Exhibit 10.15

 

RESTATED LOAN AGREEMENT

 

Between

 

ZIONS FIRST NATIONAL BANK

Lender

 

and

 

1-800 CONTACTS, INC.

Borrower

 

Effective Date: February 27, 2004

 

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LOAN AGREEMENT

 

Table of Contents

 

1.

Definitions

 

 

1.1

Definitions

 

2.

Loan Description

 

 

2.1

Amount of Loan

 

 

2.2

Nature and Duration of Loan

 

 

2.3

Promissory Note

 

 

2.4

Notice and Manner of Borrowing

 

 

2.5

Limitations on Advances

 

 

2.6

Closing Fee

 

 

2.7

Non-Use Fee

 

 

2.8

Letter of Credit Fee

 

 

2.9

Payment of Prior Loan

 

 

2.10

Automatic Debit of Borrower’s Account

 

3.

Security for Loan

 

 

3.1

Collateral

 

 

3.2

Release of Lender as Condition to Lien Termination

 

4.

Conditions to Loan Disbursements

 

 

4.1

Conditions to Loan Disbursements

 

 

4.2

No Default, Adverse Change, False or Misleading Statement

 

5.

Representations and Warranties

 

 

5.1

Organization and Qualification

 

 

5.2

Authorization

 

 

5.3

Subsidiaries

 

 

5.4

No Governmental Approval Necessary

 

 

5.5

Accuracy of Financial Statements

 

 

5.6

No Pending or Threatened Litigation

 

 

5.7

Full and Accurate Disclosure

 

 

5.8

Compliance with ERISA

 

 

5.9

Compliance with USA Patriot Act

 

 

5.10

Compliance with All Other Applicable Law

 

 

5.11

Environmental Representations and Warranties

 

 

5.12

Operation of Business

 

 

5.13

Payment of Taxes

 

 

5.14

Licensing and Distribution Agreements

 

6.

Borrower’s Covenants

 

 

6.1

Use of Proceeds

 

 

6.2

Continued Compliance with ERISA

 

 

6.3

Compliance with USA Patriot Act

 

 

6.4

Continued Compliance with Applicable Law

 

 

6.5

Subsidiaries

 

 

6.6

Prior Consent for Amendment or Change

 

 

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6.7

Payment of Taxes and Obligations

 

 

6.8

Financial Statements and Reports

 

 

6.9

Financial Covenants

 

 

6.10

Insurance

 

 

6.11

Inspection

 

 

6.12

Operation of Business

 

 

6.13

Maintenance of Records and Properties

 

 

6.14

Notice of Claims

 

 

6.15

Environmental Covenants

 

 

6.16

Exclusive Negative Pledge

 

 

6.17

Restriction on Debt

 

 

6.18

Mergers, Consolidations, and Purchase and Sale of Assets

 

 

6.19

Dividends

 

 

6.20

Loans and Investments

 

 

6.21

Intercompany Transfers of Assets

 

 

6.22

Covenants for Post-Closing Events

 

7.

Default

 

 

7.1

Events of Default

 

 

7.2

No Waiver of Event of Default

 

8.

Remedies

 

 

8.1

Remedies upon Event of Default

 

 

8.2

Rights and Remedies Cumulative

 

 

8.3

No Waiver of Rights

 

9.

General Provisions

 

 

9.1

Restated Loan Agreement

 

 

9.2

Governing Agreement

 

 

9.3

Borrower’s Obligations Cumulative

 

 

9.4

Payment of Expenses and Attorney’s Fees

 

 

9.5

Right to Perform for Borrower

 

 

9.6

Assignability

 

 

9.7

Third Party Beneficiaries

 

 

9.8

Governing Law

 

 

9.9

Severability of Invalid Provisions

 

 

9.10

Interpretation of Loan Agreement

 

 

9.11

Survival and Binding Effect of Representations, Warranties, and Covenants

 

 

9.12

Indemnification

 

 

9.13

Environmental Indemnification

 

 

9.14

Interest on Expenses and Indemnification, Collateral, Order of Application

 

 

9.15

Limitation of Consequential Damages

 

 

9.16

Waiver and Release of Claims

 

 

9.17

Revival Clause

 

 

9.18

Arbitration

 

 

9.19

Consent to Utah Jurisdiction and Exclusive Jurisdiction of Utah Courts

 

 

9.20

Notices

 

 

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9.21

Duplicate Originals; Counterpart Execution; Fax Delivery

 

 

9.22

Disclosure of Financial and Other Information

 

 

9.23

Integrated Agreement and Subsequent Amendment

 

 

 

 

 

 

 

 

 

EXHIBITS

 

 

 

Exhibit A - Promissory Note (Reducing Revolving Line of Credit)

 

 

 

Exhibit B - Form of General Release

 

 

 

Exhibit C - List of Organizational Documents of Subsidiaries

 

 

 

Exhibit D – Schedule of Existing Third Party Debt and Collateral of Borrower and
Subsidiaries

 

 

 

Exhibit E – Form of Amendment to Subordination Agreement

 

 

 

Exhibit F – Form of Opinion of Counsel for Foreign Subsidiaries

 

 

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RESTATED LOAN AGREEMENT

 

This Restated Loan Agreement is made and entered into by and between Zions First
National Bank and 1-800 CONTACTS, INC.

 

For good and valuable consideration, the receipt and sufficiency of which are
hereby acknowledged, the parties agree as follows:

 

1.                                       Definitions

 

1.1                                 Definitions

 

Terms defined in the singular shall have the same meaning when used in the
plural and vice versa.  As used herein, the term:

 

“Approved Subsidiary Loans” means Subsidiary Loans for which Lender has granted
prior written approval.  Lender’s approval will be conditioned upon, among other
things, loan documentation acceptable to lender and assignment and granting of a
security interest in the Subsidiary Loans and the Subsidiary Loan Documents. 
The IGEL Acquisition/ClearLab Debt Instruments, the Existing Lens 1st Subsidiary
Loan, the Existing ClearLab Subsidiary Loan, and the Existing Shayna Subsidiary
Loan are hereby each approved as an Approved Subsidiary Loan.

 

“Aquasoft” means AQUASOFT, LLC, a limited liability company organized and
existing under the laws of the State of Utah, its successors, and, if permitted,
assigns.

 

“Article 8 Opt-In” means provisions in the Organizational Documents of a limited
liability company to provide (i) the membership interests of the limited
liability company are a security and are governed by Article 8 of the Uniform
Commercial Code, as adopted now or in the future in the State of Utah, (ii) the
limited liability company shall issue certificates evidencing the ownership of
the membership interests and maintain a ledger demonstrating the issuance,
surrender, transfer and ownership of such certificates, and (iii) such
provisions may not be amended, modified, terminated, rescinded, or repealed
without the prior written consent of Lender so long as the Loan is outstanding
and unpaid.

 

“Asset Purchase Agreement” means the Asset Purchase Agreement dated May 4, 2002
by and among ClearLab (then known as IGEL Acquisition, Co. Pte. Ltd.)
International Vision Laboratories Pte. Ltd., IGEL Visioncare Pte. Ltd., IGEL CM
Laboratory Pte. Ltd., Stephen D. Newman, and Sinduchajana Sulistyo.

 

“Banking Business Day” means any day not a Saturday, Sunday, legal holiday in
the State of Utah, or day on which national banks in the State of Utah are
authorized to close.

 

“Borrower” means 1-800 CONTACTS, INC., a corporation organized and existing
under the laws of the State of Delaware, its successors, and, if permitted,
assigns.

 

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“CL I” means CL I, Inc., a corporation organized and existing under the laws of
the State of Utah, its successors, and, if permitted, assigns.

 

“CL II” means CL II, Inc., a corporation organized and existing under the laws
of the State of Utah, its successors, and, if permitted, assigns.

 

“CL III” means CL III, Inc., a corporation organized and existing under the laws
of the State of Utah, its successors, and, if permitted, assigns.

 

“CL4” means CL 4, L.L.C., a limited liability company organized and existing
under the laws of the State of Utah, its successors, and, if permitted, assigns.

 

“ClearLab” means ClearLab Pte. Ltd., a private company limited by shares
organized and existing under the laws of the Republic of Singapore, successor by
change of name to IGEL Acquisition Co. Pte. Ltd., its successors, and, if
permitted, assigns.

 

“Collateral” shall have the meaning set forth in Section 3.1 Collateral.

 

“Contacts Japan” means 1-800 CONTACTS Japan, KK, a corporation organized and
existing under the laws of Japan, its successors, and, if permitted, assigns.

 

“Contacts Texas” means 1-800 CONTACTS TEXAS, INC., a corporation organized and
existing under the laws of the State of Texas, its successors, and, if
permitted, assigns.

 

“DBS/ATD Default” means an event of default by ClearLab (then known as IGEL
Acquisition Co. Pte. Ltd.) under its obligations to Development Bank of
Singapore Ltd relating to an eight million six hundred seventy thousand dollar
($8,670,000.00) (Singapore) loan made in connection with the Asset Purchase
Agreement and/or under ClearLab’s obligations to Alliance Technology and
Development Limited under or relating to the Asset Purchase Agreement, which
event of default is cured within thirty (30) days of occurrence.

 

“Debt” means (i) indebtedness or liability for borrowed money; (ii) obligations
evidenced by bonds, debentures, notes, or other similar instruments; (iii)
obligations for the deferred purchase price of property or services (including
trade obligations) which are aged more than one hundred twenty (120) days from
the billing date and current operating liabilities (other than for borrowed
money) which are more than one hundred twenty (120) days past due, (iv)
obligations as lessee under capital leases; (v) current liabilities in respect
of unfunded vested benefits under Plans covered by ERISA; (vi) obligations under
letters of credit; (vii) obligations under acceptance facilities; (viii) all
third party guarantees (excluding inter-company guarantees between Borrower and
Subsidiaries or between Subsidiaries), endorsements (other than for collection
or deposit in the ordinary course of business), and other contingent obligations
to purchase (excluding outstanding purchase orders prior to delivery of the
subject goods or performance of the subject services), to provide funds for
payment to supply funds to invest in any person or entity, or otherwise to
assure a creditor against loss; and (ix) obligations secured by any mortgage,
deed of trust, lien, pledge, or security interest or other charge or encumbrance
on property, whether or not the obligations have been assumed.

 

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“Dollar” and “$” mean United States of America dollars unless indicated
otherwise.

 

“Domestic Subsidiaries” means CL I, CL II, CL III, Lens 1st, CL4, Aquasoft,
Evision, Contacts Texas, and any other domestic entity, now existing or formed
or acquired in the future, in which Borrower and/or any Subsidiary, individually
or collectively, owns or controls, directly or indirectly, more than fifty
percent (50%) of the outstanding securities or ownership interests having
ordinary voting power.

 

“EBITDA” means net income (excluding extraordinary gains and losses realized
other than in the ordinary course of business) before interest, taxes,
depreciation, and amortization, and other non-cash charges determined in
accordance with generally accepted accounting principles consistent with the
financial statements of Borrower previously delivered to Lender, provided that
for any calculation based upon a Trailing Twelve Month period which includes any
of the fiscal months of October, November or December, 2003 or January, 2004,
the sum of two hundred thousand dollars ($200,000.00) for each such month in
2003 and four hundred fifteen thousand dollars ($415,000.00) for January, 2004,
shall be added to the EBITDA amount determined pursuant to the foregoing
definition.

 

“Effective Date” shall mean the date the parties intend this Loan Agreement to
become binding and enforceable, which is the date stated at the conclusion of
this Loan Agreement.

 

“Environmental Condition” shall mean any condition involving or relating to
Hazardous Materials and/or the environment affecting the Real Property, which
results in any damage, loss, cost, expense, claim, demand, order, or liability
to or against Borrower, the Subsidiaries, or Lender by any third party
(including, without limitation, any government entity), including, without
limitation, any condition resulting from the operation of Borrower’s or any
Subsidiaries’ business and/or operations in the vicinity of the Real Property
and/or any activity or operation formerly conducted by any person or entity on
or off the Real Property.

 

“Environmental Health and Safety Law” shall mean any legal requirement that
requires or relates to:

 

a.                                       advising appropriate authorities,
employees, or the public of intended or actual releases of Hazardous Materials,
violations of discharge limits or other prohibitions, and of the commencement of
activities, such as resource extraction or construction, that do or could have
significant impact on the environment;

 

b.                                      preventing or reducing to acceptable
levels the release of Hazardous Materials;

 

c.                                       reducing the quantities, preventing the
release, or minimizing the hazardous characteristics of wastes that are
generated;

 

d.                                      assuring that products are designed,
formulated, packaged, and used so that they do not present unreasonable risks to
human health or the environment when used or disposed of;

 

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e.                                       protecting resources, species, or
ecological amenities;

 

f.                                         use, storage, transportation, sale,
or transfer of Hazardous Materials or other potentially harmful substances;

 

g.                                      cleaning up Hazardous Materials that
have been released, preventing the threat of release, and/or paying the costs of
such clean up or prevention; or

 

h.                                      making responsible parties pay for
damages done to the health of others or the environment or permitting
self-appointed representatives of the public interest to recover for injuries
done to public assets.

 

“Event of Default” shall have the meaning set forth in Section 7.1 Events of
Default.

 

“Evision” means Evision, Inc., a corporation organized and existing under the
laws of the State of Oregon, its successors, and, if permitted, assigns.

 

“Existing ClearLab Subsidiary Loan” means an existing Subsidiary Loan or
Subsidiary Loans to ClearLab, excluding the IGEL Acquisition/ClearLab Debt
Instruments, not to exceed an aggregate outstanding principal balance of five
million eight hundred fifty-nine thousand four hundred eighty-five dollars
($5,859,485.00).

 

“Existing Debt” means all Debt of Borrower and all Subsidiaries which is
existing and outstanding as of the Effective Date.

 

“Existing Lens 1st Subsidiary Loan” means an existing Subsidiary Loan or
Subsidiary Loans to Lens 1st not to exceed an aggregate outstanding principal
balance of one million four hundred thirty-five thousand dollars ($1,435,000.00)
less the Lens 1st Equity Allocation.

 

“Existing Loan Agreement” means the Loan Agreement dated July 22, 2002 between
Lender and Borrower.

 

“Existing Loan Documents” means the Loan Documents as defined in the Existing
Loan Agreement.

 

“Existing Shayna Subsidiary Loan” means an existing Subsidiary Loan or
Subsidiary Loans to Shayna not to exceed an aggregate outstanding principal
balance equal to four million three hundred eighty-four thousand dollars
($4,384,000.00) less the Shayna Equity Allocation.

 

“Existing Third Party Debt” means Existing Debt owing to a party other than
Lender, Borrower or a Subsidiary.

 

“Foreign Subsidiaries” means Contacts Japan, ClearLab, Shayna, VisionTec and any
other foreign entity, now existing or formed or acquired in the future, in which
Borrower and/or any Subsidiary, individually or collectively, owns or controls,
directly or indirectly, more than fifty percent (50%) of the outstanding
securities or ownership interests having ordinary voting power.

 

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“Formula Default” means an Event of Default based upon failure of Borrower to
timely comply with the provisions of Section 2.5, Limitations on Advances.

 

“Hazardous Materials” means (i) “hazardous waste” as defined by the Solid Waste
Disposal Act, as amended by the Resource Conservation and Recovery Act of 1976
(42 U.S.C. Section 6901 et. seq.), including any future amendments thereto, and
regulations promulgated thereunder, and as the term may be defined by any
contemporary state counterpart to such act; (ii) “hazardous substance” as
defined by the Comprehensive Environmental Response, Compensation and Liability
Act of 1980 (42 U.S.C. Section 9601 et. seq.), including any future amendments
thereto, and regulations promulgated thereunder, and as the term may be defined
by any contemporary state counterpart of such act; (iii) asbestos; (iv)
polychlorinated biphenyls; (v) underground or above ground storage tanks,
whether empty or filled or partially filled with any substance; (vi) any
substance the presence of which is or becomes prohibited by any federal, state,
or local law, ordinance, rule, or regulation; and (vii) any substance which
under any federal, state, or local law, ordinance, rule or regulation requires
special handling or notification in its collection, storage, treatment,
transportation, use or disposal.

 

“IGEL Acquisition/ClearLab Debt Instruments” means the Unsecured Promissory Note
dated July 22, 2002 executed by ClearLab (then known as IGEL Acquisition Co. Pte
Ltd) in favor of Borrower in the original principal amount of six million six
hundred twenty-eight thousand five hundred fifteen dollars and eighty-five cents
($6,628,515.85) and the Loan Agreement dated July 22, 2002 between ClearLab
(then known as IGEL Acquisition Co. Pte Ltd) and Borrower evidencing the debt
investment by Borrower in ClearLab which was made in connection with the Asset
Purchase Agreement, and any and all renewals, extensions, modifications, and
replacements thereof.

 

“Intellectual Property Assets” means (i) all right, title and interest of
Borrower in and to patent applications and patents, including, without
limitation, all proceeds thereof (such as, by way of example, license royalties
and proceeds of infringement suits), the right to sue for past, present and
future infringements, all rights corresponding thereto throughout the world, and
all reissues, divisions, continuations, renewals, extensions, and
continuations-in-part thereof (collectively, the “Patents”); (ii) all right,
title and interest of Borrower in and to trademark applications and trademarks,
including, without limitation, all renewals thereof, all proceeds thereof (such
as, by way of example, license royalties and proceeds of infringement suits),
the right to sue for past, present and future infringements, and all rights
corresponding thereto throughout the world, and the good will of the business to
which each of the Trademarks relates (collectively, the “Trademarks”); (iii) all
copyrights of Borrower and all rights and interests of every kind of Borrower in
copyrights and works protectible by copyright, and all renewals and extensions
thereof, and in and to the copyrights and rights and interests of every kind or
nature in and to all works based upon, incorporated in, derived from,
incorporating or relating to any of the foregoing or from which any of the
foregoing is derived, and all proceeds thereof (such as, by way of example,
license royalties and proceeds of infringement suits), the right to sue for
past, present and future infringements, and all rights corresponding thereto
throughout the world (collectively, the “Copyrights”); (iv) all of Borrower’s
trade secrets and other proprietary information, and all proceeds thereof
(collectively, the “Trade Secrets”); (v) all right, title, and interest of
Borrower in, to and under license agreements and contracts concerning Patents,

 

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Trademarks, Copyrights, and Trade Secrets, all amendments, modifications, and
replacements thereof, all royalties and other amounts owing thereunder, and all
proceeds thereof (collectively, the “Licenses”); (vi) all internet domain names
and addresses of Borrower and all proceeds thereof; and (vii) the phone number
1-800-CONTACTS.

 

“Lender” means Zions First National Bank, its successors, and assigns.

 

“Lens 1st” means Lens 1st Holding Company, a corporation organized and existing
under the laws of the State of Utah, its successors, and, if permitted, assigns.

 

“Lens 1st Equity Allocation” means that portion of an existing outstanding
advance of one million four hundred thirty-five thousand dollars ($1,435,000.00)
made by Borrower to Lens 1st which Borrower determines will be treated as an
equity investment and not debt.

 

“LIBOR Rate Applicable Margin” means two and seventy-five hundredths percent
(2.75%) until July 31, 2004, and thereafter:

 

a.                                       If the Maximum Leverage Ratio is
greater than three (3.0), three and twenty-five hundredths percent (3.25%).

 

b.                                      If the Maximum Leverage Ratio is greater
than two and five-tenths (2.5) but less than or equal to three (3.0), two and
seventy-five hundredths percent (2.75%).

 

c.                                       If the Maximum Leverage Ratio is
greater than two (2.0) but less than or equal to two and five-tenths (2.5), two
and twenty-five hundredths percent (2.25%).

 

d.                                      If the Maximum Leverage Ratio is less
than or equal to two (2.0), two percent (2.0%).

 

“Loan” means the reducing revolving line of credit loan to be made pursuant to
Section 2 Loan Description.

 

“Loan Agreement” means this agreement, together with any exhibits, amendments,
addendums, and modifications.

 

“Loan Documents” means the Loan Agreement, Promissory Note, Security Documents,
all other agreements and documents contemplated by any of the aforesaid
documents, and all amendments, modifications, addenda, and replacements, whether
presently existing or created in the future.

 

“Material Adverse Change” means a material adverse change in (i) the business,
assets, Real Property, condition (financial or otherwise), results of
operations, or future business prospects of Borrower and its Subsidiaries taken
as a whole, or (ii) the validity or enforceability of any of the Loan Documents
or the rights or remedies of Lender thereunder.

 

“Material Adverse Effect” means a material adverse effect on (i) the business,
assets, Real Property, condition (financial or otherwise), results of
operations, or future business

 

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prospects of Borrower and its Subsidiaries taken as a whole, or (ii) the
validity or enforceability of any of the Loan Documents or the rights or
remedies of Lender thereunder.

 

“Maximum Available Advance Amount” means twenty-eight million dollars
($28,000,000.00) through June 1, 2004, and reducing thereafter on June 1, 2004
and on the first day of each September, December, March and June until maturity
of the Promissory Note, by the amount of four hundred thousand dollars
($400,000.00).

 

“Maximum Leverage Ratio” means the maximum leverage ratio set forth in
Subsection c of Section 6.9, Financial Covenants.

 

“Organizational Documents” means, in the case of a corporation, its Articles of
Incorporation and By-Laws; in the case of a general partnership, its Articles of
Partnership; in the case of a limited partnership, its Articles of Limited
Partnership; in the case of a limited liability company, its Articles of
Organization and Operating Agreement or Regulations, if any; in the case of a
limited liability partnership, its Articles of Limited Liability Partnership or
similar documents; and all amendments, modifications, and changes to any of the
foregoing which are currently in effect.

 

“Payment Default” means an Event of Default based upon failure of Borrower to
timely make any payment to Lender under the Promissory Note.

 

“Permitted Debt” means (i) debt contemplated by this Loan Agreement; (ii) debt
of Borrower and Domestic Subsidiaries not to exceed an aggregate, outstanding
principal amount of five million dollars ($5,000,000.00) in excess of the
Existing Third Party Debt; (iii) Existing Debt; (iv) Permitted Subsidiary Loans;
(v) VisionTec Acquisition Debt; (vi) a line of credit in favor of VisionTec
existing prior to the acquisition of VisionTec by Shayna and Borrower, which
shall not exceed a principal amount of five hundred thousand dollars
($500,000.00) after completion of such acquisition; and (vii) existing capital
leases of VisionTec in the amount of approximately one hundred twenty-five
thousand dollars ($125,000.00).

 

“Permitted Subsidiary Loans” means (i) Subsidiary Loans to Subsidiaries other
than Lens 1st, ClearLab, and Shayna which do not exceed at any time outstanding
principal of two hundred fifty thousand dollars ($250,000.00) per Subsidiary,
(ii) the Existing Lens 1st Subsidiary Loan (iii) the Existing ClearLab
Subsidiary Loan, (iv) the Existing Shayna Subsidiary Loan, and (v) Approved
Subsidiary Loans.

 

“Prime Rate Applicable Margin” means seventy-five hundredths percent (.75%)
until July 31, 2004, and thereafter:

 

a.                                       If the Maximum Leverage Ratio is
greater than three (3.0), one and twenty-five hundredths percent (1.25%).

 

b.                                      If the Maximum Leverage Ratio is greater
than two and five-tenths (2.5) but less than or equal to three (3.0),
seventy-five hundredths percent (.75%).

 

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c.                                       If the Maximum Leverage Ratio is
greater than two (2.0) but less than or equal to two and five-tenths (2.5),
twenty-five hundredths percent (.25%).

 

d.                                      If the Maximum Leverage Ratio is less
than or equal to two (2.0), zero percent (0%).

 

“Promissory Note” means the Promissory Note (Reducing Revolving Line of Credit)
to be executed by Borrower pursuant to Section 2.3 Promissory Note in the form
of Exhibit A hereto, which is incorporated herein by reference, and any and all
renewals, extensions, modifications, and replacements thereof.

 

“Real Property” means any and all real property or improvements thereon owned or
leased by Borrower or in which Borrower has any other interest of any nature
whatsoever.

 

“SEC” means the United States Securities and Exchange Commission.

 

“Security Documents” means all security agreements, assignments, pledges,
financing statements, deeds of trust, mortgages, and other documents which
create or evidence any security interest, assignment, lien or other encumbrance
in favor of Lender to secure any or all of the obligations created or
contemplated by any of the Loan Documents, and all amendments, modifications,
addenda, and replacements, whether presently existing or created in the future.

 

“Shayna” means Shayna Limited, a private limited company organized and existing
under the laws of England, its successors, and, if permitted, assigns.

 

“Shayna Equity Allocation” means that portion of an existing outstanding advance
of four million three hundred eighty-four thousand dollars ($4,384,000.00) made
by Borrower to Shayna which Borrower determines will be treated as an equity
investment and not debt.

 

“Subsidiaries” means the Domestic Subsidiaries and the Foreign Subsidiaries.

 

“Subsidiary Loans” means loans from Borrower to any of the Subsidiaries, and all
amendments, modifications, addenda and replacements, whether presently existing
or made in the future.  Subsidiary Loans include the loan evidenced by the IGEL
Acquisition/ClearLab Debt Instruments, the Existing Lens 1st Subsidiary Loan,
the Existing ClearLab Subsidiary Loan, and the Existing Shayna Subsidiary Loan.

 

“Subsidiary Loan Documents” means all promissory notes, loan agreements,
security agreements, assignments, pledges, financing statements, deeds of trust,
mortgages, guarantees, and other documents which create or evidence Subsidiary
Loans, and all amendments, modifications, addenda and replacements, whether
presently existing or created in the future.

 

“Sweep Account” means the U.S. Government Money Market Sweep Account described
in the Sweep Account Agreement, Account No. 024-75488-9.

 

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“Sweep Account Agreement” means the Zions First National Bank Government Money
Market Sweep Account Agreement dated February 27, 2004 between Borrower and
Lender, and all amendments, modifications, and replacements thereof.

 

“Trailing Twelve Month” means the twelve (12) fiscal month period immediately
preceding the date of calculation.

 

“Unused Facility Fee Applicable Margin” means five-tenths percent (.5%) until
July 31, 2004, and thereafter:

 

a.                                       If the Maximum Leverage Ratio is
greater than two and five-tenths (2.5), five-tenths percent (.5%).

 

b.                                      If the Maximum Leverage Ratio is less
than or equal to two and five-tenths (2.5), thirty-eight hundredths percent
(.38%).

 

“VisionTec” means VisionTec CL Ltd., a private company organized and existing
under the laws of England, its successors, and, if permitted, assigns.

 

“VisionTec Acquisition Debt” means Loan Note Instruments issued from time to
time by Shayna, Borrower or a Foreign Subsidiary, pursuant to agreements for the
acquisition of VisionTec by Shayna and Borrower.

 

2.                                       Loan Description

 

2.1                                 Amount of Loan

 

Upon fulfillment of all conditions precedent set forth in Section 4 Conditions
to Loan Disbursements, and so long as no Event of Default exists, Lender agrees
to loan Borrower twenty eight million dollars ($28,000,000.00) as a reducing
revolving line of credit.

 

2.2                                 Nature and Duration of Loan

 

The Loan shall be a reducing revolving loan payable in full upon the dates and
upon the terms and conditions provided in the Promissory Note.  Lender and
Borrower intend the Loan to be in the nature of a line of credit under which
Borrower may repeatedly draw and repay funds on a revolving basis in accordance
with the terms and conditions of this Loan Agreement and the Promissory Note. 
The right of Borrower to draw funds and the obligation of Lender to advance
funds shall not accrue until all of the conditions set forth in Section 4
Conditions to Loan Disbursements have been fully satisfied, and shall
terminate:  (i) upon occurrence of an Event of Default or (ii) upon maturity of
the Promissory Note, unless the Promissory Note is renewed or extended by Lender
in which case such termination shall occur upon the maturity of the final
renewal or extension of the Promissory Note.  Upon such termination, any and all
amounts owing to Lender pursuant to the Promissory Note shall thereupon be due
and payable in full.

 

Upon request of Borrower, commercial or standby letters of credit for the
account of Borrower may be issued against the Promissory Note, provided that the
aggregate face amount of

 

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all such letters of credit which are outstanding or payable may not exceed
fifteen million dollars ($15,000,00.00) at any time.  The terms, conditions, and
maturity of any such letters of credit shall be reasonably acceptable to
Lender.  In addition to the letter of credit fee provided below, Borrower shall
pay Lender’s standard and customary charges for issuance of letters of credit. 
Borrower shall submit such documents and applications for issuance of letters of
credit as are required by Lender.  Upon issuance of any letter of credit against
the Promissory Note, an amount equal to the letter of credit shall be deducted
from the amount available for disbursement on the Promissory Note and will not
be available to Borrower so long as the letter of credit is outstanding or
subject to payment.  Upon submission of any drawing under any such letter of
credit which is honored by Lender, the amount of the drawing shall thereupon be
immediately disbursed under the Promissory Note for payment of the drawing. 
Interest on such amount shall accrue under the Promissory Note only from the
date of disbursement of funds to pay a drawing.

 

2.3                                 Promissory Note

 

The Loan shall be evidenced by the Promissory Note.  The Promissory Note shall
be executed and delivered to Lender prior to disbursement of any of the Loan.

 

2.4                                 Notice and Manner of Borrowing

 

Borrower shall give Lender at least two (2) Banking Business Days notice of any
advances requested under the Promissory Note.  Any advances shall be in a
minimum amount of at least five hundred thousand dollars ($500,000.00) and shall
be only in multiples thereof.

 

Additionally, at the election of Borrower, the Promissory Note may be linked to
the Sweep Account pursuant to the Sweep Account Agreement.  Borrower may
unilaterally terminate the Sweep Account at any time.  Except as expressly
modified hereby, the terms and conditions of the Sweep Account Agreement shall
remain in full force and effect.

 

All references in the Sweep Account Agreement to the “Commercial Loan Line with
Zions Bank” are amended to refer to the Loan.

 

If such election is made, (i) Lender is authorized and directed to disburse
funds under the Promissory Note for deposit into the Sweep Account on each
Banking Business Day as needed to cover all checks and other charges against the
Sweep Account; (ii) disbursements shall be made up to the Maximum Available
Advance Amount; (iii) upon occurrence of an Event of Default or event which,
with the passage of time or giving of notice or both, would constitute an Event
of Default, Lender may, in its sole discretion, cease all disbursements under
the Promissory Note into the Sweep Account; and (iv) Lender is authorized and
directed to disburse all collected funds in the Sweep Account on each Banking
Business Day to Lender to be applied on the Promissory Note.

 

It is acknowledged that posting of credits and debits to and from the Sweep
Account are made one Banking Business Day after the transactions occur and back
dated to the prior Banking Business Day.

 

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2.5                                 Limitations on Advances

 

Notwithstanding anything to the contrary in the Loan Documents, no advance shall
be made on the Promissory Note if, after making the requested advance, the total
principal amount of all advances outstanding, together with the amount of all
outstanding letters of credit issued against the Promissory Note pursuant to
Section 2.2 Nature and Duration of Loan, will exceed (i) the Maximum Available
Advance Amount, and (ii) at all times when the Maximum Leverage Ratio is greater
than two and five-tenths (2.5), the book value, as determined by generally
accepted accounting principles consistent with those used in preparation of the
financial statements of Borrower and Subsidiaries submitted to Lender, of
Borrower’s inventory.

 

Borrower will at all times when the Maximum Leverage Ratio is greater than two
and five-tenths (2.5) maintain inventory so that the aggregate, principal amount
of all advances at any time outstanding and unpaid on the Promissory Note shall
be in compliance with this requirement.  If at any time the aggregate, principal
amount of all such advances outstanding and unpaid exceeds the amount allowable
under this requirement or the Maximum Available Advance Amount, Borrower shall
immediately make payment to Lender in a sufficient amount to bring the amount of
such advances back into compliance.  If the foregoing covenant requires
prepayment of an advance based on the LIBOR Rate (as defined in the Promissory
Note) prior to the last day of the applicable Interest Period (as defined in the
Promissory Note), such prepayment shall be subject to a prepayment fee as
provided in the Promissory Note.

 

2.6                                 Closing Fee

 

Upon execution and delivery of this Loan Agreement, and satisfaction of all
conditions required to fund the Loan, Borrower shall pay Lender a closing fee of
one hundred forty thousand dollars ($140,000.00).  No portion of such fee shall
be refunded in the event of early termination of this Loan Agreement or any
termination or reduction of the right of Borrower to request advances under this
Loan Agreement.  Lender is authorized and directed, upon execution of this Loan
Agreement and confirmation that funds are available for disbursement to Borrower
under the Loan, to disburse a sufficient amount of the Loan proceeds to pay the
closing fee in full.

 

2.7                                 Non-Use Fee

 

Borrower shall pay to Lender a non-use fee for the Loan for so long as this Loan
Agreement is in effect.  The non-use fee shall be an amount equal to the Unused
Facility Fee Applicable Margin per annum of the unused portion of the Loan or,
if less, the unused portion of the Loan which is available to be advanced based
upon Borrower’s inventory as provided in Section 2.5, Limitations on Advances,
calculated on the average unused portion of the Loan for each calendar quarter
or portion thereof.  The fee shall be payable quarterly, in arrears, and shall
be due no later than the fifth Banking Business Day after the first day of the
month following each calendar quarter.  Changes in the Unused Facility Fee
Applicable Margin shall take effect on the later of (i) the first day of the
month following forty-five (45) days after the end of each fiscal quarter of
Borrower, or (ii) provided no Event of Default exists, the first day of the
month

 

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following receipt by Lender of the monthly financial statements for the quarter
or quarterly financial statements provided in Section 6.8, Financial Statements
and Reports.

 

2.8                                 Letter of Credit Fee

 

Borrower shall pay to Lender a letter of credit fee for each letter of credit
issued against the Promissory Note.  The fee for standby letters of credit shall
be the amount of the letter of credit multiplied by the LIBOR Rate Applicable
Margin.  The fee for commercial letters of credit shall be the amount of the
letter of credit multiplied by .125% for each ninety (90) day period or portion
thereof until maturity of the letter of credit.

 

2.9                                 Payment of Prior Loan

 

The Promissory Note succeeds and replaces that certain Promissory Note
(Revolving Line of Credit) dated July 22, 2002 executed by Borrower in favor of
Lender in the original principal amount of twenty million dollars
($20,000,000.00) and that certain Promissory Note (Amortizing Term Loan) dated
July 22, 2002, executed by Borrower in favor of Lender in the original principal
amount of ten million dollars ($10,000,000.00), as extended.  Lender is
authorized and directed to disburse a sufficient amount of the funds pursuant to
the Promissory Note to pay in full all obligations owing under the aforesaid
Promissory Notes.  Lender agrees to waive any prepayment fees on the aforesaid
Promissory Note.

 

2.10                           Automatic Debit of Borrower’s Account

 

Lender is authorized and directed to establish automatic debits to Borrower’s
Account No. 071-01403-9 with Lender for payment of interest on the Promissory
Note and for payment of non-use fees and letter of credit fees.

 

3.                                       Security for Loan

 

3.1                                 Collateral

 

The Loan, Promissory Note, and all obligations of Borrower under the Loan
Documents shall be secured by such collateral as is provided in the Security
Documents (the “Collateral”), which shall consist of the following, whether now
existing or hereafter created: (i) a blanket lien on all assets of Borrower,
including, the Intellectual Property Assets, including, without limitation, the
mark “1-800 CONTACTS”; (ii) the IGEL Acquisition/ClearLab Debt Instruments;
(iii) the Subsidiary Loans and the Subsidiary Loan Documents; (iv) one hundred
percent (100%) of the issued and outstanding stock and equity and ownership
interests in the Domestic Subsidiaries except Contacts Texas; and (v) sixty-five
percent (65%) of the issued and outstanding stock and equity and ownership
interests in the Foreign Subsidiaries directly owned by Borrower.

 

Any and all UCC Financing Statements previously filed by Lender with Borrower as
debtor may, at the discretion of Lender, remain of record and shall constitute
notice of Lender’s security interest in the Collateral.

 

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3.2                                 Release of Lender as Condition to Lien
Termination

 

In recognition of Lender’s right to have all its attorneys fees and expenses
incurred in connection with this Loan Agreement secured by the Collateral,
notwithstanding payment in full of the Loan and all other obligations secured by
the Collateral, Lender shall not be required to release, reconvey, or terminate
any Security Document unless and until Borrower has executed and delivered to
Lender a general release substantially in the form attached hereto as Exhibit C.

 

4.                                       Conditions to Loan Disbursements

 

4.1                                 Conditions to Loan Disbursements

 

Lender’s obligation to disburse any of the Loan is expressly subject to, and
shall not arise until all of the conditions set forth below have been
satisfied.  All of the documents referred to below must be in a form and
substance reasonably acceptable to Lender.

 

a.                                       All of the Loan Documents and all other
documents contemplated to be delivered to Lender prior to funding, and all other
documents reasonably required by Lender, have been fully executed and delivered
to Lender.

 

b.                                      All of the documents contemplated by the
Loan Documents which require filing or recording have been properly filed and
recorded so that all of the liens and security interests granted to Lender in
connection with the Loan will be properly created and perfected and will have a
priority acceptable to Lender.

 

c.                                       All other conditions precedent provided
in or contemplated by the Loan Documents have been performed.

 

d.                                      As of the date of disbursement of all or
any portion of the Loan, the following shall be true and correct:  (i) all
representations and warranties made by Borrower in the Loan Documents are true
and correct as of the date of such disbursement; and (ii) no Event of Default
has occurred and no conditions exist and no event has occurred, which, with the
passage of time or the giving of notice, or both, would constitute an Event of
Default.

 

e.                                       Lender has completed its due diligence
and review with results reasonably acceptable to Lender.

 

f.                                         Lender has received an opinion of
counsel for Borrower and Domestic Subsidiaries from a law firm or law firms or
attorney acceptable to Lender.

 

g.                                      Aquasoft and CL4 have amended their
Organizational Documents to provide for the Article 8 Opt-In and issued
certificates to Borrower as provided in the amended Organizational Documents.

 

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h.                                      Lender has received the original stock
certificates and membership certificates issued to Borrower by the Subsidiaries.

 

All conditions precedent set forth in this Loan Agreement and any of the Loan
Documents are for the sole benefit of Lender and may be waived unilaterally by
Lender.

 

4.2                                 No Default, Adverse Change, False or
Misleading Statement

 

Lender’s obligation to advance any funds at any time pursuant to this Loan
Agreement and the Promissory Note shall, at Lender’s sole discretion, terminate
upon the occurrence of any Event of Default or upon the occurrence of any
change: (i) in any of Borrower’s or Subsidiary’s organization or affairs, (ii)
in any matter concerning which an agreement, covenant, representation, or
warranty has been made herein, or (iii) upon the determination by Lender that
any representations of Borrower made in any of the Loan Documents were
materially false or materially misleading when made, which would have a Material
Adverse Effect.  Upon the exercise of such discretion, Lender shall be relieved
of all further obligations to advance funds under the Loan Documents.

 

5.                                       Representations and Warranties

 

5.1                                 Organization and Qualification

 

Borrower represents and warrants that Borrower is a corporation duly organized
and existing in good standing under the laws of the State of Delaware, and is
duly qualified to do business in each jurisdiction in which the failure to so
qualify would have a Material Adverse Effect, and that Borrower is qualified and
in good standing as a foreign corporation in the State of Utah.

 

Borrower represents and warrants that it has the full power and authority to own
its property and to conduct the business in which it engages and to enter into
and perform its obligations under the Loan Documents.

 

Borrower represents and warrants that it has delivered to Lender or Lender’s
counsel accurate and complete copies of its Organizational Documents which are
operative and in effect as of the Effective Date, which Organizational Documents
consist of a Restated Certificate of Incorporation filed with the Delaware
Secretary of State on February 11, 1998, and By-Laws adopted as of February 11,
1998.

 

5.2                                 Authorization

 

Borrower represents and warrants that the execution, delivery, and performance
by Borrower of the Loan Documents have been duly authorized by all necessary
action on the part of Borrower and are not inconsistent with Borrower’s
Organizational Documents or any resolution of the Board of Directors of
Borrower, do not and will not contravene any provision of, or constitute a
default under, any indenture, mortgage, contract, or other instrument to which
Borrower is a party or by which it is bound, and that upon execution and
delivery thereof, the

 

14

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Loan Documents will constitute legal, valid, and binding agreements and
obligations of Borrower, enforceable in accordance with their respective terms,
except as may be limited by public policy, and subject to laws of general
application related to bankruptcy, insolvency and the relief of debtors and
rules of law governing specific performance, injunctive relief or other
equitable remedies.

 

5.3                                 Subsidiaries

 

Borrower represents and warrants that:

 

a.                                       Aquasoft is a limited liability company
organized and existing in good standing under the laws of the State of Utah, and
is duly qualified to do business in each jurisdiction in which the failure to so
qualify would have a Material Adverse Effect.

 

b.                                      CL I is a corporation duly organized and
is duly existing in good standing under the laws of the State of Utah, and is
duly qualified to do business in each jurisdiction in which the failure to so
qualify would have a Material Adverse Effect.

 

c.                                       CL II is a corporation duly organized
and is duly existing in good standing under the laws of the State of Utah, and
is duly qualified to do business in each jurisdiction in which the failure to so
qualify would have a Material Adverse Effect.

 

d.                                      CL III is a corporation duly organized
and is duly existing in good standing under the laws of the State of Utah, and
is duly qualified to do business in each jurisdiction in which the failure to so
qualify would have a Material Adverse Effect.

 

e.                                       CL4 is a limited liability company duly
organized and is duly existing in good standing under the laws of the State of
Utah, and is duly qualified to do business in each jurisdiction in which the
failure to so qualify would have a Material Adverse Effect.

 

f.                                         ClearLab is a private company limited
by shares organized and existing in good standing under the laws of the Republic
of Singapore, is the successor by change of name to IGEL Acquisition Co. Pte.
Ltd., and is duly qualified to do business in each jurisdiction in which the
failure to so qualify would have a Material Adverse Effect

 

g.                                      Contacts Japan is a corporation
organized and existing in good standing under the laws of Japan, and is duly
qualified to do business in each jurisdiction in which the failure to so qualify
would have a Material Adverse Effect.

 

h.                                      Contacts Texas is a corporation duly
organized and is duly existing in good standing under the laws of the State of
Texas, and is duly qualified to do business in each jurisdiction in which the
failure to so qualify would have a Material Adverse Effect.

 

i.                                          Evision is a corporation organized
and existing in good standing under the laws of the State of Oregon, and is duly
qualified to do business in each jurisdiction in which the failure to so qualify
would have a Material Adverse Effect.

 

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j.                                          Lens 1st is a corporation organized
and existing in good standing under the laws of the State of Utah, and is duly
qualified to do business in each jurisdiction in which the failure to so qualify
would have a Material Adverse Effect.

 

k.                                       Shayna is a private company organized
and existing in good standing under the laws of England, and is duly qualified
to do business in each jurisdiction in which the failure to so qualify would
have a Material Adverse Effect.

 

l.                                          VisionTec is a private company
organized and existing in good standing under the law of England and is duly
qualified to do business in each jurisdiction in which the failure to so qualify
would have a Material Adverse Effect.

 

m.                                    Each of the Subsidiaries has the full
power and authority to own its property and to conduct the business in which it
engages.

 

n.                                      Borrower owns one hundred percent (100%)
of the issued and outstanding stock, membership interests, or other equity or
ownership interests, as the case may be, in the Subsidiaries; provided, however,
that VisionTec may be owned by Shayna.

 

o.                                      There is only one class of stock or
other equity or ownership interest issued and outstanding for each of the
Subsidiaries.

 

p.                                      There are no issued and outstanding, or
obligation to issue any, warrants, options or other rights of any nature to
acquire any stock or other equity or ownership interest in any of the
Subsidiaries.

 

q.                                      As of the date of the initial
disbursement of the Loan, the IGEL Acquisition/ClearLab Debt Instruments, the
Existing ClearLab Subsidiary Loan, the Existing Lens 1st Loan, the Existing
Shayna Subsidiary Loan, the Existing VisionTec Subsidiary Loan, and advances to
other Subsidiaries not to exceed in the aggregate two hundred fifty thousand
dollars ($250,000.00) to any Subsidiary, are the only debt obligations of any of
the Subsidiaries owing to Borrower.

 

r.                                         Borrower has delivered to Lender or
Lender’s counsel accurate and complete copies of the Organizational Documents of
each of the Subsidiaries which are operative and in effect as of the Effective
Date, which Organizational Documents are listed on Exhibit C hereto.

 

s.                                       CL I, CL II, CL III, Contacts Texas and
Contacts Japan are dormant, do not have any material assets, and are not engaged
in any active operations.

 

t.                                         The business and operations of CL4
consist solely of the purchase of equipment relating to contact lenses and
computer equipment at wholesale for immediate resale to Borrower or Domestic
Subsidiaries and lobbying activities.

 

u.                                      The business and operations of ClearLab
consist solely of research and development and manufacture of contact lenses and
related products in the Republic of

 

16

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Singapore for sale at wholesale, and sale of products manufactured by VisionTec
at wholesale.

 

v.                                      The business and operations of Lens 1st
consist solely of third party contact lens sales fulfillment.

 

w.                                    The business and operations of Aquasoft
consist solely of distribution of Aquasoft brand products.

 

x.                                        The business and operations of Evision
consist solely of sales and marketing of contact lenses and related products.

 

y.                                      The business and operations of Shayna
consist solely of a holding company for the VisionTec acquisition and management
functions for foreign operations.

 

z.                                        The business and operations of
VisionTec consist solely of research and development and the manufacturing of
contact lenses and related products in England for sale at wholesale.

 

5.4                                 No Governmental Approval Necessary

 

Borrower represents and warrants that no consent by, approval of, giving of
notice to, registration with, or taking of any other action with respect to or
by any foreign, federal, state, or local governmental authority or organization
is required for Borrower to be legally bound by the terms of the Loan Documents
or for Borrower’s execution, delivery, or performance of the Loan Documents.

 

5.5                                 Accuracy of Financial Statements

 

Borrower represents and warrants that all of its audited financial statements
heretofore delivered to Lender have been prepared in accordance with generally
accepted accounting principles consistently applied and fully and fairly
represent Borrower’s financial condition as of the date thereof and the results
of Borrower’s operations for the period or periods covered thereby.

 

Borrower represents and warrants that all of its unaudited financial statements
heretofore delivered to Lender fully and fairly represent Borrower’s financial
condition as of the date thereof and the results of Borrower’s operations for
the period or periods covered thereby and are consistent with other financial
statements previously delivered to Lender.

 

Borrower represents and warrants that since the dates of the most recent audited
and unaudited financial statements delivered to Lender, there has been no
Material Adverse Change in its financial condition.

 

Borrower represents and warrants that Exhibit D hereto is a complete and
accurate list of all Existing Third Party Debt and all collateral therefor as of
Borrower’s Fiscal year ending

 

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January 3, 2004 and that no material change in the Existing Debt or the
collateral therefor has occurred since that date.

 

5.6                                 No Pending or Threatened Litigation

 

Borrower represents and warrants that except as Lender has been otherwise
advised in writing, or as otherwise disclosed in Borrower’s prospectus or other
filings with the SEC, there are no actions, suits, or proceedings pending or, to
Borrower’s knowledge, threatened against or affecting Borrower or any Subsidiary
in any court or before any governmental commission, board, or authority which,
if adversely determined, would have a Material Adverse Effect on Borrower’s or
any Subsidiary’s financial condition, conduct of Borrower’s or any Subsidiary’s
business, or ability of Borrower to perform its obligations under the Loan
Documents.

 

5.7                                 Full and Accurate Disclosure

 

Borrower represents and warrants that this Loan Agreement, the financial
statements referred to herein, any loan application submitted to Lender, and all
other statements furnished by Borrower to Lender in connection herewith contain
no untrue statement of a material fact and omit no material fact necessary to
make the statements contained therein or herein not misleading.  Borrower
represents and warrants that it has not failed to disclose to Lender in writing,
or as otherwise disclosed in Borrower’s prospectus or other filings with the
SEC, any fact that materially and adversely affects, or is reasonably likely to
materially and adversely affect, Borrower’s or any Subsidiary’s business,
operations, properties, future business prospects, profits, condition (financial
or otherwise), or ability of Borrower to perform its obligations under this Loan
Agreement or the other Loan Documents.

 

5.8                                 Compliance with ERISA

 

Borrower represents and warrants that Borrower is in compliance in all material
respects with all applicable provisions of the Employee Retirement Income
Security Act of 1974 (“ERISA”), as amended, and the regulations and published
interpretations thereunder.  Neither a Reportable Event as set forth in
Section 4043 of ERISA or the regulations thereunder (“Reportable Event”) nor a
prohibited transaction as set forth in Section 406 of ERISA or Section 4975 of
the Internal Revenue Code of 1986, as amended, has occurred and is continuing
with respect to any employee benefit plan established, maintained, or to which
contributions have been made by Borrower or any trade or business (whether or
not incorporated) which together with Borrower would be treated as a single
employer under Section 4001 of ERISA (“ERISA Affiliate”) for its employees which
is covered by Title I or Title IV of ERISA (“Plan”); no notice of intent to
terminate a Plan has been filed nor has any Plan been terminated which is
subject to Title IV of ERISA; no circumstances exist that constitute grounds
under Section 4042 of ERISA entitling the Pension Benefit Guaranty Corporation
(“PBGC”) to institute proceedings to terminate, or appoint a trustee to
administer a Plan, nor has the PBGC instituted any such proceedings; neither
Borrower nor any ERISA Affiliate has completely or partially withdrawn under
Section 4201 or 4204 of ERISA from any Plan described in Section 4001(a)(3) of
ERISA which covers employees of Borrower or any ERISA Affiliate (“Multi-employer
Plan”); Borrower and each ERISA Affiliate has met its minimum funding
requirements under ERISA

 

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with respect to all of its Plans and the present fair market value of all Plan
assets equals or exceeds the present value of all vested benefits under or all
claims reasonably anticipated against each Plan, as determined on the most
recent valuation date of the Plan and in accordance with the provisions of ERISA
and the regulations thereunder and the applicable statements of the Financial
Accounting Standards Board (“FASB”) for calculating the potential liability of
Borrower or any ERISA Affiliate under any Plan; neither Borrower nor any ERISA
Affiliate has incurred any liability to the PBGC (except payment of premiums,
which is current) under ERISA.

 

Borrower, each ERISA Affiliate and each group health plan (as defined in ERISA
Section 733) sponsored by Borrower and each ERISA Affiliate, or in which
Borrower or any ERISA Affiliate is a participating employer, are in material
compliance with, have satisfied and continue to satisfy (to the extent
applicable) all requirements for continuation of group health coverage under
Section 4980B of the Internal Revenue Code and Sections 601 et seq. of ERISA,
and are in material compliance with, have satisfied and continue to satisfy Part
7 (Sections 701 et seq., Sections 711, 712 and 731 et seq.) of ERISA and all
corresponding and similar state laws relating to portability, access and
renewability of group health benefits and other requirements included in Part 7.

 

5.9                                 Compliance with USA Patriot Act

 

Borrower represents and warrants that it is not subject to any law, regulation,
or list of any government agency (including, without limitation, the U.S. Office
of Foreign Asset Control list) that prohibits or limits Lender from making any
advance or extension of credit to Borrower or from otherwise conducting business
with Borrower.

 

5.10                           Compliance with All Other Applicable Law

 

Except as disclosed in Borrower’s prospectus and other filings with the SEC,
Borrower represents and warrants that it has complied with all applicable
statutes, rules, regulations, orders, and restrictions of any domestic or
foreign government, or any instrumentality or agency thereof having jurisdiction
over the conduct of Borrower’s business or the ownership of its properties,
which may have a Material Adverse Effect.

 

5.11                           Environmental Representations and Warranties

 

Except as disclosed in Borrower’s prospectus and other filings with the SEC,
Borrower represents and warrants that no Hazardous Materials are now located on,
in, or under the Real Property, nor is there any Environmental Condition on, in,
or under the Real Property and neither Borrower nor, to Borrower’s knowledge,
after due inquiry and investigation, any other person has ever caused or
permitted any Hazardous Materials to be placed, held, used, stored, released,
generated, located or disposed of on, in or under the Real Property, or any part
thereof, nor caused or allowed an Environmental Condition to exist on, in or
under the Real Property, except in the ordinary course of Borrower’s business
under conditions that are generally recognized to be appropriate and safe and
that are in strict compliance with all applicable Environmental

 

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Health and Safety Laws.  Except as disclosed in Borrower’s prospectus and other
filings with the SEC, Borrower further represents and warrants that no
investigation, administrative order, consent order and agreement, litigation or
settlement with respect to Hazardous Materials and/or an Environmental Condition
is proposed, threatened, anticipated or in existence with respect to the Real
Property.

 

5.12                           Operation of Business

 

Borrower represents and warrants that the nature of the business and operations
of Borrower and each Subsidiary are consistent with the reports heretofore
provided to Lender by Borrower and the Subsidiaries and that Borrower and the
Subsidiaries are not engaged in any business or operations other than the
research and development, manufacture and marketing of contact lenses and
related products.

 

Except as disclosed in Borrower’s prospectus and other filings with the SEC,
Borrower represents and warrants that Borrower and the Subsidiaries possess all
licenses, permits, franchises, patents, copyrights, trademarks, and trade names,
or rights thereto, materially required to conduct their businesses substantially
as now conducted, and neither Borrower nor the Subsidiaries are in violation of
any valid rights of others with respect to any of the foregoing.

 

5.13                           Payment of Taxes

 

Borrower represents and warrants that Borrower has filed all tax returns
(federal, state, and local) required to be filed and has paid all taxes,
assessments, and governmental charges and levies, including interest and
penalties, on Borrower’s assets, business and income, except such as are being
contested in good faith by proper proceedings and as to which adequate reserves
are maintained.

 

5.14                           Licensing and Distribution Agreements

 

There are no material licensing, distribution or other agreements between
Borrower and any vendor or supplier of inventory or raw materials except (i)
that certain 1-800 Contacts Qualified Retailer Agreement between Vistakon
Division of Johnson & Johnson Vision Care, Inc. (“Vistakon”) and Borrower, dated
November 25, 2002, as amended by that certain Agreement dated December 29, 2003
between Vistakon and Borrower; and (ii) that certain letter agreement between
CIBA Vision Corporation and Borrower, dated October 24, 2003, and that certain
Supply and Purchase Agreement F.O.B. Destination between CIBA Vision Corporation
and Borrower dated April 3, 2003, as amended by that certain Supply and Purchase
Agreement Addendum between CIBA Vision Corporation and Borrower (undated),
complete and accurate copies of which have been provided to Lender or Lender’s
counsel.

 

6.                                       Borrower’s Covenants

 

Borrower makes the following agreements and covenants, which shall continue so
long as this Loan Agreement is in effect and so long as Borrower is indebted to
Lender for obligations arising out of, identified in, or contemplated by this
Loan Agreement.

 

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6.1                                 Use of Proceeds

 

Borrower shall use the proceeds of the Loan solely for working capital, other
general corporate purposes, Permitted Subsidiary Loans and investments permitted
in Section 6.20, Loans and Investments.

 

Borrower shall not, directly or indirectly, use any of the proceeds of the Loan
for prepayment of any debt or obligation owing by Borrower or any Subsidiary
without the prior written consent of Lender.

 

Borrower shall not, directly or indirectly, use any of the proceeds of the Loan
for the purpose of purchasing or carrying any margin stock within the meaning of
Regulation U of the Board of Governors of the Federal Reserve System, or to
extend credit to any person or entity for the purpose of purchasing or carrying
any such margin stock or for any purpose which violates, or is inconsistent
with, Regulation X of said Board of Governors, or for any other purpose not
permitted by Section 7 of the Securities Exchange Act of 1934, as amended, or by
any of the rules and regulations respecting the extension of credit promulgated
thereunder.

 

6.2                                 Continued Compliance with ERISA

 

Borrower covenants that, with respect to all Plans (as defined in
Section 5.8 Compliance with ERISA) which Borrower or any ERISA Affiliate
currently maintains or to which Borrower or any ERISA Affiliate is a sponsoring
or participating employer, fiduciary, party in interest or disqualified person
or which Borrower or any ERISA Affiliate may hereafter adopt, Borrower and each
ERISA Affiliate shall continue to comply with all applicable provisions of the
Internal Revenue Code and ERISA and with all representations made in
Section 5.8 Compliance with ERISA, including, without limitation, conformance
with all notice and reporting requirements, funding standards, prohibited
transaction rules, multi-employer plan rules, necessary reserve requirements,
and health care continuation, coverage and portability requirements.

 

6.3                                 Compliance with USA Patriot Act

 

Borrower shall (a) not be or become subject at any time to any law, regulation,
or list of any government agency (including, without limitation, the U.S. Office
of Foreign Asset Control list) that prohibits or limits Lender from making any
advance or extension of credit to Borrower or from otherwise conducting business
with Borrower, and (b) provide documentary and other evidence of Borrower’s
identity as may be requested by Lender at any time to enable Lender to verify
Borrower’s identity or to comply with any applicable law or regulation,
including, without limitation, Section 326 of the USA Patriot Act of 2001, 31
U.S.C. Section 5318.

 

6.4                                 Continued Compliance with Applicable Law

 

Except as disclosed in Borrower’s prospectus and other filings with the SEC
prior to the Effective Date, Borrower shall conduct its business in a lawful
manner and in material compliance with all applicable federal, state, and local
laws, ordinances, rules, regulations, and orders; shall maintain in good
standing all licenses and organizational or other qualifications reasonably
necessary to its business and existence; and shall not engage in any business
not

 

21

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authorized by and not in accordance with its Organizational Documents and other
governing documents.

 

Except as disclosed in Borrower’s prospectus and other filings with the SEC
prior to the Effective Date, Borrower shall cause all Subsidiaries to conduct
their respective business in a lawful manner and in material compliance with all
applicable laws, ordinances, rules, regulations, and orders; shall cause all
Subsidiaries to maintain in good standing all licenses and organizational or
other qualifications reasonably necessary to its business and existence; and
shall not permit any Subsidiaries to engage in any business not authorized by
and not in accordance with their respective Organizational Documents and other
governing documents.

 

6.5                                 Subsidiaries

 

Borrower covenants that:

 

a.                                       Borrower shall at all times be the sole
shareholder, member and owner of any equity or ownership interest in each of the
Subsidiaries and shall own one hundred percent (100%) of such stock and equity
and ownership interests; provided, however, that VisionTec may be owned by
Shayna.

 

b.                                      CL I, CL II, CL III and Contacts Japan
will remain dormant and will not engage in any active operations without the
prior written consent of Lender.

 

c.                                       The Subsidiaries shall not materially
change the nature of their respective businesses and operations without the
prior written consent of Lender, which consent will not be unreasonably
withheld.  Lender hereby consents to the relocation by Lens 1st of a significant
portion of its operations from Michigan to Utah.

 

d.                                      Borrower will not permit any of the
Subsidiaries to issue any stock, equity or ownership interest, warrant, option
or other right of any nature to acquire any stock or equity or ownership
interest in any of the Subsidiaries, except that Lender consents to the
acquisition of stock in VisionTec by Shayna and the issuance of additional stock
by VisionTec to Shayna, and to the issuance of stock or membership interests to
Borrower to evidence investments authorized by Section 6.20 Loans and
Investments.

 

e.                                       The stock and equity and ownership
interests of Borrower which are Collateral shall at all times constitute one
hundred percent (100%) of the issued and outstanding stock and equity and
ownership interests of the Domestic Subsidiaries.

 

f.                                         The stock and equity and ownership
interests of Borrower which are Collateral shall at all times constitute
sixty-five percent (65%) of the issued and outstanding stock and equity and
ownership interests of the Foreign Subsidiaries, except that the stock of
VisionTec may be owned by Shayna.

 

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6.6                                 Prior Consent for Amendment or Change

 

Borrower shall not, without Lender’s prior written consent which will not be
unreasonably withheld, modify, amend, waive, or otherwise alter, or fail to
enforce, its Organizational Documents.  Borrower shall not permit any of the
Subsidiaries to modify, amend, waive, or otherwise alter, or fail to enforce,
its Organizational Documents or other governing documents without Lender’s prior
written consent, which will not be unreasonably withheld.

 

6.7                                 Payment of Taxes and Obligations

 

Borrower shall pay when due all taxes, assessments, and governmental charges and
levies on Borrower’s assets, business, and income, and all material obligations
of Borrower of whatever nature, except such as are being contested in good faith
by proper proceedings and as to which adequate reserves are maintained.

 

6.8                                 Financial Statements and Reports

 

Borrower shall provide Lender with such financial statements and reports
regarding Borrower and the Subsidiaries as Lender may reasonably request. 
Audited financial statements and reports shall be prepared in accordance with
generally accepted accounting principles and shall fully and fairly represent
Borrower’s and the Subsidiaries’ financial condition as of the date thereof and
the results of Borrower’s and the Subsidiaries’ operations for the period or
periods covered thereby.  Unaudited financial statements and reports shall fully
and fairly represent Borrower’s and the Subsidiaries’ financial condition as of
the date thereof and the results of Borrower’s and the Subsidiaries’ operations
for the period or periods covered thereby and shall be consistent with other
financial statements previously delivered to Lender.  All audited and unaudited
financial statements and reports shall be presented on a consolidated basis.

 

Until requested otherwise by Lender, Borrower shall provide the following
financial statements, reports and notices to Lender:

 

a.                                       Annual audited financial statements
with an unqualified opinion for each fiscal year of Borrower and all
Subsidiaries from an independent accounting firm and in a form reasonably
acceptable to Lender, to be delivered to Lender within one hundred twenty (120)
days of the end of the fiscal year.  Borrower shall also submit to Lender copies
of any management letters or other reports submitted to Borrower and/or any
Subsidiaries by independent certified public accountants in connection with
examination of the financial statements of Borrower and the Subsidiaries made by
such accountants.

 

b.                                      At all times when the Maximum Leverage
Ratio exceeds two and five-tenths (2.5), Borrower shall provide monthly
unaudited financial statements of Borrower and all Subsidiaries for each fiscal
month.  At all times when the Maximum Leverage Ratio is equal to or less than
two and five-tenths (2.5), Borrower shall provide quarterly unaudited financial
statements of Borrower and all Subsidiaries for each fiscal quarter.  The
monthly and quarterly unaudited financial statements shall be in a form
reasonably acceptable to Lender.  The unaudited financial statements shall be
delivered to Lender within forty-five (45) days of the end of each applicable
fiscal month or quarter.  The quarterly unaudited financial statements may be
those submitted by Borrower to the SEC

 

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in connection with its 10Q report or, if not, shall, and the monthly unaudited
financial statements shall, include a certification by the chief financial
officers or chief executive officers of Borrower and the Subsidiaries that the
monthly or quarterly financial statements fully and fairly represent Borrower’s
and the Subsidiaries’ financial condition as of the date thereof and the results
of operations for the period covered thereby and are consistent with other
financial statements previously delivered to Lender.

 

c.                                       Promptly after the sending or filing
thereof, Borrower shall provide to Lender copies of all proxy statements,
financial statements, and reports which Borrower sends to its stockholders or
investors, and copies of all regular, periodic, and special reports, and all
registration statements which Borrower files with the Securities and Exchange
Commission, any governmental authority which may be substituted therefor, with
any national securities exchange, or with any similar state authority; provided,
however, that Borrower shall not be required to deliver information under this
Section 6.7(c) that has already been delivered to Lender under Sections 6.7(a)
and 6.7(b) above.

 

d.                                      Each financial statement shall be
accompanied by a compliance certificate in a form reasonably acceptable to
Lender certifying that Borrower is in compliance with all terms and conditions
of this Loan Agreement, including compliance with the financial covenants
provided in Section 6.9 Financial Covenants.  The compliance certificate shall
include the data and calculations supporting all financial covenants, whether in
compliance or not, and shall be signed by the chief executive officer, chief
financial officer or vice president of finance of Borrower.

 

6.9                                 Financial Covenants

 

Except as otherwise provided herein, each of the accounting terms used in this
Section 6.9 shall have the meanings used in accordance with generally accepted
accounting principles consistent with those used in preparation of the financial
statements of Borrower and the Subsidiaries submitted to Lender.  Financial
covenants shall be determined on a consolidated basis.

 

a.                                       Working Capital.  Borrower will
maintain at all times an excess of current assets over current liabilities of
not less than five million two hundred fifty thousand dollars ($5,250,000.00),
excluding outstanding principal owing on the Promissory Note and excluding the
current portion of long term liabilities.

 

b.                                      Capital Expenditures.  Borrower will not
make any expenditures for tangible fixed or capital assets if, after giving
effect thereto, the aggregate of all such expenditures made by Borrower would
exceed nine million dollars ($9,000,000.00) for Borrower’s fiscal year 2004,
fourteen million dollars ($14,000,000.00) for Borrowers fiscal year 2005, and
seventeen million dollars ($17,000,000.00) for each Borrower’s fiscal year
thereafter.  Amounts not expended in any fiscal year may be carried over to the
next fiscal year for purposes of this calculation.

 

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c.                                       Maximum Leverage Ratio.  Borrower will
at all times maintain a Trailing Twelve Month ratio of Total Borrowed Debt to
EBITDA of three and five-tenths (3.5) until the end of the fiscal quarter ending
approximately June 30, 2004, three (3.0) thereafter until the end of the fiscal
quarter ending approximately December 31, 2004, and two and five-tenths (2.5)
thereafter.

 

Total Borrowed Debt means (i) indebtedness or liability of Borrower for borrowed
money, (ii) obligations of Borrower as a lessee under capital leases, (iii) all
guarantees (excluding inter-company guarantees between Borrower and Subsidiaries
or between Subsidiaries), endorsements (other than for collection or deposit in
the ordinary course of business), (iv) other contingent obligations to purchase
(excluding purchase orders prior to delivery of the subject goods or performance
of the subject services) to provide funds for payment, to supply funds to invest
in any person or entity, or otherwise assure a creditor against loss (but
excluding all VisionTec Acquisition Debt), (v) accounts payable to trade
creditors for goods or services which are more than one hundred twenty (120)
days past due, and (vi) the face amount of all outstanding letters of credit
issued for the account of Borrower.

 

d.                                      Minimum Fixed Charge Coverage Ratio. 
Borrower will at all times maintain a ratio of (i) Trailing Twelve Month EBITDA
minus Replacement Capital Expenditures minus Trailing Twelve Month Cash Taxes to
(ii) Trailing Twelve Month Net Cash Interest Expense plus current maturities of
long term debt (excluding the principal balance outstanding and due under the
Promissory Note at maturity and excluding current maturities of the VisionTec
Acquisition Debt), of one and two-tenths (1.2) until the end of the fiscal
quarter ending approximately September 30, 2004, one and four-tenths (1.4)
thereafter until the end of the fiscal quarter ending approximately March 31,
2005, and one and five-tenths (1.5) thereafter.

 

Replacement Capital Expenditures means one million five hundred thousand dollars
($1,500,000.00) for Borrower’s fiscal year 2004, two million dollars
($2,000,000.00) for Borrower’s fiscal year 2005, and two million five hundred
thousand dollars ($2,500,000.00) for each of Borrower’s fiscal years thereafter.

 

Cash Taxes means expenditures paid for foreign, federal and state income taxes.

 

Net Cash Interest Expense means interest expenses paid minus interest income
received.

 

e.                                       Net Worth.  Borrower will maintain at
all times a net worth of not less than fifty million dollars ($50,000,000.00)
until the end of the fiscal quarter ending approximately December 31, 2004,
fifty-five million ($55,000,000.00) thereafter until the end of the fiscal
quarter ending approximately December 31, 2005, and sixty-five million dollars
($65,000,000.00) thereafter.

 

Net worth means the excess of total assets over total liabilities.

 

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6.10                           Insurance

 

Borrower shall maintain insurance with financially sound and reputable insurance
companies or associations in such amounts and covering such risks as are usually
carried by companies engaged in the same or a similar business and similarly
situated, which insurance shall name Lender as a loss payee and an additional
insured and may provide for reasonable deductibility from coverage thereof. 
Borrower shall provide copies of policies or certificates of coverage evidencing
such insurance is in place upon request of Lender and with all annual financial
statements.

 

6.11                           Inspection

 

Borrower shall, and shall cause the Subsidiaries to, permit Lender or any
representative of Lender from time to time upon at least two (2) Banking
Business Days prior notice and within normal business hours to examine and make
copies of and abstracts from the records and books of account of, and visit and
inspect the properties and assets of, Borrower and the Subsidiaries, and to
discuss the affairs, finances, and accounts of Borrower and the Subsidiaries
with any of Borrower’s or the Subsidiaries’ officers and directors and with
Borrower’s and the Subsidiaries’ independent accountants.

 

6.12                           Operation of Business

 

Except as disclosed in Borrower’s prospectus and other filings with the SEC
prior to the Effective Date, Borrower shall maintain, and cause the Subsidiaries
to maintain, all licenses, permits, franchises, patents, copyrights, trademarks,
and trade names, or rights thereto, materially necessary to conduct their
respective businesses and Borrower shall not violate, or allow the Subsidiaries
to violate, any valid rights of others with respect to any of the foregoing. 
Borrower and the Subsidiaries shall continue to engage in a business of the same
general type as now conducted.

 

6.13                           Maintenance of Records and Properties

 

Borrower and the Subsidiaries shall keep adequate records and books of account
in which complete entries will be made in accordance with generally accepted
accounting principles consistently applied, reflecting all financial
transactions of Borrower and the Subsidiaries.  Borrower shall maintain, keep
and preserve, and cause the Subsidiaries to maintain, keep and preserve, all of
their respective properties (tangible and intangible) necessary or useful in the
proper conduct of their businesses in good working order and condition, ordinary
wear and tear excepted.

 

6.14                           Notice of Claims

 

Borrower and the Subsidiaries shall promptly notify Lender in writing, unless
Borrower has made or will make such disclosure in its filings with the SEC and
provided a copy thereof to Lender, of all actions, suits or proceedings filed or
threatened against or affecting Borrower or the Subsidiaries in any court or
before any governmental commission, board, or authority which, if adversely
determined, would have a Material Adverse Effect.

 

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6.15                           Environmental Covenants

 

Borrower covenants that it will:

 

a.                                       Not permit the presence, use, disposal,
storage or release of any Hazardous Materials on, in, or under the Real
Property, except in the ordinary course of Borrower’s business under conditions
that are generally recognized to be appropriate and safe and that are in strict
compliance with all applicable Environmental Health and Safety Laws.

 

b.                                      Not permit any substance, activity or
Environmental Condition on, in, under or affecting the Real Property which is in
violation of any Environmental Health and Safety Laws.

 

c.                                       Comply with the provisions of all
Environmental Health and Safety Laws.

 

d.                                      Notify Lender immediately of any
discharge of Hazardous Materials, Environmental Condition, or environmental
complaint or notice received from any governmental agency or any other party.

 

e.                                       Upon any discharge of Hazardous
Materials or upon the occurrence of any Environmental Condition, immediately
contain and remove the same in strict compliance with all Environmental Health
and Safety Laws, promptly pay any fine or penalty assessed in connection
therewith, and immediately notify Lender of such events.

 

f.                                         Permit Lender to inspect the Real
Property for Hazardous Materials and Environmental Conditions, to conduct tests
thereon, and to inspect all books, correspondence, and records pertaining
thereto.

 

g.                                      From time to time upon Lender’s
reasonable request not to exceed once per year, and at Borrower’s expense,
provide a report (including all validated and unvalidated data generated for
such reports) of a qualified independent environmental engineer acceptable to
Lender, satisfactory to Lender in scope, form, and content, and provide to
Lender such other and further assurances reasonably satisfactory to Lender, that
Borrower is in compliance with these covenants concerning Hazardous Materials
and Environmental Conditions, and that any past violation thereof has been
corrected in compliance with all applicable Environmental Health and Safety
Laws.

 

h.                                      Immediately advise Lender of any
additional, supplemental, new, or other information concerning any Hazardous
Materials or Environmental Conditions relating to the Real Property.

 

6.16                           Exclusive Negative Pledge

 

Borrower will not create, incur, assume, or suffer to exist, and will not permit
the Subsidiaries to create, incur, assume, or suffer to exist, any mortgage,
deed of trust, pledge, lien, security interest, hypothecation, assignment,
deposit arrangement, or other preferential arrangement, charge, or encumbrance
(including, without limitation, any conditional sale, other title retention
agreement, or finance lease) of any nature, upon or with respect to any of
Borrower’s or the Subsidiaries’ properties or assets, now owned or hereafter
acquired, or sign or

 

27

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file, under the Uniform Commercial Code of any jurisdiction, a financing
statement under which Borrower or the Subsidiaries appears as debtor, or sign
any security agreement authorizing any secured party thereunder to file such
financing statement, except (i) those contemplated by this Loan Agreement, (ii)
those presently existing and securing Existing Debt, (iii) those approved in
writing by Lender, (iv) purchase money security interests securing Permitted
Debt, and (v) liens for taxes and assessments not yet due and payable or, if due
and payable, those being contested in good faith by appropriate proceedings and
for which appropriate reserves are maintained.

 

Borrower will not enter into any covenant or agreement with any other lender,
creditor, or any other party in which Borrower agrees to not create, incur,
assume, or suffer to exist any mortgage, deed of trust, pledge, lien, security
interest, hypothecation, assignment, deposit arrangement or other preferential
arrangement, charge, or encumbrance (including, without limitation, any
conditional sale, other title retention agreement, or finance lease) of any
nature, upon or with respect to any of Borrower’s properties or assets, now
owned or hereafter acquired, except as consented to in advance in writing by
Lender.

 

Borrower shall cause each of the Subsidiaries to comply with the covenants of
this Section 6.16 the same as if the covenants had been made by each of the
Subsidiaries.

 

6.17                           Restriction on Debt

 

Borrower shall not create, incur, assume, or suffer to exist and will not permit
the Subsidiaries to create, incur, assume, or suffer to exist any debt except
Permitted Debt.

 

Borrower shall cause each of the Subsidiaries to comply with the covenants of
this Section 6.17 the same as if the covenants had been made by each of the
Subsidiaries.

 

6.18                           Mergers, Consolidations, and Purchase and Sale of
Assets

 

Except for Permitted Acquisition Baskets, Borrower shall not wind up, liquidate,
or dissolve itself, reorganize, merge, or consolidate with or into, or convey,
sell, assign, transfer, lease, or otherwise dispose of (whether in one
transaction or a series of transactions) all or substantially all of its assets
(whether now owned or hereafter acquired) to any person or entity, or acquire
all or substantially all of the assets or the business of any person or entity,
without prior written consent of Lender, which consent shall not be unreasonably
withheld.

 

Except for Permitted Acquisition Baskets and as provided in Section 6.22
Covenants for Post-Closing Events, Borrower shall not permit any of the
Subsidiaries to wind up, liquidate, or dissolve itself, reorganize, merge, or
consolidate with or into, or convey, sell, assign, transfer, lease, or otherwise
dispose of (whether in one transaction or a series of transactions) all or
substantially all of its assets (whether now owned or hereafter acquired) to any
person or entity, or acquire all or substantially all of the assets or the
business of any person or entity without prior written consent of Lender, which
consent shall not be unreasonably withheld.

 

Permitted Acquisition Baskets means any merger involving Borrower or any of the
Subsidiaries or any acquisitions by Borrower or any of the Subsidiaries of all
or substantially all

 

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of the assets or business of any person or entity in which (i) if a merger,
Borrower or the Subsidiary is the surviving entity; (ii) the acquired company
operates or the assets are used in the same business lines as Borrower or any
Subsidiaries; (iii) the value (whether cash or other consideration) paid by
Borrower or the Subsidiary does not exceed two million five hundred thousand
dollars ($2,500,000.00); and (iv) the aggregate value (whether cash or other
consideration) paid by Borrower and all Subsidiaries for all acquired companies
and assets during the Trailing Twelve Month period does not exceed five million
dollars ($5,000,000.00).

 

The acquisition of VisionTec shall be excluded from and not counted in
calculating the Permitted Acquisition Basket.

 

6.19                           Dividends

 

Borrower shall not (a) (i) declare or pay any cash dividends, (ii) purchase,
redeem, retire or otherwise acquire for value any of its capital stock now or
hereafter outstanding, (iii) make any distribution of assets to its
stockholders, investors, or equity holders, whether in cash, assets, or in
obligations of Borrower, (iv) allocate or otherwise set apart any sum for the
payment of any dividend or distribution on, or for the purchase, redemption, or
retirement of any shares of its capital stock or equity interests, or (v) make
any other distribution by reduction of capital or otherwise in respect of any
shares of its capital stock or equity interests, (b) (i) at any time prior to
December 31, 2005, (ii) at any time if an Event of Default has occurred which
has not been waived or cured, (iii) if an Event of Default would result by such
payment or action or exist after such payment or action, and (iv) if the
aggregate amount or value of all such payments, distributions, and allocations
would exceed ten million dollars ($10,000,000.00) in any fiscal year of
Borrower.

 

6.20                           Loans and Investments

 

Borrower shall not make any loans to, or make any investments in, or pay any
advances of any nature whatsoever to any person or entity, in an aggregate,
outstanding amount greater than two million five hundred thousand dollars
($2,500,000.00), except (i) advances in the ordinary course of business to
vendors, suppliers, and contractors; (ii) Permitted Subsidiary Loans; and (iii)
investments in ClearLab and VisionTec and/or Shayna.

 

Borrower shall not permit any of the Subsidiaries to make any loans to, or make
any investments in, or pay any advances of any nature whatsoever to any person
or entity, except (i) advances in the ordinary course of business to vendors,
suppliers and contractors; (ii) the investment of Shayna in VisionTec in
connection with the acquisition of VisionTec; and (iii) investments, loans and
advances by Foreign Subsidiaries in other Foreign Subsidiaries.

 

6.21                           Intercompany Transfers of Assets

 

Borrower shall not make and shall not allow to be made any transfers of assets
between Borrower and any of the Subsidiaries or between any of the Subsidiaries
except the Permitted Subsidiary Loans, payment of the Permitted Subsidiary
Loans, loans and advances by Foreign Subsidiaries to other Foreign Subsidiaries
and repayment of such loans and advances, the

 

29

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acquisition of VisionTec, transfers of intellectual property assets related to
manufacturing processes and materials, and as consented to in writing by Lender.

 

6.22                           Covenants for Post-Closing Events

 

a.                                       Within thirty (30) days of the
Effective Date, Borrower shall deliver to Lender an executed amendment to the
Subordination Agreement dated July 22, 2002, executed by Lender, Borrower,
ClearLab (then known as IGEL Acquisition Co. Pte. Ltd.), The Development Bank of
Singapore Ltd, and Alliance Technology and Development Limited (in judicial
management) in substantially the form attached hereto as Exhibit E.

 

b.                                      Within thirty (30) days of the Effective
Date, Borrower shall provide all information, records, documents and information
reasonably requested by Lender to assist Lender in identifying, describing,
valuing, taking a security interest in, perfecting its security interest in, and
performing due diligence concerning, the Intellectual Property Assets and
Borrower shall execute and deliver such additional or replacement security
agreements, collateral assignment agreements, notices, and other documents as
may be reasonably requested by Lender concerning the Intellectual Property
Assets.

 

c.                                       Within thirty (30) days of the
Effective Date, Borrower shall cause to be delivered to Lender and opinion or
opinions of counsel for ClearLab, Shayna and VisionTec, from a law firm or law
firms or attorney acceptable to Lender, in substantially the form attached
hereto as Exhibit F, dated as of the Effective Date.

 

d.                                      Within thirty (30) days of the Effective
Date, Borrower shall:

 

(i)                                     Cause to be filed a termination of the
UCC Financing Statement No. 2014448 9 filed on December 14, 2001, with the
Delaware Secretary of State, with U.S. Bancorp as secured party.

 

(ii)                                  Provide to Lender copies of the following
UCC Financing Statements filed with the Utah Division of Corporations and
Commercial Code naming US Bancorp as secured party: Filing No. 203040200224
filed November 19, 2002 and Filing No. 205519200227 filed December 18, 2002.

 

(iii)                               If the UCC Financing Statements provided in
(ii), above, cover any Collateral other than a purchase money security interest
in specific equipment and proceeds thereof, Borrower shall provide a
subordination or release from US Bancorp in a form acceptable to Lender, as to
all such other Collateral.

 

e.                                       Within one hundred eighty (180) days of
the Effective Date, Borrower shall cause Contacts Texas to be wound up and
dissolved.

 

f.                                         Within thirty (30) days of the
Effective Date, (i) Borrower shall cause to be delivered to Lender copies of the
final documents for acquisition of VisionTec by Borrower and Shayna, copies of
the final documents, if any, transferring ownership of

 

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VisionTec from Borrower to Shayna, copies of the Organizational Documents of
VisionTec, a copy of the Stock Ledger of VisionTec, copies of the outstanding
stock certificates issued by VisionTec to Borrower and Shayna, and such other
documents and records concerning the VisionTec acquisition as may be reasonably
requested by Lender; and (ii) Borrower shall cause to be delivered to Lender an
opinion or opinions of counsel for VisionTec, Borrower and Shayna, from a law
firm or firms or attorney acceptable to Lender, addressing such matters
concerning the acquisition of VisionTec by Borrower and Shayna as are reasonably
requested by Lender, including closing of the VisionTec acquisition and the
authorized, issued and outstanding stock of VisionTec and ownership thereof.

 

g.                                      Within thirty (30) days of the Effective
Date, Borrower shall cause to be executed and delivered promissory notes
evidencing the Existing ClearLab Subsidiary Loan, the Existing Lens 1st
Subsidiary Loan, and the Existing Shayna Subsidiary Loan and Borrower shall
endorse and deliver such promissory notes to Lender.

 

7.                                       Default

 

7.1                                 Events of Default

 

Time is of the essence of this Loan Agreement.  The occurrence of any of the
following events, and if required, the giving of any notice and passage of the
prescribed time period without cure, shall constitute a default under this Loan
Agreement and under the Loan Documents and shall be termed an “Event of
Default”:

 

a.                                       Borrower fails in the payment or
performance of any obligation, covenant, agreement, or liability created by any
of the Loan Documents.

 

b.                                      Any representation, warranty, or
financial statement made by or on behalf of Borrower in any of the Loan
Documents, or any document contemplated by the Loan Documents, is materially
false or materially misleading.

 

c.                                       Default occurs or Borrower fails to
comply with any term in any of the Loan Documents.

 

d.                                      Any indebtedness of Borrower or any of
the Subsidiaries under any note, indenture, contract, agreement, or undertaking
is accelerated, other than a DBS/ATD Default.

 

e.                                       Default or an event which, with the
passage of time or the giving of notice or both, would constitute a default, by
Borrower or any of the Subsidiaries, occurs on any note, indenture, contract,
agreement, or undertaking, including any note, indenture, contract, agreement,
or undertaking between Borrower and any of the Subsidiaries, other than a
DBS/ATD Default.

 

f.                                         Borrower or any of the Subsidiaries
is dissolved or substantially ceases business operations, except as permitted in
this Loan Agreement.

 

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g.                                      A receiver, trustee, or custodian is
appointed for any part of Borrower’s or any of the Subsidiaries’ property, or
any part of Borrower’s or any of the Subsidiaries’ property is assigned for the
benefit of creditors.

 

h.                                      Any proceeding is commenced or petition
filed under any bankruptcy or insolvency law by or against Borrower or any of
the Subsidiaries.

 

i.                                          Any judgment or regulatory fine is
entered against Borrower or any of the Subsidiaries which may materially affect
Borrower or any of the Subsidiaries.

 

j.                                          Borrower or any of the Subsidiaries
becomes insolvent or fails to pay its debts as they mature.

 

k.                                       Any Material Adverse Change occurs in
Borrower’s or any Subsidiaries’ condition or any event occurs which may cause a
Material Adverse Change in Borrower’s or any Subsidiaries’ condition.

 

Any Payment Default shall not be entitled to any notice nor any cure period. 
Any Formula Default shall not be entitled to any notice but Borrower shall have
three (3) Banking Business Days from the due date of the Compliance Certificate
pursuant to Subsection 6.8d to cure such Formula Default.  If the Formula
Default is cured within said three (3) Banking Business Days, then Lender may
not exercise any rights or remedies based upon that Formula Default.  Any other
Event of Default shall be subject to Lender first giving Borrower notice of such
default and Borrower shall have fifteen (15) days from the date of giving such
notice to cure such Event of Default.  If the Event of Default is cured within
said fifteen day period, then Lender may not exercise any rights or remedies
based upon that Event of Default.

 

7.2                                 No Waiver of Event of Default

 

No course of dealing or delay or failure to assert any Event of Default shall
constitute a waiver of that Event of Default or of any prior or subsequent Event
of Default.

 

8.                                       Remedies

 

8.1                                 Remedies upon Event of Default

 

Upon the occurrence of an Event of Default, and at any time thereafter, all or
any portion of the obligations due or to become due from Borrower to Lender,
whether arising under this Loan Agreement, the Promissory Note, the Security
Documents or otherwise, at the option of Lender and without notice to Borrower
of the exercise of such option, shall accelerate and become at once due and
payable in full, and Lender shall have all rights and remedies created by or
arising from the Loan Documents, and all other rights and remedies existing at
law, in equity, or by statute.

 

Additionally, Lender shall have the right, immediately and without prior notice
or demand, to set off against Borrower’s obligations to Lender, whether or not
due, all money and other amounts owed by Lender in any capacity to Borrower,
including, without limitation,

 

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checking accounts, savings accounts, and other depository accounts, and Lender
shall be deemed to have exercised such right of setoff and to have made a charge
against any such money or amounts immediately upon occurrence of an Event of
Default, even though such charge is entered on Lender’s books subsequently
thereto.

 

8.2                                 Rights and Remedies Cumulative

 

The rights and remedies herein conferred are cumulative and not exclusive of any
other rights or remedies and shall be in addition to every other right, power,
and remedy that Lender may have, whether specifically granted herein or
hereafter existing at law, in equity, or by statute.  Any and all such rights
and remedies may be exercised from time to time and as often and in such order
as Lender may deem expedient.

 

8.3                                 No Waiver of Rights

 

No delay or omission in the exercise or pursuance by Lender of any right, power,
or remedy shall impair any such right, power, or remedy or shall be construed to
be a waiver thereof.

 

9.                                       General Provisions

 

9.1                                 Restated Loan Agreement

 

This Loan Agreement and the Loan Documents replace and supersede the Existing
Loan Agreement and the Existing Loan Documents, except that UCC Financing
Statements filed in connection with the Existing Loan Documents may, at Lender’s
option, remain of record and provide notice of the security interests granted by
the Loan Documents.

 

9.2                                 Governing Agreement

 

In the event of conflict or inconsistency between this Loan Agreement and the
other Loan Documents, excluding the Promissory Note, the terms, provisions and
intent of this Loan Agreement shall govern.

 

9.3                                 Borrower’s Obligations Cumulative

 

Every obligation, covenant, condition, provision, warranty, agreement,
liability, and undertaking of Borrower contained in the Loan Documents shall be
deemed cumulative and not in derogation or substitution of any of the other
obligations, covenants, conditions, provisions, warranties, agreements,
liabilities, or undertakings of Borrower contained herein or therein.

 

9.4                                 Payment of Expenses and Attorney’s Fees

 

Borrower shall pay all reasonable expenses of Lender relating to the
negotiation, drafting of documents, documentation of the Loan, and
administration and supervision of the Loan, including, without limitation,
filing fees and reasonable attorneys fees and legal expenses,

 

33

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whether incurred in making the Loan, in future amendments or modifications to
the Loan Documents, or in ongoing administration and supervision of the Loan.

 

Upon occurrence of an Event of Default, Borrower agrees to pay all costs and
expenses, including reasonable attorney fees and legal expenses, incurred by
Lender in enforcing, or exercising any remedies under, the Loan Documents, and
any other rights and remedies.

 

Borrower agrees to pay all expenses, including reasonable attorney fees and
legal expenses, incurred by Lender in any bankruptcy proceedings of any type
involving Borrower, the Loan Documents, or the Collateral, including, without
limitation, expenses incurred in modifying or lifting the automatic stay,
determining adequate protection, use of cash collateral or relating to any plan
of reorganization.

 

9.5                                 Right to Perform for Borrower

 

Lender may, in its sole discretion and without any duty to do so, elect to
discharge taxes, tax liens, security interests, or any other encumbrance upon
the Collateral or any other property or asset of Borrower, to pay any filing,
recording, or other charges payable by Borrower, or to perform any other
obligation of Borrower under this Loan Agreement or under the Security
Documents, in the event that Borrower is in default under the terms of the Loan
Documents.

 

9.6                                 Assignability

 

Borrower may not assign or transfer any of the Loan Documents and any such
purported assignment or transfer is void.

 

Lender may assign or transfer any of the Loan Documents.  Funding of this Loan
may be provided by an affiliate of Lender.

 

9.7                                 Third Party Beneficiaries

 

The Loan Documents are made for the sole and exclusive benefit of Borrower and
Lender and are not intended to benefit any other third party.  No third party
may claim any right or benefit or seek to enforce any term or provision of the
Loan Documents.

 

9.8                                 Governing Law

 

The Loan Documents shall be governed by and construed in accordance with the
laws of the State of Utah, except to the extent that any such document expressly
provides otherwise.

 

9.9                                 Severability of Invalid Provisions

 

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

 

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9.10                           Interpretation of Loan Agreement

 

The article and section headings in this Loan Agreement are inserted for
convenience only and shall not be considered part of the Loan Agreement nor be
used in its interpretation.

 

All references in this Loan Agreement to the singular shall be deemed to include
the plural and vice versa and references in the collective or conjunctive shall
also include the disjunctive unless the context otherwise clearly requires a
different interpretation.

 

9.11                           Survival and Binding Effect of Representations,
Warranties, and Covenants

 

All agreements, representations, warranties, and covenants made herein by
Borrower shall survive the execution and delivery of this Loan Agreement and
shall continue in effect so long as any obligation to Lender contemplated by
this Loan Agreement is outstanding and unpaid, notwithstanding any termination
of this Loan Agreement.  All agreements, representations, warranties, and
covenants made herein by Borrower shall survive any bankruptcy proceedings
involving Borrower, to the extent permissible under applicable bankruptcy laws. 
All agreements, representations, warranties, and covenants in this Loan
Agreement shall bind the party making the same, its successors and, in Lender’s
case, assigns, and all rights and remedies in this Loan Agreement shall inure to
the benefit of and be enforceable by each party for whom made, their respective
successors and, in Lender’s case, assigns.

 

9.12                           Indemnification

 

Borrower shall indemnify Lender for any and all claims and liabilities, and for
damages which may be awarded or incurred by Lender, and for all reasonable
attorney fees, legal expenses, and other out-of-pocket expenses incurred in
defending such claims, arising from or related in any manner to the negotiation,
execution, or performance by Lender of any of the Loan Documents, but excluding
any such claims based upon breach or default by Lender or gross negligence or
willful misconduct of Lender.

 

Lender shall have the sole and complete control of the defense of any such
claims.  Lender is hereby authorized to settle or otherwise compromise any such
claims as Lender in good faith determines shall be in its best interests.

 

9.13                           Environmental Indemnification

 

Borrower shall indemnify Lender for any and all claims and liabilities, and for
damages which may be awarded or incurred by Lender, and for all reasonable
attorney fees, legal expenses, and other out-of-pocket expenses arising from or
related in any manner, directly or indirectly, to (i) Hazardous Materials
located on, in, or under the Real Property; (ii) any Environmental Condition on,
in, or under the Real Property; (iii) violation of or non-compliance with any
Environmental Health and Safety Law; (iv) any breach or violation of
Section 5.11 Environmental Representations and Warranties and/or
Section 6.15 Environmental Covenants; and/or (v) any activity or omission,
whether occurring on or off the Real Property,

 

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whether prior to or during the term of the loans secured hereby, and whether by
Borrower or any other person or entity, relating to Hazardous Materials or an
Environmental Condition.  The indemnification obligations of Borrower under this
Section shall survive any reconveyance, release, or foreclosure of the Real
Property, any transfer in lieu of foreclosure, and satisfaction of the
obligations secured hereby.

 

Lender shall have the sole and complete control of the defense of any such
claims.  Lender is hereby authorized to settle or otherwise compromise any such
claims as Lender in good faith determines shall be in its best interests.

 

9.14                           Interest on Expenses and Indemnification,
Collateral, Order of Application

 

All expenses, out-of-pocket costs, attorneys fees and legal expenses, amounts
advanced in performance of obligations of Borrower, and indemnification amounts
owing by Borrower to Lender under or pursuant to this Loan Agreement, the
Promissory Note, and/or any Security Documents shall be due and payable upon
demand.  If not paid upon demand, all such obligations shall bear interest at
the default rate provided in the Promissory Note from the date of disbursement
until paid to Lender, both before and after judgment.  Lender is authorized to
disburse funds under the Promissory Note for payment of all such obligations.

 

Payment of all such obligations shall be secured by the Collateral and by the
Security Documents.

 

All payments and recoveries shall be applied to payment of the foregoing
obligations, the Promissory Note, and all other amounts owing to Lender by
Borrower in such order and priority as determined by Lender.  Unless provided
otherwise in the Promissory Note, payments on the Promissory Note shall be
applied first to accrued interest and the remainder, if any, to principal.

 

9.15                           Limitation of Consequential Damages

 

Except for acts by Lender of gross negligence or willful misconduct, Lender and
its officers, directors, employees, representatives, agents, and attorneys,
shall not be liable to Borrower for consequential damages arising from or
relating to any breach of contract, tort, or other wrong in connection with the
negotiation, documentation, administration or collection of the Loan.

 

9.16                           Waiver and Release of Claims

 

Borrower (i) represents that it has no defenses to or setoffs against any
indebtedness or other obligations owing to Lender or its affiliates (the
“Obligations”), nor claims against Lender or its affiliates for any matter
whatsoever, related or unrelated to the Obligations, and (ii) releases Lender
and its affiliates from all claims, causes of action, and costs, in law or
equity, existing as of the date of this Loan Agreement, which Borrower has or
may have by reason of any matter of any conceivable kind or character
whatsoever, related or unrelated to the Obligations, including the subject
matter of this Loan Agreement.  This provision shall not apply

 

36

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to claims for performance of express contractual obligations owing to Borrower
by Lender or its affiliates.

 

9.17                           Revival Clause

 

If the incurring of any debt by Borrower or the payment of any money or transfer
of property to Lender by or on behalf of Borrower should for any reason
subsequently be determined to be “voidable” or “avoidable” in whole or in part
within the meaning of any state or federal law (collectively “voidable
transfers”), including, without limitation, fraudulent conveyances or
preferential transfers under the United States Bankruptcy Code or any other
federal or state law, and Lender is required to repay or restore any voidable
transfers or the amount or any portion thereof, or upon the advice of Lender’s
counsel is advised to do so, then, as to any such amount or property repaid or
restored, including all reasonable costs, expenses, and attorneys fees of Lender
related thereto, the liability of Borrower shall automatically be revived,
reinstated and restored and shall exist as though the voidable transfers had
never been made.

 

9.18                           Arbitration

 

ARBITRATION DISCLOSURES:

 

1.                                       ARBITRATION IS FINAL AND BINDING ON THE
PARTIES AND SUBJECT TO ONLY VERY LIMITED REVIEW BY A COURT.

 

2.                                       IN ARBITRATION THE PARTIES ARE WAIVING
THEIR RIGHT TO LITIGATE IN COURT, INCLUDING THEIR RIGHT TO A JURY TRIAL.

 

3.                                       DISCOVERY IN ARBITRATION IS MORE
LIMITED THAN DISCOVERY IN COURT.

 

4.                                       ARBITRATORS ARE NOT REQUIRED TO INCLUDE
FACTUAL FINDINGS OR LEGAL REASONING IN THEIR AWARDS.  THE RIGHT TO APPEAL OR TO
SEEK MODIFICATION OF ARBITRATORS’ RULINGS IS VERY LIMITED.

 

5.                                       A PANEL OF ARBITRATORS MIGHT INCLUDE AN
ARBITRATOR WHO IS OR WAS AFFILIATED WITH THE BANKING INDUSTRY.

 

6.                                       IF YOU HAVE QUESTIONS ABOUT
ARBITRATION, CONSULT YOUR ATTORNEY OR THE AMERICAN ARBITRATION ASSOCIATION.

 

a.                                       Any claim or controversy (“Dispute”)
between or among the parties and their employees, agents, affiliates, and
assigns, including, but not limited to, Disputes arising out of or relating to
the Loan, the Collateral, the Loan Documents, this arbitration provision
(“arbitration clause”), or any related agreements or instruments relating hereto
or delivered in connection herewith (“Related Agreements”), and including but
not limited to a Dispute based on or arising from an alleged tort, shall at the
request of any

 

37

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party be resolved by binding arbitration in accordance with the applicable
arbitration rules of the American Arbitration Association (the
“Administrator”).  The provisions of this arbitration clause shall survive any
termination, amendment, or expiration of this Loan Agreement or Related
Agreements.  The provisions of this arbitration clause shall supersede any prior
arbitration agreement between or among the parties.

 

b.                                      The arbitration proceedings shall be
conducted in a city mutually agreed by the parties.  Absent such an agreement,
arbitration will be conducted in Salt Lake City, Utah or such other place as may
be determined by the Administrator.  The Administrator and the arbitrator(s)
shall have the authority to the extent practicable to take any action to require
the arbitration proceeding to be completed and the arbitrator(s)’ award issued
within one hundred fifty (150) days of the filing of the Dispute with the
Administrator.  The arbitrator(s) shall have the authority to impose sanctions
on any party that fails to comply with time periods imposed by the Administrator
or the arbitrator(s), including the sanction of summarily dismissing any Dispute
or defense with prejudice.  The arbitrator(s) shall have the authority to
resolve any Dispute regarding the terms of this Loan Agreement, this arbitration
clause, or Related Agreements, including any claim or controversy regarding the
arbitrability of any Dispute.  All limitations periods applicable to any Dispute
or defense, whether by statute or agreement, shall apply to any arbitration
proceeding hereunder and the arbitrator(s) shall have the authority to decide
whether any Dispute or defense is barred by a limitations period and, if so, to
summarily enter an award dismissing any Dispute or defense on that basis.  The
doctrines of compulsory counterclaim, res judicata, and collateral estoppel
shall apply to any arbitration proceeding hereunder so that a party must state
as a counterclaim in the arbitration proceeding any claim or controversy which
arises out of the transaction or occurrence that is the subject matter of the
Dispute.  The arbitrator(s) may in the arbitrator(s)’ discretion and at the
request of any party:  (i) consolidate in a single arbitration proceeding any
other claim arising out of the same transaction involving another party that is
substantially related to the Dispute where that other party to that transaction
that is bound by an arbitration clause with Lender, such as borrowers,
guarantors, sureties, and owners of collateral and (ii) consolidate or
administer multiple arbitration claims or controversies as a class action in
accordance with the provisions of Rule 23 of the Federal Rules of Civil
Procedure.

 

c.                                       The arbitrator(s) shall be selected in
accordance with the rules of the Administrator from panels maintained by the
Administrator.  A single arbitrator shall have expertise in the subject matter
of the Dispute.  Where three arbitrators conduct an arbitration proceeding, the
Dispute shall be decided by a majority vote of the three arbitrators, at least
one of whom must have expertise in the subject matter of the Dispute and at
least one of whom must be a practicing attorney.  The arbitrator(s) shall award
to the prevailing party recovery of all costs and fees (including attorneys’
fees and costs, arbitration administration fees and costs, and arbitrator(s)’
fees).  The arbitrator(s), either during the pendency of the arbitration
proceeding or as part of the arbitration award, also may grant provisional or
ancillary remedies including but not limited to an award of injunctive relief,
foreclosure, sequestration, attachment, replevin, garnishment, or the
appointment of a receiver.

 

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d.                                      Judgment upon an arbitration award may
be entered in any court having jurisdiction, subject to the following
limitation:   the arbitration award is binding upon the parties only if the
amount does not exceed four million dollars ($4,000,000.00); if the award
exceeds that limit, any party may demand the right to a court trial.  Such a
demand must be filed with the Administrator within thirty (30) days following
the date of the arbitration award; if such a demand is not made within that time
period, the amount of the arbitration award shall be binding.  The computation
of the total amount of an arbitration award shall include amounts awarded for
attorneys’ fees and costs, arbitration administration fees and costs, and
arbitrator(s)’ fees.

 

e.                                       No provision of this arbitration
clause, nor the exercise of any rights hereunder, shall limit the right of any
party to: (i) judicially or non-judicially foreclose against any real or
personal property collateral or other security; (ii) exercise self-help
remedies, including but not limited to repossession and setoff rights; or (iii)
obtain from a court having jurisdiction thereover any provisional or ancillary
remedies including but not limited to injunctive relief, foreclosure,
sequestration, attachment, replevin, garnishment, or the appointment of a
receiver.  Such rights can be exercised at any time, before or after initiation
of an arbitration proceeding, except to the extent such action is contrary to
the arbitration award.  The exercise of such rights shall not constitute a
waiver of the right to submit any Dispute to arbitration, and any claim or
controversy related to the exercise of such rights shall be a Dispute to be
resolved under the provisions of this arbitration clause.  Any party may
initiate arbitration with the Administrator.  If any party desires to arbitrate
a Dispute asserted against such party in a complaint, counterclaim, cross-claim,
or third-party complaint thereto, or in an answer or other reply to any such
pleading, such party must make an appropriate motion to the trial court seeking
to compel arbitration, which motion must be filed with the court within
forty-five (45) days of service of the pleading, or amendment thereto, setting
forth such Dispute.  If arbitration is compelled after commencement of
litigation of a Dispute, the party obtaining an order compelling arbitration
shall commence arbitration and pay the Administrator’s filing fees and costs
within forty-five (45) days of entry of such order.

 

f.                                         Notwithstanding the applicability of
any other law to this Loan Agreement, the arbitration clause, or Related
Agreements between or among the parties, the Federal Arbitration Act, 9 U.S.C.
§ 1 et. seq., shall apply to the construction and interpretation of this
arbitration clause.  If any provision of this arbitration clause should be
determined to be unenforceable, all other provisions of this arbitration clause
shall remain in full force and effect.

 

9.19                           Consent to Utah Jurisdiction and Exclusive
Jurisdiction of Utah Courts

 

Borrower acknowledges that by execution and delivery of the Loan Documents
Borrower has transacted business in the State of Utah and Borrower voluntarily
submits to, consents to, and waives any defense to the jurisdiction of courts
located in the State of Utah as to all matters relating to or arising from the
Loan Documents and/or the transactions contemplated thereby.  EXCEPT AS
EXPRESSLY AGREED IN WRITING BY LENDER AND EXCEPT AS

 

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PROVIDED IN THE ARBITRATION PROVISIONS ABOVE, THE STATE AND FEDERAL COURTS
LOCATED IN THE STATE OF UTAH SHALL HAVE SOLE AND EXCLUSIVE JURISDICTION OF ANY
AND ALL CLAIMS, DISPUTES, AND CONTROVERSIES, ARISING UNDER OR RELATING TO THE
LOAN DOCUMENTS AND/OR THE TRANSACTIONS CONTEMPLATED THEREBY. NO LAWSUIT,
PROCEEDING, OR ANY OTHER ACTION RELATING TO OR ARISING UNDER THE LOAN DOCUMENTS
AND/OR THE TRANSACTIONS CONTEMPLATED THEREBY MAY BE COMMENCED OR PROSECUTED IN
ANY OTHER FORUM EXCEPT AS EXPRESSLY AGREED IN WRITING BY LENDER.

 

9.20                           Notices

 

All notices or demands by any party to this Loan Agreement shall, except as
otherwise provided herein, be in writing and may be sent by certified mail,
return receipt requested.  Notices so mailed shall be deemed received when
deposited in a United States post office box, postage prepaid, properly
addressed to Borrower or Lender at the mailing addresses stated herein or to
such other addresses as Borrower or Lender may from time to time specify in
writing.  Any notice so addressed and otherwise delivered shall be deemed to be
given when actually received by the addressee.

 

Mailing addresses:

 

Lender:

 

Zions First National Bank

Commercial Banking Division

UT KC15 0321

10 E. South Temple, Suite 1500

Salt Lake City, Utah  84133

Attention:  Jim C. Stanchfield, Vice President

 

With a copy to:

 

Snell & Wilmer, L.L.P.

Gateway Tower West

15 West South Temple, Suite 1200

Salt Lake City, Utah 84101

Attention:  John A. Beckstead

 

Borrower:

 

1-800 CONTACTS, INC.

66 E. Wadsworth Park Drive

Draper, Utah 84020

Attention:  Brian W. Bethers, President

 

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with a copy to:

 

1-800 CONTACTS, INC.

66 E. Wadsworth Park Drive

Draper, Utah 84020

Attention:  Joe Zeidner, Corporate Counsel

 

9.21                           Duplicate Originals; Counterpart Execution; Fax
Delivery

 

Two or more duplicate originals of the Loan Documents may be signed by the
parties, each duplicate of which shall be an original but all of which together
shall constitute one and the same instrument.

 

This Loan Agreement may be executed in several counterparts, without the
requirement that all parties sign each counterpart.  Each of such counterparts
shall be an original, but all counterparts together shall constitute one and the
same instrument.

 

Any party may deliver this executed Loan Agreement by sending its signature page
to this Loan Agreement to Lender or Lender’s counsel by facsimile transmission
(fax).  Such delivery shall be binding and effective the same as if the original
executed document had been delivered; provided that Lender may elect to require
delivery of the original executed signature of Borrower in the presence of
Lender or its representative as a condition to funding.

 

9.22                           Disclosure of Financial and Other Information

 

Borrower hereby consents to Lender disclosing to any other lender who may
participate in the Loan any and all information, knowledge, reports, and
records, including, without limitation, financial statements, relating in any
manner whatsoever to the Loan and Borrower.

 

9.23                           Integrated Agreement and Subsequent Amendment

 

The Loan Documents constitute the entire agreement between Lender and Borrower,
and may not be altered or amended except by written agreement signed by Lender
and Borrower.  PURSUANT TO UTAH CODE SECTION 25-5-4, BORROWER IS NOTIFIED THAT
THESE AGREEMENTS ARE A FINAL EXPRESSION OF THE AGREEMENT BETWEEN LENDER AND
BORROWER AND THESE AGREEMENTS MAY NOT BE CONTRADICTED BY EVIDENCE OF ANY ALLEGED
ORAL AGREEMENT.

 

All prior and contemporaneous agreements, arrangements and understandings
between the parties hereto as to the subject matter hereof are, except as
otherwise expressly provided herein, rescinded.

 

Effective Date: February 27, 2004

 

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Lender:

 

 

 

Zions First National Bank

 

 

 

 

 

By:

 

 

 

Jim C. Stanchfield

 

 

Vice President

 

 

 

Borrower:

 

 

 

1-800 CONTACTS, INC.

 

 

 

 

 

By:

 

 

 

Robert G. Hunter

 

 

Vice President of Finance and Treasurer

 

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EXHIBIT A

 

PROMISSORY NOTE

(REDUCING REVOLVING LINE OF CREDIT)

 

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EXHIBIT B

 

FORM OF GENERAL RELEASE

 

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EXHIBIT C

 

LIST OF ORGANIZATIONAL DOCUMENTS OF SUBSIDIARIES

 

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EXHIBIT D

 

SCHEDULE OF EXISTING THIRD PARTY DEBT AND
COLLATERAL OF BORROWER AND SUBSIDIARIES

 

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EXHIBIT E

 

FORM OF AMENDMENT TO SUBORDINATION AGREEMENT

 

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EXHIBIT F

 

FORM OF OPINION OF COUNSEL FOR FOREIGN SUBSIDIARIES

 

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