Document:

Exhibit
4.1

Execution
Copy

AGREEMENT
AND PLAN OF MERGER

Between

LUXOTTICA
GROUP S.p.A.

NORMA
ACQUISITION CORP.

and

OAKLEY,
INC.

Dated as
of June 20, 2007

Table of Contents

	
  ARTICLE I THE MERGER

  	
  2

  
	
  Section 1.01.The Merger

  	
  2

  
	
  Section 1.02. Effective
  Time; Closing

  	
  2

  
	
  Section 1.03. Effects
  of the Merger

  	
  2

  
	
  Section 1.04. Articles
  of Incorporation and By-Laws of the Surviving Corporation

  	
  2

  
	
  Section 1.05. Directors

  	
  2

  
	
  Section 1.06. Officers

  	
  3

  
	
  Section 1.07.
  Conversion of Shares; Cancellation of Shares

  	
  3

  
	
  Section 1.08.
  Conversion of Merger Sub Common Stock

  	
  3

  
	
  Section 1.09.
  Dissenting Shares

  	
  3

  
	
  Section 1.10. Company
  Stock-Based Arrangements

  	
  4

  
	
   

  	
   

  
	
  ARTICLE II PAYMENT FOR SHARES

  	
  5

  
	
  Section 2.01. Payment
  for Shares

  	
  5

  
	
   

  	
   

  
	
  ARTICLE III REPRESENTATIONS AND WARRANTIES OF THE
  COMPANY

  	
  8

  
	
  Section 3.01.
  Organization and Qualification; Subsidiaries

  	
  8

  
	
  Section 3.02. Articles
  of Incorporation and By-Laws

  	
  9

  
	
  Section 3.03.
  Capitalization

  	
  9

  
	
  Section 3.04. Authority
  Relative to this Agreement

  	
  10

  
	
  Section 3.05. No
  Conflict; Required Filings and Consents

  	
  11

  
	
  Section 3.06.
  Compliance with Agreements

  	
  12

  
	
  Section 3.07. SEC
  Reports and Financial Statements

  	
  13

  
	
  Section 3.08.
  Off-Balance Sheet Arrangements

  	
  14

  
	
  Section 3.09.
  Information

  	
  14

  
	
  Section 3.10.
  Litigation

  	
  15

  
	
  Section 3.11.
  Compliance with Applicable Laws

  	
  15

  
	
  Section 3.12. Internal
  Controls

  	
  15

  
	
  Section 3.13. Employee
  Benefit Plans and Arrangements

  	
  16

  
	
  Section 3.14. Intellectual
  Property

  	
  19

  
	
  Section 3.15.
  Environmental Matters

  	
  21

  
	
  Section 3.16. Taxes

  	
  22

  
	
  Section 3.17. Absence
  of Certain Material Adverse Changes

  	
  24

  
	
  Section 3.18. Affiliate
  Transactions

  	
  24

  
	
  Section 3.19. Real
  Property

  	
  24

  
	
  Section 3.20. Labor
  Matters

  	
  25

  
	
  Section 3.21. Material
  Contracts

  	
  26

  
	
  Section 3.22. Opinion
  of Financial Advisor

  	
  26

  
	
  Section 3.23.
  Relationships with Customers and Others

  	
  27

  
	
  Section 3.24. Brokers

  	
  27

  

 

 i
 

 

	
  ARTICLE IV REPRESENTATIONS AND WARRANTIES OF
  PARENT AND THE MERGER SUB

  	
  27

  
	
  Section 4.01.
  Organization and Qualification

  	
  27

  
	
  Section 4.02. Authority
  Relative to this Agreement

  	
  28

  
	
  Section 4.03. No
  Conflict; Required Filings and Consents

  	
  28

  
	
  Section 4.04.
  Information

  	
  29

  
	
  Section 4.05. Financing

  	
  30

  
	
  Section 4.06. Ownership
  of Shares

  	
  30

  
	
  Section 4.07. Brokers

  	
  30

  
	
   

  	
   

  
	
  ARTICLE V COVENANTS

  	
  30

  
	
  Section 5.01. Conduct
  of Business of the Company

  	
  30

  
	
  Section 5.02. Access to
  Information; No Control of Operations

  	
  34

  
	
  Section 5.03. Further
  Assurances; Reasonable Best Efforts

  	
  35

  
	
  Section 5.04. Filings;
  Consents

  	
  36

  
	
  Section 5.05. Public
  Announcements

  	
  38

  
	
  Section 5.06.
  Indemnification; Employees and Employee Benefits

  	
  38

  
	
  Section 5.07. No
  Solicitation

  	
  41

  
	
  Section 5.08.
  Preparation of the Proxy Statement

  	
  44

  
	
  Section 5.09.
  Shareholders’ Meeting

  	
  45

  
	
  Section 5.10.
  Notification of Certain Matters

  	
  45

  
	
  Section 5.11. State
  Takeover Laws

  	
  45

  
	
  Section 5.12.
  Shareholder Litigation

  	
  46

  
	
  Section 5.13. Merger
  Sub

  	
  46

  
	
  Section 5.14.
  Compliance with Export, Embargo and Defense Controls

  	
  46

  
	
  Section 5.15. CFIUS
  Notice

  	
  46

  
	
   

  	
   

  
	
  ARTICLE VI CONDITIONS TO CONSUMMATION OF THE MERGER

  	
  46

  
	
  Section 6.01.
  Conditions to the Obligations of Each Party

  	
  46

  
	
  Section 6.02.
  Conditions to the Obligations of Parent and Merger Sub

  	
  47

  
	
  Section 6.03.
  Conditions to the Obligations of the Company

  	
  48

  
	
   

  	
   

  
	
  ARTICLE VII TERMINATION; AMENDMENTS; WAIVER

  	
  48

  
	
  Section 7.01.
  Termination

  	
  48

  
	
  Section 7.02. Effect of
  Termination

  	
  50

  
	
  Section 7.03. Fees and
  Expenses

  	
  51

  
	
  Section 7.04. Amendment

  	
  52

  
	
  Section 7.05.
  Extension; Waiver

  	
  52

  
	
   

  	
   

  
	
  ARTICLE VIII MISCELLANEOUS

  	
  52

  
	
  Section 8.01.
  Non-Survival of Representations and Warranties

  	
  52

  
	
  Section 8.02. Entire
  Agreement; Assignment

  	
  53

  
	
  Section 8.03. Validity

  	
  53

  
	
  Section 8.04. Notices

  	
  53

  
	
  Section 8.05. Governing
  Law; Jurisdiction

  	
  54

  
	
  Section 8.06. Waiver of
  Jury Trial

  	
  54

  

 

 ii
 

 

	
  Section 8.07. Descriptive
  Headings, etc

  	
  55

  
	
  Section 8.08.
  Counterparts; Effectiveness

  	
  55

  
	
  Section 8.09. Parties
  in Interest; No Third Party Beneficiaries

  	
  55

  
	
  Section 8.10. Certain
  Definitions

  	
  55

  
	
  Section 8.11. Specific
  Performance

  	
  56

  

 

 iii

INDEX OF
DEFINED TERMS

	
  Articles of Merger

  	
  Section 1.02

  
	
  Acquisition Agreement

  	
  Section 5.07(c)

  
	
  Acquisition Proposal

  	
  Section 5.07(d)

  
	
  Agreement

  	
  Recitals

  
	
  Antitrust Regulatory Conditions

  	
  Section 7.01(b)

  
	
  Board

  	
  Recitals

  
	
  Change of Board Recommendation

  	
  Section 5.07(c)

  
	
  CFIUS

  	
  0

  
	
  CFIUS Notice

  	
  0

  
	
  Closing Consents

  	
  Section 6.02

  
	
  Closing Date

  	
  Section 1.02

  
	
  Code

  	
  Section 2.01(f)

  
	
  Company

  	
  Recitals

  
	
  Company Disclosure Schedule

  	
  ARTICLE III

  
	
  Company Options

  	
  Section 1.10(a)

  
	
  Company Representatives

  	
  Section 5.02(a)

  
	
  Company Stock-Based Awards

  	
  Section 1.10(b)

  
	
  Confidentiality Agreements

  	
  Section 5.02(a)

  
	
  Consent

  	
  Section 3.05(b)

  
	
  Continuation Period

  	
  Section 5.06(d)

  
	
  Contracts

  	
  Section 3.21(b)

  
	
  Controlled Group Liability

  	
  Section 3.13(a)

  
	
  Dissenting Shares

  	
  Section 1.09

  
	
  Divestiture

  	
  Section 5.04(b)

  
	
  Effective Time

  	
  Section 1.02

  
	
  Employee Benefit Arrangement

  	
  Section 5.01(f)

  
	
  Employees

  	
  Section 5.06(d)

  
	
  Environmental Law

  	
  Section 3.15

  
	
  ERISA

  	
  Section 3.13(a)

  
	
  ERISA Affiliate

  	
  Section 3.13(a)

  
	
  Exchange Act

  	
  Section 3.05(a)

  
	
  Exchange Fund

  	
  Section 2.01(a)

  
	
  Extended Termination Date

  	
  Section 7.01(b)

  
	
  Filed Contracts

  	
  Section 3.21(b)

  
	
  Final Termination Date

  	
  Section 7.01(b)

  
	
  Foreign Plan

  	
  Section 3.13(a)

  
	
  Founder

  	
  Recitals

  
	
  Founder Voting Agreement

  	
  Recitals

  
	
  GAAP

  	
  Section 3.07(b)

  
	
  Governmental Entity

  	
  Section 3.05(b)

  
	
  Hazardous Substance

  	
  Section 3.15

  
	
  HSR Act

  	
  Section 3.05(a)

  
	
  Income Tax

  	
  Section 3.16(p)

  

 

 i
 

 

	
  Indemnified Parties

  	
  Section 5.06(a)

  
	
  Initial Termination Date

  	
  Section 7.01(b)

  
	
  Intellectual Property

  	
  Section 3.14

  
	
  IRS

  	
  Section 3.13(b)

  
	
  Lien

  	
  Section 8.10(c)

  
	
  LTIP Performance Units

  	
  Section 1.10(b)

  
	
  Material Adverse Effect

  	
  Section 3.01

  
	
  Measurement Date

  	
  Section 3.03

  
	
  Merger

  	
  Recitals

  
	
  Merger Price

  	
  Recitals

  
	
  Merger Fees

  	
  Section 3.24

  
	
  Merger Sub

  	
  Recitals

  
	
  Necessary 23B.19 Actions

  	
  Section 3.05(c)

  
	
  New Plans

  	
  Section 5.06(f)

  
	
  NYSE

  	
  Section 3.05(a)

  
	
  Old Plans

  	
  Section 5.06(f)

  
	
  Option Plans

  	
  Section 1.10(a)

  
	
  Other Filings

  	
  Section 3.09

  
	
  Parent

  	
  Recitals

  
	
  Parent Representatives

  	
  Section 5.02(a)

  
	
  Parent Termination Fee

  	
  Section 7.03(b)

  
	
  Paying Agent

  	
  Section 2.01(a)

  
	
  Permitted Issuances

  	
  Section 5.01(c)

  
	
  Plans

  	
  Section 3.13(a)

  
	
  Preferred Stock

  	
  Section 3.03

  
	
  Proxy Statement

  	
  Section 5.08(a)

  
	
  Qualified Plans

  	
  Section 3.13(c)

  
	
  Registered Intellectual Property

  	
  Section 3.14(a)

  
	
  Release

  	
  Section 3.15

  
	
  Required Shareholder Approval

  	
  Section 6.01(a)

  
	
  Restricted Share

  	
  Section 1.10(c)

  
	
  Revised Parent Proposal

  	
  Section 5.07(c)

  
	
  Sarbanes-Oxley Act

  	
  Section 3.11

  
	
  SEC

  	
  Section 3.07(a)

  
	
  SEC Reports

  	
  Section 3.07(a)

  
	
  Share

  	
  Recitals

  
	
  Share Certificates

  	
  Section 2.01(a)

  
	
  Shares

  	
  Recitals

  
	
  Sole Shareholder

  	
  Section 4.02

  
	
  Special Meeting

  	
  Section 5.09

  
	
  Specified Assets

  	
  Section 5.04(a)

  
	
  Specified Change of Board Recommendation

  	
  Section 5.07(c)

  
	
  Subsidiary

  	
  Section 3.01

  
	
  Superior Acquisition Proposal

  	
  Section 5.07(d)

  
	
  Surviving Corporation

  	
  Section 1.01

  

 

 ii
 

 

	
  Takeover Statute

  	
  Section 5.11

  
	
  Tax

  	
  Section 3.16(n)

  
	
  Tax Return

  	
  Section 3.16(o)

  
	
  Termination and Expense Reimbursement Fee

  	
  Section 7.03(c)

  
	
  Transaction Agreements

  	
  Section 4.02

  
	
  U.S. Plan

  	
  Section 3.13(a)

  
	
  U.S. Subsidiary Plan

  	
  Section 3.13(b)

  
	
  Voting Agreement

  	
  Section 4.02

  
	
  Voting Debt

  	
  Section 3.03

  
	
  WBCA

  	
  Recitals

  
	
  1995 Stock Plan

  	
  Section 1.10(a)

  

 

Exhibits

	
  Exhibit A

  	
  Amended and Restated Articles of Incorporation of
  the Company

  
	
  Exhibit B

  	
  Amended and Restated By-laws of the Company

  
	
  Exhibit C

  	
  Form of Non-Foreign Affidavit

  
	
  Exhibit D

  	
  Guarantee

  

 

 iii

AGREEMENT AND PLAN OF MERGER

AGREEMENT AND PLAN OF MERGER, dated as of June 20,
2007 (this “Agreement”),
by and among Luxottica Group S.p.A., an Italian corporation (“Parent”),
Norma Acquisition Corp., a Washington corporation and an indirect wholly owned subsidiary
of Parent (“Merger
Sub”), and Oakley, Inc., a Washington corporation (the “Company”).

WHEREAS, the respective Boards of Directors of Parent,
Merger Sub and the Company have approved and declared advisable this Agreement,
which contemplates the merger of Merger Sub with and into the Company, as set
forth below (the “Merger”),
in accordance with the Washington Business Corporation Act (the “WBCA”) and
upon the terms and subject to the conditions set forth in this Agreement;

WHEREAS, upon the consummation of the Merger, each
issued and outstanding share of common stock, $0.01 par value per share, of the
Company (each a “Share”
and, collectively, the “Shares”) will be converted into the right to receive $29.30
per share in cash (without interest) (the “Merger Price”), upon the terms
and subject to the limitations and conditions of this Agreement;

WHEREAS, as an inducement to Parent and Merger Sub to
enter into this Agreement, concurrently herewith, James H. Jannard (the “Founder”) has entered into an agreement
(the “Founder
Voting Agreement”) with Parent and Merger Sub to vote his Shares in
favor of this Agreement and the Merger on the terms and subject to the
conditions specified therein;

WHEREAS, as a further inducement to Parent and Merger
Sub to enter into this Agreement, concurrently herewith, the Founder has
entered into a non-competition agreement with Parent and Merger Sub (the “PS Non-Competition Agreement”), effective as of the
Effective Time of the Merger, with the rights and obligations thereunder of
Merger Sub to be rights and obligations of the Surviving Corporation by virtue
of the Merger, and on the terms and subject to the conditions specified
therein;

WHEREAS, the Board of Directors of the Company (the “Board”) has
approved the terms of the Founder Voting Agreement;

WHEREAS, the Board is recommending, subject to the
terms hereof, that the Company’s shareholders approve this Agreement and the
Merger;

WHEREAS, Parent, Merger Sub and the Company desire to
make certain representations, warranties, covenants and agreements in
connection with the Merger and also to prescribe various conditions to the
Merger;

NOW, THEREFORE, in consideration of the foregoing and
the respective representations, warranties, covenants and agreements set forth
herein, Parent, Merger Sub and the Company agree as follows:

ARTICLE
I

THE
MERGER

Section 1.01.          The
Merger.  Upon the terms and subject
to the satisfaction or waiver of the conditions hereof, and in accordance with
the applicable provisions of this Agreement and the WBCA, at the Effective Time
(as defined in Section 1.02), Merger Sub shall be merged with and into the
Company.  Following the Merger, the
separate corporate existence of Merger Sub shall cease and the Company shall
continue as the surviving corporation (the “Surviving Corporation”)
and an indirect wholly owned subsidiary of Parent.

Section 1.02.          Effective
Time; Closing.  The closing (the “Closing”) will be held at
the offices of Winston & Strawn LLP, 200 Park Avenue, New York, New York at
10:00 A.M., New York, New York time, on the fifth business day following the
date of the satisfaction or waiver of the conditions set forth in Article VI
(other than those conditions that by their nature are to be satisfied or waived
at the Closing, but subject to the satisfaction or waiver of those conditions),
or such other place and time as Parent and the Company may agree in writing
(the “Closing Date”).  On the Closing Date, the parties hereto shall
cause the Merger to be consummated by filing articles of merger (the “Articles of Merger”) with
the Secretary of State of the State of Washington,
in such form as is required by, and executed in accordance with, the relevant
provisions of Washington law.  The Merger
shall become effective at such time at which such Articles of Merger shall be
duly filed with the Secretary of State of the State of Washington, or at such later time reflected in such Articles of
Merger as shall be agreed by Parent and the Company in writing (the time that
such Merger becomes effective, the “Effective
Time”).

Section 1.03.          Effects
of the Merger.  The effect of the
Merger shall be as provided in this Agreement and the applicable provisions of
the WBCA. Without limiting the generality of the foregoing, and subject
thereto, at the Effective Time, all the properties, rights, privileges, powers
and franchises of the Company and Merger Sub shall vest in the Surviving
Corporation, and all debts, liabilities and duties of the Company and Merger
Sub shall become the debts, liabilities and duties of the Surviving Corporation.

Section 1.04.          Articles
of Incorporation and By-Laws of the Surviving Corporation.

(a)       At
the Effective Time, the amended and restated articles of incorporation of the
Company, as in effect immediately prior to the Effective Time, shall be amended
and restated to read in its entirety as set forth in Exhibit A and, as
so amended and restated, shall be the articles of incorporation of the
Surviving Corporation, until thereafter amended in accordance with the
provisions thereof and hereof and applicable law.

(b)      At
the Effective Time, the by-laws of the Company, as in effect immediately prior
to the Effective Time, shall be amended and restated to read in their entirety
as set forth in Exhibit B and, as so amended and restated, shall be the
by-laws of the Surviving Corporation, until thereafter amended in accordance
with the provisions thereof and hereof and applicable law.

Section 1.05.          Directors.  Subject to applicable law, the directors of
Merger Sub immediately prior to the Effective Time shall be the initial
directors of the Surviving Corporation and shall hold office until their
respective successors are duly elected and qualified, or their

 2
 

earlier death, resignation or removal in
accordance with the articles of incorporation or by-laws of the Surviving
Corporation.

Section 1.06.          Officers.  Subject to applicable law and any obligation
of the Company under any employment agreement with the relevant person that is
in effect as of the Effective Time, the individuals specified by Parent in
writing to the Company at least two business days prior to the Closing Date
shall be the initial officers of the Surviving Corporation and shall hold
office until their respective successors are duly elected and qualified, or
their  earlier death, resignation or
removal in accordance with the articles of incorporation or by-laws of the
Surviving Corporation.

Section 1.07.          Conversion
of Shares; Cancellation of Shares. 
At the Effective Time, by virtue of the Merger and without any action on
the part of the holders thereof, each Share issued and outstanding immediately
prior to the Effective Time (other than any Shares held by Parent, Merger Sub
or any wholly owned Subsidiary of Parent or Merger Sub, in the treasury of the
Company or by any wholly owned Subsidiary of the Company, which Shares, by
virtue of the Merger and without any action on the part of the holder thereof,
shall each be cancelled and shall cease to exist with no payment being made
with respect thereto and, other than any Shares constituting Dissenting Shares
(as defined below)), shall be converted into and represent the right to receive
in cash the Merger Price from Parent or Merger Sub (through the Paying Agent as
provided in Section 2.01).  At the Effective
Time, all Shares that have been converted into the right to receive the Merger
Price as provided in this Section 1.07 shall be automatically cancelled and
shall cease to exist and the holders of certificates which immediately prior to
the Effective Time represented such Shares shall cease to have any rights with
respect to such Shares other than the right to receive the Merger Price,
without interest thereon, upon surrender of such certificates in accordance
with Article II hereof.

Section 1.08.          Conversion
of Merger Sub Common Stock.  At the
Effective Time, by virtue of the Merger and without any action on the part of
the holder thereof, each share of common stock, par value $0.01 per share, of
Merger Sub issued and outstanding immediately prior to the Effective Time shall
be converted into and become one validly issued, fully paid and nonassessable
share of common stock, par value $0.01 per share, of the Surviving Corporation
and shall constitute the only outstanding shares of capital stock of the
Surviving Corporation.

Section 1.09.          Dissenting
Shares.  Notwithstanding anything
contained in this Agreement to the contrary and to the extent provided under
applicable law, Shares issued and outstanding immediately prior to the
Effective Time as to which the holder takes, or forbears from taking, such
actions as required to satisfy the requirements for perfecting dissenters’
rights set forth in Chapter 23B.13 of the WBCA and has not effectively
withdrawn, waived or lost its dissenters’ rights (the “Dissenting Shares”), shall not be converted
into the right to receive the Merger Price. 
At the Effective Time, by virtue of the Merger and without any action on
the part of the holder thereof, all Dissenting Shares shall be cancelled and
shall cease to exist and shall represent the right to receive only those rights
provided under the WBCA.  If, after the
Effective Time, any holder of Dissenting Shares is not entitled to payment
under Chapter 23B.13, then each Dissenting Share owned by such holder shall be
treated as if it had been converted into the 

 3
 

right to receive the Merger Price as of the
Effective Time. The Company shall promptly notify Parent upon the receipt of
any written demands for appraisal under Chapter 23B.13 of the WBCA and any
withdrawals of such demands or any actions or failure to take actions that
result in the loss or waiver of dissenters’ rights, and Parent shall have the
right to participate in all negotiations and proceedings with respect to such
demands. The Company shall not settle, offer to settle or make any payment with
respect to such demands unless it receives prior written consent from Parent,
not to be unreasonably withheld, conditioned or delayed, or unless it is
required to do so under the WBCA.  Any
amount payable to any holder of Dissenting Shares shall be paid in accordance
with the WBCA solely by the Surviving Corporation out of its own funds.

Section 1.10.          Company
Stock-Based Arrangements.

(a)       Company
Options.  Subject to Section 2.01(f),
at the Effective Time, by virtue of the Merger and without any action on the part
of the holder thereof, all outstanding and unexpired options and similar rights
to acquire Shares (other than Company Stock-Based Awards, as such term is
defined in Section 1.10(b) below), regardless of whether or not such options or
rights have vested (the “Company
Options”), including, without limitation, Company Options
granted pursuant to the Company’s 1995
Stock Incentive Plan, as amended (the “1995
Stock Plan”), and
option agreements with individuals thereunder (collectively, the “Option Plans”), shall be
cancelled and each holder of a cancelled Company Option shall be entitled to
receive, at the Effective Time, in consideration for the cancellation of each
such Company Option, an amount in cash equal to the product of (x) the
number of Shares subject to such Company Option immediately prior to the
Effective Time (assuming full vesting of each such Company Option whether or
not it has vested in accordance with its terms) and (y) the excess, if
any, of the Merger Price over the exercise price per Share subject to such
Company Option, without interest thereon.

(b)      Company
Stock-Based Awards.  Subject to
Section 2.01(f), at the Effective Time, by virtue of the Merger and without any
action on the part of the holder thereof, all performance shares, stock appreciation
rights and deferred stock, if any, outstanding immediately prior to the
Effective Time under the 1995 Stock Plan that shall not yet have been replaced
by issued Shares upon the lapse of the applicable forfeiture condition,
including, without limitation, all performance units (“LTIP Performance Units”) outstanding under
the LTIP (as defined in Section 5.06(g)) (“Company Stock-Based Awards”),
shall be cancelled.

(c)       Restricted
Stock Awards.  Any restrictions on
each Share (“Restricted Share”)
issued under the 1995 Stock Plan or under any of the Plans (as defined in
Section 3.13(a) below) or otherwise shall lapse immediately prior to, and
effective upon the occurrence of, the Effective Time, and each Restricted Share
shall be fully vested in each holder thereof at such time, and each such
Restricted Share will be treated at the Effective Time the same as, and have
the same rights and be subject to the same conditions (including the condition
set forth in Section 2.01(f)) as, each Share not subject to any
restrictions.  All dividend equivalents,
if any, credited to the account of each holder of a Restricted Share as of the
Effective Time shall be 

 4
 

distributed to the holder of such Restricted Share at the Effective
Time, without interest thereon.

(d)      Actions.  Prior to the Effective Time, the Company
shall deliver to the holders of Company Options and Company Stock-Based Awards
appropriate notices, in form and substance reasonably acceptable to Parent,
setting forth such holders’ rights pursuant to this Agreement.  The Company shall take all action as is
necessary prior to the Effective Time to terminate all Option Plans (including
such actions as are necessary to amend each Option Plan to cancel the Company
Options, Company Stock-Based Awards and other rights granted pursuant to such
Option Plan) so that at and after the Effective Time, no current or former
employee, director, consultant or other person shall have any option to
purchase or right to receive any Company Options or Company Stock-Based Awards
for his or her benefit.  Not more than
ten nor less than three business days prior to the anticipated Effective Time,
the Company shall, to the fullest extent permitted by applicable law, deliver
to Parent a list, in form reasonably acceptable to Parent, of the number of
Company Options and Company Stock-Based Awards expected to be outstanding
immediately prior to the Effective Time, and the names of the holders thereof
and in each case together with the applicable mailing addresses, tax
identification numbers and other information relating to such holders and
participants as Parent may reasonably require in connection with the payments
to be made pursuant to this Section 1.10. 
Parent may take such actions, as promptly as practicable, prior to
making any payment under this Section 1.10, as are reasonably necessary and
appropriate in order to verify the right of any person to receive such a
payment hereunder, the identifying information relating to such person and
whether any withholding is required with respect thereto and, if so, the amount
thereof.

ARTICLE
II

PAYMENT
FOR SHARES

Section 2.01.          Payment
for Shares.

(a)       From
and after the Effective Time, a bank or trust company mutually acceptable to
Parent and the Company shall act as paying agent (the “Paying Agent”) in
effecting the payment of the Merger Price in respect of certificates (the “Share Certificates”)
that, prior to the Effective Time, represented Shares entitled to payment of
the Merger Price pursuant to Section 1.07. 
Prior to the Effective Time, Parent shall enter into a paying agent
agreement with the Paying Agent in form and substance reasonably acceptable to
the Company.  At or prior to the
Effective Time, Parent or Merger Sub shall deposit, or cause to be deposited,
in trust with the Paying Agent the aggregate Merger Price to which holders of
Shares shall be entitled at the Effective Time pursuant to Section 1.07 plus
the aggregate consideration payable pursuant to Section 1.10 in exchange for
Company Options, Company Stock-Based Awards and Restricted Shares (such funds
collectively being hereinafter referred to as the “Exchange
Fund”).  Parent shall
be obligated to, from time to time, deposit any additional funds necessary to
pay the aggregate Merger Price with respect to Shares outstanding at the
Effective Time.

 5
 

(b)      Promptly
after the Effective Time, the Paying Agent shall, and Parent shall cause the
Paying Agent to, mail to each record holder of Share Certificates that
immediately prior to the Effective Time represented Shares (other than Share
Certificates representing Shares held by Parent, Merger Sub or any wholly owned
Subsidiary of Parent or Merger Sub, in the treasury of the Company or by any
wholly owned Subsidiary of the Company, and other than Dissenting Shares) a
form of letter of transmittal, in form and substance reasonably satisfactory to
Parent, which shall specify that delivery shall be effected, and risk of loss
and title to the Share Certificates shall pass, only upon proper delivery of
the Share Certificates to the Paying Agent, and instructions for use in
surrendering such Share Certificates and receiving the aggregate Merger Price
in respect thereof.  Upon the surrender
of each such Share Certificate for cancellation to the Paying Agent or to such
additional agent or agents as may be appointed by Parent, together with such
letter of transmittal, duly executed, and such other documents as may
reasonably be required by the Paying Agent, the holder of such Share
Certificate shall be paid the Merger Price multiplied by the number of Shares
formerly represented by such Share Certificate in consideration therefor, and
such Share Certificate shall forthwith be cancelled.  Until so surrendered, each such Share
Certificate (other than Share Certificates representing Shares held by Parent,
Merger Sub or by any wholly owned Subsidiary of Parent or Merger Sub, in the
treasury of the Company or by any wholly owned Subsidiary of the Company, and
other than Dissenting Shares) shall represent solely the right to receive the
aggregate Merger Price relating thereto. 
No interest or dividends shall be paid or accrued on the Merger
Price.  If the Merger Price (or any
portion thereof) is to be delivered to any person other than the person in
whose name the Share Certificate formerly representing Shares surrendered
therefor is registered, it shall be a condition to such right to receive such
Merger Price that the Share Certificate so surrendered shall be properly
endorsed or otherwise be in proper form for transfer and that the person
surrendering such Share Certificate shall pay to the Paying Agent any transfer
or other taxes required by reason of the payment of the Merger Price to a
person other than the registered holder of the Share Certificate surrendered,
or shall establish to the reasonable satisfaction of the Paying Agent that such
tax has been paid or is not applicable. Promptly after the Effective Time, the
Paying Agent shall, and Parent shall cause the Paying Agent to, mail to the
persons entitled to receive such payment, as verified by Parent pursuant to
Section 1.10(d), checks in payment of the consideration payable to such persons
pursuant to Section 1.10 in exchange for Company Options, Company Stock-Based
Awards and Restricted Shares.

(c)       Promptly
following the date which is 12 months after the Effective Time, the Paying
Agent shall deliver to the Surviving Corporation all cash, Share Certificates
and other documents in its possession relating to the transactions described in
this Agreement, and the Paying Agent’s duties shall terminate.  Thereafter, each holder of a Share
Certificate formerly representing a Share may surrender such Share Certificate
to the Surviving Corporation and, subject to the applicable abandoned property,
escheat and similar laws, receive in exchange therefor the aggregate consideration
relating thereto, without any interest or dividends thereon, as provided in
this Agreement.

(d)      After
the Effective Time, the stock transfer books of the Company shall be closed and
there shall be no transfers on the stock transfer books of the Company of any
Shares which 

 6
 

were outstanding immediately prior to the Effective Time.  If, after the Effective Time, Share Certificates
formerly representing Shares are presented to the Surviving Corporation or the
Paying Agent, they shall be surrendered and cancelled in exchange for the
payment of the aggregate consideration as provided in this Agreement.

(e)       None
of Parent, Merger Sub, the Company nor the Surviving Corporation shall be
liable to any holder of the Shares, Company Options, Company Stock-Based Awards
or other securities for any consideration to be paid in the Merger delivered to
a public official pursuant to any applicable abandoned property, escheat or
similar law.

(f)       Each
of the Company, Surviving Corporation, Parent and the Paying Agent shall be
entitled to deduct and withhold from any payment hereunder to Parent or to any
holder of Shares, Company Options, Company Stock-Based Awards or other
securities such amounts as it is required to deduct and withhold with respect
to the making of such payment under the Internal Revenue Code of 1986, as
amended (the “Code”), or any
provision of state, local or foreign tax law. 
To the extent that amounts are so withheld by the Company, Surviving
Corporation, Parent or the Paying Agent, such withheld amounts shall be treated
for all purposes of this Agreement as having been paid to the recipient in
respect of which such deduction and withholding was made by the Surviving
Corporation, Parent or the Paying Agent, as the case may be.  In the case of any holder of more than 5% of
the Shares who is a “United States person” for United States federal income tax
purposes, such holder shall deliver, on the Closing Date, a properly executed
non-foreign affidavit substantially in the form attached hereto as Exhibit C.  In the case of any holder of more than 5% of
the Shares who is not a “United States person,” for United States federal
income tax purposes, and who acquired its shares on or after January 1, 2007,
the Company shall certify, to the extent it is able to do so, that it was at no
time since January 1, 2007, a United States real property holding corporation.

(g)      If
any Share Certificate shall have been lost, stolen or destroyed, upon the
making of an affidavit of that fact by the person claiming such Share
Certificate to be lost, stolen or destroyed and, if required by Parent or the
Surviving Corporation, the posting by such person of a bond, in such reasonable
amount as Parent or the Surviving Corporation may direct, as indemnity against
any claim that may be made against it with respect to the alleged loss, theft
or destruction of such Share Certificate, the Paying Agent will issue in
exchange for such lost, stolen or destroyed Share Certificate, the Merger
Price, without any interest thereon.

(h)      The
Paying Agent shall invest the funds constituting the Exchange Fund as directed
by Parent.  Any interest or other income
resulting from such investment shall be paid to Parent.  The Exchange Fund shall not be used for any
other purpose except as provided in this Agreement.

 7
 

ARTICLE
III

REPRESENTATIONS
AND WARRANTIES OF THE COMPANY

The Company hereby represents and warrants to Parent
and Merger Sub that, except (i) as set forth in the disclosure schedule dated
the date of this Agreement and delivered by the Company to Parent and Merger
Sub prior to the execution and delivery of this Agreement and identified as
such by the Company (the “Company Disclosure Schedule”) (it being understood that any
information set forth in a particular section or subsection of the Company
Disclosure Schedule shall be deemed to be disclosed in each other section or
subsection thereof to which the relevance of such information is reasonably
apparent on its face), (ii) as may be disclosed in any of the SEC Reports (as
defined below) filed prior to the date of this Agreement and publicly
available, excluding any disclosure in any such SEC Report set forth in any
risk factor section and in any section relating to forward-looking statements
other than factual disclosures therein that are set forth elsewhere in such SEC
Report, or (iii) as arising after the date of this Agreement from any actions
taken by the Company or any of its Subsidiaries after the date hereof at, and
in accordance with, the specific written request of Parent or Merger Sub:

Section 3.01.         Organization
and Qualification; Subsidiaries.  The
Company is a corporation duly organized and validly existing under the laws of
the State of Washington.  Section 3.01 of
the Company Disclosure Schedule sets forth the percentage of all of the issued
and outstanding shares of capital stock or other equity interests owned by the
Company and its Subsidiaries in its Subsidiaries.  Each of the Company’s Subsidiaries is duly
organized, validly existing and in good standing (where applicable) under the
laws of the jurisdiction of its incorporation or organization, except where the
failure to be so organized, validly existing or in good standing would not,
individually or in the aggregate, have a Material Adverse Effect (as defined below).  The Company and each of its Subsidiaries has
the requisite power (corporate or otherwise) and authority to own, operate or
lease its properties and to carry on its business as it is now being conducted,
and is duly qualified or licensed to do business, and is in good standing, in
each jurisdiction in which the nature of its business or the properties owned,
operated or leased by it makes such qualification, licensing or good standing
necessary, except where the failure to have such power or authority or to be so
qualified, licensed or in good standing would not, individually or in the
aggregate, have a Material Adverse Effect. 
The term “Subsidiary,”
as used in this Agreement, means, with respect to any entity, any corporation,
partnership, limited liability company or other organization, whether
incorporated or unincorporated, which is consolidated with such entity for
financial reporting purposes.  Section 3.01 of the Company
Disclosure Schedule sets forth the name, jurisdiction of incorporation and principal
line of business of each Subsidiary of the Company.  The term “Material
Adverse Effect,” as used in this Agreement, means any change
or effect that is or could reasonably be expected to be materially adverse to
the business, assets, results of operations or financial condition of the
Company and its Subsidiaries, taken as a whole, except for any such change or
effect arising out of or relating to (i) the announcement of the transactions
contemplated by this Agreement or actions by Parent, Merger Sub or the Company
required to be taken pursuant to this Agreement or the failure to take any
actions that are prohibited by this Agreement, (ii) changes in general
economic, regulatory or political conditions or changes affecting the economy
or the securities or financial markets in general, except to the extent that
any such change or effect disproportionately affects the Company when compared
to other members of the Company’s industry, (iii) changes in laws, rules,
regulations or orders of any Governmental Entity (as defined herein) or
interpretations thereof by any Governmental Entity or changes in accounting 

 8
 

rules, except to the extent that any such change or effect
disproportionately affects the Company when compared to other members of the
Company’s industry, (iv) changes affecting generally the industry in which the
Company conducts business, except to the extent that any such change or effect
disproportionately affects the Company when compared to other members of the
Company’s industry, (v) a material worsening of current conditions caused by an
act of terrorism or war (whether declared or not declared) occurring after the
date of this Agreement or any natural disasters or any national or
international calamity affecting the United States or (vi) any change in the
market price or trading volume of the Company’s securities, including as a
result of the failure of the Company to meet analysts’ expectations, provided
that the exception in this clause (vi) shall not prevent or otherwise affect a
determination that any cause underlying such change has resulted in or
contributed to the occurrence of a Material Adverse Effect as defined without
reference to this clause (vi).

Section 3.02.          Articles
of Incorporation and By-Laws.  The
Company has heretofore made available to Parent and Merger Sub an accurate and
complete copy of the articles of incorporation or certificate of formation and
the by-laws or operating agreement, or other similar organizational documents,
each as amended to the date hereof, of the Company and each Subsidiary of the
Company.  Such articles of incorporation
or certificate of formation and by-laws or operating agreement or such other
organizational documents are in full force and effect.  The Company is not in violation of, and none
of its Subsidiaries is in violation in any material respect of, any provision
of its articles of incorporation or certificate of formation or by-laws or
operating agreement, or other similar organizational document.

Section 3.03.          Capitalization.  Section 3.03 of the Company Disclosure
Schedule sets forth (i) as of the close of business on June 18, 2007  (the “Measurement
Date”), the number of authorized and outstanding Shares and the
number of authorized and outstanding shares of preferred stock (“Preferred Stock”) of the
Company, (ii) as of the Measurement Date, the number of Shares for which the
Company Options are exercisable and the related exercise prices, (iii) the
number of Shares reserved for issuance pursuant to the Option Plans, (iv) as of
the Measurement Date, the number of outstanding Company Stock-Based Awards in
the form of restricted stock units which have not yet been replaced by issued
Shares, (v) the number of Shares originally made subject to the 1995 Stock
Plan, (vi) the number of Shares that, as of the Measurement Date, had been
issued pursuant to the 1995 Stock Plan and (vii) the number of Shares that, as
of the date of this Agreement, remain issuable pursuant to the 1995 Stock Plan.
The Company’s procedures with respect to the granting of all Company Options
provided for the specification of an exercise price that is no less than the
market price for the Shares on the date of the grant.  The Company complied in all material respects
with such procedures with respect to the granting of the Company Options.  The Founder is the record and, to the
knowledge of the Company, the beneficial owner, as beneficial ownership is
defined in the Exchange Act (as defined below), of 44,426,400 of the
outstanding Shares.  There are no bonds,
debentures, notes or other indebtedness having general voting rights (or
convertible into, or exchangeable for, securities having such rights) (“Voting Debt”) of the
Company or any of its Subsidiaries issued and outstanding.  Except for the Company Options, the Company
Stock-Based Awards, and options, subscriptions or other rights issued and
outstanding which are held by the Company or any Subsidiary in any other
Subsidiary and except as set forth in Section 3.03 of the Company 

 9
 

Disclosure Schedule, there are no existing
options, warrants, calls, subscriptions or other rights, agreements,
arrangements or commitments of any character, relating to the issued or
unissued capital stock of the Company or any of its Subsidiaries, obligating
the Company or any of its Subsidiaries to issue, transfer or sell or cause to
be issued, transferred or sold any shares of capital stock or Voting Debt of,
or other equity interest in, the Company or any of its Subsidiaries or
securities convertible into or exchangeable for such shares or equity interests,
nor are there any obligations of the Company or any of its Subsidiaries to
grant, extend or enter into any such option, warrant, call, subscription or
other right, agreement, arrangement or commitment.  There are no outstanding contractual obligations
of the Company or any of its Subsidiaries to any third-party to repurchase,
redeem or otherwise acquire any Shares or other capital stock of the Company or
any of its Subsidiaries.  Except for the
Founder Voting Agreement, to the knowledge of the Company, as of the date of
this Agreement, there are no voting agreements with respect to the Shares which
affect or relate to the voting of, or the execution of written consents with
respect to, or the solicitation of proxies relating to the voting of, any security
of the Company or any of its Subsidiaries. 
Each of the outstanding shares of capital stock of each of the Company’s
Subsidiaries is validly issued, fully paid and nonassessable, and such shares
of the Company’s Subsidiaries are owned, beneficially and of record, by the
Company or by a Subsidiary of the Company, in each case, free and clear of any
Lien, other than Liens imposed by or arising under applicable law.  There are no outstanding contractual
obligations of the Company or any of its Subsidiaries to make an investment (in
the form of a loan, capital contribution or otherwise) in any entity other than
a Subsidiary.

Section 3.04.          Authority
Relative to this Agreement.  Except
for the Required Shareholder Approval (as defined in Section 6.01(a)), the
Company has all necessary corporate power and authority to execute and deliver
this Agreement, to perform its obligations hereunder and to consummate the
transactions contemplated hereby.  The execution,
delivery and performance of this Agreement by the Company and the consummation
by the Company of the transactions contemplated hereby have been duly and
validly authorized, approved and declared advisable by the Board and no other
corporate proceedings on the part of the Company are necessary to authorize or
approve this Agreement (other than, with respect to the Merger, the adoption of
this Agreement by holders of two-thirds of the outstanding Shares and the
filing of the Articles of Merger as required by the WBCA).  This Agreement has been duly and validly
executed and delivered by the Company and, assuming the due and valid
authorization, execution and delivery of this Agreement by Parent and Merger
Sub, constitutes a legally valid and binding obligation of the Company,
enforceable against the Company in accordance with its terms, except that such
enforceability may be limited by (i) bankruptcy, insolvency, moratorium or
other similar laws affecting or relating to the enforcement of creditors’
rights generally, (ii) general principles of equity and (iii) the remedies
of specific performance and injunctive relief and other forms of equitable
relief being subject to the discretion of the Governmental Entity (as defined
below) before which any enforcement proceeding therefor may be brought.  The Board, at a meeting duly called and held
on June 20, 2007, prior to the execution and delivery of this Agreement, by
adopting resolutions that, as of the time of execution and delivery of this
Agreement, are in full force and effect and have not been in any way modified
or rescinded, has duly taken all actions necessary under the WBCA and the
Company’s articles of incorporation to (a) approve and adopt this Agreement and
the transactions contemplated hereby 

 10
 

(including the Merger), (b) determine that
this Agreement and the transactions contemplated hereby (including the Merger)
are advisable and fair to and in the best interests of the Company and its
shareholders, (c) direct that this Agreement be submitted to the Company
shareholders for adoption, (d) resolve to recommend that the shareholders of
the Company approve this Agreement and the transactions contemplated hereby and
(e) approve the Founder Voting Agreement. 
As a result of the foregoing actions, the only vote required to
authorize and approve the Merger is the affirmative vote of the holders of
two-thirds of the Shares.

Section 3.05.          No
Conflict; Required Filings and Consents.

(a)       Assuming
(i) compliance with any requirements of the Hart-Scott-Rodino Antitrust
Improvements Act of 1976, as amended (the “HSR Act”), and any
requirements of any foreign, supranational or other antitrust or similar laws,
(ii) compliance with the requirements of the Securities Exchange Act of
1934, as amended, and the rules and regulations promulgated thereunder (the “Exchange Act”) and any
applicable state securities or “blue sky” laws are met, (iii) the filing
of the Articles of Merger and other appropriate instruments, if any, as
required by the WBCA, is made, (iv) compliance with any applicable requirements
of the 1988 Exon-Florio provision of the Defense Production Act of 1950, as
amended, (v) the filing of the Proxy Statement (as defined in Section 5.08
below) and receipt of the Required Shareholder Approval, (vi) compliance with
any requirements of The New York Stock Exchange (the “NYSE”)
and (vii) the Consents referred to in Section 3.05(b) of the Company Disclosure
Schedule are obtained or made, none of the execution and delivery of this
Agreement by the Company, the performance or consummation by the Company of the
transactions contemplated hereby or compliance by the Company with any of the
provisions hereof will (w) conflict with or violate the articles of
incorporation or by-laws of the Company or the comparable organizational
documents of any of its Subsidiaries, (x) conflict with or violate any
law, statute, ordinance, rule, regulation, order, judgment, decree, injunction
or other binding action or requirement of any Governmental Entity (as defined
in Section 3.05(b) below) applicable to the Company or any of its Subsidiaries,
or by which any of them or any of their respective properties or assets may be
bound or affected, (y) other than the accelerated vesting of Company
Options, Company Stock-Based Awards and Restricted Shares, result in a breach
or violation of, a default under (or an event which with notice or lapse of
time or both would become a default), or the triggering of any payment or other
obligations to any of the Company’s or any of its Subsidiaries’ present or
former employees pursuant to, any of the Company’s or any of its Subsidiaries’
existing Employee Benefit Arrangements (as defined in Section 5.01(f) below) or
any grant or award made under any of the foregoing, or (z) result in a
violation or breach of or constitute a default (or an event which with notice or
lapse of time or both would become a default) under, or give to others any
rights of termination, amendment, acceleration or cancellation of, or result in
any loss of any benefit under, or the creation of any Lien on any of the property
or assets of the Company or any of its Subsidiaries pursuant to, any note,
bond, mortgage, indenture, contract, agreement, lease, license, permit,
franchise or other instrument or obligation to which the Company or any of its
Subsidiaries is a party or by which the Company or any of its Subsidiaries or
any of their respective assets or properties may be bound or affected, except,
with respect to clauses (x), (y) and (z), as would not, 

 11
 

individually or in the aggregate, have a Material Adverse Effect or
prevent the consummation of the Merger.

(b)      None of the execution and
delivery of this Agreement by the Company, the performance or consummation by
the Company of the transactions contemplated hereby or compliance by the
Company with any of the provisions hereof will require any consent, waiver,
approval, authorization, order, decree, license, or permit of, or registration
or filing with or notification to (any of the foregoing being a “Consent”), any government
or subdivision thereof, domestic, foreign or supranational, or any
administrative, governmental or regulatory authority, agency, commission,
tribunal or body, domestic, foreign or supranational (a “Governmental Entity”) or
any third party, except for (i) compliance with any applicable requirements of
the Exchange Act, (ii) the filing of the Articles of Merger pursuant to the
WBCA, (iii) compliance with any requirements of the HSR Act and any
requirements of any foreign, supranational or other antitrust or similar laws,
(iv) compliance with the requirements of the NYSE, (v) compliance with any
applicable requirements of the 1988 Exon-Florio provision of the Defense
Production Act of 1950, as amended, (vi) the Consents referred to in Section
3.05(b) of the Company Disclosure Schedule and (vii)  Consents the failure of which to obtain or make would not,
individually or in the aggregate, have a Material Adverse Effect.

(c)       The
Board has taken all actions necessary for the Company to take in order to
ensure that the restrictions applicable to business combinations contained in Chapter
23B.19 of the WBCA are, and will be, inapplicable to the execution, delivery
and performance of this Agreement (such actions by the Board, the “Necessary 23B.19 Actions”), including but
not limited to ensuring that the Board approve the significant business
transaction before an acquiring person’s share acquisition time.  No other state takeover statute or similar
legal requirement applies or purports to apply to the Company with respect to
the Agreement or the agreements contemplated herein.  No representation is made by the Company with
respect to the application of Chapter 23B.19 of the WBCA or any similar statute
as a result of actions by Parent or its affiliates taken prior to the time that
the Board took the Necessary 23B.19 Actions; provided, however, that, to the
Company’s knowledge, Chapter 23B.19 of the WBCA will not apply to Parent or its
affiliates.

Section 3.06.          Compliance
with Agreements.  Except as disclosed
in the SEC Reports (as defined in Section 3.07(a)) filed and publicly available
prior to the date of this Agreement, neither the Company nor any of its
Subsidiaries is in conflict with, or in default or violation of, any note,
bond, mortgage, indenture, contract, agreement, lease, license, permit,
franchise or other instrument or obligation to which the Company or any of its
Subsidiaries is a party or by which the Company or any of its Subsidiaries, or
any property or asset of the Company or any of its Subsidiaries is bound or
affected, including, without limitation, any Contract (as defined in Section
3.21 below), except for such conflicts, defaults and violations which would
not, individually or in the aggregate, reasonably be expected to have a
Material Adverse Effect.

 12
 

Section 3.07.          SEC
Reports and Financial Statements.

(a)       The
Company has filed with the United States Securities and Exchange Commission
(the “SEC”) all forms, reports,
schedules, registration statements, definitive proxy statements and other
documents required to be filed by the Company with the SEC since March 31, 2006
(as they have been amended since the time of their filing and including any
current report on Form 8-K that has been filed with or furnished to the SEC and
any documents filed, furnished or incorporated by reference as exhibits to any
such filing, collectively, the “SEC
Reports”).  As of their
respective dates, except as and to the extent modified or superseded in any
subsequent SEC Report that is filed prior to the Effective Time, each SEC
Report, including, without limitation, any financial statements or schedules
included or incorporated by reference therein, in the case of SEC Reports filed
on or prior to the date of this Agreement, complied, and in the case of SEC
Reports filed after the date of this Agreement and prior to the Effective Time,
will have complied, in all material respects with the requirements of the
Exchange Act or the Securities Act, and the rules and regulations of the SEC
promulgated thereunder, that were or are applicable to such SEC Report, and
none of the SEC Reports contained, or will contain, when filed any untrue
statement of a material fact or omitted to state a material fact required to be
stated therein or necessary to make the statements made therein, in light of
the circumstances under which they were made, not misleading.  Since March 31, 2006, no Subsidiary of the
Company is or has been required to file any form, report or other document with
the SEC.

(b)      The
consolidated balance sheets as of December 31, 2006 and 2005, and the related
consolidated statements of income, shareholders’ equity and cash flows for each
of the three fiscal years in the period ended December 31, 2006 (including the
related notes and schedules thereto) of the Company contained in the Company’s
annual report on Form 10-K for the fiscal year ended December 31, 2006 included
in the SEC Reports present fairly, in all material respects, the
consolidated financial position and the consolidated results of operations and
cash flows of the Company and its consolidated Subsidiaries as of the dates or
for the periods presented therein in accordance with United States generally
accepted accounting principles (“GAAP”)
applied on a consistent basis during the periods involved except as otherwise
noted therein.

(c)       Except
as reflected, reserved against or otherwise disclosed in the financial
statements dated as of December 31, 2006 (including the related notes and
schedules thereto) of the Company included in the SEC Reports filed and
publicly available prior to the date of this Agreement, or disclosed in the Company
Disclosure Schedule, neither the Company nor any of its Subsidiaries has any
liabilities or obligations (absolute, accrued, fixed, contingent or otherwise)
required to be set forth in a consolidated balance sheet of the Company and its
Subsidiaries under GAAP, other than (i) liabilities incurred in the ordinary
course of business, (ii) liabilities or obligations that the Company is
expressly permitted to incur pursuant to Section 5.01 or that are incurred
pursuant to, and in accordance with the terms of, Contracts listed in Section
3.21(b) of the Company Disclosure Schedule (as in effect on the date hereof,
without amendment or modification), (iii) liabilities for fees and expenses
actually incurred by the Company in connection with the transactions contemplated
by this Agreement or (iv) which would not, individually or in the aggregate,
reasonably be expected to have a Material Adverse Effect.

 13
 

(d)      The
unaudited consolidated balance sheet as of March 31, 2007 and the related
unaudited consolidated statement of income, shareholders’ equity and cash flows
of the Company for the fiscal quarter ended March 31, 2007 (including the
related notes and schedules thereto) of the Company contained in the Company’s
quarterly report on Form 10-Q for the fiscal quarter ended March 31, 2007
present fairly, in all material respects, the consolidated financial position
and the consolidated results of operations and cash flows of the Company and
its consolidated Subsidiaries as of the date or for the period presented therein
in accordance with GAAP applied on a consistent basis during the period
involved, except as otherwise noted therein, subject to the absence of
footnotes and to year-end audit adjustments, none of which adjustments would be
material.

(e)       The
Company has heretofore furnished to Parent an accurate and complete copy of all
material agreements, documents or other instruments required to be, but which
have not yet been, filed with the SEC and any amendments or modifications which
have not yet been filed with the SEC to agreements, documents or other
instruments which previously had been filed by the Company with the SEC
pursuant to the Securities Act and the rules and regulations promulgated
thereunder or the Exchange Act and the rules and regulations promulgated
thereunder.

Section 3.08.          Off-Balance
Sheet Arrangements.  Section 3.08 of
the Company Disclosure Schedule describes, and the Company has made available
to Parent accurate and complete copies of the documentation creating or
governing, all securitization transactions and other “off-balance sheet
arrangements” (as defined in Item 303(c) of Regulation S-K under the Securities
Act) to which the Company or any of its Subsidiaries is a party and has any
continuing liability and which would be required to be disclosed pursuant to
the Exchange Act in an annual or quarterly report required to be filed with the
SEC.

Section 3.09.          Information.

None of the information
supplied by the Company specifically for inclusion or incorporation by reference
in (i) the Proxy Statement (as defined in Section 5.08 below) or (ii) any
other document filed or to be filed with the SEC in connection with the
transactions contemplated by this Agreement (the “Other Filings”) will, at the
respective times filed with the SEC and, in addition, in the case of the Proxy
Statement, at the date it or any amendment or supplement is mailed to
shareholders of the Company, and at the time of the Special Meeting (as defined
in Section 5.09 below), contain any untrue statement of a material fact or omit
to state any material fact required to be stated therein or necessary in order
to make the statements made therein, in light of the circumstances under which
they were made, not misleading, provided that no representation is made by the
Company with respect to information furnished by Parent or Merger Sub
specifically for inclusion therein.  The
Proxy Statement and the Other Filings made by the Company will, at the
respective times filed with the SEC and mailed to the shareholders, comply in
all material respects with the provisions of the Exchange Act and the rules and
regulations thereunder, if applicable, except that no representation is made by
the Company with respect to statements made therein based on information
supplied by Parent or Merger Sub in writing specifically for inclusion in the
Proxy Statement.

 14

Section 3.10.          Litigation.  There is no legal action, suit, claim or
legal, administrative or other proceeding or, to the knowledge of the Company,
investigation that is pending or, to the knowledge of the Company, threatened
against the Company or any of its Subsidiaries that would, individually or in
the aggregate, reasonably be expected to have a Material Adverse Effect or
prevent or materially delay the consummation of the Merger, nor is there any
judgment, decree, injunction or order of any Governmental Entity or arbitrator
outstanding against the Company or any of its Subsidiaries that would,
individually or in the aggregate, reasonably be expected to have a Material
Adverse Effect or prevent the consummation of the Merger.

Section 3.11.          Compliance
with Applicable Laws.  The Company
and its Subsidiaries hold all permits, licenses, registrations, variances,
exemptions, orders and approvals of all Governmental Entities required in
connection with the ownership or occupancy of their respective properties and
assets and the operation of their respective businesses, including, without
limitation, all necessary permits for export transactions and registrations
with Governmental Entities as required under applicable export control laws,
except for such permits, licenses, variances, exemptions, orders and approvals
the failure of which to hold would not, individually or in the aggregate, have
a Material Adverse Effect.  Except as
referred to in the SEC Reports filed and publicly available prior to the date
hereof, the Company and its Subsidiaries are not in violation of any law, rule,
regulation or order of any Governmental Entity or arbitrator applicable to the
Company or its Subsidiaries or by which any property or asset of the Company or
any of its Subsidiaries is bound or affected, including, without limitation,
the Sarbanes-Oxley Act of 2002 (the “Sarbanes-Oxley Act”), the
Foreign Corrupt Practices Act, all applicable United States export control laws
and regulations, and all applicable trade sanctions and embargoes (except that
no representation or warranty is made in this Section 3.11 with respect to
Environmental Laws or Taxes, which are exclusively the subject of Section 3.15
and Section 3.16, respectively, or the matters specifically covered by Section
3.13), except for violations or possible violations that would not,
individually or in the aggregate, reasonably be expected to have a Material
Adverse Effect.

Section 3.12.          Internal
Controls.

(a)  
The Company has established and maintains internal controls over
financial reporting and disclosure controls and procedures (as such terms are
defined in Rule 13a-15 and Rule 15d-15 under the Exchange Act).  Such disclosure controls and procedures are
reasonably designed to ensure that material information relating to the
Company, including its consolidated Subsidiaries, required to be disclosed by
the Company in the reports that it files or submits under the Exchange Act is
accumulated and communicated to the Company’s senior management, including its
chief executive officer and chief financial officer, as appropriate to allow
timely decisions regarding required disclosure and to make the certifications
required pursuant to Sections 302 and 906 of the Sarbanes-Oxley Act.  Such internal controls over financial reporting
are sufficient to provide reasonable assurance that (i) transactions are
executed in accordance with management’s authorization, (ii) transactions are
recorded as necessary to permit preparation of financial statements in
conformity with GAAP and to maintain accountability for assets and liabilities,
(iii) access to assets or incurrence of liability is permitted only in
accordance with management’s authorization and (iv) the 

 15
 

recorded accountability for assets and liabilities is compared with the
existing assets and liabilities at reasonable intervals and appropriate action
is taken with respect to any differences.

(b)      The
Company’s management has disclosed, based on its most recent evaluation of
internal controls over financial reporting prior to the date of this Agreement,
to the Company’s auditors and the audit committee of the board of directors of
the Company (i) any significant deficiencies and material weaknesses in the
design or operation of internal controls over financial reporting that are reasonably
likely to adversely affect in any material respect the Company’s ability to
record, process, summarize and report financial information or (ii) any fraud,
whether or not material, that involves management or other employees who have a
significant role in the Company’s internal controls.  Neither the Company nor any of its
Subsidiaries has received or otherwise had or obtained knowledge of any
material complaint, allegation, assertion or claim, whether written or oral,
regarding the accounting or auditing practices, procedures, methodologies or
methods of the Company or any of its Subsidiaries or their respective internal
accounting controls, including any material complaint, allegation, assertion or
claim that the Company or any of its Subsidiaries has engaged in questionable
accounting or auditing practices.

(c)       The chief
executive officer and chief financial officer of the Company have made all
certifications required by the Sarbanes-Oxley Act, the Exchange Act and any
related rules and regulations promulgated by the SEC with respect to the
Company SEC Documents, and, as of the date of such certifications, the
statements contained in such certifications were complete and correct.  The management of the Company has completed
its assessment of the effectiveness of the Company’s internal controls over
financial reporting in compliance with the requirements of Section 404 of the
Sarbanes-Oxley Act for the year ended December 31, 2006, and such assessment
concluded that such controls were effective in all material respects, and the
Company’s independent registered public accountant has issued (and not
subsequently withdrawn or qualified) an attestation report concluding that the
Company maintained effective internal control over financial reporting as of
December 31, 2006.

Section 3.13.          Employee
Benefit Plans and Arrangements.

(a)       “Plans” means all
severance, pension, benefit, deferred compensation, incentive compensation,
stock option, bonus, welfare benefit and other employee benefit plans, programs
and policies that provide benefits (other than benefits that do not, for any
plan, exceed $100,000 in the aggregate) to any present or former director,
officer or employee of the Company or any of its Subsidiaries, or any
beneficiary or dependent of any such person (whether or not written), sponsored
or maintained by the Company or any of its Subsidiaries to which the Company or
any of its Subsidiaries contributes or is obligated to contribute.  Without limiting the generality of the
foregoing, the term “Plans” includes all employee welfare benefit plans within
the meaning of Section 3(1) of the Employee Retirement Income Security Act of
1974, as amended, and the regulations thereunder (“ERISA”)
and all employee pension benefit plans within the meaning of Section 3(2) of
ERISA.  An “ERISA
Affiliate” means, with respect to the Company, any
corporation, person or trade or business 

 16
 

which is a member of the group which is under common control with the
Company, and which together with the Company is treated as a single employer
within the meaning of Section 414(b), (c), (m) or (o) of the Code.  “Controlled Group Liability”
means any and all liabilities (i) under Title IV of ERISA, (ii) under Section
302 of ERISA, (iii) under Sections 412 and 4971 of the Code, (iv) arising as a
result of a failure to comply with the continuation coverage requirements of
Section 601 et seq. of ERISA and Section 4980B of the Code, and (v) under
corresponding or similar provisions of foreign laws or regulations.  “U.S. Plan”
means any Plan that covers any present or former director, officer or employee
located in the United States.  “Foreign Plan” means any Plan that is subject to the laws of
any jurisdiction outside the United States.

(b)      Section 3.13(b) of the
Company Disclosure Schedule includes a complete list of all U.S. Plans.  With respect to each written U.S. Plan, other
than a U.S. Subsidiary Plan (as defined below), the Company has made available
to Parent a true, correct and complete copy of: 
(i) all plan documents and trust agreements; (ii) the most
recent Annual Report (Form 5500 Series) and accompanying schedule, if any;
(iii) the current summary plan description, if any; (iv) the most
recent annual financial report, if any; (v) the most recent actuarial
report, if any; and (vi) if the Plan is intended to be a “qualified plan”
within the meaning of Section 401(a) of the Code (a “Qualified Plan”), the
most recent determination letter from the Internal Revenue Service (the “IRS”).  With respect to each written U.S. Plan
maintained by any Subsidiary (a “U.S. Subsidiary Plan”),
the Company has made available to Parent a true, correct and complete copy of
all Plan documents. With respect to each material unwritten U.S. Plan, the
Company has made available to Parent a summary in reasonable detail of such
U.S. Plan.

(c)       Except
as set forth in Section 3.13(c) of the Company Disclosure Schedule, each Plan
currently complies in all material respects, and has materially complied in the
past, both in form and operation, with its terms and with all applicable
provisions of all laws and regulations applicable to it, including, in the case
of the U.S. Plans, with the applicable provisions of ERISA and the Code.  With respect to each Qualified Plan, the IRS
has issued a favorable determination letter evidencing the U.S. Plan’s
compliance with the GUST amendment or an application for a favorable
determination letter has been or will be filed with the IRS within the applicable
remedial amendment period under Code Section 401(b) and nothing has occurred
or, to the knowledge of the Company, is expected to occur that would adversely
affect the qualified status of such U.S. Plan or any related trust.  Notwithstanding the foregoing, to the Company’s
knowledge, all reports, notices and other disclosure relating to any Plan
required to be filed with, or furnished to, governmental entities, Plan
participants or Plan beneficiaries have been timely filed and furnished in
accordance with applicable law, including, but not limited to, notices required
to be furnished to employees under the Consolidated Omnibus Budget
Reconciliation Act of 1985 upon the occurrence of a “qualifying event,” as
defined in Section 4980B of the Code.

(d)      With respect to each U.S.
Plan and, to the Company’s knowledge, each Foreign Plan, all contributions
required to be made to such Plan by applicable law or regulation or by any
applicable Plan document, and all premiums due or payable with respect to
insurance 

 17
 

policies funding any such Plan, have been timely made or paid in full
or, to the extent not required to be made or paid on or before the date hereof,
have been fully reflected in the financial statements of the Company included
in the SEC Reports to the extent required under GAAP.  There does not now exist nor, to the
knowledge of the Company, do any circumstances exist that would result in, any
Controlled Group Liability that would be a material liability of the Company or
its Subsidiaries, taken as a whole (other than routine claims for benefits),
following the Closing.

(e)       As
of the date hereof, (i) each U.S. Plan that is subject to Section 302 of ERISA
and Section 412 of the Code meets the minimum funding standards of Section 302
of ERISA and Section 412 of the Code (without regard to any funding waiver);
and (ii) neither the Company nor any of its ERISA Affiliates is required to
provide security to such U.S. Plan pursuant to Section 307 of ERISA or Section
501(a)(29) of the Code; and since its last valuation date, there have been no
amendments to such U.S. Plan that materially increase the present value of
accrued benefits.

(f)       No
U.S. Plan is a multiemployer plan, as defined in Section 3(37) of ERISA. With
respect to each U.S. Plan and, to the Company’s knowledge, each Foreign Plan,
no claims are pending against any such Plan, or the Company or any of its
Subsidiaries with respect to such Plan, except in respect of benefit payments
in the normal course of business, and, to the Company’s knowledge, no employee,
beneficiary, dependent, or governmental agency has threatened any appeal or
litigation regarding any matter with respect to the Plans.  Except as set forth in Section 3.13(f) of the
Company Disclosure Schedule, no U.S. Plan provides benefits, including without
limitation death or medical benefits (whether or not insured), with respect to
current or former employees (or their beneficiaries or dependents) of the
Company or its Subsidiaries after retirement or other termination of service
(other than (i) as required by Section 601 et seq. of ERISA, (ii) death
benefits or retirement benefits under any Qualified Plan or (iii) deferred
compensation benefits accrued as liabilities on the books of the Company or any
of its Subsidiaries).

(g)      No
prohibited transaction has occurred with respect to any U.S. Plan that is not
exempt under Section 4975 of the Code and Section 406 of ERISA, and neither the
Company nor any of its Subsidiaries has engaged in any transaction with respect
to any U.S. Plan that could subject it to either a material civil penalty
assessed pursuant to Section 409, 502(i) or 502(l) of ERISA or a material tax
imposed pursuant to Section 4975 or 4976 of the Code.

(h)      Except
as set forth in Section 3.13(h) of the Company Disclosure Schedule, no U.S.
Plan has any interest in any annuity contract or other investment or insurance
contract issued by an insurance company that is the subject of bankruptcy,
conservatorship, rehabilitation or similar proceeding.

(i)        None
of the persons performing services for the Company or its Subsidiaries has been
improperly classified as an independent contractor or, in the case of
employees, as being exempt from the payment of wages for overtime, except for
such improper classifications that would not, individually or in the aggregate,
reasonably be expected to have created or to create 

 18
 

after the date of this Agreement any liability of the Company or any
Subsidiary that exceeds or would exceed, together with any liability referred
to in the last sentence of Section 3.20, $5,000,000 in the aggregate.

(j)        With
respect to each Foreign Plan: (i) if intended to be funded or book-reserved,
the fair market value of the assets of each funded Foreign Plan, the liability
of each insurer for any Foreign Plan funded through insurance, or the reserve
shown on the financial statements of the Company for any unfunded Foreign Plan,
together with any accrued contributions, is sufficient to procure or provide
for the projected benefit obligations, as of the Effective Time, with respect
to all current and former participants in such plan based on reasonable, country-specific
actuarial assumptions and valuations, and no transaction contemplated by this
Agreement shall cause such assets or insurance obligations or book reserve to
be less than such projected benefit obligations; (ii) each Foreign Plan is in
material compliance with all registration requirements and has been maintained
in good standing with the appropriate regulatory authorities; and (iii) each
Foreign Plan intended to qualify for special tax treatment is in material
compliance with all requirements for such treatment. To the knowledge of the
Company, with respect to employees outside the United States, none of the
Company or any Subsidiary has made any ex-gratia or voluntary payment to any
such employee by way of superannuation, pension allowance or otherwise.

(k)       Each
of the Company’s “nonqualified deferred compensation plans” within the meaning
of Code Section 409A (and associated Treasury Department guidance) has been
operated in good faith compliance (as determined in accordance with applicable
Treasury Department guidance) with Code Section 409A

(l)        Except
as set forth in Section 3.13(l) of the Company Disclosure Schedule:  (i) there is no contract, agreement, plan or
arrangement covering any employee, former employee, independent contractor or
former independent contractor of the Company or any of its Subsidiaries that,
individually or collectively could give rise to (or already has resulted in) a
payment by the Company (or the provision by the Company of any other benefit
such as accelerated vesting) that would not be deductible by reason of Code
Section 280G or subject to an excise tax under Code Section 4999; (ii) neither
the Company nor any of its Subsidiaries has any indemnity obligation for any
excise Taxes imposed under Code Section 4999; and (iii) neither the Company nor
any of its Subsidiaries has made any payments (or is required to make any
payments pursuant to the terms of an existing contract) that are not deductible
under Code Section 162(m).

Section 3.14.          Intellectual
Property. “Intellectual
Property” shall mean all intellectual property, including (a)
patents and applications therefor, including all continuations, divisionals,
continuations-in-part, provisionals, reissues, reexaminations, substitutions
and extensions thereof, (b) trademarks, service marks, trade names, trade
dress, logos, corporate names and other source or business identifiers,
together with the goodwill symbolized by any of the foregoing, and all
applications, registrations, renewals and extensions thereof, (c) all Internet
domain names, (d) copyrights, and all registrations, applications, renewals,
extensions and reversions thereof, (e) trade secret rights in information,
including trade secret rights in any 

 19
 

formula, pattern, compilation, program,
device, method, technique, or process, that (i) derives independent economic
value, actual or potential, from not being generally known to, and not being
readily ascertainable by proper means by, other persons who can obtain economic
value from its disclosure or use, and (ii) is the subject of efforts that are
reasonable under the circumstances to maintain its secrecy and (f) all other
intellectual property or proprietary rights in discoveries, know-how,
inventions, processes and techniques, and other proprietary or confidential information.

(a)       Section
3.14(a) of the Company Disclosure Schedule sets forth an accurate and complete
list as of the date of this Agreement of all issued patents and pending patent
applications, registered trademarks, pending trademark applications for registration
of trademarks, service mark registrations and service mark applications,
registered copyrights, and pending applications for registration of copyrights
owned by the Company or any of its Subsidiaries (“Registered Intellectual Property”).  Section 3.14(a) of the Company Disclosure
Schedule lists (i) the jurisdictions in which each such item of Registered
Intellectual Property has been issued or registered or in which any such
application for issuance or registration has been filed, (ii) the registration
or application date, as applicable, for each such item of Registered
Intellectual Property and (iii) the registration or application number, as
applicable, for each such item of Registered Intellectual Property.

(b)      The
Company or any of its Subsidiaries is (i) the sole and exclusive owner of all
right, title and interest in and to all of the Registered Intellectual Property
listed or required to be listed in Section 3.14(b) of the Company Disclosure
Schedule free and clear of all Liens and (ii) licensed or otherwise has a valid
right to use all material Intellectual Property used in or necessary for the
conduct of its business as currently conducted.

(c)       To
the knowledge of the Company, the conduct of the business of the Company and
its Subsidiaries as currently conducted does not infringe, constitute an
unauthorized use or misappropriation of, or violate any Intellectual Property
or privacy or publicity right of any person, in each of the foregoing cases, in
any material respect.

(d)      Except
as set forth in Section 3.14(d) of the Company Disclosure Schedule, to the
knowledge of the Company, no person is infringing, violating, or
misappropriating any Company-owned Intellectual Property, in each of the
foregoing cases, in any material respect, and no written claims or, to the
knowledge of the Company, unwritten claims alleging such infringement,
violation or misappropriation have been made since January 1, 2005 against any
person by the Company or any of its Subsidiaries.

(e)       The
Company and the Subsidiaries have taken commercially reasonable measures to
protect the confidentiality of all material trade secrets and any other
material confidential information of the Company and its Subsidiaries (and any
material confidential information owned by a third person to whom the Company
or any of its Subsidiaries has a confidentiality obligation).

(f)       Except
as set forth in Section 3.14(f) of the Company Disclosure Schedule, as of the
date hereof neither the Company nor any of its Subsidiaries is the subject of
any pending 

 20
 

legal proceeding that (i) alleges a claim of infringement,
misappropriation, dilution or violation by the Company or any of its
Subsidiaries of any Intellectual Property rights of a third person or alleges a
violation of any right of privacy or publicity of any person by the Company or
any of its Subsidiaries, and no such written claim has been asserted (or, to
the knowledge of the Company, threatened in writing) against the Company or its
Subsidiaries at any time during the twelve (12) month period immediately prior
to the date hereof, or (ii) challenges the ownership or validity of any
material Company-owned Intellectual Property.

(g)      As
of the date hereof, all necessary registration, maintenance, renewal and other
relevant filing fees in connection with any of the Registered Intellectual
Property have been timely paid, and all necessary documents, certificates and
other relevant filings in connection with such Registered Intellectual Property
have been timely filed with the relevant Governmental Entities and Internet
domain name registrars in the United States or foreign jurisdictions, as the
case may be, to the extent required to be paid or filed prior to the date
hereof, for the purpose of maintaining the issuances, registrations or applications
for such Registered Intellectual Property except where the Company has, in its
reasonable business judgment, decided to abandon or cancel such Registered
Intellectual Property, or except as could not reasonably be expected to have a
Material Adverse Effect.

(h)      The
consummation of the transactions contemplated hereby will not, pursuant to any
contract to which the Company or any of its Subsidiaries is a party, result in
the loss or impairment of the Surviving Corporation’s right to own or use any
Company-owned Intellectual Property, except as would not have a Material
Adverse Effect.

Section 3.15.          Environmental
Matters.  Except for matters that
would not, individually or in the aggregate, have a Material Adverse Effect:  (i) there has been no Release of Hazardous
Substances by the Company or any of its Subsidiaries that remains outstanding
on any real property currently or, to the knowledge of the Company, formerly
owned, leased or operated by the Company or any of its Subsidiaries requiring
notice or remedial action by the Company or any of its Subsidiaries under
applicable Environmental Law and no real property currently or, to the
knowledge of the Company, formerly owned, leased or operated by the Company or
any Subsidiary thereof is contaminated with any Hazardous Substances requiring
notice or remedial action by the Company or any of its Subsidiaries under
Environmental Law; (ii) no judicial or administrative proceeding, order,
judgment, decree, settlement or, to the knowledge of the Company, investigation
is pending or, to the knowledge of the Company, threatened against the Company
or its Subsidiaries alleging violations of Environmental Laws; (iii) the
Company and its Subsidiaries have not received in writing any claims, notices
or correspondence that remains outstanding alleging liability of the Company or
any Subsidiary under any Environmental Law for Releases or threatened Releases
of Hazardous Substances on real property currently or formerly owned, leased or
operated by the Company or any of its Subsidiaries, or liability for any
off-site disposal of Hazardous Substances or contamination by the Company or
any Subsidiary; and (iv) the business and operations of the Company and its
Subsidiaries comply in all material respects with applicable Environmental Laws
and the Company and its Subsidiaries have obtained all material permits,
authorizations and licenses relating to Environmental Laws necessary for the
operation of their businesses; all such permits, authorizations and licenses
are 

 21
 

in full force and effect and the Company and
its Subsidiaries are in compliance, in all material respects, with the terms
and conditions of such permits.  “Environmental Law” means
any applicable federal, state or local law, regulation, permit, order, decree
or judicial opinion or other agency requirement having the force and effect of
law and governing Hazardous Substances or protection of the environment or
human health as it relates to the environment. 
“Hazardous Substance”
means any toxic or hazardous substance or waste that is regulated under
Environmental Law, including any petroleum products, asbestos or
polychlorinated biphenyls.  “Release” means spill,
emission, leaking, pumping, injection, deposit, disposal, discharge, dispersal,
leaching or migration of a Hazardous Substance into the environment, including
the abandonment or discarding of barrels, containers, and other closed
receptacles containing any Hazardous Substance.

Section 3.16.          Taxes.

(a)       The
Company and each of its Subsidiaries has complied in all material respects with
all laws relating to Taxes and has filed all material Tax Returns required to
be filed by the Company and each of its Subsidiaries in accordance with
applicable laws.  All such Tax Returns
are true, correct and complete in all material respects.

(b)      All
material Taxes of the Company and each of its Subsidiaries due and payable
(whether or not shown as due on a Tax Return) have been paid.  There are no unpaid assessments for
additional material Taxes of the Company or any of its Subsidiaries for any
period.

(c)       Reserves
(excluding any reserve established to reflect timing differences between book
and Tax items) have been established on the books and records of the Company
and each of its Subsidiaries (in accordance with GAAP) for the unpaid material
Taxes of the Company and each of its Subsidiaries.  Since the date of the most recent balance
sheet contained in the SEC Reports, neither the Company nor any of its
Subsidiaries has incurred any material Taxes arising from transactions occurring
outside the ordinary course of business consistent with past practices and
customs.

(d)      No
federal, state, local or foreign audits or other administrative proceedings,
discussions or court proceedings are presently in progress or pending with
regard to any material Taxes or Tax Returns of the Company or any of its
Subsidiaries.

(e)       Neither
the Company nor any of its Subsidiaries has executed or filed with any taxing
authority (whether federal, state, local or foreign) any agreement or other
document extending or having the effect of extending the period for assessment,
reassessment or collection of any material Taxes, and no power of attorney
granted by the Company or any of its Subsidiaries with respect to material
Taxes is currently in force.

(f)       The
Company has made available to Parent copies that are true and materially
correct and complete of (i) all Tax Returns relating to material Income Taxes
of the Company and its Subsidiaries and other material Tax Returns of the
Company and its Subsidiaries for the preceding three (3) taxable years and (ii)
all material written assessments or proposed 

 22
 

assessments received from the IRS in the last three (3) years that have
not been previously resolved.  No claim
that has not been previously resolved has been made in the last three (3) years
that the Company or any of its Subsidiaries has not properly paid Taxes or
filed Tax Returns in a jurisdiction in which the Company or any of its
Subsidiaries does not file a Tax Return.

(g)      Neither
the Company nor any of its Subsidiaries has been a member of any consolidated,
combined or unitary group for federal, state, local or foreign Tax purposes
(other than the group for which the Company is the parent) since January 1,
2004.  Neither the Company nor any of its
Subsidiaries is (or has ever been) a party to any material tax sharing or
similar arrangement for the sharing of Tax liabilities that will remain in
effect after the Closing, other than customary property Tax obligations in
respect of leased premises.

(h)      There
are no material Liens for Taxes on any assets of the Company or any of its
Subsidiaries, other than Liens for Taxes not yet due and payable.

(i)        As
of the date hereof, neither the Company nor any of its Subsidiaries is a
partner in a partnership for federal income tax purposes other than a
partnership among or between the Company and any of its Subsidiaries.

(j)        With
respect to national jurisdictions outside of the United States, since January
1, 2005, the Company and each of its Subsidiaries has been resident in its
jurisdiction of incorporation for corporation tax purposes and is not and has
not been treated as resident in or belonging to, or subject to Tax in, any
other jurisdiction for any material Tax purpose.

(k)       Neither
the Company nor any of its Subsidiaries has been, in the past five years, a
party to a transaction reported or intended to qualify as a reorganization
under Code Section 368.

(l)        Neither
the Company nor any of its Subsidiaries has engaged in a transaction that could
affect the Income Tax liability for any taxable year not closed by the
applicable statute of limitations which (i) is a “reportable transaction,” as
defined in the Treasury Regulations promulgated under Code Section 6011 that
were in effect at the time of such transaction, or (ii) is the same as or
substantially similar to one of the types of tax avoidance transactions that
the IRS identified by notice, regulation or other form of published guidance as
a “listed transaction,” as set forth in Treasury Regulation Section 1.6011-4(b)(2).

(m)      Neither
the Company nor any of its Subsidiaries is a party to a “gain recognition
agreement” under Code Section 367.

(n)      The
term “Tax,” as used in this
Agreement, means any net income, capital gains, gross income, gross receipts,
sales, use, transfer, ad valorem, franchise, profits, license, capital,
withholding, payroll, estimated, employment, excise, goods and services,
severance, stamp, occupation, premium, property, social security, environmental
(including Code Section 59A), alternative or add-on, value added, registration,
windfall profits or other tax, charge, fee, levy, customs duties, or other
similar charge imposed by a taxing authority of the United States or 

 23
 

any state, local, or foreign government or agency or subdivision
thereof, including any interest, penalties, additions to tax, or additional
amounts incurred or accrued under applicable law or charged by any taxing
authority.

(o)      The
term “Tax Return,” as used in this
Agreement, means any return, declaration, report, claim for refund, or
information return or other statement (including any schedule or attachment
thereto or amendment thereof) to be supplied to a taxing authority or a third
party in connection with Taxes.

(p)      The
term “Income Tax” means any Tax
imposed on, or measured by, net income or net worth (including any penalties or
interest or other additional amounts imposed thereon).

Section 3.17.          Absence
of Certain Material Adverse Changes. 
Since December 31, 2006, (i) there has not occurred or failed to
occur any change, event or development that, individually or in the aggregate,
has had or would reasonably be expected to have a Material Adverse Effect and
(ii) the business of the Company and its Subsidiaries has been conducted in the
ordinary course of business in all material respects.  In addition, except as set forth in
Section 3.17 of the Company Disclosure Schedule, no actions have been
taken or have been agreed to be taken by the Company or its Subsidiaries
between January 1, 2007 and the date of this Agreement that, if taken after the
date of this Agreement without Parent’s consent, would be proscribed by Section
5.01(b), (d), (e), (g), (i), (j), (k), (o), (p), (q) or (r), but in the case of
(r), only to the extent as it applies to the other subsections of Section 5.01
specifically referred to in this sentence.

Section 3.18.          Affiliate
Transactions.

(a)       Except
for the employment Contracts entered into in the ordinary course of business
since January 1, 2006, there have been no transactions, agreements,
arrangements or understandings between the Company or any of its Subsidiaries,
on the one hand, and any affiliate thereof, on the other hand, that would be
required to be disclosed under Item 404 of Regulation S-K under the Securities
Act and have not been so disclosed.

(b)      Section
3.18(b) of the Company Disclosure Schedule lists all loans to any executive
officer or director of the Company or any of its Subsidiaries, other than loans
in connection with cashless exercises of stock options, tax obligations upon
vesting of restricted stock, or advancements of relocation, travel or other
business expenses, including the date of the loan, the amount of the loan and
the date of any amendment to the terms of the loan.  Neither the Company nor any of its
Subsidiaries has extended or maintained credit, arranged for the extension of
credit, or renewed any extension of credit in the form of a personal loan to or
for any director or executive officer of the Company in violation of the
Sarbanes-Oxley Act.

Section 3.19.          Real
Property.

(a)       Except
for the real property listed in Section 3.19(a) of the Company Disclosure
Schedule, neither the Company nor any of its Subsidiaries owns any real
property.

 24
 

(b)      Section
3.19(b) of the Company Disclosure Schedule lists all retail space leases in the
United States to which the Company or any Subsidiary is a party as a lessee,
and specifies (i) the store number, if applicable, (ii) the location of the
real property, (iii) the name of the lessor, (iv) the remaining lease term with
renewal options, if applicable, (v) whether the lessee’s obligations are
guaranteed and, if so, by whom and (vi) whether the lessee or, to the knowledge
of the Company, the lessor is currently in default pursuant to such lease.

(c)       Section
3.19(c) of the Company Disclosure Schedule lists leases for office space and
distribution centers, each having an aggregate annual net rent of $500,000 or
greater, to which the Company or any Subsidiary is a party as a lessee, and
specifies (i) the location of the real property, (ii) the name of the lessor,
(iii) the remaining lease term with renewal options, if applicable, (iv) the
fixed rent for the remaining term, (v) whether the lessee’s obligations are
guaranteed and, if so, by whom, (vi) whether the transactions contemplated by
this Agreement require the consent of the lessor under such lease and (vii)
whether the lessee or, to the knowledge of the Company, the lessor is currently
in default pursuant to such lease.

(d)      With
respect to each lease listed in Section 3.19(b) and Section 3.19(c) of the
Company Disclosure Schedule: (i) the Company or one of its Subsidiaries is the
tenant named under the lease and has a valid leasehold interest in each parcel
of leased real property that is subject to the lease; and (ii) except as
disclosed in such Section 3.19(b) or Section 3.19(c), neither the Company nor
any of its Subsidiaries has assigned, sublet or encumbered any interest in the
lease and, to the knowledge of the Company, there are no Liens thereon.

Section 3.20.          Labor
Matters.  Except as set forth in
Section 3.20 of the Company Disclosure Schedule, no employee of the Company or
of any of its Subsidiaries is represented by any labor union, any collective
bargaining organization or any labor organization in connection with such
employee’s employment with the Company or any of its Subsidiaries.  Except as set forth in Section 3.20 of the
Company Disclosure Schedule, to the knowledge of the Company, no labor
organization or group of employees of the Company or any of its Subsidiaries
has made a pending demand for recognition or certification, and, to the
knowledge of the Company, there are no representation or certification
proceedings or petitions seeking a representation or certification proceeding
pending or threatened to be brought or filed, with the National Labor Relations
Board or any other labor relations tribunal or authority.  Neither the Company nor any of its
Subsidiaries has experienced any actual or, to the knowledge of the Company,
threatened employee lockouts, strikes, material work stoppages, or material
slowdowns within the two-year period immediately prior to the date of this
Agreement.  Section 3.20 of the Company
Disclosure Schedule lists all employment agreements or consulting agreements
covering employees or individual consultants of the Company or any of its
Subsidiaries in connection with their employment or consultancy with the
Company or any of its Subsidiaries that provide for annual salaries or annual
consulting fees of more than $150,000 for any employee or consultant working in
the United States or $200,000 for any employee or consultant working outside
the United States.  To the Company’s
knowledge, neither the Company nor any of its Subsidiaries has been subject to
any wage and hour investigation or complaint by any Governmental Entity nor is
any such investigation or complaint pending or threatened that, if adversely
determined, would reasonably be expected to result, after the date of this
Agreement, in the creation of any liability 

 25
 

of the Company or any Subsidiary that
exceeds, individually or in the aggregate, together with any liability referred
to in Section 3.13(i), $5,000,000.

Section 3.21.          Material
Contracts.

(a)       As
of the date of this Agreement, there does not exist any violation or default
under (nor does there exist any condition which upon the passage of time or the
giving of notice or both would cause or result in a violation or default under)
any material contract (as such term is defined in Item 601(b)(10) of Regulation
S-K under the Securities Act) to which the Company or any of its Subsidiaries
is a party or by which any of them or any of their properties or assets is
bound, except for such violations or defaults as have been waived or which
would not, individually or in the aggregate, reasonably be expected to have a
Material Adverse Effect.

(b)      Other
than those contracts that are filed as exhibits to the SEC Reports filed and
publicly available prior to the date of this Agreement (the “Filed Contracts”),
Section 3.21(b) of the Company Disclosure Schedule lists all written and oral
contracts, agreements, guarantees, leases, and executory contracts that exist
as of the date hereof to which the Company or any of its Subsidiaries is a
party or by which it is bound that (i) are required to be filed as an exhibit
to an SEC Report, (ii) materially restrict or would materially restrict the
ability of the Company, Parent (after giving effect to the consummation of the
Merger) or any of their respective Subsidiaries from competing or otherwise
conducting their respective businesses substantially as such businesses are
conducted on the date of this Agreement, or (iii) contain minimum annual
requirements of the Company or its Subsidiaries to make or become liable to
make payments of $1,000,000 or more in any 12-month period, and, with respect
to (ii) and (iii), which have a term of more than one year and cannot be
cancelled on less than 90 days’ notice without a material penalty or other
material financial cost to the Company or any of its Subsidiaries (the
contracts so described and the Filed Contracts are referred to herein
collectively as the “Contracts”).

(c)       Except
as set forth in Section 3.21(c) of the Company Disclosure Schedule and except
for open purchase orders entered into in the ordinary course of business for
materials or supplies, there does not exist any contract to which the Company
or any of its Subsidiaries is a party providing for its purchase from a third
party, at a cost of $1,000,000 or more in any twelve-month period, of products
for resale by the Company or any of its Subsidiaries at retail: (i) under which
a violation or default would be caused by the execution and delivery of this
Agreement or the consummation of the transactions contemplated hereby; or (ii)
that cannot by virtue of its terms be cancelled or terminated by the Company or
any of its Subsidiaries, without a material penalty or other material financial
cost to the Company or any of its Subsidiaries, on less than ninety (90) days’
notice to the other party to such Contract.

Section 3.22.          Opinion
of Financial Advisor.  The Board
received, at its meeting held on June 20, 2007, the opinion, dated June 20,
2007, of Goldman, Sachs & Co. that, as of such date and
subject to the assumptions, qualifications and limitations set forth in such opinion,
the $29.30 in cash per Share to be received by the holders of the Shares
pursuant to this Agreement 

 26
 

is fair to such holders from a financial
point of view. The Company will provide a true, complete and correct copy of
such opinion to Parent solely for informational purposes promptly after receipt
thereof by the Company.

Section 3.23.          Relationships
with Customers and Others.  Prior to
the date hereof, neither the Company nor any of its Subsidiaries has received
notice that any customer (including, without limitation, any governmental
agency), retailer, insurer, supplier, distributor or sales representative
intends to cancel, terminate or otherwise modify any Contract or agreement with
the Company or any of its Subsidiaries in any manner adverse to the Company or
any of its Subsidiaries, except as would not, individually or in the aggregate,
reasonably be expected to have a Material Adverse Effect.

Section 3.24.          Brokers.  Except for the engagement of Goldman, Sachs
& Co., whose fees will be paid by the Company, none of the Company, any of
its Subsidiaries, or any of their respective officers, directors, or employees
has employed any broker or finder or incurred any liability for any investment
banking or brokerage fees, commissions or finder’s fees in connection with the
transactions contemplated by this Agreement for which the Company or any of its
Subsidiaries is responsible.  The Company
has heretofore delivered to Parent accurate and complete copies of all written
agreements, and summaries in reasonable detail of all oral agreements, between
the Company and any accountants, investments bankers, financial advisors,
public relations consultants, proxy solicitation firms and other experts and
non-legal advisors entered into on or prior to the date of this Agreement
pursuant to which any such person would be entitled to any payment of any
Merger Fees, including, without limitation, the agreement with Goldman, Sachs
& Co. “Merger Fees”
means all fees and expenses paid or payable by or on behalf of the Company or
any of its Subsidiaries to all accountants, investment bankers, financial
advisors, public relations consultants, proxy solicitation firms and other
experts and non-legal advisors incident to the negotiation, preparation and
execution of this Agreement and the consummation of the transactions
contemplated hereby.

When used in this Article III, references to the “knowledge
of the Company” shall mean to the actual knowledge of the Chairman of the
Board, the Chief Executive Officer, the Chief Financial Officer, the Chief
Operating Officer, the Vice President of Business Development, the senior
officer in charge of human resources, or any other person who is a Senior Vice
President of the Company, after reasonable inquiry.

ARTICLE
IV

REPRESENTATIONS
AND WARRANTIES

OF PARENT AND MERGER SUB

Parent and Merger Sub
represent and warrant to the Company that:

Section 4.01.          Organization
and Qualification.  Parent is a
corporation duly organized, validly existing and in good standing under the
laws of Italy.  Merger Sub is a corporation
duly organized, validly existing and in good standing under the laws of the
State of Washington.  Each of Parent and
Merger Sub has the requisite corporate power and authority to own, operate 

 27
 

or lease its properties and to carry on its
business as it is now being conducted, and is duly qualified or licensed as a
foreign corporation to do business, and is in good standing, in each
jurisdiction in which the nature of its business or the properties owned,
operated or leased by it makes such qualification, licensing or good standing
necessary, except where the failure to be so qualified, licensed or in good
standing, would not, individually or in the aggregate, prevent or materially
impair or delay the consummation of the Merger or the other transactions
contemplated by this Agreement or Parent or Merger Sub from satisfying their
respective obligations under this Agreement.

Section 4.02.          Authority
Relative to this Agreement.  Each of
Parent and Merger Sub has all necessary corporate power and authority to
execute and deliver this Agreement, the Founder Voting Agreement and the
Founder Non-Competition Agreement (collectively, the “Transaction Agreements”),
to perform its obligations hereunder and thereunder, and to consummate the
transactions contemplated hereby and thereby. 
The execution, delivery and performance of the Transaction Agreements by
Parent and Merger Sub and the consummation by Parent and Merger Sub of the
transactions contemplated thereby have been duly and validly authorized,
approved and declared advisable by the Boards of Directors of Parent and Merger
Sub, and approved by Luxottica U.S. Holdings Corp., a Delaware corporation and
the sole shareholder of Merger Sub (the “Sole
Shareholder”), and no other corporate proceedings on the part
of Parent or Merger Sub are necessary to authorize or approve the Transaction
Agreements or to consummate the transactions contemplated thereby (other than,
with respect to the Merger, the filing of the Articles of Merger or other
instruments as required by the WBCA). 
Each of the Transaction Agreements has been duly and validly executed
and delivered by each of Parent and Merger Sub and, assuming the due and valid
authorization, execution and delivery by the Company, constitutes a legally
valid and binding obligation of each of Parent and Merger Sub, enforceable
against each of them in accordance with its terms, except that such
enforceability may be limited by (i) bankruptcy, insolvency, moratorium or
other similar laws affecting or relating to the enforcement of creditors’
rights generally, (ii) general principles of equity and (iii) the remedies
of specific performance and injunctive relief and other forms of equitable
relief being subject to the discretion of the Governmental Entity before which
any enforcement proceeding therefor may be brought.

Section 4.03.          No
Conflict; Required Filings and Consents.

(a)       Assuming
(i) compliance with any requirements of the HSR Act and any requirements of any
foreign, supranational or other antitrust laws, (ii) the requirements of the
Exchange Act and any applicable state securities or “blue sky” laws are met and
(iii) the filing of the Articles of Merger and other appropriate instruments,
if any, as required by the WBCA is made, none of the execution and delivery of
the Transaction Agreements by Parent or Merger Sub, the performance or
consummation by Parent or Merger Sub of the transactions contemplated thereby
or compliance by Parent or Merger Sub with any of the provisions thereof will
(x) conflict with or violate the organizational documents of Parent or Merger
Sub, (y) conflict with or violate any law, statute, ordinance, rule,
regulation, order, judgment, decree, injunction or other binding action or
requirement of any Governmental Entity applicable to Parent or Merger Sub, or
any of their Subsidiaries, or by which any of them or 

 28
 

any of their respective properties or assets may be bound or affected,
(z) result in a violation or breach of or constitute a default (or an event
which with notice or lapse of time or both would become a default) under, or
give to others any rights of termination, amendment, acceleration or cancellation
of, or result in any loss of any benefit under, or the creation of any Lien on
any of the property or assets of Parent, Merger Sub, or any of their respective
Subsidiaries pursuant to, any note, bond, mortgage, indenture, contract,
agreement, lease, license, permit, franchise or other instrument or obligation
to which Parent or Merger Sub or any of their respective Subsidiaries is a
party or by which Parent, Merger Sub, or any of their respective Subsidiaries
or any of their respective assets or properties may be bound or affected,
except with respect to clauses (y) and (z), as would not, individually or in
the aggregate, prevent or materially impair or delay the consummation of the
Merger or the other transactions contemplated by the Transaction Agreements or
Parent or Merger Sub from satisfying their respective obligations under the
Transaction Agreements.

(b)      None
of the execution and delivery of the Transaction Agreements by Parent and
Merger Sub, the performance or consummation by Parent and Merger Sub of the
transactions contemplated thereby or compliance by Parent and Merger Sub with
any of the provisions hereof will require Parent or Merger Sub to obtain any
Consent of any Governmental Entity or any third party, except for (i)
compliance with any applicable requirements of the Exchange Act, (ii) the
filing of the Articles of Merger pursuant to the WBCA, (iii) compliance with
any requirements of the HSR Act and any requirements of any foreign,
supranational or other antitrust or similar laws, (iv) compliance with the
requirements of the NYSE, (v) compliance with any applicable requirements of
the 1988 Exon-Florio provision of the Defense Production Act of 1950, as
amended, and (vi) Consents the failure of which to obtain or make would not,
individually or in the aggregate, prevent or materially impair or delay the
consummation of the Merger or the other transactions contemplated by this
Agreement or Parent or Merger Sub from satisfying their respective obligations
under this Agreement.

Section 4.04.          Information.  None of the information supplied or to be
supplied by Parent or Merger Sub in writing specifically for inclusion or incorporation
by reference in (i) the Proxy Statement or (ii) the Other Filings will, at the
respective times filed with the SEC or any Governmental Entity with regulatory
jurisdiction over enforcement of any applicable antitrust or similar laws and,
in addition, in the case of the Proxy Statement, at the date it or any
amendment or supplement is mailed to shareholders, and at the time of the
Special Meeting and the Effective Time, contain any untrue statement of a
material fact or omit to state any material fact required to be stated therein
or necessary in order to make the statements made therein, in light of the
circumstances under which they are made, not misleading, provided that no
representation is made by either Parent or the Merger Sub with respect to
information furnished by the Company specifically for inclusion therein.  The Other Filings made by Parent or Merger
Sub will, at the respective times filed with the SEC, comply as to form in all
material respects with the provisions of the Exchange Act and the rules and
regulations thereunder, if applicable, except that no representation is made by
Parent or Merger Sub with respect to statements made therein based on
information supplied by the Company in writing specifically for inclusion in
the Other Filings.

 29
 

Section 4.05. 
Financing.  Parent will
have, prior to the Effective Time, the funds necessary to pay, or cause Merger
Sub to pay, the Merger Consideration with respect to the Shares outstanding
immediately prior to the Effective Time, to fund payments contemplated hereby
with respect to the Company Options and Company Stock-Based Awards, and to pay
all fees and expenses related to the transactions contemplated by this
Agreement to be paid by it.  Parent will
provide such funds to Merger Sub or the Paying Agent at or prior to the
Effective Time.

Section 4.06.          Ownership
of Shares. As of the date hereof, Parent and its affiliates and
Subsidiaries do not beneficially own any Shares. As of the date hereof, to the
knowledge of Parent and except as contemplated in connection with this
Agreement, the Voting Agreement and agreements contemplated herein and therein,
neither Parent nor any of its affiliates or Subsidiaries has entered into any
agreement, arrangement, or understanding, whether or not in writing, for the
purpose of acquiring, holding, voting, or disposing of any Shares with any
other person who beneficially owns, or whose affiliates or associates
beneficially own, directly or indirectly, such Shares, in each case, which
would result in Parent or any of its affiliates or Subsidiaries being an “acquiring
person” under chapter 23B.19 of the WBCA.

Section 4.07.          Brokers.  Except for the engagement of Rothschild Inc.
and Rothschild S.p.A., whose fees will be paid by Parent, none of Parent,
Merger Sub or any of their respective Subsidiaries, officers, directors or
employees, has employed any broker or finder or incurred any liability for any
investment banking or brokerage fees, commissions or finder’s fees in
connection with the transactions contemplated by this Agreement for or with
respect to which the Company is or might be liable prior to the Effective Time.

ARTICLE
V

COVENANTS

Section 5.01.          Conduct
of Business of the Company.  Except as contemplated by this
Agreement (including, without limitation, the activities expressly permitted by
this Section 5.01), by Section 5.01 of the Company Disclosure Schedule, as
required by law or with the prior written consent of Parent, during the period
from the date of this Agreement to the earlier of (x) such time as this
Agreement is terminated in accordance with Section 7.01, and (y) the Effective
Time, the Company will, and will cause each of its Subsidiaries to, (i) conduct
its operations only in the ordinary course of business, (ii) use its
commercially reasonable efforts to preserve intact the business or organization
of the Company and each of its Subsidiaries, taken as a whole, and to keep
available the services of its and their present officers and key employees,
generally, and (iii) use its commercially reasonable efforts to preserve
the goodwill of those having material business relationships with it. Without
limiting the generality of the foregoing and except as otherwise contemplated
by this Agreement or as set forth in Section 5.01 of the Company Disclosure
Schedule, the Company will not, and will not permit any of its Subsidiaries to,
prior to the earlier of the Effective Time and the termination of this
Agreement in accordance with Section 7.01, without the prior written consent of
Parent (not to be unreasonably withheld, conditioned or delayed):

 30

(a)       adopt
any amendment to the articles of incorporation or by-­laws or comparable
organizational documents in effect on the date hereof of the Company or any
Subsidiary;

(b)      sell,
pledge, encumber or dispose of any shares owned by it in any of its Subsidiaries,
except to a wholly owned Subsidiary of the Company and except for pledges to
lenders solely as collateral security under any borrowing arrangement in
existence on the date hereof, or under any permitted amendments thereto or any
new arrangements permitted hereunder;

(c)       except
for (i) issuances of capital stock of the Company’s Subsidiaries to the Company
or a wholly owned Subsidiary of the Company and (ii) issuances of Shares with
respect to the Company Options or Company Stock-Based Awards outstanding as of
the date hereof (collectively, clauses (i) and (ii), the “Permitted Issuances”),
issue, reissue, sell, or convey, or authorize the issuance, reissuance, sale or
conveyance of (x) shares of capital stock (or other ownership interests) of any
class (including shares held in treasury), or securities convertible or
exchangeable into capital stock (or other ownership interests) of any class, or
any rights, warrants or options to acquire any such convertible or exchangeable
securities or capital stock (or other ownership interests), or any Voting Debt
or (y) any other securities in respect of, in lieu of, or in substitution for,
Shares outstanding on the date hereof;

(d)      declare,
set aside or pay any dividend or other distribution (whether in cash, securities
or property or any combination thereof) in respect of any class or series of
its capital stock or otherwise make any payments to shareholders in their capacity
as shareholders, other than: (i) a single dividend in respect of the Shares,
payable in cash, declared on or after February 29, 2008, and payable on the
earlier of: (x) a date in March 2008, as determined by the Board, or (y) one
business day prior to the Effective Time, in an amount not to exceed $0.16 per
Share; and (ii) any distribution by a Subsidiary of the Company to the Company
or a wholly owned Subsidiary of the Company;

(e)       other
than in connection with the Permitted Issuances or in connection with cashless
exercises of Company Options or repurchases of restricted stock from employees
upon termination of any such employee’s employment pursuant to the terms of the
award agreement under which such restricted stock was granted, split, combine,
subdivide, reclassify or redeem, purchase or otherwise acquire, or propose to
redeem or purchase or otherwise acquire, directly or indirectly, any shares of
its capital stock, or any of its other securities;

(f)       (i) increase the
compensation, in whatever form (other than severance), including salaries,
hourly wages, commissions, bonuses, temporary employee commissions, overtime
pay, vacation, sick time, holiday and other paid time off, and employer paid
health and welfare benefits (collectively, “Compensation”)
payable or to become payable to any of its present or former directors,
officers or employees (whether from the Company or any of its Subsidiaries), or
incur any obligation to pay any Compensation, except for increases and
incurrences that are in the ordinary course of business consistent with past
practice and that would not, after giving effect thereto, result in the
aggregate Compensation expense of the Company and its Subsidiaries being in
excess of: (x) $310 million for the year ended December 31, 2007; or (y)

 31
 

$174 million for the six-month period ending
June 30, 2008; provided, however, that, in determining compliance
with this Section 5.01(f)(i), any Compensation expense attributable to
employees of any entity or entities acquired in compliance with Section 5.01(p)
shall be disregarded, (ii) grant any stock appreciation rights, phantom stock,
or performance units pursuant to the Option Plans or otherwise, it being
understood that the granting of any stock options or restricted stock is
governed by Section 5.01(c) above, or make or agree to make, any severance or
termination payments to any former, existing or new director, officer or
employee of the Company or any of its Subsidiaries, except for such payments
made in the ordinary course of business either (x) pursuant to a Plan or
contract in effect as of the date of this Agreement or (y) that are not in
excess of $500,000 in the aggregate, (iii) enter into any employment, severance
or other compensation agreement with, any former, existing or new director,
officer or employee of the Company or any of its Subsidiaries providing for
base Compensation or severance Compensation in excess of $150,000 per annum,
other than renewals of existing agreements for up to one year on substantially
similar terms (allowing for customary merit increases consistent with past
practice), or (iv) establish, adopt, enter into, or materially amend or waive
any material performance or vesting criteria, or accelerate vesting or
exercisability under, any collective bargaining, bonus, profit sharing, thrift,
compensation, stock option, restricted stock, pension, retirement, savings,
welfare, deferred compensation, employment, termination, severance or other
employee benefit plan, agreement, trust, fund, policy or arrangement for the
benefit or welfare of any former, existing or new director, officer or employee
(any of the foregoing being an “Employee
Benefit Arrangement”) or otherwise amend or modify the terms
of any Employee Benefit Arrangement, except (1) amendments of employment
agreements for Non-U.S. Employees (as defined below) that provide for customary
merit increases or other changes to terms of employment (other than an
extension of the term of employment) consistent with past practice and (2) as
to clauses (i) through (iv): (A) as may be required to comply with any
applicable law or any existing Plan or agreement; (B) for any technical
amendment or modification of the terms of an Employee Benefit Arrangement that
would not impose on the Company or any of its Subsidiaries any material new or
amended obligation thereunder; (C) that the foregoing shall not apply to the
issuance of offer letters for “at will” employment agreements and arrangements
that do not provide for severance following termination of employment for any
reason; and (D) that, if the Effective Time occurs on or prior to February 15,
2008, the Compensation Committee of the Board shall be entitled to determine,
in good faith, in accordance with standards applicable thereto that are applied
consistently with past practice, the amounts of bonuses payable to participants
in the Company’s Officer Bonus Plan and to other employees of the Company and
its Subsidiaries under the Company’s bonus program in respect of 2007 and to
cause such bonuses to be paid within five (5) business days prior to the
Effective Time;

(g)      mortgage,
encumber, license, sell, lease or dispose of any assets (other than inventory)
or securities (other than those referred to in Section 5.01(b), which shall
govern in respect thereof) which are material to the Company and its
Subsidiaries, taken as a whole, in each case outside the ordinary course of
business;

(h)      other than guarantees of
leases, obligations of wholly owned Subsidiaries or pursuant to existing
agreements or commitments in the ordinary course of business or

 32
 

amendments thereto enacted in the ordinary
course of business, or to lenders under any borrowing arrangement in existence
on the date hereof or entered into the ordinary course of business, (i) incur,
assume, guarantee or pre-pay any indebtedness for borrowed money, except that
the Company and its Subsidiaries may incur or assume indebtedness for borrowed
money to finance acquisitions made in compliance with Section 5.01(p) and may
incur, assume or pre-pay indebtedness for borrowed money under existing
revolving credit agreements and lines of credit described in Section 5.01(h) of
the Company Disclosure Schedule or under amendments thereto or replacements
thereof enacted in the ordinary course of business which amendments do not,
singly or in the aggregate, increase the principal amount or interest rate or
other fees and expenses payable thereunder and that do not otherwise impose any
new or amended obligation on the Company or any of its Subsidiaries, (ii)
assume, guarantee, endorse or otherwise become liable or responsible (whether
directly, contingently or otherwise) for any obligations of any other person
(other than the Company or a wholly owned Subsidiary of the Company) in excess
of $50,000, except in the ordinary course of business and except in connection
with acquisitions permitted by Section 5.01(p), (iii) pay, discharge or satisfy
any claims, liabilities or obligations (absolute, accrued, contingent or
otherwise) in excess of $200,000, other than the payment, discharge or
satisfaction of liabilities or obligations in the ordinary course of business
or those reflected or reserved against in the most recent financial statements,
(iv) make any loans, advances or capital contributions to, or investments in,
any other person in excess of $100,000, except in the ordinary course of
business and except for loans, advances, capital contributions or investments
between any Subsidiary of the Company and the Company or another Subsidiary of
the Company or (v) authorize or make capital expenditures other than in
accordance with the purposes, amounts and time periods specified in Section
5.01(h) of the Company Disclosure Schedule (provided that the aggregate
amount of capital expenditures permitted to be made in the first half of 2008
as set forth in Section 5.01(h) of the Company Disclosure Schedule shall be
increased by an amount equal to the excess, if any, of (1) the amount of
capital expenditures permitted to be made in the second half of 2007 as set
forth in Section 5.01(h) of the Company Disclosure Schedule over (2) the amount
of capital expenditures actually made during the second half of 2007);

(i)        except
as set forth in Section 5.01(i) of the Disclosure Schedule, settle or
compromise any suit or claim or threatened suit or claim where the amount to be
paid is greater than $500,000;

(j)        authorize,
recommend, propose or announce an intention to adopt a plan of complete or
partial liquidation or dissolution of the Company or any of its Subsidiaries
that, in the full fiscal year of the Company next preceding such intended
action, had a shareholders’ equity in excess of $100,000 or revenues in excess
of $1,000,000;

(k)       change
any material election with respect to Taxes, change any Tax accounting period
or change any material method of Tax accounting, if any such change would
reasonably be expected to have a material adverse effect on the Tax position of
the Company and its Subsidiaries taken as a whole;

 33
 

(l)        other
than in the ordinary course of business, (i) expressly waive any material
rights or (ii) cancel or forgive any indebtedness for borrowed money in excess
of $100,000 owed to the Company or any of its Subsidiaries other than
indebtedness of the Company or a wholly owned Subsidiary of the Company;

(m)      voluntarily
permit any material insurance policy naming the Company or any of its
Subsidiaries as a beneficiary or a loss payee to be canceled or terminated,
except in the ordinary course of business;

(n)      enter
into or amend, or agree to the renewal of, any contract or agreement that would
be a “Contract” as defined in Section 3.21 or any contract or agreement
providing for payment by a third party of more than $1,000,000 in any 12-month
period, in each case for a term in excess of one (1) year and that cannot be
terminated by the Company or one of its Subsidiaries on less than 90 days’
notice without material penalty or other material financial costs to the
Company or any of its Subsidiaries, other than (i) amendments or waivers that
are required by applicable law or regulations, (ii) renewals of Contracts,
leases (including store leases) or agreements or contracts in accordance with
the terms thereof or on market terms in the ordinary course of business or on
terms not materially less favorable in the aggregate to the Company than those
in effect immediately prior to the renewal or (iii) new store leases entered
into, or modifications or terminations of, or amendments to, existing store
leases made, in the ordinary course of business and in compliance with the
terms set forth in Section 5.01(n) of the Company Disclosure Schedule; or agree
to an amendment or modification of any agreement involving the payment of any
Merger Fees to Goldman, Sachs & Co. or any of its affiliates in amounts in
excess of those provided for in the agreements delivered pursuant to Section
3.24 above;

(o)      except
as may be required as a result of a change in law or under GAAP, make any
material change in its methods, principles and practices of accounting;

(p)      acquire
(by merger, consolidation or acquisition of stock or assets) any corporation,
partnership or other business organization or division thereof or acquire any
material assets of any such entity or of any other person, other than any such
acquisitions related to optics or optical retail operations, provided that the
total consideration, including assumed debt paid or payable by the Company and
its Subsidiaries, does not exceed $20 million in the aggregate for all such
acquisitions;

(q)      enter
into any joint venture, partnership or similar agreement, other than in respect
of airport retail stores in the ordinary course of business as required by the
lessors thereof; or

(r)       agree
in writing or otherwise to take any of the foregoing prohibited actions.

Section 5.02.          Access to Information; No Control
of Operations.

(a)       From the date hereof until the Effective
Time, subject to reasonable restrictions imposed from time to time after
consultation with counsel, the Company shall, and shall cause its Subsidiaries,
and shall use its reasonable efforts to cause each of their respective
officers,

 34
 

employees, and past and present counsel,
accountants, tax advisors, financial advisors, representatives and agents (collectively,
the “Company Representatives”)
to provide Parent and Merger Sub and their respective officers, employees,
counsel, advisors, accountants, financial advisors, financial sources and
representatives (collectively, the “Parent
Representatives”), at Parent’s expense,  reasonable access during normal business
hours and upon reasonable notice, to the offices and other facilities and to
the books and records of the Company and its Subsidiaries, as will permit
Parent and Merger Sub to make inspections of such as either of them may
reasonably require, and shall use its reasonable efforts to cause the Company
Representatives and the Company’s Subsidiaries to furnish Parent, Merger Sub
and Parent Representatives to the extent reasonably available with such
financial and operating data and other information with respect to the business
and operations of the Company and its Subsidiaries as Parent and Merger Sub may
from time to time reasonably request and subject to the Company’s existing
written policies with respect to the protection of employee privacy and
protection of attorney-client privilege and attorney work product; provided
that such access and inspections shall not unreasonably disrupt the operations
of the Company or its Subsidiaries or the performance of their duties. Parent,
Merger Sub and the Parent Representatives shall maintain the confidentiality of
any information obtained pursuant to this Section or otherwise in accordance
with the terms of the Confidentiality Agreements dated July 25, 2006 and
October 12, 2006 between Parent and the Company (the “Confidentiality
Agreements”). 
Notwithstanding anything to the contrary in this Agreement, the Company
shall not be required to provide any information or access that it reasonably
believes would violate applicable law, rules or regulations or the terms of any
confidentiality agreement by which it is bound; provided that, in any
case where the Company is relying on this sentence in not providing all or any
of the information or access requested by Parent, it shall promptly inform
Parent and/or the relevant Parent Representative of its reliance on this
exception and indicate in such notice the specific reason for such reliance.

(b)      Nothing
contained in this Agreement shall give to Parent or Merger Sub, directly or
indirectly, the right to control or direct the Company’s or its Subsidiaries’
operations prior to the Effective Time.

(c)       No
investigation by any of the parties or their respective Representatives shall
affect the representations, warranties, covenants or agreements of the other
parties set forth herein.  The Company
makes no representation or warranty as to the accuracy of any information
provided pursuant to Section 5.02(a), and neither Merger Sub nor Parent may
rely on the accuracy of any such information, in each case other than as
expressly set forth in the Company’s representations and warranties contained
in the Transaction Agreements.

Section 5.03.          Further Assurances; Reasonable Best
Efforts.

(a)       Subject to the terms and conditions
herein provided and to applicable legal requirements, each of the Company,
Parent and Merger Sub shall, and shall cause its respective Subsidiaries to,
cooperate and use its reasonable best efforts to take, or cause to be taken,
all action, and to do, or cause to be done, in the case of the Company,
consistent with the fiduciary duties of the Board with the advice of the
Company’s outside legal counsel, and

 35
 

to assist and cooperate with the other
parties hereto in doing, as promptly as practicable, all things necessary,
proper or advisable under applicable laws and regulations to consummate and
make effective the transactions contemplated by this Agreement.

(b)      If at any time prior to the Effective Time
any material event or circumstance relating to either the Company or Parent or
Merger Sub, or any of their respective Subsidiaries, is discovered by the
Company or Parent, as the case may be, and which should be set forth in an
amendment to the Proxy Statement, the discovering party will promptly inform
the other party of such event or circumstance. 
If at any time after the Effective Time any further action is necessary
or desirable to carry out the purposes of this Agreement, including the
execution of additional instruments, the proper officers and directors of each
party to this Agreement shall take all such necessary or desirable action as is
reasonable under the circumstances.

(c)       Each
of the parties agrees to cooperate with each other in taking, or causing to
take, at the direction of Parent, all actions necessary to delist the Shares
from the NYSE and deregister the shares under the Exchange Act as soon as
practicable following the Effective Time.

Section 5.04.          Filings; Consents.

(a)       Upon the terms and conditions hereof each
of the parties hereto shall, and shall cause its Subsidiaries to, use its
reasonable best efforts to obtain as promptly as practicable all material
Consents of any Governmental Entity or any other person required in connection
with, and waivers of any material breaches or material violations of any
material Contracts, permits, licenses or other material agreements that may be
caused by, the consummation of the transactions contemplated by this Agreement,
including, without limitation, by (i) 
filing, or causing to be filed, any Notification and Report Form and
related material required under the HSR Act as soon as reasonably practicable
after the date of this Agreement but, in any event, unless specifically agreed
otherwise by the Company and Parent, no later than thirty (30) calendar days
after the date of this Agreement, and by using its reasonable best efforts to
be able to certify, and to certify, as soon as reasonably practicable, its
substantial compliance with any such requests for additional information or
documentary material that may be made under the HSR Act, unless Parent and the
Company mutually determine that it is reasonable under the circumstances not to
comply substantially with any requests for additional information and documentary
material under the HSR Act, (ii) promptly making all other required filings or
submissions to Governmental Entities, (iii) cooperating and consulting with one
another in (A) determining whether any other filings are required, or are
deemed advisable, to be made with, or Consents, permits, authorizations or
approvals are required, or are deemed advisable, to be obtained from, any third
party, the United States government or any other Governmental Entity in
connection with the execution and delivery of this Agreement and the
consummation of the transactions contemplated hereby and (B) timely making all
such filings and timely seeking all such Consents, permits, authorizations,
approvals or waivers and (iv) generally, taking, or causing to be taken, all
other actions necessary to avoid or eliminate each and every impediment under
any antitrust, competition or trade regulation law that may be asserted by any
Governmental Entity with respect to the Merger so as to enable the Closing to
occur as

 36
 

soon as reasonably possible, and in any event no later
than the Extended Termination Date (as defined in Section 7.01(b)) or, if
applicable, the Final Termination Date (as defined in Section 7.01(b)), provided
that the Company shall not be required to obtain any Consent from any person
other than Governmental Entities unless Parent reimburses the Company for all
reasonable out-of-pocket expenses incurred in obtaining such Consent; provided,
however, that the Company shall not pay or agree to pay any fee or other
similar charge to any such person in order to obtain its Consent without the
prior written approval of Parent not to be unreasonably withheld.

In furtherance of the foregoing, Parent
shall, and shall cause its Subsidiaries to, take all such actions, including,
without limitation, (x) proposing, negotiating, committing to and effecting, by
consent decree, hold separate order, or otherwise, the sale, divestiture or
disposition of such assets or businesses of Parent or any of its Subsidiaries
or, after the Effective Time, of the Company or of any of its Subsidiaries and
(y) otherwise taking or committing to take actions that limit or would limit
Parent’s or its Subsidiaries’ (including, after the Effective Time, the Company’s
and its Subsidiaries’ as Subsidiaries of Parent) freedom of action with respect
to, or its ability to retain, one or more of their respective businesses,
product lines or assets, in each case as may be required in order to avoid the
entry of any order, judgment, decree, injunction, temporary restraining order,
or ruling of a court of competent jurisdiction or any Governmental Entity in
any suit or proceeding, which would otherwise have the effect of preventing or
materially delaying the Closing; provided  further, however,
that Parent shall not be required to take any such action, and the failure to
do so shall not be deemed to be a failure to exercise its reasonable best
efforts as required by this Section 5.04(a), if such actions, individually or
in the aggregate, would require the sale, divestiture, licensing or other
disposition in any form (collectively, a “Divestiture”) of any one or more businesses or assets,
including without limitation, product lines, brands, or other particular types
or groups of assets (collectively, the “Specified Assets”)
and: (A) in the case of one or more required Divestitures of Specified Assets
of Parent or one or more of its Subsidiaries, and/or the Company and or one or
more of its Subsidiaries, that are sold at wholesale, such Specified Assets
accounted for more than $85 million in the worldwide consolidated net sales of
Parent or the Company, as the case may be, to all customers, including the
amount of the intercompany sales of such Specified Assets by each party to its
own retail division or retail segment, as the case may be; or (B) without
limiting the applicability of clause (A) above, in the case of one or more
required Divestitures of Specified Assets of Parent or one or more of its
Subsidiaries, and/or the Company and one or more of its Subsidiaries, that are
not sold at wholesale, including, without limitation, Specified Assets
consisting of retail assets, such Specified Assets accounted for more than $100
million in the worldwide consolidated net sales of Parent or the Company, as
the case may be; with, in each such case, consolidated net sales to be
determined for the four most recently completed consecutive fiscal quarters of
Parent and/or the Company, as the case may be. 
Neither the Company nor any of its Subsidiaries shall propose,
negotiate, or commit to any such sale, divestiture or disposition of any of its
assets, businesses or product lines without Parent’s prior written consent.

(b)      Each of the Company and
Parent shall, without limitation: (i) promptly notify the other of, and if in
writing, furnish the other with copies of (or, in the case of oral

 37
 

communications, advise the other of) any
communications from or with any Governmental Entity with respect to the
transactions contemplated by this Agreement; (ii) permit the other to review
and discuss in advance, and consider in good faith the views of the other in
connection with, any proposed written or any oral communication with any such
Governmental Entity; (iii) not participate in any meeting or have any
communication with any such Governmental Entity unless it has given the other
an opportunity to consult with it in advance and, to the extent permitted by
such Governmental Entity, give the other party the opportunity to attend and
participate therein; and (iv) furnish the other party with copies of all filings
and communications between it (or its advisors) and any such Governmental
Entity with respect to the transactions contemplated by this Agreement; provided,
however, that, notwithstanding the foregoing, the rights of the Company
and Parent under this Section 5.04(b) may be exercised on their behalf by their
respective outside counsel.

Section 5.05.          Public Announcements.  The initial press release announcing the
terms of this Agreement shall be a joint press release.  Thereafter, other than in connection with
reasonable responses to questions in quarterly earnings conference calls,
Parent, Merger Sub and the Company each agree to consult with each other before
issuing any press release or otherwise making any public statement with respect
to the transactions contemplated by this Agreement, agree to provide to the
other party for review a copy of any such press release or public statement,
and shall not issue any such press release or make any such public statement
prior to such consultation and review, unless required by applicable law or any
listing agreement with a securities exchange.

Section 5.06.          Indemnification; Employees and
Employee Benefits.

(a)       Parent agrees that all
rights to indemnification and advancement of expenses now existing in favor of
any individual who at or prior to the Effective Time was a director, officer,
employee or agent of the Company or any of its Subsidiaries or who, at the
request of the Company or any of its Subsidiaries, served as a director,
officer, member, trustee or fiduciary of another corporation, partnership,
joint venture, trust, pension or other employee benefit plan or enterprise
(together with such individual’s heirs, executors or administrators, the “Indemnified Parties”) as
provided by applicable law and/or in the articles of incorporation and by-laws
of the Company and its Subsidiaries existing and in effect on the date hereof
and/or indemnification agreements existing and in effect on the date hereof,
shall survive the Merger, and shall continue in full force and effect for a period
of not less than six years from the Effective Time (or, with respect to any
indemnification agreement, the term of such indemnification agreement, if such
term is less than six years) unless otherwise required by applicable law, and
the indemnification and advancement of expenses provisions of the articles of
incorporation and by-laws of the Surviving Corporation and the Subsidiaries of
the Company and such indemnification agreements, indemnification and
advancement of expenses provisions shall not be amended, repealed or otherwise
modified, provided that in the event any claim or claims are asserted or
made within such six-year period, all rights to indemnification and advancement
of expenses in respect of any such claim or claims shall continue until final
disposition of any and all such claims. 
From and after the Effective Time, Parent shall cause the Sole
Shareholder to assume, be jointly and severally liable for, and

 38
 

honor, guarantee and stand surety for, and
shall cause the Surviving Corporation to honor, in accordance with their
respective terms, each of the covenants contained in this Section 5.06.

(b)      Parent
agrees that, from and after the Effective Time, the Surviving Corporation shall
cause to be maintained in effect for not less than six years (except as
provided in the last proviso of this Section 5.06(b)) from the Effective Time
the current policies of directors’ and officers’ liability insurance maintained
by the Company; provided, however, that the Surviving Corporation
may substitute therefor policies of at least the same coverage containing terms
and conditions which are not materially less advantageous to the beneficiaries
of the current policies and with carriers having an A.M. Best “key rating” of
AX or better, provided that such substitution shall not result in any gaps or
lapses in coverage with respect to matters occurring prior to the Effective
Time, and provided  further, that the Surviving Corporation shall
first use its reasonable best efforts to obtain from such carriers a so-called “tail”
policy providing such coverage and being effective for the full six year period
referred to above, and shall be entitled to obtain such coverage in annual
policies from such carriers only if it is unable, after exerting such efforts
for a reasonable period of time, to obtain such a “tail” policy; and provided
further, that the Surviving Corporation shall not be required to pay an
annual premium in excess of 250% of the last annual premium paid by the Company
prior to the date hereof as set forth in Section 5.06(b) of the Company
Disclosure Schedule (or, in the case of a “tail” policy obtained pursuant to
the preceding proviso, shall not be required to pay an aggregate premium
therefor in excess of an amount equal to six times 250%  of such last annual premium) and, if the
Surviving Corporation is unable to obtain the insurance required by this
Section 5.06(b), it shall obtain as much comparable insurance as possible for
an annual premium (or an aggregate premium, as the case may be) equal to such
maximum amount.

(c)       In
the event that Parent, the Surviving Corporation or any of their respective
successors or assigns (i) consolidates with or merges into any other person and
shall not be the continuing or surviving corporation or entity in such
consolidation or merger or (ii) transfers all or substantially all of its
properties and assets to any person, then and in either such case, proper
provision shall be made so that the successors and assigns of Parent or the
Surviving Corporation, as the case may be, shall assume the obligations set
forth in this Section.  It is expressly
agreed that the Indemnified Parties shall be third party beneficiaries of
Section 5.06(a) and Section 5.06(b) above, and of this Section 5.06(c).

(d)      For the period beginning
on the Closing Date and ending on December 31, 2008 (the “Continuation Period”),
Parent shall cause the Surviving Corporation to provide U.S. Employees with
compensation and benefits that are no less favorable in the aggregate,
determined on an individual basis, than those provided to such individual under
the Company’s Employee Benefit Arrangements applicable to U.S. Employees in
effect at the Effective Time or otherwise (exclusive of benefits related to the
equity securities of the Company); provided, however, that
nothing herein shall prevent the Surviving Corporation from amending or
terminating any specific plan, program, policy, practice or arrangement, or
require that the Surviving Corporation provide or permit investment in the
securities of Parent or the Surviving Corporation, or interfere with the
Surviving Corporation’s obligation to make such changes as are necessary to
comply with applicable law, or preclude the Surviving

 39
 

Corporation from terminating the employment
of any Employee for any reason for which the Company could have terminated the
employment of such person or that was not prohibited prior to the Effective
Time. During the Continuation Period, Parent shall cause the Surviving
Corporation to provide Non-U.S. Employees with compensation and benefits that
are no less favorable in the aggregate, determined, with respect to each
separate country in which such Non-U.S. Employees work, on a group basis rather
than on an individual basis for such country, than the less favorable of: (i)
those provided under the Company’s Employee Benefit Arrangements for the
Non-U.S. Employees in such country; or (ii) those provided by the Company’s
Employee Benefit Arrangements for its U.S. Employees, in each case, as in
effect as of the Effective Time, but exclusive of benefits related to the
equity securities of the Company; provided that, in any event, benefits
provided to the Non-U.S. Employees that are immaterial, but customary and
reasonable in the local jurisdiction, shall be continued during the
Continuation Period.  “U.S. Employees” means employees and former employees of the
Company and its Subsidiaries who work or worked in the United States.  “Non-U.S. Employees”
means employees and former employees of the Company and its Subsidiaries who
work or worked outside the United States.

(e)       Parent
and its affiliates (including the Surviving Corporation) shall honor all
Employee Benefit Arrangements (including, without limitation, any severance,
change of control and similar plans and agreements) in accordance with their
terms as in effect immediately prior to the Effective Time (except for such
changes made to any Employee Benefit Arrangement between the date hereof and
the Effective Time that are not made in compliance with the terms of this Agreement),
subject to any amendment or termination thereof after the Effective Time that
may be permitted by the terms thereof, and except that Parent and its
affiliates shall be permitted to amend or terminate any plan, program, policy,
practice or arrangement as permitted pursuant to the proviso in the first
sentence in Section 5.06(d) above.

(f)       For all purposes under
the employee benefit plans of Parent and its affiliates providing benefits to
any Employees after the Effective Time (the “New Plans”), each
Employee shall be credited with his or her years of service with the Company
and its Subsidiaries prior to the Effective Time (including predecessor or
acquired entities or any other entities for which the Company and its
Subsidiaries have given credit for prior service), to the same extent as such
Employee was entitled, as at the Effective Time, to credit for such service
under any similar or comparable plans (except to the extent such credit would
result in a duplication of accrual of benefits in whole or in part).  In addition, and without limiting the
generality of the foregoing:  (i) each
Employee immediately shall be eligible to participate, without any waiting
time, in any and all New Plans to the extent coverage under such New Plan
replaces coverage under a similar or comparable plan in which such Employee
participated immediately before the Effective Time (such plans, collectively,
the “Old Plans”); and (ii) for
purposes of each New Plan providing medical, dental, pharmaceutical and/or
vision benefits to any Employee, Parent shall with respect to fully insured
programs use its best efforts to, and with respect to self-insured programs
shall, cause all pre-existing condition exclusions and actively-at-work
requirements of such New Plan to be waived for such Employee and his or her
covered dependents, and Parent shall cause any eligible

 40
 

expenses incurred by such Employee and his or
her covered dependents during the portion of the plan year of the Old Plan
ending on the date such Employee’s participation in the corresponding New Plan
begins to be taken into account under such New Plan for purposes of satisfying
all deductible, coinsurance and maximum out-of-pocket requirements, as well as
all maximums or caps with respect to number of visits or annual or lifetime
dollar limitations, applicable to such Employee and his or her covered
dependents for the applicable plan year as if such amounts had been paid or
such visits occurred in accordance with such New Plan.  Notwithstanding the foregoing provisions of
this Section 5.01(f) or any other term or provision of this Agreement to the
contrary, subject to the requirements, if any, of applicable law, in no event
shall any Employee be credited with such years of service in connection with
vesting rights under, or be entitled to be a beneficiary under, any pension
plan now or hereafter established by Parent or any of its Subsidiaries.

(g)      Section
5.06(g) of the Company Disclosure Schedule sets forth a description of the
Company’s Long-Term Incentive Plan (the “LTIP”)
as in effect as of the date of this Agreement and includes a list of the
Employees of the Company who are, as of the date of this Agreement, grantees of
any benefit under the LTIP, specifying for each the particular target benefit
held by such person.  Notwithstanding
anything in this Agreement to the contrary, the LTIP shall be modified by the
Company prior to, but effective as of, the Effective Time, in all material
respects, in accordance with the terms of such modification set forth in
Section 5.06(g) of the Company Disclosure Schedule, and pursuant to such
instruments, documents and resolutions of the Board (or a committee thereof) as
shall be reasonably satisfactory in form and substance to Parent.

(h)      Parent
shall cause the Surviving Corporation to continue arrangements with a service
provider to the Company on the terms set forth in Section 5.06(h) of the
Company Disclosure Schedule.

Section 5.07.          No Solicitation.

(a)       The Company shall, and shall cause its
Subsidiaries, the Company Representatives and its directors to, immediately
cease and cause to be terminated any existing activities, discussions or
negotiations with any parties conducted heretofore with respect to any
Acquisition Proposal.  The Company also
will promptly request each person that has heretofore executed a confidentiality
agreement in connection with its consideration of an Acquisition Proposal and
in connection with which discussions are taking place, or have taken place
during the twelve (12) month period preceding the date of this Agreement with
respect to an Acquisition Proposal, to return or destroy all confidential
information heretofore furnished to such person by the Company or on the
Company’s behalf.

(b)      The Company agrees that,
prior to the Effective Time, it shall not, directly or indirectly, and shall
not permit or cause any of its Subsidiaries to, nor shall it authorize or
permit any Company Representatives or any of its directors to, directly or
indirectly, (i) initiate, solicit or knowingly encourage (including by way of
furnishing non-public information) the making of any proposal or offer concerning
an Acquisition Proposal or 

 41
 

(ii) engage in any discussions or
negotiations concerning, or provide any non-public information or data to any
person relating to, an Acquisition Proposal, whether made before or after the
date of this Agreement unless, after the date hereof, (A) the Company receives
a bona fide written proposal not initiated, solicited or knowingly encouraged
in violation of this Agreement that constitutes an Acquisition Proposal, (B)
the Board in good faith determines, after consultation with its outside legal
counsel and independent financial advisors, that such Acquisition Proposal may
reasonably be expected to result in a Superior Acquisition Proposal, (C) the
Company (x) shall have provided at least 48 hours advance written notice to
Parent that it intends to take such action, which shall also set forth the
identity of the person making the Acquisition Proposal, all of the terms and
conditions of such Acquisition Proposal and delivery of complete copies of all
documents reflecting or related to the Acquisition Proposal, and (y) shall have
received from such person an executed customary confidentiality agreement
containing terms no less stringent in all material respects, than those terms
contained in the Confidentiality Agreements, including, in any event, a
prohibition on such person from purchasing or otherwise acquiring any capital
stock of the Company while such person is engaged in negotiations with the
Company, provided that the Company shall promptly notify Parent if and when
such prohibition is no longer in effect; provided that such
confidentiality agreement shall not contain any exclusivity provision or other
term that would prevent the Company from consummating the transactions
contemplated by this Agreement, and (D) the Company shall have made available
to Parent (or Parent’s counsel pursuant to a joint defense agreement) the same
nonpublic information being furnished to such person.  The Company shall promptly notify Parent of
any material amendments or revisions to any such Acquisition Proposal.

(c)       The
Board (or any committee thereof) shall not (i) except as permitted by this
Section 5.07, withdraw, modify or change, or propose publicly to withdraw,
modify or change, in a manner adverse to Parent, the Company Board
Recommendation (as defined in Section 5.08) (a “Change of Board Recommendation”), (ii) except as permitted by
this Section 5.07, approve or recommend, or propose publicly to approve or
recommend, any Acquisition Proposal, or (iii) cause the Company or any of its
Subsidiaries to enter into or approve any letter of intent, agreement in
principle, acquisition agreement or similar agreement relating to any
Acquisition Proposal (an “Acquisition
Agreement”), unless (with respect to taking any action
described in (i), (ii) or (iii)), prior to the date on which the Required
Shareholder Approval has been obtained, (A) subject to clause (B) below, the
Board has received an Acquisition Proposal theretofore described to Parent as
required by Section 5.07(b) which it has determined in good faith (after having
consulted with outside legal counsel and its independent financial advisors) is
a Superior Acquisition Proposal and has determined that the failure of the
Board to terminate this Agreement or withdraw, modify or change the Company
Board Recommendation would be inconsistent with the fiduciary duties of the
directors and (B) the Company has notified Parent in writing of all of the
terms and conditions of the Superior Acquisition Proposal together with
delivery to Parent of complete copies of all documents reflecting or related to
such Superior Acquisition Proposal and of the determinations described in
clause (A) above and of its intent to take such action, and has taken into
account any revised proposal made by Parent to the Company (a “Revised Parent Proposal”)
within five (5) business days after Parent’s receipt of such notice and again
has

 42

determined in good faith after consultation with its outside legal
counsel and independent financial advisors that such Acquisition Proposal (as
the same may have been modified or amended) remains a Superior Acquisition
Proposal; provided, however, that if a Revised Parent Proposal
has been made, and the Acquisition Proposal has been modified or amended after
the Revised Parent Proposal was made, then the Company shall promptly notify
Parent in writing of all of the terms and conditions of such modification or
amendment together with delivery of complete copies of all documents reflecting
or related to such modification or amendment, and any such modification or
amendment to such Acquisition Proposal shall be deemed to be a new Acquisition
Proposal for purposes of re-starting, as of the date of Parent’s receipt of
such notice, the five (5) business day period described above in this clause
(B).  Notwithstanding the foregoing, if
the Board (or any committee thereof) makes a Change of Board Recommendation
that is either (a) made in connection with a Superior Acquisition Proposal that
is an Acquisition Proposal described in clause (ii) of the definition of
Acquisition Proposal or (b) made pursuant to Section 5.07(e) (either such
Change of Board Recommendation described in clauses (a) or (b), a “Specified Change of Board Recommendation”),
then, to the extent permitted under the WBCA (including pursuant to subsection
(2)(a) of Section 23B.11.030 of the WBCA), the Company shall take all actions
as necessary to call, give notice of, convene and hold the Special Meeting so
as to permit the Special Meeting to be held in compliance with Section 5.09
without a recommendation of the Board.

(d)      The
term “Acquisition Proposal”
shall mean any offer or proposal (whether or not in writing and whether or not
delivered to the Company’s shareholders generally), from any person to acquire,
in a single transaction or series of transactions, by merger, tender offer,
stock acquisition, asset acquisition, consolidation, liquidation, business
combination or otherwise (i) at least 50% of any class of equity securities of
the Company, or (ii) assets of the Company and/or one or more of its
Subsidiaries which in the aggregate constitutes 35% or more of the net
revenues, net income or assets of the Company and its Subsidiaries, taken as a
whole, other than the transactions contemplated by this Agreement. The term “Superior Acquisition Proposal”
shall mean any bona fide unsolicited written Acquisition Proposal on terms more
favorable to the holders of Shares than the transactions contemplated by this
Agreement, taking into account all of the terms and conditions of such proposal
and this Agreement (including any proposal by Parent to amend the terms of the
transactions contemplated by this Agreement), as well as the anticipated
timing, conditions and prospects for completion of such Acquisition Proposal; provided
further, that if any negotiations with a third party related to an
Acquisition Proposal that are not initiated, solicited or knowingly encouraged
in violation of this Section 5.07 in compliance with subsection (b) above
result in a revised bona fide Acquisition Proposal from such third party being
made to the Company, then such revised Acquisition Proposal shall also be
considered a bona fide Acquisition Proposal not initiated, solicited or
knowingly encouraged in violation of this Section 5.07.

(e)       Nothing
in this Agreement shall prohibit or restrict the Board, in circumstances not
involving an Acquisition Proposal, from effecting a Change of Board
Recommendation to the extent that the Board determines in good faith (after
consultation with outside legal counsel) that such action is necessary under
applicable law in order for the directors to comply

 43
 

with their fiduciary duties to the Company’s shareholders.  The Company shall give Parent and Merger Sub
written notice of any such action taken by the Board not later than the
business day next succeeding the day on which such action is taken, setting
forth in reasonable detail the action taken and the basis therefore.

(f)       Nothing
contained in this Section 5.07 or elsewhere in this Agreement shall prohibit
the Company from (i) taking and disclosing to its shareholders a position
contemplated by Rule 14d-9 and 14e-2(a) promulgated under the Exchange Act or
(ii) making any disclosure to the Company’s shareholders if, in the good faith
judgment of the Board, after consultation with its outside counsel, failure so
to disclose would be inconsistent with its fiduciary duties under applicable
law or such disclosure would be necessary to comply with the Company’s
obligations under federal securities laws or the rules of the NYSE; provided
that any such disclosure made pursuant to clause (i) or (ii) (other than a “stop,
look and listen” letter or similar communication of the type contemplated by
Rule 14d-9(f) under the Exchange Act) shall be deemed to be a Change of Board
Recommendation unless the Board expressly reaffirms to the Company’s
shareholders in such disclosure the Company Board Recommendation.

Section 5.08.          Preparation
of the Proxy Statement.

(a)       As
soon as reasonably practicable following the date of this Agreement, the
Company shall prepare a preliminary proxy statement relating to the meeting of
the Company’s shareholders to be held in connection with the Merger (together
with any amendments thereof or supplements thereto, in each case in the form or
forms mailed to the Company’s shareholders, the “Proxy Statement”) and
file the Proxy Statement with the SEC. 
Parent and Merger Sub shall cooperate with the Company in the
preparation and filing of the Proxy Statement. 
The Proxy Statement shall include a recommendation of the Board (the “Company Board Recommendation”) that its
shareholders vote in favor of the Merger and this Agreement (subject to Section
5.07 hereof).  The Company shall use its
reasonable best efforts to have the Proxy Statement cleared by the SEC as
promptly as practicable after such filing. 
The Company shall use its reasonable best efforts to cause the Proxy
Statement to be mailed to the Company’s shareholders as promptly as practicable
and, in any event, within five (5) business days after the Proxy Statement is
cleared by the SEC.

(b)      If
at any time prior to the Effective Time any event shall occur that should be
set forth in an amendment of or a supplement to the Proxy Statement, the
Company shall prepare and file with the SEC such amendment or supplement as
soon thereafter as is reasonably practicable. 
Parent, Merger Sub and the Company shall cooperate with each other in
the preparation of the Proxy Statement, and the Company shall notify Parent of
the receipt of any comments of the SEC with respect to the Proxy Statement and
of any requests by the SEC for any amendment or supplement thereto or of
additional requests by the SEC for any amendment or supplement thereto or for
additional information, and shall provide to Parent promptly copies of all correspondence
between the Company or any representative of the Company and the SEC with respect
to the Proxy Statement.  The Company
shall give Parent and its counsel the opportunity to review the Proxy Statement
and all responses to requests for additional 

 44
 

information by, and replies to comments of, the SEC before their being
filed with, or sent to, the SEC.  Each of
the Company, Parent and Merger Sub shall use its reasonable best efforts after
consultation with the other parties hereto, to respond promptly to all such
comments of and requests by the SEC.

Section 5.09.          Shareholders’
Meeting.  The Company shall, through
its Board, take all action necessary, in accordance with and subject to the
WBCA and its articles of incorporation and bylaws, to duly call, give notice of
and convene and hold a special meeting of its shareholders not earlier than
thirty (30) calendar days, but in no event later than fifty (50) calendar days,
after the Proxy Statement is first mailed to shareholders, to consider and vote
upon the adoption and approval of this Agreement and the Merger (such special
shareholder meeting, the “Special
Meeting”), provided, that such later date may be extended to
the extent reasonably necessary to permit the Company to file and distribute
any material amendment to the Proxy Statement as is required by applicable
law.  The Company shall include in the
Proxy Statement the Company Board Recommendation and the Board shall use its
reasonable best efforts to obtain the approval of the Merger and this
Agreement, subject to the duties of the Board to make any further disclosure to
the shareholders (which shall not, unless expressly stated, constitute a
withdrawal or adverse modification of such recommendation) and subject to the
right to withdraw, modify or change such recommendation in accordance with
Section 5.07 hereof.  Notwithstanding the
foregoing, if a Change of Board Recommendation (other than a Specified Change
of Board Recommendation) occurs, the Company shall not be obligated to call,
give notice of, convene and hold the Special Meeting.

Section 5.10.          Notification
of Certain Matters.  Parent and the
Company shall use their reasonable best efforts to promptly notify each other
of:  (a) 
any notice or other communication from any person alleging that the
Consent of such person is or may be required in connection with the
transactions contemplated by this Agreement if such Consent would be material
to the transactions; (b) any material notice or other communication from any
governmental or regulatory agency or authority in connection with the
transactions contemplated by this Agreement or regarding any violation, or
alleged violation, of law; (c) any actions, suits, claims, investigations or
proceedings in connection with the transactions contemplated by this Agreement
commenced or, to the best of its knowledge, threatened against or involving or
otherwise affecting the Company or any of its Subsidiaries; or (d) the
occurrence or non-occurrence of any fact or event which would be reasonably
likely to cause any condition set forth in Article VI not to be satisfied; provided,
however, that no such notification, nor the obligation to make such
notification, shall affect the representations, warranties or covenants of any
party or the conditions to the obligations of any party hereunder.

Section 5.11.          State
Takeover Laws.  If any “fair price,” “moratorium,”
“control share acquisition,” “interested shareholder” or other similar
anti-takeover statute or regulation (each a “Takeover Statute”) other
than those contained in Chapter 23B.19 of the WBCA is or may become applicable
to the Merger or the other transactions contemplated by this Agreement, each of
Parent, Merger Sub and the Company and their respective boards shall grant such
approvals and take such actions as are necessary so that such transactions may
be consummated as 

 45
 

promptly as practicable on the terms
contemplated by this Agreement, and otherwise act to eliminate or minimize the
effects of such Takeover Statutes.

Section 5.12.          Shareholder
Litigation.  The Company shall give
Parent the opportunity to participate in the defense of any shareholder
litigation against the Company and/or its officers or directors relating to the
transactions contemplated by this Agreement.

Section 5.13.          Merger
Sub.  Parent will take all action
necessary to cause Merger Sub to perform its obligations under this Agreement
and to consummate the Merger on the terms and conditions set forth in this
Agreement.

Section 5.14.          Compliance
with Export, Embargo and Defense Controls. 
The Company shall take all actions, including the adoption of a
Company-wide compliance policy that is reasonably acceptable to the Purchaser,
as may be reasonably necessary to ensure that, from and after the Effective
Time, the operation and governance of the Company and its Subsidiaries will
comply with and be permissible under (i) the Export Administration Regulations
(as set forth in 15 C.F.R. Part 730 et seq.), (ii) Executive Orders of the
President and implementing regulations regarding embargoes administered by the
United States Office of Foreign Assets Control under 31 C.F.R. Chapter V and
(iii) the International Traffic in Arms Regulations.

Section 5.15.          CFIUS
Notice.  Each of Parent and the
Company shall use its reasonable best efforts to obtain as promptly as
reasonably practicable a written notification issued by the Committee on
Foreign Investment in the United States (“CFIUS”) that CFIUS has concluded a review of a notification
voluntarily filed jointly by Parent and the Company pursuant to the
requirements of the 1988 Exon-Florio provision of the Defense Production Act of
1950, as amended, and has determined not to conduct a full investigation or, if
a full investigation is deemed to be required, notification that the United
States government will not take action to prevent the consummation of the
transactions contemplated by this Agreement (such determination or notification,
the “CFIUS Notice”).

ARTICLE
VI

CONDITIONS
TO CONSUMMATION OF THE MERGER

Section 6.01.          Conditions
to the Obligations of Each Party. 
The respective obligations of Parent, Merger Sub and the Company to
consummate the Merger are subject to the satisfaction or waiver, on or prior to
the Closing Date, of each of the following conditions:

(a)       Shareholder
Approval.  The shareholders of the
Company shall have duly adopted this Agreement, pursuant to the requirements of
the Company’s articles of incorporation and by-laws and applicable law (the “Required Shareholder Approval”).

(b)      Injunctions;
Illegality.  The consummation of the
Merger shall not be restrained, enjoined or prohibited by any order, judgment,
decree, injunction or ruling of a court of 

 46
 

competent jurisdiction or any Governmental Entity and there shall not
have been any statute, rule or regulation enacted, promulgated or deemed
applicable to the Merger by any Governmental Entity which prevents the
consummation of the Merger or has the effect of making the Merger illegal.

(c)       HSR
and Other Antitrust Regulatory Clearances. (i) Any applicable waiting
period (or any extension thereof), filings or approvals under the HSR Act that
are required in order to permit the consummation of the Merger under the HSR Act
shall have expired, been terminated, been made or been obtained and (ii) any
applicable waiting period (or any extension thereof), filings or approvals
under any of the applicable statutes or regulations identified in Section
6.01(c)(ii) of the Company Disclosure Schedule that are required in order to
permit the consummation of the Merger thereunder, or that otherwise shall have
been agreed by Parent and the Company to be specified therein, shall have
expired, been terminated, been made or been obtained.

(d)      Government
Consents or Filings.  The Consents of
Governmental Entities, including filings, if any, with Governmental Entities
set forth in Section 6.01(d) of the Company Disclosure Schedule shall have been
obtained or made.

Section 6.02.          Conditions
to the Obligations of Parent and Merger Sub.  The obligations of Parent and Merger Sub to
consummate the Merger are subject to the satisfaction or waiver by Parent on or
prior to the Closing Date of the following further conditions:

(a)       Performance.  The Company shall have performed in all
material respects its covenants and obligations under this Agreement required
to be performed by it on or prior to the Closing Date.

(b)      Representations
and Warranties. (i) The representations and warranties of the Company
contained in Section 3.01 (Organization and Qualification; Subsidiaries),
Section 3.02 (Articles of Incorporation and By-Laws), Section 3.03
(Capitalization), Section 3.04 (Authority Relative to this Agreement), Section
3.05 (No Conflict; Required Filings and Consents) and Section 3.22 (Opinion of
Financial Advisor) of this Agreement shall be true and correct in all material
respects, and the representations and warranties of the Company contained in
the first sentence of Section 3.17 (Absence of Certain Material Adverse
Changes) shall be true and correct, in each case both when made and as of the
Closing Date, as if made at and as of such time (except to the extent expressly
made as of an earlier date, in which case as of such date) and (ii) all other
representations and warranties of the Company contained in this Agreement shall
be true and correct (without giving effect to any qualification as to
materiality or Material Adverse Effect contained in any specific representation
or warranty) as of the Closing Date as if made on and as of the Closing Date,
except (A) for changes contemplated or permitted by this Agreement, (B) that
the accuracy of representations and warranties that by their terms speak as of
another date will be determined as of such date and (C) where any failures of
any such representations and warranties to be so true and correct at and as of
the Closing Date, or such other date, as applicable, would not, individually or
in the aggregate, have a Material Adverse Effect.  Parent shall have received a certificate of
the 

 47
 

Company, executed by the Chief Executive Officer and Chief Financial
Officer of the Company, as to the satisfaction of the conditions set forth in
Sections 6.02(a) and (b).

(c)       Founder Non-Competition Agreement.
No actions shall have been taken by the Founder that would constitute a breach
of his obligations under the Founder Non-Competition Agreement upon its
effectiveness.

(d)   Resignations.
Parent shall have received evidence reasonably satisfactory to it that,
effective as of the Effective Time, all of the members of the Board of
Directors and officers of the Company shall have resigned from the Board of
Directors of, and from their positions as officers of, the Company.

Section 6.03.          Conditions
to the Obligations of the Company. 
The obligations of the Company to consummate the Merger are subject to
the satisfaction or waiver by the Company on or prior to the Closing Date of
the following further conditions:

(a)       Performance.  Each of Parent and the Merger Sub shall have
performed in all material respects its covenants and obligations under this
Agreement required to be performed by it on or prior to the Closing Date.

(b)      Representations
and Warranties.  The representations
and warranties of Parent and the Merger Sub contained in this Agreement, to the
extent qualified with respect to materiality, shall be true and correct in all
respects, and, to the extent not so qualified, shall be true and correct in all
material respects, at and as of the Closing Date as if made at and as of such
time, except that the accuracy of representations and warranties that by their
terms speak as of the date of this Agreement or some other date will be
determined as of such date.  The Company
shall have received certificates of each of Parent and Merger Sub, executed by
their respective Chief Executive Officer and Chief Financial Officer, as to the
satisfaction of the conditions set forth in Sections 6.03(a) and (b).

ARTICLE
VII

TERMINATION;
AMENDMENTS; WAIVER

Section 7.01.          Termination.  This Agreement may be terminated and the
Merger contemplated hereby may be abandoned at any time prior to the Effective
Time, notwithstanding approval thereof by the shareholders of the Company:

(a)       by
the mutual written consent of Parent and the Company;

(b)      by
Parent or the Company, if the Effective Time shall not have occurred on or
prior to March 20, 2008 (as extended pursuant to the following proviso, the “Initial Termination Date”);
provided that if the Company does not file a Notification and Report
Form, including required exhibits and schedules, relating to the Merger and the
transactions contemplated by this Agreement, as required by the HSR Act within
thirty (30) calendar days after the date of this Agreement, or within such
longer period as may have been agreed to 

 48
 

pursuant to Section 5.04(a), the Initial Termination Date shall be
extended by the number of calendar days in excess of thirty (30) (or, if
applicable, the number of days in such longer period) that elapse after the
date of this Agreement prior to the date on which the Company makes such
filing; provided  further, that if all of the conditions set forth
in Article VI have been satisfied as of the Initial Termination Date other than
(x) the conditions (the “Antitrust
Regulatory Conditions”) set forth in Section 6.01(b) (to the
extent that the order, judgment, decree, injunction or ruling relates to a
violation or alleged violation of antitrust, trade regulation or competition
laws) or Section 6.01(c), (y) the last sentence of Section 6.02(b) and (z) the
last sentence of Section 6.03(b), the Initial Termination Date shall be
automatically extended to June 20,
2008 (except that such date shall be deemed to have been extended by the
same number of days, if any, as the Initial Termination Date shall have been
extended pursuant to the first proviso set forth above) (the “Extended Termination Date”)
and Parent, Merger Sub or the Company shall be entitled to terminate this
Agreement under this Section 7.01(b) only if the Effective Time shall not have
occurred on or prior to the Extended Termination Date; provided  further,
that if all of the conditions set forth in Article VI have been satisfied as of
the Extended Termination Date other than (1) the conditions (the “Foreign Antitrust Regulatory Conditions”) set forth in
Section 6.01(b) (to the extent that the order, judgment, decree, injunction or
ruling relates to a violation or alleged violation of antitrust, trade
regulation or competition laws of the United Kingdom, Australia, Germany or
South Africa (the “Foreign Regulatory
Jurisdictions”)) or Section 6.01(c)(ii), (2) the last sentence of
Section 6.02(b) and (3) the last sentence of Section 6.03(b), the Extended
Termination Date shall be automatically extended to September 20, 2008 (except
that such date shall be deemed to have been extended by the same number of
days, if any, as the Initial Termination Date shall have been extended pursuant
to the first proviso set forth above) (the “Final
Termination Date”) and Parent, Merger Sub or the Company shall be entitled
to terminate this Agreement under this Section 7.01(b) only if the Effective
Time shall not have occurred on or prior to the Final Termination Date; provided
further, that the right to terminate this Agreement pursuant to this
Section 7.01(b) shall not be available to any party whose breach of the
covenants set forth in Sections 5.03(a), 5.04, 5.08 or 5.09 has been the cause
of, or resulted in, the failure of the Merger to be consummated by the Initial
Termination Date or the Final Termination Date, as applicable;

(c)       by
Parent or the Company if any court of competent jurisdiction or other
Governmental Entity shall have issued, enacted, entered, promulgated or
enforced any law, order, judgment, decree, injunction or ruling or taken any
other action (that has not been vacated, withdrawn or overturned) restraining,
enjoining or otherwise prohibiting the Merger and such law, order, judgment,
decree, injunction, ruling or other action shall have become final and
nonappealable; provided that the party seeking to terminate pursuant to
this Section 7.01(c) shall have used its reasonable best efforts to challenge
such law, order, judgment, decree, injunction or ruling;

(d)      by
the Company, (i) if there shall have occurred, on the part of Parent or Merger
Sub, a breach of any representation, warranty, covenant or agreement contained
in this Agreement that (x) would result in a failure of a condition set forth
in Section 6.03(a) or Section 6.03(b) and (y) which is not curable or, if
curable, is not cured within thirty (30) 

 49
 

calendar days after written notice of such breach is given by the
Company to Parent, or (ii) if a third party, including any group, shall have
made a Superior Acquisition Proposal and the Board has taken any of the actions
referred to in clauses (i), (ii) or (iii) of Section 5.07(c) (but only after
compliance by the Board and the Company (1) with the requirements of clauses
(A) and (B) thereof and (2) with the last sentence of Section 5.07(c));

(e)       by
Parent, if there shall have occurred, on the part of the Company, a breach of
any representation, warranty, covenant or agreement contained in this Agreement
that (x) would result in a failure of a condition set forth in Section 6.02(a)
or Section 6.02(b) to be satisfied and (y) which is not curable or, if curable,
is not cured within thirty (30) calendar days after written notice of such
breach is given by Parent to the Company;

(f)       by
Parent if the Special Meeting has been duly held and the Required Shareholder
Approval referred to in Section 6.01(a) shall not have been obtained by reason
of the failure to obtain the requisite vote at such Special Meeting or at any
adjournment or postponement thereof; or

(g)      by
Parent, if any of the following shall have occurred:  (i) the Board (or any committee thereof)
shall have failed to recommend that the Company’s shareholders vote to adopt
this Agreement and approve the Merger; (ii) a Change of Board Recommendation;
(iii) the Company shall have failed to include in the Proxy Statement the
Company Board Recommendation or a statement to the effect that the Board has
determined and believes that the Merger is in the best interests of the Company’s
shareholders; (iv) the Company shall have entered into any Acquisition
Agreement relating to any Acquisition Proposal or there shall have been
consummated a transaction with respect to an Acquisition Proposal; (v) a
tender or exchange offer relating to Shares shall have been commenced and the
Company shall not have published or sent to its shareholders, on or before the
later of: (x) one business day following the expiration of any outstanding five
business-day period for receipt of a Revised Acquisition Proposal pursuant to
Section 5.07(c) or (y) fifteen business days after the commencement of such
tender or exchange offer, a statement disclosing that the Board recommends
rejection of such tender or exchange offer; or (vi) the Board shall have
recommended acceptance of a third party tender or exchange offer relating to
Shares; provided that any termination pursuant to clause (i) or (ii) above
shall have occurred prior to the Special Meeting.

Section 7.02.          Effect
of Termination.  In the event of the
termination of this Agreement pursuant to Section 7.01, this Agreement shall
forthwith become void and have no effect, without any liability on the part of
any party or its respective former, current or future general or limited
partners, managers, members, directors, officers or shareholders, affiliates or
agents, other than pursuant to the provisions of this Section 7.02, Section
7.03, Article VIII (excluding Section 8.01 and Section 8.11) and the
confidentiality obligations set forth in Section 5.02, which shall survive any
such termination.  Nothing contained in
this Section 7.02 shall relieve any party from liability for any breach of this
Agreement.

 50
 

Section 7.03.          Fees
and Expenses.

(a)       Whether
or not the Merger is consummated, except as otherwise provided herein, all
costs and expenses incurred in connection with the Merger, this Agreement and
the transactions contemplated by this Agreement shall be paid by the party
incurring such expenses.

(b)      In
the event that (x) the Company shall have terminated this Agreement pursuant to
Section 7.01(d)(ii), (y) Parent shall have terminated this Agreement pursuant
to Section 7.01(g) or (z) Parent shall have terminated this Agreement pursuant
to Section 7.01(f) and, after the date of this Agreement but prior to the date
of the Special Meeting, any person (other than Parent, Merger Sub or their
respective affiliates) has made to the Company an Acquisition Proposal or shall
have publicly announced an intention (whether or not conditional) to make a proposal
or offer relating to an Acquisition Proposal and, within twelve (12) months
following such termination, the Company or any of its Subsidiaries, directly or
indirectly, (i) enters into a definitive agreement for an Acquisition Proposal
with any person who has made an Acquisition Proposal or any affiliate of such
person between the date of this Agreement and the date of such termination or (ii)
consummates a transaction with respect to an Acquisition Proposal with any
person, then the Company shall promptly (and, in any event, within three
business days after the later of such termination by Parent, the execution of a
definitive agreement for an Acquisition Proposal or the consummation of such
Acquisition Proposal, as applicable, or in the case of such termination by the
Company, immediately upon such termination) pay to Parent a termination fee of
$69 million (the “Parent
Termination Fee”).  The
Company shall not withhold any amount from the Parent Termination Fee so long
as Parent shall have delivered to the Company a duly signed and completed IRS
Form W-8BEN (or any successor form thereto) claiming its entitlement as a
resident of Italy to an exemption from U.S. federal withholding tax with
respect to the Parent Termination Fee pursuant to the income tax treaty between
Italy and the United States. The Parent Termination Fee shall be payable by
wire transfer of immediately available funds.

(c)       In
the event that this Agreement is terminated pursuant to Section 7.01(b) or
Section 7.01(c) as a result of the failure to satisfy the Antitrust Regulatory
Conditions and provided that the condition set forth in Section 6.01(a) and all
conditions to the obligations of Parent and Merger Sub set forth in Section
6.02 have been satisfied on the date this Agreement is terminated (other than
the conditions set forth in the last sentence of Section 6.02(b)), Merger Sub
shall, and Parent shall cause Merger Sub to, promptly (and, in any event,
within three business days after such termination) pay to the Company $80
million (the “Termination and Expense
Reimbursement Fee”) as promptly as practicable following such
termination of this Agreement.  The
Termination and Expense Reimbursement Fee shall be payable by wire transfer of
immediately available funds.  The
Termination and Expense Reimbursement Fee shall be unconditionally guaranteed
by Parent pursuant to that certain Guarantee, in the form attached hereto as Exhibit
D, executed and delivered by it concurrently herewith.

(d)      The
parties hereto agree that the provisions contained in this Section 7.03 are an
integral part of the transactions contemplated by this Agreement, that the
damages resulting from the termination of this Agreement as set forth in
Sections 7.03(b) and (c) of this 

 51
 

Agreement are uncertain and incapable of accurate calculation and that
the amounts payable pursuant to Sections 7.03(b) and (c) hereof are reasonable
forecasts of the actual damages which may be incurred by the parties under such
circumstances. The amounts payable pursuant to Sections 7.03(b) and (c) hereof
constitute liquidated damages and not a penalty and shall be the sole monetary
remedy in the event of termination of this Agreement on the bases specified in
such Sections. If either party fails to pay to the other party any amounts due
under Sections 7.03(b) and (c) in accordance with the terms hereof, the
breaching party shall pay the costs and expenses (including legal fees and expenses)
of the other party in connection with any action, including the filing of any
lawsuit or other legal action, taken to collect payment.

(e)       Any
amounts not paid when due pursuant to this Section 7.03 shall bear interest
from the date such payment is due until the date paid at a rate equal to the
prime rate of Citibank N.A. in effect on the date such payment was required to
be made.

Section 7.04.          Amendment.  This Agreement may be amended by the Company,
Parent and Merger Sub at any time prior to the Effective Time, whether before
or after any approval of this Agreement by the shareholders of the Company,
but, after any such approval, no amendment shall be made which decreases the
Merger Price or which adversely affects the rights of the Company’s shareholders
hereunder without the approval of such shareholders.  This Agreement may not be amended except by
an instrument in writing signed on behalf of all the parties.

Section 7.05.          Extension;
Waiver.  Subject to the express
limitations herein, at any time prior to the Effective Time, Parent, on the one
hand, and the Company, on the other hand, may (i) extend the time for the
performance of any of the obligations or other acts of any other party hereto,
(ii) waive any inaccuracies in the representations and warranties contained
herein by any other party or in any document, certificate or writing delivered
pursuant hereto by any other party or (iii) unless prohibited by applicable
laws, waive compliance with any of the covenants or conditions contained in this
Agreement.  Any agreement on the part of
any party to any such extension or waiver shall be valid only if set forth in
an instrument in writing signed on behalf of such party.  The failure of any party to assert any of its
rights under this Agreement or otherwise will not constitute a waiver of such
rights.

ARTICLE
VIII

MISCELLANEOUS

Section 8.01.          Non-Survival
of Representations and Warranties. 
The representations and warranties made in this Agreement shall not
survive beyond the Effective Time. 
Notwithstanding the foregoing, the agreements set forth in Section 1.09,
Section 1.10, Section 2.01, Section 5.03(c), Section 5.06 and this Article VIII
shall survive the Effective Time for the applicable statute of limitations
(except to the extent a shorter period of time is explicitly specified
therein).

 52
 

Section 8.02.          Entire
Agreement; Assignment.

(a)       This
Agreement (including the documents and the instruments referred to herein)
together with the Confidentiality Agreements constitutes the entire agreement
and supersedes all prior agreements, understandings, representations and
warranties, both written and oral, among the parties to this Agreement with
respect to the subject matter hereof and thereof.  No representation, warranty, inducement,
promise, understanding or condition not set forth in this Agreement has been
made or relied upon by any of the parties.

(b)      Neither
this Agreement nor any of the rights, interests or obligations hereunder will
be assigned by any of the parties hereto (whether by operation of law or
otherwise) without the prior written consent of the other party.  Any purported assignment not permitted under
this Section 8.02(b) will be null and void ab initio.  Subject to the preceding sentence, this
Agreement will be binding upon, inure to the benefit of and be enforceable by
the parties and their respective successors and assigns.

Section 8.03.          Validity.  The invalidity or unenforceability of any
provision of this Agreement shall not affect the validity or enforceability of
any other provision of this Agreement, each of which shall remain in full force
and effect.

Section 8.04.          Notices.  All notices, requests, claims, demands and
other communications hereunder shall be in writing and shall be deemed to have
been duly given when delivered in person, by overnight courier or facsimile to
the respective parties as follows:

If to Parent or Merger Sub:

Luxottica Group S.p.A.

Via C. Cantù 2

20123 Milan, Italy

Facsimile:  011 39 02 8699 6550

Attention:  Enrico Cavatorta,
                   Chief Financial Officer

with a copy to:

Winston & Strawn LLP

200 Park Avenue

New York, New York  10166

Facsimile:  212 294 4700

Attention:  Jonathan Goldstein

If to the Company:

Oakley, Inc.

One Icon

Foothill Ranch, California 92610

Facsimile:  949 454 0394

Attention:  Cos Lykos,
                   Vice
President of Business Development

 53
 

with a copy to:

Skadden, Arps, Slate,
Meagher & Flom LLP

300 South Grand Avenue

Suite 3400

Los Angeles, California  90071

Facsimile:  213 687 5600

Attention:  Jerome L. Coben and Jeffrey
H. Cohen

or to such other address as the person to whom notice is given may have
previously furnished to the other in writing in the manner set forth above
(provided that notice of any change of address shall be effective only upon
receipt thereof).

Section 8.05.          Governing
Law; Jurisdiction.

(a)       This
Agreement shall be governed by and construed in accordance with the laws of the
State of New York, regardless of the laws that might otherwise govern under
applicable principles of conflicts of laws thereof, except that the laws of the
State of Washington shall govern the provisions of Sections 1.01 through 1.09,
5.06(a) and (c), 5.07 and 5.09 hereof to the extent that such provisions are
specifically applicable to the Merger, its authorization and the fiduciary
duties of directors of the Company relating thereto. In furtherance of the
foregoing, and subject to the exception set forth in the preceding sentence,
the internal law of the State of New York shall control the interpretation and
construction of this Agreement, even if, under such jurisdiction’s choice of
law or conflict of law analysis, the substantive law of some other jurisdiction
ordinarily would apply.

(b)      Each
of the Parties hereto irrevocably consents to the exclusive jurisdiction and
venue of the United States District Court for the Southern District of New York
or any New York State court located in New York County, State of New York, in
connection with any matter based upon or arising out of this Agreement or the
matters contemplated herein, agrees that process may be served upon them in any
manner authorized by the laws of the State of New York for such Persons and
waives and covenants not to assert or plead any objection that they might
otherwise have to such jurisdiction, venue and process.

Section 8.06.          Waiver
of Jury Trial.  EACH PARTY
ACKNOWLEDGES AND AGREES THAT ANY CONTROVERSY OR DISPUTE THAT MAY ARISE UNDER
THIS AGREEMENT IS LIKELY TO INVOLVE COMPLICATED AND DIFFICULT ISSUES AND
THEREFORE EACH SUCH PARTY HEREBY IRREVOCABLY AND UNCONDITIONALLY WAIVES ANY
RIGHT SUCH PARTY MAY HAVE TO A TRIAL BY JURY IN RESPECT OF ANY LITIGATION
DIRECTLY OR INDIRECTLY ARISING OUT OF OR RELATING TO THIS AGREEMENT OR THE
TRANSACTIONS CONTEMPLATED HEREBY.  EACH
PARTY CERTIFIES AND ACKNOWLEDGES THAT (i) NO REPRESENTATIVE, AGENT OR ATTORNEY
OF ANY OTHER PARTY HAS REPRESENTED, EXPRESSLY OR OTHERWISE, THAT SUCH OTHER
PARTY WOULD 

 54
 

NOT, IN THE EVENT OF LITIGATION, SEEK TO
ENFORCE THE FOREGOING WAIVER, (ii) EACH SUCH PARTY UNDERSTANDS AND HAS
CONSIDERED THE IMPLICATIONS OF THIS WAIVER, (iii) EACH SUCH PARTY MAKES THIS
WAIVER VOLUNTARILY AND (iv) EACH SUCH PARTY HAS BEEN INDUCED TO ENTER INTO THIS
AGREEMENT BY, AMONG OTHER THINGS, THE MUTUAL WAIVERS AND CERTIFICATIONS IN THIS
SECTION 8.06.

Section 8.07.          Descriptive
Headings, etc.  The descriptive
headings herein are inserted for convenience of reference only and are not
intended to be part of or to affect the meaning or interpretation of this
Agreement.  All references herein to “Articles,”
“Sections” and “Paragraphs” shall refer to corresponding provisions of this
Agreement unless otherwise expressly noted.

Section 8.08.          Counterparts;
Effectiveness.  This Agreement may be
executed in two or more identical counterparts, all of which shall be
considered one and the same agreement and shall become effective when
counterparts have been signed by each party and delivered to each other
party.  In the event that any signature
to this Agreement or any amendment hereto is delivered by facsimile
transmission or by e-mail delivery of a “pdf” format data file, such signature
shall create a valid and binding obligation of the party executing (or on whose
behalf such signature is executed) with the same force and effect as if such
facsimile or “.pdf” signature page were an original thereof.  No party hereto shall raise the use of a
facsimile machine or e-mail delivery of a “.pdf” format data file to deliver a
signature to this Agreement or any amendment hereto or the fact that such
signature was transmitted or communicated through the use of a facsimile
machine or e-mail delivery of a “.pdf” format data file as a defense to the
formation or enforceability of a contract and each party hereto forever waives
any such defense.

Section 8.09.          Parties
in Interest; No Third Party Beneficiaries.  This Agreement shall be binding upon and inure
solely to the benefit of the parties hereto and their successors and permitted
assigns, and, except as set forth in Sections 5.06(a), (b) and (c), nothing in
this Agreement, express or implied, is intended to confer upon any other person
any rights or remedies of any nature whatsoever under or by reason of this
Agreement.

Section 8.10.          Certain
Definitions.  Certain terms used in
this Agreement are defined as follows:

(a)       the
term “affiliate,” as applied to any person, shall mean any other person
directly or indirectly controlling, controlled by, or under common control
with, that person.  For the purposes of
this definition, “control” (including, with correlative meanings, the terms “controlling,”
“controlled by” and “under common control with”), as applied to any person,
means the possession, directly or indirectly, of the power to direct or cause
the direction of the management and policies of that person, whether through
the ownership of voting securities, by contract or otherwise, and a person
shall be deemed to control another person if the controlling person owns 25% or
more of any class of voting securities (or other ownership interest) of the
controlled person;

 55
 

(b)      the
term “business day” shall mean each day other than a Saturday, Sunday or a day
on which commercial banks and national stock exchanges located in New York, New
York, or Milan, Italy are closed or authorized by law to close;

(c)       the
term “Lien” shall mean a lien, claim, option, charge, security interest or
encumbrance (other than licenses or other agreements related to Intellectual
Property which are not intended to secure an obligation); and

(d)      the
term “person” shall include individuals, corporations, partnerships, trusts,
other entities and groups (which term shall include a “group” as such term is
defined in Section 13(d)(3) of the Exchange Act).

Section 8.11.          Specific
Performance.  The parties hereto
agree that irreparable damage would occur and that the parties would not have
any adequate remedy at law in the event that any of the provisions of this
Agreement were not performed in accordance with their specific terms or were
otherwise breached.  It is accordingly
agreed that the parties shall be entitled to an injunction or injunctions to
prevent breaches of this Agreement and to enforce specifically the terms and
provisions hereof, this being in addition to any other remedy to which they are
entitled at law or in equity, except as otherwise provided in Section 7.03(d).

 56
 

IN WITNESS WHEREOF, each
of the parties has caused this Agreement to be executed on its behalf by its
respective officer thereunto duly authorized, all as of the day and year first
above written.

	
   

  	
  LUXOTTICA GROUP S.P.A.

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
    /s/
  ANDREA GUERRA

  	
   

  
	
   

  	
   

  	
  Name:

  	
  Andrea Guerra

  
	
   

  	
   

  	
  Title:

  	
  Chief Executive
  Officer

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  NORMA ACQUISITION
  CORP.

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
    /s/
  ENRICO CAVATORTA

  	
   

  
	
   

  	
   

  	
  Name:

  	
  Enrico Cavatorta

  
	
   

  	
   

  	
  Title:

  	
  President

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  OAKLEY, INC.

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
    /s/
  D. SCOTT OLIVET

  	
   

  
	
   

  	
   

  	
  Name:

  	
  D. Scott Olivet

  
	
   

  	
   

  	
  Title:

  	
  Chief Executive
  Officer

  
					

 

 57
 

 

Schedule 6.01(c)(ii)

Antitrust and Competition Law
Clearances

The
applicable anti-trust, competition or other similar laws or regulations of:

1.     Australia

2.     Germany

3.     South Africa

4.     United Kingdom

 58

EXHIBIT A

AMENDED AND RESTATED

ARTICLES OF INCORPORATION

OF

OAKLEY, INC.

Article I

The name of the
Corporation is Oakley, Inc. (the “Corporation”).

Article
II

1.             The Corporation shall have
authority to issue one thousand (1,000) shares of common stock, each having a
par value of one penny ($.01) (the “Common Stock”).

2.             The shares of the Common Stock of
this Corporation may be issued by the Corporation from time to time for such
consideration as from time to time may be fixed by the Board of Directors of the Corporation; and all issued shares of the
Common Stock of the Corporation shall be deemed fully paid and
non-assessable.

Article
III

The
street address of the registered office of the Corporation in the State of
Washington is 925 Fourth Avenue, Suite 2900, Seattle, Washington
98104-1158 and the name of the registered agent of the Corporation at such
address is PTSGE Corp.

Article
IV

A director of the
Corporation shall not be personally liable to the Corporation or its
shareholders for monetary damages for conduct as a director, except for:

a.             Acts or omissions involving
intentional misconduct by the director or a knowing violation of law by the
director;

b.             Conduct violating RCW 23B.08.310 of
the Washington Business  Corporation Act, as amended from
time to time (the “Act”)(which involves certain distributions by the
Corporation);

c.              Any transaction from which the director will personally receive a benefit in money,
property, or services to which the director is not legally entitled.

If the Act is amended to
authorize corporate action further eliminating or limiting the personal
liability of directors or officers, then the liability of a director or officer 

 

of the Corporation shall be eliminated or limited to the fullest extent
permitted by the Act, as so amended. The provisions of this Article IV shall be  deemed to be a contract with each director and officer of  the Corporation who serves as such at any time while
such provisions are in effect, and each director and officer entitled to the benefits
hereof shall be deemed to be serving as such in reliance on the provisions of this Article IV. Any  repeal or modification of
this Article IV by the  shareholders of the
Corporation shall not adversely affect
any right  or
protection of a director or officer
of the Corporation with respect to any acts or omissions of such director or
officer occurring prior to such repeal or modification.

Article V

1.             The Corporation
shall indemnify its directors and officers to the full extent permitted by
applicable law. The Corporation shall advance expenses for such persons
pursuant to the terms set forth in the Bylaws.

2.             The Board of
Directors may take such action as is necessary to carry out these
indemnification and expense advancement provisions. It is expressly empowered
to adopt, approve and amend from time to time such Bylaws, resolutions,
contracts or further indemnification and expense advancement arrangements
implementing these provisions as may be permitted by law, including the
purchase and maintenance of insurance. Such Bylaws, resolutions, contracts or
further arrangements shall include but not be limited to implementing the
manner in which determinations as to any indemnity or advancement of expenses
shall be made.

3.             No amendment or
repeal of this Article V shall apply to or have any effect on any right to
indemnification provided hereunder with respect to acts or omissions occurring
prior to such amendment or repeal.

Article VI

1.             The number of
directors of the Corporation shall be specified in the Bylaws, and such number
may from time to time be increased or decreased in such manner as may be
prescribed in the Bylaws.

2.             Any director or the
entire Board of Directors may be removed from office at any time, at a duly
called meeting of shareholders, by the affirmative vote of shareholders which
satisfied the requirements of Article IX applicable to amendment, modification,
or repeal of these Articles.

3.             Vacancies in the
Board of Directors, including vacancies resulting from an increase in the
number of directors, shall be filled by a majority of the directors then in
office, though less than a quorum, by the sole remaining director or by action
of the shareholders. All directors elected to fill vacancies shall hold office
for a term expiring at the annual meeting of shareholders at which the term of
the class to which they have been elected expires and until his or her
successor shall have been elected qualified. No decrease in the number of
directors constituting the Board of Directors shall shorten or eliminate the
term of any incumbent director.

 2
 

 

Article
VII

1.             Any
action required or permitted to be taken at a shareholders’ meeting may be
taken without a meeting or a vote if either: (i) the action is taken by written
consent of all shareholders entitled to vote on the action; or (ii) for so long
as the Corporation is not a public company, the action is taken by written
consent of shareholders holding of record, or otherwise entitled to vote, in
the aggregate not less than the minimum number of votes that would be necessary
to authorize or take such action at a meeting at which all shares entitled to
vote on the action were present and voted.

2.             To
the extent that the Act requires prior notice of any such action to be given to
nonconsenting or nonvoting shareholders, such notice shall be given at least
one (1) day prior to the date on which the action becomes effective (or such
longer period as required by law, in the case
of a significant business transaction under RCW 23B.19.020(15)). The form of
notice shall be sufficient to apprise the nonconsenting or nonvoting
shareholder of the nature of the action to be effected
in a manner approved by the Board of Directors or by the committee or officers
to whom the Board of Directors has delegated that responsibility.

3.             Unless
these Articles of Incorporation provide for a greater voting requirement for any voting group of shareholders, the affirmative
vote or written consent of a majority of all of the votes entitled to be
cast by a voting group shall be sufficient, valid and effective to approve and authorize any acts of the Corporation that, under
the Act, would otherwise require the approval of two-thirds (2/3) of all
of the votes entitled to be cast, including, without limitation: (i) an
amendment to these Articles of Incorporation; (ii) the merger of the
Corporation into another corporation or the merger of one or more other
corporations into the Corporation; (iii) the acquisition
by another corporation of all of the outstanding shares of one or more classes
or series of capital stock of the Corporation; (iv) the sale, lease,
exchange or other disposition by the Corporation
of all or substantially all of its property otherwise than in the usual and
regular course of business; or (v) the dissolution of the Corporation.

4.             No
class or series of shares shall be entitled to vote as a voting group on the
matters set forth in subsections 1(a), (e) or
(f) of RCW 23B.10.040, or any successor provisions thereto.  No  class
or series of shares shall be entitled to vote as a voting group on a merger or
share exchange as otherwise provided for in RCW 23B.11.035, or any
successor provision thereto.

5.             In
furtherance and not in limitation of the powers conferred by the Act, the Board
of Directors is expressly authorized to make, adopt, repeal, alter, amenda and
rescind the Bylaws of the Corporation by a resolution adopted by a majority of
the directors. The shareholders shall also have the power to adopt, amend or
repeal the Bylaws of the Corporation as set forth therein.

6.             Special meetings of the
shareholders of the Corporation for any purpose may be called at any time by the Board of Directors or an authorized committee
of the Board of Directors, or by written demand to the Corporation’s Secretary
by shareholders representing at least ten percent (10%) of the shares entitled
to vote on any issue proposed to be considered at such proposed special
meeting.

7.             For purposes of these Articles, the
following capitalized terms shall have the meaning 

 3
 

 

set forth below. “Subsidiary”
means any Corporation or other entity of which a majority of the voting power
of the capital shares entitled to vote generally in the election of Directors
is owned, directly or indirectly, by the Corporation. “Voting Shares” shall
mean all Common Stock and any other shares entitled to vote for the election of
directors as of the date on which a determination of the number of outstanding
Voting Shares is being made under these Articles of Incorporation.

 

 4

EXHIBIT B

AMENDED AND RESTATED BYLAWS

OF

OAKLEY, INC.

ARTICLE I

SHAREHOLDERS

Section 1.               Annual
Meeting. An annual meeting of the shareholders for the election of directors
and for the transaction of such other business as may properly come before the
meeting shall be held each year on the date and at the time determined by the
Board of Directors. The failure to hold an annual meeting at the time stated in
these Bylaws does not affect the validity of any corporate action.

Section 2.               Special
Meetings. Except as otherwise provided by law, special meetings of shareholders
of this Corporation shall be held whenever called by the Board of Directors or
an authorized committee of the Board of Directors in accordance with the
provisions of these Bylaws.

Section 3.               Place of Meetings. Meeting of shareholders shall be
held at such place within or without the State of Washington as determined by
the Board of Directors, pursuant to proper notice.

Section 4.               Notice.
Written notice of each shareholders’ meeting stating the date, time, and place
and, in case of a special meeting, the purpose(s) for which such meeting is
called, shall be given by the Corporation not less than ten (10) (unless a
greater period of notice is required by law in a particular case) nor more than
sixty (60) days prior to the date of the meeting, to each shareholder of record
entitled to vote at such meeting unless required by law to send notice to all
shareholders regardless of whether or not such shareholders are entitled to
vote, to the shareholder’s address as it appears on the current record of
shareholders of this Corporation.

Section 5.               Waiver of
Notice. A shareholder may waive any notice required to be given by these
Bylaws, the Articles of Incorporation of this Corporation, as amended and
restated from time to time (the “Articles of Incorporation”), or the Washington
Business Corporation Act, as amended from time to time (the “Act”), before or
after the meeting that is the subject of such notice. A valid waiver is created
by any of the following three methods: (a) in writing, signed by the
shareholder entitled to the notice and delivered to the Corporation for
inclusion in its corporate records; (b) attendance at the meeting, unless the
shareholder at the beginning of the meeting objects to holding the meeting or
transacting business at the meeting; or (c) as to the consideration of a
particular matter that is not within the purpose or purposes described in the
meeting notice, the shareholders’ failure to object at the time of 

 

presentation
of such matter for consideration.

Section 6.               Quorum of
Shareholders. At any meeting of the shareholders, holders of a majority of the
votes of all the shares entitled to vote on a matter, represented by
shareholders of record in person or by proxy, shall constitute a quorum.

Once
a share is represented at a meeting, other than to object to holding the
meeting or transacting business, it is deemed to be present for quorum purposes
for the remainder of the meeting and for any adjournment of that meeting unless
a new record date is or must be set for the adjourned meeting. At such
reconvened meeting, any business may be transacted that might have been
transacted at the meeting as originally noticed.

Section 7.               Proxies.
Shareholders of record may vote at any meeting either in person or by proxy
executed in writing. A proxy is effective when received by the Secretary of the
Corporation or another officer or agent of the Corporation authorized to
tabulate votes for the Corporation. A proxy is valid for eleven (11) months
unless a longer period is expressly provided in the proxy.

Section 8.               Voting.
Subject to the provisions of the laws of the State of Washington, and unless
otherwise provided in the Articles of Incorporation, each outstanding share is
entitled to one (1) vote on each matter voted on at a shareholders’ meeting,
with all shares voting together as a single class.

Section 9.               Action by
shareholders.  Except as otherwise
provided for in the Articles of Incorporation of the Corporation and if a
quorum exists, the affirmative vote of a majority of all of the votes cast by a
voting group shall be sufficient, valid and effective to approve and authorize
any acts of the Corporation that, under the Act, would otherwise require the
approval of two-thirds (2/3) of all of the votes entitled to be cast,
including, without limitation: (i) an amendment to the Articles of
Incorporation; (ii) the merger of the Corporation into another corporation or
the merger of one or more other corporations into the Corporation; (iii) the acquisition
by another corporation of all of the outstanding shares of one or more classes
or series of capital stock of the Corporation; (iv) the sale, lease, exchange
or other disposition by the Corporation of all or substantially all of its
property otherwise than in the usual and regular course of business; or (v) the
dissolution of the Corporation.

Section 10.             Adjournment.
A majority of the shares represented at the meeting, even if less than a
quorum, may adjourn any meeting of the shareholders from time to time. At a
reconvened meeting at which a quorum is present, any business may be transacted
at the meeting as originally noticed. If a meeting is adjourned to a different
date, time or place, notice need not be given of the new date, time or place if
a new date, time or place is announced at the meeting before adjournment;
however, if a new record date of the adjourned meeting is or must be fixed in
accordance with the corporate laws of the State of Washington, notice of the
adjourned meeting must be given to persons who are shareholders as of the new
record date.

 2
 

 

Section 11.              Advance Notice Requirements for Shareholder Proposals
and Director Nominations. Any shareholder seeking to bring business before or
to nominate a director or directors at any meeting of shareholders, must
provide written notice thereof in accordance with this Section 11 The notice
must be delivered to, or mailed and received at, the principal executive
offices of the Corporation not less than (i) with respect to an annual meeting
of shareholders, one hundred twenty (120) calendar days in advance of the date
that the Corporation’s proxy statement was released to shareholders in
connection with the previous year’s annual meeting, except that if no annual
meeting of shareholders was held in the previous year or if the date of the
annual meeting has been changed by more than thirty (30) calendar days from the
date contemplated at the time of the previous year’s proxy statement, such
notice must be received by the Corporation a reasonable time before the
Corporation’s proxy statement is to be released, and (ii) with respect to a
special meeting of shareholders, a reasonable time before the Corporation’s
proxy statement is to be released.  The
Board of Directors may waive this advance notice requirement at its discretion,
and shall be deemed to have so waived such notice requirement if it does not
object to a shareholder proposal or director nomination presented without
adequate notice at the time it is made.

ARTICLE II

BOARD OF DIRECTORS

Section 1.                Powers of Directors. All corporate powers shall be
exercised by or under the authority of, and the business and affairs of the
Corporation shall be managed under the direction of, the Board of Directors,
except as otherwise provided by the Articles of 
Incorporation.

Section 2.                Number and Qualifications.  The number of directors shall be fixed from
time to time by resolution of a majority of the Board of Directors or by action
of the shareholders taken in accordance with Article I, Section 9 of these
Bylaws.  Directors must have reached the
age of majority.  Until modified in
accordance with the provisions of these Bylaws, the Board of Directors shall
consist of three (3) directors.

Section 3.                Election - Term of Office. Except as otherwise
provided in these Bylaws, the Board of Directors shall be elected by the
shareholders at the annual meeting of shareholders. Nominations of candidates
for election as directors at an annual meeting of shareholders may only be made
(a) by, or at the direction of, the Board of Directors or (b) by any
shareholder of the Corporation who is entitled to vote at the meeting and who
complies with the procedures set forth in Article I, Section 11 of these
Bylaws.  Each director shall hold office
for the term for which elected and until his or her successor shall have been
elected and qualified. If, for any reason, the directors shall not have been
elected at the designated annual meeting, they may be elected at a special
meeting of shareholders called for that purpose in the manner provided by these
Bylaws.

Section 4.                Regular
Meetings. Regular meetings of the Board of Directors shall be held immediately
following each annual meeting of shareholders and at such other 

 3
 

 

times
and at such places as the Board may determine, and no notice thereof need be
given.

Section 5.               Special
Meetings. Special meetings of the Board of Directors may be held at any time,
whenever called by the Chairman of the Board, President or Chief Executive
Officer, with notice thereof being given to each director by the officer
calling or directed to call the meeting.

Section 6.               Notice. No
notice is required for regular meetings of the Board of Directors. Notice of
special meetings of the Board of Directors, stating the date, time, and place
thereof, shall be given, where practicable, at least two (2) days prior to the
date of the meeting. The purpose of the meeting need not be given in the
notice. Such notice shall be given in the manner provided by Section 3 of
Article III of these Bylaws.

Section 7.               Waiver of
Notice. A director may waive notice of a special meeting of the Board either
before or after the meeting, and such waiver shall be deemed to be the
equivalent of giving notice. Attendance of a director at a meeting shall
constitute waiver of notice of that meeting unless said director, at the
beginning of the meeting, or promptly upon such director’s arrival, objects to
holding the meeting or transacting business at the meeting and does not
thereafter vote for or assent to action taken at the meeting. Any waiver by a
non-attending director must be in writing, signed by the director entitled to
the notice and delivered to the Corporation for inclusion in its corporate
records.

Section 8.               Quorum of
Directors. A majority of the members of the Board of Directors shall constitute
a quorum for the transaction of business. When a quorum is present at any
meeting, a majority of the members present thereat shall decide any question
brought before  such meeting, except as
otherwise provided by the Articles of Incorporation or by these Bylaws.

Section 9.               Adjournment.
A majority of the directors present, even if less than a quorum, may adjourn a
meeting and continue it to a later time. 
Notice of the adjourned meeting or of the business to be transacted
thereat, other than by announcement, shall not be necessary. At any adjourned
meeting at which a quorum is present, any business may be transacted which
could have been transacted at the meeting as originally called.

Section 10.             Resignation
and Removal. Any director of this Corporation may resign at any time by giving
written notice to the Board of Directors, its Chairman, or the President or
Secretary of this Corporation. Any such resignation is effective when the
notice is delivered, unless the notice specifies a later effective date. A
director, any class of directors, or the entire Board of Directors may be
removed as prescribed in the Articles of Incorporation.

Section 11.             Vacancies.
Unless otherwise provided by law, vacancies in the Board of Directors shall be
filled by a majority of the directors then in office, though less than a
quorum, by the sole remaining director or by action of the shareholders taken
in accordance with Article I, Section 9 of these Bylaws.

 4
 

 

Section 12.             Compensation.
By resolution of the Board of Directors, each director may be paid expenses, if
any, of attendance at each meeting of the Board of Directors (and each meeting
of any committees thereof), and may be paid a stated salary as director, or a
fixed sum for attendance at each meeting of the Board of Directors (and each
meeting of any committee thereof), or both. No such payment shall preclude any
director from serving this Corporation in any other capacity and receiving
compensation therefor.

Section 13.             Presumption
of Assent. A director of this Corporation who is present at a meeting of the
Board of Directors at which action on any corporate matter is taken shall be
presumed to have assented to the action taken unless:

a.               The
director objects at the beginning of the meeting, or promptly upon the director’s
arrival, to holding it or transacting business at the meeting;

b.              The
director’s dissent or abstention from the action taken is entered in the
minutes of the meeting; or

c.             The
director delivers written notice of dissent or abstention to the presiding
officer of the meeting before its adjournment or to the Corporation within a
reasonable time after adjournment.

The right of dissent or abstention is not available to a director who
votes in favor of the action taken.

Section 14.             Committees of the Board of Directors. The Board of
Directors is expressly authorized to create one or more committees of directors
in accordance with the provisions of Section 23B.08.250 of the Act. Each
committee must have two or more members, who serve at the pleasure of the Board
of Directors. The creation of a committee and appointment of members to it must
be approved by a majority of all the directors in office when such action is
taken or such other number of directors as may be required by Section
23B.08.250(2) of the Act. To the extent specified by the Board of Directors or
in the Articles of Incorporation or these Bylaws, each committee may exercise
the authority of the Board of Directors under Section 23B.08.010 of the Act;
provided, however, a committee may not: (a) authorize or approve a distribution
except according to a general formula or method prescribed by the Board of
Directors, (b) approve or propose to shareholders action that is required by
the Act to be approved by shareholders; (c) fill vacancies on the Board of
Directors or on any of its committees, (d) amend the Articles of Incorporation
pursuant to Section 23B.10.020 of the Act, (e) adopt, amend or repeal these
Bylaws, (f) approve a plan of merger not requiring shareholder approval, or (g)
authorize or approve the issuance or sale or contract for sale of shares, or determine
the designation and relative rights, preferences, and limitations of a class or
series of shares, except that, in the case of
this cause (g), the Board of Directors may authorize a committee, or a senior
executive officer of the Corporation, to do so within limits specifically
prescribed by the Board of Directors.

 5
 

 

ARTICLE III

SPECIAL MEASURES APPLYING TO

SHAREHOLDER AND/OR DIRECTOR ACTIONS

Section
1.           Action by Written Consent.
Any action required or permitted to be taken at an annual, regular or special
meeting of the shareholders or the Board of Directors may be accomplished
without a meeting if the action is taken by all the shareholders entitled to
vote thereon, or all the members of the Board, as the case may be.  Unless otherwise prohibited by the Articles
of Incorporation, action may also be taken by less than unanimous consent where
such consent has been signed by, as the case may be, shareholders representing
not less than the number of shares otherwise necessary to authorize such action
at a meeting at which all shares entitled to vote thereon were present and
voted, or by the majority (or such other number as may otherwise be required by
the Articles of Incorporation or these Bylaws for authorizing such action) of
the members of the Board of Directors. 
An action taken by unanimous or less than unanimous consent must be
evidenced by one or more written consents describing the action taken, signed
by the number of shareholders or directors required above, as the case may be,
either before or after the action is taken, and delivered to the Corporation
for inclusion in the minutes or filing with the Corporation’s records.

Action
taken by written consent of the shareholders is effective when all consents are
in the possession of the Corporation, unless the consent specifies a later
effective date. Action taken by written consent of the Board of Directors is
effective when the last director signs the consent, unless the consent
specifies a later effective date.

Section 2.             Telephonic
Meeting. Meetings of the shareholders and Board of Directors may be effectuated
by means of a conference telephone or similar communications equipment by means
of which all persons participating in the meeting can hear each other during
the meeting. Participation by such means shall constitute presence in person at
such meeting.

Section 3.             Oral and
Written Notice. Oral notice of a meeting of the Board of Directors may be
communicated in person or by telephone, email, wire or wireless equipment that
does not transmit a facsimile of the notice. Oral notice is effective when
communicated.

Written
notice may be transmitted by mail, reputable overnight or express delivery
service, or personal delivery; telegraph or teletype; or telephone, email,
wire, or wireless equipment that transmits a facsimile of the notice. Written
notice is effective at the earliest of the following:

a.          when dispatched by
telegraph, teletype or facsimile equipment, if such notice is sent to the
person’s address, telephone number or other number appearing on the records of
the Corporation;

b.         when received;

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c.           five (5) days
after its deposit in the U.S. mail if mailed with first class postage;

d.           the
day of delivery as shown on the delivery receipt or acknowledgment if delivered
by reputable overnight or express delivery service; or

e.             on the date shown on the
return receipt, if sent by registered or certified mail, return receipt requested, and
the receipt is signed by or  on behalf of the addressee.

ARTICLE IV

OFFICERS

Section
1.               Positions.  The officers of the Corporation shall be a
Chief Executive Officer, President and a Secretary.  In addition, the Board of Directors may
appoint a Chairman of the Board of Directors, Vice Chairman of the Board of
Directors, a Chief Financial Officer, one or more Vice Presidents and such
other officers and assistant officers to perform such duties as from time to
time it may deem appropriate. The Board of Directors may also delegate to any
other officer or officers of the Corporation the power to choose such other
officers and assistant officers and to prescribe their respective duties and
powers. No officer need be a shareholder or a director of this Corporation. Any
two or more offices may be held by the same person.

Section 2.               Appointment
and Term of Office. The officers of this Corporation shall be appointed
annually by the Board of Directors at the first meeting of the Board of
Directors held after each annual meeting of the shareholders. If officers are
not appointed at such meeting, such appointment shall occur as soon as possible
thereafter. Each officer shall hold office until a successor shall have been
appointed and qualified or until said officer’s earlier death, resignation or
removal.

Section 3.               Powers and
Duties. If the Board of Directors appoints persons to fill the following
officer positions, such officer shall have the powers and duties, as the Board
of Directors in its sole discretion may amend from time to time, set forth
below:

a.           Chairman of the Board
of Directors. The Chairman of the Board of Directors shall preside at all
meetings of the shareholders and of the Board of Directors. The Chairman of the
Board of Directors shall possess the same power as the Chief Executive Officer
and the President to sign all bonds, deeds, mortgages and any other agreements,
and such signature shall be sufficient to bind this Corporation. The Chairman
of the Board of Directors shall, subject to the direction and control of the
Board of Directors, have general supervision of the business of the
Corporation. The Chairman of the Board of Directors shall also perform such
other duties as the Board of Directors shall designate.

b.           Vice Chairman of the
Board of Directors. The Vice Chairman of the Board of Directors shall possess
the same power as the Chief Executive Officer and the 

 7
 

 

President
to sign all bonds, deeds, mortgages and any other agreements, and such
signature shall be sufficient to bind this Corporation. Unless the Chairman of
the Board of Directors has been appointed and is present, the Vice Chairman of
the Board of Directors shall preside at meetings of the shareholders and the
Board of Directors. The Vice Chairman of the Board of Directors shall also
perform such other duties as the Board of Directors, the Chairman of the Board
of Directors or the Chief Executive Officer shall designate.

c.             Chief Executive
Officer. The Chief Executive Officer shall, together with the Chairman of the
Board of Directors, if any, and subject to the direction and control of the
Board of Directors, have general supervision of the business of the
Corporation. The Chief Executive Officer shall, in the absence of the Chairman
of the Board of Directors and the Vice Chairman of the Board of Directors, if
any, preside at all meetings of the shareholders and the Board of Directors.

The
Chief Executive Officer may sign all bonds, deeds, mortgages, and any other
agreements, and such signature shall be sufficient to bind this Corporation.
The Chief Executive Officer shall perform such other duties as the Board of
Directors or the Chairman of the Board of Directors, if any, shall designate.

d.             President. The
President shall possess the power to sign all bonds,  deeds, mortgages and any other agreements, and such signatures
shall be sufficient to bind this Corporation.
The President shall perform such other duties as the Board of Directors, the
Chairman of the Board of Directors, if any, or the Chief Executive Officer
shall designate.

e.          Chief Operating Officer.
The Chief Operating Officer shall possess the same power as the President and
the Chief Executive Officer to sign all bonds, deeds, mortgages and any other
agreements, and such signature shall be sufficient to bind this Corporation.
The Chief Operating Officer shall also perform such other duties as the Board
of Directors, the Chairman of the Board of Directors, if any, or the Chief
Executive Officer shall designate.

f.           Vice Presidents. Each
Vice President shall have such powers and discharge such duties as may be
assigned from time to time to such Vice President by the Board of Directors,
the Chairman of the Board of Directors, if any, the Chief Executive Officer or
the President. The Board of Directors may select a specific title for a Vice
President of this Corporation which such title shall include the words “Vice
President” together with such other term or terms which may generally indicate
such Vice President’s rank and/or duties. During the absence or disability of
the Chairman of the Board of Directors (if one has been elected), the Chief
Executive Officer and the President, the Vice President (or in the event that
there be more than one Vice President, the
Vice Presidents in the order designated by the Board of Directors) shall
exercise all functions of the Chairman of the Board of Directors, if any, the
Chief Executive Officer and the President, except as limited by resolution of
the Board of Directors.

g.          Secretary. The Secretary shall:

 8
 

 

(1)           Prepare minutes of the
directors’ and shareholders’ meetings and keep them in one or more books
provided for that purpose;

(2)           Authenticate records of the
Corporation;

(3)           See that all notices
are duly given in accordance with the provisions of these Bylaws or as required
by law;

(4)           Be custodian of the
corporate records and of the seal of the Corporation (if any), and affix the
seal of the Corporation to all documents as may be required;

(5)           Keep a register of the
post office address of each shareholder which shall be furnished to the
Secretary by such shareholder;

(6)           Sign, with the
Chairman of the Board of Directors, if any, the President, the Chief Executive
Officer or a Vice President, certificates for shares of the Corporation,
the issuance of which shall have been authorized
by resolution of the Board of Directors;

(7)           Have general charge of
the stock transfer books of the Corporation; and

(8)            In general perform
all the duties incident to the office
of Secretary  and such other duties
as from time to time may be assigned to him or her by  the Board of Directors,
the Chairman of the  Board of Directors, if any, the President or the Chief Executive Officer.  In the Secretary’s absence, the Board of
Directors may appoint an assistant secretary to perform the Secretary’s duties.

h.           Chief Financial
Officer. The Chief Financial Officer shall have custody of the funds and
securities of the Corporation, shall keep full and accurate accounts of
receipts and disbursements of the Corporation in books belonging to the
Corporation and shall deposit all moneys and other valuable effects of the
Corporation in the name and to the credit of the Corporation in such
depositories as may be designated by the Board of Directors. The Chief
Financial Officer shall disburse the funds of the Corporation as may be ordered
by the Board of Directors, taking proper vouchers for such disbursements, and
shall render to the Chairman of the Board of Directors, if any, the President,
the Chief Executive Officer and the Board of Directors at its regular meetings,
or when the Chairman of the Board of Directors, if any, the President, the
Chief Executive Officer or the Board of Directors so requires, an account of
all of his or her transactions as Chief Financial Officer and of the financial
condition of the Corporation. If required by the Board of Directors, the Chief Financial
Officer shall give the Corporation a bond in such sum and with such surety or
sureties as shall be satisfactory to the Board of Directors for the faithful
performance of the duties of his or her office and for the restoration to the
Corporation, in case of his or her death, resignation, retirement or removal
from office, of all books, papers, vouchers, money and other property of
whatever kind in his or her possession or under his or her control belonging to
the Corporation.

 9
 

 

Section 4.               Salaries and Contract Rights. The Salaries, if any, of
the officers shall be fixed from time to time by the Board of Directors. The
appointment of an officer shall not of itself create a contract right.

Section 5.               Resignation
or Removal. Any officer of this Corporation may resign at any time by giving
written notice to the Board of Directors. Any such resignation is effective
when the notice is delivered, unless the notice specifies a later date, and
shall be without prejudice to the contract rights, if any, of such officer.

The
Board of Directors, by majority vote, may remove any officer or agent appointed
by it, with or without cause. The removal shall be without prejudice  to the contract rights, if any, of the person
so removed.

Section 6.               Vacancies.
If any office becomes vacant by any reason, the directors may appoint a
successor or successors who shall hold office for the unexpired term.

ARTICLE V

CERTIFICATES OF SHARES AND THEIR TRANSFER;

UNCERTIFICATED SHARES

Section 1.               Issuance of
Shares.  No shares of this Corporation
shall be issued unless authorized by the Board of Directors.  Such authorization shall include the maximum
number of shares to be issued and the consideration to be received.  A good faith determination by the Board that
the consideration received or to be received for the shares to be issued is
adequate is conclusive insofar as the adequacy of consideration relates to
whether the shares are validly issued, fully paid and nonassessable.

Section 2.               Issuance of
Certificated Shares. Unless the Board of Directors determines that the
Corporation’s shares are to be uncertificated, certificates for shares of the
Corporation shall be in such form as is consistent with the provisions of the
Act. The certificate shall be signed by original or facsimile signature of two
officers of the Corporation, and the seal of the Corporation may be affixed
thereto.

Section 3.               Transfer of Certificated Stock. Certificated shares of
stock may be transferred by delivery of the certificate accompanied by either
an assignment in writing on the back of the certificate or by a written power
of attorney to assign and transfer the same on the books of the Corporation,
signed by the record holder of the certificate. Shares shall be transferable on
the books of this Corporation, upon surrender thereof so assigned or endorsed.

Section 4.               Loss or
Destruction of Certificates. In case of the loss, mutilation or destruction of
a certificate of stock, a duplicate certificate may be issued upon such terms
as the Board of Directors shall prescribe.

 10
 

 

Section 5.               Issuance of
Uncertificated Shares. The Board of Directors may authorize the issue of some
or all of the shares of any or all of the Corporation’s classes or series of
stock without certificates; provided, however, that such authorization shall
not affect shares already represented by certificates until they are
surrendered to the Corporation. Within a reasonable time after the issue or
transfer of shares without certificates, the Corporation shall send the
shareholders, a written statement of the information required on certificates
by the Act. Said statement shall be informational to the shareholder and not
incontrovertible evidence of stock ownership.

The
statement shall be signed by original or facsimile signature of two officers of
the Corporation, and the seal of the Corporation may be affixed thereto.

Section
6.               Transfer of
Uncertificated Stock. Transfer of uncertificated shares of stock may be
accomplished by delivery of an assignment in writing or by a written power of
attorney to assign and transfer the same on the books of the Corporation,
signed by the record holder of the shares. Surrender of the written statement
shall not be a requirement for transfer of the shares so represented.

Section 7.               Record Date and Transfer Books. For the purpose of
determining shareholders who are entitled to notice of or to vote at any
meeting of shareholders or any adjournment thereof, or entitled to receive
payment of any dividend, or in order to make a determination of shareholders
for any other proper purpose, the Board of Directors may fix in advance a
record date for any such determination of shareholders, such date in any case
to be not more than seventy (70) days and, in case of a meeting of
shareholders, not less than ten (10) days prior to the date on which the
particular action, requiring such determination of shareholders, is to be
taken.

If no
record date is fixed for such purposes, the date on which notice of the meeting
is mailed or the date on which the resolution of the Board of Directors
declaring such dividend is adopted, as the case may be, shall be the record
date for such determination of shareholders.

When
a determination of shareholders entitled to vote at any meeting of shareholders
has been made as provided in this section, such determination shall apply to
any adjournment thereof, unless the Board of Directors fixes a new record date,
which it must do if the meeting is adjourned more than one hundred twenty (120)
days after the date fixed for the original meeting.

Section 8.               Voting
Record. The officer or agent having charge of the stock transfer books for
shares of this Corporation shall make at least ten (10) days before each
meeting of shareholders a complete record of the shareholders entitled to vote
at such meeting or any adjournment thereof, arranged in alphabetical order,
with the address of and the number of shares held by each. Such record shall be
produced and kept open at the time and place of the meeting and shall be
subject to the inspection of any shareholder during the whole time of the
meeting for the purposes thereof.

 11
 

 

ARTICLE VI

BOOKS AND RECORDS

Section 1.               Books of Accounts, Minutes and Share  Register.
The Corporation:

a.             Shall keep as
permanent records minutes of all meetings of its shareholders and Board of Directors,
a record of all actions taken by the shareholders or Board of Directors without
a meeting, and a record of all actions taken by a committee of the Board of
Directors exercising the authority of the Board of Directors on behalf of the
Corporation;

b.             Shall maintain appropriate
accounting records;

c.             Or its agent shall maintain a
record of its shareholders, in a format that permits preparation of a list of
the names and addresses of all shareholders, in alphabetical order by class of
shares showing the number and class of shares held by each; and

d.         Shall keep a copy of the following records at its principal  office:

(1)           The Articles of Incorporation;

(2)           The Bylaws or Restated Bylaws and all amendments to them  currently in effect;

(3)           The minutes of all shareholders’ meetings, and records of all actions taken by shareholders without a meeting, for the
past three (3) years;

(4)           Its financial statements for the past
three (3) years, including balance sheets showing in reasonable detail the
financial condition of the Corporation as of the close of each fiscal year, and
an income statement showing the results of its operations during each fiscal
year;

(5)           All written communications to shareholders generally within the past three (3) years;

(6)           A list of the names and business
addresses of its current directors and officers; and

(7)           Its most recent annual report
delivered to the Secretary of Sate of Washington.

 12
 

 

Section 2.               Copies of Resolutions. Any person
dealing with the Corporation may rely upon a copy of any of the records of the
proceedings, resolutions or votes of the Board of Directors or shareholders,
when certified by the President or Secretary.

ARTICLE
VII

INDEMNIFICATION
OF DIRECTORS, OFFICERS, EMPLOYEES AND AGENTS

Section 1.               Indemnification Rights of
Directors, Officers, Employees and Agents. The Corporation shall indemnify its
directors and officers and may indemnify its employees and agents (each an “Indemnified
Party”) to the full extent permitted by the Act or other applicable law, as
then in effect, and the Articles of Incorporation, against liability arising
out of a proceeding to which each such Indemnified Party was made a party
because the Indemnified Party is or was a director, officer, employee or agent
of the Corporation. The Corporation shall advance expenses incurred by each
such Indemnified Party who is a party to a proceeding in advance of final
disposition of the proceeding, as provided by applicable law, the Articles of Incorporation or by written agreement, which
written agreement may allow any required determinations to be made by any
appropriate person or body consisting of a member or members of the Board of
Directors, or any other person or body appointed by the Board of Directors, who
is not a party to the particular claim for which an Indemnified Party is
seeking indemnification, or independent legal counsel.

The Corporation is not obligated to indemnify an
Indemnified Party for any amounts paid in settlement of any proceeding without
the Corporation’s prior written consent to such settlement and payment. The
Corporation shall not settle any proceeding in any manner which would impose
any penalty or limitation on an Indemnified Party without such Indemnified
Party’s prior written consent. Neither the Corporation nor an Indemnified Party
may unreasonably withhold its consent to a proposed settlement.

Section 2.                Contract and
Related Rights.

a.           Contract Rights. The
right of an Indemnified Party to indemnification and advancement of expenses is
a contract right upon which the Indemnified Party shall be presumed to have
relied in determining to serve or to continue to serve in his or her capacity
with the Corporation. Such right shall continue as long as the Indemnified
Party shall be subject to any possible proceeding. Any amendment to or repeal
of this Article shall not adversely affect any right or protection of an
Indemnified Party with respect to any acts or omissions of such Indemnified
Party occurring prior to such amendment or repeal.

b.           Optional Insurance, Contracts and Funding.  The Corporation may:

(1)           Maintain insurance, at
its expense, to protect itself and any Indemnified Party against any liability,
whether or not the Corporation would have power to indemnify the Indemnified
Party against the same liability under Sections 23B.08.510 or .520 of the Act,
or a 

 13
 

 

successor
section or statute;

(2)           Enter into contracts
with any Indemnified Party in furtherance of this Article and consistent with
the Act; and

(3)           Create a trust fund,
grant a security interest, or use other means (including without limitation a
letter of credit) to ensure the payment of such amounts as may be necessary to
effect indemnification provided in this Article.

Section
3.                 Exceptions. Any other
provision herein to the contrary notwithstanding, the Corporation shall not be
obligated pursuant to the terms of these Bylaws to indemnify or advance
expenses to an Indemnified Party with respect to any proceeding:

a.           initiated or brought
voluntarily by an Indemnified Party and not by way of defense, except with respect
to proceedings brought to establish or enforce a right to indemnification under
these Bylaws, the Articles of Incorporation or any statute or law; but such
indemnification or advancement of expenses may be provided by the Corporation
in specific cases if the Board of Directors finds it to be appropriate;

b.        instituted by an
Indemnified Party to enforce or interpret the provisions hereof or the Articles
of Incorporation, if a court of competent jurisdiction determines that each of
the material assertions made by such Indemnified Party in such proceeding was
not made in good faith or was frivolous;

c.             to the extent such Indemnified
Party has otherwise actually received payment
(under any insurance policy or otherwise) of the amounts otherwise indemnifiable
hereunder; or

d.             if the Corporation is prohibited by
the Articles of Incorporation, the Act or
other applicable law as then in effect from paying such indemnification and/or
advancement of expenses.

ARTICLE VIII

AMENDMENT OF BYLAWS

Section
1.                By the Shareholders.
These Bylaws may be amended or repealed by a resolution duly adopted by not
less than a majority of the
shares entitled to vote thereon.

Section
2.                By the Board of
Directors. These Bylaws may be amended or repealed, or new Bylaws may be
adopted, by a resolution duly adopted by a majority of the whole Board of
Directors.

 14

Exhibit
C

CERTIFICATE
OF NON-FOREIGN STATUS - ENTITY

Section 1445 of the Internal Revenue Code of 1986, as
amended, provides that a transferee of a U.S. real property interest must
withhold tax if the transferor is a foreign person.  For U.S. tax purposes (including Section
1445), the owner of a disregarded entity (which has legal title to a U.S. real
property interest under local law) will be the transferor of the property and
not the disregarded entity.  To inform the
transferee that withholding of tax is not required, the undersigned hereby
certifies the following on behalf of [NAME OF TRANSFEROR]:

1.                                       [NAME
OF TRANSFEROR] is not a foreign corporation, foreign partnership, foreign
trust, or foreign estate (as those terms are defined in the Internal Revenue
Code and Income Tax Regulations);

2.                                       [NAME
OF TRANSFEROR] is not a disregarded entity as defined in Treasury Regulation
Section 1.1445-2(b)(2)(iii);

3.                                       [NAME
OF TRANSFEROR]’s U.S. employer identification number is _________________; and

4.                                       [NAME
OF TRANSFEROR]’s office address is:

[ADDRESS]

[NAME OF TRANSFEROR] understands that this
certification may be disclosed to the Internal Revenue Service by the
transferee and that any false statement contained herein could be punished by
fine, imprisonment, or both.

Under penalties of perjury I declare that I have
examined this certification and to the best of my knowledge and belief it is
true, correct and complete, and I further declare that I have authority to sign
this document on behalf of [NAME OF TRANSFEROR].

	
  

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  Name of Transferor:

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  Title:

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  Date:

  	
   

  
				

 

 

Exhibit
C

CERTIFICATE
OF NON-FOREIGN STATUS - INDIVIDUAL

Section 1445 of the Internal Revenue Code of 1986, as
amended, provides that a transferee of a U.S. real property interest must
withhold tax if the transferor is a foreign person.  To inform the transferee that withholding of
tax is not required, I, [NAME OF TRANSFEROR], hereby certify:

1.                                       I
am not a nonresident alien for purposes of U.S. income taxation;

2.                                       My
U.S. taxpayer identifying number (Social Security number) is
_________________________; and

3.                                       My
home address is:

[ADDRESS]

I understand that this certification may be disclosed
to the Internal Revenue Service by the transferee and that any false statement
I have made here could be punished by fine, imprisonment, or both.

Under penalties of perjury I declare that I have
examined this certification and to the best of my knowledge and belief it is
true, correct and complete.

 

	
  

  	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  Date:

  	
   

  
				

 

EXHIBIT D

GUARANTEE

This Guarantee is made as
of the 20th day of June, 2007 by Luxottica Group S.p.A.,
an Italian corporation (the “Guarantor”), in favor and for the benefit of Oakley, Inc., a Washington corporation (“Oakley”).

W
I T N E S S E T H

WHEREAS, the
Guarantor beneficially indirectly owns all of the issued and outstanding stock
of Norma Acquisition Corp., a Washington corporation (the “Payor”);
and

WHEREAS, the
Payor has entered into that certain Agreement and Plan of Merger, dated as of
the date hereof (as the same may be amended, supplemented or otherwise modified
from time to time, the “Merger Agreement”), with Oakley and the Guarantor, pursuant
to which the Guarantor has agreed to acquire all of the outstanding shares of
capital stock of Oakley through the merger (the “Merger”) of the Payor with and
into Oakley; and

WHEREAS,
pursuant to Section 7.03(c) of the Merger Agreement, if the Merger Agreement is
terminated under certain circumstances, Payor has agreed to pay to Oakley the
Termination and Expense Reimbursement Fee; and

WHEREAS, as an
inducement to Oakley to enter into the Merger Agreement, Guarantor has agreed
to guarantee Payor’s obligation to pay the Termination and Expense
Reimbursement Fee;

NOW, THEREFORE, in consideration of the foregoing premises and
for other good and valuable consideration, the receipt and sufficiency of which
are hereby acknowledged, the Guarantor hereby agrees as follows:

1.                                      DEFINED
TERMS.

(a)                                  Unless otherwise defined herein,
terms defined in the Merger Agreement and used herein shall have the meanings
given to them in the Merger Agreement.

(b)                                 The words “hereof,” “herein” and “hereunder”
and words of similar import when used in this Guarantee shall refer to this
Guarantee as a whole and not to any particular provision of this Guarantee, and
Section and paragraph references are to this Guarantee unless otherwise
specified.

(c)                                  The meanings given to terms defined
herein shall be equally applicable to both the singular and plural forms of
such terms.

2.                                      GUARANTEE.  Subject to
the provisions hereof, the Guarantor hereby unconditionally guarantees to
Oakley the due and punctual payment of the Termination and Expense
Reimbursement Fee by Payor when the same shall become due and payable.  Guarantor’s 

 1
 

liability
hereunder shall be and is specifically limited to payment of the Termination
and Expense Reimbursement Fee required to be made in accordance with the terms
of the Merger Agreement.  The Guarantor
and Oakley agree that this Guarantee constitutes a guarantee of payment and not
of collection.  The Guarantor agrees to
pay, on demand, and to save Oakley harmless against liability for, any and all
costs and expenses (including fees and disbursements of counsel) incurred or
expended by or on behalf of Oakley in connection with the enforcement of or
preservation of any rights under this Guarantee.

3.                                      GUARANTEE
ABSOLUTE AND UNCONDITIONAL.  (a) The Guarantor hereby agrees that its obligations
hereunder shall be unconditional, irrevocable, and absolute, irrespective of
(i) the validity or enforceability of the Merger Agreement, (ii) any amendment
to or modification of any of the terms or provisions of the Merger Agreement,
(iii) the absence of any action to enforce the Merger Agreement against the
Payor, (iv) any waiver or consent by Oakley with respect to any provisions of
the Merger Agreement, or (v) any other act or thing or omission, or delay to do
any other act or thing, which may or might in any manner or to any extent
either vary the risk of the Guarantor as an obligor in respect of the
obligations provided for in this Guarantee or otherwise operate as a discharge
of the Guarantor as a matter of law or equity (other than the indefeasible
payment in full in cash of all of its obligations under this Guarantee).  The Guarantor hereby waives demand of and
protest of the Termination and Expense Reimbursement Fee and also waives notice
of protest for nonpayment, any right to require a proceeding first against the
Payor, and all demands whatsoever and covenants that this Guarantee will not be
discharged except by complete performance of the obligation to pay the
Termination and Expense Reimbursement Fee in accordance with the Merger
Agreement.

4.                                      TERMINATION.
 This
Guarantee shall remain in full force and effect until the earliest to occur of:
(i) the indefeasible payment in full of the entire Termination and Expense
Reimbursement Fee, (ii) termination of the Merger Agreement in accordance with
its terms without any obligation on the part of Payor to pay the Termination
and Expense  Reimbursement  Fee, or (iii) consummation of the
Merger.  Thereafter, Oakley shall take
such action and execute such documents as the Guarantor may request in order to
evidence the termination of this Guarantee.

5.                                      REPRESENTATIONS
AND WARRANTIES.  Guarantor represents and warrants to, and
agrees with, Oakley that:

(a)                                  Guarantor is duly organized and
validly existing as a corporation under the laws of Italy;

(b)                                 Guarantor has duly taken all
necessary corporate action to authorize, and has all necessary corporate power
and authority to execute and deliver, this Guarantee and to perform the
obligations of Guarantor pursuant to this Guarantee.  This Guarantee has been duly executed and
delivered by Guarantor and is the valid, binding and enforceable obligation of
Guarantor, enforceable against Guarantor in accordance with its terms, except
as such enforcement may be limited by (i) bankruptcy, insolvency or similar
laws affecting creditors’ rights generally or (ii) 

 2
 

general principles of equity, whether
considered in a proceeding in equity or at law; and

(c)                                  The
execution and delivery of this Guarantee by Guarantor, and its performance of
its obligations under this Guarantee, do not and will not (i) violate or
conflict with any provision of the charter documents or bylaws of Guarantor or
(ii) violate or conflict with, or constitute a breach of, any law, rule or
regulation, order, writ, injunction, decree, award, or any agreement,
instrument, indenture, deed or any other restriction, to which Guarantor is
subject or a party.

6.                                      SUBROGATION.  The
Guarantor shall be subrogated to all rights of Oakley against the Payor in
respect of any amounts paid by the Guarantor pursuant to the provisions of this
Guarantee; PROVIDED, HOWEVER, that so
long as any of the Termination and Expense Reimbursement Fee shall remain
unsatisfied, all rights of the Guarantor against the Payor based upon such
right of subrogation shall in all respects be subordinate and junior in right
of payment to the prior indefeasible payment in full of the Termination and
Expense Reimbursement Fee to Oakley.

7.                                      REINSTATEMENT.  This
Guarantee shall continue to be effective, or be reinstated, as the case may be,
if at any time payment, or any part thereof, of any of the Termination and
Expense Reimbursement Fee is rescinded or must otherwise be restored or
returned by Oakley upon the insolvency, bankruptcy, dissolution, liquidation or
reorganization of the Payor or upon or as a result of the appointment of a
receiver, intervenor or conservator of, or trustee or similar officer for, the
Payor or any substantial part of its property, or otherwise, all as though such
payments had not been made.

8.                                      PAYMENTS.  The
Guarantor hereby agrees that if it is required hereunder to pay the Termination
and Expense Reimbursement Fee, it will be paid to Oakley, by wire transfer of
immediately available funds, to the wire transfer address specified in a notice
given by Oakley to it.

9.                                      NOTICES.  All notices,
requests, claims, demands and other communications hereunder shall be in writing
and shall be deemed to have been duly given when delivered in person, by
overnight courier or facsimile to the respective parties as follows:

If to Guarantor:

Luxottica Group, S.p.A.

Via Cantù, 2

20123 Milan

Italy

Facsimile: 011-39-02-8699-6550

Attention: Enrico Cavatorta

 3
 

with a copy to:

Winston &
Strawn LLP

200 Park Avenue

New York, New York 10166

Facsimile: (212) 294-4700

Attention: Jonathan Goldstein

If to Oakley:

Oakley, Inc.

One Icon

Foothill Ranch, California 92610

Facsimile: (949) 699-3597

Attention:  D. Scott Olivet, Chief
Executive Officer

with a copy to:

Skadden, Arps, Slate,
Meagher & Flom, LLP

300 S. Grand Avenue

Suite 3400

Los Angeles, California 90071

Facsimile: (213) 687-5600

Attention: Jerome L. Coben and Jeffrey H. Cohen

or to such other address
as the person to whom notice is given may have previously furnished to the
other in writing in the manner set forth above (provided that notice of any
change of address shall be effective only upon receipt thereof).

10.                               SEVERABILITY.  Any provision
of this Guarantee which is prohibited or unenforceable in any jurisdiction
shall, as to such jurisdiction, be ineffective to the extent of such
prohibition or unenforceability without invalidating the remaining provisions
hereof, and any such prohibition or unenforceability in any jurisdiction shall
not invalidate or render unenforceable such provision in any other
jurisdiction.

11.                               INTEGRATION.  This
Guarantee represents the entire agreement of the Guarantor with respect to the
subject matter hereof and there are no promises or representations, written or
oral, by Oakley relative to the subject matter hereof not reflected herein.

12.                               AMENDMENTS
IN WRITING; NO WAIVER; CUMULATIVE REMEDIES.

(a)                                  None of the terms or provisions of
this Guarantee may be waived, amended, supplemented or otherwise modified
except by a written instrument executed by the Guarantor and Oakley; PROVIDED
that any provision of this Guarantee may be waived by Oakley in a letter or
agreement executed by Oakley and delivered to Guarantor pursuant hereto.

 

 4
 

(b)                                 Oakley shall not by any act (except
by a written instrument pursuant to paragraph 12(a) hereof), be deemed to have
agreed to any delay, indulgence, omission or otherwise be deemed to have waived
any right or remedy hereunder or to have acquiesced in any default or in any
breach of any of the terms and conditions hereof.  No failure to exercise, nor any delay in
exercising, on the part of Oakley, any right, power or privilege hereunder
shall operate as a waiver thereof.  No
single or partial exercise of any right, power or privilege hereunder shall
preclude any other or further exercise thereof or the exercise of any other
right, power or privilege.  A waiver by
Oakley of any right or remedy hereunder on any one occasion shall not be construed
as a bar to any right or remedy which Oakley would otherwise have on any future
occasion.

(c)                                  The rights and remedies herein
provided are cumulative, may be exercised singly or concurrently and are not
exclusive of any other rights or remedies provided by law.

13.                               SECTION
HEADINGS.  The
section headings used in this Guarantee are for convenience of reference only
and are not to affect the construction hereof or be taken into consideration in
the interpretation hereof.

14.                               SUCCESSORS
AND ASSIGNS.  This Guarantee shall be binding upon the successors and assigns of the
Guarantor and shall inure to the benefit of Oakley and its successors and
assigns; provided that the Guarantor may not assign or delegate any of its
rights or obligations hereunder without the express prior written consent of
Oakley, which Oakley may grant or withhold in its sole and absolute discretion.

15.                               GOVERNING
LAW.  This
Guarantee shall be governed by and construed in accordance with the laws of the
State of New York, regardless of the laws that might otherwise govern under
applicable principles of conflicts of laws thereof.

IN WITNESS WHEREOF,
the undersigned has caused this Guarantee to be executed on its behalf by its
officer thereunto duly authorized, all as of the day and year first above
written.

 

	
   

  	
   

  	
   

  	
   

  	
  Luxottica Group S.p.A.

  
	
   

  	
   

  	
   

  	
   

  	
  By:

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
  /s/ Andrea Guerra

  
	
   

  	
   

  	
   

  	
   

  	
  Name:

  	
   

  	
  Andrea Guerra

  
	
   

  	
   

  	
   

  	
   

  	
  Title:

  	
   

  	
  Chief Executive Officer

  

 

 5Exhibit 4.2

NON-COMPETITION
AGREEMENT

THIS
NON-COMPETITION AGREEMENT (this “Agreement”)
is entered into as of June  20, 2007, by
and among Luxottica Group S.p.A., a company organized under the laws of the
Republic of Italy (“Parent”), Norma
Acquisition Corp., a Washington corporation and an indirect wholly owned
subsidiary of Parent (“Merger Sub”),
and Oakley, Inc. a Washington corporation (the “Company”),
and Jim Jannard (“Shareholder”).

RECITALS

A.            Shareholder is a founder, majority
shareholder and the Chairman of the Board of the Company and, accordingly, has
acquired: (i) valuable trade secrets and other confidential and proprietary
information relating to the Company’s and its Subsidiaries’ current business of
designing, manufacturing, marketing, selling, and distributing eyewear and
optical products including, without limitation, sunglasses, eyewear lenses,
goggles and electronically enabled eyewear (the “Business”)
and (ii) the ability to control the goodwill of the Business conducted by the
Company and its Subsidiaries.  For the
avoidance of doubt, the “Business” as used herein shall not include Red.com,
Inc.’s (“Red”) current business of
manufacturing, designing, licensing, selling, marketing and distributing
digital cinematography cameras, including the lenses, sensors, filters and
other parts used in digital cinematography cameras, as well as accessories to
digital cinematography cameras (the “Red Business”).

B.            Shareholder’s noncompetition and
nonsolicitation covenants and confidentiality agreements as reflected in this
Agreement are each essential parts of the transactions described in that
certain Agreement and Plan of Merger, dated as of June 20, 2007 (the “Merger Agreement”), by and among Parent,
Merger Sub and the Company, pursuant to which, among other things, Merger Sub
will be merged with and into the Company (the transactions contemplated in
connection with the Merger Agreement are referred to hereinafter as the “Merger”).

C.            As a result of the Merger,
Shareholder will dispose of his entire ownership interest in the Company, as
defined by Section 16601 of the California Business and Professions Code (the “BPCC”), and Parent will indirectly acquire this interest and
the parties confirm that the Shareholder’s entry into this Agreement is a material
inducement to Parent and Merger Sub to consummate the Merger.

D.            The parties agree that it is in the
best interests of all parties for Parent and Merger Sub to obtain the full
benefit of the entire goodwill of the Company, and that failure to receive the
entire goodwill contemplated by the Merger would materially reduce the value of
the Merger and the Company to Parent and Merger Sub.

E.             In order to protect the trade
secrets and other confidential and proprietary information and the entire
goodwill related to the Business, and as a condition of Parent and Merger Sub
entering into the Merger Agreement, Shareholder has agreed to the
noncompetition and nonsolicitation covenants and the confidentiality agreements
provided in this Agreement, 

 

which Agreement is
being executed and delivered concurrently with the execution and delivery of
the Merger Agreement.

F.             Accordingly, the Merger Agreement
requires Shareholder to execute and deliver this Agreement as a condition
precedent to Parent and Merger Sub’s obligation to consummate the Merger under
the Merger Agreement.

G.            The Shareholder and the Company are
parties to an Amended and Restated Consultant Agreement dated May 12, 1998 (the
“Consultant Agreement”), a copy of
which is annexed hereto.

H.            The parties hereto intend that,
effective as of the occurrence of the closing under the Merger Agreement (the “Closing”), certain terms and conditions of
the Consultant Agreement shall be incorporated by reference into and shall
thereupon become part of this Agreement, as if set forth herein at length and
that, subject to such incorporation by reference, the Consultant Agreement
shall thereupon be terminated and cancelled in all respects.

AGREEMENT

NOW,
THEREFORE, in consideration of the foregoing and to induce Parent and Merger
Sub to consummate the Merger, Shareholder hereby covenants and agrees as
follows:

1.             Effectiveness of Agreement.  This Agreement is effective upon execution
but is conditioned upon (i) the Closing and (ii) the satisfaction of the
condition set forth in Section 18 and shall be null and void ab initio should the Merger Agreement be
terminated, or the Merger not close or be completed for any reason, or the
condition set forth in Section 18 not be satisfied in the time period provided
therein.

2.             Noncompetition.

(a)           Shareholder, Parent, the Company and
Merger Sub agree that, due to the nature of Shareholder’s association with the
Company and its subsidiaries, Shareholder has: (i) acquired valuable trade
secrets and other confidential and proprietary information relating to the
Business and (ii) acquired the ability to control and direct the goodwill of
the Business.  Shareholder acknowledges
that such intellectual property and goodwill is crucial to the success,
profitability and viability of the Company’s Business and will continue to be
so after the Closing. Shareholder further agrees that Shareholder’s disclosure
or unauthorized use of such information or redirection of goodwill will cause
substantial loss and harm to the Company, its subsidiaries and Parent and its
Subsidiaries. In light of the foregoing, the parties also agree that the
covenants set forth in this Agreement are necessary to protect the entire
goodwill and value of the intellectual property of the Company through and
following the Merger.

(b)           During the period commencing at the
Closing and ending five years later (the “Restricted
Period”), Shareholder agrees that Shareholder shall not, anywhere in
the Business Area (as defined below), directly or indirectly, own, manage,
operate, join, control, participate in, or be connected with (as a stockholder,
partner, member, investor, lender (treating, for purposes of this Section 2(b),
any donation as if it were a loan if the Shareholder actually 

 2
 

 

knows, at the time
of making the donation, that its proceeds will be used for a purpose that, if
made as a loan, would be prohibited by this Section 2(b)), guarantor, or credit
enhancer), or provide consultative services or otherwise provide services to
(whether as an employee or consultant, with or without pay), any business,
individual (including, without limitation, any relative of the Shareholder),
corporation, limited liability company, partnership, firm or other entity that
is then, or to Shareholder’s actual knowledge intends to be, a competitor of
the Company or any of its Subsidiaries, including any individual or entity then
engaged, or to Shareholder’s actual knowledge is intending to engage, in the
Business (each such individual or entity is referred to herein as a “Competitor”); provided, however, that
notwithstanding the restrictions set forth in this Section 2(b), the
Shareholder may (i) own, directly or indirectly, solely as a passive
investment, securities of any entity in competition with the Business where
equity securities are traded on any national securities exchange, provided
that Shareholder is not a controlling person of, or a member of a group which
controls, such entity and does not, directly or indirectly, “beneficially own”
(as defined in Rule 13d-3 of the Securities Exchange Act of 1934, as amended)
five percent (5.0%) or more of any class of securities of such entity; and (ii)
be an investor, partner, member, director or principal of a private equity
firm, venture capital firm, or hedge fund that makes investments in a Competitor,
provided that Shareholder completely recuses himself from selecting,
advising or managing the investment in any such Competitor.

(c)           “Business
Area” as used herein, means any place in the world.

3.             Nonsolicitation of the Company’s
and its Subsidiaries’ Employees, Customers and Suppliers.

(a)
During the Restricted Period, Shareholder shall not, directly or indirectly,
solicit, recruit, request, cause, induce or encourage to leave the employment
of the Company or any of its subsidiaries (such conduct is collectively
referred to as “solicitation”) any person who is
then employed by the Company other than Shareholder’s son and up to six other
employees of the Company or its subsidiaries who receive a base salary of less
than $100,000 per year; provided, however, that the foregoing
restriction will not prevent the Shareholder from hiring any such person (i)
who contacts such Shareholder on his or her own initiative without any direct
or indirect solicitation by or encouragement from such Shareholder or (ii) as a
result of placing general advertisements on websites, in trade journals,
newspapers or similar publications which are not directed at the Company or its
subsidiaries or such employees.

(b)
During the Restricted Period, Shareholder shall not, directly or indirectly,
solicit, recruit, request, cause, induce or knowingly encourage any customer,
vendor, supplier, distributor, partner or other person or entity currently
under contract with the Company  or
currently doing business with the Company 
to terminate, or materially and adversely reduce or alter, its business
with the Company as it pertains to the Business; provided, however, that
Shareholder and Red may each contract directly with Weeks, Kaufman, Nelson and
Johnson Law, a partnership, for legal and other services without having to
obtain prior written consent of Parent or the Company.

4.             Personal Reference, Office and
Executive Assistant.  Provided that
he is and remains in compliance with this Agreement, Shareholder shall be
entitled to refer to himself as, 

 3
 

 

“Founder” and “Mad
Scientist” of the Company at all times following the Closing.  The Company shall also continue to allow
Shareholder to maintain and enjoy full access to his current office at One
Icon, Foothill Ranch, California 92610, and provide Shareholder the services of
his current executive assistant (and, as necessary, any reasonably comparable
successor) who shall be employed and compensated by the Company, for so long as
the Company occupies the premises of such office.

5.             Assignment of Intellectual
Property Rights and Confidentiality; Incorporation by Reference of Consultant
Agreement.  The provisions of Section
3, entitled “Assignment of Intellectual Property Rights” and Section 5(a),
entitled “Confidentiality” of the Consultant Agreement are hereby incorporated
by reference herein, as if set forth at length herein, with all references
therein to “Jannard” and to “Oakley” deemed to be to the Shareholder and the
Company, respectively, and, as so incorporated, shall inure to the benefit of
Parent for the full term of this Agreement, notwithstanding the termination of
the Consultant Agreement provided for herein; provided, however, that the
parties acknowledge that Shareholder has developed certain designs, inventions,
discoveries, products, systems, processes, techniques and technologies and
related intellectual property in the field of the Red Business in connection
with his position as founder and principal investor of Red (collectively, the “Red Intellectual Property”) and agree that, notwithstanding
Section 3(a) of the Consulting Agreement, the definition of “Inventions”
therein shall not include any Red Intellectual Property, all of which are owned
by Red.

6.             Injunctive
Relief.  Shareholder acknowledges and
agrees that the noncompetition, nonsolicitation, and other covenants and
agreements made by Shareholder herein each are of substantial value to Parent
and the Company and that a breach of any of those covenants and agreements will
cause irreparable harm to Parent, Merger Sub and the Company and its
subsidiaries, for which Parent, Merger Sub and the Company and its subsidiaries
have no adequate remedy at law. 
Therefore, in addition to any other remedies that may be available to
Parent and the Company and its subsidiaries under this Agreement or otherwise,
Parent and the Company and its subsidiaries shall be entitled to temporary
restraining orders, preliminary and permanent injunction or other equitable
relief to specifically enforce Shareholder’s duties and obligations under this Agreement,
or to enjoin any breach of this Agreement, or to restrain Shareholder from
engaging in any conduct that would constitute a breach of this Agreement.  Nothing herein contained shall be construed
as prohibiting Parent and the Company and its subsidiaries from pursuing any
other remedies available to Parent and the Company and its subsidiaries for
such breach or threatened breach, including, without limitation, the recovery
of damages from Shareholder.

7.             Reasonableness and
Enforceability of Covenants and Agreements.

(a)           The parties expressly agree that the
character, duration and geographical scope of this Agreement are reasonable in
light of the circumstances as they exist on the date upon which this Agreement
has been executed, including, but not limited to, Shareholder’s material
economic interest in the Merger and Shareholder’s position of confidence and
trust as a founder, majority shareholder, and the Chairman of the Board of
Directors of the Company.

 4
 

 

(b)           Shareholder represents and warrants that
(i) as part of the Merger, Parent will indirectly acquire all of Shareholder’s
ownership interest in the Company; (ii) it is Shareholder’s understanding that
the Company and its subsidiaries will carry on the Business after the Closing;
(iii) Shareholder has been fully advised by his own counsel of his own choosing
in connection with the negotiation, drafting, execution and delivery of this
Agreement and the transactions contemplated by the Merger Agreement and this
Agreement; (iv) the transactions contemplated by the Merger Agreement are
designed and intended to qualify as a sale (or other disposition) by
Shareholder of all of the Shareholder’s ownership interest in the Company
within the meaning of Section 16601 of the BPCC, which section provides as follows:

Any person who sells the
goodwill of a business, or any owner of a business entity selling or otherwise
disposing of all of his or her ownership interest in the business entity, or
any owner of a business entity that sells (a) all or substantially all of its
operating assets together with the goodwill of the business entity, (b) all or
substantially all of the operating assets of a division or a subsidiary of the
business entity together with the goodwill of that division or subsidiary, or
(c) all of the ownership interest of any subsidiary, may agree with the buyer
to refrain from carrying on a similar business within a specified geographic
area in which the business so sold, or that of the business entity, division,
or subsidiary has been carried on, so long as the buyer, or any person deriving
title to the goodwill or ownership interest from the buyer, carries on a like
business therein.  For the purposes of
this section, “business entity” means any
partnership (including a limited partnership or a limited liability
partnership), limited liability company, or corporation.  For the purposes of this section, “owner of a business entity” means any partner, in the case
of a business entity that is a partnership (including a limited partnership or
a limited liability partnership), or any member, in the case of a business
entity that is a limited liability company, or any owner of capital stock, in
the case of a business entity that is a corporation.  For the purposes of this section, “ownership interest” means a partnership interest, in the
case of a business entity that is a partnership (including a limited
partnership a limited liability partnership), a membership interest, in the
case of a business entity that is a limited liability company, or a capital
stockholder, in the case of a business entity that is a corporation.  For the purposes of this section, “subsidiary” means any business entity over which the selling
business entity has voting control or from which the selling business entity
has a right to receive a majority share of distributions upon dissolution or
other liquidation of the business entity (or has both voting control and a
right to receive these distributions.)

(c)           Shareholder further represents,
warrants, acknowledges and agrees that he has read Section 16601 of the BPCC,
understands its terms, and agrees that Section 16601 of the BPCC applies in the
context of the transactions contemplated by the Merger Agreement and this
Agreement, and that such transactions are within the scope and intent of
Section 16601 of the BPCC and an exception to Section 16600 of the BPCC, and
agrees to be fully bound by the restrictive covenants and the other agreements
contained in this Agreement. Accordingly, 

 5
 

 

Shareholder agrees
to be bound by the restrictive covenants and the other agreements contained in
this Agreement to the maximum extent permitted by law, it being the intent and
spirit of the parties that the restrictive covenants and the other agreements
contained in this Agreement shall be valid and enforceable in all respects and
subject to the terms and conditions of this Agreement.

(d)           If any court of competent
jurisdiction determines that any covenant or agreement contained herein, or any
part thereof, is unenforceable because of the character, duration or geographic
scope of such provision, such court shall have the power to reduce the duration
or scope of such provision, as the case may be, and, in its reduced form, such
provision shall then be enforceable to the maximum extent permitted by applicable
law.

8.             Severability.  If any of the provisions of this Agreement
shall otherwise contravene or be invalid under the laws of any state, country
or other jurisdiction where this Agreement is applicable but for such
contravention or invalidity, such contravention or invalidity shall not
invalidate all of the provisions of this Agreement, but rather this Agreement
shall be construed, insofar as the laws of that state, country or jurisdiction
are concerned, as not containing the provision or provisions contravening or
invalid under the laws of that state, country or jurisdiction, and the rights
and obligations created by this Agreement shall be construed and enforced
accordingly in such state, country or jurisdiction.

9.             Construction; Jurisdiction and
Venue.  This Agreement shall be
construed and enforced in accordance with and governed by the laws of the State
of California, without regard to any principles of conflicts of laws or choice
of laws. Each of the parties hereto (i) consents to submit itself to the
personal jurisdiction of any federal district court within Orange County, State
of California in the event any dispute arises out of this Agreement or any of
the transactions contemplated by this Agreement, (ii) agrees that it will not
attempt to deny or defeat such personal jurisdiction by motion or other request
for leave from any such court, (iii) agrees that it will not bring any action
relating to this Agreement or any of the transactions contemplated hereby in
any court other than any federal court within Orange County, State of
California, (iv) consents to service of process by first class certified mail,
return receipt requested, postage prepaid, or by overnight courier to the
address at which such party is to receive notice and (v) waives any objection
to the laying of venue with respect to such dispute in any federal court within
Orange County, State of California and waives and agrees not to plead or claim
in any such court that any such dispute brought in any such court has been
brought in an inconvenient forum.

10.           Waivers.  Parent’s or the Company’s or its subsidiaries’
failure to insist upon strict compliance with any of the terms, covenants, or
conditions hereof shall not be deemed a waiver of such term, covenant, or
condition, nor shall any waiver or relinquishment of, or failure to insist upon
strict compliance with, any right or power hereunder at any one or more times
be deemed a waiver or relinquishment of such right or power at any other time
or times.  No breach of any covenant,
agreement, warranty or representation shall be deemed waived unless expressly
waived in writing by the party waiving the breach.  No waiver of any breach hereunder shall be
construed to be, nor shall be, a waiver of any other breach of this Agreement.

 6
 

 

11.           Entire Agreement; Amendments.  Shareholder understands that this Agreement,
including the exhibits hereto, together with the Merger Agreement and the
ancillary documents executed in connection therewith, contains the entire
agreement and understanding of the parties relating to the subject matter
hereof and, except as expressly stated in this Agreement, supersedes any prior
agreement (including the Consulting Agreement), understanding or negotiations
respecting such subject.  No change to or
modification of this Agreement shall be valid or binding unless it is in
writing and signed by Shareholder, a duly authorized officer of the Company,
and a duly authorized representative of Parent.

12.           Counterparts.  This Agreement may be executed in
counterparts, which together shall constitute one and the same Agreement.  The parties may execute more than one copy of
this Agreement, each of which copies shall constitute an original.  A facsimile signature shall be deemed to be
the same as an original signature.

13.           Section Headings.  The headings of each section, subsection or
other subdivision or portion of this Agreement are for convenience and
reference only, and in no way define, limit, extend or describe the scope of
this Agreement or the intent of any provisions hereof.

14.           Assignment.  Shareholder agrees that he will not assign,
sell, transfer, delegate, or otherwise dispose of, whether voluntarily or
involuntarily, or by operation of law, any rights or obligations under this
Agreement.  Parent, Company and Merger
Sub agree that they will not assign, sell, transfer, delegate, or otherwise
dispose of, whether voluntarily or involuntarily, any rights or obligations
under this Agreement; provided, however, that Parent or Company may assign
their rights hereunder to an entity controlled, directly or indirectly, by
Parent or to a purchaser of the Business as then operated by the Company.  Any such purported assignment, transfer, or
delegation in violation of this Section 14 shall be null and void.    This Agreement shall be binding upon and
shall inure to the benefit of the parties and their respective heirs, legal
representatives, successors, and permitted assigns.

15.           Notices.  All notices and other communications
hereunder shall be in writing and shall be deemed given if delivered personally
or two (2) business days after being mailed by registered or certified mail
(return receipt requested) to the parties at the following addresses (or at
such other address for a party as shall be specified by like notice):

(a)           if to Parent or Merger Sub:

Luxottica Group S.p.A.

Via C. Cantú 2

20123 Milan, Italy

Facsimile: 011 39 02 8699
6550

Attention: Enrico Cavatorta,
Chief Financial Officer

 

with a copy to (which shall
not constitute notice):

 

Winston & Strawn LLP

200 Park Avenue

New York, New York 10166

 7
 

 

Facsimile: (212) 294-4700

Attention: Jonathan
Goldstein

 

(b)           if to the Company:

Oakley, Inc.

One Icon

Foothill Ranch, California 92610

Facsimile: (949) 454-0394

Attention: Cos Lykos, Vice President of Business Development

(c)                                  if
to Shareholder:

c/o
Weeks, Kaufman, Nelson and Johnson Law, a partnership

465
Stevens Avenue, Suite 310

Solana
Beach, California 92075

Facsimile:
(858) 794-2141

Attention: Greg Weeks

with a copy to:

O’Melveny
& Myers LLP

610
Newport Center Drive, 17th Floor

Newport
Beach, California 92660

Facsimile:
(949) 823-6994

Attention:
David A. Krinsky and Andor D. Terner

 

16.           Joint Drafting.  Shareholder understands and agrees that this
Agreement is deemed to have been jointly drafted by the parties.  Any uncertainty or ambiguity shall not be
construed for or against any party based on attribution of drafting to any
party.

17.           Termination of Consultant
Agreement. Effective as of the Closing, the Consultant Agreement shall be
terminated and cancelled in all respects, except that:  (a) the terms and provisions of the
Consultant Agreement that have been incorporated by reference shall, as
provided herein, survive as a part of this Agreement; and (b) Section 6,
entitled “Fringe Benefits,” and Section 7, entitled “Products”, shall survive
such termination and remain enforceable by the Shareholder against the Company
and Parent.

 18.          Ancillary
Agreements.  It is an express
condition to all of Shareholder’s obligations under this Agreement that, within
one business day following the Closing, each of the agreements attached to this
Agreement as Exhibit A have been signed by the Company (and by Parent,
where applicable) and delivered to Shareholder at the notice address provided
in Section 15.

 8

 

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

	
   

  	
  LUXOTTICA GROUP S.P.A.

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Andrea Guerra

  
	
   

  	
   

  	
  Name: 

  	
  Andrea Guerra

  
	
   

  	
   

  	
  Title:

  	
  Chief Executive Officer

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  NORMA ACQUISITION CORP.

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Enrico
  Cavatorta

  
	
   

  	
   

  	
  Name: 

  	
  Enrico Cavatorta

  
	
   

  	
   

  	
  Title:

  	
  President

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  OAKLEY, INC.

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ D. Scott
  Olivet

  
	
   

  	
   

  	
  Name: 

  	
  D. Scott Olivet

  
	
   

  	
   

  	
  Title:

  	
  Chief Executive Officer

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  SHAREHOLDER

  
	
   

  	
   

  
	
   

  	
   

  	
  /s/ Jim
  Jannard

  
	
   

  	
   

  	
  Jim Jannard

  	
   

  
					

 

 

Exhibit A

Ancillary Agreements

[attached hereto]

 

 

AGREEMENT REGARDING HISTORICAL ARTIFACTS

This
Agreement Regarding Historical Artifacts (“Agreement”) is
entered into as of                   , 2007 by and among Luxottica Group S.p.A., a
corporation organized under the laws of the Republic of Italy (“Parent”), Oakley, Inc., a Washington corporation (the “Company”), and Jim Jannard (the “Jannard”).

RECITALS

WHEREAS, the Company has developed a library which
contains the history of the Company as a business entity, and includes
discontinued advertising and other marketing materials and product samples
produced prior to May 1998 (such materials collectively, the “Artifacts”);

WHEREAS, the Company, Parent and Norma Acquisition
Corp. (“Merger Sub”), entered into an
Agreement and Plan of Merger dated June __, 2007, pursuant to which Merger Sub
was merged (the “Merger”) with and into the
Company, with the Company being the surviving corporation of the Merger and a
wholly-owned subsidiary of Parent; and

WHEREAS, each of the Parties now desires to
acknowledge and confirm the ownership of the Artifacts and rights of removal of
same.

NOW,
THEREFORE, in
consideration of the foregoing and the agreements set forth below, each of
Jannard, Parent and the Company, each a “Party” and
collectively, the “Parties,” do
hereby agree as follows:

AGREEMENT

1.   Ownership
of Artifacts.   The Parties hereby agree that Jannard shall, as among the
Parties, retain all right, title and interest in and to the Artifacts. The
Company and Parent each hereby covenants that it will not assert any claim that
either the Company or Parent possesses any ownership right, title or interest
in the Artifacts.

2.   Right
to Remove Artifacts.   The Parties hereby agree that Jannard shall have
the right at any time, in his sole discretion, but subject at all times to
Section 3 hereof, to remove the Artifacts from the premises of the Company or
any other location at which the Artifacts may be kept.

3.   Procedure
for Removal of Artifacts.   Prior to removing any Artifacts pursuant to
Section 2 hereof, Jannard shall provide written notification (a “Removal Notification”) to [the Chief Executive
Officer/Chief Financial Officer/Corporate Secretary] of the Company (the “Designated Officer”) of such removal. In such Removal
Notification, Jannard shall provide reasonable detail concerning the identity of
the Artifacts proposed to be removed (the “Removal Items”).
Jannard shall not remove any Removal Items until the earliest of (i) his
receipt of written confirmation from the Designated Officer that the Company
does not object to the removal of the Removal Items, (ii) the lapse of five
business days from the provision of the Removal Notification if Jannard has not
prior to such time received any return notification from the Designated
Officer, or (iii) if the Designated Officer notifies Jannard that the

 1
 

 

Company deems the Removal
Items not to constitute Artifacts for purposes of this Agreement, upon the
resolution of such matter pursuant to Section 4 hereof.

4.   Dispute
Resolution.   The Parties shall make a good-faith attempt to resolve
any controversy, claim, or dispute between the Parties arising out of or
related to this Agreement or the rights of the Parties hereunder (including the
characterization of any Removal Item as an Artifact for purposes of this
Agreement) through informal negotiation between the Parties. In the event that
any such dispute is not settled by good-faith negotiations by the date which is
thirty (30) days after notice by the Jannard, on the one hand, or the Company
or Parent, on the other hand, to the other that a dispute exists, any such
Party may submit the dispute to arbitration. Such arbitration shall proceed in
accordance with the then-current rules for arbitration established by Judicial
Arbitration Mediation Services, Inc. (“JAMS”), unless
the Parties collectively agree otherwise. The award rendered by the arbitrator
shall include (i) a provision that the prevailing Party in such arbitration
recover from the other Party or Parties its costs and reasonable attorneys’
fees relating to the arbitration, (ii) the amount of such costs and fees, and
(iii) an order that the losing Party or Parties pay the fees and expenses of
the arbitrator. Any arbitration proceeding initiated pursuant to this Section 4
shall take place in JAMS’ Orange County, California offices.

5.   Notices.   Any
communications required or permitted to be given by any provision of this
Agreement or which any Party may desire to give the other shall be given as set
forth herein, either in person or at the addresses or numbers set forth below,
or to such other addresses or numbers as said Party may hereafter or from time
to time designate by written notice to the other Parties.

	
   

  	
  To Jannard:

  
	
   

  	
   

  
	
   

  	
  c/o Weeks,
  Kaufman, Nelson and Johnson Law, a partnership

  465 Stevens Avenue, Suite 310

  
	
   

  	
  Solana Beach,
  California 92075

  Facsimile: (858) 794-2141

  
	
   

  	
  Attention: Greg
  Weeks

  
	
   

  	
   

  
	
   

  	
  To Company:

  
	
   

  	
   

  
	
   

  	
  Oakley, Inc.

  One Icon

  
	
   

  	
  Foothill Ranch,
  California 92610

  Facsimile: (949) 454-0394

  
	
   

  	
  Attention: Cos
  Lykos, Vice President of Business Development

  
	
   

  	
   

  
	
   

  	
  with a copy to:

  
	
   

  	
   

  
	
   

  	
  Skadden, Arps,
  Slate, Meagher & Flom LLP

  300 South Grand Avenue, Suite 3400

  
	
   

  	
  Los Angeles,
  California 90071

  Facsimile: (213) 687-5600

  
	
   

  	
  Attention:
  Jerome L. Coben and Jeffrey H. Cohen 

  

 

 2
 

 

	
  

  	
   

  
	
   

  	
  To Parent:

  
	
   

  	
   

  
	
   

  	
  Luxottica Group
  S.p.A.

  Via C. Cantu 2

  
	
   

  	
  20123 Milan,
  Italy

  
	
   

  	
  Facsimile: 011
  39 02 8699 6550

  
	
   

  	
  Attention:
  Enrico Cavatorta, Chief Financial Officer

  
	
   

  	
   

  
	
   

  	
  with a copy to:

  
	
   

  	
   

  
	
   

  	
  Winston &
  Strawn LLP

  200 Park Avenue

  
	
   

  	
  New York, New
  York 10166

  
	
   

  	
  Facsimile: (212)
  294-4700

  Attention: Jonathan Goldstein

  

 

6.   Entire
Agreement.   This Agreement constitutes the entire agreement between
the Parties hereto pertaining to the subject matter hereof, and the final,
complete and exclusive expression of the terms and conditions hereof. All prior
agreements, representations, negotiations and understandings of the Parties,
oral or written, express or implied, on the subject matter hereof are hereby
superseded and merged herein.

7.   Governing
Law.   The validity, construction and operational effect of this
Agreement shall be governed by the laws of the State of California.

8.   Invalidity
of Provision.   If any portion of this Agreement is held to be invalid
or unenforceable by a court of competent jurisdiction, the remainder of this
Agreement shall remain in full force and effect.

9.   Amendments.   This
Agreement may be amended only by written agreement signed by both of the
Parties hereto.

10.   Counterparts.   This
Agreement may be executed in several counterparts and all such executed
counterparts shall constitute one agreement, binding on all of the Parties
hereto, notwithstanding that all of the Parties hereto are not signatories to
the original or to the same counterpart. This Agreement shall not be binding
unless and until all Parties hereto have executed the Agreement.

11.   Successors
and Assigns.   This Agreement shall be binding upon and shall inure to
the benefit of the successors and assigns of the Parties hereto.

[REMAINDER OF PAGE
INTENTIONALLY LEFT BLANK]

 3
 

 

IN
WITNESS WHEREOF, the
Parties have entered into this Agreement as of the date first above written.

	
  

  	
  Jannard:

  	
   

  
	
   

  	
   

  	
  JIM JANNARD

  
	
   

  	
   

  	
   

  
	
   

  	
  Company:

  	
  OAKLEY, INC.

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By:

  	
   

  
	
   

  	
   

  	
  Name:

  	
   

  
	
   

  	
   

  	
  Title:

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  Parent:

  	
  LUXOTTICA GROUP S.P.A.

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By:

  	
   

  
	
   

  	
   

  	
  Name:

  	
   

  
	
   

  	
   

  	
  Title:

  	
   

  

 

 4

 

AMENDMENT NO. 2

to

TRADEMARK LICENSE AGREEMENT

AND ASSIGNMENT OF RIGHTS

This Amendment No. 2 to Trademark License Agreement
and Assignment of Rights (this “Amendment”) is
entered into as of                   ,
2007 by and between Oakley, Inc., a Washington corporation (the “Company”), and Y, LLC, a Delaware limited liability company
(“Y, LLC”).

WHEREAS, the Company and Y, LLC previously entered
into that certain Trademark License Agreement and Assignment of Rights as of
March 31, 2000, and that certain Amendment thereto as of June 1, 2002
(collectively, the “Agreement”);
and

WHEREAS, the Company and Y, LLC now desire to amend
the Agreement as set forth herein.

NOW, THEREFORE,
in consideration of the foregoing and the agreements set forth below, the
parties hereby agree as follows:

1.     Section (vi)(2) of the Agreement is hereby amended and restated
in its entirety as
follows: 

“(2) TERMINATION. At any time after [insert date of second anniversary of effective time of the merger of
Norma Acquisition Corp. into Oakley, Inc.], this Agreement may be terminated by either party upon 30
days’ written notice to the other party.”

2.     Except as expressly modified herein, the Agreement shall remain
in full force and effect in accordance with its original terms.

3.     Capitalized terms that are not defined herein shall have the
meanings ascribed to them in the Agreement.

4.     The validity, construction and operational effect of this
Amendment shall be governed by the laws of the State of California.

5.     This Amendment 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 instrument.

[Signatures on following page.]

 

IN
WITNESS WHEREOF, the parties have caused this Amendment to be duly executed and
delivered on the day and year first above written.

	
  Y, LLC:

  	
  Y, LLC

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  
	
   

  	
  Name:

  	
   

  
	
   

  	
  Title:

  	
   

  
	
   

  	
   

  	
   

  
	
  Company:

  	
  OAKLEY, INC.

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
   

  
	
   

  	
  Name:

  	
   

  
	
   

  	
  Title:

  	
   

  

 

 

AMENDMENT NO. 1

to

LEASE AGREEMENT

This Amendment No. 1 to Lease Agreement (this “Amendment”) is entered into as of                            ,
2007 by and between Oakley, Inc., a Washington corporation (the “Company”), and N2T, Inc., an Oregon corporation (“Lessor”).

WHEREAS, the Company and Lessor
previously entered into that certain Lease Agreement effective as of January
30, 2006 (the “Agreement”); and

WHEREAS, the Company and Lessor
now desire to amend the Agreement as set forth herein.

NOW,
THEREFORE, in consideration of the foregoing and the
agreements set forth below, the parties hereby agree as follows:

1.     Section 1.29 of the Agreement is hereby amended and restated in
its entirety as follows:

“1.29 Term.
The term “Term” means the lease term hereunder beginning on the Delivery Date
and (i) ending on January 31, 2009; or (ii) to the extent this Agreement is
renewed as provided in Section 3.1, then ending one (1) year following the last
such renewal term hereunder.”

2.     The first sentence of Section 3.2 of the Agreement is hereby
amended by the replacement of the initial word “The” with the following: “At
any time after January 31, 2009, the”.

3.     Except as expressly modified herein, the Agreement shall remain
in full force and effect in accordance with its original terms.

4.     Capitalized terms that are not defined herein shall have the
meanings ascribed to them in the Agreement.

5.     The validity, construction and operational effect of this
Amendment shall be governed by the laws of the State of California.

6.     This Amendment 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 instrument.

[Signatures on following page.]

 

IN WITNESS WHEREOF, the parties have caused this
Amendment to be duly executed and delivered on the day and year first above
written.

	
  Lessor:

  	
  N2T, INC

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  
	
   

  	
  Name:

  	
   

  
	
   

  	
  Title:

  	
   

  
	
   

  	
   

  	
   

  
	
  Company:

  	
  OAKLEY, INC.

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
   

  
	
   

  	
  Name:

  	
   

  
	
   

  	
  Title:

  	
   

  
	
   

  	
   

  	
   

  

 

 

AMENDMENT NO. 1

to

TIME SHARING AGREEMENT

This Amendment No. 1 to Time Sharing Agreement (this “Amendment”) is entered into as of                          ,
2007 by and between Oakley, Inc., a Washington corporation (the “Company”), and Jim Jannard (“Lessee”).

WHEREAS, the Company and Lessee
previously entered into that certain Time  Sharing Agreement effective as of January 30,
2006 (the “Agreement”); and

WHEREAS, the Company and Lessee
now desire to amend the Agreement as set forth
herein.

NOW,
THEREFORE, in consideration of the foregoing and the
agreements set  forth below, the parties hereby agree as
follows:

1.     Section 7.1 of the Agreement is hereby amended and restated in
its entirety as follows:

“7.1 TERM. This
Agreement is entered into as of the Effective Date and will continue until
January 31, 2009, unless terminated earlier as provided herein. The term of
this Agreement may be renewed by the Parties in writing, in each case, for
successive additional one (1) year periods, unless terminated earlier as
provided herein.”

2.     Subsection (a) of Section 7.2 of the Agreement is hereby amended
and restated in its entirety as follows:

“(a) At any time after
January 31, 2009, by either Oakley or Jannard upon at least fifteen (15) days’
prior written notice to the other Party for any reason, with or without cause;  or”

3.     Except as expressly modified herein, the Agreement shall remain
in full force and effect in accordance with its original terms.

4.     Capitalized terms that are not defined herein shall have the
meanings ascribed to them in the Agreement.

5.     The validity, construction and operational effect of this
Amendment shall be governed by the laws of the State of California.

6.     This Amendment 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 instrument.

[Signatures on following page.]

 

IN
WITNESS WHEREOF, the parties have caused this Amendment to be duly executed and
delivered on the day and year first above written.

	
  Lessee:

  	
   

  
	
   

  	
  JIM JANNARD

  
	
   

  	
   

  
	
  Company:

  	
  OAKLEY, INC.

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  
	
   

  	
  Name:

  	
   

  
	
   

  	
  Title:

  	
   

  
	
   

  	
   

  

 

 

AMENDMENT NO. 1

to

TIME SHARING AGREEMENT

This Amendment No. 1 to Time Sharing Agreement (this “Amendment”) is entered into as of                  ,
2007 by and between Oakley, Inc., a Washington corporation (the “Company”), and Red.com, Inc., a Washington corporation (“Lessee”). 

WHEREAS, the Company and Lessee
previously entered into that certain Time Sharing Agreement effective as of
January 30, 2006 (the “Agreement”);
and 

WHEREAS, the Company and Lessee
now desire to amend the Agreement as set forth herein.

NOW,
THEREFORE, in consideration of the
foregoing and the agreements set forth
below, the parties hereby agree as follows: 

1.     Section 7.1 of the Agreement is hereby amended and restated in
its entirety as follows: 

“7.1 TERM. This
Agreement is entered into as of the Effective Date and will continue until
January 31, 2009, unless terminated earlier as provided herein. The term of
this Agreement may be renewed by the Parties in writing, in each case, for
successive additional one (1) year periods, unless terminated earlier as
provided herein.”

2.     Subsection (a) of Section 7.2 of the Agreement is hereby amended
and restated in its entirety as follows:

“(a) At any time
after January 31, 2009, by either Oakley or Red. com upon at least fifteen (15)
days’ prior written notice to the other Party for any reason, with or without cause; or”

3.     Except as expressly modified herein, the Agreement shall remain
in full force and effect in accordance with its original terms.

4.     Capitalized terms that are not defined herein shall have the
meanings ascribed to them in the Agreement.

5.     The validity, construction and operational effect of this
Amendment shall be governed by the laws of the State of California.

6.     This Amendment 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 instrument.

[Signatures on following page.]

 

IN
WITNESS WHEREOF, the parties have caused this Amendment to be duly executed and
delivered on the day and year first above written.

	
  Lessee:

  	
  RED.COM, INC

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  
	
   

  	
  Name:

  	
   

  
	
   

  	
  Title:

  	
   

  
	
   

  	
   

  	
   

  
	
  Company:

  	
  OAKLEY, INC.

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
   

  
	
   

  	
  Name:

  	
   

  
	
   

  	
  Title:

  	
   

  

 

 

AMENDMENT NO. 1

to

TIME SHARING AGREEMENT

This Amendment No. 1 to Time Sharing Agreement (this “Amendment”) is entered into as of               
2007 by and between Oakley, Inc., a Washington corporation (the “Company”), and X, LLC, Inc., a Washington limited liability
company (“Lessee”).

WHEREAS, the Company and Lessee
previously entered into that certain Time Sharing Agreement effective as of
January 30, 2006 (the “Agreement”);
and

WHEREAS, the Company and Lessee
now desire to amend the Agreement as set forth herein.

NOW,
THEREFORE, in consideration of the foregoing and the
agreements set forth below, the parties
hereby agree as follows: 

1.             Section
7.1 of the Agreement is hereby amended and restated in its entirety as follows: 

“7.1 TERM. This
Agreement is entered into as of the Effective Date and will continue until
January 31, 2009, unless terminated earlier as provided herein. The term of
this Agreement may be renewed by the Parties in writing, in each case, for
successive additional one (1) year periods, unless terminated earlier as
provided herein.”

2.             Subsection
(a) of Section 7.2 of the Agreement is hereby amended and restated in its
entirety as follows:

“(a) At any time
after January 31, 2009, by either Oakley or X, LLC upon at least fifteen (15) days’
prior written notice to the other Party for any reason, with or without cause;
or”

3.             Except
as expressly modified herein, the Agreement shall remain in full force and
effect in accordance with its original terms.

4.             Capitalized
terms that are not defined herein shall have the meanings ascribed to them in
the Agreement.

5.             The
validity, construction and operational effect of this Amendment shall be
governed by the laws of the State of California.

6.             This
Amendment 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
instrument.

[Signatures on following page.]

 

IN
WITNESS WHEREOF, the parties have caused this Amendment to be duly executed and
delivered on the day and year first above written.

 

	
  Lessee:

  	
  X, LLC

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  
	
   

  	
  Name:

  	
   

  
	
   

  	
  Title:

  	
   

  
	
   

  	
   

  	
   

  
	
  Company:

  	
  OAKLEY, INC.

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
   

  
	
   

  	
  Name:

  	
   

  
	
   

  	
  Title:

  	
   

  

 

 

AMENDMENT
NO. 1

to

TIME SHARING AGREEMENT

This
Amendment No. 1 to Time Sharing Agreement (this “Amendment”)
is entered into as of                       , 2007
by and between Oakley, Inc., a Washington corporation (the “Company”), and Y, LLC, Inc., a Washington limited liability
company (“Lessee”).

WHEREAS, the Company and Lessee previously entered
into that certain Time Sharing Agreement effective as of January 30, 2006 (the “Agreement”); and

WHEREAS, the Company and Lessee now desire to amend
the Agreement as set forth herein.

NOW,
THEREFORE, in
consideration of the foregoing and the agreements set forth below, the parties
hereby agree as follows:

1.   Section
7.1 of the Agreement is hereby amended and restated in its entirety as follows:

“7.1   TERM. This Agreement is entered into as of
the Effective Date and will continue until January 31, 2009, unless terminated
earlier as provided herein. The term of this Agreement may be renewed by the
Parties in writing, in each case, for successive additional one (1) year
periods, unless terminated earlier as provided herein.”

2.   Subsection
(a) of Section 7.2 of the Agreement is hereby amended and restated in its
entirety as follows:

“(a) At any time after January 31, 2009, by either Oakley or Y, LLC
upon at least fifteen (15) days’ prior written notice to the other Party for
any reason, with or without cause; or”

3.   Except
as expressly modified herein, the Agreement shall remain in full force and
effect in accordance with its original terms.

4.   Capitalized
terms that are not defined herein shall have the meanings ascribed to them in
the Agreement.

5.   The
validity, construction and operational effect of this Amendment shall be
governed by the laws of the State of California.

6.   This
Amendment 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
instrument.

[Signatures on following page.]

 

IN
WITNESS WHEREOF, the parties have caused this Amendment to be duly executed and
delivered on the day and year first above written.

 

	
  Lessee:

  	
  Y, LLC

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
   

  
	
   

  	
  Name:

  	
   

  
	
   

  	
  Title:

  	
   

  

 

	
  Company:

  	
  OAKLEY, INC.

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
   

  
	
   

  	
  Name:

  	
   

  
	
   

  	
  Title:

  	
   

  

 

 2

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