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 November 11, 2005 (the "Stipulation"), i s

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 thei r

counsel of record in the Litigation ; and (ii) Luxottica Group S .p .A., ("Luxottica"), Sunglass Hu t

International , Inc. ("Sunglass Hut"), formerly known as and named in this lawsuit as Shade

Acquisition Corporation ("Shade"), and Leonardo Del Vecchio ("Del Vecchio") (collectively ,

the "Settling Defendants" or the "Luxottica Defendants"), by and through their counsel of record

in the Litigation, subject to the approval of the United States District Court for the Easter n

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 in a

Tender Offer dated March 5, 2001, in which Luxottica 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 Consolidate d

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

controlling shareholder of Luxottica), and Shade . The First Amended Complaint was also file d

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

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

William Phillips ("Outside Director Defendants" and collectively with Hauslein, the "Sunglas s

Hut Defendants")

5 . The First Amended Complaint alleged, inter alia, a violation of Section 14(d) of

the Securities Exchange Act of 1934 ("1934 Act"), Rule 14d-10 (commonly referred to as th e

Best Price Rule of the Williams Act), and Section 10(b) of the 1934 Act and sought a potentia l

recovery of several hundred million dollars for the Class .

6. Defendants filed motions to dismiss the First Amended Complaint on April 12 ,

2002. By Memorandum and Order dated November 26, 2003, the Court denied in part and

granted in part Defendants' motions 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 th e

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 Sectio n

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

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

All Defendants denied that they violated any laws or did anything wrong . They contended that

their actions were lawful under the federal securities laws and under state law .

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

Adler Freeman & Herz LLP ("Wolf Haldenstein") was appointed as substitute Lead Counsel fo r

the Class, replacing the Goodkind firm .

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

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

tendered to and accepted 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, o r

assigns of any defendant.

11 . On July 19, 2005, the Luxottica Defendants filed motions for summary judgment .

On August 12, 2005, Plaintiffs filed papers in opposition to the summary judgment motions .

12. On August 10, 2005, the Court granted preliminary approval of a proposed $3 .75

million settlement with the Sunglass Hut Defendants ("Sunglass Hut Defendants' Settlement") .

Pursuant to the preliminary approval order, notice that the class was certified and the proposed

settlement with the Sunglass Hut Defendants was mailed and published . As set forth in further

detail below, the final settlement hearing on the Sunglass Hut Defendants' Settlement has bee n

adjourned, so it can be held at the same time as the final settlement hearing on this settlement . It

is contemplated by all parties to this Action that one Final Judgment will be entered for the entir e

case .

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13 . Since it was named Lead Counsel for the Class, Wolf Haldenstein devoted

substantial time carrying out all facets of discovery, including but not limited to reviewin g

documents produced by the Defendants and third parties, conducting numerous depositions ,

issuing and responding to interrogatories, and conducting expert discovery, as well as briefing

legal issues, including responding to the Settling Defendants' summary judgment motions .

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

period of time. Specifically, the Plaintiffs and the Settling Defendants (i) participated in a

mediation session in San Francisco, California with retired United States Magistrate Judg e

Edward I . Infante; (ii) participated in several mediation sessions with United States Magistrat e

Judge Marilyn D. Go; and (iii) finally reached the settlement in a mediation session with th e

Honorable Arlin Adams, retired Judge of the United States Court of Appeals for the Thir d

Circuit .

II. SETTLING DEFENDANTS' DENIALS OF WRONGDOING AND LIABILIT Y

15. 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 bee n

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

that Lead Plaintiff or the Class have suffered any damage, that Lead Plaintiff or the Class wer e

harmed by the conduct alleged in the Litigation, or that the Settling Defendants engaged in an y

willful, knowing, intentional, or fraudulent conduct in violation of any law. Specifically, the

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

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

prospect of employment with competitors at the peak of his career and in light of his proven419968

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track record of success, and specifically deny that the payments were a bribe or in any way

improper ; (b) the payments to Hauslein as consideration for his covenant not to compete were to

protect Luxottica's investment in purchasing Sunglass Hut, and that Hauslein's execution of such

a covenant was a condition precedent to its acquisition of Sunglass Hut; (c) the tender offer price

was fair and reasonable to Sunglass Hut shareholders, was the maximum price Luxottica wa s

willing to pay, and included a 119% premium over the market price immediately preceding new s

reports of the potential acquisition, and that Sunglass Hut would not have been able to improv e

upon that offer; (d) Sunglass Hut negotiated the terms of the tender offer with Luxottica at arms '

length in an effective and rigorous manner with the full input of independent expert advisers; (e)

the Luxottica Defendants did not receive any improper profit or other advantage in connectio n

with the agreement with Hauslein or the Tender Offer ; (f) the Sunglass Hut board of directors

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

shareholders' best interests paramount ; and (g) Hauslein's Sunglass Hut shareholdings had n o

bearing on the outcome of any acquisition, and Hauslein did not request or receive any extra

consideration for the tender of his shares in response to the Tender Offer.

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

that further conduct of the Litigation would be protracted and expensive, require the incurrence

of substantial additional legal fees and other costs of defense, and necessitate the attendance o f

Luxottica's senior executives in Brooklyn, New York for a several week trial; that the consequent

disruption of Luxottica 's business would affect negatively its operations and profitability; that

the continued pendency of this Litigation through trial and any subsequent appeals would be a

further distraction to Luxottica's management and undermine its ability to compete in the

marketplace; that the existence of this litigation and its attendant publicity would negativel y

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impact Luxottica's reputation and good will, and by extension, its revenue and profitability; that

there is uncertainty and risk inherent in any litigation, especially in complex cases like thi s

Litigation ; and that, for these and other reasons, it is desirable and beneficial that the Litigatio n

be settled in the manner and upon the terms and conditions set forth in this Stipulation .

III . CLAIMS OF LEAD PLAINTIFF

17. Plaintiffs believe that the claims asserted have substantial merit. Lead Counsel

recognizes and acknowledges the uncertain outcome and the risk of any litigation, especially i n

complex actions such as this litigation, as well as the difficulties and delays inherent in suc h

litigation . Lead Counsel is also mindful of the inherent problems of proof and possible defense s

to the violations asserted against the Settling Defendants in the Litigation . Among other matters ,

because the Non-Competition Agreement between Luxottica and Hauslein was disclosed in and

attached to the Tender Offer materials, there was no basis to assert, and Lead Plaintiff did no t

claim that the Luxottica Defendants had committed a fraud. Plaintiffs also acknowledge, and

during the course of the final mediation, Judge Adams opined that there was no evidence that th e

Luxottica Defendants had "bribed" Hauslein, or that they had committed any other willful ,

knowing, or intentional violation of any law . Lead Plaintiff asserted that liability could

nonetheless be imposed on the Luxottica Defendants under the terms of the Best Price Rule eve n

in the absence of such proof; however, the Settling Defendants disagreed with that assertion, an d

emphasized that because no such proof existed, no viable legal claim could be stated against

them. Lead Counsel also recognizes the expense and length of continued proceedings necessar y

to prosecute the claims asserted against the Settling Defendants in this Litigation through tria l

and appeals. Lead Counsel believes that the settlement set forth in this Stipulation confer s

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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 Plaintiff and the Class .

III . TERMS OF STIPULATION AND AGREEMENT OF SETTLEMEN T

NOW, THEREFORE, IT IS HEREBY STIPULATED AND AGREED by and amon g

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

asserted against the Settling 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 specifie d

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 such

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 an d

conditions specified in ¶ 7.1 of the Stipulation have been met and have occurred .

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1 .7 "Tender Offer" means Luxottica's offer of $11 .50 cash per share for

Sunglass Hut stock announced on February 22, 2001 and commenced March 5, 2001 .

1 .8 "Escrow Agent" means Daniel W . Krasner, Esq ., and Jeffrey G. Smith,

Esq., 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

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, substantiall y

in the form attached hereto as Exhibit B . It is contemplated by all parties to this Action that one

Final Judgment will be entered for the entire case and Exhibit B is the proposed Judgment for th e

entire action .

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 o f

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 .

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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 an d

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 o r

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 Exhibi t

B, and in Section 4 .1 of this Stipulation .

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

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

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

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, o r

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 Sunglass Hut Defendants .

1 .17 "Released Person" or "Released Persons" means Luxottica Group S .p.A . ,

Shade Acquisition Corporation, Sunglass Hut International, Inc ., Leonardo Del Vecchio

(collectively "the Luxottica Defendants"), each of the Luxottica Defendants' respective past or

present subsidiaries, parents, member firms, related entities, divisions and affiliates, insurer s

(including but not limited to Riunione Adriatica di Sicurta S.p.A ("RAS")), attorneys (including

but not limited to Winston & Strawn LLP and Grimaldi e Associati), investment advisors

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(including but not limited to Rothschild, Inc . and Rothschild Italia S.p.A.), accountant s

(including but not limited to Deloitte & Touche), 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, 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 controllin g

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 o r

Released Persons are the Sunglass Hut Defendants . The releases in this Action shall not releas e

any claims any of the Luxottica Defendants may have against their insurance carriers, includin g

but not limited to RAS .

1 .18 "Releasing Party" or "Releasing Parties" means Lead Plaintiff, each an d

every Member of the Class, the Class, or any Person or entity (except those opting out of th e

Class) that asserted or could have asserted a claim against the Released Persons relating to any o f

the events, transactions, allegations, or factual matter contained in the Second Amende d

Complaint .

1 .19 "Settling 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 an y

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 i n

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

(except for claims to enforce the Settlement) .

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

tendered to and accepted pursuant to the Tender Offer of March 5, 2001, which provided for a

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 o f

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 Propose d

Partial Settlement, Motion for Attorneys' Fees and Settlement Fairness Hearing" that was

provided to potential Class Members .

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

within the definition of the Class .

1 .22 "Settlement Fund" means the principal amount of fourteen million fiv e

hundred thousand dollars ($14,500,000.00), plus any interest that may accrue thereon in th e

Escrow Account as provided for in ¶ 2 .1 hereof.

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

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

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

Releasing Parties 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 o r

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

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

relinquished , to the fullest extent permitted 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 an d

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

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

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 o r

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

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 heretofor e

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 withou t

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

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

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

settlement of which this release is a part .

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1 .25 "Settling Defendants" or "Luxottica Defendants" means Sunglass Hut

International, Inc ., formerly known as and named in this lawsuit as Shade Acquisition

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

1 .26 "Outside Director Defendants" means Rohit Desai, John Duerden, Robert

Grayson, Michael McCadden and William Phillips .

1 .27 "Sunglass Hut Defendants" means Rohit Desai, John Duerden, Robert

Grayson, Michael McCadden, William Phillips and James N . Hauslein .

2 . The Settlemen t

(a) The Settlement Fun d

2.1 In release and settlement of the Best Price Rule claim asserted b y

Plaintiffs herein against the Settling Defendants, and in consideration for the other terms an d

conditions of this Stipulation, Luxottica caused $14,500,000 (the "Settlement Amount") to b e

wired on September 22, 2005, into an interest bearing escrow account (the "Escrow Account" )

controlled by Winston & Strawn LLP, where it will remain until this Stipulation of Settlement i s

executed. Upon execution of the Stipulation, control of the Escrow Account shall transfer to th e

Escrow Agent for the purpose of this Settlement . The Escrow Agent shall be Daniel W . Krasner,

Esq. and Jeffrey G. Smith, Esq ., of Wolf Haldenstein Adler Freeman & Herz LLP, jointly, both

of whom submit to this Court's jurisdiction for all purposes related to the Settlement. The actual

cost of the notice and administration of the proposed settlement, up to $100,000, shall be paid

from the settlement amount . The Luxottica Defendants shall have no other liability for suc h

costs.

(b) The Bar Order

2 .2 Based on a letter agreement between counsel for the Sunglass Hut

Defendants and counsel for the Plaintiffs, dated November 11, 2005, a bar order is not needed .

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The letter agreement provides in relevant part, as follows : "Based on the fact that there are now

proposed settlements with all parties to this Action, all parties agree that it is appropriate to have

one judgment for the entire case and that a bar order is no longer needed . All parties hav e

cooperated in resolving the outstanding issues and agree that one judgment, covering the entire

action is appropriate." Accordingly, Plaintiffs and the Sunglass Hut Defendants modified th e

terms of the Sunglass Hut Stipulation by agreeing to a judgment that does not include a bar

order.

(c) The Escrow Agen t

2.3 The Escrow Agent shall invest the Settlement Fund deposited pursuant to

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

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 .

2.4 The Escrow Agent shall not disburse the Settlement Fund, except provide d

otherwise in the Stipulation (including paragraph 2 .8), until (a) there is 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 i s

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 the Court .

2.5 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 ar e

consistent with the terms of the Stipulation .

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2.6 All funds held by the Escrow Agent shall be deemed and considered to b e

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

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

(d) Taxes

2.7 The Settling Parties and the Escrow Agent agree to treat the Se tt lement

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

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

elections as necessary or advisable to carry out the provisions of this ¶ 2 .7, 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, an d

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 Escro w

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, th e

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

in this ¶ 2 .7) shall be consistent with this ¶ 2 .7 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

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

2.7(b) hereof.

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

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

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) expense s

and costs incurred in connection with the operation and implementation of this ¶ 2 .7 (including,

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

costs and expenses relating to filing (or failing to file) the returns described in this ¶ 2 .7) ("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 Defendant s

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 b e

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 liabilit y

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

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

of this T 2 .7 .

(e) Termination of Settlement

2.8 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 event419968

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the Judgment is reversed or vacated following any appeal taken therefrom, the Settlement Fun d

(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 t o

Luxottica in accordance with the instructions to be provided by Luxottica or defense counse l

within ten (10) business days ; provided, however, that the actual costs, if any, of the notice an d

administration of the proposed settlement, up to $100,000, will be payable from the Escrow

Account. The Luxottica Defendants will have no other liability for such costs .

3 . Notice Order and Settlement Hearing

3.1 Promptly after execution of the Stipulation, the Settling Parties shall

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

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 shal l

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

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 .

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

a hearing (the "Settlement Hearing") and approve the settlement of the Litigation as set fort h

herein . At or after the Settlement Hearing, Lead 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 pay the Settlement Amount, Settling

Defendants shall have no liability, obligation or responsibility for the administration of the

Settlement or disbursement of the Net Settlement Fund .419968

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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 shal l

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 form

and content contained in Exhibit A-2 attached hereto .

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

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

shall have, fully, finally, and forever released, relinquished and discharged all Settlin g

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

Claims .

5. Administration and Calculation of Claims, Final Awards,and Supervision and Distribution of Settlement Fun d

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 dist ribution

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

be applied as follows :

(a) to pay all the costs, expenses and fees reasonably and actually incurred i n

connection with providing Notice, locating Class Members, soliciting Class claims, assistin g

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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 ¶ 2 .7 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;

(d) to pay Lead Plaintiff's expenses, if and to the extent allowed by the Court ;

and

(e) to distribute the balance of the Settlement Fund (the "Net Settlemen t

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

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:

(a) Within ninety (90) days after the mailing of the Notice or such other time

as may be set by the Court, each Person claiming to be an Authorized Claimant shall be require d

to submit to the Claims Administrator a completed Proof of Claim and Release, substantially i n

the form of Exhibit A-2 attached hereto, signed under penalty of perjury and supported by suc h

documents as specified in the Proof of Claim and Release and as are reasonably available to the

Authorized Claimant, unless they have previously submitted the supporting documents to the

claims administrator.

Except as otherwise ordered by the Court, all Class Members who fail to timely submit a

Proof of Claim and Release within such period, or such other period as may be ordered by the

Court, or otherwise allowed, shall be forever barred from receiving any payments pursuant to th e

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Stipulation and the settlement set forth herein, but will in all other respects be subject to an d

bound by the provisions of the Stipulation, the releases contained herein, and the Judgment .

(b) The Net Settlement Fund shall be distributed to the Authorized Claimant s

substantially in accordance with a Plan of Allocation described in the attached Notice an d

approved by the Court .

5 .3 Except for Settling Defendants' obligation to pay the Settlement Amount ,

the Settling Defendants and Released Persons shall have no responsibility for, interest in, o r

liability whatsoever with respect to the investment or distribution of the Settlement Fund, th e

Plan of Allocation, the determination, administration, or calculation of claims, the payment o r

withholding of Taxes, or any losses incurred in connection therewith .

5 .4 No Person shall have any claim against Plaintiffs' Counsel or any claim s

administrator, or any Released Person based on distributions made substantially in accordanc e

with the Stipulation and the settlement contained herein, the Plan of Allocation, or further order s

of the Court .

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

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

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 o r

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

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 .

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5 .6 This is not a claims made settlement and the Luxottica Defendants will

have no right to a return of any part of the Settlement Fund once the Settlement becomes Final .

If after payment of fees and expenses, and all appropriate distributions, there is any money

remaining in the Settlement Fund, the Settling Parties will jointly recommend to the Court that

the money be donated to a charity for the victims of Hurricane Katrina .

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

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

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

of attorneys' fees to be paid exclusively from the Settlement Fund; plus (b) reimbursement o f

expenses and costs incurred in connection with prosecuting the Litigation, plus any interest o n

such attorneys' fees, costs, and expenses at the same rate and for the same periods as earned b y

the Settlement Fund. Plaintiffs' Counsel reserve the right to make additional applications fo r

fees and expenses incurred in administering the Settlement .

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' Lead Counsel solely from th e

Settlement Fund, as ordered within three (3) business days after the Court executes an order

awarding such fees and expenses . Unless the Court orders an allocation of fees and expenses

amongst Plaintiffs' Counsel, Lead Counsel shall thereafter allocate the attorneys' fees amongs t

Plaintiffs' Counsel in a manner in which they in good faith believe reflects the contributions o f

such counsel to the prosecution and settlement of the Litigation. In the event that the Effectiv e

Date does not occur, or the Judgment or the order making the Fee and Expense Award i s

reversed or modified, or the Stipulation is cancelled or terminated for any other reason, and i n

the event that the Fee and Expense Award has been paid to any extent, then Plaintiffs' Counsel ,

including their law firm, partners, and/or shareholders, shall within ten (10) days from receiving419968

21

notice from Defendants' Counsel or from a Court of appropriate jurisdiction, refund to the

Settlement Fund, the fees, expenses and costs previously paid to them from the Settlement Fun d

plus interest thereon at the same rate as earned on the Settlement Fund in an amount consistent

with such reversal or modification . Each such Plaintiffs' Counsel's law firm, as a condition of

receiving such fees and expenses, on behalf of itself and each partner and/or shareholder of it ,

agrees that the law firm and its partners and/or shareholders are subject to the jurisdiction of th e

Court for the purpose of enforcing the provisions of this paragraph .

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 th e

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 o r

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

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

forth herein .

6.4 Lead Plaintiff may apply to the Court for an award of its expenses from

the Settlement Fund.

6.5 Except for Settling Defendants' obligation to pay the Settlement Amount ,

Settling Defendants shall have no responsibility to pay any attorney fees or expenses approve d

by the Court and all such fees and expenses shall be paid solely from the Settlement Fund .

7. Conditions of Settlement, 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 :

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(a) the Court has approved the Stipulation in all material respects and ha s

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

(b) the Court has entered the Judgment substantially in the form of Exhibit B

attached hereto ;

(c) the Settlement shall not have been terminated pursuant to 17 .3 ;

(d) the Judgment has become Final ;

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

settlement; and

(f) if a Judgment is entered only with the Luxottica Defendants, 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 ¶ 7 .1 above, any an d

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

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 ; or (d) the date upon which the Judgment is modified or reversed in an y

material respect by the Court of Appeals or the Supreme Court . Settling Defendants shall also

have the option to terminate the Settlement and this Stipulation under the terms of th e

Supplemental Agreement described in ¶ 8 below.

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7 .4 A hearing (the "Settlement Hearing") shall be held at a date and tim e

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

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

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 b e

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

Counsel and to determine the amount of expenses that should be awarded to Lead Plaintiff . Lead

Counsel shall provide to counsel for the Settling Defendants and file copies with the Court, a s

soon as practical after receipt by Lead Counsel, or in any event not less than five (5) busines s

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 b e

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

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

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 termination or

withdrawal from this Stipulation pursuant to the Supplemental Agreement, this Stipulation shal l

become null and void and of no further force and effect .

9 . Miscellaneous Provisions

9.1 The Settling Part ies : (a) acknowledge that it is their intent to consummate

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

41996824

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 thi s

Stipulation to fruition .

9.2 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 th e

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

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

requirements of Federal Rule of Civil Procedure 11 . 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 consultatio n

with competent legal counsel .

9.3 The Settling Defendants continue to deny all claims asserted against the m

in this Litigation . Neither the Stipulation nor the settlement, nor any act performed or 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 th e

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

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 o r

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

419968

25

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

or similar defense or counterclaim .

9.4 All agreements made and orders entered during the course of th e

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

9.5 All of the Exhibits to the Stipulation are material and integral parts hereo f

and are fully incorporated herein by this reference .

9.6 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 .

9.7 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 thi s

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 th e

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

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

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

and not mere recitals .

9.8 Plaintiffs' Counsel, on behalf of the Class, is expressly authorized by Lea d

Plaintiff to take all appropriate actions required or permitted to be taken by the Class pursuant to

the Stipulation to effectuate its terms and also are expressly authorized to enter into an y

modifications or amendments to the Stipulation on behalf of the Class that it deems appropriate .

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9.9 Each counsel or other Person executing the Stipulation or any of it s

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

do so .

9.10 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 .

9.11 The Stipulation shall be binding upon, and inure to the benefit of, th e

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

9.12 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 .13 The Stipulation and the Exhibits attached hereto and the Supplemental

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

performed, in the State of New York, and the rights and obligations of the part ies 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 la w

principles , and where governed , the PSLRA .

9.14 After the completion of the entire Litigation and/or the distribution of the

Net Settlement Fund to Authorized Claimants, whichever is later, and upon request from counse l

for Settling Defendants, Plaintiffs' Counsel shall, at Settling Defendants' option, either return to

them, or provide reasonable written assurances of the destruction of, all discovery material

produced in the Litigation (including inter alia, transcripts, documents, CD-ROMs, interrogatory

419968

27

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 . If the discovery materials are returned to the Settling Defendants ,

they shall reimburse Lead Counsel for the actual costs of identifying, collecting, and returnin g

them.

9.15 Any notice to be given or sent to any counsel in this Litigation shall b e

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

9.16 If a Judgment is entered only with the Luxottica Defendants, pursuant to

Rule 54(b) of the Federal Rules of Civil Procedure, the parties will jointly request that the Cour t

enter an Order determining 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 .

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

by their duly authorized attorneys, dated as of November 11, 2005 .

WOLF HALDENSTEIN ADLERFREEMAN & HERZ LLP

Daniel W. Krasner (DK-638 1)David L. Wales (DW-6912)Matthew M. Guiney (MG-5858)270 Madison AvenueNew York, NY 10016Telephone : (212) 545-4600:Fax : (212) 686-0114

Counsel for PlaintiffClass andas Escrow Agent

WINSTON & STRAWN LLP

Jose Di Benedetto (JD-8648)Eric M. Nelson (EN-0803)200 Park AvenueNew York, NY 10166Telephone : (212) 294-6700Facsimile : (212) 294-4700

Counselfor Luxottica Group S.p.A.,Sunglass Hut International Inc. (formerlyknown as and named in the Litigation asShade Acquisition Corporation) andLeonardo Del Vecchio

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