Document:

Inducement Award Agreement

  
 Exhibit 10.5

 Execution Copy 
 ASCENT
SOLAR TECHNOLOGIES, INC. 
 INDUCEMENT AWARD AGREEMENT 
 This INDUCEMENT AWARD AGREEMENT (the “Award Agreement”) is made as of August 3, 2009 by and between ASCENT SOLAR
TECHNOLOGIES, INC., a Delaware corporation (the “Company”), and Farhad Moghadam (the “Optionee”). 
 Subject to the Optionee’s Amended and Restated Executive Employment Agreement dated as of August 3, 2009 (the “Employment Agreement”), the parties agree as follows: 
 PART I: NOTICE OF GRANT 
 1. Description
of Stock Option Grant. Farhad Moghadam, the undersigned Optionee, has been granted an option the (“Option”) to purchase common stock of the Company (the “Shares”). The Option is not subject to any existing
equity incentive plan of the Company and is intended to qualify as an “inducement award” under Nasdaq Rule 5635(c)(4). Material terms of the Option include: 
  

			
	Date of Grant:	  	August 3, 2009
	Vesting Commencement Date: (same as Date of Grant, if left blank)	  	August 3, 2009
		
	Exercise Price per Share:	  	$         (closing price on Date of Grant)
		
	Total Number of Shares:	  	200,000
		
	Type of Option:	  	Nonstatutory Stock Option
		
	 Expiration Date:
 (10 years from Date of Grant, if left
blank)
	  	

  

			
	Vesting Schedule:	  	
		
	August 3, 2010	  	25%
		
	August 3, 2011	  	25%
		
	August 3, 2012	  	25%
		
	August 3, 2013	  	25%

 2. Definitions. The following definitions shall apply in this Award Agreement:

  

	 	(a)	“Change of Control” is defined in the Employment Agreement. 

  

	 	(b)	“Cause” is defined in the Employment Agreement. 

  

	 	(c)	“Permanent Disability” is defined in the Employment Agreement. 

  

					
	 INDUCEMENT AWARD AGREEMENT
 FARHAD MOGHADAM

	  		  	

 Execution Copy 
  
 3. Termination and Material Events. Notwithstanding anything elsewhere in this Award Agreement to the contrary: 
 (a) Termination Period. Except as set forth below, this Option shall be exercisable for ninety (90) days after Optionee ceases to be a
director, officer, employee or consultant of the Company (or a parent or subsidiary of the Company); provided, however, that in no event may this Option be exercised after the Expiration Date set forth in the Notice of Grant. 
 (b) Termination Without Cause. If the Optionee is terminated by the Company without Cause pursuant to Section 5(b) of the Employment
Agreement, and the Optionee signs and does not revoke a release of claims with the Company (in a form reasonably acceptable to the Company and Optionee) and provided that such release of claims becomes effective no later than sixty (60) days
following the termination date or such earlier date required by the release agreement, the Company will cause any part of the Option which would vest based on time during that the twelve month period after the date of termination to vest and become
exercisable on the termination date. 
 (c) Disability of Optionee. If Optionee suffers a Permanent Disability and the Employment
Agreement terminates as described in Section 5(c) of the Employment Agreement, the Optionee may, to the extent the Option is vested on the date of termination, exercise the Option within one (1) year of termination (but in no event later
than the expiration of the term of such Option as set forth in the Award Agreement). If, after termination, the Optionee does not exercise his or her Option within the time specified herein, the Option shall terminate. 
 (d) Death of Optionee. If Optionee dies and the Employment Agreement terminates as described in Section 5(d) of the Employment
Agreement, the Option may, to the extent that the Option is vested on the date of death, be exercised within one (1) year following Optionee’s death (but in no event later than the expiration of the term of such Option as set forth in the
Notice of Grant) by the Optionee’s designated beneficiary, provided such beneficiary has been designated prior to Optionee’s death in a form acceptable to Company. If no such beneficiary has been designated by the Optionee, then such
Option may be exercised by the personal representative of the Optionee’s estate or by the person(s) to whom the Option is transferred pursuant to the Optionee’s will or in accordance with the laws of descent and distribution. If the Option
is not so exercised within the time specified herein, the Option shall terminate. 
  

	 	(e)	Change of Control. 

 (i) Acceleration of
Vesting. Upon occurrence of a Change of Control, any part of the Option outstanding and held by the Optionee as of the date of such termination will vest in full as to 100% of the unvested portion of the award. 
 (ii) Limitation on Payments. Notwithstanding anything herein to the contrary, in the event of a Change of Control, in no event shall the Optionee
be entitled to receive any amount which would result in the imposition of tax imposed by Section 4999 of the Internal Revenue Code of 1986, as amended, or any similar state tax (collectively, the “Excise Tax”). In such a case,
any payment due to the Optionee shall automatically be reduced to the maximum amount that may be received by the Optionee that will not trigger any Excise Tax. 
  

	 	(f)	Adjustments Upon Changes in Capitalization or Dissolution. 

 (i) Changes in Capitalization. Subject to any required action by the stockholders of the Company, the number of shares of common stock covered by the Option, as well as the price per share of common stock covered by each such
Option, shall be 

  

					
	 INDUCEMENT AWARD AGREEMENT
 FARHAD MOGHADAM

	  		  	

 Execution Copy 
  
 
proportionately adjusted for any increase or decrease in the number of issued shares of common stock of the Company resulting from a stock split, reverse
stock split, stock dividend, combination or reclassification of the common stock, or any other increase or decrease in the number of issued shares of common stock effected without receipt of consideration by the Company; provided, however, that
conversion of any convertible securities of the Company shall not be deemed to have been “effected without receipt of consideration.” Such adjustment shall be made by the Company’s board of directors (or a committee thereof), whose
determination in that respect shall be final, binding and conclusive. Except as expressly provided herein, no issuance by the Company of shares of stock of any class, or securities convertible into shares of stock of any class, shall affect, and no
adjustment by reason thereof shall be made with respect to, the number or price of shares of common stock subject to the Option. 
 (ii)
Dissolution or Liquidation. In the event of the proposed dissolution or liquidation of the Company, the Company shall notify the Optionee as soon as practicable prior to the effective date of such proposed transaction. The Company in its
sole discretion may provide for the Optionee to have the right to exercise his Option until ten (10) days prior to such transaction as to up to all of the Shares covered thereby, including Shares as to which the Option would not otherwise be
exercisable. In addition, the Company may provide that any Company repurchase option applicable to any Shares purchased upon exercise of an Option shall lapse as to all such Shares, provided the proposed dissolution or liquidation takes place
at the time and in the manner contemplated. To the extent it has not been previously exercised, an Option will terminate immediately prior to the consummation of such proposed action. 
 PART II: AGREEMENT 
 1. Grant of Option. The Company hereby grants to the
Optionee an Option to purchase the number of Shares set forth in the Notice of Grant, at the exercise price per Share set forth in the Notice of Grant (the “Exercise Price”), subject to the terms of the Employment Agreement, which
are incorporated by reference herein. 
 2. Exercise of Option. 
 (a) Right to Exercise. This Option shall be exercisable during its term in accordance with the Vesting Schedule set out in the Notice of Grant and
with the applicable provisions of this Award Agreement. 
 (b) Method of Exercise. This Option shall be exercisable by delivery of an
exercise notice in the form attached as Exhibit A (the “Exercise Notice”) which shall state the election to exercise the Option, the number of Shares with respect to which the Option is being exercised, and such other
representations and agreements as may be required by the Company. The Exercise Notice shall be accompanied by payment of the aggregate Exercise Price as to all exercised Shares. This Option shall be deemed to be exercised upon receipt by the Company
of such fully executed Exercise Notice accompanied by the aggregate Exercise Price. 
 No Shares shall be issued pursuant to the exercise of
an Option unless such issuance and such exercise complies with applicable laws and regulations. Assuming such compliance, for income tax purposes the Shares shall be considered transferred to the Optionee on the date on which the Option is exercised
with respect to such Shares. 
  

					
	 INDUCEMENT AWARD AGREEMENT
 FARHAD MOGHADAM

	  		  	

 Execution Copy 
  
 3. Method of Payment. Payment of the aggregate Exercise Price shall be by any of the following, or a combination thereof, at the election of
the Optionee: 
 (a) cash or check; 
 (b) surrender of other Shares which, (i) in the case of Shares acquired from the Company, either directly or indirectly, have been
owned by the Optionee for more than six (6) months on the date of surrender, and (ii) have a Fair Market Value on the date of surrender equal to the aggregate Exercise Price of the exercised Shares; or 
 (c) any other form or manner approved by the Compensation Committee of the Company’s board of directors. 
 4. Restrictions on Exercise. This Option may not be exercised if the issuance of such Shares upon such exercise or the method of payment of
consideration for such shares would constitute a violation of any applicable law or regulation. 
 5. Non-Transferability of
Option. This Option may not be transferred in any manner otherwise than by will or by the laws of descent or distribution and may be exercised during the lifetime of Optionee only by Optionee. The terms of this Award Agreement shall
be binding upon the executors, administrators, heirs, successors and assigns of the Optionee. 
 6. Term of Option. This Option
may be exercised only within the term set out in the Notice of Grant, and may be exercised during such term only in accordance with the terms of this Award Agreement. 
 7. Tax Obligations. Optionee acknowledges and agrees that Optionee is solely responsible for the satisfaction of all federal, state, local and foreign income and other tax arising from or applicable to
the Option grant, vesting or exercise and the acquisition or sale of the Shares. Optionee agrees that Optionee shall indemnify the Company for any liability, including attorneys’ fees and expenses, accrued by the Company as a result of the
Optionee’s failure to satisfy those taxes. 
 8. Entire Agreement; Governing Law. This Award Agreement and the Employment
Agreement constitute the entire agreement of the parties with respect to the subject matter hereof and supersede in their entirety all prior undertakings and agreements of the Company and Optionee with respect to the subject matter hereof, and may
not be modified adversely to the Optionee’s interest except by means of a writing signed by the Company and Optionee. This Agreement is governed by the internal substantive laws but not the choice of law rules of Colorado. 
 9. No Guarantee of Continued Service. OPTIONEE ACKNOWLEDGES AND AGREES THAT THE VESTING OF SHARES PURSUANT TO THE VESTING SCHEDULE
HEREOF IS EARNED ONLY BY CONTINUING AS A SERVICE PROVIDER AT THE WILL OF THE COMPANY (NOT THROUGH THE ACT OF BEING HIRED, BEING GRANTED THIS OPTION OR ACQUIRING SHARES HEREUNDER). OPTIONEE FURTHER ACKNOWLEDGES AND AGREES THAT THIS AGREEMENT, THE
TRANSACTIONS CONTEMPLATED HEREUNDER AND THE VESTING SCHEDULE SET FORTH HEREIN DO NOT CONSTITUTE AN EXPRESS OR IMPLIED PROMISE OF CONTINUED ENGAGEMENT AS A SERVICE PROVIDER FOR THE VESTING PERIOD, FOR ANY PERIOD, OR AT ALL, AND SHALL NOT INTERFERE IN
ANY WAY WITH OPTIONEE’S RIGHT OR THE COMPANY’S RIGHT TO TERMINATE OPTIONEE’S RELATIONSHIP AS A SERVICE PROVIDER AT ANY TIME, WITH OR WITHOUT CAUSE, SUBJECT TO THE PROVISIONS IN THE EMPLOYMENT AGREEMENT. 
  

					
	 INDUCEMENT AWARD AGREEMENT
 FARHAD MOGHADAM

	  		  	

 Execution Copy 
  
 Optionee has reviewed this Agreement Option in its entirety, has had an opportunity to obtain the advice of counsel and other advisors prior to executing
this Award Agreement and fully understands all provisions of the Award Agreement. Optionee hereby agrees to accept as binding, conclusive and final all decisions or interpretations of the Compensation Committee of the Company’s board of
directors upon any questions arising under this Award Agreement. Optionee further agrees to notify the Company upon any change in the residence address indicated below. 
  

					
	OPTIONEE	 		 	ASCENT SOLAR TECHNOLOGIES, INC.
			
	 /s/ Farhad Moghadam
	 		 	 /s/ Gary Gatchell

	Farhad Moghadam	 		 	By
			
		 		 	 Gary Gatchell

		 		 	Name
			
	  
	 		 	 CFO

		 		 	Title
	  
	 		 	
	Residence Address	 		 	

  

					
	 INDUCEMENT AWARD AGREEMENT
 FARHAD MOGHADAM

	  		  	

 Execution Copy 
  
 EXHIBIT A 
 EXERCISE NOTICE
AND AGREEMENT 
 Ascent Solar Technologies, Inc. 
 12300
Grant Street 
 Thornton, CO 80241 
 Attention: Stock Option
Administrator 
  

							
	Name of Optionee:	  		  		 	Farhad Moghadam
				
	Optionee’s Address:	  		  		 	  

				
	Optionee’s Social Security Number:	  		  		 	  

				
	Date of Award Agreement:	  		  		 	August 3, 2009
				
	Exercise Date:	  		  		 	  

				
	The Shares Purchased are Incentive Stock Options:	  		  		 	No
				
	Number of Shares Purchased Pursuant to this Notice:	  		  		 	  

				
	Exercise Price per Share:	  		  	$	 	  

				
	Aggregate Exercise Price:	  		  	$	 	  

				
	Amount of Payment Enclosed:	  		  	$	 	  

 1. Exercise of Option. Pursuant to the Inducement Award Agreement (“Award
Agreement”) entered into as of the date set forth above between the undersigned Optionee and Ascent Solar Technologies, Inc., a Delaware corporation (“Company”), Optionee hereby elects, effective as of the date of this
Notice, to exercise Optionee’s option to purchase the number of shares of common stock (the “Shares”) of the Company indicated above. 
 2. Payment. Enclosed is Optionee’s payment in the amount indicated above, which is the full exercise price for the Shares. 
 3. Deemed Date of Exercise. The date of exercise shall be deemed to be the date on which this Notice is filed with Company, together with payment of the aggregate Exercise Price, and on which Shares become
eligible for issuance to Optionee under applicable state and federal laws and regulatory requirements. 
 4. Compliance with Laws.
Optionee understands and acknowledges that the purchase and sale of the Shares may be subject to approval under the state and federal securities laws and other laws and, notwithstanding any other provision of the Award Agreement to the contrary, the
exercise of any rights to purchase Shares is expressly conditioned upon approval (if necessary) and compliance with all such laws. 
  

					
	 INDUCEMENT AWARD AGREEMENT
 FARHAD MOGHADAM

	  		  	

 Execution Copy 
  
 5. Representations of Optionee. Optionee represents and warrants to the Company, as follows: 
 (a) Optionee has received, read, and understood the Award Agreement and agrees to abide by and be bound by its terms and conditions. 
 (b) The Options exercised herewith are exercisable only according to the schedule in the Award Agreement. 
 (c) Optionee is aware of the business affairs and financial condition of the Company and has acquired sufficient information about the Company to reach
an informed and knowledgeable decision to acquire the Shares. 
 6. Refusal to Transfer. The Company shall not be required (a) to
transfer on its books any Shares that have been sold or otherwise transferred in violation of any of the provisions of this Agreement or the Award Agreement or (b) to treat as owner of such Shares or to accord the right to vote or receive
dividends to any purchaser or other transferee to whom such Shares shall have been so transferred. 
 7. Tax Consultation. Optionee
understands that Optionee may suffer adverse tax consequences as a result of Optionee’s purchase or disposition of the Shares. Optionee represents that Optionee is not relying on the Company for any tax advice. 
 8. Entire Agreement. The Award Agreement is incorporated herein by reference. This Exercise Notice and Agreement, the Award Agreement and the
Employment Agreement constitute the entire agreement of the parties with respect to the subject matter hereof. 
  

					
	Submitted by:	 		 	Accepted by:
	OPTIONEE	 		 	COMPANY
			
		 		 	 Ascent Solar Technologies, Inc.,
 a Delaware
corporation

			
	  
	 		 	  

	Signature	 		 	By
			
	  
	 		 	  

	Print Name	 		 	Name
			
		 		 	  

		 		 	Title

  

					
	 INDUCEMENT AWARD AGREEMENT
 FARHAD MOGHADAMSettlement Agreement

 Exhibit 10.1 
 SETTLEMENT AGREEMENT AND MUTUAL RELEASE 
 This Settlement Agreement and Mutual Release
(“Settlement Agreement”) is entered into by and among 1-800 CONTACTS, Inc., Vision Direct, Inc., and drugstore.com, inc. as follows: 
 DEFINITIONS 
 The following definitions shall apply to this Settlement Agreement: 
  

	 	A.	The term “1-800 Contacts” shall refer to 1-800 CONTACTS, Inc. 

  

	 	B.	The term “Vision Direct” shall refer to Vision Direct, Inc. 

  

	 	C.	The term “Drugstore.com” shall refer to drugstore.com, inc. 

  

	 	D.	The term “Effective Date” shall refer to May 8, 2009 as the effective date of this Settlement Agreement. 

  

	 	E.	The term “New York Action” shall collectively refer to the action filed by 1-800 Contacts against Vision Direct, on or about February 27, 2008, titled 1-800
Contacts, Inc. v. Vision Direct, Inc., No. 08-cv-1949, which is pending in the United States District Court for the Southern District of New York, and the counterclaim asserted by Vision Direct against 1-800 Contacts.

  

	 	F.	The term “Utah Action” shall refer to the action filed by 1-800 Contacts against Vision Direct and Drugstore.com on or about February 26, 2008, titled 1-800
Contacts, Inc. v. Drugstore.com, Inc. and Vision Direct, Inc., No. 08-cv-00157, which was subsequently dismissed from the United States District Court for the District of Utah, Central Division for improper venue. 

 

	 	G.	The term “Dispute” shall collectively refer to the New York Action, the Utah Action, and all claims raised in the New York Action and the Utah Action.

  

	 	H.	The term “2004 Settlement Agreement” shall refer to a prior settlement agreement entered into by 1-800 Contacts and Vision Direct effective June 24, 2004 (the
“2004 Settlement Agreement”). 

  

	 	I.	The term “trademark” or “trademarks” shall refer to trademarks, trade names or service marks. 

  

	 	J.	The term “Settlement Sum” shall refer to the payment of Four Hundred Seventy Five Thousand Dollars ($475,000) to 1-800 Contacts by Vision Direct. The Settlement Sum
reflects a partial reimbursement of 1-800 Contacts’ attorneys’ fees. 

  

	 	K.	The term “Parties” refers to 1-800 Contacts, Vision Direct and Drugstore.com. 

	 	L.	The term “Negative Keyword List” shall refer to each list of negative keywords to be implemented by each Party for the purpose of preventing a Party’s Internet
advertising from appearing in response to a search for another Party’s Intellectual Property Rights, which are currently set forth in Exhibits A and B to the Order of Permanent Injunction to be submitted to the Court in the New York Action, as
updated in accordance with the procedure set forth in this Settlement Agreement. 

  

	 	M.	The term “Intellectual Property Rights” shall refer to: (a)(1) a Party’s trademarks, (2) any identical or confusingly similar variation of the Party’s
trademarks, (3) domain names containing the Party’s trademarks, (4) domain names containing any identical or confusingly similar variation of the Party’s trademarks, (5) URLs containing the Party’s trademarks, or
(6) URLs containing any identical or confusingly similar variation of the Party’s trademarks; and (b) that are used by the Party in good faith in commerce for the purpose of selling contact lenses. 

 RECITALS 
 WHEREAS, the Dispute arises
out of the allegations that Vision Direct’s Internet advertisement appeared in the search results pages of one or more Internet search engines when a user searched for 1-800 Contacts. 
 WHEREAS, 1-800 Contacts claims that the appearance of such Internet advertisements violates the 2004 Settlement Agreement, and infringes 1-800
Contacts’ trademarks; 
 WHEREAS, Vision Direct and Drugstore.com have raised a concern that an agreement with a competitor to implement
negative keywords could implicate the antitrust laws of the United Sates, and 1-800 Contacts has taken the position that no antitrust laws would be violated by such an agreement; 
 WHEREAS, the Parties, without any admission of wrongdoing or liability and without conceding any infirmity in any claim or defense asserted or intended
to be asserted, wish to resolve the Dispute and mutually agree to release each other from any claims arising from or related to said Dispute, on the terms set forth in this Settlement Agreement. 
 TERMS 
 The Parties agree to resolve
the Dispute as follows: 
 1. Consideration. In consideration for the Release of Claims and other provisions set forth in this
Settlement Agreement, and upon full execution of this Settlement Agreement: 
 (a) Vision Direct will pay the Settlement Sum by wire transfer
to 1-800 Contact’s account on or before June 6, 2009, unless the payment date is extended as provided for in this Settlement Agreement, as follows: 
  

			
	Account Name:	  	1-800 Contacts, Inc.
	Bank Name:	  	Zion First National Bank

  

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	Account No.:	  	071014039
	ABA Routing No.:	  	124000054
	SWIFT Code:	  	ZFNBUS55

 (b) The parties will comply with the operating terms set forth in Exhibit 2. 
 2. Release of Claims Against Vision Direct and Drugstore.com. Except with respect to the obligations created by or arising out of this Settlement
Agreement, 1-800 Contacts, on behalf of itself and its officers, directors, employees accountants, experts, investors, agents, shareholders, administrators, attorneys, divisions, affiliates, subsidiaries, parent entities, assigns, predecessor and
successor entities, hereby fully and forever releases and absolutely discharges Vision Direct and Drugstore.com and their respective officers, directors, employees, investors, shareholders, administrators, attorneys, affiliates, divisions,
subsidiaries, parent entities, predecessor and successor corporations, and assigns from, and agrees not to sue concerning, any claim, demand, duty, debt, liability, account, reckoning, obligation, cost, expense, lien, attorneys’ fee, action,
cause of action, or rights 1-800 Contacts has or may have against Vision Direct and/or Drugstore.com as of the Effective Date, known or unknown, accrued or unaccrued, relating to: 
 (a) any and all claims relating to the Dispute, including all claims that were alleged or could have been alleged in the Dispute; 
 (b) any and all claims relating to or arising from a breach of the 2004 Settlement Agreement, including all claims that were or could have been alleged;

 (c) any and all claims relating to the appearance of a Party’s Internet advertisement in connection with the sale of contact lenses,
in response to an Internet search for another Party’s Intellectual Property Rights; and 
 (d) any and all claims for attorneys’
fees and costs incurred in connection with the Dispute. 
 3. Release of Claims Against 1-800 Contacts. Except with respect to the
obligations created by or arising out of this Settlement Agreement, Vision Direct and Drugstore.com, on behalf of themselves and their respective officers, directors, employees, accountants, experts, investors, agents, shareholders, administrators,
attorneys, divisions, affiliates, subsidiaries, parent entities, assigns, predecessor and successor entities, hereby fully and forever release and absolutely discharge 1-800 Contacts, its officers, directors, employees, investors, shareholders,
administrators, attorneys, affiliates, divisions, subsidiaries, parent entities, predecessor and successor corporations, and assigns from, and agree not to sue concerning, any claim, demand, duty, debt, liability, account, reckoning, obligation,
cost, expense, lien, attorneys’ fee, action, cause of action, or rights Vision Direct and/or Drugstore.com has or may have against 1-800 Contacts as of the Effective Date, known or unknown, accrued or unaccrued, relating to: 
 (a) any and all claims relating to the Dispute, including all claims that were alleged or could have been alleged in the Dispute; 
  

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 (b) any and all claims relating to or arising from a breach of the 2004 Settlement Agreement, including
all claims that were or could have been alleged; 
 (c) any and all claims relating to the appearance of a Party’s Internet
advertisement in connection with the sale of contact lenses, in response to an Internet search for another Party’s Intellectual Property Rights; and 
 (d) any and all claims for attorneys’ fees and costs incurred in connection with the Dispute. 
 4.
The 2004 Settlement Agreement. The 2004 Settlement Agreement shall remain in full force and effect except that the Parties’ sol obligations with respect to the use of negative keywords shall be to comply with the terms of this Settlement
Agreement. The Parties expressly agree that the Mutual Releases in this Settlement Agreement do not release any non-negative keyword obligation created by or arising out of the 2004 Settlement Agreement. For the sake of clarity, in the event that
the Parties are no longer obligated to implement negative keywords, the Parties’ obligations under Paragraph 4 of the 2004 Settlement Agreement survive. 
 5. No Pending Lawsuits. Except for the Dispute, each of the Parties represents that it has no lawsuits, claims, complaints or actions pending in its name, or on behalf of any other person or entity, against any
of the other Parties or any of the other Parties’ parent or subsidiary corporations, in any court, whether federal or in any state, or before any government agency or entity. 
 6. Stipulated Order of Permanent Injunction. Within seven (7) days of the Effective Date, the Parties shall jointly submit to the Court in
the New York Action an Order of Permanent Injunction, in the form attached to this Settlement Agreement as Exhibit 1, and jointly request its entry. The Order of Permanent Injunction shall require the Parties to implement the Negative Keyword Lists
for the purpose of preventing a Party’s Internet advertising from appearing in response to a search for another Party’s Intellectual Property Rights. An exhibit to the Order of Permanent Injunction will contain the initial Negative Keyword
Lists. 
 (a) Entry of the Order of Permanent Injunction shall act as a final adjudication of the Dispute, except that the Court shall
expressly retain jurisdiction to enforce, implement or construe the Order of Permanent Injunction and this Settlement Agreement. The Parties waive notice of entry of the Permanent Injunction and the right to appeal therefrom and consent to its
immediate entry in accordance with its terms, and agree to be bound thereby. 
 (b) If the Court fails to enter the Order of Permanent
Injunction prior to the due date for payment of the Settlement Sum, then such payment shall be made within five business days of the entry of the Order of Permanent Injunction. If the Court refuses to enter the Order of Permanent Injunction, then
the Parties shall confer in good faith to determine whether they will agree to proceed with a settlement of the Dispute absent entry of such Order of Permanent Injunction. If the Court refuses to enter the Order of Permanent Injunction and the
Parties are not both willing to proceed with a settlement absent entry of such Order of Permanent Injunction, then this Settlement Agreement shall become null and void and of no effect. 
  

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 7. No Admission of Liability. This Settlement Agreement and the performance of the obligations
referred to in this Settlement Agreement shall effect the settlement of the Dispute. All of the claims asserted in the Dispute are denied and contested, and nothing contained in this Settlement Agreement, including the payment of the Settlement Sum,
shall be construed as an admission of any fact, wrongdoing or liability of any kind by any Party or by any other person. Each Party expressly denies that it is in any way liable or responsible to any other Party. 
 8. Costs. The Parties shall each bear their own costs, attorneys’ fees and other fees incurred in connection with the Dispute and this
Settlement Agreement. 
 9. Authority. Each of the Parties represents and warrants that the undersigned has the authority to act on
its behalf and to bind it and all who may claim through it to the terms and conditions of this Settlement Agreement. Each of the Parties represents and warrants to the other that it has not, prior to the Effective Date, assigned or transferred or
purported to assign or transfer any of its claims in the Dispute, or any party or portion thereof, and agrees to indemnify and hold harmless the other Parties from and against any claim, demand, damage, debt, liability, account, reckoning,
obligation, cost, expense, lien, action and cause of action (including the payment of attorneys’ fees and costs actually incurred, whether or not litigation is commenced) based on, in connection with or arising out of any such assignment or
transfer or purported or claimed assignment or transfer. 
 10. No Representations. Each of the Parties acknowledges to the other
Parties that it has been represented by independent legal counsel of its own choice throughout all of the negotiations which preceded the execution of this Settlement Agreement and that it has executed this Settlement Agreement with the consent and
on the advice of such independent legal counsel. Each of the Parties further acknowledges that it and its counsel have had adequate opportunity to make whatever investigation or inquiry they may deem necessary or desirable in connection with the
subject matter of this Settlement Agreement prior to the Effective Date. 
 11. Severability. The language of this Settlement
Agreement has been approved by counsel for the Parties. The language of this Settlement Agreement shall be construed as a whole according to its fair meaning and none of the Parties (nor the Parties’ respective attorneys) shall be deemed to be
the draftsman of this Settlement Agreement in any action which may arise between the Parties after the Effective Date. In the event that any provision or portion of this Settlement Agreement becomes or is declared by a court of competent
jurisdiction to be illegal, unenforceable or void, that provision shall be severed from this Settlement Agreement and the remainder of this Settlement Agreement shall be valid and enforceable and continue in full force and effect between the Parties
just as if the provision held to be illegal, unenforceable or void had never been included in this Settlement Agreement. 
 12. Entire
Agreement. This Settlement Agreement and the 2004 Settlement Agreement as modified hereby contain the entire agreement and understanding concerning the subject matter between the Parties and supersedes and replaces all prior negotiations,
proposed agreements or agreements, whether written or oral. Each of the Parties acknowledges and warrants to the other Parties that no other party nor any attorney, agent or representative of the other party has made any promise, representation or
warranty whatsoever, expressed or implied, written or oral, not contained in this Settlement Agreement to induce that Party to execute this Settlement Agreement. Each of the 

  

 -5- 

 
Parties acknowledges and warrants to the other Parties that it has not executed this Settlement Agreement in reliance on any promise, representation or
warranty not expressly set out in this Settlement Agreement. 
 13. No Oral Modification. This Settlement Agreement may only be
amended in writing signed by authorized representatives of 1-800 Contacts, Vision Direct and Drugstore.com. 
 14. Binding Nature of The
Agreement. This Settlement Agreement is and shall be binding upon, and shall inure to the benefit of, the predecessors, successors, and assigns of the Parties to the extent permitted by law. No party may assign its rights, duties or obligations
under this Settlement Agreement, directly or indirectly, in whole or in part, without the prior written consent of the other Parties, except in connection with a merger, reorganization or change in control, or a sale of all or substantially all of a
Party’s business, equity and/or assets. 
 15. Governing Law. This Settlement Agreement shall in all respects be interpreted,
enforced, and governed by and under the laws of the State of New York without regard to its choice of law rules. 
 16. Litigation.
Any litigation in connection with this Agreement, including but not limited to any breach of this Settlement Agreement or the interpretation or construction of the terms of this Settlement Agreement, violation of the Order of Permanent Injunction or
modification of the Order of Permanent Injunction, shall only be brought in the United States District Court for the Southern District of New York, or, if the amount in controversy is less than $75,000, in a New York State Court located within New
York County. 
 17. Counterparts. This Settlement Agreement may be executed in counterparts, and each counterpart shall have the same
force and effect as an original and shall constitute an effective, binding agreement on the part of each of the undersigned. 
 18.
Execution Of Other Necessary Documents. The Parties agree to execute any further documentation that may be required in order to effect the provisions of this Settlement Agreement, including all documentation necessary to enter the Order of
Permanent Injunction. 
 19. Headings. The headings set forth in this Settlement Agreement are for convenience only and shall have no
effect on the construction or interpretation of this Settlement Agreement. 
 20. Statements About Settlement. In the event that any
Party wishes to issue a press release regarding this Settlement Agreement, then the Parties will jointly agree on the language of such press release. 
 21. Sale by Drugstore.com of its Vision Business. In the event that Drugstore.com sells its vision business, including all websites that sell contact lenses and contact lens products, and (1) the sale is
an arm’s length transaction with an unrelated company, and (2) as a result of the sale, Drugstore.com is no longer in the business of selling contact lenses, then Drugstore.com’s obligations under this Settlement Agreement shall
terminate. 
  

 -6- 

 21. Voluntary Execution of Agreement. This Settlement Agreement is executed voluntarily and
without any duress or undue influence on the part or behalf of the Parties, with the full intent of releasing all claims. The Parties acknowledge that: 
 (a) They have read this Settlement Agreement; 
 (b) They have been represented in the preparation,
negotiation, and execution of this Settlement Agreement by legal counsel of their own choice or that they have voluntarily declined to seek such counsel; 
 (c) They understand the terms and consequences of this Settlement Agreement and of the releases it contains; 
 (d) They are fully aware of the legal and binding effect of this Settlement Agreement. 
 IN WITNESS WHEREOF, the Parties have
executed this Settlement Agreement on the respective dates set forth below. 
  

							
		 		 	1-800 CONTACTS, INC.
				
	Dated: May 8, 2009	 		 	By	 	 /s/

			
		 		 	VISION DIRECT, INC.
			
	Dated: May 8, 2009	 		 	 /s/

			
		 		 	DRUGSTORE.COM, INC.
			
	Dated: May 8, 2009	 		 	 /s/

  

 -7-

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