultants and agents of the Company (individually, a "Company Indemnified Party" and collectively the
"Company Indemnified Parties," and together with the No Fear Indemnified Parties, the "Indemnified
Parties") harmless from and against any and all Losses resulting from or arising out of No Fear's willful breach of this Agreement in any material respect, reckless disregard
of its obligations and duties under this Agreement, or willful misconduct, gross negligence or willful malfeasance in the performance of or in connection with providing the Services. 

        4.3    Indemnification Procedures for Third Party Claims.    In order for an Indemnified Party to be entitled to any
indemnification provided for under this Agreement in respect of, arising out of or involving any suit, action, proceeding, claim, demand or written notice made by any third party against an
Indemnified Party (a "Third Party Claim"), the Indemnified Party must notify the party of whom it is requesting such indemnification (the
"Indemnifying Party") in writing of the Third Party Claim within thirty
(30) calendar days after receipt by such Indemnified Party of written notice of the Third Party Claim;  provided, however, that the failure of any Indemnified Party to give such notice shall not relieve the
Indemnifying Party of any liability hereunder unless the Indemnifying Party has suffered material prejudice by such failure. If a Third Party Claim is made against an Indemnified Party, the
Indemnifying Party shall be entitled, if it so chooses, to elect to compromise or assume the defense thereof by delivering written notice to such effect to the Indemnified Party within  thirty
(30) calendar days or such shorter period as is reasonably required, following receipt by the
Indemnifying Party of the notice of the Third Party Claim. If the Indemnifying Party elects to compromise or assume the defense of any Third Party Claim, it may not agree to any settlement or
compromise of such claim, other than a settlement or compromise solely for monetary damages for which the Indemnifying Party shall be responsible, without the prior written consent of the Indemnified
Party. The Indemnified Party will cooperate in all reasonable respects with the Indemnifying Party in connection with such compromise or defense and shall have the right to participate in such
compromise or defense with counsel (but not more than one firm) selected (with the consent of the Indemnifying Party, not to be withheld unreasonably) and paid for by the Indemnifying Party. Except as
otherwise provided, regardless of which party assumes the defense of a Third Party Claim, (i) the Indemnified Party shall not settle or compromise any Third Party Claim without the consent of
the Indemnifying Party, (ii) the Indemnifying Party shall not withhold unreasonably consent to any settlement or compromise of such claim and (iii) the Indemnified Party and the
Indemnifying Party shall cooperate in any settlement or compromise of such claim, whether by the Indemnifying Party or the Indemnified Party, as the case may be. In the event the Indemnifying Party
does not compromise or assume the defense of any Third Party Claim, the Indemnifying Party shall promptly pay to the Indemnified Party all reasonable costs and expenses incurred or to be incurred by
an Indemnified Party in defending any claim in advance of the final disposition thereof; provided,  however, that if it ultimately is determined by a court
of competent jurisdiction (from whose decision no appeals may be taken or the time for appeal
has lapsed) that the Indemnified Party was not entitled to indemnity hereunder, then the Indemnified Party shall repay promptly all amounts so advanced. The Indemnified Party shall deliver to the
Indemnifying Party statements of the reasonable costs and expenses so incurred, or to be incurred, on a monthly basis, and the Indemnifying Party shall pay promptly to the Indemnified Party the
amounts shown on such statements. 

        4.4    Indemnification Procedures for Non-Third Party Claims.    In the event an Indemnified Party shall
claim a right to payment pursuant to this Agreement for other than a Third Party Claim, such Indemnified Party shall send written notice of such claim to the Indemnifying Party and such notice shall
specify the basis for such claim in reasonable detail; provided, however, that the failure to give such
notice or to specify such claim shall not relieve the Indemnifying Party of any liability hereunder (unless the Indemnifying Party has suffered material prejudice by such failure). Any dispute between 

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the
parties with respect to a claim for indemnity under this Agreement shall be resolved in accordance with the provisions of Article 7 below. 

        4.5    Exclusive Remedy.    Absent fraud, the indemnification provided in this  Article 4 shall be the sole and exclusive
remedy available to the parties for breach of any of the terms, conditions, representations or
warranties contained herein or any right, claim or action arising from the transactions contemplated hereby; provided,  however, this exclusive remedy does
not preclude a party from (i) bringing an action for specific performance or other equitable remedy to
require a party to perform its obligations under this Agreement or (ii) otherwise exercising any rights of such party under the terms of this Agreement. 

        4.6    Limitation of Liability.    Notwithstanding any other provision of this Agreement, (i) no party shall be
liable to the other party for indemnification under this Article 4 for any indirect, special, incidental, punitive, exemplary or consequential
damages arising out of this Agreement, including, but not limited to, loss of profits, and each party hereby releases the other party from any claims that it may have against the other party for any
such damages and loss of profits, unless such damages or loss of profits are covered by insurance, in which event the insured party shall be obligated to seek recovery and submit any recovery to the
Indemnified Party; provided, however, that the foregoing shall not be construed to preclude recovery by
the Indemnified Party in respect to Losses directly incurred from Third Party Claims. Both parties shall take commercially reasonable actions to mitigate their damages. 

 
 

ARTICLE 5
  RELATIONSHIP OF PARTIES    
    

        5.1    Independent Contractor.    Notwithstanding any other provision herein to the contrary, No Fear acknowledges and
agrees that (i) the relationship between No Fear, on the one hand, and the Company, on the other hand, is that of independent contractor only and in no event shall any representative of No Fear
be deemed to be an employee of the Company and (ii) No Fear shall have no authority to enter into any agreement or to make any representation, commitment or warranty binding upon the Company or
to obtain or incur any right, obligation or liability on behalf of the Company. This Agreement is not intended to create any other relationship of any kind, including, but not limited to, an
employer-employee relationship, joint venture, franchise, partnership or other relationship of any similar kind between or among the Company and No Fear or representatives of the Company or No Fear,
and the parties expressly deny the existence of any such relationship. As an independent contractor, No Fear solely is responsible for payment of all taxes relating to the obligations of No Fear under
this Agreement, and any employee of No Fear, including, but not limited to, all federal, state and local income taxes, employment-related taxes, worker's compensation insurance, social security taxes
and withholding taxes. 

        5.2    Confidentiality.    

        (a)   No
party (a "Disclosing Party") shall, without the prior written consent of the other party (the
"Non-Disclosing Party"), disclose any Confidential Information (defined below) of the Non-Disclosing Party, except to a
Disclosing Party's employees or representatives who need to know such information for any reason contemplated by this Agreement (and then only to the extent that any such persons are under an
obligation to maintain the confidentiality of, and to abide by the non-use provisions set forth herein with respect to, the Confidential Information), or use any Confidential Information
of the Non-Disclosing Party for any reason other than as contemplated by this Agreement. Without limiting the provisions of  Section 5.2(c) below, in the event that the Disclosing Party is requested
or required by documents subpoena, civil investigative demand or other
similar process or applicable law to disclose any Confidential Information, the Disclosing Party shall provide the Non-Disclosing Party with prompt written notice of such demand or other
similar process so that the Non-Disclosing Party may seek an appropriate protective order 

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or,
to the extent such subpoena, demand, process or law is mandatory and no protective order is possible, waive the Disclosing Party's compliance with the provisions of this  Section 5.2(a), as
appropriate. In addition to the foregoing, each party agrees that it will disclose Confidential Information only to such
employees or representatives who need to know such information for any reason contemplated by this Agreement or to assist such party in fulfilling its obligations or enforcing its rights under this
Agreement (and then only to the extent that any such person is under an obligation to maintain the confidentiality of such Confidential Information). 

        (b)   The
term "Confidential Information" as used in this Section 5.2
means the following (and whether disclosed prior to or after the date of this Agreement): (i) as to the Company, all confidential information relating to the business and operations of the
Company and (ii) as to No Fear, all confidential information relating to the business and operations of No Fear; provided,  however, that the term
"Confidential Information" does not include information which (1) is
generally available to the public currently, (2) becomes generally available to the public other than as a result of disclosure by the Disclosing Party or (3) becomes available to the
Disclosing Party on a non-confidential basis from a source other than the Non-Disclosing Party (so long as such source is not bound by a duty of confidentiality (whether by
agreement or otherwise) to the Non-Disclosing Party). 

 
 

ARTICLE 6
  TERMINATION    
    

        6.1    Termination.    Each party to this Agreement shall have the right to terminate this Agreement, with or without
cause, upon thirty (30) days' notice. 

        6.2    Effect of Termination.    If this Agreement is terminated in accordance with  Section 6.1 above, from and after the date
of such termination, this Agreement shall have no further force or effect, without any liability on
the part of any party or its directors, officers, members or stockholders, except for the obligations of the parties hereto which continue after termination as provided in  Section 8.7 below and
that No Fear shall be entitled to receive all undisputed invoice amounts which have not been paid prior to the date of such
termination. Nothing in this Section 6.2 shall be deemed to release either party from any liability for any willful and material breach of any
obligation hereunder. 

 
 

ARTICLE 7
  DISPUTE RESOLUTION    
    

        7.1    Dispute Resolution.    In the event that a party to this Agreement has reasonable grounds to believe that the
other party hereto has breached or failed to satisfactorily perform any of its obligations hereunder, such party will notify promptly the other party in writing of the substance of its belief. The
party receiving such notice must respond in writing within ten (10) calendar days of receipt of such
notice and either provide evidence that it has cured (or is diligently in the process of curing) the condition specified, or provide an explanation why it believes that its performance is in
accordance with the terms and conditions of this Agreement, and also specify three (3) dates (excluding holidays and weekends), all of which must
be within thirty (30) calendar days from the date of the notice of termination, for a meeting to resolve
the dispute. The claiming party will then select one of the three (3) dates, and a dispute resolution
meeting will be held. If the parties cannot resolve their dispute by good faith negotiations, then the parties shall be free to seek relief in the courts as specified in  Section 7.2. 

        7.2    Submission to Jurisdiction.    The Company and No Fear irrevocably submit to the jurisdiction of the courts of
the State of California for the purposes of any suit, action or other proceeding arising out of this Agreement or any transaction contemplated hereby (and each agrees that no such action, suit or
proceeding relating to this Agreement or any transaction contemplated hereby shall be brought 

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by
it or any of its affiliates except in such courts). The Company and No Fear agree that service of any process, summons, notice or document by registered mail to such person's respective address set
forth below shall be effective service of process for any action, suit or proceeding in California with respect to any matters to which it has submitted to jurisdiction as set forth above in the
immediately preceding sentence. 

        7.3    Waiver of Jury Trial.    Each party hereby waives and agrees to cause each of its affiliates to waive, to the
fullest extent permitted by applicable law, any right it may have to a trial by jury in respect of any litigation directly and indirectly arising, out of, under or in connection with this Agreement. 

 
 

ARTICLE 8
  MISCELLANEOUS    
    

        8.1    Successors and Assigns.    This Agreement may not be assigned by the Company or No Fear without the prior
written consent of the other party, except that the Company may assign its rights and delegate its obligations hereunder without No Fear's consent in connection with a sale of all or substantially all
of the assets of the Company or in connection with a merger, acquisition or other corporate reorganization of the Company. Any attempt to assign any rights or obligations arising under this Agreement,
except as set forth in this Section 8.1, without such prior consent shall be null and void. Subject to the foregoing, this Agreement will be
binding upon and inure to the benefit of the parties and their successors and permitted assigns. Nothing contained in this Agreement, express or implied, is intended to confer upon any person other
than the parties to it and their respective successors and permitted assigns any rights or remedies under or by reason of this Agreement. 

        8.2    Governing Law.    The construction, validity and enforceability of this Agreement shall be governed by the laws
of the State of California, without regard to its conflicts of laws principles. 

        8.3    Notices.    All notices, requests and other communications hereunder must be in writing and will be deemed to
have been duly given only if delivered personally or by facsimile transmission or mailed (first class postage prepaid) or sent by overnight courier to the parties at the following addresses: 

	(a)
	To
the Company: 

Spy
Optic, Inc.

2070 Las Palmas Drive

Carlsbad, California 92009

Attention: Barry Buchholtz

Facsimile: (760) 804-8442 

	

	With
a copy to: 

Pillsbury
Winthrop LLP

11682 El Camino Real, Suite 200

San Diego, California 92130

Attention: Christopher M. Forrester

Facsimile: (858) 509-4010 

	(b)
	To
No Fear: 

No
Fear, Inc.

2251 Faraday Avenue

Carlsbad, California 92008

Attention: Mark Simo

Facsimile: (760) 931-9741 

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All
such notices, requests and other communications will (i) if delivered personally to the address provided in this Section 8.3, be
deemed given upon delivery, (ii) if delivered by facsimile transmission to the facsimile number as provided in this Section 8.3, be deemed
given upon receipt, provided confirmation of such receipt is obtained, and (iii) if delivered by mail or courier service in the manner described above to the address as provided in this  Section 8.3, be deemed given upon receipt, provided confirmation of such receipt is obtained (in each case regardless, of whether such notice,
request or other communication is received by any other person to whom a copy of such notice is to be delivered pursuant to this Section 8.3).
Any party from time to time may change its address, facsimile number or other information for the purpose of notices to that party by giving notice specifying such change to the other parties hereto
as herein provided. Notwithstanding any other provision herein to the contrary, in the event that any obligation hereunder falls on a weekend or holiday, such obligation shall be deemed to be due on
the next business day following such weekend or holiday. 

        8.4    No Waiver.    The failure of either party at any time to require performance by the other party of any
provision of this Agreement shall in no way affect the right of such party to require performance of that provision. Any waiver by either party of any breach of any provision of this Agreement shall
not be construed as a waiver of any continuing or succeeding breach of such provision, a waiver of the provision itself or a waiver of any tight under this Agreement. 

        8.5    Severability.    All provisions of this Agreement are severable and any provision which may be prohibited by
law shall be ineffective to the extent of such prohibition without invalidating the remaining provisions of this Agreement and the parties hereto agree to cooperate to provide a legal substitute for
any provision which is prohibited by law. 

        8.6    Entire Agreement; Modifications and Amendments.    This Agreement (including, but not limited to,  Schedule I attached
hereto) and any other agreements executed and delivered by the parties contemporaneously herewith constitute the entire
agreement between the parties concerning the subject matter hereof and supersedes all prior agreements and understandings both oral or written, between the parties with respect to the subject matter
hereof. Except to the limited extent provided herein, no provision of this Agreement may be amended or waived unless such amendment or waiver is agreed to in writing and signed by the parties to this
Agreement. 

        8.7    Survival.    In the event this Agreement is terminated pursuant to  Article 6, from and after the date of termination,
this Agreement shall have no further force or effect, except for the provisions of  Articles 2, 4, 5, 7 and this Article 8, which shall survive such
termination. 

        8.8    Headings: Interpretation.    The headings contained in this Agreement are for reference purposes only and shall
not in any way control the meaning or interpretation of this Agreement. For purposes of this Agreement, the term "affiliate" shall mean a person or entity controlling, controlled by or under common
control with the person or entity to which reference to an affiliate is made. 

        8.9    Counterparts.    This Agreement may be executed in separate counterparts, each of which so executed and
delivered shall constitute an original, but all such counterparts shall together constitute one and the same instrument and any one of which may be used to evidence this Agreement. 

[REMAINDER
OF PAGE INTENTIONALLY LEFT BLANK] 

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        IN WITNESS WHEREOF, the parties have executed this Agreement as of the Effective Date. 

	 	 	SPY OPTIC, INC.
	

 	
 	

By:	

/s/  MICHAEL BROWER      

	 	 	Its:	Chief Financial Officer
	 	 	Name:	Michael Brower
	

 	
 	
NO FEAR, INC.
	

 	
 	

By:	

/s/  MARK SIMO      

	 	 	Its:	Chief Executive Officer
	 	 	Name:	Mark Simo

[SIGNATURE PAGE TO CORPORATE SERVICES AGREEMENT]

  

 
 

SCHEDULE I    
    
    MANAGEMENT SERVICES    
    

Description of Service  

Accounting
Services 

Administrative
Services 

Legal
Services 

Other
Services may be added to this Schedule from time to time in accordance with Article 1 of this Agreement. 

SA-1

QuickLinks

Exhibit 10.3

CORPORATE SERVICES AGREEMENT

RECITALS

ARTICLE 1 SERVICES

ARTICLE 2 PAYMENTS

ARTICLE 3 REPRESENTATIONS AND WARRANTIES

ARTICLE 4 INDEMNIFICATION

ARTICLE 5 RELATIONSHIP OF PARTIES

ARTICLE 6 TERMINATION

ARTICLE 7 DISPUTE RESOLUTION

ARTICLE 8 MISCELLANEOUS

SCHEDULE I MANAGEMENT SERVICESQuickLinks
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Exhibit 10.13    
    

 
 

LIMITED EXCLUSIVE SUPPLY
  AGREEMENT    
    

        This Limited Exclusive Supply Agreement (the "Agreement") is entered into as of November 19, 2004 (the
"Effective Date"), by and between SPY OPTIC, INC., a California corporation ("SPY"), and LEM
S.R.L. an Italian limited partnership ("LEM"), with respect to the following facts: 

        A.    SPY
designs, markets and sells sunglasses, goggles and other products bearing the "SPY" trademarks. 

        B.    The
parties previously entered into that certain Limited Exclusive Supply Agreement, dated as of November 1, 2002 (the "Prior
Agreement"), pursuant to which LEM manufactured sunglasses and goggles for SPY. 

        C.    The
parties desire to acknowledge the termination of the Prior Agreement. 

        D.    SPY
and LEM desire to enter into a new agreement, pursuant to which SPY will engage LEM to manufacture and supply certain products for SPY. 

        NOW,
THEREFORE, in consideration of the mutual covenants herein contained, and for other valuable consideration, the parties agree as follows: 

        1.    Term.    Unless earlier terminated in accordance with the provisions of  Section 13 hereof, the term of this Agreement (the "Term") shall commence on the Effective Date
and shall terminate on October 31, 2006. 

        2.    Exclusive Relationship.    Subject to the terms and conditions of this Agreement, during the Term (i) SPY
shall purchase the styles of products set forth on Exhibit A attached hereto (the "Products")
exclusively from LEM and (ii) LEM shall manufacture and supply the Products to SPY; provided,  however, that SPY shall have the right, in its sole
discretion, to add, delete or change products on the list of the Products at any time upon ninety
(90) days written notice to LEM. 

        3.    Supply of Products. 

                a.    Purchase Orders.    SPY shall order the Products by issuing a purchase order in substantially the
form set forth on Exhibit B attached hereto (a "Purchase Order") identifying, without limitation,
the applicable Products to be manufactured, the units of Products ordered, scheduled shipment dates (the "Shipment Dates") and the port of destination.
The terms of each Purchase Order shall be (i) consistent with the terms and conditions of this Agreement and (ii) binding upon LEM unless LEM rejects such Purchase Order (in its
reasonable discretion) by delivering written notice to SPY expressly rejecting such Purchase Order within fifteen (15) days of the delivery of such Purchase Order by SPY to LEM. Each Purchase
Order must be placed in accordance with the lead time restrictions set forth in Section 3(c) below. 

                b.    Efforts.    All activities and services contemplated for performance by LEM pursuant to this
Agreement shall be performed in a professional manner, consistent with the standard of skill and care exercised by the best professionals within LEM's industry on projects of comparable scope and
complexity, and in conformance with the requirements of this Agreement. 

                c.    Lead Times.    SPY shall provide LEM with a minimum order lead time for the delivery of the
Products (i.e., the time between receipt of a Purchase Order by LEM and the scheduled Shipment Date) set forth in clauses (i), (ii) and (iii), as applicable, below. For those Purchase Orders in
which SPY fails to provide such minimum lead time, LEM shall be obligated to accept such Purchase Order; provided,  however, that LEM shall not be obligated
to deliver the Products subject to such Purchase Order in the applicable time period but LEM shall use its
commercially reasonable efforts to deliver the Products subject to such Purchase Order by the Shipment Date(s) requested by SPY in such Purchase Order. 

 

                        i.    Sunglass Manufacturing Lead Times.    LEM shall manufacture sunglass products with the following
lead times: 

	 
	 	Purchase Order Date
 
	 	Lead Time
 
	 	 

	 	 	From and after the date of this Agreement through January 1, 2005	 	60 Days	 	 
	 	 	January 2, 2005 through July 1, 2005	 	45 Days	 	 
	 	 	July 2, 2005 through October 31, 2006	 	30 Days	 	 

                        ii.    Motocross Goggle Manufacturing Lead Times.    LEM shall manufacture motocross goggle products
with the following manufacturing lead times: 

	 
	 	Purchase Order Date
 
	 	Lead Time
 
	 	 

	 	 	From and after the date of this Agreement	 	60 Days or such other time as the parties mutually agree	 	 

                        iii.    Snow Goggle Manufacturing Lead Times.    LEM and SPY shall develop an annual schedule which is
mutually acceptable to both parties in writing by December 15 of each year of the Term for the manufacture and supply of snow goggles by LEM to SPY in the following calendar year. 

                d.    Late Shipments. 

                        i.    LEM
shall notify SPY promptly in writing in the event that the delivery of any Product under a Purchase Order will be delayed until after the scheduled
Shipment Date. 

                        ii.    In
the event that LEM does not provide at least fifteen (15) days written notice to SPY that more than 10% of any Product will not be shipped by
LEM in accordance with the Shipment Date set forth in a Purchase Order, SPY shall have the right to charge LEM with a penalty in an amount equal to 2% of the purchase price of the applicable
Product(s) that were not shipped in accordance with such Shipment Date. SPY may deduct such penalty from any amounts owing by SPY to LEM. 

                e.    Forecasts.    On or before the fifth day of each month during the Term, SPY shall provide to LEM a
non-binding rolling forecast setting forth SPY's estimated purchase requirements for the following sixty day period as set forth on  Exhibit C. In the event that (i) SPY does not provide such
forecast to LEM by the fifth day of each month or (ii) such forecast
sets forth estimated purchase requirements which are different (i.e., lesser or greater in amount) by more than 20% from SPY's actual purchase
requirements as set forth in Purchase Orders for such respective periods with respect to any Products, SPY acknowledges and agrees that LEM may not be able to deliver such Products by the Shipment
Date(s) requested by SPY in such Purchase Orders. 

        4.    Terms of Supply; Credit Limit; Minimum Purchases. 

                a.    Sunglasses/Motocross Goggles.    The following terms and conditions shall apply to the sunglasses
and motocross goggles which are part of the Products: 

                        i.    The
purchase price of sunglasses and motocross goggles shall be as set forth in Exhibit D and shall
be effective for all shipments of such sunglasses and motocross goggles with Shipment Dates prior to September 1, 2005. Prior to September 1, 2005, or as soon thereafter as possible, LEM
and SPY shall mutually agree as to the prices that will be effective for such sunglasses and motocross goggles which have Shipment Dates after September 1, 2005. 

                        ii.    At
the time of each shipment of sunglasses and/or motocross goggles, LEM shall invoice SPY and SPY shall pay for all conforming sunglasses and/or
motocross goggles within sixty 

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(60) days
of the receipt of the product by SPY's freight forwarder that corresponds to such invoice, provided that the amounts owing by SPY to
LEM at any time for such orders shall not exceed €800,000 (the "Credit Limit"). In the event that a shipment of sunglasses and/or
motocross goggles would result in the amounts owing by SPY to LEM exceeding the Credit Limit, LEM shall have the right to withhold a portion of such shipment such that the amounts owing by SPY to LEM
will not exceed the Credit Limit until such time as either (a) LEM and SPY shall have mutually agreed on payment terms with respect to such portion of the shipment or (b) the amounts
owing by SPY to LEM have been reduced to an amount such that the shipping of the withheld portion of such shipment will not cause the amounts owing by SPY to LEM to exceed the Credit Limit. 

                b.    Snow Goggles.    The following terms and conditions shall apply to the snow goggles which are part
of the Products. 

                        i.    The
purchase price of snow goggles shall be as set forth in Exhibit E and shall be effective for all
shipments of such snow goggles with Shipment Dates prior to November 1, 2005. Prior to November 1, 2005, or as soon thereafter as possible, LEM and SPY shall mutually agree as to the
prices that will be effective for such snow goggles which have Shipment Dates after November 1, 2005. 

                        ii.    Payments
for snow goggles shall made as set forth in Exhibit E.

                c.    Minimum Purchase Requirements.    SPY agrees to purchase the monthly and annual minimum number of
units of the various styles of the Products as set forth in Exhibit F (the "Minimum Purchase
Requirements"). The parties hereby acknowledge and agree that SPY may purchase up to 10% less than the Minimum Purchase Requirements during the applicable periods and still be
in compliance with its obligations regarding the Minimum Purchase Requirements. 

                d.    Shipment and Freight.    LEM shall ship all Products ordered to SPY's facility or such other
destination as designated either in the Purchase Order or subsequently in writing by SPY. Transportation arrangements shall be made by LEM, with the approval of SPY. LEM shall ship all Products
freight and duty collect. 

                e.    Delivery Terms.    The terms of delivery of the Products shall be F.O.B. LEM's factory. Risk of
loss and damage to the Products shall pass to SPY upon shipment of such Products. SPY shall procure insurance, at its sole expense, for such Products during shipment. 

        5.    Quality Control.    LEM shall use its best efforts to manufacture and supply the Products to SPY in accordance
with the SPY quality control standards set forth in Exhibit G hereto (the "Specifications"). 

                a.    Product Inspections at LEM's Facilities.    SPY shall have the right to inspect any Products that
have been manufactured by LEM prior to their shipment to SPY. Inspections may be performed by SPY on a weekly basis upon forty-eight (48) hours notice to LEM. LEM agrees to cooperate and
provide SPY with adequate space in its facilities to perform effectively any and all inspections. 

                b.    Product Inspections After Receipt by SPY.    If SPY discovers that a Product contains any damage,
defect or is otherwise non-conforming, SPY may reject such Products by giving written notice to LEM and may: 

                        i.    return
the Products to LEM at LEM's sole expense; 

                        ii.    return
the Products to LEM at LEM's sole expense and require LEM to repair or replace such Products and redeliver conforming Products to SPY; or 

                        iii.    repair
the Products and charge LEM all costs and expenses associated with such repairs, provided that SPY (a) gives written notice to LEM of such
estimated costs and expenses and (b) provides LEM with an opportunity within two (2) days of receipt of such notice to request that SPY return such Products as set forth in  Section 5(b)(i). 

3

 

        6.    Maintenance of Raw Material Inventory. 

                a.    Minimum Inventory Level.    Subject to  Section 6(b) below, LEM shall be solely responsible for the procurement and costs of all raw materials
and components necessary for the
manufacture of the Products. LEM shall maintain levels of the inventory of raw materials and components (i) sufficient to manufacture a minimum of 80,000 units of sunglasses which are part of
the Products and (ii) consistent with the composition of inventory of raw materials and components necessary to fulfill the projections given by SPY to LEM on a monthly basis as provided in  Section 3(e)
 above. 

                b.    Excess Raw Material.    On or about August 31 of each year of the Term, LEM and SPY shall
reconcile the inventory of raw materials and components. If SPY has discontinued or removed any Products for which a projection was provided pursuant to  Section 3, and for which SPY did not issue
Purchase Orders for such Products, SPY shall purchase the raw materials and components up to a maximum
amount of no greater than 105% of Spy's purchase orders for such Products that cannot be used by LEM for other Products or otherwise. Costs of such raw materials and components shall be agreed upon
between SPY and LEM in writing. 

                c.    Inventory Deposit.    SPY shall provide LEM with an aggregate deposit (not to exceed
€380,000 at any time) for the purchase of raw materials and components necessary for the manufacture of Products in accordance with the Inventory Deposit Schedule set forth below (the
"Inventory Deposit"). 

	 
	 	Inventory Deposit Schedule
	 	 

	 	 	December 15, 2004	 	€ 50,000	 	 
	 	 	January 15, 2005	 	€ 50,000	 	 
	 	 	February 15, 2005	 	€ 50,000	 	 
	 	 	March 15, 2005	 	€ 100,000	 	 
	 	 	April 15, 2005	 	€ 130,000	 	 

                d.    Inventory Reporting.    LEM shall provide SPY with an inventory position report of raw materials
and components on a monthly basis in a format to be agreed to by both LEM and SPY. 

                e.    Insufficient Inventory Level; Return of Inventory Deposit.    If at any time LEM does not maintain
sufficient levels of raw materials and components as provided herein, SPY shall notify LEM in writing of such deficiency, and LEM shall have thirty (30) days after the date of the written
notice to increase the inventory level to the minimum levels required herein. 

        7.    Other SPY Manufacturing Requirements.    LEM shall comply with the following additional SPY manufacturing
requirements: 

                a.    Retail Ready Packaging.    All units of the Products shipped by LEM after February 1, 2005
shall be packaged in accordance with the packaging requirements set forth in Exhibit H. Prior to January 1, 2005, SPY shall provide LEM
with a printer and the necessary software to produce UPC labels in accordance with the requirements set forth in Exhibit H (the
"Equipment"). The Equipment shall at all times remain titled in the name of, and owned by, SPY, and shall be deemed on loan to LEM. Upon termination of
this Agreement, or as soon thereafter as possible, the Equipment shall be returned to SPY at LEM's expense. 

                b.    Source of Components.    SPY shall have the right at any time during the Term to specify the third
parties from whom LEM must purchase specific components for use in the Product, including, but not limited to, lenses and packaging as long as such components have a cost no greater than the current
cost paid by LEM and in the event that such cost is greater SPY will reimburse LEM for such increase. 

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                c.    Subcontractors.    LEM shall not subcontract its obligations under this Agreement with respect to
quality control, final assembly and/or final packaging processes, without the prior written consent of SPY, which consent shall not be withheld unreasonably. SPY shall have the right to inspect such
subcontractor's facilities and financial condition prior to giving such consent. 

        8.    Rebate.    LEM shall provide SPY with a volume rebate based on the purchases made during 2004. LEM agrees to
issue a credit memo in the amount of € 230,037.11 Euros by December 31, 2004. If such credit memo is not issued SPY may debit the account of LEM in said amount.
This credit will be deducted from payments to LEM in the following amounts and on the following dates: 

	 	 	January 15, 2005	 	€ 57,509.28	 	 
	 	 	February 15, 2005	 	€ 57,509.28	 	 
	 	 	March 15, 2005	 	€ 57,509.28	 	 
	 	 	April 15, 2005	 	€ 57,509.27	 	 

        9.    Warranty; Indemnification. 

                a.    LEM
warrants to SPY that the Products, when shipped to SPY by LEM and for a period of one year following shipment of such Products to SPY, (i) will
conform to the Specifications, as then in effect; (ii) will be produced in conformance with current good manufacturing practices; (iii) will be free of defects in materials and
workmanship and (iv) will be conveyed with good title, free from any lawful security interest, lien or encumbrance. 

                b.    LEM
shall indemnify, defend and hold harmless SPY against any and all liabilities, losses, damages, costs and expenses, made against or sustained by SPY as
a result of any third party claim arising from (i) any defect in materials or workmanship of any Products; (ii) LEM's failure to deliver products in accordance with LEM's warranties as
provided in Section 9(a) above; (iii) LEM's gross negligence or willful misconduct in the performance of this Agreement or (iv) a
breach of its representations, warranties or covenants in this Agreement. 

                c.    SPY
shall indemnify, defend and hold harmless LEM against any and all liabilities, losses, damages, costs and expenses,, made against or sustained by LEM as
a result of any third party claim arising from SPY's gross negligence, infringement of patents, or willful misconduct in the performance of this Agreement. 

        10.    Covenants.    During the Term, LEM covenants as follows: 

                a.    Debt.    LEM will not at any time permit its debt to exceed
€ 3,000,000. 

                b.    Merger, Consolidation, etc.    LEM will not consolidate with or merge with any other third party
or convey, sell, transfer, license or lease substantially all of its assets in a single transaction or series of transactions to any third party. 

                c.    Line of Business.    LEM will not engage in any business if, as a result, the general nature of
the business in which LEM, taken as a whole, would then be engaged would be materially changed from the general nature of business in which LEM, taken as a whole, is engaged on the date of this
Agreement. 

                d.    Transactions with Affiliates.    LEM will not enter into directly or indirectly any transaction or
group of related transactions (including, without limitation, the purchase, lease, license, sale or exchange of properties of any kind or the rendering of any service) with any affiliate, except in
the ordinary course and pursuant to the reasonable requirements of LEM's business and upon fair and reasonable terms no less favorable to LEM than would be obtainable in a comparable arm's-length
transaction with a third party not an affiliate. 

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                e.    Certain Other Covenants.    LEM will not, without the consent of SPY, take (or agree to take) any
of the following actions: 

                        i.    Form
any subsidiary or merge with, acquire all or substantially all of the assets or stock of, or otherwise combine with or make any investment in, or loan
or advance to, any third party or form any subsidiary. 

                        ii.    Enter
into any lending, borrowing or other commercial transaction with any of its employees, directors, affiliates or other third party related to LEM. 

                        iii.    Make
any changes in any of its business objectives, purposes, or operations that could reasonably be expected to have a material adverse effect or engage
in any business other than that presently engaged in or amend its charter or by-laws or other organizational documents. 

        11.    No Supply of Products to Competitors.    LEM agrees that during the Term, it will not manufacture or supply
sunglasses and/or goggles, or any of the components thereof, for any of SPY's competitors which are listed on Exhibit I hereto (the
"Competitors") without the prior written consent of SPY, which consent may be withheld in SPY's sole discretion. In the event that LEM receives an
inquiry or request from a Competitor for the manufacture or supply of sunglasses and/or goggles, or any of the components thereof, LEM shall immediately notify SPY in writing of such inquiry or
request, as well as the identity of the Competitor. SPY shall notify LEM in writing whether it will consent to such manufacture or supply of sunglasses and/or goggles, or any of the components
thereof, by LEM for such Competitor. Unless SPY consents in writing, LEM shall not manufacture any sunglasses and/or goggles, or any of the components thereof, for such Competitor. 

        12.    Purchase Option.    LEM hereby grants to SPY an exclusive option (the
"Option") to purchase all or substantially all of LEM's assets, business or equity securities pursuant to the terms and conditions set forth in  Exhibit J. In the event that the Option is exercised, LEM and SPY shall agree to the terms of an acquisition agreement in a form reasonably
satisfactory to both parties, which agreement shall
contain, among other things, representations and warranties with respect to the condition of LEM's business and assets that are customary and standard. 

        13.    Termination.    This Agreement shall terminate as provided herein and subject to the following terms and
conditions. 

                a.    Discretionary Termination.    Either party shall have the right to terminate this Agreement at any
time and for any reason, by giving written notice to the other party of its election to terminate this Agreement pursuant to this Section 13(a),
which notice shall specify an effective termination date which is at least six (6) months after the date of such notice. 

                b.    Default.    If either party defaults or otherwise breaches any material provision of this
Agreement, and (i) fails to cure such default or breach, including, but not limited to, payment by SPY to LEM in accordance with this Agreement, within ten (10) days after a written
demand for performance by the non-defaulting party, or (ii) fails to commence action to cure such default or breach within ten (10) days after a written demand for
performance by the non-defaulting party, and to diligently pursue such cure to completion thereafter, if such default or breach is not susceptible of being cured within ten
(10) days, the non-defaulting party, in addition to any other rights it may have under applicable law, shall have the right, at its option, to immediately terminate this Agreement
by giving written notice thereof to the defaulting party which shall specify the effective termination date. 

                c.    Insolvency.    If a petition under any bankruptcy or insolvency law is filed by or against a
party, or if either party suspends business or commits any act amounting to a business failure, the other party shall have the absolute right, at its option, to immediately terminate this Agreement by
giving written notice thereof to the insolvent party which shall specify the effective termination date. 

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                d.    Effect of Termination.    Upon termination of this Agreement for any reason, the following
provisions shall apply: 

                        i.    In
the event of a discretionary termination of this Agreement by SPY or LEM pursuant to  Section 13(a) hereof, the following shall apply: 

                                (1)    SPY
shall pay amounts owing to LEM in accordance with the payment terms set forth in this Agreement. 

                                (2)    For
purchase orders submitted by SPY prior to the date of the termination notice (the "Termination
Notice") issued by SPY to LEM, LEM shall manufacture and supply the Products which are the subject of such purchase orders in accordance with their terms, unless otherwise
mutually agreed to by the parties. 

                        ii.    LEM
shall provide SPY, within thirty (30) days after the effective termination date, with an inventory of all of the Products in LEM's possession,
including LEM's cost for such Products. SPY shall purchase from LEM (at LEM's actual cost) all Products that have been ordered pursuant to a Purchase Order prior to such termination date. All Products
produced in excess of 105% of SPY's Purchaser Orders shall be destroyed by LEM, and LEM shall provide a certificate to SPY confirming that such destruction has occurred. 

                        iii.    Notwithstanding
any other provision to the contrary, in no event shall any notice of termination delivered by LEM to SPY hereunder (or any resulting
termination of this Agreement) adversely affect SPY's right to exercise the Option, unless such termination is directly the result of SPY's failure to cure a default or breach relating to SPY's
payments obligations under this Agreement. 

        14.    Ownership of Intellectual Property. 

                a.    License Grant.    To the extent that the Products or know-how, processes or
information used by LEM in the performance of its obligations under this Agreement, or any other Confidential Information (as defined below), are or could be covered by patents, copyrights,
trademarks, trade secrets or other intellectual property rights in any jurisidiction (collectively, the "Intellectual Property Rights"), SPY grants to
LEM a limited, non-transferable, non-assignable, non-sublicensable, non-exclusive license under any such Intellectual Property Rights owned or
sublicensable by SPY hereunder solely for (i) the Term of this Agreement and (ii) use by LEM in the performance of its obligations under this Agreement in favor of SPY. 

                b.    Improvements.    To the extent that LEM or persons employed by LEM or under LEM's control, alone
or with SPY, make any inventions or develop any ideas which are improvements to any Products or Intellectual Property Rights of SPY, LEM (i) agrees to disclose promptly such inventions and
ideas (as well as any other Confidential Information) to SPY and (ii) hereby assigns, in partial consideration for the performance by SPY of its obligations hereunder, any and all such
inventions and ideas (as well as any other Intellectual Property Rights) to SPY. 

                c.    Registration of Rights.    SPY may register any patents, copyrights, trademarks or other
intellectual property rights pertaining to any Products or Intellectual Property Rights of SPY (including, without limitation, processes used in the manufacture of the Products). LEM agrees that it
will (i) promptly cooperate, as reasonably requested by SPY, in respect of any such registration and (ii) not make any such registration of its own in respect of any Products or
Intellectual Property Rights of SPY
(including, without limitation, processes used in the manufacture of the Products). 

                d.    Limited Use.    During the Term of this Agreement, LEM agrees not to perform the manufacture of
the Products or related products using any Intellectual Property Rights owned by or licensed to SPY for any other person or entity (other than SPY) without the prior written consent of SPY, which
consent may be withheld in SPY's sole discretion. 

7

 

        15.    Confidential Information; Return Of Proprietary Information. 

                a.    Confidentiality.    "Confidential Information"
refers to: (i) the business or technical information of SPY or LEM (including any information relating to product or service plans, designs, costs, product or service prices and names,
finances, marketing plans, business plans, requests for proposals, proposals, business opportunities, security, personnel, research, development, know-how, proprietary information relating
to the Products, and other information of a proprietary or confidential nature) and (ii) any information disclosed hereunder and designated by the disclosing party (a
"Disclosing Party") as "confidential" or "proprietary" or which, if disclosed orally, is identified as confidential at the time of such disclosure and
confirmed in a writing delivered to the receiving party (a "Recipient") within thirty (30) days of such disclosure;  provided, however, that "Confidential Information" does
not include information that: (a) is in or enters the public domain without breach of this Agreement by a Recipient; (b) a Recipient receives from a third party without restriction on
disclosure and without breach of a nondisclosure obligation; or (c) a Recipient develops independently, which the Recipient can prove with written evidence. Notwithstanding any other provision
herein to the contrary, the parties acknowledge and agree that the terms of this Agreement shall constitute Confidential Information. 

                b.    Confidentiality Obligations.    Each party agrees to take all measures reasonably required in
order to maintain the confidentiality of all Confidential Information in its possession or control, which will in no event be less than the measures used to maintain the confidentiality of its own
information of equal importance. It is understood and agreed that a Recipient may use and disclose Confidential Information received from a Disclosing Party solely for the purposes of exercising the
Recipient's rights and performing its obligations under this Agreement. It is further understood and agreed that the parties may disclose the terms and conditions of this Agreement to their respective
actual and potential investors, attorneys, financial advisors, accountants, collaborators, business partners, employees and contractors who are bound by written agreements with the Recipient to
maintain the Confidential Information of the Disclosing Party in confidence or who are otherwise under obligations of confidentiality to the Recipient (collectively, the
"Representatives"); provided, however, that the
Recipient shall be liable for any unauthorized disclosure by such Representatives. The parties also may disclose Confidential Information of the other party in the course of prosecuting or defending
litigation, complying with applicable governmental regulations or submitting information to tax or other governmental authorities, provided that if a
party is required to make any such disclosure of another party's Confidential Information, to the extent it may legally do so, it will give reasonable advance
notice to the latter party of such disclosure and will use diligent efforts to secure confidential treatment of such Confidential Information prior to its disclosure (whether through protective orders
or otherwise). Without limiting the foregoing sentence, the parties agree that either party may file this Agreement as an exhibit to a registration statement filed under the Securities Act of 1933, or
a periodic report filed under the Securities Exchange Act of 1934, so long as the party so filing this Agreement exercises its reasonable efforts to seek confidential treatment regarding the financial
terms of this Agreement. 

                c.    Injunctive Relief.    The Recipient of Confidential Information acknowledges that Confidential
Information includes trade secrets or confidential or proprietary information, the disclosure of which could cause substantial harm to the Disclosing Party that could not be remedied by the payment of
damages alone. Accordingly, the parties agree that a Disclosing Party shall be entitled to seek preliminary and permanent injunctive relief and other equitable relief for any breach of this  Section 15. 

                d.    Return of Confidential Information.    Upon the written request of the Disclosing Party, the
Receiving Party shall promptly return all tangible items relating to Confidential Information of the Disclosing Party, including all written material, photographs, models, components and the like made 

8

 

available
or supplied by the Disclosing Party to the Receiving Party, and all copies and derivatives thereof. 

        16.    GENERAL PROVISIONS. 

                a.    Relationship of the Parties.    The parties are independent contracting parties, and neither party
shall be deemed to be the servant, employee or agent of the other party. Nothing in this Agreement shall be deemed to create the relationship of partners, principal, agent or joint ventures between
the parties. Each party agrees that it has no right or authority to incur obligations of any kind in the name of or for the account of the other party nor to commit or bind the other party to any
contract or other obligation, except as set out above. This Agreement is not for the benefit of any third party. 

                b.    Severability.    If any provision of this Agreement or the application of any such provision to
any party or circumstances shall be determined by any court of competent jurisdiction to be invalid and unenforceable to any extent, the remainder of this Agreement or the application of such
provision to such person or circumstances other than those to which it is so determined to be invalid and unenforceable, shall not be affected thereby, and each provision hereof shall be validated and
shall be enforced to the fullest extent permitted by law. 

                c.    No Waiver.    No express or implied waiver by any party of any provision of this Agreement or of
any
breach or default of the other party shall constitute a continuing waiver, and no waiver by any party shall prevent such party from enforcing any and all other provisions of this Agreement or from
acting upon such other provisions or upon any other or subsequent breach or default by the other party. 

                d.    Notices.    All notices, demands, requests, consents, statements, satisfactions, waivers,
designations, refusals, confirmations, denials and other communications that may be required or otherwise provided for or contemplated hereunder shall be in writing and shall be deemed to be properly
given and received (i) upon delivery, if delivered in person or by facsimile transmission with receipt acknowledged, (ii) three (3) business days after having been deposited for
overnight delivery with Federal Express or another comparable overnight courier service, or (iii) five (5) business days after having been deposited in any post office or mail depository
regularly maintained by the U.S. Postal Service or the official governmental postal service in Italy, as the case may be, and sent by registered or certified mail (or its equivalent in Italy), postage
prepaid, addressed as follows: 

	 	 	If to SPY:	 	If to LEM:	 	 
	

 	
 	

2070 Las Palmas Drive	
 	

Via Roma 57	
 	

 
	 	 	Carlsbad, California 92009	 	Daverio, Varese	 	 
	 	 	U.S.A.	 	ITALY	 	 
	 	 	Attention: Barry Buchholtz	 	Attention: Riccardo Polinelli	 	 
	 	 	Fax: (760) 804-8442	 	Fax: 011-39-033-294-9085	 	 

or to such other person or persons at such address or addresses as may be designated by written notice to the other parties hereunder. 

                e.    Binding Effect, Benefits.    This Agreement shall inure to the benefit of and be binding upon the
parties hereto and their respective heirs, successors and assigns; provided, however, that nothing in
this Agreement shall be construed to confer any rights, remedies, obligations or liabilities on any person other than the parties hereto or their respective heirs, successors and assigns. 

                f.    Survival.    All terms and provisions of this Agreement intended to be observed and performed
after the expiration or termination of this Agreement shall survive such expiration or termination, and shall continue thereafter in full force and effect. 

9

 

                g.    Further Assurances.    Each party agrees to take such further action and to execute and deliver to
the other party such additional assignments, agreements, powers and instruments as the other party may reasonably require or deem advisable to carry into effect the purposes of this Agreement or to
better assure and confirm unto the other party its rights, powers and remedies hereunder. 

                h.    Amendments.    This Agreement may be amended or modified only by the written agreement of all of
the parties hereto. 

                i.    Counterparts.    This Agreement may be executed in one or more counterparts, each of which shall
be deemed an original but all of which together shall constitute one and the same document. The parties additionally acknowledge and agree that this Agreement may be executed and delivered by
facsimile. At such time as each of the parties has a facsimile copy of this Agreement, and/or counterparts thereof, containing the signatures of all of the parties, this Agreement shall be treated as
having been fully executed and delivered for all purposes. 

                j.    Assignment.    This Agreement may not be assigned or transferred by either party without the prior
written consent of SPY or LEM, as applicable, except in connection with the sale of the assets or capital stock of SPY. 

                k.    Entire Agreement.    This Agreement embodies the entire agreement and understanding of the parties
hereto with respect to the subject matter of this Agreement and supersedes all prior agreements, whether written or oral, with respect thereto. 

                l.    Applicable Law; Construction and Interpretation.    This Agreement and the rights and obligations
of the parties hereto shall be governed by and construed and enforced in accordance with the internal laws of the State of California, U.S.A., excluding any laws regarding the conflict or choice of
laws. 

                m.    Jurisdiction.    LEM agrees that any legal action or proceeding with respect to this Agreement, or
any action or proceeding to execute or otherwise enforce any judgment obtained against LEM or any of its properties, may be brought in the courts of State of California, U.S.A., provided always that
suit also may be brought in the courts of any country or place where LEM or any of its assets may be found, and, by execution and delivery of this Agreement, LEM irrevocably submits to each such
jurisdiction. LEM irrevocably waives any objection which it may now or hereafter have to the venue of any suit, action or proceeding, arising out of or relating in any manner to this Agreement, and
hereby further irrevocably waives any claim that any such suit, action or proceeding brought in any such court has been brought in an inconvenient forum. 

        IN
WITNESS WHEREOF, the parties have executed this Agreement as of the date first written above. 

	SPY OPTIC, INC.,

a California corporation	 	LEM S.R.L.

an Italian limited partnership
	

 	
 	

 	
 	

 	
 	

 
	By	 	/s/  BARRY BUCHHOLTZ      
 Barry Buchholtz

Chief Executive Officer	 	By	 	/s/  RICCARDO POLINELLI      
 Riccarodo Polinelli

President

10

QuickLinks

Exhibit 10.13

LIMITED EXCLUSIVE SUPPLY AGREEMENT

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