Document:

Exhibit 10.9

 

 

EMPLOYMENT AGREEMENT

 

THIS EMPLOYMENT AGREEMENT
(this “Agreement”)
is made and entered into on the 4th day of May, 2002 effective as of
the Effective Date (as defined below), by and between Igel Acquisition Co. Pte.
Ltd., a Singapore corporation located at 139 Joo Seng Road, #06-01,ATD Centre,
Singapore 368362 (the “Company”), and STEPHEN D. NEWMAN, the
undersigned individual (“Employee”).

 

RECITALS

 

A.                                   1-800 Contacts, Inc., a Delaware corporation
and parent of the Company (“Parent”), owns all of the shares of the
Company.

 

B.                                     The Company has been formed to engage in the
business of developing, manufacturing and marketing contact lenses using
certain assets acquired from Igel VisionCare Pte. Ltd. (“IVC”) and certain proprietary
technology of Employee embodied in certain patent applications and patents
issued thereon acquired by the Company pursuant to an assignment agreement
dated the date of this Agreement made between the Company and Employee (the “Assignment
Agreement”).

 

C.                                     The Company desires to employ Employee, and
Employee desires to be employed by the Company, subject to the terms and
conditions hereinafter set forth.

 

D.                                    The parties hereto agree that this Agreement
shall take effect from the date of closing (the “Effective Date”) under the
Asset Purchase Agreement dated the date of this Agreement made by and among
Employee, the Company, IVC, Igel C.M. Laboratory Pte Ltd, International Vision
Laboratories Pte Ltd and Sinduchajana Sulistyo (the “Asset Purchase Agreement”).

 

AGREEMENT

 

NOW, THEREFORE, in
consideration of the mutual agreements herein contained, the parties hereby
agree as follows:

 

GENERAL PROVISIONS

 

1.                                       Employment Term.

 

The Company hereby employs
Employee and Employee hereby agrees to serve the Company as its President and Chief
Technology Officer. The initial term of this Agreement shall, unless sooner
terminated pursuant to Sections 4 or 5 below, be five years from the Effective
Date (the “Initial Term”).
This Agreement may be renewed for a further term of one year upon expiration of
the Initial Term upon written agreement of both parties and thereafter, upon
written agreement of both parties, for further terms of one year each upon the
expiry of each preceding one year period (any of such renewed one year terms
shall be referred to as a

 

 

“Renewal Term”
and the Initial Term and any Renewal Terms shall be collectively referred to as
the “Term”).
If, however, either or both Employee and the Company fail to agree upon one or
more Renewal Terms, this Agreement shall terminate on the last day of the
Initial Term or the last day of any Renewal Term (as the case may be);
provided, however, if Employee remains in the Company’s employ in any capacity
whatsoever following any such last day, the term of this Agreement shall be extended
on a month-to-month basis until it is terminated by either the Company or
Employee with not less than one month’s prior written notice to the other.

 

2.                                       Employee’s Duties.

 

(a)                                  Position.
Employee shall act as President and Chief Technology officer of the Company and
shall perform the duties and responsibilities as may from time to time be
reasonably requested by the Chairman of the Company and the Board of Directors
of the Company (the “Board”), including the duties specified in Exhibit A
hereto. Employee shall diligently and faithfully execute such duties and
responsibilities, and shall report directly to the Chairman of the Company and
the Board.

 

(b)                                 Policies.
Employee further agrees to abide by any policies and procedures of the Company
that may be set forth in handbooks, manuals and other materials provided or
developed by the Company during the Term of this Agreement, as amended from
time to time by the Company at its discretion. In the event of any conflict or
inconsistency between this Agreement and any matter set out in such handbooks,
manuals and other materials, the terms of this Agreement shall prevail. There
is not and there will not be any collective agreement applicable to Employee’s
employment hereunder.

 

(c)                                  Time and Loyalty. Subject to Section 2(d) below, Employee shall devote all of his
working hours and his best efforts to the performance of his duties to the
Company during the Term of this Agreement. Employee shall also act with
complete loyalty to the Company and, without limiting the generality of the
foregoing, shall not engage in any activity or conduct prohibited by Sections 9
through 13 below during the Term of this Agreement.

 

(d)                                 Permitted Activities.  Notwithstanding the
provisions of Section 2(c) above, the Company agrees that Employee shall
be entitled to continue fulfilling his existing obligations under existing
license agreements dated 4 August 1998 and 1 August 1998 entered into
by Fysh Pty Ltd (“Fysh”) and Dugmont Pty Ltd. (“Dugmont”)
respectively and attached in Exhibit C hereto, prior to the Effective Date
specifically in respect of certain patens relating to toric contact lenses
referred to in the said existing license agreements developed by Employee and
that Employee shall be entitled from time to time to provide consulting
services to Fysh, Dugmont and/or Donald Bruce Noack (“DBN”) in connection with the
conception and development of products based on such patents (such agreements
and arrangements with Fysh, Dugmont DBN and the licensees under such license
agreements are hereinafter referred to as the “Toric Lens

 

 

Consulting and License Arrangements”), provided that such activities do not
unreasonably interfere or conflict with Employee’s duties and obligations under
this Agreement.

 

(e)                                  Product Development. Employee shall devote his best efforts to the development, design and
manufacture of contact lenses and related products, and without. limiting the
generality of the foregoing, Employee may be required by the Company to
conceive, design or develop any toric lenses based on the patents licensed by
Fysh to the Company pursuant to a License Agreement dated the date of this
Agreement made between Fysh and the Company. Employee shall not be required by
the Company to conceive, design or develop any toric contact lenses that are or
may be construed as being based upon, utilizing, copying or infringing on any
patent, design, know-how, technology, method and or process underlying any
toric contact lenses conceived, designed and/or developed by Fysh or DBN after
the date of this Agreement.

 

(f)                                    Residency Employment Pass. During the Term, Employee shall secure and
maintain an employment pass issued by the Ministry of Manpower of Singapore to
legally perform his duties under this Agreement and the Company shall execute
such documents and provide all necessary assistance as Employee may reasonably
require for securing and maintaining such employment pass.

 

3.                                       Compensation.

 

(a)                                  Base Salary.
As compensation for services rendered under this Agreement Employee shall be
entitled to receive from the Company an annual base salary in the amount of
225,000 Singapore Dollars (“S$”) for each 12-month period of this Agreement
commencing from the Effective Date; provided, however, that such amount shall
be paid in twenty-four (24) equal payments in each 12-month period, payable on
the 1st and 15th of each month. Employee shall be entitled to receive
increments to his annual base salary consistent with the policy of the Company
prevailing from time to time with regard to executive salary increments.

 

(b)                                 Stock Options.
In addition to the compensation provided for in Section 3(a) above and as
additional consideration for the covenant not to compete and not to solicit set
out in Sections 12 and 13 below, Employee shall be granted options to purchase
shares of Parent’s US$0.01 par value common stock, according to the price and
vesting schedule set forth in Exhibit B hereto and pursuant to the terms
and conditions set forth in Exhibit B hereto. Employee shall also be eligible
to participate in Parent’s stock option plan, and any other equity
participation, bonus or incentive plan offered or provided to other executives
of the Company.

 

 

(c)                                  Medical Benefits

 

(i)                                     Employee and his immediate family will be
extended medical benefits consistent with the policy of the Company prevailing
from time to time and which is offered or provided to executives of the
Company.

 

(ii)                                  Employee and his immediate family will be
entitled to participate in the appropriate insurance scheme that may be
implemented by the Company whereby the Company contributes for the provision of
death and disability insurance to its executives and members of their families,
consistent with the policy of the Company prevailing from time to time.

 

(d)                                 Vacation.
Employee shall be entitled to yearly paid vacation leave in accordance with
practices and policies established by the Company provided that Employee shall
in any event be entitled to four weeks’ paid vacation leave each year and
Employee shall be entitled at the end of each year to carry over up to one
week’s vacation leave to the next year, provided that any unused vacation leave
will be forfeited without payment.

 

(e)                                  Retirement Benefits. Employee shall be entitled to retirement benefits in accordance with
practices and policies established by the Company from time to time.

 

(f)                                    Reimbursed Expenses. Employee shall be reimbursed all approved traveling expenses, hotel
expenses and other out-of-pocket expenses reasonably incurred by Employee in or
about the discharge of his duties hereunder, in accordance with the practices
and policies established by the Company.

 

(g)                                 Other Benefits. Employee shall also be entitled to all other benefits outlined in the
Company’s benefits policy as may be implemented from time to time. The Company
reserves the right to amend, modify or revoke any and all benefits referred to
in subsections (c) through (g) of Section 3 of this Agreement or any
policies of the Company.

 

(h)                                 Taxes. All
taxes on salaries, allowances and other payments made to Employee shall be
borne by Employee in accordance with applicable laws. Employee agrees and
acknowledges that the Company has the right to deduct and/or to withhold such
salaries or monies notwithstanding that the same may be due to Employee, for
the purpose of (i) making good any sums that Employee may owe to the Company,
(ii) recovering any sums which may have been paid by the Company to Employee in
excess of Employee’s entitlement under the terms of this Agreement, and/or
(iii) complying with applicable laws including (but without limitation to) the
payment of taxes due to the Inland Revenue Department of Singapore in
accordance with the Income Tax Act (Cap. 134, 1996 Ed), and/or such sums to
anyone, as may be required under applicable laws.

 

4.                                       Termination by the Company. Notwithstanding anything to the contrary,
Employee’s employment may be terminated by the Company at any time as provided
in this Section 4.

 

 

(a)                                  Termination with Notice.  The Company my terminate
Employee’s employment at any time by giving Employee a minimum of six month’s
advance written notice and by paying Employee the compensation provided for in
Section 4(c) below.

 

(b)                                 Termination with Cause. The Company may, with cause, terminate Employee’s employment
immediately and without any notice or pay in lieu of notice of such
termination. For purposes of this Section 4(b), “cause” shall mean (i) the
willful and continued failure by Employee to perform his duties of the position
set forth herein or his continued failure to perform duties to the Company as
set forth herein or his continued failure to perform duties reasonably
requested or reasonably prescribed by the Company’s Board of Directors (other
than as a result of Employee’s death, insanity, incapacity or disability), (ii)
Employee engaging in conduct which is materially monetarily injurious to the
Company or any of its affiliates, (iii) gross negligence or willful misconduct
by Employee in the performance of his duties which results in, or causes,
material monetary harm to the Company or any of its affiliates, or (iv)
Employee’s commission of a felony or other civil or criminal offence involving
moral turpitude In the case of subsections (i), (ii) and (iii) above, finding
of “cause” for termination shall be made only after the Company first giving Employee
written notice and a 30 day opportunity to cure together with an opportunity
for Employee, together with counsel (if requested by Employee), to be heard
before the Board. A determination of “cause” by the Board shall be effective
only if agreed upon by a majority of the Directors on the Board, which shall
include at least one Director who is not an employee of the Company or its
affiliates.

 

(c)                                  Compensation.
If Employee’s employment is terminated by the Company without cause or if
Employee terminates his employment for cause pursuant to subsections (i), (ii)
or (iii) of Section 5(b) below, the Company shall pay to Employee:

 

(i)                                     a sum equal to his last drawn monthly salary
multiplied by the number of unexpired months (or part thereof) of the then current
Term together with all other payments to which. Employee is then entitled under
this Agreement, including, without limitation, the aggregate of all
installments of the sum of S$125,000 that remain payable under Section 12
below;

 

(ii)                                  in the case where Employee’s employment is
terminated by the Company without cause pursuant to Section 4(a) above,
the stock options set forth in Exhibit B hereto and any other stock options
granted to Employee by Parent and/or the Company shall, to the extent not
vested immediately prior to the date of such termination, immediately vest and
all such options shall be exercisable in accordance with the terms of the
relevant stock option plan under which such options were granted;

 

(iii)                               in the case where Employee terminates his
employment for cause pursuant to subsections (i), (ii) or (iii) of
Section 5(b) below, all stock options set forth in Exhibit B hereto and
any other stock options granted to  Employee
by Parent or the Company prior to the date of such terminations shall, but only
to the extent such stock options are vested

 

 

on
or prior to the date of such termination, be exercisable in accordance with the
terms of the relevant stock option plan under which such options were granted.
Any unvested stock options as of the date of any such termination shall be
forfeited; and

 

(iv)                              the Company and Employee agree that the
provisions of subsection (iii) above shall also apply if Employee
terminates his employment with notice or if the Company terminates Employee’s
employment for cause pursuant to Section 4(b) above.

 

For
the avoidance of doubt, none of the above compensation will be paid on the
termination of Employee’s employment under any other circumstances whatsoever.

 

(d)                                 Acknowledgement.  Employee understands that other
than as provided in Sections 4(a), 4(b) and 4(c) above, Employee is not
entitled to any additional prior notice of the termination of his employment or
any additional payment of salary, damages or compensation in lieu of notice for
any termination of this Agreement by the Company.

 

5.                                       Termination by Employee.

 

(a)                                  Termination with Notice. Employee may terminate his employment under this Agreement at any
time by giving the Company a minimum of six month’s advance written notice.

 

(b)                                 Termination with Cause. Employee may, with cause, terminate his employment immediately and
without any notice or pay in lieu of notice of such termination. For purposes
of this Section 5(a) above, “cause” shall mean (i) a material and
persistent breach by the Company of its obligations under this Agreement, (ii)
a proceeding has been instituted seeking a declaration that the Company or
Parent is insolvent or seeking arrangement or composition with creditors,
liquidation or the appointment of a trustee, receiver or liquidator or
analogous procedure under any applicable law and such proceedings remain
undismissed and unstayed for a period of 60 days or are being consented to by
the Company or Parent (as the case may be), or (iii) the Company or Parent
ceasing to carry on business. Notwithstanding the foregoing, however, Employee
shall not terminate his employment under subsection (i) above without
first giving the Company or Parent written notice and a 30 day opportunity to
cure.

 

6.                                       Changes in Position and Transfer of Employee. During the Term, Employee shall be assigned
such additional or substitute titles and duties as the Chairman of the Company
and the Board may reasonably assign to him, provided such additional or
substitute titles or duties are commensurate with the level set out initially
in this Agreement and, provided further, that the Company shall not have the
right to transfer Employee to a location outside Singapore and Australia
without Employee’s consent, provided that Employee acknowledges and agrees that
he will be required to travel to the extent necessary for the conduct of the
Company’s business.

 

 

7.                                      Corporate Opportunities. Employee agrees that during the Term he shall promptly disclose and
offer to the Company in writing any opportunities regarding the manufacture or
sale of contact lenses and the contact lens technology and market in general of
which he might become aware during the Term and that he shall refrain from
using any of those opportunities to his personal benefit.

 

8.                                       Definition of Confidential Information. In this Agreement, the term “Confidential
Information” with respect to the Company and its affiliates, or any
third party, shall mean any and all intellectual property (including, but not
limited to, patents, trademarks, trade secrets, copyrights and designs, and all
applications therefore), business information, confidential information and
other information of the Company or Parent or of any third party received or
acquired by the Company, as the case may be. Confidential Information shall include
any and all of the following, which are not intended to be mutually exclusive:

 

(a)                                  technologies, techniques, computer programs,
designs, data, research, testing data and results, books, methods, systems,
formulae, formulations, recipes, compositions, trade secrets, devices,
apparatuses, processes, procedures and records (whether owned by the Company or
Parent or any third party or used under license);

 

(b)                                 the Company’s or Parent’s data base;

 

(c)                                  the Company’s or Parent’s customer lists,
together with telephone numbers, addresses, email addresses and all other
information related to customers;

 

(d)                                 all of the Company’s or Parent’s proprietary
software and other proprietary information and processes necessary to operate
the Company’s web site;

 

(e)                                  business names and telephone numbers of
persons with which the or Parent maintains a business relationship or which are
disclosed to Employee as a result of his employment by the Company;

 

(f)                                    marketing information and methods, including
marketing data, market expansion plans, sales and marketing techniques and the
names, addresses, telephone and telecopier numbers, and the operations, buying
habits and practices of customers, potential customers, distributors,
representatives and brokers;

 

(g)                                 information regarding employees, including
terms and conditions of employment and performance evaluations:

 

(h)                                 information regarding purchasing methods,
sources, including names and identifying and other information regarding
vendors and suppliers, costs of materials, and prices at which materials,
products or services are or have been obtained or sold:

 

 

(i)                                     financial information, financial statements,
forecasts, reports and all other financial information not disseminated to the
public

 

(j)                                     information regarding the Company’s or
Parent’s products and services; and

 

(k)                                  information regarding the Company or Parent
or their respective operations and activities.

 

Confidential Information
shall not include any information:

 

(i)                                     that is in the public domain;

 

(ii)                                  that was not acquired from the Company or
Parent or their affiliates and which Employee lawfully had in his possession
prior to the date of this Agreement; and

 

(iii)                               that, hereafter, through no act or omission
on the part of the Employee, becomes part of the public domain.

 

For
the avoidance of doubt, Confidential Information shall also not include any
information regarding the patent applications and patents and other items of
intellectual property that are the subject of the Toric Lens Consulting and
License Arrangements.

 

9.                                       Duty of Confidentiality.

 

(a)                                  Employee agrees to hold all Confidential
Information of the Company and its affiliates (collectively, the “Group
Companies”), in
strictest confidence unless disclosure or use is required by law or any
governmental authority or regulatory body. During the term of Employee’s
employment hereunder, Employee may have access to and become acquainted with
Confidential Information of third parties (such as suppliers, customers, etc.
of the Group Companies) which is in the Company’s possession and with whom a
Group Company is in a confidential relationship. Employee agrees to also hold
such third parties’ Confidential Information in strictest confidence as if it
were Confidential Information of the Company.

 

(b)                                 During the term of this Agreement and
thereafter, Employee shall not directly or indirectly in any way use (other
than for the Group Companies’ purposes), copy, transfer or disclose any
Confidential Information of the Group Companies or of any third party referred to
in Section 9(a) above, except as required in the performance of Employee’s
duties for the Company, or as specifically authorized by the Chairman of the
Company or the Board.  The parties
acknowledge and agree that, as between them all items of Confidential
Information are important, material and confidential trade secrets of the Group
Companies and affect the successful conduct of the business of the Group
Companies and their goodwill, and that any breach of this Section 9 is a
material breach of this Agreement.

 

 

(c)                                  All files, documents, works and other
materials containing any (i) Confidential Information of any third party
referred to in Section 9(a) above which is in the Company’s possession,
(ii) Confidential Information of the Group Companies, or (iii) information
affecting or relating to the business, services or products of the Group
Companies, which Employee shall prepare, use, possess or control shall be and
remain the sole property of the Group Companies; and with the exception of
ordinary work routinely taken home, shall not be removed from the Company’s
facilities without prior specific authorization of the Chairman of the Company
or the Board.

 

10.                                 Employee’s Duties on Termination.

 

(a)                                  Employee agrees that, upon termination of
this Agreement or upon the request of the Company at any time, Employee shall
immediately return to the company all property of the Group Companies in
Employee’s possession, use or control, including all originals and any and all
copies of any files, documents, works and other materials containing any
Confidential Information of the Group Companies or any third party referred to
in a Section 9(a) above, in whatsoever medium contained.  Employee shall not take with him, or cause
or permit the removal from the Company’s facilities, or any unauthorized
destruction of, any originals or copies of any files, documents, works or other
materials containing any Confidential Information of the Group Companies or any
third party referred to in Section 9(a) above, regardless of the form or
medium in which they are contained.

 

(b)                                 After Employee ceases to be an employee of
the Company, Employee shall not undertake any employment or activity if
Employee has actual knowledge prior to such undertaking that the loyal and
complete fulfillment of the duties of such employment or other activity would
require or would be likely to require Employee to disclose or use any
Confidential Information in breach of Section 9 above.

 

11.                                 Ownership of Inventions.

 

Employee hereby assigns and
transfers to the Company any and all inventions and innovations relating to
contact lenses and related products (whether deemed patentable or not), and/or
any improvements thereof (whether completed or in process) made or discovered
by Employee (or jointly with others) during the Term, and in the course of,
Employee’s employment by the Company and whether or not using any of Company’s
methods processes, know-how, software, hardware, facilities, trade secrets or
Confidential Information (whether made during or after normal office hours, or
at or away from the Company’s facilities) relating to or useful in the business
of the Company, including all rights and interests with respect to any formula,
process, technique, know-how, methodology, apparatus, device, technology, product,
accessory or other item (collectively, “Inventions”) but the Inventions shall
exclude any of the foregoing that is based specifically on the patents relating
to toric contact lenses referred to in the Toric Consulting and License
Arrangements and that arises from Employee’s performance of his obligations
under the Toric Consulting and License Arrangements (whether

 

 

or
not such obligations are in writing and regardless of whether such obligations
are moral or contractual in nature, but only to the extent that such
obligations exist as of the Effective Date). Employee agrees to promptly
disclose to the Company all Inventions. 
Employee agrees to execute any reasonable document prepared by the
Company that is necessary or appropriate to document, perfect or affect the
purposes of this Section 11 or to secure any patent, trademark or
copyright registration or other protection thereof of the Company.

 

12.                                 Non-competition. In consideration of the entry by the Company into this Agreement and
the Company’s undertakings to pay the base salary referred to in
Section 3(a) above and to procure that Parent extends the stock options
referred to in Section 3(b) above and the payment of S$125,000 to
Employee, which payment shall be made in five installments of S$25,000 each at
the beginning of each period of 12 months during the Initial Term, Employee
hereby undertakes that during the Term and for a period of 24 months after the
termination of Employee’s employment, Employee shall not, and shall not attempt
to, directly or indirectly, own an interest in, operate, join, control,
participate in, or be retained as an officer, director, employee, agent,
consultant, independent contractor, partner, shareholder, investor or principal
of, any individual, person or entity engaged in a business where a majority of
the sales of such business are from the development, design manufacture and/or
sale of contact lens products or services similar to or competing with or
likely to compete with those of the Company or Parent (and the development,
design and/or manufacture of which Employee was materially concerned during the
24 month period immediately prior to termination of his employment) in any part
of the territory where the Company or its affiliates is then doing business directly
or indirectly through a subsidiary, joint venture, distributorship or otherwise
(other than as a holder of not more than one percent of the issued shares or
debentures of any company listed on any stock exchange).

 

Notwithstanding
the foregoing, it is agreed that for purposes of this Section 12 and this
Agreement, the following activities shall not be deemed to be a breach of this
Section 12:

 

(a)                                  the performance by Employee of his
obligations pursuant to the Toric Consulting and License Arrangements (whether
or not such obligations are in writing and regardless of whether such
obligations are moral or contractual in nature, but only to the extent such
obligations exist as of the Effective Date);

 

(b)                                 the ownership by Employee of an interest in
IVC;

 

(c)                                  IVC designing, developing, manufacturing or
selling any product or service for sale in Asia (excluding Japan);

 

(d)                                 the design, development, manufacture or sale
by IVC in Europe of contact lenses in vials;

 

(e)                                  the manufacture by IVC of contact lenses by lathing
and the design, development or sale thereof; and

 

 

(f)                                    the exploitation or use by Employee in any
manner of the Flipper Lens Technology and/or the Packaging Technology (as
respectively defined in the Assignment Agreement) and/or the design, development,
manufacture or sale of contact lenses and related products in relation thereto
by or on behalf of Employee in the event that the Flipper Lens Technology
and/or the Packaging Technology is re-assigned by the Company to Employee
pursuant to the Assignment Agreement.

 

For
the avoidance of doubt, Employee shall be in breach of his non-compete
covenants in this Section if Employee’s involvement in IVC extends beyond
an ownership interest in IVC to include performance of any work for, or any
participation in the operations of, IVC or any other form of participation in
IVC unless such performance or participation by Employee takes place after the
termination of Employee’s employment hereunder and is restricted to the
activities permitted in subsections (a) to (f) above in which case Employee
shall not be in breach of his non-compete covenants in this Section 12.

 

The
Company and Employee agree that, in the event of any conflict between the
provisions of this Section 12 and any non-competition covenants given by
Employee under the Asset Purchase Agreement, the provisions of this
Section 12 shall prevail.

 

13.                                 Non-solicitation. For a period of 24 months after the date of termination of this
Agreement Employee shall not, directly or indirectly, do any of the following:

 

(a)                                  solicit, induce or influence (or seek to
induce or influence) any employee of the Company, Parent or their respective
affiliates who is employed by the Company, Parent or their respective
affiliates as at the date of such termination; or

 

(b)                                 solicit any supplier, contractor or customer
of the Company, the Parent or their respective affiliates, who, at any time
during the one year preceding the date of termination, has been a supplier,
contractor or customer of the Company, Parent or their respective affiliates
with whom Employee was directly in contact with during the course of his
employment.

 

The
Company and Employee agree that, in the event of any conflict between the
provisions of this Section 13 and any non-solicitation covenants given by
Employee under the Asset Purchase Agreement, the provisions of this
Section 13 shall prevail.

 

14.                                 Interpretation and Acknowledgement.

 

(a)                             It is the intention of the parties that the
confidentiality, non-competition and non-solicitation covenants contained in
Section 9, 12, and 13 above shall be enforced to the greatest extent (but
to no greater extent) in time, area and degree of participation as permitted by
applicable law.  To this end, the
parties agree that such covenants shall be construed to extend in time and
territory and with respect to degree of participation only so far as it may be
enforced, and that such covenants are to that end hereby declared divisible and
severable since it is a

 

 

purpose
of this Agreement tot govern competition by Employee anywhere in the territory
where the Company, Parent or their affiliates may then be doing business.

 

(b)                            Employee acknowledges that Employee’s
covenants and agreements in the said Section 9, 12, and 13 are reasonable
and are necessary to protect the legitimate interests and Confidential
Information of the Group Companies. 
Employee’s covenants and agreement in the said Sections 9, 12, and 13
shall survive the termination of this Agreement.

 

15.                                 Enforcement.
For any breach of the said Sections 9, 12 and 13, Employee agrees that the
Company shall be entitled to such remedies as are provided under Singapore law,
including, without limitation, equitable remedies.

 

MISCELLANEOUS

 

16.                                 Previous Agreements. This Agreement shall supersede any previous agreements and
understandings between Employee and the Company and/or Parent, including the
Consulting Agreement dated January 31, 2002 between Employee and Parent.
Employee acknowledges that he does not have any claim whatsoever against the
Company or Parent for costs, damages, compensation or otherwise under or in
connection with the said previous agreements and understandings, including the
Consulting Agreement, other than for unpaid fees owing to Employee thereunder
(if any) which shall be deemed to have been terminated by mutual consent on the
Effective Date.

 

17.                                 Entire Agreement. This Agreement (including the recitals set forth at the beginning of
this Agreement and Exhibits A and B attached hereto) and the Assignment
Agreement set forth the entire agreement and understanding between the parties
in respect of Employee’s employment and cannot be modified or altered, nor can
any provision hereof be waived, except in writing signed by the parties or a
duly authorized officer of the parties.

 

18.                                 Interpretation. The section and other headings in this Agreement are for
purposes of reference only and shall not limit, expand, or otherwise affect the
construction of any of the provisions of this Agreement.  Whenever the context requires, the singular
shall include the plural, the plural shall include the singular, and the whole
shall include any part thereof.

 

19.                                 Invalidity of Provision. In case anyone or more of the provisions in
this Agreement. shall, for any reason, be held to be invalid, illegal, or
unenforceable in any respect, such invalid, illegal, or unenforceable
provision(s) shall be curtailed, limited, construed, or eliminated to the
extent necessary to remove such invalidity, illegality, or unenforceability
with respect to the applicable law as it shall then be applied and the other
provisions of this Agreement shall not be affected thereby.

 

20.                                 Assignment.
No party hereto may assign this Agreement without the prior written consent of
the other party provided that the Company may assign this Agreement to any of
its affiliates upon prior written notice to and with consent from, Employee
(which consent shall not be unreasonably withheld).

 

 

21.                                 Binding Effect. This Agreement shall inure to the benefit of and be binding upon
Employee and Employee’s heirs, and legal representatives, and upon the Company
and its successors and assigns.

 

22.                                 Waiver. No
waiver of any provision of this Agreement shall constitute a waiver of any
other provision, whether or not similar, nor shall any waiver constitute a
continuing waiver.

 

23.                                 Notice. Any
notice required or permitted to be given under this Agreement shall be in
writing and shall be sufficient if personally delivered or sent by a reputable
courier service (e.g. Federal Express, DHL, etc.) and addressed, if to
Employee, at Employee’s address in the Company’s records, or if to the Company,
to the Chairman of the Company and the Board at the Company’s Singapore office.
Such notice shall be deemed given when delivered, if delivered personally, or,
if sent by courier, at the earlier of actual receipt or five business days
after delivery to the courier service, addressed as aforesaid.

 

24.                                 Governing Law.
This Agreement shall be governed by and construed in accordance with the laws
of Singapore.

 

25.                                 Jurisdiction.
The parties irrevocably agree that the courts of Singapore are to have
non-exclusive jurisdiction to settle any disputes which may arise out of or in
connection with this Agreement and that, accordingly, any legal action or
proceedings arising out of or in connection with this Agreement may be brought
in those courts and the parties irrevocably submit to the jurisdiction of those
courts.

 

26.                                 Counterparts.
This Agreement may be executed in one or more counterparts, each of which shall
be deemed an original, but all of which together will constitute one and the
same instrument; provided, however, that original signature pages for any
signatures received by’ facsimile shall be delivered to both parties within
five (5) days of transmission.

 

27.                                 Contracts (Rights of Third Parties) Act 2001. A person who is not a party to this
Agreement has no right under the Contracts (Rights of Third Parties) Act 2001
to enforce any term of this Agreement

 

28.                                 Definitions. In this Agreement, the following terms shall have
the following meanings respectively ascribed to them:

 

“affiliates”
means an entity or person controlled by, controlling, or under common control
with, another entity or person;

 

“business day”
means a day (other than a Saturday or Sunday) on which commercial banks are
open for business in Singapore; and

 

 

“control”
(including its correlative meanings, “controlled by”, “controlling” and “under
common control with”) means, respect to a corporation, the right to exercise,
directly or indirectly more than 50 percent of the voting rights attributable
to the shares of such corporation or the possession, directly or indirectly, of
the power to direct or cause the direction of the management or policies of
such corporation.

 

 

IN WITNESS WHEREOF, the parties have executed this Agreement as
of the date set forth above.

 

	
  COMPANY:

  
	
   

  
	
   

  
	
  IGEL Acquisition Co. Pte.
  Ltd.

  
	
   

  
	
   

  	
   

  
	
  Signed By: Jonathan Coon

  
	
  Title: Director

  
	
   

  
	
  EMPLOYEE:

  
	
   

  
	
   

  	
   

  
	
  Stephen D. NewmanExhibit 10.15

 

RESTATED LOAN AGREEMENT

 

Between

 

ZIONS FIRST NATIONAL BANK

Lender

 

and

 

1-800 CONTACTS, INC.

Borrower

 

Effective Date: February 27, 2004

 

 

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

  	
   

  

 

i

 

	
   

  	
  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

  	
   

  

 

ii

 

	
   

  	
  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

  	
   

  

 

iii

 

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.

 

1

 

“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.

 

2

 

“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;

 

3

 

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.

 

4

 

“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,

 

5

 

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

 

6

 

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%).

 

7

 

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.

 

8

 

“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

 

9

 

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.

 

10

 

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

 

11

 

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.

 

12

 

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.

 

13

 

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

 

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.

 

15

 

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

 

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

 

17

 

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

 

18

 

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

 

19

 

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.

 

20

 

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

 

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.

 

22

 

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

 

23

 

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.

 

24

 

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.

 

25

 

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.

 

26

 

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

 

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

 

28

 

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

 

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

 

30

 

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.

 

31

 

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,

 

32

 

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

 

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.

 

34

 

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,

 

35

 

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

 

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

 

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.

 

38

 

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

 

39

 

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

 

40

 

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

 

41

 

	
   

  	
  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

  

 

42

 

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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