UNITED STATES DISTRICT COURTEASTERN DISTRICT OF NEW YORK

In re LUXOTTICA GROUP S .p.A. No. CV 01-3285 (JBW) (MDG)

SECURITIES LITIGATION

STIPULATION OF SETTLEMENT

This Stipulation of Settlement dated as of July 20, 2005 (the "Stipulation"), is made and

entered into by and among the following Settling Parties : (i) the Lead Plaintiff (on behalf of itself

and each of the Class Members) (collectively "Plaintiffs"), by and through their counsel of

record in the Litigation; and (ii) James N . Hauslein, Rohit M . Desai, John H. Duerden, Robert C .

Grayson, Michael McCadden and William E . Phillips (collectively, the "Settling Defendants")

by and through their counsel of record in the Litigation, subject to the approval of the United

States District Court for the Eastern District of New York (the "Court") .

1. THE LITIGATION

1 . On or after May 22, 2001, the following actions were filed in the Court, as class

actions on behalf of persons who tendered their shares of common stock of Sunglass Hut

International , Inc. ("Sunglass Hut") in a Tender Offer dated March 5, 2001, in which Shade

Acquisition Corporation ("Shade"), a wholly-owned subsidiary of Luxottica Group S .p.A .

("Luxott ica") made a tender offer of $11 .50 per share : Yates v. Luxottica Group S.p.A., CV

2001-3285 ; Dash Ltd. v. Luxottica Group S.P.A ., CV 2001-4049 ; Rodgers v. Luxottica Group

S.p.A., CV 2001-4107 . By Order of the Court, on September 19, 2001, these actions were

consolidated and styled In re Luxottica Group S.p . A . Securities Litigation , No. CV 01 -3285 (RR)

(MDG) (the "Litigation") .

2. Plaintiff, Greenway Partners, L.P. (the "Lead Plaintiff' or "Greenway"), was

designated Lead Plaintiff by Memorandum and Order of the Court dated September 25, 2001 .

3 . By Order of the Court dated September 25, 2001, Goodkind Labaton Rudoff &

Sucharow LLP (the "Goodkind firm") was appointed as Lead Counsel for the Class .

4. On November 1, 2001, the Lead Plaintiff filed a First Amended Consolidated

Class Action Complaint ("First Amended Complaint"), against Luxottica, Leonardo Del Vecchio

(the controlling shareholder of Luxottica), and Shade (collectively, "Luxottica Defendants"

and/or the "Non-Settling Defendants"). The First Amended Complaint was also filed against

James N. Hauslein ("Hauslein," Sunglass Hut's Chairman of the Board), and the outside

directors of Sunglass Hut : Rohit Desai, John Duerden, Robert Grayson, Michael McCadden and

William Phillips ("Outside Director Defendants") .

5 . The First Amended Complaint alleged, inter alia, that the Luxottica Defendants

offered and paid greater consideration to Hauslein than to other tendering Sunglass Hut

shareholders as an inducement to Hauslein to support the Tender Offer and tender his shares, in

violation of Section 14(d) of the Securities Exchange Act of 1934 (" 1934 Act") and Rule 14d-10,

commonly referred to as the Best Price Rule of the Williams Act . It also alleged that the

Luxottica Defendants violated Section 10(b) of the 1934 Act . The First Amended Complaint

further alleged that : (i) Hauslein breached his fiduciary duty in receiving the extra payments

from Luxottica, totaling $15 million dollars ; (ii) that the Outside Director Defendants breached

their common law fiduciary duties by, inter alia, agreeing and acquiescing to Hauslein's

acceptance of the $15 million payment from Luxottica, which was excessive and put Hauslein in

a conflicted position at the time he was negotiating the tender offer price on behalf of Sunglass

Hut and its shareholders; and (iii) that the Luxottica Defendants aided and abetted Hauslein's

breach of his fiduciary duties .

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6. Defendants filed motions to dismiss the Complaint on April 12, 2002 . By

Memorandum and Order dated November 26, 2003, the Court denied in part and granted in part

Defendants' motion to dismiss the Complaint. Specifically, the Court granted the motion to

dismiss the claim brought pursuant to Section 10(b) of the 1934 Act . The Court denied the

motion to dismiss the claims brought based on violations of the Best Price Rule of the Williams

Act and common law .

7 . On June 8, 2004, Plaintiffs filed a Second Amended and Consolidated Complaint

("Second Amended Complaint"), adding a claim for control person liability, pursuant to Section

20(a) of the 1934 Act, against Leonardo Del Vecchio .

8. In late June of 2004, all Defendants answered the Second Amended Complaint .

All Defendants deny that they violated any laws or did anything wrong . They believe that their

actions were proper under the federal securities laws and under state law .

9. Pursuant to an Order of the Court dated October 22, 2004, Wolf Haldenstein

Adler Freeman & Herz LLP ("Wolf Haldenstein") was appointed as new Lead Counsel for the

Class, replacing the Goodkind firm .

10. Pursuant to a Stipulation and Order entered on December 29, 2004, the Court

certified a Class defined as follows : all persons and entities whose shares of Sunglass Hut were

tendered to and accepted by Shade pursuant to the Tender Offer of March 5, 2001, which

provided for a net cash payment of $11 .50 per share . Excluded from the Class are the

defendants, members of the immediate family of each individual defendant, any entity in which

any defendant has majority ownership, and the legal representatives, heir, successors,

predecessors in interest, or assigns of any defendant .

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11 . Since it was named Lead Counsel for the Class, Wolf Haldenstein has spent a

considerable amount of time carrying out all facets of discovery, including but not limited to

reviewing documents produced by the defendants and third parties, conducting numerous

depositions, and issuing and responding to interrogatories .

12. The parties also engaged in extensive settlement negotiations over an extended

period of time . In addition to several mediation sessions with Magistrate Judge Marilyn D . Go,

Plaintiffs and the Settling Defendants had a full day settlement meeting on January 21, 2005 . In

addition, the Plaintiffs participated in a mediation session in San Francisco, California with

retired United States Magistrate Judge Edward I. Infante.

IL SETTLING DEFENDANTS' DENIALS OF WRONGDOING AND LIABILIT Y

13. Settling Defendants have denied and continue to deny each and all of the claim s

and contentions alleged by Lead Plaintiff in the Litigation against them . Settling Defendants

expressly have denied and continue to deny all charges of wrongdoing or liability against them

arising out of any of the conduct, statements, acts or omissions alleged, or that could have been

alleged, in the Litigation. Settling Defendants also have denied and continue to deny, inter alia,

the allegations that Lead Plaintiff or the Class have suffered damage or that Lead Plaintiff or the

Class were harmed by the conduct alleged against them in the Litigation . Specifically, the

Settling Defendants contend that (a) the non-compete and consulting payments that Luxottica

contracted to pay Hauslein were fair and reasonable given that Hauslein was giving up the

prospect of employment with competitors at the peak of his career and in light of his proven

track record of success ; (b) the tender offer price was fair and reasonable to Sunglass Hut

shareholders and that Sunglass Hut was not likely to be able to improve upon that offer ; (c)

Sunglass Hut negotiated the terms of the tender offer with Luxottica in an effective and rigorous

manner with the full input of expert professional advisers ; and (d) the Sunglass Hut board of

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directors approved the tender offer terms only after careful consideration and deliberation with

the shareholders' best interest paramount .

14. Settling Defendants' decision to settle the Litigation was based on the conclusion

that further conduct of the Litigation would be protracted and expensive, that it is desirable that

the claims asserted against them in the Litigation be fully and finally settled in the manner and

upon the terms and conditions set forth in this Stipulation, the uncertainty and risks inherent in

any litigation, especially in complex cases like this Litigation, and the determination that it is

desirable and beneficial that the Litigation be settled in the manner and upon the terms and

conditions set forth in this Stipulation .

III. CLAIMS OF LEAD PLAINTIFF AND BENEFITS OF SETTLEMEN T

15 . Plaintiffs believe that the claims asserted in the Litigation have substantial merit.

Lead Counsel, however, recognize and acknowledge the uncertain outcome and the risk of any

litigation, especially in complex actions such as this Litigation, as well as the difficulties and

delays inherent in such litigation. Lead Counsel also is mindful of the inherent problems of

proof under and possible defenses to the violations asserted against the Settling Defendants in the

Litigation. Lead Counsel also recognizes the expense and length of continued proceedings

necessary to prosecute the claims asserted against the Settling Defendants in this Litigation

through trial and appeals . Lead Counsel believes that the settlement set forth in this Stipulation

confers substantial benefits upon the Class. Lead Counsel has determined that the settlement set

forth in the Stipulation is in the best interests of the Lead Plaintiffs and the Class .

IV. TERMS OF STIPULATION AND AGREEMENT OF SETTLEMENT

NOW, THEREFORE, IT IS HEREBY STIPULATED AND AGREED by and among

Lead Plaintiff (for itself and the Class Members) and Settling Defendants, by and through their

respective counsel of record, that, subject to the approval of the Court, the Released Claim s

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asserted against the Sett ling Defendants shall be finally and fully compromised, settled, and

released, and the Released Claims shall be dismissed with prejudice, as to all Settling Parties ,

upon and subject to the terms and conditions of the Stipulation, as follows :

1. Definitions

As used in the Stipulation, the following terms have the meanings specified

below:

1 .1 "Sunglass Hut" or "SHI" means Sunglass Hut International, Inc .

1 .2 "Authorized Claimant" means any Class Member whose claim fo r

recovery has been allowed pursuant to the terms of the Stipulation .

1 .3 "Claimant" means any Class Member who files a Proof of Claim in suc h

form and manner, and within such time, as the Court shall prescribe .

1 .4 "Claims Administrator" means The Garden City Group, inc .

1 .5 "Defendants" means all defendants in this litigation -- James N. Hauslein,

Rohit Desai, John Duerden, Robert Grayson, Michael McCadden, William Phillips, the Luxottic a

Group, S.p.A., Shade Acquisition Corporation, and Leonardo Del Vecchio .

1 .6 "Effective Date" means the first date by which all of the events and

conditions specified in' 7 .1 of the Stipulation have been met and have occurred .

1 .7 "Tender Offer" means Shade Acquisition Corporation's offer of $11 .50

net per share for Sunglass Hut stock announced on February 22, 2001 and dated March 5, 2001 .

1 .8 "Escrow Agent" means the law firm of Wolf Haldenstein Adler Freeman

& Herz LLP.

1 .9 "Final" means: (a) if no appeal from the Judgment is sought, the day afte r

the last date such an appeal could be filed ; or (b) if an appeal is sought from the Judgment, the

day after such Judgment is affirmed or the appeal is dismissed or denied and such Judgment is no

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longer subject to further judicial review . Any proceeding or order, or any appeal or petition for a

writ of certiorari pertaining solely to any plan of allocation and/or application for attorneys' fees,

costs or expenses, shall not in any way delay or preclude the Judgment from becoming Final .

1 .10 "Judgment" means the judgment to be rendered by the Court, substantially

in the form attached hereto as Exhibit B.

1 .11 "Person" means an individual, corporation, limited liability corporation ,

professional corporation, limited liability partnership, partnership, limited partnership,

association, joint stock company, estate, legal representative, trust, unincorporated association,

government or any political subdivision or agency thereof, any business or legal entity and all of

their respective spouses, heirs, beneficiaries, executors, administrators, predecessors, successors,

representatives, or assignees .

1 .12 "Lead Counsel" means Wolf Haldenstein Adler Freeman & Herz LLP.

1 .13 "Lead Plaintiff' means Greenway Partners, L .P .

1 .14 "Plan of Allocation" means a plan or formula of allocation of th e

Settlement Fund whereby the Settlement Fund shall be distributed to Authorized Claimants after

payment of expenses of notice and administration of the settlement, Taxes and Tax Expenses and

such attorneys' fees, costs, expenses and interest as may be awarded by the Court . Any Plan of

Allocation is not part of the Stipulation and Settling Defendants shall have no responsibility or

liability with respect thereto .

1 .15 "Release" means the text of the release set forth in the Proof of Claim and

Release, annexed as Exhibit A-2, in the Court's Order and Final Judgment, annexed as Exhibit

B, and in Section 4.1 of this Stipulation.

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1 .16 "Released Claims" means any and all claims, rights or causes of action or

liabilities whatsoever, whether based on federal, state, local, statutory or common law or any

other law, rule or regulation, including both known and Unknown Claims, that have been or

could have been asserted in any forum by or on behalf of the Releasing Parties against the

Released Persons, including all claims that were or could have been asserted in the Litigation, or

any other claims relating to any of the events, transactions, allegations, or factual matter

contained in the Second Amended Complaint . Specifically excluded from the definition of

Released Claims are any claims asserted against the Non-Settling Defendants, including, but not

limited to claims asserted under Section 14(d) of the Securities Exchange Act of 1934 and Rule

14d-10 .

1 .17 "Released Person" or "Released Persons" means James N . Hauslein, Rohit

M. Desai, John H . Duerden, Robert C. Grayson, Michael McCadden, William E. Phillips, the

respective past or present subsidiaries, parents, member firms, related entities, divisions and

affiliates, the past and present insurers (including National Union Fire Insurance Company of

Pittsburgh, PA ("National Union")), reinsurers, attorneys, accountants, representatives of any of

them, affiliates, successors and predecessors of each of the foregoing and all present and former

members, partners, principals, administrators, officers, directors, shareholders, agents,

employees, attorneys, advisors, investment advisors, insurers, auditors and accountants of any of

them and any person, firm, trust, corporation, officer, director or other individual or entity in

which they have a controlling interest or which is otherwise related to any of them and their legal

representatives, heirs, successors in interest or assigns. Specifically excluded from the definition

of Released Person or Released Persons are the Non-Settling Defendants .

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1 .18 "Releasing Party" or "Releasing Parties" means Lead Plaintiff, the Class,

or any Person. or entity (except those opting out of the Class) that asserted or could have asserted

a claim against the Released Persons relating to any of the events, transactions, allegations, or

factual matter contained in the Second Amended Complaint .

1 .19 "Settled Defendants' Claims" means all claims (including, but not limited

to, Unknown Claims), demands, losses, rights, and causes of action of any nature whatsoever,

whether known or unknown, whether accrued or unaccrued, whether suspected or unsuspected,

whether concealed or hidden, that have been or could have been asserted in the Litigation or any

forum by the Settling Defendants or any of them or the successors and assigns of any of them

against any of the Lead Plaintiff, Class Members or their attorneys, which arise out of or relate in

any way to the institution, prosecution, assertion, settlement, or resolution of the Litigation

(except for claims to enforce the Settlement) .

1 .20 "Class" means all persons and entities whose shares of Sunglass Hut were

tendered to and accepted by Shade pursuant to the Tender Offer of March 5, 2001, which

provided for a net cash payment of $11 .50 per share. Excluded from the Class are the

Defendants, members of the immediate family of each individual defendant, any entity in which

any Defendant has majority ownership, and the legal representatives, heirs, successors,

predecessors in interest, or assigns of any Defendant . Also excluded from the Class are those

Persons who timely and validly request exclusion from the Class pursuant to the "Notice of

Pendency of Class Action and Proposed Partial Settlement, Motion for Attorneys' Fees and

Settlement Fairness Hearing" to be sent to potential Class Members .

1 .21 "Class Member" or "Member of the Class" means a Person who falls

within the definition of the Class .

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1 .22 "Settlement Fund" means the principal amount of three million seven

hundred fifty thousand dollars ($3,750,000 .00), plus any interest that may accrue thereon as

provided for herein .

1 .23 "Settling Parties" means, collectively, each of the Settling Defendants and

the Lead Plaintiff on behalf of themselves and the Members of the Class .

1 .24 "Unknown Claims" means any Released Claims which any of the

Releasing Part ies does not know or suspect to exist in his, her, or its favor at the time of the

release of the Released Persons which , if known by him, her or it, might have affected his, her or

its settlement with and release of the Released Persons , or might have affected his, her or its

decision not to object to this Settlement . With respect to any and all Released Claims, the

Releasing Parties, by operation of the Order and Final Judgment , shall have waived and

relinquished , to the fullest extent permi tted by law, the provisions , rights , and benefits of § 1542

of the California Civil Code, which provides :

A GENERAL RELEASE DOES NOT EXTEND TO CLAIMSWHICH THE CREDITOR DOES NOT KNOW ORSUSPECT TO EXIST IN HIS FAVOR AT THE TIME OFEXECUTING THE RELEASE , WHICH IF KNOWN BYHIM MUST HAVE MATERIALLY AFFECTED HISSETTLEMENT WITH THE DEBTOR .

The Releasing Parties, by operation of the Order and Final Judgment, shall have waived any and

all provisions, rights and benefits conferred by any law of any state or territory of the United

States, or principle of common law, which is similar, comparable or equivalent to § 1542 of the

California Civil Code . By reference to the California Civil Code, the parties hereto do not agree

or concede that California law is applicable to this Litigation . Any Releasing Party may

hereafter discover facts in addition to, or different from, those which he, she or it now knows or

believes to be true with respect to the subject matter of the Released Claims, but each Releasing

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Party, by operation of the Order and Final Judgment, shall have fully, finally and forever settled

and released any and all Released Claims, known or unknown, suspected or unsuspected,

contingent or non-contingent, whether or not concealed or hidden, which now exist, or heretofore

have existed, upon any theory of law or equity now existing or coming into existence in the

future, including, but not limited to, conduct which is negligent, intentional, with or without

malice, or a breach of any duty, law or rule, without regard to the subsequent discovery or

existence of such different or additional facts . The parties hereto acknowledge that the foregoing

waiver of "Unknown Claims" was bargained for and a key element of the Stipulation and

settlement of which this release is a part .

1 .25 "Settling Defendants" means Rohit Desai, John Duerden, Robert Grayson,

Michael McCadden, William Phillips and James N . Hauslein.

1 .26 "Non-Settling Defendants" means Shade Acquisition Corporation,

Luxottica Group S .p.A., and Leonardo Del Vecchio .

1 .27 "Luxottica Defendants" means Shade Acquisition Corporation, Luxottica

Group S .p .A., and Leonardo Del Vecchio .

1 .28 "Outside Director Defendants" means Rohit Desai, John Duerden, Robert

Grayson, Michael McCadden and William Phillips .

2 . The Settlement

(a) The Settlement Fun d

2.1 The Settling Defendants shall cause their insurer National Union to pa y

$3,750,000 (the "Settlement Amount") . From the Settlement Amount, the Settling Defendants

agree to cause their insurer National Union to pay the actual cost of the notice and administration

of the proposed settlement, up to $100,000, and to pay it within thirty days after the claims

administrator issues a bill for these services . The remainder of the Settlement Amount shall b e

11405659.v2

paid within thirty days after the Judgment entered by the District Court has become Final, into an

interest bearing escrow account (the "Escrow Account") established and controlled by the

Escrow Agent, for the purpose of this Settlement .

(b) The Bar Order

2.2 Effective immediately upon the so ordering of this Stipulation, an d

effective permanently when the Judgment becomes Final, each of the Defendants is hereby

permanently barred, enjoined, and restrained from commencing, prosecuting, or asserting any

claim on its own behalf or on behalf of another, whether arising under state, federal, or foreign

law as claims, cross-claims, counterclaims, or third party claims in any court or other forum in

the United States, Italy, or elsewhere (a) for indemnity or contribution against any other

Defendant arising out of or reasonably flowing from the claims, facts, transactions, or allegations

in the Litigation, or (b) any other claim against another Defendant where (i) the injury to the

Defendant asserting the claim is that Defendant's liability to the plaintiffs, or (ii) the claim is

based in whole or part upon, or arises from, any contention that (A) any portion of the $15

million in payments to Defendant James N . Hauslein under the Consulting and Non-Competition

Agreement dated as of February 22, 2001 . was not entirely lawful and pursuant to a valid and

binding contract and/or (B) any Defendant has any liability by reason of the making of the

Consulting and Non-Competition Agreement dated as of February 22, 2001 or any payment

made thereunder;, provided, however, that all other rights to indemnification existing at the time

of the Merger Agreement by and among Shade Acquisition Corp ., Luxottica Group S .p.A., and

Sunglass Hut International, Inc ., in favor of any of the Settling Defendants shall continue in full

force and effect to the extent permissible by law . The Court shall enter an order that contains the

terms of the immediately preceding sentence (the "Bar Order") .

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2.3 The Court shall reduce any judgment obtained against the Non-Settlin g

Defendants by $3,750,000 or in the amount of the Settling Defendants' equitable share of the

damages concerning claims asserted against the Settling Defendants, whichever is the greater

("Judgment Reduction") . Following the entry of a final judgment in favor of Plaintiffs, if any,

("Plaintiffs' Final Judgment"), if any Non-Settling Defendant brings an action predicated on

Plaintiffs' Final Judgment against any person or entity that is not a party to this Stipulation, then

the Non-Settling Defendant shall be barred from seeking or obtaining any recovery that would

include the amount of the Judgment Reduction . As provided for in Fla . Stat . § 768.315(b), NY

Gen. Ob . Law § 15-108, and any other applicable law, the Settling Defendants shall, upon the

Effective Date, be relieved of "liability to any other person for contribution" claims arising from

any of the allegations, transactions, or events relating to the Litigation .

(c) The Escrow Agen t

2.4 The Escrow Agent shall invest the Settlement Fund deposited pursuant t o

2.1 above in (i) United States Treasury bills, Treasury notes or other instruments insured or

guaranteed by the full faith and credit of the United States government ; and/or (ii) an interest

bearing account with J .P. Morgan Chase ; and/or (iii) a fund maintained through J .P. Morgan

Chase which invests in or is backed by investments of the nature provided in clauses (i) and (ii )

of this sentence .

2.5 The Escrow Agent shall not disburse the Settlement Fund until (a) there i s

an Effective Date, and (b) the Court shall have entered an order directing the disbursement of the

Settlement Fund. Counsel for the Settling Defendants shall be given five business days' notice

before the Court is moved for an order directing the disbursement of the Settlement Fund . The

Settlement Fund shall be disbursed only as provided for in this Stipulation and any order of th e

Court.

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2 .6 Subject to further order and/or direction as may be made by the Court, the

Escrow Agent is authorized to execute such transactions on behalf of the Class Members as are

consistent with the terms of the Stipulation .

2.7 All funds held by the Escrow Agent shall be deemed and considered to be

in custodies legis, and shall remain subject to the jurisdiction of the Court, until such time as such

funds shall be distributed pursuant to the Stipulation and/or further order(s) of the Court .

(d) Taxes

2.8 The Settling Parties and the Escrow Agent agree to treat the Settlemen t

Fund, from the date of its creation as being at all times a "qualified settlement find" within the

meaning of Treas . Reg. §1 .468B-1 . In addition, the Escrow Agent shall timely make such

elections as necessary or advisable to carry out the provisions of this 1 2 .8, including the

"relation-back election" (as defined in Treas . Reg. § 1 .468B-1) back to the earliest permitted date .

Such elections shall be made in compliance with the procedures and requirements contained in

such regulations . It shall be the responsibility of the Escrow Agent to timely and properly

prepare and deliver the necessary documentation for signature by all necessary parties, and

thereafter to cause the appropriate filing to occur.

(a) For the purpose of § 468B of the Internal Revenue Code of 1986, a s

amended, and the regulations promulgated thereunder, the "administrator" shall be the Escrow

Agent. The Escrow Agent shall timely and properly file all informational and other tax returns

necessary or advisable with respect to the Settlement Fund (including, without limitation, the

returns described in Treas . Reg. § 1 .468B-2(k)) . Such returns (as well as the election described

in this 12.8) shall be consistent with this ¶ 2 .8 and in all events shall reflect that all Taxes as

defined in subsection (b) below (including any estimated Taxes, interest or penalties) on th e

1 44o5659 .v2

income earned by the Settlement Fund shall be paid out of the Settlement Fund as provided in ¶

2.8(b) hereof.

(b) All (i) Taxes (including any estimated Taxes, interest or penalties) arising

with respect to the income earned by the Settlement Fund, including any Taxes or tax detriments

that may be imposed upon the Settling Defendants with respect to any income earned by the

Settlement Fund for any period during which the Settlement Fund does not qualify as a

"qualified settlement fund" for federal or state income tax purposes ("Taxes"), and (ii) expenses

and costs incurred in connection with the operation and implementation of this ¶ 2.8 (including,

without limitation, expenses of tax attorneys and/or accountants and mailing and distribution

costs and expenses relating to filing (or failing to file) the returns described in this2 .8) ("Tax

Expenses"), shall be paid out of the Settlement Fund ; in all events neither the Settling

Defendants nor the Released Persons shall have any liability or responsibility for the Taxes or

the Tax Expenses. The Escrow Agent shall indemnify and hold each of the Settling Defendants

and the Released Persons harmless for Taxes and Tax Expenses (including, without limitation,

Taxes payable by reason of any such indemnification) . Further, Taxes and Tax Expenses shall

be treated as, and considered to be, a cost of administration of the Settlement Fund and shall be

timely paid by the Escrow Agent out of the Settlement Fund without prior order from the Court,

and the Escrow Agent shall be obligated (notwithstanding anything herein to the contrary) to

withhold from distribution to Authorized Claimants any funds necessary to pay such amounts,

including the establishment of adequate reserves for any Taxes and Tax Expenses (as well as any

amounts that may be required to be withheld under Treas . Reg. § 1 .468B-2(l)(2)) ; neither

Settling Defendants nor the Released Persons are responsible nor shall they have any liability

therefor . The Settling Parties hereto agree to cooperate with the Escrow Agent, each other, an d

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their tax attorneys and accountants to the extent reasonably necessary to carry out the provisions

of this ¶ 2 .8 .

(e) Termination of Settlemen t

2.9 In the event that the Stipulation is not approved, or is terminated,

canceled, or fails to become effective for any reason, including, without limitation, in the event

the Judgment is reversed or vacated following any appeal taken therefrom, or is successfully

collaterally attacked, if the Settlement Amount had already been paid, the Settlement Fund

(including accrued interest) less reasonable expenses actually incurred or due and owing from

the Settlement Fund for the notice and administration of the Settlement, shall be refunded to

National Union in accordance with the instructions to be provided by National Union or defense

counsel within ten (10) business days of the availability of the monies from the investments

authorized herein or as otherwise agreed upon in writing by National Union . Whether or not the

Settlement amount had yet been paid, National Union shall remain responsible to pay the actual

costs, if any, of the notice and administration of the proposed settlement, up to $100,000 .

3 . Notice Order and Settlement Hearing

3 .1 Promptly after execution of the Stipulation, the Settling Parties shal l

submit the Stipulation together with its Exhibits to the Court and shall jointly apply for entry of

an order (the "Notice Order"), substantially in the form and content of Exhibit A attached hereto,

requesting, inter alia, the preliminary approval of the settlement set forth in the Stipulation, and

approval for the mailing of a settlement notice (the "Notice") and publication of a summary

notice, substantially in the forms of Exhibits A-1 and A-3 attached hereto . The Notice shall

include the general terms of the settlement set forth in the Stipulation, the proposed Plan of

Allocation, the general terms of the Fee and Expense Application as defined in ¶ 6 .1 below and

the date of the Settlement Hearing as defined below .

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3.2 The Settling Parties request that, after Notice is given, the Court hold a

hearing (the "Settlement Hearing") and approve the settlement of the Litigation as set forth

herein. At or after the Settlement Hearing, Plaintiffs' Counsel also will request that the Court

approve the proposed Plan of Allocation and the Fee and Expense Application.

3 .3 Except for their obligation to cause payment of the Settlement Amount,

Settling Defendants shall have no liability, obligation or responsibility for the administration o f

the Settlement or disbursement of the Net Settlement Fund.

4. Releases

4.1 Upon the Effective Date, the Releasing Parties, on behalf of themselves,

their heirs, executors, administrators, successors and assigns, and any persons they represent,

shall, with respect to each and every Released Claim, release and forever discharge, and shall

forever be enjoined from prosecuting, any and all Released Claims, including Unknown Claims,

against Released Persons regardless of whether such Releasing Party executes and delivers a

Proof of Claim and Release .

4.2 The Proof of Claim and Release to be executed by Class Members shal l

release all Released Claims against the Released Persons and shall be substantially in the for m

and content contained in Exhibit A-2 attached hereto .

4.3 Upon the Effective Date, each of the Settling Defendants, on behalf o f

themselves and the Released Persons, shall be deemed to have, and by operation of the Judgment

shall have, fully, finally, and forever released, relinquished and discharged all Settle d

Defendants' Claims, and shall forever be enjoined from prosecuting the Settled Defendants '

Claims .

5. Administration and Calculation of Claims, Final Awards,

and Supervision and Distribution of Settlement Fun d

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5.1 The Claims Administrator, subject to such supervision and direction of th e

Court and/or Plaintiffs' Counsel as may be necessary or as circumstances may require, shal l

administer and calculate the claims submitted by Class Members and shall oversee distributio n

of the Net Settlement Fund (defined below) to Authorized Claimants . The Settlement Fund shall

be applied as follows :

(a) to pay all the costs and expenses reasonably and actually incurred in

connection with providing Notice, locating Class Members, soliciting Class claims, assisting

with the filing of claims, administering and distributing the Settlement Fund to Authorize d

Claimants and processing Proof of Claim and Release forms ;

(b) to pay the Taxes and Tax Expenses described in 12 .8 above ;

(c) to pay to Plaintiffs' Counsel attorneys' fees, expenses, and costs wit h

interest thereon (the "Fee and Expense Award"), if and to the extent allowed by the Court ; and

(d) to distribute the balance of the Settlement Fund (the "Net Settlement

Fund") to Authorized Claimants as allowed by the Stipulation and the Plan of Allocation .

(e) The Plan of Allocation provides that after the payment of the fees and

expenses identified above, the Net Settlement amount will be distributed pro rata, based on the

number of authorized shares (class members who tendered their shares in the Tender Offer) that

file claims to participate in the Settlement. Thus, the Net Settlement amount will be equally

divided and distributed to each authorized share on a pro rata basis.

5.2 Upon the Effective Date and thereafter, and in accordance with the terms

of the Stipulation, the Plan of Allocation, or such further approval and further order(s) of th e

Court as may be necessary or as circumstances may require, the Net Settlement Fund shall b e

distributed to Authorized Claimants, subject to and in accordance with the following :

18405659.v2

5.5 It is understood and agreed by the Settling Parties that any proposed Plan

of Allocation of the Net Settlement Fund including, but not limited to, any adjustments to an

Authorized Claimant's claim set forth therein, is not a necessary term of the Stipulation and may

be considered by the Court separately from the Court's consideration of the fairness,

reasonableness, and adequacy of the settlement set forth in the Stipulation, and any order or

proceedings relating to the Plan of Allocation shall not operate to terminate or cancel the

Stipulation or affect or delay the finality of the Court's Judgment approving the Stipulation and

the settlement set forth herein, or any other orders entered pursuant to the Stipulation .

5.6 The Claims Administrator shall furnish copies of all releases signed by

claimants to Settling Defendants' Counsel within a reasonable time of making disbursements of

the Settlement Fund .

6. Plaintiffs' Counsel 's Attorneys ' Fees and Reimbursement of Expense s

6.1 Plaintiffs' Counsel may submit an application or applications (the "Fe e

and Expense Application") for distributions to them from the Settlement Fund for: (a) an award

of attorneys' fees to be paid from the Settlement Fund ; plus (b) reimbursement of expenses and

costs incurred in connection with prosecuting the Litigation, plus any interest on such attorneys'

fees, costs, and expenses at the same rate and for the same periods as earned by the Settlement

Fund. Plaintiffs' Counsel reserve the right to make additional applications for fees and expenses

incurred .

6.2 The attorneys' fees, expenses and costs, including the fees of experts and

consultants, as awarded by the Court, shall be paid to Plaintiffs' Counsel from the Settlement

Fund, as ordered immediately after the Court executes an order awarding such fees and expenses

and after the Effective Date of the Settlement .

20405659 .v2

6.3 No Fee and Expense Application is a necessary term of the Stipulation,

and any Fee and Expense Application may be considered by the Court separately from the

Court's consideration of the fairness, reasonableness and adequacy of the settlement set forth in

the Stipulation, and any order or proceedings relating to any Fee and Expense Application,

including any appeal from any order relating to the Fee and Expense Application or reversal or

modification thereof, shall not operate to terminate or cancel the Stipulation, or affect or delay

the finality of the Judgment approving the Stipulation and the settlement of the Litigation se t

forth herein .

7 . Conditions of Settlemen Effect of Disapproval, Cancellation or Termination

7.1 The Effective Date of the Stipulation shall be conditioned on the

occurrence of all of the following events :

(a) Defendants have made or caused the contributions to be made to the

Settlement Fund as required by ¶ 2 .1 above ;

(b) the Court has approved the Stipulation in all material respects and has

entered the Notice Order, or an order substantially in the form of Exhibit A attached hereto ;

(c) the Court has entered the Judgment, or a judgment substantially in th e

form of Exhibit B attached hereto, or a judgment in form other than that provided abov e

("Alternative Judgment") acceptable to National Union and all of the Settling Parties, which

judgment shall include entry of the Bar Order as set forth in' 2 .2 of this Stipulation ;

(d) the Settlement shall not have been terminated pursuant to 17.3 ;

(e) the Judgment or Alternate Judgment has become Final ;

(f) Final order has been entered by the Court approving the Stipulation an d

settlement; and

2 1405659.v2

(g) A Final Judgment pursuant to Rule 54(b) has been entered in the District

Court dismissing all claims made against the Settling Defendants with prejudice .

7 .2 Upon the occurrence of all of the events referenced in 17 .1 above, any and

all remaining interest or right of Settling Defendants in or to the Settlement Fund, if any, shall be

absolutely and forever extinguished .

7.3 Settling Defendants, through their counsel and Lead Counsel, shall have

the right to terminate the Settlement and this Stipulation by providing written notice of their

election to do so ("Termination Notice") to all other parties hereto within thirty (30) days of (a)

the Court's declining to enter the Notice Order in any material respect ; (b) the Court's refusal to

approve this Stipulation or any material part of it ; (c) the Court's declining to enter the Judgment

in any material respect; (d) the date upon which the Judgment is modified or reversed in any

material respect by the Court of Appeals or the Supreme Court; or (e) the date upon which an

Alternative Judgment is modified or reversed in any material respect by the Court of Appeals or

the Supreme Court . Settling Defendants and National Union shall also have the option to

terminate the Settlement and this Stipulation under the terms of the Supplemental Agreement

described in paragraph 8 .

7.4 If the Settlement is terminated or fails to become effective and Final fo r

any reason, then the Settling Parties shall revert to the status, position and schedule as they

existed on May 12, 2005 . The Settling Parties shall have the right to : (a) complete discovery and

expert discovery; (b) submit dispositive motions ; (c) prepare for trial; and (d) perform any other

act permitted as of May 12, 2005 on the schedule then existing for the completion of such work .

There shall be one trial of all claims with all named parties, including those party to this

Stipulation .

22405659.v2

7.5 A hearing (the "Settlement Hearing") shall be held at a date and time

convenient to the Court, at the United States District Court for the Eastern District of New York,

225 Cadman Plaza East, Brooklyn, New York 11201, to determine whether the proposed

settlement on the terms and conditions provided for in this stipulation is fair, just, reasonable,

and adequate as to the Class and should be approved by the Court ; whether a Judgment as

provided in ¶ 1 .10 should be entered herein; whether the proposed Plan of Allocation should be

approved; and to determine the amount of fees and expenses that should be awarded to Plaintiffs'

Counsel . Lead Counsel shall provide to counsel for the Settling Defendants and file copies with

the Court, as soon as practical after receipt by Lead Counsel, or in any event not less than ten

(10) business days before the hearing date established by the Court, copies of any requests for

exclusion from the Class .

8 . Supplemental Agreement

8 .1 Simultaneously herewith, the Settling Parties are executing a

"Supplemental Agreement" setting forth certain conditions under which the Stipulation may be

withdrawn or terminated by the Settling Defendants if potential Class Members who tendered in

excess of a certain number of shares of Sunglass Hut stock during the Class Period exclude

themselves from the Class . The Supplemental Agreement shall not be filed prior to the

Settlement Hearing unless a dispute arises as to its terms . In the event of withdrawal from this

Stipulation pursuant to the Supplemental Agreement, this Stipulation shall become null and void

and of no further force and effect and the provisions of paragraph 7 .4 shall apply.

Notwithstanding the foregoing, the Stipulation shall not become null and void as a result of the

election by the Settling Defendants to exercise their option to withdraw from the Stipulation

pursuant to the Supplemental Agreement until the conditions set forth in the Supplemental

Agreement have been satisfied .

23405659 .v2

9. Miscellaneous Provision s

9.1 If the claims by Lead Plaintiff against the Luxottica Defendants go to trial,

James N. Hauslein, if subpoenaed, agrees to appear as a trial witness.

9.2 The Settling Parties: (a) acknowledge that it is their intent to consummate

this agreement; and (b) agree to cooperate to the extent reasonably necessary to effectuate and

implement all terms and conditions of the Stipulation and to exercise their best efforts to

accomplish the foregoing terms and conditions of the Stipulation . Lead Plaintiff shall not opt out

of the Class and shall in all respects use its best efforts to bring the settlement described in this

Stipulation to fruition .

9.3 The Settling Parties intend this settlement to be a final and complet e

resolution of all disputes between them with respect to the Litigation. Nothing in this settlement

or compromise of claims herein shall be deemed an admission by any Settling Party as to the

merits of any claim or defense . The Judgment will contain a statement that, during the course of

the Litigation, the Settling Parties and their respective counsel at all times complied with the

requirements of Federal Rule of Civil Procedure I I . The Settling Parties agree that the amount

paid to the Settlement Fund and the other terms of the settlement were negotiated in good faith

by the Settling Parties, and reflect a settlement that was reached voluntarily after consultation

with competent legal counsel .

9.4 Neither the Stipulation nor the settlement, nor any act performed o r

document executed pursuant to or in furtherance of the Stipulation or the settlement : (a) is or

may be deemed to be or may be used as an admission of, or evidence of, the validity of any

Released Claim, or of any wrongdoing or liability of the Settling Defendants ; or (b) is or may be

deemed to be or may be used as an admission of, or evidence of, any fault or omission of any of

the Settling Defendants in any civil, criminal, or administrative proceeding in any court ,

24405659 .v2

administrative agency, or other tribunal . Settling Defendants may file the Stipulation and/or the

Judgment in any action that may be brought against them in order to support a defense or

counterclaim based on principles of res judicata, collateral estoppel, release, good faith

settlement, judgment bar or reduction, or any other theory of claim preclusion or issue preclusion

or similar defense or counterclaim .

9.5 All agreements made and orders entered during the course of the

Litigation relating to the confidentiality of information shall survive this Stipulation .

9.6 All of the Exhibits to the Stipulation are material and integral parts hereof

and are fully incorporated herein by this reference.

9.7 The Stipulation may be amended or modified only by a written instrument

signed by or on behalf of all Settling Parties or their respective successors-in-interest .

9.8 This Stipulation supersedes and extinguishes any and all other promises ,

representations or agreements, whether written or oral, made at any time prior to the date of this

Stipulation by and between the Settling Parties or any of their current and former officers,

directors, stockholders, partners, principals, employees, agents, parent corporations, subsidiaries,

affiliates, predecessors, estates, assigns, and attorneys, regarding the resolution of the Litigation,

except the intent of this Stipulation is to implement the terms of the Settlement set forth in the

Memorandum of Understanding entered by the Settling Parties . The Settling Parties agree that

this Stipulation and the Supplemental Agreement contain the entire agreement between the

Settling Parties with respect to the Litigation and that the terms of this Stipulation are contractual

and not mere recitals.

9.9 Plaintiffs' Counsel, on behalf of the Class, are expressly authorized by

Lead Plaintiff to take all appropriate actions required or permitted to be taken by the Clas s

25405659 .v2

pursuant to the Stipulation to effectuate its terms and also are expressly authorized to enter int o

any modifications or amendments to the Stipulation on behalf of the Class that they dee m

appropriate .

9 .10 Each counsel or other Person executing the Stipulation or any of its

Exhibits on behalf of any party hereto hereby warrants that such Person has the full authority to

do so .

9.11 The Stipulation may be executed in one or more counterparts. All

executed counterparts and each of them shall be deemed to be one and the same instrument . A

complete set of executed counterparts shall be filed with the Court .

9.12 The Stipulation shall be binding upon, and inure to the benefit of, the

successors and assigns of the Settling Parties and the Released Persons .

9.13 The Court shall retain jurisdiction with respect to implementation and

enforcement of the terms of the Stipulation, and the Settling Parties submit to the jurisdiction o f

the Court for purposes of implementing and enforcing the settlement embodied in th e

Stipulation .

9.14 The Stipulation and the Exhibits attached hereto and the Supplementa l

Agreement shall be considered to have been negotiated, executed and delivered, and to be wholl y

performed, in the State of New York , and the rights and obligations of the parties set forth in thi s

Stipulation shall be construed and enforced in accordance with, and governed by, the internal ,

substantive laws of the State of New York without giving effect to that State's choice of law

principles .

9 .15 After the completion of the entire Litigation and/or the distribution of th e

Net Settlement Fund to Authorized Claimants, whichever is later, and upon request fr om counsel

26405659.v2

for Settling Defendants, Plaintiffs' Counsel shall furnish reasonable written assurances to

counsel for Settling Defendants of destruction of discovery material produced in the Litigation,

including inter alia, transcripts, documents, CD-ROMs, interrogatory responses, and all other

materials provided by Settling Defendants during discovery consistent with the Stipulated Order

Regarding Confidential Information dated February 25, 2004 and as amended on April 13, 2005 .

9.16 Any notice to be given or sent to any counsel in this Litigation shall be

sent to the individuals at the law firms and addresses specified below .

9 .17 Pursuant to Rule 54(b) of the Federal Rules of Civil Procedure, the Cour t

hereby determines that there is no just reason for delay, and, upon final approval of the

settlement, shall direct the entry of a final judgment dismissing all claims made against Settlin g

Defendants with prejudice-

27405659.v2

IN WITNESS WHEREOF, the parties hereto have caused the Stipulation to be executed, by thei r

duly authorized attorneys, dated as of July 20, 2005 .

WOLF HALDENSTEIN ADLERFREEMAN & HERZ LLP

Daniel W. Krasner (DK-638 1)David L. Wales (DW-6912)Matthew M. Guiney (MG-5858)270 Madison Avenu eNew York, NY 1001 6Telephone: (212) 545-4600Fax: (212) 686-011 4

Counselfor Plaintiff Class and as EscrowAgent

ORRICK HERR.INGTON &SUTCLIFFE LLP

Michael D . Torpey, admitted pro hac vice

Stephen M. Knaster, admitted pro hac vice

Kenneth P. Herzinger (KH-1181 )

The Orrick Building405 Howard Stree tSan Francisco , CA 94105Tel (415) 773-5409Fax (415) 773-575 9

Attorney for DefendantsRohit M. Desai, John H. Duerden,Robert C. Grayson, Michael McCaddenand William E. Phillips

28405659.v2

IN WITNESS WHEREOF, the parties hereto have caused the Stipulation to be executed, by their

duly authorized attorneys, dated as of July 24, 2005 .

WOLF HALDENSTEIN ADLERFREEMAN & HERZ LLP

Daniel W. Krasner (DK-6381)David L. Wales (DW-6912)Matthew M. Guiney (MG-5858)270 Madison Avenu eNew York, NY 10016Telephone: (212) 545-4600Fax: (212) 686-011 4

Counsel for Plaintiff Class and as EscrowAgent

ORRICK HERRINGTON &SUTCLIFFE LLP

G ra~~,c.. L~a Y

Michael D. Torpey, admi tted o hac viceStephen M . Knaster, admitted pro hac viceKenneth P . Herzinger (KH-1181)The Orrick Building405 Howard Stree tSan Francisco , CA 94105Tel (415) 773-540 9Fax (415) 773-575 9

Attorney for DefendantsRohit M. Desai, John H. Duerden,Robert C. Grayson, Michael McCaddenand William E. Phillips

28405659.v2

1585 BroadwayNew York, NY 10036Telephone: (212) 969-3000Fax: (212) 969-2900

Attorney far DefendantJames N. Hauslein

29405659 .v2

Matthew J. Morris (MM-5179)