10-K

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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM 10-K

(Mark One)
ý	ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 29, 2007
or
o	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from                                to

Commission File Number: 001-33760

FGX INTERNATIONAL HOLDINGS LIMITED
(Exact name of registrant as specified in its charter)

British Virgin Islands
(State or other jurisdiction of incorporation) 98-0475043
(IRS Employer Identification No.)

500 George Washington Highway
Smithfield, RI 02917
(Address of principal executive offices) (zip code)

(401) 231-3800
(Registrant's telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:

Title of each class
Ordinary shares, no par value Name of each exchange on which registered
The NASDAQ Global Market

Securities registered pursuant to Section 12(g) of the Act:
None

         Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes o    No ý

         Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes o    No ý

         Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ý    No o

         Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. ý

         Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of "large accelerated filer," "accelerated filer" and "smaller reporting company" in Rule 12b-2 of the Exchange Act.

Large accelerated filer o	Accelerated filer o
Non-accelerated filer ý (Do not check if a smaller reporting company)	Smaller reporting company o

         Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes o    No ý

         At June 30, 2007, the last business day of our most recently completed second fiscal quarter, our ordinary shares were not listed on any exchange or over-the-counter market. Our ordinary shares began trading on the NASDAQ Global Market on October 25, 2007. As of December 29, 2007, the aggregate market value of the voting shares held by non-affiliates was $140,034,983, based on the number of shares held by non-affiliates of the registrant as of December 29, 2007 and the reported last sale price of ordinary shares on December 28, 2007.

         Number of the registrant's ordinary shares, no par value, outstanding as of March 6, 2008: 21,262,308.

Documents incorporated by reference:

         Portions of the definitive Proxy Statement for FGX International Holdings Limited's Annual Meeting of Shareholders to be held on May 29, 2008 are incorporated by reference into Part III of this Form 10-K.

TABLE OF CONTENTS

PART I			4
	Item 1	Business	4
	Item 1A	Risk Factors	11
	Item 1B	Unresolved Staff Comments	18
	Item 2	Properties	18
	Item 3	Legal Proceedings	19
	Item 4	Submission of Matters to a Vote of Security Holders	19
PART II			20
	Item 5	Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities	20
	Item 6	Selected Financial Data	21
	Item 7	Management's Discussion and Analysis of Financial Condition and Results of Operations	24
	Item 7A	Quantitative and Qualitative Disclosures about Market Risk	37
	Item 8	Financial Statements and Supplementary Data	38
	Item 9	Changes in and Disagreements with Accountants on Accounting and Financial Disclosure	38
	Item 9A(T)	Controls and Procedures	38
	Item 9B	Other Information	38
PART III			39
	Item 10	Directors, Executive Officers and Corporate Governance	39
	Item 11	Executive Compensation	41
	Item 12	Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters	41
	Item 13	Certain Relationships and Related Transactions, and Director Independence	41
	Item 14	Principal Accounting Fees and Services	41
PART IV			F-1
	Item 15	Exhibits, Financial Statement Schedules	F-1
SIGNATURES
Exhibit Index

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Forward Looking Statements

        This report and the information incorporated by reference in it include forward-looking statements. These include, but are not limited to, statements about our expectations, hopes, beliefs, intentions or strategies regarding the future, as well as statements that refer to projections, forecasts or other characterizations of future events or circumstances, including any underlying assumptions. They may refer, without limitation, to retail and brand initiatives, upcoming product releases, operational improvements, market growth or acceptance of our products, and future revenue, costs, results of operations, or profitability. The words "anticipates," "believe," "continue," "could," "estimate," "expect," "intend," "may," "might," "plan," "possible," "potential," "predict," "project," "should," "would" and similar expressions may, but are not necessary to, identify forward-looking statements.

        The forward-looking statements contained or incorporated by reference in this report are based on our current expectations and beliefs concerning future developments and their potential effects on us and speak only as of the date of this report. There can be no assurance that future developments affecting us will be those that we have anticipated. These forward-looking statements involve a number of risks, uncertainties (some of which are beyond our control) or other factors that may cause actual results or performance to be materially different from those expressed or implied by these forward-looking statements. These risks and uncertainties include, but are not limited to, those factors described or referred to under the heading "Risk Factors" below. We undertake no obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise, except as may be required under applicable law.

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PART I

Item 1    Business.

The Company

        FGX International Holdings Limited is a business company incorporated under the laws of the British Virgin Islands ("BVI"). We conduct business through our subsidiary, FGX International, Inc., and its operating subsidiaries.

        Our principal shareholder, Berggruen Holdings North America Ltd. (together with its predecessors, "BHNA"), acquired AAi.FosterGrant, Inc. in a series of transactions between 2000 and 2003. We were incorporated on September 22, 2004 to hold the stock of AAi.FosterGrant and, in October 2004, we acquired Magnivision, Inc. On October 24, 2007, we undertook an initial public offering in which we sold 6,666,667 of our ordinary shares at a price to the public of $16.00 per share and certain shareholders sold 7,133,333 shares. We received approximately $97.2 million in net proceeds (after deducting underwriting discounts, commissions and expenses of approximately $9.5 million), which we used to repay indebtedness and related costs.

        Our registered office is located at Midocean Chambers, P.O. Box 805, Road Town, Tortola, British Virgin Islands. Our principal executive offices are located at 500 George Washington Highway, Smithfield, Rhode Island 02917; telephone: (401) 231-3800. Our web site is www.fgxi.com. (We have included our web site address in this document as an inactive textual reference only and you should not consider information contained on our web site or that can be accessed through our web site to be a part of this Annual Report on Form 10-K.)

Overview

        We are a leading designer and marketer of non-prescription reading glasses, sunglasses and costume jewelry with a portfolio of established, highly recognized eyewear brands including FosterGrant(1) and Magnivision. We and our predecessors have worked to build a strong reputation for providing consumers a broad selection of products that deliver style and quality at affordable prices. This is exemplified by the FosterGrant brand, which has been one of the most recognizable sunglasses brands since the 1960s "Who's That Behind Those Foster Grants?" advertising campaign, which used high profile celebrities to promote the brand.

(1)

FosterGrant®, Magnivision®, Anarchy®, Angel™, Gargoyles®, Hyperflexx® and Redi-Readers® are our trademarks. Ironman Triathlon®, Levi Strauss Signature®, Body Glove®, C9 by Champion® and Daytona International Speedway® are the property of their respective owners. The ® and ™ symbols included here are deemed to apply to each instance of the respective mark in this report.

        We sell our FosterGrant brand in the U.S. popular priced sunglasses market (less than $30) and both our FosterGrant and Magnivision brands in the domestic non-prescription reading glasses market. Our products are sourced through low-cost Asian manufacturers and sold primarily through mass channels, which include mass merchandisers, chain drug stores, chain grocery stores and variety stores. Some of our products are sold to ophthalmic retailers, mid-tier department stores and other specialty retailers. We also sell costume jewelry principally to major mass merchandisers, thereby extending our general product penetration with key customers.

        Our company-owned portfolio also includes the Anarchy, Angel and Gargoyles brands, which target different demographic groups and distribution channels at a premium price point (generally $50-$170). We believe our premium brands have a strong niche consumer appeal. We promote these brands through endorsements from well recognized action sports athletes and sponsorship of professional surfing contests and similar sporting events.

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        To complement our proprietary brands, we market both popular priced and premium eyewear under nationally-recognized licensed brands including Ironman Triathlon, Levi Strauss Signature, Body Glove, C9 by Champion and Daytona International Speedway. In addition, we sell a line of prescription frames, which we introduced in 2004 to supplement our product line and leverage our FosterGrant brand.

        Our sales into the international personal accessories market are principally generated in the United Kingdom, Canada and Mexico and have averaged approximately 15% of our net sales during the past three fiscal years.

        We believe that we have the capital structure in place that will enable us to enhance our market leadership positions through the continued investment in our core brands. We will seek to continue to add to our domestic and international customer base as well as consider selective acquisitions that fit strategically into our business model. Our future results may be impacted by risk and trends set forth in "Item 1A. Risk Factors" and elsewhere in this report.

Our Markets

        We compete in the $30 to $170 price point sunglasses market and believe the market for popular priced sunglasses is supported by a number of long-term growth drivers, including changing fashion trends, consumers' desire for multiple, activity-specific sunglasses, the growing desire for UVA/UVB eye protection and product innovation.

        Non-prescription reading glasses are designed to provide magnification for near-vision tasks associated with the normal aging process, which is marked by the decreased ability to focus on nearby objects, or presbyopia. We believe the general aging of the population is a key growth factor in the U.S. non-prescription reading glasses market. In addition, we believe that growth in this market will be driven by product innovations, the appeal of more fashionable designs and enhancement in alternative eyesight correction technologies, which typically correct nearsightedness, or myopia, but not presbyopia.

        We believe that changing fashion trends and creative designs are the key growth factors in the U.S. costume jewelry market where we primarily compete in the mass merchandise segment.

        We primarily sell sunglasses and non-prescription reading glasses products internationally in the United Kingdom and Europe, sunglasses, non-prescription reading glasses and costume jewelry products in Canada, and sunglasses and costume jewelry products in Mexico.

        See Note 19 to our consolidated financial statements in this Form 10-K for an analysis of our sales by segment and Note 18 for additional information relating to our international operations.

Our Customers

        We sell our products in approximately 57,000 retail locations worldwide. Our core customer base spans a range of mass channels, and primarily consists of mass merchandisers, chain drug stores, chain grocery stores, specialty retailers, variety stores, ophthalmic retailers and mid-tier department stores.

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Mass merchandisers in the U.S. accounted for approximately 38% of our total net sales in fiscal 2007. Representative mass merchandiser customers include Wal-Mart, Target, Meijer, Fred Meyer and BJ's Wholesale Club.



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Chain drug stores in the U.S. accounted for approximately 31% of our total net sales in fiscal 2007. Representative chain drug store customers include CVS, Walgreens, Rite Aid and Duane Reade. These stores tend to be smaller than mass merchandisers and attract a consumer base that is often less price sensitive and more convenience oriented than the mass merchandiser or variety store customer.

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•

Chain grocery stores, specialty retailers, variety stores, ophthalmic retailers and mid-tier department stores in the U.S. accounted for approximately 15% of our total net sales in fiscal 2007.

        We have established strong and long-standing relationships with many leading national retailers. Nine of our top ten customer relationships, ranked by 2007 revenues, span more than ten years each, such as our relationship with Walgreens, while our relationship with CVS extends more than 15 years and our relationship with Wal-Mart spans more than 20 years. Approximately 88% of our dollar-denominated sales are to 50 large retail customers with approximately 57,000 locations worldwide. In fiscal 2007, our five largest customers represented approximately 64% of our sales. Net sales to each of Wal-Mart, CVS and Walgreens accounted for more than 10% of our net sales and sales to Wal-Mart accounted for more than 10% of our net sales in each segment in which we operate.

Sales and Marketing

        Our domestic and international sales teams are organized by distribution channel, product line and customer. We also have dedicated sales, marketing and merchant personnel exclusively responsible for maintaining and growing our presence within certain larger customers.

        We operate our operations in Mexico through a joint venture established in 1996, AAi/Joske's S. de R.L. de C.V., of which we own 50%. AAi/Joske's develops, sources and distributes customized Mexican collections of accessories utilizing our product development personnel and supplier relationships, as well as the distribution expertise of our joint venture partner, Joske's de Mexico, S.A. de C.V. ("Joske's"), an established Mexican jewelry company with strong local retail relationships.

        We believe that relationships with our retail customers are dependent upon the efficient use of allocated floor space and the generation of profits by our customers. To this end, we strive to deliver competitively priced products and service programs that consistently provide retailers with attractive gross margins and inventory turnover rates. We have a history of customer retention from year to year, and customer loss has generally been attributable to consolidation in the various retail channels we serve.

        Our marketing organization is responsible for increasing brand awareness through activities such as advertising, public relations and consumer research. They have worked with an outside advertising agency to launch a 2008 FosterGrant advertising campaign and are focused on increasing the awareness of our premium brands, Anarchy, Angel and Gargoyles. They also are utilizing multiple advertising agencies to further develop an educational and marketing campaign launched in 2007 focusing on the advantages of non-prescription reading glasses through our Magnivision brand. We maintain showrooms and sales offices domestically at our Smithfield, Rhode Island corporate offices, in Bentonville, Arkansas, and New York City, as well as in Toronto, Mexico City, and the United Kingdom. We significantly increased spending on marketing and advertising in fiscal 2007, and we plan to continue to increase such spending over the next three to five years.

        Our business is highly seasonal, and our operating results fluctuate from quarter to quarter as a result of changes in demand for our products, our effectiveness in managing our inventories and costs, the timing of the introduction of new products and weather patterns. Sunglasses orders in the United States are usually shipped initially in December, while in the United Kingdom they are usually shipped initially in February and March. Replenishment sunglasses orders in both the United States and the United Kingdom are primarily shipped during the first half of the fiscal year as retailers build inventories for the spring and summer selling seasons. Costume jewelry is shipped primarily during the second half of the fiscal year as retailers build inventories for the holiday season. Sales of non-prescription reading glasses are generally uniform throughout the year. Although sales of our non-prescription reading glasses have, in part, offset the seasonality of sales of our costume jewelry and

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sunglasses product lines, our financial condition and results of operations are highly dependent on the shipping of product during the second half of the fiscal year.

Customer Contracts

        A majority of our eyewear sales, particularly in the chain drug store channel, are made pursuant to customer contracts. Our relationships are generally based on multi-year sales and/or dollar volume agreements. Some customers, including Wal-Mart, operate via purchase orders which set forth their terms and conditions related to purchases. Our customer contracts may be exclusive or non-exclusive and may specify inventory and service levels, anticipated inventory sales rates, sales volumes and the amount of any fixed obligation due to the customer in connection with the establishment of the relationship. Most of our costume jewelry sales are made pursuant to purchase orders.

        Upon commencement of a new customer contract or renewal of an existing customer contract, we may incur costs associated with providing new display fixtures and payments of product placement allowances. Upon commencement or renewal, we also experience a significant increase in revenue from the sale of eyewear to that customer to stock the new display fixtures. After initial stocking, we generate sales by reorders for product replenishment, which are typically at lower levels than at the commencement of the contract. In the case of a new contract, we may be required to issue credits to the customer equal to the customer's cost of the existing eyewear inventory of the incumbent supplier at the customer's retail locations and warehouses. Conversely, in the event that we are replaced as the eyewear supplier of a customer, the new supplier could be required to provide similar allowances for our customer's inventory.

        Product returns, markdowns and contractual allowances (which include product placement fees, cooperative advertising, volume rebates and other discounts) are a key component of our profitability, which we continually assess based on information and reports regarding products sold by our customers to consumers. Before entering into a new customer contract or renewing an existing customer contract, we engage in extensive analysis to determine the appropriate level of contractual allowances to be offered based on the projected profitability of the program. As a percentage of our gross product shipments, our product returns, markdowns and contractual allowances have averaged approximately 26% over the last three fiscal years.

Customer Support

        Our customers typically demand a high level of merchandising support and national distribution capability. Accordingly, our business is supported by an integrated infrastructure of sales and service, design and outsourcing functions. Our domestic sales team is supported by our merchant and field service organizations.

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Merchant Organization.  Our merchant organization works closely with our customers to improve their sales and profitability by providing services such as collaborative planning, product merchandising, fashion trend reporting and retail sales data analysis. This group is also primarily responsible for managing customer returns and markdowns. By conducting point-of-sale analysis, they help retailers manage inventory and analyze revenue and margins.



•

Field Service Organization.  Our field service organization consists of part-time employees who maintain and restock in-store displays, set up promotional materials and communicate store-level needs to our management team. We believe our field service organization enables us to better serve our customers and enhances our ability to control the content and appearance of our in-store product displays, which we believe increases our sales volume. We also believe our field service organization is significantly larger than those of our competitors and also serves as a competitive advantage.

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        Our U.K. and Mexican sales teams are each supported locally by similar merchant organizations and third-party field service organizations.

        We believe our merchant and field service organizations represent a critical differentiating competitive advantage in the marketplace. These distinctive service features enable us to better serve our customers and enhance our ability to control the content and appearance of our in-store product displays, which we believe increases our sales volume.

Working Capital

        We need working capital to support seasonal variations in our business, primarily due to the seasonal demands for our sunglasses and costume jewelry. We typically experience peak seasonal working capital needs from approximately mid-March through June and September through November in connection with these changes in demand. In the past, we have used borrowings under our revolving credit facility to satisfy normal operating costs during these periods.

Product Development and Sourcing

        We believe our reputation for style, quality and value distinguishes our products from those of our competitors and provides us with significant competitive advantages. Our product development objective is to provide stylish eyewear and costume jewelry which represent a strong price-to-value relationship for our end consumer. We employ a team of experienced eyewear and costume jewelry designers, product development specialists and support staff. The design team focuses on the development of new product styles or enhancements to reflect constantly evolving consumer preferences. The design team works closely with:

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our sales, marketing and merchant organizations, and trend forecasters to predict, monitor and respond to market trends in a timely manner;



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employees located at each of our international offices to custom design products for local style preferences;



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licensor/retailers to design products that meet their approval; and



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our manufacturers to maintain design integrity and ensure that our designs are feasible for low-cost mass-volume manufacturing while meeting quality standards.

        Consistent with general trends in the market, our costume jewelry product line tends to have more frequent design changes than our eyewear product lines. For our branded products, our designers participate in competitive shopping and closely monitor market trends to offer current styles and an "up-market" look to mass channels.

        We outsource the manufacture of our eyewear and costume jewelry products to contract manufacturers in Asia, principally in China. We have successfully executed our sourcing strategy in Asia since the 1980s. We are not dependent on any single supplier for the manufacture of any product category as we source from multiple suppliers across each such category and our largest supplier represented 12.0% of all our purchases in fiscal 2007. We buy our products from our suppliers on a purchase order basis with generally favorable trade terms and no obligation to any long-term contractual supply agreements. All purchase orders are fixed price and denominated in U.S. dollars, reducing the risks associated with short-term fluctuations in currency or raw material prices.

        In 2005, we opened an office in Shenzhen, China to enhance the management of our supplier relationships. We seek to ensure the quality of our manufacturers' products by using a third-party inspection company, managed by our Shenzhen office, to inspect all of our product orders prior to shipment from Asia. In addition, subsequent sample inspections are conducted at our facilities to verify product quality and order accuracy. We also maintain a quality control department at our Smithfield,

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Rhode Island facility and use an independent laboratory for material testing of our products. We are currently in the process of establishing a quality control laboratory in China, which should be operational by the second half of 2008.

Warehousing and Distribution

        We own and operate a 187,000 square-foot distribution center and corporate headquarters in Smithfield, Rhode Island. The facility is configured to enhance supply chain operations, rapidly distribute products, improve customer service and decrease operational costs. We receive sales and inventory data from retailers via electronic data interchange, or EDI, and generate purchase orders using vendor managed inventory, or VMI. We manage product distribution in the United States and Canada through our Smithfield, Rhode Island facility and an independent third-party contract warehouse near Long Beach, California. We ship our products to our customers by contract carriers.

        Products are typically shipped in containers by ocean or air freight, depending on our requirements and cost efficiencies, from the ports of Hong Kong, Shanghai and Quingdao in China to Long Beach, California or Boston, Massachusetts for our products that we sell domestically and in Canada or Stoke-on-Trent, United Kingdom or Mexico City, Mexico for our products that we sell internationally. The domestic containers are then shipped either directly to our Smithfield, Rhode Island distribution facility or, depending on cost and logistical considerations, to an independent third-party contract warehouse near Long Beach, California.

        Our international products are warehoused and distributed by a facility we lease in the United Kingdom for our European customers, a facility owned by our joint venture partner, Joske's, in Mexico City for our customers in Mexico and South America, and our Smithfield, Rhode Island facility for our customers in Canada.

Competition

        There is intense competition in each of the markets in which we compete. Generally, the basis of competition in our markets are brand recognition, fashion, service, merchandising, quality and price. We believe that our established relationships with large retail customers, brand recognition, efficient, low-cost sourcing strategy and ability to deliver stylish products to consumers at a competitive price are important factors in our ability to compete. Several of our competitors may enjoy substantial competitive advantages, including less outstanding indebtedness and greater financial resources that can be devoted to competitive activities, such as sales and marketing, product development and strategic acquisitions.

        In the sunglasses market, we compete against a variety of companies across multiple channels of trade. The major competitive factors include fashion trends, brand recognition and distribution channels. The majority of our sunglasses sales are in mass channels, where we primarily compete against companies such as StyleMark, Inc., iZone Group and SelectaVision. In specialty retailers, where we sell our premium products, we compete with companies in various niches, including Oakley, Orange 21 and VonZipper.

        In the non-prescription reading glasses market, our primary competitors are StyleMark, Inc., Forrester & Vos and Zoom Eyeworks. The majority of retail outlets for non-prescription reading glasses are mass channels. To establish and maintain product placement in these retail outlets, we compete primarily on retail support, point-of-sale performance, price and terms. Fashion is a differentiator in this market, and our ability to incorporate fashion into our Magnivision and FosterGrant product lines will be a key factor in retaining our market-leading position.

        The prescription frames market is intensely competitive, as frame styles are marketed under multiple brand names. To obtain space at an optical retailer, we compete against many companies,

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foreign and domestic, including Luxottica Group S.p.A., Safilo Group S.p.A., Signature Eyewear, Inc. and StyleMark, Inc. Distributors also frequently carry many lines of eyewear, and we must compete with our competitors for attention from sales representatives. At major retail chains, we compete not only against other eyewear suppliers but often against private labels of the chains themselves. To best leverage our strengths in this market, we have introduced our prescription frames into optical centers within our existing large retail customers, such as Wal-Mart. We believe successful relationships with these retailers will establish our brands in the prescription frames market and give us the experience we need to expand into other retail channels.

        Our costume jewelry products are distributed to mass merchandisers. We primarily compete against other costume jewelry manufacturers, including FAF, K&M and Tanya Creations, for the ability to distribute our products under desirable branded and private label brands for large retail customers. The primary bases of competition are price and our ability to interpret fashion trends and retail support.

Intellectual Property

        Our intellectual property portfolio, including our product designs, trademarks and licenses, are of material importance to our business.

        Trademarks.    We have numerous trademarks registered in the United States and in many foreign countries. We have registered our principal trademarks Foster Grant, Magnivision, Anarchy, Gargoyles, Hyperflexx and Redi-Readers and have an application pending for the Angel trademark in the United States. We have common law rights in the Titanium mark in the U.S. by virtue of our use of the mark in U.S. commerce. We have also registered or applied for the registration of certain other marks used by us in conjunction with the sale and marketing of our products.

        Patents.    We seek patent protection generally for those inventions and improvements likely to be incorporated into our products and displays or where patent protection will improve our competitive position. We do not have any patents that we believe are, individually or in the aggregate, material to our results of operations or financial condition.

        Licenses.    We have exclusive license agreements and/or rights of first refusal with World Triathlon Corporation to manufacture, market, distribute and sell products under the Ironman Triathlon, Levi Strauss Signature, Body Glove, C9 by Champion and Daytona International Speedway brands in the United States and/or numerous countries around the world. These agreements typically require us to guarantee certain minimum net sales requirements or make minimum royalty payments. They will expire by their terms at intervals over the next one to three years but in some cases may be renewed by us if we have complied with their terms.

        We primarily protect our intellectual property rights through patent, trade secret, trade dress, trademark, copyright and unfair competition law, in addition to nondisclosure, confidentiality and other contractual restrictions. From time to time, we bring claims against third parties who, in our opinion, infringe upon these rights. While we cannot guarantee that our efforts to protect our intellectual property rights are adequate or effective, we intend to assert our intellectual property rights against infringers.

Governmental Regulation

        Our operations are subject to a variety of federal, state and local quality control standards and regulatory requirements relating to health and safety matters. In particular, we are subject to regulations promulgated by the Occupational Safety and Health Administration, pertaining to health and safety in the workplace and the regulation of corresponding state agencies, and the Food and Drug Administration, or FDA, pertaining to safety of "medical devices." Our international businesses are subject to similar regulations in the countries where they operate, and are subject to various international trade agreements and regulations.

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        Because our products are manufactured overseas, our operations are, or may become, subject to international trade agreements and regulations. We are also subject to other restrictions imposed by the United States that include prohibitions set forth in the regulations issued by the U.S. Department of Commerce, the U.S. Department of State and the U.S. Department of the Treasury (Office of Foreign Asset Controls) with regard to "specially designated" or blocked persons or entities with which we are prohibited from doing business, as well as import/trade restrictions imposed by the countries in which our products are manufactured and sold. Modification and imposition of trade restrictions is based upon relationships between nations that we are unable to control, and we cannot predict the effect, if any, these events would have on our operations, especially in light of our concentrated product sourcing in Asia.

Backlog

        Our customers expect quick response times on standard orders, and we do not typically have a material order backlog.

Employees

        At December 29, 2007, we employed approximately 445 full-time employees and approximately 2,000 part-time employees worldwide. Most of our part-time employees are members of our field service organization, providing re-stocking and support services for our customers. We also employ temporary employees on an as-needed basis in the Smithfield, Rhode Island facility to meet seasonal needs and fulfill orders. None of our employees are represented by a collective bargaining agreement.

Item 1A    Risk Factors.

        Our business and, accordingly, an investment in our securities, involves significant risks, including but not limited to those described below. If any of those risks actually materializes, our business, financial condition and results of operations could be seriously harmed and the trading price of our shares could decline.

We operate in a highly competitive market and the size and resources of some of our competitors may allow them to compete more successfully, which could result in a loss of market share and as a result, a decrease in our net sales and gross profit.

        The sunglasses, non-prescription reading glasses, prescription frames and costume jewelry markets in which we compete are intensely competitive. Fashion is a differentiator in our markets, and our ability to continue to incorporate current fashions into our product lines and to generate marketing programs, product design and brand image that influence consumer purchases will be key factors in our ability to compete. Several of our competitors may enjoy substantial competitive advantages, including greater financial resources that can be devoted to competitive activities, such as sales and marketing, product development and strategic acquisitions. As a result, these competitors may be able to:

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adapt to changes in consumer preferences more quickly;



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anticipate and respond to changing fashion and performance trends more quickly;



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devote greater resources to the marketing and sale of their products;



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better adapt to downturns in the economy or other decreases in sales;



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borrow money at a lower cost; and



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take advantage of acquisitions and other opportunities more readily.

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We might not be able to compete successfully with these competitors in the future. If we fail to compete successfully, our market share and gross profit would be materially adversely affected.

We rely on a few customers for a significant portion of our sales. The leverage exerted by those customers or the loss of or significant decrease in business from one or more of them may materially adversely affect us.

        A few customers represent material portions of our business and results of operations. Our business and results of operations could be adversely affected by further consolidation in the mass channels or any deterioration in the financial condition of, or other adverse developments affecting, one or more of our top customers. Our large customers are also able to exert pricing and other influence on us, requiring us to market, deliver and promote our products in a manner of their choosing, which frequently is more costly to us. Moreover, we do not have a long-term contract with our largest customer, Wal-Mart. As a result, this customer generally purchases our products on an order-by-order basis, and our relationship, as well as particular orders, can be terminated at any time. The loss of or significant decrease in business from any of our major customers would materially adversely affect our business, results of operations and cash flow. Moreover, if we are successful in our strategy of broadening the range of products we sell to existing customers, the impact of any of the risks described in this risk factor would be increased.

Any interruption or termination of our relationships with our manufacturers could adversely affect our business, result in increased cost of goods sold or lead to an inability to deliver our products to our customers.

        We rely on third-party manufacturers to supply all of our products. Our principal manufacturers are located in China. We do not have long-term supply agreements with any of our manufacturers, and products are generally supplied on a purchase order basis. We cannot be certain that we will not experience difficulties with our manufacturers, such as reductions in the availability of production capacity, failures to comply with product specifications, failure to comply with applicable law, insufficient quality control, failures to meet production deadlines, increases in raw materials, labor and manufacturing costs or failures to comply with our requirements for the proper utilization of our intellectual property. If our relationship with any of our manufacturers is interrupted or terminated for any reason, we would need to locate alternative manufacturing sources. Potential events that could adversely affect our foreign supply chain include the following:

•

political instability, acts of war or terrorism, or other international events resulting in the disruption of trade with countries where our sourcing partners' manufacturing facilities are located;



•

disruptions in shipping and freight forwarding services, including as a result of dockworker or port strikes;



•

increases in oil prices, which would increase the cost of shipping;



•

interruptions in the availability of basic services and infrastructure, including power shortages;



•

extraordinary weather conditions (such as hurricanes, typhoons and snowstorms) or natural disasters (such as earthquakes or tsunamis); and



•

the occurrence of an epidemic, the spread of which may impact our ability to obtain products on a timely basis.

        These and other events could interrupt production by our third party manufacturers, increase our cost of goods sold or shipping costs, impair our ability to timely ship orders of our products, delay receipt of products into the United States, the United Kingdom or Mexico, cause us to miss the

12

delivery requirements of our customers or prevent us from sourcing products at all. As a result, we could experience lost sales, cancellation of orders, refusal to accept deliveries, increased product costs or a reduction in purchase prices, any of which could adversely affect our net sales, results of operations, reputation and relationships with our customers. The establishment of new manufacturing relationships involves numerous uncertainties, and we cannot be certain that we would be able to obtain alternative manufacturing sources in a manner that would enable us to meet our customer orders on a timely basis or on satisfactory commercial terms. If we are required to change any of our major manufacturers, we may experience increased costs, substantial disruptions in the manufacture and shipment of our products and a loss of net sales.

We may be subject to product liability claims, or we may be required to recall our products.

        Any of our products may be defective for a number of reasons, including but not limited to our suppliers' errors, failure to comply with applicable law or failure to comply with our specifications. We may be required to pay for losses or injuries caused by our products. We have been and may again be subjected to various product liability claims, including claims for serious personal injury. Successful assertion against us of one or a series of large claims could materially harm our business. Also, if one of our products is found to be defective, we may be required to recall it, which may result in substantial expense and adverse publicity and negatively impact our sales, operating results and reputation. Potential product liability claims may exceed the amount of insurance coverage or potential product liability claims may be excluded under the terms of the policy, which would hurt our financial condition. In addition, we may also be required to pay higher premiums and accept higher deductibles in order to secure adequate insurance coverage in the future.

We face business, political, operational, financial and economic risks because a material portion of our operations is outside the United States, a material portion of our sales is to customers outside the United States and all of our manufacturers are outside the United States.

        We outsource the manufacture of all our products to Asian contract manufacturers that maintain factories in China. In addition, we have foreign sales offices in the United Kingdom, Canada and Mexico and, in recent years, have made approximately 15% of our net sales to customers outside the United States. We are subject to risks inherent in international business, many of which are beyond our control, including:

•

imposition of U.S. and foreign government controls, such as export license requirements or other trade restrictions and changes in regulatory practices;



•

transportation delays and difficulties of managing international distribution channels;



•

longer payment cycles for, and greater difficulty collecting, accounts receivable;



•

unexpected changes in regulatory requirements, such as changes in withholding taxes that restrict the repatriation of earnings into the United States and affect our effective income tax rate due to profits generated or lost in foreign countries;



•

political and economic instability, including wars, terrorism, political unrest, boycotts, curtailment of trade and other business restrictions; and



•

difficulties in obtaining the protections of intellectual property laws, if any, of other countries.

Any of these events could reduce our net sales, decrease our gross margins or increase our expenses.

Fluctuations in foreign currency exchange rates could harm our results of operations.

        We are exposed to gains and losses resulting from the effect that fluctuations in foreign currency exchange rates have on the reported results in our consolidated financial statements due to the

13

translation of the operating results and financial position of our U.K., Canadian and Mexican subsidiaries. Additionally, we outsource the manufacture of our products to Asian contract manufacturers that maintain factories in China. While we pay these suppliers in U.S. dollars, their costs are typically based upon the local currency of the country in which they operate. Any decrease in the value of the U.S. dollar against these foreign currencies could result in a corresponding increase in our future cost of goods sold and decrease in our gross profit, which would materially adversely affect our financial condition and operating results.

We have indebtedness which may restrict our business and operations, adversely affect our cash flow and restrict our future access to sufficient funding to finance desired growth.

        At December 29, 2007, we had outstanding indebtedness of approximately $120.3 million under our credit facility.

        This amount of indebtedness (i) makes us more vulnerable to adverse changes in general economic, industry and competitive conditions and (ii) places us at a disadvantage compared to any of our competitors that may have less debt. Furthermore, our interest expense would increase if interest rates rise because our debt bears interest at floating rates. We dedicate a substantial portion of our cash flow to pay interest on our debt. If we do not have sufficient earnings to service our debt, we would need to refinance all or part of that debt, sell assets, borrow more money or sell securities, which we may not be able to do on commercially reasonable terms, or at all.

        The terms of our credit facility include customary events of default and covenants that limit us from taking certain actions without obtaining the consent of the lenders. In addition, our credit facility requires us to maintain certain financial ratios and restricts our ability to incur additional indebtedness. These restrictions and covenants limit our ability to respond to changing business and economic conditions and may prevent us from engaging in transactions that might otherwise be considered beneficial to us, including strategic acquisitions.

        A breach of the provisions of our credit facility, including any inability to comply with the required financial ratios, could result in an event of default under our credit facility. If an event of default occurs under our credit facility (after any applicable notice and cure periods), our lenders would be entitled to accelerate the repayment of amounts outstanding, plus accrued and unpaid interest. Moreover, these lenders would have the option to terminate any obligation to make further extensions of credit under our credit facility. In the event of a default under our credit facility, the lenders could also foreclose against the assets securing such obligations. In the event of a foreclosure on all or substantially all of our assets, we may not be able to continue to operate as a going concern.

Due to the uncertainty of the interpretation and application of existing U.S. federal income tax laws there is a risk that FGX International Holdings Limited could be treated as a U.S. corporation for U.S. federal income tax purposes, in which case we would be subject to higher taxes, which could materially adversely affect our results of operations and cash flows.

        U.S. federal income tax laws provide that if a foreign corporation acquires substantially all of the properties of a U.S. corporation and, after the acquisition, the former shareholders of the U.S. corporation own 80% or more of the stock of the foreign corporation by virtue of their ownership of the U.S. corporation's stock, the foreign corporation may be treated as a U.S. corporation for U.S. federal income tax purposes. Although we believe that these anti-inversion rules do not apply to us, these rules have not been the subject of any judicial decisions or administrative rulings, are subject to change at any time and any such change may be retroactive. Moreover, regulations or interpretations adversely affecting our position under the anti-inversion rules could be issued at any time, potentially with retroactive effect. If the Internal Revenue Service ("IRS") was to take successfully the contrary position that FGX International Holdings Limited should be treated as a U.S. corporation, we could be

14

subject to substantially higher U.S. federal income taxes and such changes could materially adversely affect our results of operations and cash flows.

We are exposed to risks relating to the evaluation of our internal control over financial reporting as required by Section 404 of the Sarbanes-Oxley Act of 2002.

        We are in the process of documenting and testing our internal control over financial reporting to enable management to evaluate our internal control as required by Section 404 of the Sarbanes-Oxley Act of 2002 for the first time as of January 3, 2009. However, we cannot be certain when we will complete our testing and any remediation actions or of the impact of these activities on our operations. If we are not able to implement the requirements of Section 404 adequately or in a timely manner, we may be subject to investigation and sanctions by regulatory authorities such as the Securities and Exchange Commission. There could also be a negative reaction in the financial markets due to a loss of confidence in the reliability of our financial statements. In addition, we may be required to incur costs in improving our internal control and the hiring of additional personnel. Any such actions could increase our operating expenses and negatively affect our results of operations.

If we are unable to implement our business strategy successfully to expand our product offerings, our business may suffer.

        We intend to continue to expand our product offerings, particularly focusing on prescription frames, more fashionable non-prescription reading glasses, our premium brands (Anarchy, Angel and Gargoyles) and higher-end licensed brands. We also plan to introduce new products within the eyewear and costume jewelry markets. However, we may not be successful in gaining market acceptance for any new products that we offer. In addition, introduction of new product offerings will require us to incur additional sales and marketing expenses, and these expenses may be material. The execution of our business strategy could strain our management, financial and operational resources, which could materially adversely affect our performance and results of operations. If our new products are not received favorably by consumers, our reputation and the value of our brands could be damaged. The lack of market acceptance of new products we may develop or our inability to generate satisfactory net sales from any new products to offset their cost could harm our business.

If we do not continue to negotiate and maintain favorable license arrangements, our growth prospects, sales and operating results could be adversely affected.

        We have entered into license agreements that enable us to sell eyewear under certain nationally recognized brands, including Ironman Triathlon, Levi Strauss Signature, Body Glove, C9 by Champion and Daytona International Speedway. We believe that our ability to maintain and negotiate favorable license agreements enables us to increase our access to additional distribution channels. Accordingly, if we are unable to negotiate and maintain or renew satisfactory license arrangements, our growth prospects, net sales and operating results could be adversely affected.

Our business could be harmed if we fail to maintain proper inventory levels or if we misjudge the market for a particular product.

        The sunglasses, non-prescription reading glasses and costume jewelry markets are subject to changing consumer preferences based on fashion and performance trends. Our success depends largely on our ability to continue to anticipate and respond to changing fashion and performance trends and consumer preferences in a timely manner. If we misjudge the market for a particular product or are unable to respond quickly to fashion trends, we may be unable to sell the products we have ordered from manufacturers or that we have in our inventory. Excess inventory levels may result in inventory write-downs, and the sale of excess inventory at discounted prices could significantly impair our brand image and harm our operating results and financial condition. Conversely, if we underestimate

15

consumer demand for our products or if our manufacturers fail to supply the quality products that we require at the time we need them, we may experience inventory shortages. Inventory shortages might delay shipments to our customers, negatively impact retailer relationships, diminish brand loyalty, or increase our costs.

If we fail to secure or protect our intellectual property rights, competitors may be able to use our intellectual property, which could weaken our competitive position, reduce our net sales and increase our costs.

        We attempt to protect our intellectual property rights through the enforcement of patent, trade secret, trade dress, trademark, copyright and unfair competition laws, in addition to nondisclosure, confidentiality and other contractual restrictions. Despite our efforts, third parties may have violated and may in the future violate our intellectual property rights. In addition, other parties, including our competitors, may independently develop similar, competing or superior products, technologies or designs that do not infringe on our intellectual property rights. If we fail to protect our intellectual property rights adequately, our competitors could obtain our proprietary information and imitate our products using processes or technologies developed by us and thereby harm our competitive position and financial condition. Parallel trade (i.e., gray markets) and counterfeiting of our products could harm our reputation for producing high-quality products.

        Since we sell our products internationally and outsource the manufacture of our products to Asian contract manufacturers that maintain factories in China, we also are dependent on the laws of foreign countries to protect our intellectual property. These laws may not enforce or protect our intellectual property rights to the same extent or in the same manner as the laws of the United States. There can be no assurance that our efforts to protect our intellectual property will be adequate, effective or will not be challenged by third parties or that the costs associated with protecting our rights abroad will not be extensive. If we are unable to protect adequately our intellectual property rights, our results of operations would be adversely affected.

We may be involved in intellectual property litigation or subject to claims by third parties for alleged infringement of their intellectual property rights, which are costly to defend, could require us to pay damages and could limit our ability to use certain technologies in the future.

        From time to time in the course of our business we are involved in litigation to protect and enforce our intellectual property rights and receive notices of claims of infringement, misappropriation or misuse of other parties' proprietary rights. Some of these claims lead to litigation. Our intellectual property rights may not have the value we believe them to have and our products may be found to infringe upon the intellectual property rights of others. Any intellectual property claim, whether or not determined in our favor or settled, could be costly, could harm our reputation and could divert our management from normal business operations. Adverse determinations in litigation could subject us to significant liability and force us to terminate sales of infringing products or to develop redesigned products or brands or could subject us to the loss of our rights to a particular patent, trademark, copyright or trade secret. In addition, we could be required to seek a license from the holder of the intellectual property, and it is possible that we may not be able to obtain a license on reasonable terms, or at all. Even if we obtain a license, the cost of potential royalty payments could negatively affect our margins. If we are unable to redesign our products or obtain a license, we may have to discontinue a particular product offering. If we fail to develop a non-infringing technology or product on a timely basis or to license the infringed technology on acceptable terms, our business, financial condition and results of operations could be harmed.

16

Fluctuations in our operating results on a quarterly and annual basis could cause the market price of our ordinary shares to decline.

        Our business is highly seasonal. In addition, our operating results fluctuate from quarter to quarter as a result of changes in demand for our products, our effectiveness in managing our suppliers and costs, the timing of the introduction of new products and weather patterns, and are likely to continue to do so. Our expense levels in the future will be based, in large part, on our expectations regarding net sales. Many of our expenses are fixed in the short term or are incurred in advance of anticipated sales. We may not be able to decrease our expenses in a timely manner to offset any seasonal shortfall of sales. These fluctuations could cause the market price of our ordinary shares to decline. You should not rely on period-to-period comparisons of our operating results as an indication of our future performance.

An increase in product returns could negatively impact our operating results.

        Sales are recognized when revenue is realized or realizable and has been earned. We recognize revenue when title to the product, ownership and risk of loss transfer to the customer, which generally is on the date of shipment. In addition, prior to revenue recognition, we require persuasive evidence of the arrangement, that the price is fixed or determinable, and that collectibility is reasonably assured. Accordingly, we provide allowances for the estimated amounts of these returns at the time of revenue recognition based on historical experience. Any significant increase in product damages or defects or product returns could materially adversely affect our operating results for the period or periods in which such events materialize.

Disruption in our distribution center could significantly lower our net sales and gross profit.

        Our distribution center in Smithfield, Rhode Island is essential to the efficient operation of our distribution network. Any serious disruption to this distribution center due to fire, snowstorms, flooding, acts of terrorism or any other cause could damage a significant portion of our inventory and could materially impair our ability to receive products from our suppliers and distribute products to our customers. In addition, we could incur significantly higher costs and longer lead times associated with distributing our products to our customers during the time that it takes for us to reopen or replace the center. As a result, any such disruption could significantly lower our net sales and gross profit.

We are heavily dependent on our current executive officers and management and the loss of any of them could adversely affect our ability to operate our business and to develop and market our products successfully.

        We believe that our future success is heavily dependent on the continuing contributions of our current executive officers and other members of management, as well as on our ability to attract and retain additional qualified management, design and sales and marketing personnel. We cannot be certain that any of them will not be recruited by our competitors or otherwise terminate their relationship with us. We do not carry key man life insurance. The loss of any key employee or the inability to attract or retain qualified personnel, including product design and sales and marketing personnel, could delay the development and introduction of, and harm our ability to sell, our products and damage our brand.

A shift by one or more of our customers to "pay-on-scan" payment programs could materially reduce our net sales, gross profit and cash flows.

        Some of our customers are considering ways to shift their inventory risks and costs of working capital by adopting "pay-on-scan" payment programs. Under these pay-on-scan arrangements, our inventory would not transfer to the customer until the customer has sold the product to a consumer.

17

Accordingly, we would not be able to recognize sales until the customer notifies us that the product has been sold to a consumer. We have historically declined to participate in most pay-on-scan inventory programs, even though some of our competitors may do so. Our decision not to participate in pay-on-scan programs may result in our loss of these customers, which would reduce our net sales and cash flows. If one or more of our customers terminates its relationship with us as a result of our decision not to participate in such pay-on-scan programs, our net sales, gross profit and cash flows may be materially adversely affected. Furthermore, if we agree to participate in such programs, it may be more difficult for us to manage effectively our inventory and our net sales and cash flows may be materially adversely affected as well.

If we fail to comply with federal regulations imposed by the Food and Drug Administration or various state regulations, we could be subject to fines and penalties and our products could be suspended or removed from the market, each of which would cause our net sales and results of operations to decline.

        Our non-prescription reading glasses and sunglasses are considered to be medical devices by the FDA, which can modify how these products are classified or could, through appropriate rulemaking, withdraw the exemption from pre-market notification. If this were to occur, it could have an adverse impact on our ability to continue to market these products and would likely increase our costs of compliance.

        If the FDA were to conclude, following such an inspection of our facilities or otherwise, that we are not in compliance with applicable laws or regulations, or that any of our medical devices are ineffective or pose an unreasonable health risk, the FDA could ban such medical devices, detain or seize adulterated or misbranded medical devices, order a recall, repair, replacement, or refund of such devices, and require us to notify health professionals and others that the devices present unreasonable risks of substantial harm to public health. The FDA may also impose operating restrictions either through consent decrees or otherwise, enjoin and restrain certain violations of applicable law pertaining to medical devices, and assess civil or criminal penalties against our officers, employees or us. The FDA may also recommend prosecution to the Department of Justice. Any of these adverse governmental actions could negatively affect our gross profit with respect to sales of our non-prescription reading glasses and sunglasses.

We may suffer negative publicity, be sued or have one or more of our license agreements or business relationships terminated if the manufacturers of our products violate labor laws or engage in practices that are viewed as unethical.

        We cannot control whether our manufacturers comply with legal and ethical labor practices. If one of these manufacturers violates, or is accused of violating, labor laws or other applicable regulations, or if such a manufacturer engages in labor or other practices that would be viewed as unethical if such practices occurred in the United States, one or more of our license agreements could be terminated by our licensors or our business relationships with our customers could be terminated. We also could suffer negative publicity or be sued. In addition, if such negative publicity affected one of our customers, it could result in the loss of business for us and materially adversely affect our business.

Item 1B    Unresolved Staff Comments.

        None.

Item 2    Properties.

        Our corporate headquarters is located on 32 acres in Smithfield, Rhode Island, and both the facility and the land are wholly owned by us. Originally constructed in 1976 and expanded by 125,000

18

square feet in 1998, this facility houses a 150,000 square foot warehouse and distribution center and 37,000 square feet of office space. We maintain leased showrooms and sales offices domestically in Bentonville, Arkansas and New York City, and internationally in Toronto, Mexico City, and the United Kingdom. We believe our current space is adequate for our current operations and when necessary, suitable replacement or additional space will be available on commercially reasonable terms.

        We also hold a lease to a 200,000 square foot facility in Miramar, Florida where we ceased operations in March 2005. This lease terminates in April 2011. We have subleased approximately 50% of this facility through the end of the lease term.

Item 3    Legal Proceedings.

        In May 2005, Coda Gargoyles, LLC, filed a lawsuit in the Supreme Court of the State of New York, County of New York alleging that one of our subsidiaries, Quantum Optics, Inc., made insufficient efforts to market products and collect accounts receivable to produce sufficient revenue to trigger earn-out provisions under our December 2003 purchase agreement relating to the acquisition of our premium brands, Anarchy, Angel and Gargoyles. The plaintiff claimed not less than $2.0 million in damages plus interest, attorney's fees and costs. One of the counts of the plaintiff's three-count complaint was a claim for breach of an implied duty of good faith and fair dealing, which was dismissed by the trial court on October 31, 2005. The two remaining counts were breach of contract and a demand for an accounting. Upon completion of mediated settlement discussions, we agreed to settle the lawsuit on March 13, 2008. Under the terms of the settlement, we agreed to pay the plaintiff $355,000 in exchange for mutual releases of all claims and a dismissal of the lawsuit with prejudice. We have not admitted any liability and have entered into the settlement to avoid the uncertainty and expense of the lawsuit. We have recorded the settlement costs in the consolidated financial statements for the fourth quarter and fiscal year ended December 29, 2007.

        In February 2007, Sun Optics, Inc. filed a lawsuit in the United States District Court, Central District of Utah alleging infringement of two of their design patents for eyeglass cases and seeking an injunction, damages, attorneys' fees and a jury trial. On March 8, 2007, the plaintiff voluntarily dismissed that lawsuit and then re-filed it in the United States District Court, District of Delaware on March 8, 2007. Plaintiff promptly sought a preliminary injunction concerning the design patents. On April 5, 2007, plaintiff moved to amend its pleadings to include a count of infringement of a utility patent for an eyeglass display and sought a preliminary injunction concerning the utility patent. On August 2, 2007, the plaintiff's motion to amend was granted, but both motions for a preliminary injunction were denied. On October 26, 2007, plaintiff brought a third motion for preliminary injunction directed to additional products. On November 2, 2007, the parties jointly moved for a 60 day stay of all dates in the case and the plaintiff moved to withdraw its third motion for preliminary injunction in order to allow the parties time to pursue settlement discussions. On November 15, 2007, the Court granted the motions to stay and withdraw. The Court has continued to stay the case to allow the parties to further pursue settlement discussions. The Federal Circuit has also stayed, and continues to stay, the briefing period on appeal to allow settlement discussions to progress. In the event that settlement discussions do not resolve the matter, the Company still intends to defend the action vigorously.

        From time to time we are also a party to various lawsuits, claims and other legal proceedings that arise in the ordinary course of our business. We do not believe that we are subject to any proceedings that, individually or in the aggregate, would be expected to materially adversely affect our results of operations or financial condition.

Item 4    Submission of Matters to a Vote of Security Holders.

        On October 16, 2007 our shareholders approved our 2007 Incentive Compensation Plan.

19

PART II

Item 5    Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities.

        Our ordinary shares trade on the NASDAQ Global Market under the symbol FGXI. The following table sets forth the high and low closing sale prices as reported by NASDAQ during the fourth quarter of fiscal 2007, beginning October 25, 2007, when our shares began trading.

	High		Low
2007
Fourth quarter	$	17.48	$	9.92

        As of March 6, 2008, there were five stockholders of record; however, we believe the number of beneficial owners to be much larger.

        We have not paid any cash dividends since our initial public offering and do not anticipate paying cash dividends in the future. Furthermore, our ability to pay cash dividends to shareholders is restricted by the terms of our credit facility.

Stock Performance Graph

        The following graph compares our cumulative total stockholder return since October 25, 2007, the date of our initial public offering, the Peer Group Index described below and the Russell 2000 Index. The graph assumes that the value of the investment in the Company's ordinary shares and each index was $100.00 on October 25, 2007. The graph was prepared based on the assumption that all dividends paid, if any, were reinvested.

20

	10/25/07		10/31/07		11/30/07		12/29/07
FGX International Holdings(1)	$	100.00	$	100.29	$	88.86	$	65.98
Russell 2000		100.00		102.74		95.37		96.02
Peer Group(2)		100.00		105.17		95.38		87.07

(1)

The Company's initial public offering priced at $16.00 per share. The Company's ordinary shares closed at $17.05 per share on October 25, 2007, the first day the Company's ordinary shares were traded on NASDAQ.

(2)

The Peer Group Index is a self-constructed peer group consisting of companies in the consumer products industry with comparable revenues, market capitalization, similar channels of trade and branded product lines. The Peer Group Index is comprised of the following companies: (i) A.T. Cross Company, (ii) Elizabeth Arden, Inc., (iii) Fossil, Inc., (iv) Chattem, Inc., (v) Jarden Corporation, (vi) Physicians Formula Holdings, Inc., (vii) Helen of Troy Limited, (viii) Prestige Brands Holdings, Inc. and (ix) Ulta Salon, Cosmetics & Fragrance, Inc.

        This performance graph is furnished and shall not be deemed "filed" with the SEC nor subject to Section 18 of the Securities Exchange Act of 1934, nor shall it be deemed incorporated by reference into any of our filings under the Securities Act of 1933.

Item 6    Selected Financial Data.

        The following table sets forth selected financial information for fiscal 2007, 2006, 2005, 2004 and 2003. Our fiscal year is a 52 or 53 week period ending on the Saturday closest to December 31. Fiscal 2007, which ended on December 29, 2007, fiscal 2006, which ended on December 30, 2006, fiscal 2005, which ended on December 31, 2005, and fiscal 2003, which ended on December 27, 2003, each included 52 weeks. Fiscal 2004, which ended on January 1, 2005, included 53 weeks. We have derived the consolidated statement of operations data for fiscal 2007, 2006 and 2005 and the consolidated balance sheet data as of December 29, 2007 and December 30, 2006 from our audited financial statements contained in Item 15 of Part IV of this Form 10-K. The selected consolidated balance sheet data as of December 31, 2005, January 1, 2005 and December 27, 2003 and the consolidated statement of operations data for the years ended January 1, 2005 and December 27, 2003 have been derived from the audited financial statements included in our prospectus filed with the Securities and Exchange Commission on October 25, 2007.

        The historical financial information set forth below may not be indicative of our future performance and should be read together with "Management's Discussion and Analysis of Financial

21

Condition and Results of Operations" and our historical consolidated financial statements and notes to those statements included in Item 7 of Part II and Item 15 of Part IV, respectively, of this Form 10-K.

			Fiscal Year Ended
			December 29, 2007			December 30, 2006			December 31, 2005			January 1, 2005			December 27, 2003
			(in thousands, except per share amounts)
Consolidated Statement of Operations Data:
Net sales:			$	240,463		$	209,208		$	189,881		$	136,691		$	120,042
Cost of goods sold				110,032			104,932			90,567			74,800			69,254
		Gross profit		130,431			104,276			99,314			61,891			50,788
Operating expenses:
	Selling expenses			68,727			55,466			47,179			36,384			30,964
	General and administrative expenses			21,183			17,918			28,205			21,038			16,909
	Amortization of acquired intangibles			6,172			7,597			9,276			1,285			—
	Legal settlement(1)			—			—			—			3,000			—
	Abandoned lease charge(2)			4,407			—			—			—			—
		Operating income		29,942			23,295			14,654			184			2,915
Other income (expense)
	Interest expense			(24,710	)		(21,951	)		(12,472	)		(3,784	)		(1,554	)
	Other income (expense), net			117			154			(72	)		28			(147	)
	Gain on sale of equity investment in joint venture(3)			—			—			—			—			2,166
		Income (loss) before income taxes		5,349			1,498			2,110			(3,572	)		3,380
Income tax expense				294			4,245			4,031			2,960			997
		Income (loss) before minority interest		5,055			(2,747	)		(1,921	)		(6,532	)		2,383
Minority interest expense				347			233			351			179			53
		Net income (loss)	$	4,708		$	(2,980	)	$	(2,272	)	$	(6,711	)	$	2,330
Basic earnings (loss) per share(4)			$	0.30		$	(0.20	)	$	(0.16	)	$	(0.46	)	$	0.39
Basic weighted average shares outstanding				15,941			14,838			14,376			14,497			6,046
Diluted earnings (loss) per share(5)			$	0.29		$	(0.20	)	$	(0.16	)	$	(0.46	)	$	0.37
Diluted weighted average shares outstanding				16,010			14,838			14,376			14,497			6,299
Other Data:
Net cash provided by (used in):
	Operating activities		$	10,913		$	(903	)	$	18,404		$	18,239		$	7,829
	Investing activities			(15,472	)		(13,948	)		(8,801	)		(89,554	)		(6,082	)
	Financing activities			(504	)		11,105			(2,478	)		73,079			1,323
Capital expenditures			$	15,472		$	10,948		$	8,969		$	7,385		$	6,331

22

	As of
	December 29, 2007		December 30, 2006			December 31, 2005			January 1, 2005		December 27, 2003
	(in thousands)
Consolidated Balance Sheet Data:
Current assets	$	112,636	$	119,053		$	92,498		$	71,251	$	60,446
Current liabilities		82,148		93,286			63,828			48,011		53,509
Property, plant and equipment, net		21,349		18,467			18,770			19,176		13,375
Total assets		211,855		221,038			201,158			188,160		87,226
Total debt, including current maturities		120,000		213,583			202,340			99,741		22,555
Total shareholders' equity (deficit)		17,333		(82,229	)		(81,264	)		20,834		27,117

(1)

Represents our portion of a patent infringement litigation settlement entered into in February 2005 in connection with an action commenced in 1992 by Magnivision (formerly known as Al-Site and then owned by its founding family, which family retained the rights to the litigation and any litigation proceeds) against an entity that is now a subsidiary of ours relating to the use of certain display devices for eyeglasses.

(2)

Represents a charge incurred as a result of the continued vacancy at our Miramar, Florida facility. We assumed the lease on this facility in connection with the Magnivision acquisition during fiscal 2004. See "Management Discussion & Analysis of Financial Condition and Results of Operations—Factors Affecting Our Results."

(3)

Represents realized gain on sale of an equity investment in a Hong Kong joint venture to the majority equity partner, including the release from a guarantee of bank debt related to that joint venture.

(4)

Basic earnings (loss) per share is computed by dividing net earnings (loss) by the weighted average number of ordinary shares outstanding during the period.

(5)

Diluted earnings (loss) per share is computed by dividing net earnings (loss) by the weighted average number of ordinary shares and dilutive potential ordinary shares outstanding during the period. Under the treasury stock method, the unexercised options are assumed to be exercised at the beginning of the period or at issuance, if later. Assumed proceeds are then used to purchase ordinary shares at the average market price during the period. Potential ordinary shares for which inclusion would have the effect of increasing diluted earnings per share (i.e., anti-dilutive) are excluded from the computation.

23

Item 7    Management's Discussion and Analysis of Financial Condition and Results of Operations.

        Management's Discussion and Analysis of Financial Condition and Results of Operations ("MD&A") is designed to provide a reader of our financial statements with a narrative from the perspective of our management on our financial condition, results of operations, liquidity and certain other factors that may affect our future results.

        Our MD&A should be read in conjunction with the Consolidated Financial Statements and related Notes included in Item 8, Financial Statements and Supplementary Data, of this Form 10-K.

        Our fiscal year ends on the Saturday closest to December 31. The 2007, 2006 and 2005 fiscal years each reflect a 52-week period.

        On October 18, 2007, the Company effected a 242,717 to one stock split of its ordinary shares. All share data has been retroactively restated to reflect the split.

Recent Developments

Initial Public Offering

        On October 24, 2007, a total of 13,800,000 ordinary shares were sold in an initial public offering at a price to the public of $16.00 per share for an aggregate of $220.8 million. 6,666,667 ordinary shares were sold by us and 7,133,333 ordinary shares were sold by our shareholders (including 1,800,000 ordinary shares sold by one of our shareholders pursuant to the underwriters' exercise of their over-allotment option). We did not receive any proceeds from ordinary shares sold by the selling shareholders. We received approximately $97.2 million in net proceeds after deducting underwriting discounts and commissions of $7.5 million and estimated underwriters' and other offering expenses of $2.0 million. The selling shareholders received approximately $106.1 million after deducting underwriting discounts and commissions of $8.0 million. We used $50.0 million of the net proceeds to repay in full the amount outstanding under our second lien term loan, $43.7 million to repay a portion of the amount outstanding under our first lien term loan, $3.0 million to repay in full the amount outstanding at the time under our revolving credit facility, and $0.5 million to pay bank fees related to the voluntary pre-payment of our second lien term loan.

Debt

        On December 19, 2007, we entered into a new $175.0 million credit facility consisting of a $100.0 million five year term loan and a $75.0 million revolving credit facility. Proceeds from this new facility, combined with the $97.2 million in net proceeds from our initial public stock offering, were used to repay approximately $220.7 million in higher interest rate indebtedness. We recorded a $2.8 million charge in the fourth quarter of fiscal 2007 due to the early extinguishment of this debt. Interest rates for borrowings under the new credit facility are based upon our leverage ratio. Interest rates were initially priced at 1.75% above the London Interbank Offered Rate (LIBOR) and then range from 1.00% to 2.25% above the LIBOR for Eurodollar-based borrowings, and from 0.00% to 1.25% above the defined base rate for base rate borrowings.

Summary of Results

•

Net sales increased 14.9% in 2007 to $240.5 million. The increase reflected the addition of new customers and the continued benefit of demographic trends on sales of our non-prescription reading glasses, as well as new styles introduced in our sunglasses segment.



•

Gross margin as percentage of net sales improved to 54.2% in 2007 versus 49.8% in 2006. This increase was due to our focus on higher margin product mix and cost reductions at suppliers.

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•

Net income increased from a loss of $3.0 million, or $0.20 per share, in 2006 to net income of $4.7 million, or $0.29 per share, in 2007. This increase was driven by sales growth due to the addition of new customers and favorable gross margin improvement in 2007.



•

Cash flow provided from operating activities was $10.9 million in 2007 compared to a use of $0.9 million in 2006.



•

We launched a national television advertising campaign supporting the FosterGrant brand.

Results of Operations

        The following table sets forth, for the periods indicated, selected statement of operations data as a percentage of net sales:

			Fiscal Year Ended
			December 29, 2007		December 30, 2006		December 31, 2005
Net sales			100.0	%	100.0	%	100.0	%
Cost of goods sold			45.8		50.2		47.7
Gross profit			54.2		49.8		52.3
Operating expenses:
	Selling expenses		28.6		26.5		24.9
	General and administrative expenses		8.8		8.6		14.8
	Amortization of acquired intangibles		2.6		3.6		4.9
	Abandoned lease charge		1.8		—		—
		Operating income	12.4		11.1		7.7
Other income (expense):
	Interest expense		(10.3	)	(10.5	)	(6.6	)
	Other income (expense), net		0.1		0.1		—
	Income before income taxes and minority interest		2.2		0.7		1.1
Income tax expense			0.1		2.0		2.1
Income (loss) before minority interest			2.1		(1.3	)	(1.0	)
Minority interest expense			0.1		0.1		0.2
Net income (loss)			2.0	%	(1.4	)%	(1.2	)%

        The following table sets forth, for the periods indicated, selected segment data as a percentage of net sales.

	Fiscal Year Ended
Segment Net Sales	December 29, 2007				December 30, 2006				December 31, 2005
	(dollars in thousands)
Non-prescription reading glasses	$	117,862	49.0	%	$	95,327	45.6	%	$	83,220	43.8	%
Sunglasses and prescription frames		61,717	25.6			56,725	27.1			42,848	22.6
Costume jewelry		24,933	10.4			28,207	13.5			34,351	18.1
International		35,951	15.0			28,949	13.8			29,462	15.5
Net sales	$	240,463	100.0	%	$	209,208	100.0	%	$	189,881	100.0	%

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        The following table sets forth, for the periods indicated, selected operating results by segment.

		Fiscal Year Ended
Segment		December 29, 2007				December 30, 2006				December 31, 2005
		(dollars in thousands)
Non-prescription reading glasses
	Net sales	$	117,862	100.0	%	$	95,327	100.0	%	$	83,220	100.0	%
	Cost of goods sold		46,759	39.7			40,011	42.0			33,893	40.7
	Gross profit	$	71,103	60.3	%	$	55,316	58.0	%	$	49,327	59.3	%
Sunglasses and prescription frames
	Net sales	$	61,717	100.0	%	$	56,725	100.0	%	$	42,848	100.0	%
	Cost of goods sold		35,376	57.3			33,873	59.7			23,560	55.0
	Gross profit	$	26,341	42.7	%	$	22,852	40.3	%	$	19,288	45.0	%
Costume jewelry
	Net sales	$	24,933	100.0	%	$	28,207	100.0	%	$	34,351	100.0	%
	Cost of goods sold		14,570	58.4			18,585	65.9			22,377	65.1
	Gross profit	$	10,363	41.6	%	$	9,622	34.1	%	$	11,974	34.9	%
International
	Net sales	$	35,951	100.0	%	$	28,949	100.0	%	$	29,462	100.0	%
	Cost of goods sold		13,327	37.1			12,463	43.1			10,737	36.4
	Gross profit	$	22,624	62.9	%	$	16,486	56.9	%	$	18,725	63.6	%

Fiscal 2007 Compared to Fiscal 2006

        Net Sales.    Net sales increased by $31.3 million, or 14.9%, from $209.2 million in fiscal 2006 to $240.5 million in fiscal 2007.

        In the non-prescription reading glasses segment, net sales increased by $22.5 million, or 23.6%, from $95.3 million in fiscal 2006 to $117.9 million in fiscal 2007. This increase was due to product display enhancements at two major customers, which contributed $9.6 million of incremental sales in fiscal 2007, and $5.2 million of additional sales as a result of a non-prescription reading glasses contract with a major customer that was awarded to us in the fourth quarter of fiscal 2006. The remaining increase was primarily due to higher sales volume at major customers.

        In the sunglasses and prescription frames segment, net sales increased by $5.0 million, or 8.8%, from $56.7 million in fiscal 2006 to $61.7 million in fiscal 2007. Of this increase, $4.3 million was the result of a new promotional program launched at a major customer during fiscal 2007 as well as promotional roll-outs and organic sales growth at other existing customers.

        In the costume jewelry segment, net sales decreased by $3.3 million, or 11.6%, from $28.2 million in fiscal 2006 to $24.9 million fiscal 2007. This decrease was primarily due to the strategic decision to reduce participation in promotional programs and the reduction of retail space allocated for our product at a major customer.

        In the international segment, net sales increased by $7.0 million, or 24.2%, from $28.9 million in fiscal 2006 to $36.0 million in fiscal 2007. This increase was primarily driven by strong sales across all segments in Canada as well as a non-prescription reading glasses roll-out launched in the United Kingdom.

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        Gross Profit.    Gross profit increased by $26.2 million, or 25.1%, from $104.3 million in fiscal 2006 to $130.4 million in fiscal 2007. As a percentage of net sales, gross profit increased from 49.8% to 54.2% in the corresponding periods.

        In the non-prescription reading glasses segment, gross profit increased by $15.8 million, or 28.5%, from $55.3 million in fiscal 2006 to $71.1 million in fiscal 2007. As a percentage of net sales, gross profit increased from 58.0% to 60.3% during the corresponding periods. The dollar increase in gross profit was primarily due to increased sales volume. The increase in gross profit as a percentage of net sales was primarily the result of favorable product mix and lower product costs.

        In the sunglasses and prescription frames segment, gross profit increased by $3.5 million, or 15.3%, from $22.9 million in fiscal 2006 to $26.4 million in fiscal 2007. As a percentage of net sales, gross profit increased from 40.3% to 42.7% in the corresponding periods. The dollar increase in gross profit was primarily due to the increase in net sales. The increase in gross profit as a percentage of net sales was primarily the result of favorable product mix and lower product costs from our suppliers.

        In the costume jewelry segment, gross profit increased by $0.7 million, or 7.7%, from $9.6 million in fiscal 2006 to $10.4 million in fiscal 2007. As a percentage of net sales, gross profit increased from 34.1% to 41.6% in the corresponding periods. The dollar increase in gross profit and increase in gross profit as a percentage of net sales were primarily due to a strategic change to forgo lower margin promotional programs at a major customer.

        In the international segment, gross profit increased by $6.1 million, or 37.2%, from $16.5 million in the fiscal 2006 to $22.6 million in fiscal 2007. As a percentage of net sales, gross profit increased from 56.9% to 62.9% in the corresponding periods. The dollar increase in gross profit was primarily due to the increase in net sales in Canada and the United Kingdom. The increase in gross profit as a percentage of net sales resulted from favorable sales mix in the United Kingdom of non-prescription reading glasses.

        Selling Expenses.    Selling expenses increased by $13.3 million, or 23.9%, from $55.5 million in fiscal 2006 to $68.7 million in fiscal 2007. As a percentage of net sales, selling expenses increased from 26.5% to 28.6% in the corresponding periods. The increase in selling expenses was due to $4.9 million of expenses incurred in connection with our FosterGrant television and Magnivision print advertising campaign launched in 2007; higher field service costs of $2.5 million as a result of increased volume and a dedicated investment towards our field service management; higher freight charges of $1.8 million due to higher fuel costs and an increased volume of direct-to-store shipments; higher personnel costs of $1.7 million as a result of increased headcount to support expansion of our business.

        General and Administrative Expenses.    General and administrative expenses increased by $3.3 million, or 18.2%, from $17.9 million in fiscal 2006 to $21.2 million in fiscal 2007. As a percentage of net sales, general and administrative expenses increased from 8.6% to 8.8% in the corresponding periods. The dollar increase was primarily the result of incremental personnel costs and higher audit fees associated with becoming a public company and legal settlement costs.

        Amortization of Acquired Intangibles.    Amortization of acquired intangibles decreased by $1.4 million, or 18.8%, from $7.6 million in fiscal 2006 to $6.2 million in fiscal 2007. This decrease was primarily due to certain intangible assets associated with the acquisition of Magnivision being amortized on an accelerated basis over their economic lives.

        Abandoned Lease Charge.    During fiscal 2007, the Company recorded a total of $4.4 million in abandoned lease charges as a result of the continued vacancy of our Miramar, Florida facility. This charge assumes that the remaining space of this facility will remain vacant through the end of the lease term in April 2011.

27

        Interest Expense.    Interest expense increased $2.8 million, or 12.6%, from $22.0 million in fiscal 2006 to $24.7 million in fiscal 2007. This increase was due to a $2.8 million charge related to the early extinguishment of debt under our prior credit facility discussed in the Recent Developments section above.

        Income Taxes.    Provision for income taxes decreased from $4.2 million in fiscal 2006 to $0.3 million fiscal 2007. This decrease was primarily related to the release of a portion of the $4.5 million valuation allowance we had previously recorded against U.S. deferred tax assets. We recorded that allowance in prior periods based on our determination at the time that it was more likely than not that our U.S. deferred tax assets would not be realized (primarily due to cumulative losses in the periods preceding recording of the allowance). As a result of improved operating results in the U.S. and our assessment of expected future results in the U.S., we determined that it was more likely than not that a substantial portion of our U.S. deferred tax assets would be realized and released most of our valuation allowance, recognizing an income tax benefit of $3.4 million. This benefit was primarily offset by a $1.5 million charge to establish a deferred tax liability related to the future recognition of certain foreign deferred tax assets in the U.S.

        Net Income (Loss).    For the reasons described above, our net income increased by $7.7 million, or 258.0%, from a loss of $3.0 million in fiscal 2006 to income of $4.7 million in fiscal 2007.

Fiscal 2006 Compared to Fiscal 2005

        Net Sales.    Net sales increased by $19.3 million, or 10.2%, from $189.9 million in fiscal 2005 to $209.2 million in fiscal 2006.

        In the non-prescription reading glasses segment, net sales increased by $12.1 million, or 14.5%, from $83.2 million in fiscal 2005 to $95.3 million in fiscal 2006. Of this increase, $15.4 million was attributable to a new non-prescription reading glasses contract with a major customer that was awarded to us in fiscal 2006, which was partially offset by a planned reduction in shipments to another major customer in anticipation of a planned new program launch in the first quarter of fiscal 2007.

        In the sunglasses and prescription frames segment, net sales increased by $13.9 million, or 32.4%, from $42.8 million in fiscal 2005 to $56.7 million in fiscal 2006. Of this increase, $11.3 million was attributable to our being awarded a significant portion of a year round sunglasses program by, and obtaining more retail space at, a major customer and the non-recurrence in fiscal 2006 of an early inventory replenishment termination by a major customer that occurred in fiscal 2005.

        In the costume jewelry segment, net sales decreased by $6.1 million, or 17.9%, from $34.4 million in fiscal 2005 to $28.2 million in fiscal 2006. This decrease was primarily due to a back-to-school promotional program that shipped to a major customer in fiscal 2005 that was not repeated in fiscal 2006.

        In the international segment, net sales decreased by $0.5 million, or 1.7%, from $29.5 million in fiscal 2005 to $28.9 million in fiscal 2006. The decrease was primarily due to a $3.6 million charge for product return commitments made to a majority of our customers in the United Kingdom in order to implement a new merchandising strategy. This decrease was partially offset by a new program launched at two major customers in Canada and improved retail sales in Mexico.

        Gross Profit.    Gross profit increased by $5.0 million, or 5.0%, from $99.3 million in fiscal 2005 to $104.3 million in fiscal 2006. As a percentage of net sales, gross profit decreased from 52.3% to 49.8% in the corresponding periods.

        In the non-prescription reading glasses segment, gross profit increased by $6.0 million, or 12.1%, from $49.3 million in fiscal 2005 to $55.3 million in fiscal 2006. As a percentage of net sales, gross profit decreased from 59.3% to 58.0% in fiscal 2006. The dollar increase in gross profit was due to an

28

increase in net sales. The decrease in gross profit as a percentage of net sales was primarily due to an increase in sales at two major customers of lower margin styles during fiscal 2006 as compared to fiscal 2005.

        In the sunglasses and prescription frames segment, gross profit increased by $3.6 million, or 18.5%, from $19.3 million in fiscal 2005 to $22.9 million in fiscal 2006. As a percentage of net sales, gross profit decreased from 45.0% in fiscal 2005 to 40.3% in fiscal 2006. The dollar increase in gross profit was due to the increase in net sales. The decrease in gross profit as a percentage of net sales was primarily due to a higher percentage of sales coming from opening price point styles, which carry lower gross margins, during fiscal 2006 as compared to fiscal 2005.

        In the costume jewelry segment, gross profit decreased by $2.4 million, or 19.6%, from $12.0 million in fiscal 2005 to $9.6 million in fiscal 2006. As a percentage of net sales, gross profit decreased from 34.9% in fiscal 2005 to 34.1% in fiscal 2006. The dollar decrease in gross profit was due to a decrease in net sales in the costume jewelry segment as compared to fiscal 2005. This decrease in gross profit as a percentage of net sales was primarily due to a lower margin holiday box promotional program that represented a larger portion of net sales in fiscal 2006 as compared to fiscal 2005.

        In the international segment, gross profit decreased by $2.2 million, or 12.0%, from $18.7 million in fiscal 2005 to $16.5 million in fiscal 2006. As a percentage of net sales, gross profit decreased from 63.6% in fiscal 2005 to 56.9% in fiscal 2006. The dollar decrease in gross profit was a result of the $3.6 million charge in the United Kingdom described above. This decrease in gross profit as a percentage of net sales also resulted from an unfavorable sales mix weighted toward lower margin products.

        Selling Expenses.    Selling expenses increased by $8.3 million, or 17.6%, from $47.2 million in fiscal 2005 to $55.5 million in fiscal 2006. As a percentage of net sales, selling expenses increased from 24.9% in fiscal 2005 to 26.5% in fiscal 2006. This increase in selling expenses was due to higher freight charges of $2.1 million related to higher fuel costs and a higher mix of direct to store shipments; higher field service costs of $2.4 million related to the setting of initial shipments of new sunglasses products and non-prescription reading glasses display updates at retail; and $0.4 million of stock-based compensation expense in accordance with our adoption of SFAS 123R. We also incurred additional depreciation expense of $2.4 million related to an increase of display fixtures related to new customer accounts awarded to us during fiscal 2006.

        General and Administrative Expenses.    General and administrative expenses decreased by $10.3 million, or 36.5%, from $28.2 million in fiscal 2005 to $17.9 million in fiscal 2006. As a percentage of net sales, general and administrative expenses decreased from 14.8% in fiscal 2005 to 8.6% in fiscal 2006. The decrease relates to expenses that occurred in 2005 that did not recur in 2006. Among these expenses was a $2.3 million severance charge incurred in connection with the termination of three senior executives, $3.0 million in costs to conduct operations at Magnivision's Florida facility, which has since been closed, $0.7 million of depreciation related to the Magnivision facility and $0.3 million in legal fees associated with patent infringement litigation, which has since been resolved. In addition, we incurred charges of $1.1 million in fiscal 2005 related to legal fees and other litigation settlements, charges of approximately $0.1 million relating to corporate renaming and $0.2 million in connection with our search for, and hiring of, our Chief Executive Officer.

        Amortization of Acquired Intangibles.    Amortization of acquired intangibles decreased by $1.7 million, or 18.1%, from $9.3 million in fiscal 2005 to $7.6 million in fiscal 2006. This decrease was due to certain intangible assets associated with the acquisition of Magnivision being amortized on an accelerated basis over their economic lives.

29

        Interest Expense.    Interest expense increased $9.5 million, or 76.0%, from $12.5 million in fiscal 2005 to $22.0 million in fiscal 2006. This increase was primarily due to the full year impact of incremental debt incurred in December 2005 in connection with a dividend to shareholders and amounts outstanding under our line of credit, combined with higher interest rates on higher borrowings in fiscal 2006 as compared to fiscal 2005.

        Income Taxes.    Income taxes increased by $0.2 million, or 5.3%, from $4.0 million in fiscal 2005 to $4.2 million in fiscal 2006. This increase was due to higher income in Canada for fiscal 2006 as compared to fiscal 2005.

        Net Loss.    For the reasons described above, our net loss increased by $0.7 million, or 31.2%, from $2.3 million in fiscal 2005 to $3.0 million in fiscal 2006.

Liquidity and Capital Resources

        Our primary liquidity needs are for working capital, capital expenditures (specifically display fixtures) and debt service. Our primary sources of cash have been cash flow from operations, net proceeds from our initial public offering and borrowings under our credit facility. As of December 29, 2007, we had $4.6 million of cash and cash equivalents and $54.7 million available under our revolving credit facility. As of December 30, 2006, we had $9.7 million of cash and cash equivalents and $2.2 million available under our revolving credit facility.

        As a result of our new capital structure and new credit facility, we believe that our cash flow from operations, available cash and cash equivalents and borrowings available under our credit facility will be adequate to meet our liquidity needs through at least fiscal 2008. However, our ability to make scheduled payments of principal, pay the interest on or refinance our indebtedness or fund planned capital expenditures will depend on our future performance, which, to a certain extent, is subject to general economic, financial, competitive and other factors that are beyond our control.

        Although we have no specific current plans to do so, to the extent we decide to pursue one or more strategic acquisitions, we may need to incur additional indebtedness or sell additional equity to finance those acquisitions.

Cash Flows

        The following table summarizes our cash flow activities for the periods indicated:

		Fiscal Year Ended
		December 29, 2007			December 30, 2006			December 31, 2005
		(in thousands)
Net cash provided by (used in):
	Operating activities	$	10,913		$	(903	)	$	18,404
	Investing activities		(15,472	)		(13,948	)		(8,801	)
	Financing activities		(504	)		11,105			(2,478	)
Effect of exchange rates on cash balances			(33	)		841			(495	)
Increase (decrease) in cash and cash equivalents		$	(5,096	)	$	(2,905	)	$	6,630

30

        We purchase finished goods from our contract manufacturers in Asia and take title upon delivery to the freight consolidator. Transit times range from ten to 30 days. Our payment terms with our eyewear suppliers range from 45 to 120 days and provide discounts to us for timely payments, while payment terms with our costume jewelry suppliers average 30 days. As a result of increases in our overall sales volume, we have used cash to fund our receivables and inventories. In general, these increases are only partially offset by increases in accounts payable to our suppliers.

        Operating Activities.    During fiscal 2007, the Company generated $10.9 million in cash from operating activities as compared to a use of $0.9 million in fiscal 2006. The increase in operating cash flow was primarily due to higher net income of $7.7 million and decreases in accounts receivable and accounts payable. The decrease in accounts receivable was a result of timing of cash collections in the fiscal 2007 as compared to fiscal 2006. The decrease in accounts payable was primarily the result of increased purchases to support new business at a major customer at the end of fiscal 2006.

        Net cash provided by operating activities decreased by $19.3 million from $18.4 million in fiscal 2005 to a use of $0.9 million in fiscal 2006. The decrease in net cash provided by operating activities is primarily due to an additional $9.5 million in interest expense and a $9.3 million increase in accounts receivable in fiscal 2006 compared to fiscal 2005.

        Investing Activities.    Net cash used in investing activities increased by $1.5 million from $13.9 million in fiscal 2006 to $15.5 million in fiscal 2007. The increase in net cash used in investing activities was primarily due to incremental display fixture costs associated with the addition of new customers and a $3.0 million purchase price adjustment recorded in 2006 related to the Magnivision acquisition.

        Net cash used by investing activities increased by $5.1 million from $8.8 million in fiscal 2005 to $13.9 million in fiscal 2006. The increase in net cash used by investing activities was primarily due to incremental display fixture costs associated with the addition of new customers. Also contributing to this increase was a $3.0 million payment of a portion of the $5.1 million settlement in connection with the working capital adjustment dispute related to the Magnivision acquisition.

        Financing Activities.    Net cash used in financing activities decreased by $11.6 million from $11.1 million in fiscal 2006 to a use of $0.5 million in fiscal 2007. The decrease in net cash used in financing activities was primarily due to the $93.8 million of cash proceeds we received in connection with our initial public offering which is net of prepaid initial public offering costs; $120.0 million of borrowings under our new credit facility and a $5.0 million decrease in our net borrowings under our revolving line of credit. These proceeds were offset by long-term debt payments of $220.7 million to extinguish our old credit facility and $1.1 million of financing fee payments in connection with our refinancing.

        Net cash provided by financing activities increased by $13.6 million from a use of $2.5 million in fiscal 2005 to $11.1 million in fiscal 2006. The increase in net cash provided by financing activities was primarily due to an increase in net borrowings under our revolving line of credit of $12.5 million.

Capital Expenditures

        Our capital expenditures were $15.5 million and $10.9 million for fiscal 2007 and 2006, respectively. The majority of our capital expenditures related to permanent display fixtures, which we provide in our customers' retail locations and this increase was primarily due to the addition of new customers in fiscal 2007. We depreciate our fixtures using an estimated useful life of two to three years. The future timing and volume of such capital expenditures will be affected by new business, customer contract renewals and replacements of existing fixtures at existing retail customers.

31

        At December 29, 2007, we had outstanding commitments for capital expenditures of $5.2 million relating to permanent display fixtures. We intend to fund these expenditures primarily from operating cash flow and borrowings under our revolving credit facility.

Credit Facility

        On December 19, 2007, we refinanced our then-existing credit facility. This new facility was comprised of (a) a $75.0 million revolving credit facility, which may be increased with the consent of our existing or additional lenders by up to an additional $50.0 million; and (b) a $100.0 million term loan facility ("Term Loan Facility"). Interest rates for borrowings under the new facility are determined based upon our leverage ratio. Interest rates will be initially priced at 1.75% above LIBOR and then range from 1.00% to 2.25% above LIBOR for Eurodollar-based borrowings, and from 0.00% to 1.25% above the defined base rate for base rate borrowings. The Term Loan Facility is due in 20 consecutive quarterly graduating installments ranging from $1.9 million to $8.1 million commencing on March 31, 2008. The Term Loan Facility will mature on December 19, 2012. Amounts due under the new facility are collateralized by a pledge of 100% of our tangible and intangible assets. The Company will also pay commitment fees and other customary fees. These commitment fees will range from 0.20% to 0.50% per annum depending upon the Company's leverage ratio.

        As of December 29, 2007, we had outstanding indebtedness of $100.0 million under our Term Loan Facility, $20.0 million outstanding under our revolving credit facility and $0.3 million outstanding under letters of credit. Our borrowing availability thereunder was $54.7 million. The interest rate on the Term Loan Facility and the revolving credit facility are at LIBOR plus 1.75% (6.65% as of December 29, 2007).

        Our credit facility contains covenants limiting, among other things, mergers, consolidations, liquidations and dissolutions; sales of assets; investments and acquisitions; indebtedness; liens and other encumbrances; dividends and other restricted payments; payment and modification of material subordinated debt instruments; transactions with affiliates; changes in fiscal year; negative pledge clauses; restrictions on subsidiary distributions; sale and leaseback transactions; factoring arrangements and changes in lines of business; and capital expenditures. Our credit facility also requires that we comply with a leverage ratio and fixed charge coverage ratio covenants. Our credit facility, including affirmative and negative covenants, is described in more detail under "Description of Credit Facility." For a description of risks associated with our credit facility, see "Risk Factors—Risks Related to Our Business—We have indebtedness which may restrict our business and operations, adversely affect our cash flow and restrict our future access to sufficient funding to finance desired growth."

Magnivision Purchase Price Adjustment

        On October 1, 2004, we acquired all of the outstanding common shares of Magnivision, Inc. from American Greetings Corporation for cash consideration of approximately $81.5 million, including expenses, subject to a post-closing working capital price adjustment. Following the closing of the acquisition, a dispute arose between us and American Greetings related to the calculation of the post-closing purchase price adjustment required by the purchase agreement. The post-closing purchase price adjustment was used to reconcile each party's calculation of Magnivision's working capital as of the closing date of the transaction. The dispute primarily concerned certain provisions of the purchase agreement governing use of American Greetings' historical accounting procedures and the calculation of closing date working capital. This dispute was brought to binding arbitration in 2005. The arbitrator reached a tentative decision in March 2006 requiring us to pay additional purchase consideration of approximately $6.0 million. We entered into a settlement agreement on October 24, 2006, pursuant to which we paid American Greetings a total of $5.1 million.

32

Contractual Obligations and Other Commitments

        As of December 29, 2007, our contractual obligations and other commitments were as follows:

		Payments Due by Period
		Total		Less than 1 Year		1-3 Years		3-5 Years		More than 5 Years
		(in thousands)
Long-term debt obligations(1)		$	100,311	$	7,670	$	32,641	$	60,000	$	—
Interest payment obligations(2)			20,771		6,283		10,267		4,221		—
Operating lease obligations			7,585		2,134		4,304		1,084		63
Minimum royalty obligations(3)			1,427		521		638		268		—
Purchase obligations(4)			5,177		5,177		—		—		—
	Total(5)	$	135,271	$	21,785	$	47,850	$	65,573	$	63

(1)

Includes obligations to pay principal only under our new credit facility and capital lease obligations. No interest expense is included. All principal payments under our credit facility assume that principal payments are made as originally scheduled.

(2)

Represents estimated interest payments to be made on our variable rate debt. All interest payments assume that principal payments are made as originally scheduled. Interest rates used to determine interest payments for variable rate debt are based upon the interest rate in effect on December 29, 2007.

(3)

Consists of obligations for future minimum royalties pertaining to licensed brands to be paid to third-party licensors.

(4)

Represents obligations related to display fixtures.

(5)

Excludes approximately $5.2 million of income tax liabilities that have been recorded in other long-term liabilities in our consolidated balance sheet as of December 29, 2007, in accordance with FASB issued Interpretation No. 48, Accounting For Uncertainty in Income Taxes—an interpretation of FASB Statement No. 109, Accounting for Income Taxes.

Off-Balance Sheet Arrangements

        As of December 29, 2007, we did not have any off-balance sheet arrangements, as defined in Item 303(a)(4)(ii) of SEC Regulation S-K.

Critical Accounting Estimates

        We prepare our consolidated financial statements in accordance with accounting principles generally accepted in the United States. As such, management is required to make certain estimates, judgments and assumptions that it believes are reasonable based on the information available. These estimates and assumptions affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses for the periods presented. Actual circumstances could differ from those estimates, and any such differences may materially affect our reported results. The estimates and assumptions that management believes are the most significant in preparing our financial statements are described below.

Revenue Recognition

        Sales are recognized when revenue is realized or realizable and has been earned. We recognize revenue when title to the product, ownership and risk of loss transfer to the customer, which generally is on the date of shipment. We also maintain destination-based terms with principally one customer in

33

the United States and with all of our customers in the United Kingdom and Mexico pursuant to which we recognize revenue upon confirmation of receipt by the customer. In addition, prior to revenue recognition, we require persuasive evidence of the arrangement that the price is fixed or determinable, and that collectibility is reasonably assured. A provision for anticipated returns is recorded as a reduction of sales in the same period that the revenue is recognized in accordance with FASB Statement No. 48, Revenue Recognition When Right of Return Exists. We account for certain customer promotional payments, volume rebates, cooperative advertising, product placement fees and other discounts as a reduction of revenue under the guidance issued by the FASB's Emerging Issues Task Force (EITF) in Issue No. 00-25, Vendor Income Statement Characterization of Consideration Paid to a Reseller of the Vendor's Products, Issue No. 00-14, Accounting for Certain Sales Incentives, and Issue No. 01-09, Accounting for Consideration Given by a Vendor to a Customer (Including a Reseller of the Vendor's Products). We also enter into multi-year supply agreements with many of our customers that often have minimum purchase requirements. Upfront payments and credits to customers are recorded as a reduction of revenue when the customer has earned the credits based on the purchase order or sales contract and are provided for based upon our estimates.

Product Returns, Markdowns and Contractual Allowances

        Net sales, as reported in our consolidated statements of operations, represent gross shipments to our customers less provisions and charges for product returns, markdowns, damages and contractual allowances. We regularly review and revise our estimates of returns, markdowns and contractual allowances, which are recorded at the time of sale based upon our historical experience, in light of actual returns, planned product discontinuances and promotional sales. We record returns, markdowns and contractual allowances as a reduction to sales and as a reserve against accounts receivable on our consolidated balance sheet. Actual product returns, markdowns and contractual allowances, as well as realized value on product returns, may differ significantly, either favorably or unfavorably, from our estimates.

        Contractual allowances include product placement fees, cooperative advertising, volume rebates and other discounts that are agreed upon as a component of our program terms with our customers. These allowances are specific to a customer contract and are recognized at the time of shipment. We record contractual allowances as a reduction of gross sales but not as a reduction of accounts receivable. Instead, we record contractual allowances as an accrued expense on our consolidated balance sheet.

Inventories

        Inventories are stated at the lower of cost (first-in, first-out) or market and consist of finished goods. We provide inventory allowances for excess, slow moving and obsolete inventories determined primarily by estimates of future demand. The allowance is measured as the difference between the cost of the inventory and estimated market value and charged to the provision for inventory, which is a component of our cost of goods sold. Assumptions about future demand are among the primary factors used to estimate market value. At the time of the loss recognition, which is recorded to cost of goods sold, a new, lower-cost basis for that inventory is established and subsequent changes in facts and circumstances do not result in the restoration or increase in that newly established cost basis. Inventory management is a primary management focus as we balance the need to maintain adequate inventory levels to ensure timely customer order fulfillment against the risk of obsolescence because of changing fashion trends and customer requirements.

Impairment of Long-Lived Assets

        We test for impairment whenever events or changes in circumstances indicate that the carrying value of the asset might not be recoverable from estimated future cash flows. We account for long-lived

34

assets, excluding goodwill and non-amortized trademarks, in accordance with the provisions of SFAS No. 144, Accounting for Impairment or Disposal of Long-Lived Assets ("SFAS 144"). SFAS 144 requires recognition of an impairment loss only if the carrying amount of a long-lived asset or asset group is not recoverable from its estimated undiscounted cash flows. An impairment loss is measured as the difference between the carrying amount and fair value of the asset or asset group.

Valuation of Goodwill and Other Intangible Assets

        Goodwill represents the excess of cost over the fair value of the net tangible assets and identifiable intangible assets of businesses acquired. The fair value of identified intangible assets is based upon an estimate of the future economic benefits expected to result from ownership, which represents the amount at which the assets could be bought or sold in a current transaction between willing parties, that is, other than in a forced or liquidation sale. In accordance with SFAS No. 142, Goodwill and Other Intangible Assets, we test our goodwill and indefinite-lived intangibles for impairment annually or more frequently if events or circumstances indicate impairment may exist. We generally complete our annual analysis of goodwill during our fourth fiscal quarter or more frequently if impairment indicators arise. We apply a two-step fair value-based test to assess goodwill for impairment. The first step compares the fair value of a reporting unit to its carrying amount, including goodwill. If the carrying amount of the reporting unit exceeds its fair value, the second step is then performed. The second step compares the carrying amount of the reporting unit's goodwill to the fair value of the goodwill. If the fair value of the goodwill is less than the carrying amount, an impairment loss would be recorded in our income from operations. Intangible assets with definite lives are amortized over their estimated useful lives and are also reviewed for impairment if events or changes in circumstances indicate that their carrying amount may not be realizable.

        We make certain estimates and assumptions in order to determine the fair value of net assets and liabilities, including, among other things, an assessment of market conditions, projected cash flows, cost of capital and growth rates which could significantly impact the reported value of goodwill and other intangible assets. Estimating future cash flows requires significant judgment, and our projections may vary from cash flows eventually realized. When necessary, we engage third-party specialists to assist us with our valuations. The valuations employ a combination of present value techniques to measure fair value, corroborated by comparisons to estimated market multiples. These valuations are based on a discount rate determined by us to be consistent with industry discount rates and the risks inherent in our current business model.

        We cannot predict the occurrence of certain future events that might adversely affect the reported value of goodwill and other intangible assets that totaled $70.2 million and $76.4 million at December 29, 2007 and December 30, 2006, respectively. Such events include strategic decisions made in response to economic and competitive conditions, the impact of the economic environment on our customer base or material negative changes in our relationships with material customers.

Stock-Based Compensation

        We have a stock-based compensation plan for employees and non-employee members of our board of directors. Under this plan, we grant options to purchase our shares at or above the fair market value of our shares. On January 1, 2006, the first day of fiscal 2006, we adopted SFAS 123R, which requires us to measure all stock-based compensation awards using a fair value method and record such expense in our consolidated financial statements. We use the Black-Scholes option pricing model to value the options that are granted under these plans. The Black-Scholes method includes four significant assumptions: (1) expected term of the option, (2) risk-free interest rate, (3) expected dividend yield and (4) expected stock price volatility.

35

Concentration of Credit Risk

        We must estimate the collectibility of our accounts receivable. Management specifically analyzes accounts receivable balances in view of customer credit worthiness, customer concentrations, historical bad debts, current economic trends, and changes in our customer payment terms when evaluating the adequacy of the allowance for doubtful accounts. Three customers together accounted for 55% and 65% of our accounts receivable at December 29, 2007 and December 30, 2006, respectively. To reduce credit risk, we purchase credit insurance, as we deem appropriate. Historical write-offs, as a result of uncollectability, have been less than 1% of net sales annually.

Income Taxes

        We account for income taxes under the asset and liability method. Under this method, deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date.

        Significant management judgment is required in determining our provision for income taxes, deferred tax assets and liabilities and any valuation allowance. Our effective tax rates differ from the statutory rate due to the impact of acquisition-related costs, state taxes, and the tax impact of non-U.S. operations. Our future effective tax rates could be adversely affected by earnings being lower than anticipated in countries where we have lower statutory rates and vice versa. Changes in the valuation of our deferred tax assets or liabilities, or changes in tax laws or interpretations thereof may also adversely affect our future effective tax rate. In addition, we are subject to the continuous examination of our income tax returns by the IRS and other tax authorities. We regularly assess the likelihood of adverse outcomes resulting from these examinations to determine the adequacy of our provision for income taxes.

        At December 29, 2007 and December 30, 2006, our total valuation allowance was $2.6 million and $6.2 million, respectively, due to foreign net operating loss carry forwards and foreign tax credits. The valuation allowance is based on estimates of taxable income in each of the jurisdictions in which we operate and the period over which our deferred tax assets will be recoverable. If market conditions improve and future results of operations exceed our current expectations, our existing tax valuation allowances may be adjusted, resulting in future tax benefits. Alternatively, if market conditions deteriorate further or future results of operations are less than expected, future assessments may result in a determination that some or all of the deferred tax assets are not realizable. As a result, we may need to establish additional tax valuation allowances for all or a portion of the gross deferred tax assets, which may have a material adverse effect on our business, results of operations and financial condition.

        During the current fiscal year, the Company determined that a substantial portion of the U.S. deferred tax assets in respect of which it had established valuation allowances would more likely than not be realized in the foreseeable future. This determination was based upon the Company's improved U.S. operating results, primarily from growth in revenues in fiscal 2007.

Recent Accounting Pronouncements

        In September 2006, the FASB issued Statement of Financial Accounting Standards No. 157, Fair Value Measurements ("SFAS No. 157"), which defines fair value, establishes a framework for measuring fair value in generally accepted accounting principles and expands disclosures about fair value measurements. SFAS No. 157 is applicable for the Company as of December 31, 2007, the first day of

36

fiscal 2008. The FASB issued FASB Staff Position FAS 157-b, Effective Date of FASB Statement No. 157, which deferred the effective date of the Statement for certain nonfinancial assets and liabilities until fiscal 2009. The Company does not expect the adoption of SFAS No. 157 to have a material impact on its consolidated balance sheet and results of operations.

        In February 2007, the FASB issued SFAS No. 159, The Fair Value Option for Financial Assets and Financial Liabilities ("SFAS No. 159"). SFAS 159 expands opportunities to use fair value measurements in financial reporting and permits entities to choose to measure certain financial instruments at fair value. SFAS 159 is effective for fiscal years beginning after November 15, 2007. The Company has not decided if it will choose to measure any eligible financial assets and liabilities at fair value.

        In December 2007, the FASB issued Statement of Financial Accounting Standards No. 160, Noncontrolling Interests in Consolidated Financial Statements, ("SFAS No. 160") which requires noncontrolling (minority) interests in subsidiaries to be initially measured at fair value and presented as a separate component of shareholders' equity. Current practice is to present noncontrolling interests as a liability or other item outside of equity. This Statement is required to be applied prospectively after the beginning of fiscal 2009, although the presentation and disclosure requirements are required to be applied on a retrospective basis. The Company does not expect the adoption of SFAS No. 160 to have a material impact on its consolidated balance sheet or results of operations.

Item 7A    Quantitative and Qualitative Disclosures about Market Risk.

        We are exposed to market risk from changes in interest rates and foreign currency exchange rates, which may adversely affect our results of operations and financial condition.

        Our exposure to interest rate risk currently relates to amounts outstanding under our revolving and term loan credit facility. This facility is comprised of a $100.0 million term loan facility and a $75.0 million revolving credit facility. As of December 29, 2007, we had $100.0 million outstanding under the term loan facility and $20.0 million outstanding under the revolving credit facility. Both facilities bore interest of 1.75% above LIBOR, or 6.65% at December 29, 2007. A hypothetical change in the interest rate of 100 basis points would have an effect on our annual results of operations and cash flows of approximately $1.0 million.

        On March 10, 2008, we entered into an interest rate swap agreement (the "Swap") to manage our exposure to floating interest rate risk on our credit facility. The Swap will have an initial notional amount of approximately $49.1 million and is scheduled to decline to reflect certain scheduled principal payments under the term loan portion of our credit facility. Under the Swap, we will receive a floating interest rate based on 3-month LIBOR and pay a fixed interest rate of 3.22% through December 19, 2012. The Swap has been designated as a cash flow hedge under SFAS No. 133 and we will record the effective portion of any change in the fair value as other comprehensive income (loss), net of tax, and reclassify the gains and losses to interest expense during the hedged interest payment period.

        We are subject to risk from changes in the foreign exchange rates relating to our Canadian and U.K. subsidiaries, and our Mexico joint venture. Assets and liabilities of these entities are translated to U.S. dollars at year-end exchange rates. Income and expense items are translated at average rates of exchange prevailing during the year. Translation adjustments are accumulated as a separate component of shareholders' equity. Gains and losses, which result from foreign currency transactions, are included as other income (expense) in the accompanying consolidated statements of income. The potential loss resulting from a hypothetical 10.0% adverse change in the quoted foreign currency exchange rate amounts would not have a material impact on our annual results of operations and cash flows.

37

Item 8    Financial Statements and Supplementary Data.

        The response to this Item is included as a separate section of this report immediately following Item 15.

Item 9    Changes in and Disagreements with Accountants on Accounting and Financial Disclosure.

        None.

Item 9A(T)    Controls and Procedures.

(a) Evaluation of Disclosure Controls and Procedures

        Our management, with the participation of Alec Taylor, our Chief Executive Officer, and Anthony Di Paola, our Chief Financial Officer, evaluated the effectiveness of our disclosure controls and procedures, as defined in Rule 13a-15(e) under the Securities Exchange Act of 1934, as of the end of the period covered by this Report. Based upon that evaluation, our Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures were effective.

(b) Changes in Internal Control over Financial Reporting

        As a result of an evaluation completed by our Chief Executive Officer and Chief Financial Officer, we have concluded that there were, during the fiscal quarter ended December 29, 2007, no changes in our internal control over financial reporting that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

* * * * *

        This Annual Report does not include a report of management's assessment regarding internal control over financial reporting or an attestation report of our registered public accounting firm due to a transition period established by rules of the Securities and Exchange Commission for newly public companies.

* * * * *

        We do not expect that our disclosure controls and procedures or our internal control over financial reporting will prevent all error and all fraud. A control system, no matter how well designed and operated, can provide only reasonable, not absolute, assurance that the objectives of the control system are met. Because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, within the Company have been detected.

Item 9B    Other Information.

        None.

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PART III

Item 10    Directors, Executive Officers and Corporate Governance.

Executive Officers

        Set forth below is a list of our executive officers, their ages and positions, and a brief description of the recent business experience of each one.

Name	Age	Position
Alec Taylor	54	Chief Executive Officer and Director
John H. Flynn, Jr.	57	President
Anthony Di Paola	41	Executive Vice President, Chief Financial Officer and Treasurer
Steven Crellin	47	Executive Vice President, Sales
Jeffrey J. Giguere	47	Executive Vice President, General Counsel and Secretary
Gerald Kitchen	59	Executive Vice President, Operations
Richard W. Kornhauser	53	Executive Vice President, Chief Marketing Officer
Robert Grow	50	Executive Vice President, Product Development
Richard Christy	45	Vice President, Supply Chain Management and Customer and Field Service
Thomas Fernandes	35	Vice President, Merchandising
Timothy Swartz	44	Vice President, Licensing and Quantum Optics
Mark A. Williams	36	Vice President, Corporate Controller

Alec Taylor, Chief Executive Officer and Director—Mr. Taylor has been our Chief Executive Officer since October 2005. Before joining us, he was President and Chief Operating Officer of Chattem, Inc., a publicly traded manufacturer and marketer of health and beauty products, toiletries and dietary supplements, from January 1998 to September 2005 and a director of Chattem from 1993 to 2005. Mr. Taylor was previously an attorney with Miller and Martin in Chattanooga, Tennessee, from 1978 to January 1998. Mr. Taylor is also a director of Olan Mills Inc. and Constar International Inc.

John H. Flynn, Jr., President—Mr. Flynn has served as our President since December 2004. Mr. Flynn was the Executive Vice President, Sales of AAi.FosterGrant, Inc. from 1998 to December 2004, President and CEO of the predecessor of AAi.FosterGrant, Inc. from 1985 to 1998, and Vice President of AAi.FosterGrant, Inc. (then known as Accessories Associates Inc.) from 1982 to 1985. Mr. Flynn is a director of the Sunglass Association of America Inc.

Anthony Di Paola, Executive Vice President, Chief Financial Officer and Treasurer—Mr. Di Paola has served as our Executive Vice President, Chief Financial Officer and Treasurer since July 2007. Before that, Mr. Di Paola held various finance positions at General Electric, including Americas Controller for GE Water & Process Technologies, from February 2005 to July 2007. Mr. Di Paola previously served as Vice President and Corporate Controller of Ionics, Inc., a publicly traded supplier of water purification and wastewater treatment equipment and services, from May 2000 to February 2005, when Ionics was acquired by General Electric Company.

Steven Crellin, Executive Vice President, Sales—Mr. Crellin has served as our Executive Vice President, Domestic Sales since January 2006, Executive Vice President, Magnivision from October 2004 to December 2005 and the Vice President, Sales of Magnivision from February 1998 to October 2004. Mr. Crellin sits on the advisory board of the National Association of Chain Drug Stores and is a director of the Sunglass Association of America Inc.

Jeffrey J. Giguere, Executive Vice President, General Counsel and Secretary—Mr. Giguere has served as our Executive Vice President, General Counsel and Secretary since April 2007. Mr. Giguere was Vice President, General Counsel and Secretary of American Power Conversion Corporation, a publicly

39

traded provider of back-up power products and services, from June 2001 to March 2007, and General Counsel from April 2000 to June 2001.

Gerald Kitchen, Executive Vice President, Operations—Mr. Kitchen has served as our Executive Vice President, Operations since January 2007, and was our Vice President, Operations since September 2004 and the Vice President, Operations of our subsidiary, AAi.FosterGrant, Inc., since January 2004. Before that, Mr. Kitchen served as President of Blue Mountain Industries, Inc., a textile manufacturer, during 2003, and Vice President of Global Sourcing for Roam International Limited, a luggage importer, from April 2000 to December 2002.

Richard W. Kornhauser, Executive Vice President, Marketing—Mr. Kornhauser has served as Executive Vice President and Chief Marketing Officer since January 2008. Prior to that, Mr. Kornhauser was the Vice President of Marketing for Chattem, Inc., from May 2000 to October 2007.

Robert Grow, Executive Vice President, Product Development—Mr. Grow has served as Executive Vice President, Product Development since January 2008. Prior to that, Mr. Grow was our Vice President, Product Development from April 2004 to January 2008. From January 2000 to April 2004, Mr. Grow was the National Sales Manager.

Richard Christy, Vice President, Supply Chain Management and Customer and Field Service—Mr. Christy has served as our Vice President, Supply Chain Management and Customer and Field Service since January 2007. Prior to that Mr. Christy served as our Director of Supply Chain Management from February 2004 to January 2007 and Director of Supply Planning from April 2000 to February 2004.

Thomas Fernandes, Vice President, Merchandising—Mr. Fernandes has been with us since July 2001, serving as our Vice President, Merchandising since January 2007. Prior to that, Mr. Fernandes was a Senior Merchandise Manager from May 2006 to December 2006 and Merchandise Manager from July 2001 to May 2006.

Timothy Swartz, Vice President, Licensing and Quantum Optics—Mr. Swartz has served as Vice President of Licensing and Quantum Optics since November 2005. Prior to that, Mr. Swartz served as our Vice President of the Premium Eyewear Divisions/Quantum Optics, from June 2002 through November 2005. In addition, Mr. Swartz served in numerous positions at Lantis Eyewear Corp., a designer and distributor of eyewear, including Vice President of the Ophthalmic Division from 1998 through June 2002.

Mark A. Williams, Vice President, Corporate Controller—Mr. Williams has served as our Vice President and Corporate Controller since January 2006. Prior to that, Mr. Williams served as Corporate Controller from January 2004 to January 2006 and Assistant Controller from January 2003 to January 2004. In addition, Mr. Williams served as Director of Internal Audit for A.T. Cross Company, a designer and distributor of fine writing instruments, eyewear and personal accessories, from March 1999 to January 2003. Mr. Williams is a Certified Public Accountant in the State of Rhode Island.

Code of Ethics

        We have adopted a code of ethics that applies to our Directors and senior financial officers, including our Chief Executive Officer and Chief Financial Officer. This code sets forth written standards that are designed to deter wrongdoing and to promote honest and ethical conduct, including the ethical handling of actual or apparent conflicts of interest between personal and professional relationships; full, fair, accurate, timely, and understandable disclosure in reports and documents that we file with, or submit to, the Securities and Exchange Commission and in our other public communications; compliance with applicable governmental laws, rules and regulations; the prompt internal reporting of violations of the code to an appropriate person or persons; and accountability for

40

adherence to the code. The code of ethics is available without charge upon request from our Corporate Secretary, FGX International Holdings Limited, 500 George Washington Highway, Smithfield, RI 02917. If we make any substantive amendment to this code of ethics or grant any waiver from any of its provisions, we will disclose the nature of such amendment or waiver in a report on Form 8-K.

Directors and Corporate Governance

        The remaining information required by this item is incorporated by reference from the information responsive thereto in the sections in the Proxy Statement for our Annual Meeting of Shareholders to be held on May 29, 2008 (the "Proxy Statement") captioned "Proposal 1: Election of Directors," "Corporate Governance—Audit Committee," and "Other Matters—Section 16(a) Beneficial Ownership Reporting Compliance."

Item 11    Executive Compensation.

        The information required by this item is incorporated by reference from the information responsive thereto in the sections in the Proxy Statement captioned "Executive Compensation" and "Corporate Governance—Compensation Committee Interlocks and Insider Participation."

Item 12    Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters.

        Information required by this item is incorporated by reference from the information responsive thereto in the sections in the Proxy Statement captioned "Shares Held by Principal Shareholders and Management."

        The following table sets forth information regarding our equity compensation plans as of December 29, 2007:

Plan category		Number of shares to be issued upon exercise of outstanding options (a)	Weighted-average exercise price of outstanding options (b)		Number of shares remaining available for future issuance under equity compensation plans (excluding shares reflected in column (a)) (c)
Equity compensation plans approved by stockholders		782,260	$	15.98	2,217,740
Equity compensation plans not approved by stockholders		N/A		N/A	N/A
	Total	782,260	$	15.98	2,217,740

Item 13    Certain Relationships and Related Transactions, and Director Independence.

        The information required by this item is incorporated by reference from the information responsive thereto in the sections in the Proxy Statement captioned "Executive Compensation—Executive Employment Agreements" and "—Potential Payments upon Termination of Employment or Change-in-Control," "Certain Relationships and Related Person Transactions" and "Corporate Governance—Board of Directors Independence and Meetings."

Item 14    Principal Accounting Fees and Services.

        The information required by this item is incorporated by reference from the information responsive thereto in the section in the Proxy Statement captioned "Proposal 2: Ratification of the Appointment of Our Independent Registered Public Accounting Firm."

41

PART IV

Item 15    Exhibits, Financial Statement Schedules.

(a)

The following documents are filed as part of this Report:



1.

Financial Statements:

Report of Independent Registered Public Accounting Firm	F-2
Consolidated Balance Sheets—December 29, 2007 and December 30, 2006	F-3
Consolidated Statements of Operations—For the fiscal years ended December 29, 2007, December 30, 2006 and December 31, 2005	F-4
Consolidated Statements of Shareholders' Equity (Deficit) and Comprehensive Income (Loss)—For the fiscal years ended December 29, 2007, December 30, 2006 and December 31, 2005	F-5
Consolidated Statements of Cash Flows—For the fiscal years ended December 29, 2007, December 30, 2006 and December 31, 2005	F-6
Notes to Consolidated Financial Statements	F-7

2.

Financial Statement Schedules:



•

Schedule II—Valuation and Qualifying Accounts for the fiscal years ended December 29, 2007, December 30, 2006 and December 31, 2005



•

All other schedules for which provision is made in the applicable regulation of the Securities and Exchange Commission are not required under the related instructions or are inapplicable, and therefore have been omitted.



(b)

Exhibits

        The exhibits listed in the Exhibit Index following the signature page are filed herewith, which Exhibit Index is incorporated herein by reference.

(c)

Financial Statement Schedules

        See (a)2. above

F-1

Report of Independent Registered Public Accounting Firm

The Board of Directors and Shareholders
    FGX International Holdings Limited:

        We have audited the accompanying consolidated balance sheets of FGX International Holdings Limited and subsidiaries as of December 29, 2007 and December 30, 2006 and the related consolidated statements of operations, shareholders' equity (deficit) and comprehensive income (loss), and cash flows for the fiscal years ended December 29, 2007, December 30, 2006 and December 31, 2005. These consolidated financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these consolidated financial statements based on our audits.

        We conducted our audits in accordance with the auditing standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

        In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of FGX International Holdings Limited and subsidiaries as of December 29, 2007 and December 30, 2006 and the results of their operations and their cash flows for the fiscal years ended December 29, 2007, December 30, 2006 and December 31, 2005 in conformity with U.S. generally accepted accounting principles.

        As discussed in note 10 to the consolidated financial statements, effective December 31, 2007, the Company adopted the provisions of FASB Interpretation No. 48, Accounting for Uncertainty in Income Taxes—an interpretation of FASB Statement No. 109, Accounting for Income Taxes. As discussed in note 11 to the consolidated financial statements, effective January 1, 2006, the Company adopted the provisions of Statement of Financial Accounting Standards No. 123(R), Share-Based Payment.

	/s/ KPMG LLP
Providence, Rhode Island March 13, 2008

F-2

FGX INTERNATIONAL HOLDINGS LIMITED

Consolidated Balance Sheets

December 29, 2007 and December 30, 2006

(in thousands)

			December 29, 2007			December 30, 2006
ASSETS
Current assets:
	Cash and cash equivalents		$	4,567		$	9,663
	Accounts receivable, less allowances of $15,839 and $19,752 at December 29, 2007 and December 30, 2006, respectively			53,001			59,030
	Inventories			33,226			34,643
	Prepaid expenses and other current assets			11,001			7,085
	Deferred tax assets			10,841			8,632
		Total current assets		112,636			119,053
Property, plant and equipment, net				21,349			18,467
Other assets:
	Goodwill			25,357			25,357
	Intangible assets, net of accumulated amortization of $24,330 and $18,158 at December 29, 2007 and December 30, 2006, respectively			44,868			51,040
	Other assets			7,645			7,121
		Total assets	$	211,855		$	221,038
LIABILITIES AND SHAREHOLDERS' EQUITY (DEFICIT)
Current liabilities:
	Revolving line of credit		$	20,000		$	12,500
	Current maturities of long-term obligations			7,661			7,010
	Accounts payable			27,364			44,103
	Accrued expenses			26,167			28,080
	Accrued income taxes			956			1,593
		Total current liabilities		82,148			93,286
Long-term obligations, less current maturities				92,778			194,073
Deferred tax liabilities				9,260			15,093
Other long term liabilities				9,174			—
Minority interest				1,162			815
Commitments and contingencies (note 13)
Shareholders' equity (deficit):
	Common stock, no par value. Authorized 101,000 shares; issued 21,934 shares; outstanding 21,304 shares at December 29, 2007 and outstanding 14,837 shares at December 30, 2006			—			—
	Additional paid-in capital			96,180			1,499
	Accumulated other comprehensive income			943			694
	Accumulated deficit			(77,277	)		(81,985	)
	Treasury stock, at cost, 630 shares at December 29, 2007 and 430 shares at December 30, 2006			(2,513	)		(2,437	)
		Total shareholders' equity (deficit)		17,333			(82,229	)
		Total liabilities and shareholders' equity (deficit)	$	211,855		$	221,038

See accompanying notes to consolidated financial statements.

F-3

FGX INTERNATIONAL HOLDINGS LIMITED

CONSOLIDATED STATEMENT OF OPERATIONS

Fiscal years ended December 29, 2007, December 30, 2006 and December 31, 2005

(in thousands, except per share amounts)

			Fiscal Year Ended
			December 29, 2007			December 30, 2006			December 31, 2005
Net sales			$	240,463		$	209,208		$	189,881
Cost of goods sold				110,032			104,932			90,567
		Gross profit		130,431			104,276			99,314
Operating expenses:
	Selling expenses			68,727			55,466			47,179
	General and administrative expenses			21,183			17,918			28,205
	Amortization of acquired intangibles			6,172			7,597			9,276
	Abandoned lease charge			4,407			—			—
		Operating income		29,942			23,295			14,654
Other income (expense):
	Interest expense			(24,710	)		(21,951	)		(12,472	)
	Other income (expense), net			117			154			(72	)
		Income before income taxes	$	5,349		$	1,498		$	2,110
Income tax expense				294			4,245			4,031
		Income (loss) before minority interest	$	5,055		$	(2,747	)	$	(1,921	)
Minority interest expense				347			233			351
		Net income (loss)	$	4,708		$	(2,980	)	$	(2,272	)
Basic earnings (loss) per share			$	0.30		$	(0.20	)	$	(0.16	)
Basic weighted average shares outstanding				15,941			14,838			14,376
Diluted earnings (loss) per share			$	0.29		$	(0.20	)	$	(0.16	)
Diluted weighted average shares outstanding				16,010			14,838			14,376

See accompanying notes to consolidated financial statements.

F-4

FGX INTERNATIONAL HOLDINGS LIMITED

Consolidated Statements of Shareholders'

Equity (Deficit), and Comprehensive Income (Loss)

Fiscal Years ended December 29, 2007, December 30, 2006 and
December 31, 2005

(in thousands)

	Common stock							Accumulated other comprehensive income									Total shareholders' equity (deficit)
					Additional paid-in capital						Accumulated deficit			Treasury stock						Comprehensive Income (loss)
	Shares		Par value
Balance, January 1, 2005	14,334		$	—	$	66,212		$	617		$	(45,995	)	$	—		$	20,834
Conversion of common shares in subsidiary to parent	325			—		—			—			—			—			—			—
Issuance of common shares from exercise of stock options	608			—		394			—			—			—			394			—
Redemption of common shares	(430	)		—		—			—			—			(2,437	)		(2,437	)		—
Stock-based compensation expense for vesting of stock options	—			—		1,756			—			—			—			1,756			—
Dividend paid to common shareholders	—			—		(68,362	)		—			(30,738	)		—			(99,100	)		—
Foreign currency translation adjustment	—			—		—			(439	)		—			—			(439	)		(439	)
Net loss	—			—		—			—			(2,272	)		—			(2,272	)		(2,272	)
Comprehensive loss for the year ended December 31, 2005																				$	(2,711	)
Balance, December 31, 2005	14,837			—		—			178			(79,005	)		(2,437	)		(81,264	)
Stock-based compensation expense for vesting of stock options	—			—		1,499			—			—			—			1,499			—
Foreign currency translation adjustment	—			—		—			516			—			—			516			516
Net loss	—			—		—			—			(2,980	)		—			(2,980	)		(2,980	)
Comprehensive loss for the year ended December 30, 2006																				$	(2,464	)
Balance, December 30, 2006	14,837			—		1,499			694			(81,985	)		(2,437	)		(82,229	)
Net proceeds from issuance of common stock	6,667			—		93,817			—			—			—			93,817			—
Redemption of common shares	(200	)		—		—			—			—			(76	)		(76	)		—
Stock-based compensation expense for vesting of stock options	—			—		864			—			—			—			864			—
Foreign currency translation adjustment	—			—		—			249			—			—			249			249
Net income	—			—		—			—			4,708			—			4,708			4,708
Comprehensive income for the year ended December 29, 2007																				$	4,957
Balance, December 29, 2007	21,304		$	—	$	96,180		$	943		$	(77,277	)	$	(2,513	)	$	17,333

See accompanying notes to consolidated financial statements.

F-5

FGX INTERNATIONAL HOLDINGS LIMITED

Consolidated Statements of Cash Flows

Fiscal Years Ended December 29, 2007, December 30, 2006 and December 31, 2005

(in thousands)

				Fiscal Year Ended
				December 29, 2007			December 30, 2006			December 31, 2005
Cash flows from operating activities:
	Net income (loss)			$	4,708		$	(2,980	)	$	(2,272	)
	Adjustments to reconcile net income (loss) to net cash provided by (used) in operating activities:
		Depreciation and amortization			18,871			18,416			18,946
		Abandoned lease charge			4,407			—			—
		Noncash stock option compensation			864			1,499			1,756
		Minority interest			347			233			351
		Deferred income taxes			(7,824	)		559			1,970
		Loss on disposal of property, plant, and equipment			—			543			—
	Changes in assets and liabilities:
		Accounts receivable			6,532			(22,486	)		(13,207	)
		Inventories			1,430			(6,181	)		(1,654	)
		Prepaid expenses and other current assets			(3,822	)		(3,202	)		(464	)
		Other assets			637			(1,854	)		3,873
		Accounts payable			(16,781	)		15,629			9,034
		Accrued expenses and other long-term liabilities			2,358			(1,486	)		587
		Accrued income taxes			(814	)		407			(516	)
			Net cash provided by (used in) operating activities		10,913			(903	)		18,404
Cash flows from investing activities:
	Purchases of property, plant and equipment				(15,472	)		(10,948	)		(8,969	)
	Proceeds from sale of property, plant and equipment				—			—			168
	Purchased of acquired business, net of cash acquired				—			(3,000	)		—
			Net cash used in investing activities		(15,472	)		(13,948	)		(8,801	)
Cash flows from financing activities:
	Net borrowings under revolving note payable				7,500			12,500			—
	Proceeds from issuance of long-term obligations				120,000			—			200,000
	Payments on long-term obligations				(220,650	)		(1,268	)		(99,955	)
	Net proceeds from initial public offering				93,817			—			—
	Payment of financing fees				(1,095	)		—			(3,660	)
	Purchase of financial instrument				—			(127	)		—
	Dividends paid on common stock				—			—			(98,776	)
	Redemption of common stock				(76	)		—			(87	)
		Net cash (used in) provided by financing activities			(504	)		11,105			(2,478	)
Effect of exchange rate changes on cash and cash equivalents					(33	)		841			(495	)
		Net increase (decrease) in cash and cash equivalents			(5,096	)		(2,905	)		6,630
Cash and cash equivalents, beginning of period					9,663			12,568			5,938
Cash and cash equivalents, end of period				$	4,567		$	9,663		$	12,568

See accompanying notes to consolidated financial statements.

F-6

FGX INTERNATIONAL HOLDINGS LIMITED

Notes to Consolidated Financial Statements

(Dollars in thousands, except share and per share amounts)

(1) Reporting Entity and Nature of Business

        FGX International Holdings Limited (the "Company") is a leading designer and marketer of non-prescription reading glasses, sunglasses and costume jewelry with distribution primarily in the mass merchandise, chain drug store and chain grocery store channels in North America and the United Kingdom. The Company is incorporated under the laws of the British Virgin Islands.

(2) Recent Accounting Pronouncements

        In September 2006, the FASB issued Statement of Financial Accounting Standards No. 157, Fair Value Measurements ("SFAS No. 157"), which defines fair value, establishes a framework for measuring fair value in generally accepted accounting principles and expands disclosures about fair value measurements. SFAS No. 157 is applicable for the Company as of December 31, 2007, the first day of fiscal 2008. The FASB issued FASB Staff Position FAS 157-b, Effective Date of FASB Statement No. 157, which deferred the effective date of the Statement for certain nonfinancial assets and liabilities until fiscal 2009. The Company does not expect the adoption of SFAS No. 157 to have a material impact on its consolidated balance sheet and results of operations.

        In February 2007, the FASB issued SFAS No. 159, The Fair Value Option for Financial Assets and Financial Liabilities ("SFAS No. 159"). SFAS 159 expands opportunities to use fair value measurements in financial reporting and permits entities to choose to measure certain financial instruments at fair value. SFAS 159 is effective for fiscal years beginning after November 15, 2007. The Company has not decided if it will choose to measure any eligible financial assets and liabilities at fair value.

        In December 2007, the FASB issued Statement of Financial Accounting Standards No. 160, Noncontrolling Interests in Consolidated Financial Statements, ("SFAS No. 160") which requires noncontrolling (minority) interests in subsidiaries to be initially measured at fair value and presented as a separate component of shareholders' equity. Current practice is to present noncontrolling interests as a liability or other item outside of equity. This Statement is required to be applied prospectively after the beginning of fiscal 2009, although the presentation and disclosure requirements are required to be applied on a retrospective basis. The Company does not expect the adoption of SFAS No. 160 to have a material impact on its consolidated balance sheet or results of operations.

(3) Significant Accounting Policies

(a)   Principles of Consolidation

        The consolidated financial statements include the results of operations of the Company as well as those companies in which the Company has majority ownership or control. All significant intercompany balances and transactions have been eliminated in consolidation. Minority interest payable represents the minority partners' accumulated earnings in our joint venture in Mexico.

(b)   Fiscal Year-End

        The Company's fiscal year ends on the Saturday closest to December 31. Fiscal 2007, 2006 and 2005 each reflect a 52-week period.

(c)   Stock Split

        On October 18, 2007, the Company (i) amended its Memorandum and Articles of Association to increase its authorized shares to 101,000,000 and (ii) effected a 242,717 to one stock split of its

F-7

FGX INTERNATIONAL HOLDINGS LIMITED

Notes to Consolidated Financial Statements (Continued)

(Dollars in thousands, except share and per share amounts)

(3) Significant Accounting Policies (Continued)

ordinary shares. All share data shown in the accompanying consolidated financial statements have been retroactively restated to reflect the split.

(d)   Cash and Cash Equivalents

        Cash equivalents of $0 and $2,000 at December 29, 2007 and December 30, 2006, respectively, consist of overnight repurchase agreements and certificates of deposits with an initial term of less than three months. The Company considers all highly liquid investments with original maturities of three months or less at the time of purchase to be cash equivalents.

(e)   Inventories

        Inventories are stated at the lower of cost (first-in, first-out) or market and consist of finished goods. Inventory reserve adjustments are considered permanent decreases to the cost basis of the inventory and are recorded in cost of goods sold in the Company's Consolidated Statements of Operations.

(f)    Advertising Costs

        Advertising costs, which are included in selling expenses, are expensed when the advertisement first takes place. Advertising expense was approximately $6.6 million, $1.3 million and $1.3 million for fiscal 2007, 2006 and 2005, respectively.

(g)   Property, Plant and Equipment

        Property, plant and equipment are stated at cost. Depreciation is provided using the straight-line method over the estimated useful lives indicated below. Leasehold improvements are amortized over the shorter of the lease term or estimated useful life of the asset. Fully depreciated displays are written off to the respective accumulated depreciation account each year.

Asset classification	Estimated useful life
Building and improvements	10-20 years
Display fixtures	2-3 years
Furniture, fixtures and equipment	3-5 years
Leasehold improvements	Shorter of useful life or lease term

(h)   Goodwill and Other Intangible Assets

        Goodwill represents the excess of cost over the fair value of the net tangible assets and identifiable intangible assets of businesses acquired. Goodwill and intangible assets acquired in a purchase business combination and determined to have an indefinite useful life are not amortized, but instead tested annually in accordance with the provisions of FASB Statement No. 142, Goodwill and Other Intangible Assets. Intangible assets with estimable useful lives are amortized over their respective estimated useful lives to their estimated residual values, and reviewed for impairment in accordance with the provisions of FASB Statement No. 144, Accounting for the Impairment or Disposal of Long-Lived Assets. SFAS No. 144 requires recognition of an impairment loss only if the carrying amount of a long-lived asset or asset group is not recoverable from its undiscounted cash flows. An impairment loss is measured as the

F-8

FGX INTERNATIONAL HOLDINGS LIMITED

Notes to Consolidated Financial Statements (Continued)

(Dollars in thousands, except share and per share amounts)

(3) Significant Accounting Policies (Continued)

difference between the carrying amount and fair value of the asset or asset group. The Company evaluates its long-lived assets if impairment indicators arise. The Company evaluates each of its reporting units with goodwill during the fourth quarter of each fiscal year or more frequently if impairment indicators arise.

        Intangible assets consist of trademarks, customer relationships and patents. Trademarks, customer relationships and patents, acquired in business combinations, are recorded at their estimated fair value at the date of the combination. The Company has determined that currently owned trademarks have indefinite useful lives, customer relationships have an estimated useful life of 15.25 years and patents have an estimated useful life of 4.25 years. The Company is amortizing the recorded amount of the customer relationships on an accelerated basis and the patents on a straight-line basis over their estimated useful lives. The amortization method of the customer relationships is accelerated based on a projected economic value of the asset over its useful life.

(i)    Revenue Recognition

        Sales are recognized when revenue is realized or realizable and has been earned. The Company's policy is to recognize revenue when title to the product, ownership and risk of loss transfer to the customer, which generally is on the date of shipment. The Company also maintains destination-based terms with a limited number of customers in the United States and Canada and with substantially all of its customers in the United Kingdom and Mexico under which it recognizes revenue upon confirmation of receipt by the customer. In addition, prior to revenue recognition, the Company requires persuasive evidence of the arrangement, that the price is fixed or determinable, and that collectibility is reasonably assured. A provision for anticipated returns is recorded as a reduction of sales in the same period that the revenue is recognized in accordance with FASB Statement No. 48, Revenue Recognition When Right of Return Exists.

        The Company accounts for certain customer promotional payments, volume rebates, cooperative advertising, product placement fees and other discounts as a reduction of revenue under the guidance issued by the Financial Accounting Standards Board's Emerging Issues Task Force (EITF) in Issue No. 00-25, Vendor Income Statement Characterization of Consideration Paid to a Reseller of the Vendor's Products, Issue No. 00-14, Accounting for Certain Sales Incentives, and Issue No. 01-09, Accounting for Consideration Given by a Vendor to a Customer (Including a Reseller of the Vendor's Products). The Company also enters into multi-year supply agreements with many of its customers that often have minimum purchase requirements. Upfront payments and credits to our customers associated with these multi-year agreements are recorded to "Other assets" in our Consolidated Balance Sheets and are recorded net of accumulated amortization. Amortization of these payments and credits is recorded as earned by our customers over the contract term and are recorded as a reduction of revenue. When the payment or credit has been fully amortized the asset and related amortization are written off. Amortization estimated to be earned by our customers and charged to operations during the next twelve months are classified as "Prepaid expenses and other current assets" in the Consolidated Balance Sheets.

F-9

FGX INTERNATIONAL HOLDINGS LIMITED

Notes to Consolidated Financial Statements (Continued)

(Dollars in thousands, except share and per share amounts)

(3) Significant Accounting Policies (Continued)

(j)    Shipping and Handling

        Shipping and handling costs are recorded as a component of cost of goods sold. Any shipping and handling billed to customers is recognized as a component of net sales. Shipping and handling billed to customers is not significant for any of the periods presented.

(k)   Net Income (Loss) Per Share

        The Company calculates net income (loss) per share in accordance with SFAS No. 128, Earnings Per Share. Basic net income (loss) per share is computed by dividing net income (loss) by the weighted average number of common shares outstanding. Diluted net income (loss) per share is computed by dividing net income (loss) by the weighted average number of common shares outstanding and potentially dilutive securities outstanding during the period. Potentially dilutive securities include stock options using the treasury stock method. Securities are excluded from the computations of diluted net income (loss) per share if their effect would be antidilutive.

	Fiscal Year Ended
	December 29, 2007		December 30, 2006			December 31, 2005
Net income (loss)	$	4,708	$	(2,980	)	$	(2,272	)
Shares used in computing basic net income (loss) per share		15,941,489		14,837,647			14,375,928
Effect of dilutive securities		68,386		—			—
Shares used in computing diluted net income (loss) per share		16,009,875		14,837,647			14,375,928
Net income (loss) per share—basic	$	0.30	$	(0.20	)	$	(0.16	)
Net income (loss) per share—diluted	$	0.29	$	(0.20	)	$	(0.16	)
Antidilutive potential common shares excluded from the computation above		1,284,577		1,064,748			1,064,748

(l)    Comprehensive Income (Loss)

        Comprehensive income (loss) is defined in FASB Statement No. 130, Reporting Comprehensive Income, as the change in equity of a business enterprise during the period from transactions and other events and circumstances from nonowner sources. The difference between comprehensive income and net income (loss) represents foreign currency translation adjustments which are recorded gross of tax.

(m)  Concentration of Credit Risk

        Financial instruments that potentially subject the Company to concentrations of credit risk are principally accounts receivable. A significant portion of the Company's business activity is with domestic mass merchandisers whose ability to meet their financial obligations is dependent on economic conditions germane to the retail industry. At its discretion, the Company sells products to certain customers in bankruptcy. To reduce credit risk, the Company routinely assesses the financial strength of its customers and maintains credit insurance on substantially all of its domestic and Canadian accounts receivable.

F-10

FGX INTERNATIONAL HOLDINGS LIMITED

Notes to Consolidated Financial Statements (Continued)

(Dollars in thousands, except share and per share amounts)

(3) Significant Accounting Policies (Continued)

(n)   Disclosure of Fair Value of Financial Instruments

        The Company's financial instruments consist mainly of cash and cash equivalents, accounts receivable, interest rate cap contracts, accounts payable and debt. The carrying amounts of the Company's financial instruments approximate fair value due to either their short-term nature or market rates of interest.

(o)   Use of Estimates

        The preparation of the consolidated financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make a number of estimates and assumptions relating to the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenues and expenses during the period. Significant items subject to such estimates and assumptions include the carrying amount of intangibles and goodwill, and valuation allowances for receivables, inventories and deferred income tax assets. Actual results could differ from those estimates.

(p)   Income Taxes

        Income taxes are accounted for under the asset and liability method. Under this method, deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases and operating loss carryforwards. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date.

        Deferred income taxes have not been provided for the undistributed earnings of the Company's foreign subsidiaries as such undistributed earnings are considered to be indefinitely reinvested.

(q)   Derivative Instruments

        FASB Statement No. 133, Accounting for Derivative Instruments and Hedging Activities (SFAS No. 133), requires companies to recognize all derivative instruments as either assets or liabilities in the balance sheet at fair value. The accounting for changes in the fair value of a derivative instrument depends on whether it has been designated and qualifies as part of a hedging relationship and further, on the type of hedging relationship. For those derivative instruments that are designated and qualify as hedging instruments, a company must designate the hedging instrument, based upon the exposure being hedged, as a fair value hedge, a cash flow hedge or a hedge of a net investment in an international operation.

        The Company has derivative financial instruments in place to control interest rate exposure on its variable rate indebtedness. The Company has determined that these derivative financial instruments (interest rate caps) do not qualify as an effective hedge for accounting purposes under SFAS No. 133. Because these instruments have been deemed to be not effective, the change in the fair value of the instruments from one period to another has been recorded in "Interest expense" in the accompanying consolidated statement of operations with an offsetting entry to "Fair Value of Financial Instruments" in the accompanying consolidated balance sheets.

F-11

FGX INTERNATIONAL HOLDINGS LIMITED

Notes to Consolidated Financial Statements (Continued)

(Dollars in thousands, except share and per share amounts)

(3) Significant Accounting Policies (Continued)

(r)   Supplemental Cash Flow Disclosures

        Cash paid during fiscal years 2007, 2006 and 2005 for interest and income taxes is as follows:

	Fiscal
	2007		2006		2005
Interest	$	21,862	$	21,437	$	8,264
Income taxes		4,307		3,017		1,862

        The Company had the following noncash activities related to acquired equipment financed with capital lease obligations for fiscal years 2007, 2006 and 2005:

Fiscal Year:
	2007	$	234
	2006		—
	2005		297

        The Company also had the following noncash activities:

Fiscal 2006:

•

The Company concluded the settlement of the acquisition related working capital adjustment and accordingly reduced the accrual and goodwill by approximately $0.8 million (see note 4).

Fiscal 2005:

•

In connection with a severance agreement with a former member of management, the redemption of common stock totaling $2,279, net of $70 in cashless exercise of vested stock options, is payable in the form of a promissory note over a period of 24 months (see notes 9 and 14).



•

Three members of management executed cashless exercises of the vested portion of their stock options totaling $324. The cashless exercises were netted against the dividends issued to these individuals (see notes 11 and 15).



•

The Company accrued approximately $6.0 million and increased goodwill related to a tentative resolution to a disputed acquisition related working capital adjustment (see note 4).

(4) Acquisition

        On October 1, 2004, the Company, through a subsidiary, acquired all of the outstanding common shares of Magnivision, Inc., a leading domestic designer and marketer of non-prescription reading glasses, for cash consideration of approximately $81.5 million. The cash consideration includes direct acquisition costs, but excludes deferred financing costs of $3.7 million, which were capitalized and had been included as "Other assets" on the consolidated balance sheet for the fiscal year ended January 1, 2005. The unamortized balance of the financing costs of $2.9 million were subsequently recorded to interest expense in the fiscal year ended December 31, 2005, in conjunction with a debt refinancing with a new syndicate of lenders in December 2005. The purchase price of the acquisition included a working capital adjustment. The determination of this working capital adjustment was disputed and

F-12

FGX INTERNATIONAL HOLDINGS LIMITED

Notes to Consolidated Financial Statements (Continued)

(Dollars in thousands, except share and per share amounts)

(4) Acquisition (Continued)

brought to binding arbitration in 2005. The arbitrator reached a tentative decision on March 18, 2006, which required the Company to pay an additional purchase price of $6.0 million. A final settlement of the purchase price adjustment took place on October 24, 2006. On that date, the Company entered into a settlement agreement to pay additional purchase price consideration of $5.1 million. The Company paid $3.0 million of the settlement during the fiscal year ended December 30, 2006, and paid $1.1 million on June 1, 2007 and paid $1.0 million on December 3, 2007. Accordingly, as of December 30, 2006, the Company reduced its previous accrual for the working capital adjustment dispute by approximately $0.8 million with a corresponding reduction to goodwill. The final cost of the acquisition was approximately $86.7 million.

        In connection with this acquisition, the Company assumed the lease of a distribution facility in Miramar, Florida that expires in April 2011. The initial calculation and subsequent evaluations of the lease liability is uncertain since the Company must use judgment to estimate the timing and duration of future vacancy periods and the amount and timing of potential future sublease income. When estimating these costs and their related timing, the Company considered a number of factors, which include, but are not limited to, the location and condition of the property, the specific marketplace demand and general economic conditions. The liability as of January 1, 2005, which was based on an initial estimate, was $3,300. During fiscal 2005, the Company revised the estimate to increase the liability by $2,968 due to a revision of sublease assumptions and made rent payments of $1,571. In January 2007, the Company executed a sublease agreement for approximately one-half of the facility. During fiscal 2007, the Company reevaluated the leasing market due to the deteriorating real estate market conditions in the Miramar, Florida area. This resulted in a $4,407 abandoned lease charge in connection with the continued vacancy at this facility. This charge assumes that the remaining space of this facility will remain vacant through the end of the lease term. The liability as of December 29, 2007 and December 30, 2006 is $5,493 and $2,705, respectively, of which $1,485 is included in accrued expenses and $4,008 is in included in other long-term liabilities in the consolidated balance sheets.

(5) Property, Plant and Equipment

		December 29, 2007		December 30, 2006
Property, plant and equipment:
	Land	$	1,233	$	1,233
	Building and improvements		6,067		5,976
	Display fixtures		26,486		18,010
	Furniture, fixtures and equipment		15,857		16,326
	Leasehold improvements		2,893		2,893
	Equipment under capital lease		3,553		3,691
			56,089		48,129
	Less accumulated depreciation		34,740		29,662
		$	21,349	$	18,467

F-13

FGX INTERNATIONAL HOLDINGS LIMITED

Notes to Consolidated Financial Statements (Continued)

(Dollars in thousands, except share and per share amounts)

(6) Goodwill and Other Intangible Assets

        At December 29, 2007 and December 30, 2006, goodwill totaled $25,357. At December 29, 2007 and December 30, 2006, $1.8 million, $23.4 million and $0.2 million of goodwill is related to the costume jewelry, non-prescription reading glass and international segments, respectively. Other intangible assets were as follows:

			December 29, 2007				December 30, 2006
		Weighted Average Amortization Period
			Gross Carrying Amount		Accumulated Amortization		Gross Carrying Amount		Accumulated Amortization
Patents		4.25 years	$	2,900	$	2,175	$	2,900	$	1,450
Customer relationships		15.25 years		43,531		22,155		43,531		16,708
	Total amortizable intangible assets	14.56 years		46,431		24,330		46,431		18,158
Trademarks				22,767		—		22,767		—
	Total intangible assets		$	69,198	$	24,330	$	69,198	$	18,158

        The Company has recorded amortization expense of $6,172, $7,597 and $9,276 for its customer relationships and patents during fiscal 2007, 2006 and 2005, respectively.

        Goodwill and trademarks are not being amortized as they have been determined to have indefinite lives.

        Estimated annual amortization expense for the next five years and thereafter is as follows, and there are no expected residual values related to these amortizable intangible assets:

Years:
	2008	$	5,182
	2009		3,632
	2010		2,924
	2011		2,355
	2012		1,895
	Thereafter		6,113
		$	22,101

F-14

FGX INTERNATIONAL HOLDINGS LIMITED

Notes to Consolidated Financial Statements (Continued)

(Dollars in thousands, except share and per share amounts)

(7) Accrued Expenses

        Accrued expenses are comprised of the following as of December 29, 2007 and December 30, 2006:

	December 29, 2007		December 30, 2006
Additional purchase price consideration (Note 4)	$	—	$	1,937
Accrued customer allowances		13,538		12,239
Accrued lease obligation (Note 4)		1,485		2,705
Accrued bonuses		2,717		1,922
Other		8,427		9,277
	$	26,167	$	28,080

(8) Credit Agreements

        On December 19, 2007, the Company entered into a new credit agreement ("December 2007 Credit Agreement"), which replaced the December 2005 Credit Agreement defined below. The December 2007 Credit Agreement is comprised of (a) a $75.0 million revolving credit facility, which may be increased with the consent of our existing or additional lenders by up to an additional $50.0 million; and (b) a $100.0 million term loan facility ("Term Loan Facility"). Interest rates for borrowings under the Credit Facility are determined based upon the Company's leverage ratio. Interest rates will be initially priced at 1.75% above the London interbank offered rate (LIBOR) and then range from 1.00% to 2.25% above the LIBOR for Eurodollar-based borrowings, and from 0.00% to 1.25% above the defined base rate for base rate borrowings. Amounts due under the December 2007 Credit Agreement are collateralized by a pledge of 100% of the Company's tangible and intangible assets. The Company will also pay commitment fees and other customary fees. These commitment fees will range from 0.20% to 0.50% per annum depending upon the Company's leverage ratio.

        The Term Loan Facility as of December 29, 2007 bears interest at LIBOR (4.9% as of December 29, 2007) plus 1.75%. The Term Loan Facility is due in 20 consecutive quarterly graduating installments ranging from $1.9 million to $8.1 million commencing on March 31, 2008. The Term Loan Facility will mature on December 19, 2012. As of December 29, 2007, $100.0 million of the Term Loan Facility is outstanding as well as $0.3 million outstanding under letters of credit.

        The December 2007 Credit Agreement stipulates that the Company comply with leverage ratio covenants and a fixed charge ratio covenant. The Credit Facility contains customary affirmative and negative covenants that, among other things, limit the ability of the Company, and their respective subsidiaries to pay certain dividends; incur additional indebtedness or liens; make certain investments, restricted payments, or acquisitions and dispositions; and enter into certain transactions with affiliates. The Company must also comply with certain administrative covenants, including furnishing audited financial statements to the lenders within 90 days of fiscal year end. As of December 29, 2007, the Company was in compliance with the required restrictive covenants.

        On December 9, 2005, the Company entered into a new credit agreement ("December 2005 Credit Agreement"), which replaced the agreement dated October 1, 2004 ("October 2004 Credit Agreement"). The December 2005 Credit Agreement was comprised of a first lien term loan of

F-15

FGX INTERNATIONAL HOLDINGS LIMITED

Notes to Consolidated Financial Statements (Continued)

(Dollars in thousands, except share and per share amounts)

(8) Credit Agreements (Continued)

$150.0 million ("First Lien Term Loan"), a second lien term loan of $50.0 million ("Second Lien Term Loan") (collectively the "Term Loans") and a revolving commitment that were limited to $15.0 million (the "Revolver"). Borrowings under the December 2005 Credit Agreement were limited to the lesser of $215.0 million or the outstanding balance of the Term Loans plus the Revolver. For each component of the facility, the Company had the option of electing a prime plus or LIBOR plus interest rate. Amounts due under the December 2005 Credit Agreement were collateralized by a pledge of 100% of the Company's capital stock and mortgages on substantially all of the Company's tangible and intangible assets.

        The December 2005 Credit Agreement stipulated that the Company comply with leverage ratio covenants and an interest coverage ratio covenant. This Credit Agreement limited the payment of dividends to $100 million in aggregate over the term of the agreement. As of December 30, 2006, $99.1 million in dividends had been declared and paid (see note 15). The Company was also required to comply with certain administrative covenants, including furnishing audited financial statements to the lenders within 90 days of fiscal year end. As of December 30, 2006, the Company was in compliance with the required restrictive covenants.

        The Company used $50.0 million of the net proceeds from its initial public offering to repay in full the amount outstanding under the Second Lien Term Loan, $43.7 million to repay a portion of the amount outstanding under our First Lien Term Loan, $3.0 million to repay in full the amount outstanding under the Revolver and $0.5 million of bank fees related to the voluntary pre-payment of the Second Lien Term Loan.

Financial Instruments

        As required by the October 2004 Credit Agreement, and to manage the interest rate risk related to fluctuations in LIBOR, the Company entered into interest rate cap agreements (the "Caps") with financial institutions in order to cap the LIBOR component of the interest rate at 5.25%. The Caps covered 50% of the scheduled principal balance of the term loans through December 31, 2008. The Caps had been deemed to be not effective for accounting purposes according to Statement of Financial Accounting Standards (SFAS) No. 133 Accounting for Derivative Instruments and Hedging Activities as modified by SFAS No. 138 Accounting for Derivative Instruments and Certain Hedging Activities. The Company made an initial investment of $250 on November 19, 2004 and subsequent investments of $93 on March 2, 2006 and $34 on December 14, 2006 to enter into the Caps, which are included in the financial statements in "Fair value of Financial Instruments." Because the instruments were deemed not to be effective hedges for accounting purposes, the change in fair value of the Caps (unrealized gain or loss) from one period to another has been recorded in "Interest Expense" in the accompanying consolidated statement of operations with an offsetting entry to the "fair value of financial instruments" included in other assets in the accompanying consolidated balance sheets. The change in the fair value of the Caps was $87 and $123 for fiscal 2007 and fiscal 2006, respectively.

F-16

FGX INTERNATIONAL HOLDINGS LIMITED

Notes to Consolidated Financial Statements (Continued)

(Dollars in thousands, except share and per share amounts)

(9) Long-Term Obligations

        Long-term obligations consist of the following as of December 29, 2007 and December 30, 2006:

	December 29, 2007		December 30, 2006
Term Loan Facility under the December 2007 Credit Agreement due December 9, 2012, 20 consecutive quarterly graduating installments beginning March 31, 2008 with payments ranging from $1,875 to $8,125, interest based on LIBOR of 4.9% (as of December 29, 2007) plus 1.75%	$	100,000		—
First Lien Term Loan under the December 2005 Credit Agreement, as amended on May 24, 2007, due December 9, 2012, 23 consecutive quarterly graduating installments beginning March 31, 2007 with payments ranging from $1,500 to $2,979 with final installment of $110,206 due December 9, 2012, interest at LIBOR of 5.36% (as of December 30, 2006) plus 4%		—	$	150,000
Second Lien Term Loan under the December 2005 Credit Agreement due December 9, 2013 payable in a single installment, interest at LIBOR of 5.36% (as of December 30, 2006) plus 7.75%		—		50,000
Promissory note to former executive officer, monthly payments of principal and interest of $100 through October 2007, interest at 5% per annum		—		881
Capital lease obligation of computer equipment, payable in monthly installments of principal and interest of $12 through February 2008, interest at 5.66% per annum		61		202
Capital lease obligations of office equipment, payable in monthly installments of principal and interest of $6 and $4 through March 2010, interest rates ranging from 6.22% to 6.80% per annum		250		—
Deferred compensation plan (Note 12)		128		—
		100,439		201,083
Less current maturities		7,661		7,010
	$	92,778	$	194,073

F-17

FGX INTERNATIONAL HOLDINGS LIMITED

Notes to Consolidated Financial Statements (Continued)

(Dollars in thousands, except share and per share amounts)

(10) Income Taxes

        Income before income taxes and minority interest consisted of the following for fiscal years 2007, 2006 and 2005:

		Fiscal
		2007		2006		2005
Domestic		$	948	$	717	$	(1,680	)
Foreign			4,401		781		3,790
	Income before income taxes and minority interest	$	5,349	$	1,498	$	2,110

        Total federal, state, and foreign income tax expense for fiscal years 2007, 2006 and 2005 are as follows:

			Fiscal
			2007			2006			2005
Current:
	Federal		$	4,663		$	155		$	(1,416	)
	State			1,320			1,317			480
	Foreign			2,255			2,214			2,997
				8,238			3,686			2,061
Deferred:
	Federal			(4,897	)		374			1,379
	State			(1,038	)		(318	)		841
	Foreign			1,399			(1,004	)		(544	)
				(4,536	)		(948	)		1,676
Change in valuation allowance				(3,408	)		1,507			294
				(7,944	)		559			1,970
		Total	$	294		$	4,245		$	4,031

F-18

FGX INTERNATIONAL HOLDINGS LIMITED

Notes to Consolidated Financial Statements (Continued)

(Dollars in thousands, except share and per share amounts)

(10) Income Taxes (Continued)

        The actual expense for fiscal years 2007, 2006 and 2005 differs from the "expected" tax expense (computed by applying the U.S. statutory federal corporate tax rate to income (loss) before income taxes and minority interest) as follows:

	Fiscal
	2007			2006			2005
Computed "expected" tax expense	$	1,872		$	509		$	717
State income taxes, net of federal income tax benefit		184			660			872
Foreign tax differential		1,884			1,100			1,582
Foreign tax credit		(3,506	)		—			—
Deemed foreign dividend		3,293			—			—
Nondeductible expense		158			133			37
Nondeductible compensation		219			509			606
Charitable donation		(283	)		—			—
Change in valuation allowance		(3,408	)		1,507			294
Other, net		(119	)		(173	)		(77	)
	$	294		$	4,245		$	4,031

        Deferred income taxes relate to the following temporary differences as of December 29, 2007 and December 30, 2006:

			December 29, 2007			December 30, 2006
Deferred tax assets:
	Nondeductible reserves		$	2,448		$	6,846
	Nondeductible accruals			8,753			5,096
	Other			512			187
		Gross current deferred tax assets		11,713			12,129
	Less valuation allowance			(872	)		(3,497	)
		Net current deferred tax assets		10,841			8,632
Net operating loss carryforwards				2,314			3,128
Tax basis of property, plant and equipment				1,984			(137	)
Foreign tax credits				1,375			—
Other				2,681			2,117
		Gross long-term deferred tax assets		8,354			5,108
	Less valuation allowance			(1,770	)		(2,678	)
		Net long-term deferred tax assets		6,584			2,430
Deferred tax liabilities:
	Intangible assets			(15,844	)		(17,523	)
		Net long-term deferred tax liability		(15,844	)		(17,523	)
		Net deferred tax asset (liability)	$	1,581		$	(6,461	)

F-19

FGX INTERNATIONAL HOLDINGS LIMITED

Notes to Consolidated Financial Statements (Continued)

(Dollars in thousands, except share and per share amounts)

(10) Income Taxes (Continued)

        A valuation allowance is provided when it is more likely than not that some portion or all of the deferred tax assets will not be recognized. In connection with the acquisition of Magnivision, the Company had previously reduced the valuation allowance by $6,227. This reduction was the result of deferred tax liabilities recorded by Magnivision, Inc. which could be used to support the recognition of the previously reserved deferred tax assets. During 2005, upon completion of the valuation (see Note 4(a)), the Company adjusted the value of the intangible assets acquired related to the Magnivision acquisition. As a result of this adjustment, the Company further reduced the valuation allowance by $2,941 for a total reduction to the valuation allowance of $9,168. This reduction in the valuation allowance was recorded as a reduction of the goodwill associated with the Magnivision acquisition. The Company has approximately $4,319 of available net operating loss carryforwards in the U.S., which may be utilized and expire at various dates through 2023, and is limited on an annual basis to $283 due to the Company's equity restructuring during 2003. The Company has approximately $1,375 of available foreign tax credits, which may be utilized and expire at various dates through 2017. The Company has approximately $1,270 of net operating loss carryforward in the U.K. This net operating loss does not have an expiration.

        At December 31, 2006, a full valuation allowance was recorded against the gross U.S. deferred tax asset since management believed that after considering all the available objective evidence, both positive and negative, historical and prospective, with greater weight given to historical evidence, it was more likely than not that these assets would not be realized primarily due to the cumulative losses in recent years.

        During fiscal 2007, the Company determined that a substantial portion of the U.S. deferred tax assets in respect of which it had established valuation allowances would more likely than not be realized in the foreseeable future. This determination was based upon the Company's improved U.S. operating results, primarily from growth in revenues, and expected future results taking into account the Company's U.S. taxable income in fiscal 2005, 2006 and fiscal 2007. The Company believes that its expectations of future operating results are reliable and supported by firm sales commitments and scheduled product store roll-outs which are expected to produce taxable income. The Company expects that these positive factors will be sufficient to support the realization of a substantial portion of the U.S. deferred tax assets. Accordingly, $3,408 of the valuation allowance was released during fiscal 2007 and was recognized as a discrete income tax benefit in our consolidated statement of operations for fiscal 2007. The Company has continued to record a full valuation allowance against all of its U.K. deferred tax assets due to the lack of positive historical operating results and projected future expected losses in the U.K.

        In addition, the calculation of the Company's tax liabilities involves dealing with uncertainties in the application of complex tax regulations in multiple jurisdictions. The Company records liabilities for estimated tax obligations in the United States and other tax jurisdictions.

        During 2006, the Company completed an examination by the Internal Revenue Service for 2004. This examination resulted in no assessment of taxes.

        As of December 29, 2007, in addition to the discrete benefit discussed above related to the reduction of the valuation allowance, the remaining change in the valuation allowance was a direct

F-20

FGX INTERNATIONAL HOLDINGS LIMITED

Notes to Consolidated Financial Statements (Continued)

(Dollars in thousands, except share and per share amounts)

(10) Income Taxes (Continued)

result of the net decrease in the Company's current and long-term deferred tax asset balances from December 30, 2006.

        As a result of the Company's fiscal 2007 taxable income and the anticipation of sufficient taxable income in years when the temporary differences are expected to become tax deductions, the Company believes that it will realize the benefit of the deferred tax assets, net of existing valuation allowance.

        In June 2006, the FASB issued FIN No. 48, Accounting for Uncertainty in Income Taxes—an interpretation of FASB Statement No. 109, Accounting for Income Taxes. The Interpretation addresses the determination of whether tax benefits claimed or expected to be claimed on a tax return should be recorded in the financial statements. Under FIN 48, the Company may recognize the tax benefit from an uncertain tax position only if it is more likely than not that the tax position will be sustained on examination by the taxing authorities, based on the technical merits of the position. The tax benefits recognized in the financial statements from such a position should be measured based on the largest benefit that has a greater than fifty percent likelihood of being realized upon ultimate settlement.

        FIN 48 also provides guidance on derecognition, classification, interest and penalties on income taxes, accounting in interim periods and requires increased disclosures. The Company adopted the provisions of FIN 48 on December 31, 2006, the first day of the 2007 fiscal year and recognized no adjustment to retained earnings. The Company recognizes potential accrued interest and penalties related to unrecognized tax benefits in income tax expense, which is consistent with the recognition of these items in prior reporting periods. As of December 29, 2007, the Company has accrued approximately $0.7 million of interest and penalties related to our uncertain tax positions.

        The Company does not anticipate significant changes to the total amount of unrecognized tax benefits within the next 12 months.

        A tabular reconciliation of the gross amounts of unrecognized tax benefits, excluding interest and penalties, is as follows:

Balance, December 31, 2006		$	2,443
	Gross increases in prior period position		469
	Gross decreases in prior period position		(34	)
	Gross increases in current period position		1,543
Balance, December 29, 2007		$	4,421

        If the $4,421 is recognized, approximately $1,465 would decrease the effective tax rate in the period in which each of the benefits is recognized and the remainder would be offset by the reversal of related deferred tax assets.

(11) Incentive Stock Plan and Stock Options

        Effective January 1, 2006, the Company adopted Statement of Financial Accounting Standards No. 123 (revised 2004), Share-Based Payment ("SFAS 123R"), which amends Statement of Financial Accounting Standards No. 123, as amended by No. 148, and Statement of Financial Accounting Standards No. 95, Statement of Cash Flows. The Company adopted SFAS 123R under the modified

F-21

FGX INTERNATIONAL HOLDINGS LIMITED

Notes to Consolidated Financial Statements (Continued)

(Dollars in thousands, except share and per share amounts)

(11) Incentive Stock Plan and Stock Options (Continued)

prospective basis as defined in the statement. Prior to 2006, as permitted by Statement of Financial Accounting Standards No. 123, as amended by No. 148, Accounting for Stock-Based Compensation, (collectively "SFAS 123"), the Company accounted for the plan under the recognition and measurement principles of Accounting Principles Board Opinion No. 25, Accounting for Stock Issued to Employees, and related interpretations. At the time, stock options were granted at or above the fair market value of the Company's stock and, accordingly, no compensation expense was recognized for these grants in the consolidated statements of operations in fiscal 2005. Compensation expense recorded in fiscal 2005 related to the acceleration of vesting of event-based options in order for certain members of management to participate in the dividend declared in 2005. Stock-based compensation is recognized on a straight-line basis over the requisite service period of the award. In accordance with the modified prospective transition method, the Company's consolidated financial statements for 2005 have not been restated to reflect, and do not include, the impact of SFAS 123R.

        Had compensation expense been recorded under the fair value method as set forth in the provisions of SFAS 123 for stock options awarded, the impact on the Company's net loss and loss per share for fiscal 2005 would have been:

		Fiscal 2005
Net loss	As reported	$	(2,272	)
Add compensation expense recognized during the period			1,756
Deduct total stock-based employee compensation expense determined under fair value based method for all awards			(1,924	)
Net loss	Pro forma	$	(2,440	)
Basic loss per share	As reported	$	(0.16	)
	Pro forma	$	(0.17	)
Diluted loss per share	As reported	$	(0.16	)
	Pro forma	$	(0.17	)

        The Company currently provides stock-based compensation under its 2007 Incentive Compensation Plan ("2007 Plan") that was approved by our shareholders prior to our initial public offering on October 24, 2007. The 2007 Plan provides for the issuance of up to 3,000,000 ordinary shares to key employees. In October 2007, the Company granted 778,260 non-qualified stock options under the 2007 Plan at $16.00 per share. These options granted will vest ratably over a three-year period from the date of the grant and each has an expiration date of ten years.

        In December 2007, the Company granted 4,000 non-qualified stock options to its Board of Directors at $12.95 per share. These options will vest ratably over a three-year period from the date of the grant and each have an expiration date of ten years.

        As of December 29, 2007, 782,260 options were outstanding and 2,217,740 options were available for grant under the 2007 Plan. Upon exercise of stock options, shares will be issued out of the Company's authorized and unissued ordinary shares.

F-22

FGX INTERNATIONAL HOLDINGS LIMITED

Notes to Consolidated Financial Statements

(Dollars in thousands, except share and per share amounts)

(11) Incentive Stock Plan and Stock Options (Continued)

        During fiscal 2007, the Company recognized stock compensation expense of $0.9 million, of which $0.3 million was recognized in selling expenses and $0.6 million was recognized in general and administrative expenses. The total fair value of shares vested during fiscal 2007 was $2.1 million.

        During fiscal 2006, no options were granted or exercised. The Company recognized stock compensation expense of $1.5 million, of which $0.4 million was recognized in selling expenses and $1.1 million was recognized in general and administrative expenses. The total fair value of shares vested during fiscal 2006 was $0.9 million.

        During fiscal 2005, the Company granted share options to two members of management under the Amended and Restated 2004 Key Executive Stock Option Plan. The exercise prices of these options were deemed to be greater than the fair value and no compensation expense has been recorded in accordance with APB No. 25.

•

On December 15, 2005, the Company issued options to the new Chief Executive Officer for an aggregate of 800,962 shares of common stock at an exercise price of $10.11 per share which expire on December 15, 2015. These options consisted of 480,577 time-based vesting options and 320,385 event-based vesting options. The 480,577 time-based vesting options vest in three annual installments as follows: 160,192 of these options became exercisable on October 19, 2006, 160,192 became exercisable on October 19, 2007 and 160,193 will become exercisable on October 19, 2008. The 320,385 event-based vesting options vest as follows: 160,192 options will become exercisable upon the Company having a market capitalization for 30 consecutive trading days equal to or greater than $1.0 billion; and 160,193 options will become exercisable upon the Company having a market capitalization for 30 consecutive trading days equal to or greater than $1.5 billion.



•

On December 15, 2005, the Company issued options to an existing member of senior management for an aggregate of 141,705 shares of common stock at an exercise price of $8.63 per share. These options vest in three annual installments as follows: 49,597 options became exercisable on September 1, 2006, 49,597 options became exercisable on September 1, 2007 and 42,511 options will become exercisable on September 1, 2008.

        In November 2005, the Board of Directors accelerated the vesting of all of the then outstanding event-based options (230,581 shares) in order for certain members of management to participate in the dividend declared in December 2005. In connection with this modification, the Company recorded stock-based compensation of $1.8 million to represent the difference in intrinsic value of the stock options from date of grant to the acceleration date of these options. The total intrinsic value of the share options exercised during the fiscal year 2005 was $4.5 million.

The Company uses the Black-Scholes valuation model in determining fair value of stock-based awards. The weighted average grant-date fair value of share options granted during fiscal 2007 was $6.02. No options were granted in fiscal 2006 and the weighted average grant-date fair value of share options granted during fiscal 2005 was $2.82. The fair value of each option grant is estimated on the date of

F-23

FGX INTERNATIONAL HOLDINGS LIMITED

Notes to Consolidated Financial Statements (Continued)

(Dollars in thousands, except share and per share amounts)

(11) Incentive Stock Plan and Stock Options (Continued)

grant using the Black-Scholes option pricing model with the following weighted average assumptions used for grants in fiscal 2007 and 2005:

	Fiscal
	2007		2005
Expected volatility	30.0	%	45.0	%
Dividend yield	—		—
Risk-free interest rate	4.1		4.4
Expected life (years)	6.0		7.0

        A summary of the changes in the Company's stock option plan for fiscal years 2007, 2006 and 2005 are as follows:

	2007				2006			2005
	Shares		Weighted Average Exercise Price		Shares	Weighted Average Exercise Price		Shares		Weighted Average Exercise Price
Outstanding at beginning of year	1,064,748		$	9.08	1,064,748	$	9.08	1,303,051		$	0.74
Granted	782,260		$	15.98	—	$	—	942,668		$	9.89
Exercised	—		$	—	—	$	—	(608,443	)	$	0.65
Terminated	(33,472	)	$	0.38	—	$	—	(572,528	)	$	0.38
Outstanding at year end	1,813,536		$	12.00	1,064,748	$	9.08	1,064,748		$	9.08
Exercisable at end of year	508,187		$	8.72	305,010	$	7.31	—		$	—
Shares reserved at end of year	3,249,016				1,064,748			—

        With respect to the 1,813,536 outstanding options and 508,187 options exercisable at December 29, 2007, the weighted average remaining contractual life of these options was 8.69 years and 2.18 years, respectively. The aggregate intrinsic value of the options outstanding and options exercisable at December 29, 2007 was $1.9 million and $1.3 million, respectively.

        As of December 29, 2007 there was $4.6 million of total unrecognized compensation cost related to outstanding share-based compensation arrangements. This cost is expected to be recognized over a weighted-average period of 2.7 years.

(12) Employee Benefit Plans

        The Company has a defined contribution profit sharing plan covering substantially all employees. The profit sharing plan allows eligible participants to make contributions in accordance with Internal Revenue Code Section 401(k). The Company matches employee contributions equal to 25% of the first 6% of compensation that an employee contributes. These matching contributions totaled approximately $115, $25 and $120 for fiscal years 2007, 2006 and 2005, respectively. Under the terms of the profit sharing plan, voluntary Company contributions are made at the discretion of the Company. No voluntary profit sharing contributions were made by the Company for fiscal years 2007, 2006 and 2005.

F-24

FGX INTERNATIONAL HOLDINGS LIMITED

Notes to Consolidated Financial Statements (Continued)

(Dollars in thousands, except share and per share amounts)

(12) Employee Benefit Plans (Continued)

        Effective January 1, 2007, the Company adopted a non-qualified deferred compensation plan to permit selected key employees to elect to defer a percentage of their base salary, discretionary bonuses and other performance-based compensation during any calendar year into the plan. The Company matches employee contributions equal to 25% of the first 6% of compensation that an employee defers. The fair value of the plan assets and related liability was $128 and has been recorded as other assets and as a long-term obligation in the consolidated balance sheet as of December 29, 2007.

(13) Commitments and Contingencies

(a)   Operating Leases

        The Company has operating leases for certain facilities and equipment. Future minimum rental payments under these agreements are as follows as of December 29, 2007:

Years:
	2008	$	2,134
	2009		2,149
	2010		2,155
	2011		944
	2012		140
	Thereafter		63
		$	7,585

        The Company incurred rental expense for certain facilities and equipment of $1,732, $872 and $1,220, for fiscal years 2007, 2006 and 2005, respectively.

(b)   Royalties

        The Company has several agreements that require royalty payments to brand licensors based on a percentage of certain net product sales, subject to specified minimum payments.

        Future minimum royalty obligations relating to these agreements are as follows as of December 29, 2007:

Years:
	2008	$	521
	2009		370
	2010		268
	2011		268
	2012		—
	Thereafter		—
		$	1,427

F-25

FGX INTERNATIONAL HOLDINGS LIMITED

Notes to Consolidated Financial Statements (Continued)

(Dollars in thousands, except share and per share amounts)

(13) Commitments and Contingencies (Continued)

        In addition, certain agreements require that the Company pay additional fees based on a percentage of net product sales. These fees are not subject to minimum payment obligations. In the event the Company transfers its rights under certain agreements, a transfer fee would be payable.

(c)   Litigation

        In February 2005, the Company reached an agreement to settle a patent infringement action commenced in 1992 by Magnivision (formerly known as Al-Site and then owned by its founding family, which retained the rights to the litigation and any litigation proceeds) against an entity which is now a subsidiary of the Company relating to the use of certain display devices for eyeglasses. The United States District Court for the Central District of California entered a final judgment on the agreed settlement and a series of subsequent orders clarifying certain of the terms thereof. Pursuant to the agreed settlement, the Company is obligated to pay the plaintiff $11.0 million. However, there is a cost sharing agreement in place which provides that an unrelated third party is paying approximately $7.9 million of the $11.0 million final judgment. The unrelated third party participated in the settlement proceedings with the court, and an affiliate of the third party has guaranteed payments on amounts due under the cost sharing agreement directly with the plaintiff. As a result of the cost sharing agreement, and a credit of $2.0 million which the court allowed for a prejudgment payment the Company had previously made to the plaintiff, the total remaining obligation under the agreed settlement, as construed by the court, was approximately $1.1 million. This amount was paid by the Company as of the end of fiscal 2005. The court scheduled a three year monthly payment plan in May 2005 and thus far all payments have been timely made. However, the Company remains legally liable for the outstanding balance on the agreed settlement even though it is being paid by the third party. As of December 29, 2007 and December 30, 2006, the outstanding balance on the agreed settlement was approximately $1.3 million and $4.3 million, respectively.

        In May 2005, Coda Gargoyles, LLC, filed a lawsuit in the Supreme Court of the State of New York, County of New York alleging that one of the Company's subsidiaries made insufficient efforts to market products and collect accounts receivable to produce sufficient revenue to trigger earn-out provisions under the Company's December 2003 purchase agreement relating to the acquisition of the Company's premium brands, Anarchy, Angel and Gargoyles. The plaintiff claimed not less than $2.0 million in damages plus interest, attorney's fees and costs. One of the counts of the plaintiff's three-count complaint was a claim for breach of an implied duty of good faith and fair dealing, which was dismissed by the trial court on October 31, 2005. The two remaining counts were breach of contract and a demand for an accounting. Upon completion of mediated settlement discussions, the Company agreed to settle the lawsuit on March 13, 2008. Under the terms of the settlement, the Company agreed to pay the plaintiff $355 in exchange for mutual releases of all claims and a dismissal of the lawsuit with prejudice. The Company has not admitted any liability and entered into the settlement to avoid the uncertainty and expense of the lawsuit. The Company recorded the settlement costs in the consolidated financial statements for the fourth quarter and fiscal year ended December 29, 2007.

        In February 2007, Sun Optics, Inc. filed a lawsuit in the United States District Court, Central District of Utah alleging infringement of two of their design patents for eyeglass cases and seeking an injunction, damages, attorneys' fees and a jury trial. On March 8, 2007, the plaintiff voluntarily dismissed that lawsuit and then re-filed it in the United States District Court, District of Delaware on

F-26

FGX INTERNATIONAL HOLDINGS LIMITED

Notes to Consolidated Financial Statements (Continued)

(Dollars in thousands, except share and per share amounts)

(13) Commitments and Contingencies (Continued)

March 8, 2007. Plaintiff promptly sought a preliminary injunction concerning the design patents. On April 5, 2007, plaintiff moved to amend its pleadings to include a count of infringement of a utility patent for an eyeglass display and sought a preliminary injunction concerning the utility patent. On August 2, 2007, the plaintiff's motion to amend was granted, but both motions for a preliminary injunction were denied. On August 22, 2007, plaintiff appealed the denial of its motions for a preliminary injunction to the United States Court of Appeals for the Federal Circuit. On November 15, 2007, the Court granted the motions to stay and withdraw. The Court has continued to stay the case to allow the parties to further pursue settlement discussions. The Federal Circuit has also stayed, and continues to stay, the briefing period on appeal to allow settlement discussions to progress. The Company intends to defend the action vigorously if settlement discussions fail.

        In the ordinary course of business, the Company is party to various types of litigation. The Company maintains insurance to mitigate certain of these risks. The Company believes it has meritorious defenses to all claims, and, in its opinion, all litigation currently pending or threatened will not have a material effect on the Company's financial position or results of operations.

(14) Termination of Certain Executives and Related Redemption of Common Stock

        The Company terminated the employment of three executives during fiscal year 2005. The Company recorded severance charges totaling $2.3 million in fiscal 2005, which are included in General and Administrative Expenses in the consolidated statements of operations. The Company has paid $0.8 million, $1.3 million and $0.2 million during fiscal 2007, 2006 and 2005, respectively.

        One of these terminated executives elected to exercise his vested stock options through a cashless exercise which was netted against the subsequent redemption of these common shares. The Company redeemed his common shares owned, as well as the common shares owned by a second terminated executive, for $2.4 million. This cost was recorded as Treasury Stock. The Company has paid approximately $0.9 million, $1.1 million and $0.4 million of this redemption during fiscal 2007, 2006 and 2005, respectively.

        During fiscal 2007, the Company repurchased 200,005 ordinary shares owned by a former member of management for $76. The cost was recorded as Treasury Stock.

(15) Dividend

        In December 2005, the Company declared an aggregate dividend of $99.1 million to common stockholders of record on December 14, 2005. The dividend of $6.68 per share was paid prior to December 31, 2005. This dividend was funded by proceeds from the December 2005 Credit Agreement as described in Note 8.

(16) Initial Public Offering

        On October 24, 2007, the Company sold a total of 13,800,000 ordinary shares in an initial public offering at a price to the public of $16.00 per share for an aggregate of $220.8 million. 6,666,667 ordinary shares were sold by the Company and 7,133,333 ordinary shares were sold by the Company's shareholders (including 1,800,000 ordinary shares sold by one of the Company's shareholders pursuant to the underwriters' exercise of their over-allotment option). The selling shareholders received

F-27

FGX INTERNATIONAL HOLDINGS LIMITED

Notes to Consolidated Financial Statements (Continued)

(Dollars in thousands, except share and per share amounts)

(16) Initial Public Offering (Continued)

approximately $106.1 million after deducting underwriting discounts and commissions of $8.0 million. The Company did not receive any proceeds from ordinary shares sold by the selling shareholders. The Company received approximately $97.2 million in net proceeds after deducting underwriting discounts and commissions of $7.5 million and estimated underwriters' and other offering expenses of $2.0 million. The Company used the net proceeds received from the initial public offering to pay down debt as outlined in Note 8.

(17) Related Party Transactions

        Through the date of its initial public offering, the Company was paying a quarterly fixed management fee to Berggruen Holdings ("BH"). The amount incurred was $375, $500 and $500 for fiscal years 2007, 2006 and 2005, respectively. The fee incurred is included in General and Administrative expenses in the accompanying consolidated statements of operations. The Company reimbursed BH approximately $19 during fiscal 2007 for their fees incurred in connection with their guarantee of the working capital adjustment dispute (see Note 4). The Company reimbursed BH approximately $80 during fiscal 2007 for fees BH paid for services provided by an interim managing director for the Company's U.K. subsidiary. The Company also reimbursed BH approximately $65 in connection with the use of BH's private aircraft during fiscal 2007.

        As of December 29, 2007 and December 30, 2006 there was $0 and $125 accrued and payable to BH, respectively.

(18) Enterprise-Wide Disclosures

        The Company markets its products primarily to customers in the mass merchandise retail channel. Although the Company closely monitors the creditworthiness of its customers, a substantial portion of its customers' ability to meet their financial obligations is dependent on economic conditions germane to the retail industry. At its discretion, the Company sells product to certain customers in bankruptcy. The Company maintains a credit insurance policy on its primary customers.

F-28

FGX INTERNATIONAL HOLDINGS LIMITED

Notes to Consolidated Financial Statements (Continued)

(Dollars in thousands, except share and per share amounts)

(18) Enterprise-Wide Disclosures (Continued)

        Net sales to each of the Company's three largest customers, Wal-Mart Stores, Inc., Walgreens and CVS Corporation for each segment and in total for fiscal years 2007, 2006 and 2005, respectively, are indicated in the table below:

		Fiscal
		2007		2006		2005
Wal-Mart Stores, Inc.:
	Non-prescription Reading Glasses	30	%	26	%	30	%
	Sunglasses	32		27		17
	Costume Jewelry	48		70		76
	International Operations	21		26		31
	Consolidated net sales	31		32		35
Walgreens:
	Non-prescription Reading Glasses	17	%	15	%	—	%
	Sunglasses	5		23		6
	Consolidated net sales	10		13		2
CVS Corporation:
	Non-prescription Reading Glasses	21	%	22	%	25	%
	Consolidated net sales	10		10		11

        These customers' accounts receivable balances represent approximately 55% and 65% of gross accounts receivable as of December 29, 2007 and December 30, 2006, respectively. No other customer accounted for 10% or more of the Company's net sales.

        The Company currently purchases a significant portion of its inventory from certain suppliers in Asia. There are other suppliers of the inventory items purchased and management believes that these suppliers could provide similar inventory at fairly comparable terms. However, a change in suppliers could cause a delay in the Company's distribution process and a possible loss of sales, which would adversely affect operating results.

        Summary geographic information for net sales is as follows:

			Fiscal
			2007		2006		2005
Net sales:
	United States		$	204,512	$	180,259	$	160,419
	Foreign			35,951		28,949		29,462
		Total	$	240,463	$	209,208	$	189,881

        No individual foreign country net sales were greater than 10% of total net sales. Substantially all long-lived assets are located in the United States.

F-29

FGX INTERNATIONAL HOLDINGS LIMITED

Notes to Consolidated Financial Statements (Continued)

(Dollars in thousands, except share and per share amounts)

(19) Segments

        The Company operates primarily in the eyewear and costume jewelry markets. The Company's four reportable segments are Non-prescription Reading Glasses, Sunglasses and Prescription Frames, Costume Jewelry and International. These segments have been determined based upon the nature of the products offered and availability of discrete financial information, and are consistent with the way the Company organizes and evaluates financial information internally for the purposes of making operating decisions and assessing performance.

        The Non-prescription Reading Glasses, Sunglasses and Prescription Frames and Costume Jewelry segments represent sales of these product lines in the United States. The International segment sells similar product lines outside the United States. The Company measures profitability of its segments based on gross profit.

        Expenditures for additions to long-lived assets are not tracked or reported by the operating segments, except for display fixtures. Depreciation expense on display fixtures is specific to each segment. Non-display fixture depreciation is not allocable to a specific segment and is included in corporate and unallocated. Amortization of intangible assets that relate to acquired businesses is included in the specific segment to which they relate. The identifiable assets of the International segment consists of assets of our international subsidiaries. For the other reportable segments the identifiable assets include inventories and intangible assets. The Company does not segregate other assets on a product line basis for internal management reporting and therefore, such information is not presented. Assets included in corporate and unallocated principally are cash and cash equivalents,

F-30

FGX INTERNATIONAL HOLDINGS LIMITED

Notes to Consolidated Financial Statements (Continued)

(Dollars in thousands, except share and per share amounts)

(19) Segments (Continued)

accounts receivable, prepaid expenses, deferred income taxes, other assets, and property, plant and equipment.

	Fiscal
	2007			2006			2005
Segment Net Sales
Non-prescription Reading Glasses	$	117,862		$	95,327		$	83,220
Sunglasses and Prescription Frames		61,717			56,725			42,848
Costume Jewelry		24,933			28,207			34,351
International		35,951			28,949			29,462
Total Net Sales	$	240,463		$	209,208		$	189,881
Gross Profit
Non-prescription Reading Glasses	$	71,103		$	55,316		$	49,327
Sunglasses and Prescription Frames		26,341			22,852			19,288
Costume Jewelry		10,363			9,622			11,974
International		22,624			16,486			18,725
Total Gross Profit	$	130,431		$	104,276		$	99,314
Segment Profits (Losses)
Non-prescription Reading Glasses	$	49,907		$	34,656		$	29,622
Sunglasses and Prescription Frames		15,429			12,709			12,530
Costume Jewelry		6,388			6,370			7,749
International		7,607			4,108			6,383
Corporate/ Unallocated expenses		(49,389	)		(34,548	)		(41,630	)
Income from Operations	$	29,942		$	23,295		$	14,654
Depreciation
Non-prescription Reading Glasses	$	5,600		$	4,606		$	3,648
Sunglasses and Prescription Frames		3,901			3,446			2,052
Costume Jewelry		100			189			385
International		2,138			1,608			1,396
Corporate/Unallocated		960			970			2,189
Total	$	12,699		$	10,819		$	9,670
Amortization of Intangibles
Non-prescription Reading Glasses	$	6,172		$	7,597		$	9,276
Total	$	6,172		$	7,597		$	9,276
Identifiable Assets
Non-prescription Reading Glasses	$	75,075		$	82,398		$	85,576
Sunglasses and Prescription Frames		16,909			19,581			16,143
Costume Jewelry		4,454			4,891			5,752
International		21,598			19,811			17,302
Corporate/ Unallocated		93,819			94,357			76,385
Total	$	211,855		$	221,038		$	201,158

F-31

FGX INTERNATIONAL HOLDINGS LIMITED

Notes to Consolidated Financial Statements (Continued)

(Dollars in thousands, except share and per share amounts)

(20) Quarterly Results (unaudited)

		Quarter
													Year to date
		First			Second			Third			Fourth
2007
Net sales		$	61,149		$	62,614		$	53,919		$	62,781	$	240,463
Gross profit			31,837			33,801			29,157			35,636		130,431
Income before income taxes and minority interest			2,582			194			501			2,072		5,349
Net income (loss)			1,918			1,499			(18	)		1,309		4,708
Per common share
Net income (loss)
	Basic	$	0.13		$	0.10		$	—		$	0.07	$	0.30
	Diluted	$	0.13		$	0.10		$	—		$	0.07	$	0.29
2006
Net sales		$	45,079		$	51,410		$	42,691		$	70,028	$	209,208
Gross profit			22,770			25,553			20,986			34,967		104,276
Income (loss) before income taxes and minority interest			(1,688	)		(667	)		(4,272	)		8,125		1,498
Net income (loss)			(2,599	)		(1,669	)		(4,623	)		5,911		(2,980	)
Per common share
Net income (loss)
	Basic	$	(0.18	)	$	(0.11	)	$	(0.31	)	$	0.40	$	(0.20	)
	Diluted	$	(0.18	)	$	(0.11	)	$	(0.31	)	$	0.40	$	(0.20	)

F-32

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

The Board of Directors and Shareholders
FGX International Holdings Limited:

        Under date of March 13, 2008, we reported on the consolidated balance sheets of FGX International Holdings Limited and subsidiaries as of December 29, 2007 and December 30, 2006 and the related consolidated statements of operations, shareholders' equity (deficit) and comprehensive income (loss), and cash flows for the fiscal years ended December 29, 2007, December 30, 2006 and December 31, 2005, which are included on Form 10-K for the year-ended December 29, 2007. Our report refers to a change in accounting for uncertain tax provisions in 2007 and to a change in accounting for share-based payments in 2006. In connection with our audits of the aforementioned consolidated financial statements, we also audited the related financial statement schedule of Valuation and Qualifying Accounts and Reserves in the Form 10-K. This financial statement schedule is the responsibility of the Company's management. Our responsibility is to express an opinion on the financial statement schedule based on our audits.

        In our opinion, such financial statement schedule, when considered in relation to the basic consolidated financial statements taken as a whole, presents fairly, in all material respects, the information set forth therein.

Providence, Rhode Island
March 13, 2008 /s/ KPMG LLP

SCHEDULE II

FGX International Holdings Limited

Valuation and Qualifying Accounts and Reserves
Fiscal years ended December 29, 2007, December 30, 2006 and December 31, 2005
(in thousands)

		Balance at Beginning of Year		Provision Charged to Costs and Expenses		Write-Offs and Other			Balance at End of Year
Valuation accounts deducted from assets to which they apply—for returns, markdowns and doubtful accounts receivable:
	2007	$	19,752	$	37,241	$	(41,154	)	$	15,839
	2006	$	16,037	$	32,903	$	(29,188	)	$	19,752
	2005	$	22,203	$	31,389	$	(37,555	)	$	16,037

SIGNATURES

        Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized on the 13^th day of March, 2008.

FGX INTERNATIONAL HOLDINGS LIMITED
By:	/s/  ALEC TAYLOR Alec Taylor Chief Executive Officer

        Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed by the following persons in the capacities indicated and on the dates indicated.

Signature	Title	Date
/s/  ALEC TAYLOR Alec Taylor	Chief Executive Officer (Principal Executive Officer), Director and authorized representative in the United States	March 13, 2008
/s/  ANTHONY DI PAOLA Anthony Di Paola	Executive Vice President, Chief Financial Officer and Treasurer (Principal Financial and Accounting Officer)	March 13, 2008
/s/  JARED BLUESTEIN Jared Bluestein	Director	March 13, 2008
/s/  ZVI EIREF Zvi Eiref	Director	March 13, 2008
/s/  ROBERT L. MCDOWELL Robert L. McDowell	Director	March 13, 2008
/s/  JENNIFER D. STEWART Jennifer D. Stewart	Director	March 13, 2008

EXHIBIT INDEX

Number	Description	References
3.1	Form of Amended and Restated Memorandum of Association of the Registrant.	(2)
3.2	Form of Amended and Restated Articles of Association of the Registrant.	(2)
4.1	Form of Specimen Ordinary Share Certificate.	(2)
*10.1	Amended and Restated Employment Agreement between FGX International Inc. and Alec Taylor, dated as of December 19, 2006.	(1)
*10.2	Amended and Restated Employment Agreement by and among FGX International Inc. and Steve Crellin, dated as of February 18, 2008.
*10.3	Amended and Restated Employment Agreement by and among FGX International Inc. and John H. Flynn, Jr., dated as of February 18, 2008.
*10.4	Amended and Restated 2004 Key Executive Stock Option Plan dated as of September 29, 2004.	(1)
*10.5	Form of Time-Based Vesting Incentive Stock Option Agreement under the Amended and Restated 2004 Key Employee Stock Option Plan.	(1)
*10.6	Time-Based Stock Option Agreement between FGX International Holdings Limited and Alec Taylor dated as of December 15, 2005.	(1)
*10.7	Amendment to Time-Based Stock Option Agreement between FGX International Holdings Limited and Alec Taylor, dated as of December 20, 2006.	(1)
*10.8	Incentive Stock Option Agreement between FGX International Holdings Limited (f/k/a Envision Worldwide Holdings Limited) and Steven Crellin, dated as of October 2, 2004.	(1)
*10.9	Time-Based Stock Option Agreement between FGX International Holdings Limited and Steven Crellin, dated as of December 15, 2005.	(1)
*10.10	Amendment to Incentive Stock Option Agreement between FGX International Holdings Limited and Steven Crellin, dated December 20, 2006.	(1)
*10.11	Amendment to Time-Based Stock Option Agreement between FGX International Holdings Limited and Steven Crellin, dated as of December 20, 2006.	(1)
*10.12	Event-Based Stock Option Agreement between FGX International Holdings Limited and Alec Taylor, dated as of December 15, 2005.	(1)
*10.13	Amendment to Event-Based Vesting Incentive Stock Option Agreement between FGX International Holdings Limited and Alec Taylor, dated as of November 16, 2006.	(1)
*10.14	2007 Incentive Compensation Plan.	(1)
*10.15	Form of Nonqualified Stock Option Agreement under 2007 Incentive Compensation Plan	(2)
10.16	Registration Rights Agreement between FGX International Holdings Limited and Berggruen Holdings North America Ltd., dated as of November 17, 2006.	(1)
*10.17	Form of Director and Officer Indemnification Agreement executed by Alec Taylor, John H. Flynn, Jr., Jared Bluestein, Jennifer D. Stewart, Anthony Di Paola, Steven Crellin, Jeffrey J. Giguere, Gerald Kitchen, Robert Grow, Richard Christy, Thomas Fernandes, Timothy Swartz and Mark A. Williams.	(1)

*10.18	Redemption Letter and Release Agreement between FGX International Holdings Limited and Brian Lagarto dated as of June 22, 2007.	(1)
*10.19	FGX International Inc. Deferred Compensation Plan, effective as of January 1, 2007.	(1)
*10.20	FGX International Inc. Single Employer Welfare Benefit Plan, effective as of January 1, 2007.	(1)
*10.21	Employment Agreement by and between FGX International Inc. and Jeffrey J. Giguere, dated as of April 9, 2007.	(1)
*10.22	Employment Agreement by and between FGX International Inc. and Anthony Di Paola, dated as of July 23, 2007.	(1)
*10.23	Indemnification Obligation Confirmation Letter (cost-sharing agreement) dated June 6, 2005.	(1)
*10.24	Employment Agreement by and between FGX International Inc. and Gerald Kitchen, dated as of August 27, 2007.	(1)
*10.25	Severance Agreement by and between FGX International Inc. and Mark Williams, dated as of May 2, 2007.	(1)
*10.26	Employment Agreement by and among FGX International Inc. and Richard W. Kornhauser, dated as of January 31, 2008.
10.27	Revolving Credit and Term Loan Agreement among FGX International Holdings Limited, a BVI business company, FGX International Limited, a BVI business company, FGX International Inc., the Borrower, SunTrust Bank, as Administrative Agent, as issuing bank and as swingline lender, and a syndicate of banks and other financial institutions, dated as of December 19, 2007.
21.1	Subsidiaries of the Registrant.
23.1	Consent of Independent Registered Public Accounting Firm.
31.1	Section 302 Certification of CEO
31.2	Section 302 Certification of CFO
32.1	Section 906 Certification of CEO
32.2	Section 906 Certification of CFO

(1)

Incorporated by reference to the filing of such exhibit with our Form S-1, effective October 24, 2007.

(2)

Incorporated by reference to the filing of such exhibit with our Form 10-Q for the period ended September 29, 2007.

*

Management contract or compensatory plan or arrangement.

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Documents incorporated by reference
TABLE OF CONTENTS
Forward Looking Statements
PART I

Item 1 Business.

Item 1A Risk Factors.
Item 1B Unresolved Staff Comments.
Item 2 Properties.
Item 3 Legal Proceedings.
Item 4 Submission of Matters to a Vote of Security Holders.

PART II

Item 5 Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities.
Item 6 Selected Financial Data.

Item 7 Management's Discussion and Analysis of Financial Condition and Results of Operations.

Item 7A Quantitative and Qualitative Disclosures about Market Risk.
Item 8 Financial Statements and Supplementary Data.
Item 9 Changes in and Disagreements with Accountants on Accounting and Financial Disclosure.
Item 9A(T) Controls and Procedures.
Item 9B Other Information.

PART III

Item 10 Directors, Executive Officers and Corporate Governance.
Item 11 Executive Compensation.
Item 12 Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters.
Item 13 Certain Relationships and Related Transactions, and Director Independence.
Item 14 Principal Accounting Fees and Services.

PART IV

Item 15 Exhibits, Financial Statement Schedules.

Report of Independent Registered Public Accounting Firm
FGX INTERNATIONAL HOLDINGS LIMITED Consolidated Balance Sheets December 29, 2007 and December 30, 2006 (in thousands)
FGX INTERNATIONAL HOLDINGS LIMITED CONSOLIDATED STATEMENT OF OPERATIONS Fiscal years ended December 29, 2007, December 30, 2006 and December 31, 2005 (in thousands, except per share amounts)
FGX INTERNATIONAL HOLDINGS LIMITED Consolidated Statements of Shareholders' Equity (Deficit), and Comprehensive Income (Loss) Fiscal Years ended December 29, 2007, December 30, 2006 and December 31, 2005 (in thousands)
FGX INTERNATIONAL HOLDINGS LIMITED Consolidated Statements of Cash Flows Fiscal Years Ended December 29, 2007, December 30, 2006 and December 31, 2005 (in thousands)
FGX INTERNATIONAL HOLDINGS LIMITED Notes to Consolidated Financial Statements (Dollars in thousands, except share and per share amounts)
FGX INTERNATIONAL HOLDINGS LIMITED Notes to Consolidated Financial Statements (Dollars in thousands, except share and per share amounts)
FGX International Holdings Limited Valuation and Qualifying Accounts and Reserves Fiscal years ended December 29, 2007, December 30, 2006 and December 31, 2005 (in thousands)
SIGNATURES
EXHIBIT INDEX

EX-10.2

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EXHIBIT 10.2

AMENDED AND RESTATED EMPLOYMENT AGREEMENT

        This Amended and Restated Employment Agreement (this "Agreement"), dated as of February 18, 2008, is entered into by and between FGX International Inc., a Delaware corporation (the "Company"), and Steven Crellin, a resident of the State of Massachusetts (the "Employee").

RECITALS

        The Company, Magnivision, Inc., a Delaware corporation that was indirectly merged into the Company, and the Employee are parties to a certain Amended and Restated Employment Agreement dated as of September 1, 2005 (the "Original Agreement"). The Company and the Employee desire to amend and restate the Original Agreement to modify certain of the terms and conditions set forth therein.

TERMS OF AGREEMENT

        In consideration of the above recitals and the mutual covenants contained herein, and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereby agree as follows:

        1.    Employment.    The Company hereby agrees to employ the Employee to serve in the capacities described herein, and the Employee agrees to accept such employment and perform such services, upon the terms and subject to the conditions set forth in this Agreement.

        2.    Term.    The Employee's employment by the Company under this Agreement shall commence on September 1, 2005 (the "Commencement Date") and expire on the close of business on August 31, 2008 (the "Expiration Date"). Thereafter, this Agreement shall automatically renew for successive one (1) year periods, unless either party provides written notice to the other party of its intention to terminate this Agreement thirty (30) days prior to the expiration of the term (each a "Renewal Term" and together with the Initial Term, the "Term"). The Term shall be subject to earlier termination in accordance with the terms and conditions of this Agreement. For purposes of this Agreement, "Termination Date" shall mean the date on which this Agreement is terminated in accordance with the terms of this Agreement.

        3.    Duties and Responsibilities.    During the Term, the Employee shall serve as an Executive Vice President of the Company and of FGX International Holdings Limited, a British Virgin Islands corporation and the indirect parent of the Company ("FGX Holdings"), (FGX Holdings, together with the direct and indirect subsidiaries of FGX Holdings, the "FGX Group"). The Employee shall perform such duties and have such authority as may be assigned and delegated to him from time to time by the Chief Executive Officer or President of FGX Holdings or the Board of Directors of FGX Holdings (the "Board"). The Employee shall at all times perform his duties and responsibilities honestly, diligently, in good faith and to the best of his ability. The Employee shall observe and comply with all of the rules, regulations, policies and procedures established by the Company from time to time and all applicable laws, rules and regulations imposed by governmental and regulatory authorities from time to time. The Employee's employment by the Company shall be full-time and exclusive and the Employee agrees that he will devote his full business time, attention and energies to the performance of his obligations hereunder. Notwithstanding the foregoing, the Employee shall be permitted to engage in charitable and civic activities and manage his personal passive investments, provided such personal passive investments are not in a company which engages in a business competitive with any business of the FGX Group and provided that such activities do not individually or collectively interfere with the performance of his duties and responsibilities under this Agreement. The Employee shall be based in the greater Providence, Rhode Island area, subject to such travel as may be necessary to fulfill his obligations under this Agreement.

        4.    Compensation.    As compensation for his services hereunder and in consideration of the covenants set forth in Sections 10, 11, 12, 13, 14 and 15 below, the Company shall pay to the Employee the following compensation, subject to any withholding and other taxes as may be imposed by applicable federal, state or local government authorities and other normal and usual employee deductions:

        (a)    Base Salary.    The Company shall pay to the Employee an annual base salary (the "Base Salary") of Three Hundred Thousand Dollars ($300,000.00) per year during the Term. The Base Salary may be increased from time to time during the Term in the sole discretion of the Board. The Base Salary shall, at a minimum, be reviewed by the Board annually. The Base Salary shall be payable in accordance with the Company's customary payroll practices and procedures and shall be prorated for any partial year during the Term.

        (b)    Bonus.    In addition to the Base Salary, the Employee shall be eligible for payment of a target bonus (the "Bonus") of 50% of the Base Salary on account of the services rendered by him during each calendar year during the Term and the attainment of certain performance goals established by the Board, and the amount of any such bonus shall be payable from time to time during the Term in the sole discretion of the Board. The Bonus shall be subject to increase or decrease in the discretion of the Board.

        5.[Reserved.]    

        6.    Fringe Benefits.    The Employee shall be entitled to participate in all employee benefit plans and programs (including, without limitation, profit sharing, medical, disability and life insurance plans and programs) that the Company establishes and makes generally available from time to time to its employees, subject, however, to the applicable eligibility requirements and other provisions of such plans and programs (including, without limitation, requirements as to position, tenure, salary, age and health). The Employee shall also be entitled to receive such fringe benefits and perquisites as may be generally provided by the Company from time to time to its employees, in accordance with the policies of the Company in effect from time to time.

        7.    Paid Time Off.    The Employee shall be entitled to twenty (20) days of paid time off annually in accordance with the Company's paid time off policies in effect from time to time, to be taken at such time(s) as shall not, in the reasonable judgment of the President of the Company, interfere with the Employee's fulfillment of his duties hereunder. The Employee shall be entitled to as many holidays, sick days and personal days as are generally provided by the Company from time to time to its employees in accordance with the Company's policies as in effect from time to time.

        8.    Reimbursement of Expenses.    The Company shall pay or reimburse the Employee for all reasonable travel, entertainment and other expenses incurred by him in connection with the performance of his duties hereunder in accordance with the policies and procedures of the Company as in effect from time to time provided that (a) such expenditure is of a nature deductible under Section 162 of the Internal Revenue Code (the "Code") on the Federal income tax return of the Company as a business expense and not as deductible compensation to the Employee and (b) Employee provides the Company with such documentary evidence as may in the opinion of the Company be required by the Code or any regulation promulgated thereunder for the substantiation of such expenditure as a deductible business expense of the Company and not as deductible compensation to the Employee. The Employee agrees that, if at any time, any payment made to the Employee by the Company as a business expense reimbursement shall be disallowed as a deductible expense to the Company by the appropriate taxing authorities, the Employee shall reimburse the Company to the full extent of such disallowance.

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        9.    Termination.    Notwithstanding anything to the contrary contained in this Agreement, the parties hereto shall have the right, in addition to any other rights and remedies which they may have, to terminate this Agreement and the Employee's employment hereunder as follows:

        (a)    For Cause.    The Company shall have the right to immediately terminate this Agreement and the Employee's employment with the Company hereunder by delivery of written notice to the Employee upon (i) the willful failure of the Employee to follow the good faith directions of the Chief Executive Officer or President of the Company or the executive officer of the Company charged with the supervision of the Employee provided to the Employee consistent with the provisions of this Agreement (other than any such failure resulting from his incapacity due to illness or physical or mental disability which is subject to the provisions of Section 9(c)) after written notice thereof from the Company and a ten (10) day opportunity to cure, (ii) any act by the Employee of fraud or dishonesty, misappropriation or embezzlement, or willful misconduct or gross negligence in connection with the performance of the Employee's duties hereunder, (iii) a breach by the Employee of any provision hereof or of any contractual or legal duty to the Company (including, but not limited to, the unauthorized disclosure of Confidential Information (as defined herein), and non-compliance with the written policies, guidelines and procedures of the Company or any of its affiliates), after written notice thereof from the Company and a ten (10) day opportunity to cure in the event that such breach was not willful, (iv) the commission by the Employee of a felony or a crime involving moral turpitude (including pleading guilty or no contest to such crime or a lesser crime which results from plea bargaining), whether or not such felony, crime or lesser offense was committed in connection with the business of the Company, (v) habitual drunkenness or substance abuse by the Employee or (vi) any act of the Employee which injures or could reasonably be expected to injure the reputation, business or business relationships of the Company.

        (b)    Death.    This Agreement shall automatically terminate in the event of the Employee's death without notice to either party.

        (c)    Disability.    The Company shall have the right to terminate this Agreement and the Employee's employment with the Company hereunder upon not less than thirty (30) days' prior written notice to the Employee in the event that the Employee shall be unable to perform his duties hereunder by virtue of illness or physical or mental disability (from any cause or causes whatsoever) in substantially the manner and to the extent required of him hereunder prior to the commencement of such disability, and the Employee shall fail to perform such duties for periods aggregating one hundred eighty (180) days, whether or not continuous, in any continuous three hundred sixty (360) day period ("Disability").

        (d)    Without Cause.    The Company shall have the right to terminate this Agreement and the Employee's employment with the Company at any time without cause on not less than this (30) days' prior written notice to the Employee.

        (e)    Resignation for Good Reason.    Notwithstanding anything to the contrary within this Agreement, if the Company substantially changes the terms and conditions of Employee's employment by either (i) unilaterally reducing his Base Salary or (ii) substantially changing his job responsibilities without his consent, then Employee shall have the right to terminate his employment with the Company for "Good Reason." Prior to doing so, the Employee shall be required to provide notice to the Company in writing of the specific circumstances which the Employee contends justify his resignation for "Good Reason," and the Company shall have fifteen (15) business days in which to cure such changes which led to the Employee's determination to that he had the right to resign for "Good Reason." If the Employee resigns for "Good Reason," he shall be entitled to the severance benefits as if he had been terminated without cause as described in subsection (g) below.

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        (f)    Mutual Agreement.    The parties may terminate the Employee's employment with the Company hereunder upon their mutual written consent.

        (g)    Payments Upon Termination.    In the event that the Company shall terminate this Agreement and the Employee's employment with the Company under Section 9(a), (b) or (c) above or the Employee terminates his employment with the Company for any reason prior to the Expiration Date, then the Company shall pay to the Employee (or his heirs and/or personal representatives) the Base Salary earned through the date of termination and shall reimburse the Employee for any expenses for which the Employee is entitled to reimbursement under Section 8 of this Agreement, and the Company shall have no further obligation to the Employee. In the event that the Company shall terminate this Agreement and the Employee's employment with the Company under Section 9(d) above (for a reason other than those covered by Sections 9(a), (b) or (c) above), then the Company shall (i) pay to the Employee the Base Salary earned through the date of termination, when and as the same would have been payable but for such termination, (ii) pay to the Employee the Bonus, if any, that is payable to the Employee pursuant to Section 4(b) above on account of any year preceding the year in which such termination occurs, when and as the same would have been payable hereunder but for such termination, (iii) reimburse the Employee for any expenses for which the Employee is entitled to reimbursement under Section 8 of this Agreement, when and as the same would have been reimbursed but for such termination, (iv) continue to pay to the Employee the Base Salary (as in effect on the last day of his employment with the Company) for a period of twelve (12) months following the date of termination, or if the Company exercises its Noncompete Extension (as defined below) the Company will continue to pay to the Employee the Base Salary (as in effect on the last day of his employment with the Company) for a period of eighteen (18) months, and (v) continue to provide the Employee with those medical, life and disability insurance benefits, if any, which are provided to the Employee on the last day of his employment with the Company for a period of twelve (12) months following his last day of employment with the Company, and the Company shall have no further obligation to the Employee. In the event of termination, the Employee shall make reasonable efforts to mitigate damages by seeking other employment; provided, however, that he shall not be required to accept a position of substantially different character than the highest position held by him with the Company or a position that would cause him to violate the provisions of Section 12 hereunder, nor shall he be required to accept a position in a location which is unreasonable, given the personal circumstances of the Employee. To the extent that the Employee shall receive compensation, benefits and service credit for benefits from such other employment during such twelve (12) month period following the date of termination, the payment to be made and the benefits to be provided by the Company under the provisions of this Subsection 9(g) shall be correspondingly reduced.

        (h)    Change in Control.    In the event that the assets of the Company are sold or substantially divested, and any such successor in interest to the Company does not assume this Agreement, then the Company agrees that the Employee shall be entitled to the severance benefits as if he had been terminated without cause as described in subsection (g) above.

        (i)    Certain Reductions of Payments by the Company.

        (1)   Anything in this Agreement to the contrary notwithstanding, in the event it shall be determined that any payment or distribution by the Company to or for the benefit of the Employee, whether paid or payable or distributed or distributable pursuant to the terms of this Agreement or otherwise (a "Payment"), would constitute an "excess parachute payment" within the meaning of Section 280G(b) of the Code, and thus would result in the Employee incurring an excise tax under Section 4999 of the Code, then the aggregate present value of amounts payable or distributable to or for the benefit of the Employee pursuant to this Agreement (such payments or distributions pursuant to this Agreement are hereinafter

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referred to as "Agreement Payments") shall be reduced to the Reduced Amount, but only if and to the extent that the after-tax value to the Employee of reduced Agreement Payments would exceed the after-tax value to the Employee of the Agreement Payments received by the Employee without application of such reduction. The "Reduced Amount" shall be an amount expressed in present value which maximizes the aggregate present value of Agreement Payments without causing any Payment to be nondeductible by the Company because of Section 280G of the Code. Anything to the contrary notwithstanding, if the Reduced Amount is zero and it is determined further that any Payment which is not an Agreement Payment would nevertheless be nondeductible by the Company for Federal income tax purposes because of Section 280G of the Code, then the aggregate present value of Payments' which are not Agreement Payments shall also be reduced (but not below zero) to an amount expressed in present value which maximizes the aggregate present value of Payments without causing any Payment to be nondeductible by the Company because of Section 280G of the Code. For purposes of this Section 9(e)(i), present value shall be determined in accordance with Section 280G(d)(4) of the Code. Thus, for illustrative purposes only, if the Employee's average W-2 compensation for the five (5) years prior to the year in which a change in control occurs (the "Base Amount") was $500,000, and the value of the payments and benefits that are contingent upon the change in control (the "Parachute Payments") was $1,510,000, the Employee would have an excess parachute payment within the meaning of Section 280G(b) of the Code since the value of the parachute payments ($1,510,000) would be greater than three (3) times the Employee's Base Amount ($1,500,000). The amount of the excess parachute payment would be $1,010,000 (the amount by which the value of the parachute payments exceeds one (1) times the Base Amount), and if the aggregate amount of the parachute payments was not reduced, the Employee would incur an excise tax under Section 4999 of the Code equal to 20% of the excess parachute payment (or $202,000). This excess parachute payment could be avoided if instead, the value of the parachute payments was reduced by $10,001 to $1,499,999 (since the value of the parachute payments then would be less than three (3) times the Base Amount). Since the Employee would receive a greater after tax amount, under the foregoing example, if his parachute payments were reduced by $10,001 (to $1,499,999) than he would if his parachute payments were not reduced and the Employee incurred a $202,000 excise tax (reducing his parachute payments to $1,308,000) on the excess parachute payment, the Employee's parachute payments would be reduced under this provision to $1,499,999 (by $10,001) to avoid any excess parachute payments.

        (2)   All determinations required to be made under this Section 9(e)(i) shall be made by the Company's accountants for the Company's last fiscal year or, at the mutual agreement of the Employee and the Company, any other nationally or regionally recognized firm of independent public accountants (the "Accounting Firm"), which shall provide detailed supporting calculations both to the Company and the Employee within twenty (20) business days of the date of termination or such earlier time as is requested by the Company and an opinion to the Employee that he has substantial authority not to report any excise tax on his Federal income tax return with respect to any Payments. Any such determination by the Accounting Firm shall be binding upon the Company and the Employee. The Employee shall determine which and how much of the Payments shall be eliminated or reduced consistent with the requirements of this Section 9(e)(i), provided that, if the Employee does not make such determination within ten business days of the receipt of the calculations made by the Accounting Firm, the Company shall elect which and how much of the Payments shall be eliminated or reduced consistent with the requirements of this Section 9(e)(i) and shall notify the Employee promptly of such election. Within five business days thereafter, the Company shall pay to or distribute to or for the benefit of the Employee such amounts as are then due to the Employee under this Agreement. All fees and expenses of the Accounting Firm

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incurred in connection with the determinations contemplated by this Section 9(e)(i) shall be borne by the Company.

        (3)   As a result of the uncertainty in the application of Section 280G of the Code at the time of the initial determination by the Accounting Firm hereunder, it is possible that Payments will have been made by the Company which should not have been made ("Overpayment") or that additional Payments which will not have been made by the Company could have been made ("Underpayment"), in each case, consistent with the calculations required to be made hereunder. In the event that the Accounting Firm, based upon the assertion of a deficiency by the Internal Revenue Service against the Employee which the Accounting Firm believes has a high probability of success, determines that an Overpayment has been made, any such Overpayment paid or distributed by the Company to or for the benefit of the Employee shall be treated for all purposes as a loan ab initio to the Employee which the Employee shall repay to the Company together with interest at the applicable federal rate provided for in Section 7872(f)(2) of the Code; provided, however, that no such loan shall be deemed to have been made and no amount shall be payable by the Employee to the Company if and to the extent such deemed loan and payment would not either reduce the amount on which the Employee is subject to tax under Section 1 and Section 4999 of the Code or generate a refund of such taxes. In the event that the Accounting Firm, based upon controlling precedent or other substantial authority, determines that an Underpayment has occurred, any such Underpayment shall be promptly paid by the Company to or for the benefit of the Employee together with interest at the applicable federal rate provided for in Section 7872(f)(2) of the Code.

        10.    Confidential Information.    The Employee recognizes and acknowledges that he will have access to certain Confidential Information (as defined below) and that such information constitutes valuable, special and unique property of FGX Group. The Employee acknowledges that the Confidential Information is and shall remain the exclusive property of the FGX Group. The Employee agrees that he will not at any time (whether during the Term or at any time thereafter) disclose any Confidential Information to anyone outside the FGX Group, or utilize any Confidential Information for his own benefit or the benefit of any third party without the prior written consent of the Company. The Employee further agrees that all memoranda, disks, files, notes, records or other documents which contain Confidential Information, whether in electronic form or hard copy, and whether created by the Employee or others, which come into his possession, shall be and remain the exclusive property of the FGX Group to be used by the Employee only in the performance of his obligations hereunder. The Employee agrees that the foregoing restrictions shall apply whether or not such information is marked "Confidential," "Proprietary" or otherwise. For purposes hereof, "Confidential Information" shall mean and include all information, whether written or oral, tangible or intangible, of a private, secret, proprietary or confidential nature, of or concerning the FGX Group or their business or operations, including without limitation any trade-secrets or know-how, computer software programs in both source code and object code form, any technique, process or methodology, any sales, promotional or marketing plans, programs, techniques, practices or strategies, any expansion plans (including existing and entry into new markets), any operational or management guidelines any cost, pricing or other financial data or projections, the identity and background of any customer, employee, prospect, supplier or investor, and any other information that is to be treated as confidential because of any duty of confidentiality owed by the FGX Group to a third party or any other information that any member of the FGX Group shall, in the ordinary course of business, possess or use and not release externally without restriction on use or disclosure. Notwithstanding the foregoing, the term "Confidential Information" shall not include information which (a) was known by the Employee prior to the commencement of his employment with the Company, (b) becomes available to the Employee from a source other than a member of the FGX Group or parties with whom any member of the FGX Group does business that is not bound by a duty of confidentiality to any member of the FGX Group or such

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other parties or (c) becomes generally available or known in the industry other than as a result of its disclosure by the Employee. In the event that the Employee becomes, on the advice of counsel, legally obligated to disclose any Confidential Information other than to a member of the FGX Group, he will provide the Company with prompt written notice thereof so that the FGX Group may seek a protective order or other appropriate remedy and the Employee will cooperate with and assist the FGX Group in securing such protective order or other remedy. In the event that such protective order is not obtained, or that the FGX Group waives compliance with the provisions of this Section to permit a particular disclosure, the Employee will furnish only that portion of the Confidential Information which he is, on the advice of counsel, legally required to disclose. The Employee agrees to execute such confidentiality agreements that the Board may adopt and/or modify from time to time as a standard form to be executed by employees of the Company.

        11.    Return of Documents and Property.    Upon the termination of the Employee's employment with the Company or at any other time upon the request of the Company, the Employee (or his heirs or personal representatives) (a) shall deliver to the Company all memoranda, disks, flies, notes, records or other documents which contain or are based upon Confidential Information and shall not retain any copies thereof in any format or storage medium (including computer disk or memory) and (b) purge from any computer system in his possession other than those owned by and returned to the Company, all computer files which contain or are based upon any Confidential Information and confirm such purging in writing to the Company.

        12.    Noncompetition.    The Employee acknowledges that the members of the FGX Group engage in a competitive business, the Employee's services and responsibilities are unique in character and are of particular significance to the members of the FGX Group, and the Employee's position with the Company will place him in a position of confidence and trust with the customers, suppliers, employees of and investors in the FGX Group. The Employee consequently agrees that it is reasonable and necessary for the protection of the members of the FGX Group and its goodwill and business that the Employee makes the commitments set forth herein. The Employee therefore agrees that during the Term and for a period of eighteen (18) months thereafter (the "Noncompete Period"), he will not as an individual proprietor, partner, shareholder, officer, director, employee, consultant, independent contractor, agent, joint venturer, investor or lender, directly or indirectly, engage anywhere in the United States in the business of providing services relating to the sale or distribution of jewelry, sunglasses, reading glasses or any of their accessories or in any other business engaged in by any member of the FGX Group while the Employee was employed by the Company; provided, however, that the beneficial ownership by the Employee of less than five percent (5%) of the shares of common stock of any other corporation having a class of equity securities actively traded on a national securities exchange or over-the-counter market shall not be deemed, in and of itself, to violate the prohibitions of this Section 12. Notwithstanding the foregoing, for so long as a majority of the issued and outstanding capital stock of the Company is owned directly or indirectly by Berggruen Holdings, Inc. or one or more of its affiliates or a representative of Berggruen Holdings, Inc. or one or more of its affiliates is on the Board (or any entity owning a majority of the issued and outstanding shares of the Company, whether directly or indirectly) the Company shall have the right to extend the Noncompete Period for an additional six (6) months for a total of twenty-four (24) months (the "Noncompete Extension") by delivering to Employee written notice of such decision prior to termination of the original eighteen (18) month Noncompete Period.

        13.    Non-Solicitation of Employees.    The Employee agrees that he will not during the Noncompete Period, directly or indirectly, employ or permit any company or business directly or indirectly controlled by him to employ, any person who is, or at any time during the preceding twelve month period, was an employee of any member of the FGX Group, or induce, persuade or seek to induce or persuade any such person to leave his employment with any member of the FGX Group.

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        14.    Non-Disparagement.    The Employee agrees that at all times during and after the Term, the Employee will not engage in any conduct that is injurious to the reputation or interests of any member of the FGX Group, including, but not limited to, making disparaging comments (or inducing or encouraging others to make disparaging comments) about any member of the FGX Group, or any of their respective, directors, officers, employees or agents, or their respective operations, financial condition, prospects, content, products or services.

        15.    Intellectual Property.

        (a)    Ownership of Developments.    The Employee acknowledges that all original works of authorship, inventions, improvements, discoveries, developments, concepts, software (including, without limitation, images, text, source code, object code, html code and scripts), databases and trade secrets and other original works, and any upgrades, modifications, improvements or enhancements to the foregoing and any related patents, patent applications, copyrights and copyright applications, which are created, made, conceived, developed or reduced to practice by the Employee or under his or her direction or jointly with others during the Term or within one (1) year thereafter (whether or not during normal working hours, on the premises of the Company or using Company's equipment or Confidential Information), which relate to the present or anticipated business activities of the FGX Group (all of which are collectively referred to as "Developments") are and shall remain the sole and exclusive property of the Company, and all right, title and interest therein, whether or not used by the Company, shall, from the inception of development, be exclusively and perpetually the property of the Company. Unless otherwise agreed to in writing by the Company, nothing in this or any agreement or in the course of dealing between the Employee and the Company shall be construed to grant the Employee or his affiliates any ownership right, title or interest in or license to any of the Developments. The Employee acknowledges that all Developments made by the Employee (solely or with others) within the scope of the Employee's employment and winch are protectable by copyright are "works made for hire" within the meaning of the U.S. Copyright Act and any other U.S. and foreign laws relating to intellectual property. To the extent that any Developments shall not be deemed "works made for hire", the Employee hereby irrevocably assigns to the Company any of his worldwide right, title or interest in and to all Developments and all intellectual property rights, including but not limited to all worldwide copyrights, trade secrets, patent rights and trademark rights, in and to all of the Developments, and any extensions and renewals thereof.

        (b)    Obligations of the Employee.    The Employee shall (i) promptly notify, make full disclosure to, and execute and deliver any documents requested by, the Company, to evidence or better assure title to all Developments in the Company, as so requested, (ii) renounce any and all claims, including but not limited to claims of ownership and royalty, with respect to all Developments and all other property owned or licensed by any member of the FGX Group, (iii) assist the members of the FGX Group in obtaining, maintaining and enforcing for itself at its own expense United States and foreign patents, copyrights, trademark, trade secret or other protection of any and all Developments and (iv) promptly execute, whether during his employment with the Company or thereafter, all applications, endorsements or other documents necessary or appropriate to maintain patents and other rights for any member of the FGX Group and to protect the title of the members of the FGX Group thereto, including but not limited to assignments of such patents, copyrights, trademark, trade secrets and other rights in accordance with Subsection (c) below.

        (c)    Patent and Copyright Registrations.    The FGX Group and their nominees shall have the right to use and apply for common law and statutory protections of all Developments in any and all countries and jurisdictions. Furthermore, the Employee agrees to assist the members of the FGX Group or their designees, at the FGX Group's expense, in every proper way to secure the FGX Group's rights in the Developments and any patents, copyrights, trademark and mask work

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rights or other intellectual property rights relating thereto in any and all countries and jurisdictions, including the disclosure to the Company of all pertinent information and data with respect thereto, the execution of all applications, specifications, oaths, assignments and all other instruments which the Company shall deem necessary in order to apply for and obtain such rights and in order to assign and convey to the FGX Group, their successors, assigns and nominees the sole and exclusive right, title and interest in and to such Developments, including all rights associated with works of authorship throughout the world, any copyrights, patents, mask work rights, trade secrets, or other intellectual property rights relating thereto or analogous to those set forth herein. The Employee further agrees that his obligation to execute or cause to be executed any such instrument or papers shall continue after the termination of this Agreement. If the FGX Group is unable because of the Employee's mental or physical incapacity, his refusal or for any other reason to secure his signature to apply for or to pursue any application for any United States or foreign patents or copyright registrations covering Developments, then the Employee hereby irrevocably designates and appoints the Company and its duly authorized officers and agents as his agent and attorney-in-fact, which designation and appointment is coupled with an interest, to act for and on his behalf and stead, to execute and file any such applications and to do all other lawfully permitted acts to further the prosecution and issuance of patent or copyright registrations thereon with the same legal force and effect as if executed by the Employee. The foregoing rights shall also apply to any divisions, continuations, renewals, reissues and extensions of the foregoing, as applicable, now existing or hereafter filed, issued or acquired.

        (d)    Prior Inventions Retained and Licensed.    Attached hereto as Exhibit B is a list describing all inventions, original works of authorship, developments, improvements and trade secrets which were created, made, conceived, developed or reduced to practice by the Employee prior to his employment with the Company which relate to the present or anticipated business activities of the FGX Group(collectively, the "Prior Inventions"). The Prior Inventions shall belong to the Employee and shall not be assigned to the Company hereunder. If no such Prior Inventions are listed on Exhibit B, the Employee represents that there are no such Prior Inventions. If in the course of his employment with the Company, the Employee incorporates into any invention, improvement, development, product, copyrightable material or trade secret any invention, improvement, development, concept, discovery or other proprietary information owned by the Employee or in which the Employee has an interest, the Company is hereby granted and shall have a nonexclusive royalty-free, irrevocable, perpetual, worldwide license to make, have made, modify, use and sell such item as part of or in connection with such product, process or machine.

        (e)    Inventions Assigned to the United States.    The Employee agrees to assign to the United States government all his right, title, and interest in and to any and all Developments whenever such full title is required to be in the United States by a contract between the Company and the United States or any of its agencies.

        (f)    Maintenance of Records.    The Employee agrees to keep and maintain adequate and current written records of all Developments made by the Employee (solely or jointly with others) during the term of his employment with the Company. The records will be in the form of notes, sketches, drawings, and any other format that may be specified by the Company. The records will be available to and remain the sole property of the Company at all times.

        16.    Enforceability of Restrictive Covenants.    The Employee hereby acknowledges that the restrictions on his activity contained in Sections 10, 11, 12, 13, 14 and 15 are necessary for the reasonable protection of the members of the FGX Group and are a material inducement to the Company entering into this Agreement and the Option Agreement. The Employee further acknowledges that a breach or threatened breach of any such provisions would cause irreparable harm to the members of the FGX Group for which there is no adequate remedy at law. The Employee agrees that in the event of any breach or threatened breach of any provision contained in Section 10,

9

11, 12, 13, 14 or 15 of this Agreement, the Company shall have the right, in addition to any other rights or remedies it may have, to seek injunctive relief without having to post bond or other security and without having to prove special damages or the inadequacy of the available remedies at law. The parties acknowledge that (a) the time, scope, geographic area and other provisions contained in Sections 10, 11, 12, 13, 14 and 15 are reasonable and necessary to protect the goodwill and business of the Company, (b) the customers of the Company may be serviced from any location and accordingly it is reasonable that the covenants set forth herein are not limited by narrow geographic area and (c) the restrictions contained in Sections 10, 11, 12, 13, 14 and 15 will not prevent him from being employed or earning a livelihood. If any covenant contained in Section 10, 11, 12, 13, 14 or 15 is held to be unenforceable by reason of the time, scope or geographic area covered thereby, such covenant shall be interpreted to extend to the maximum time, scope or geographic area for which it may be enforced as determined by a court making such determination, and such covenant shall only apply in its reduced form to the operation of such covenant in the particular jurisdiction in which such adjudication is made. In the event that the Company shall bring any action, suit or proceeding against the Employee for the enforcement of this Agreement, the calculation of the Noncompete Period shall not include the period of time commencing with the filing of the action, suit or proceeding to enforce this Agreement through the date of the final judgment or final resolution (including all appeals, if any) of such action, suit or proceeding. The existence of any claim or cause of action by the Employee against any member of the FGX Group predicated on this Agreement or otherwise shall not constitute a defense to the enforcement by the Company of any provision of Section 10, 11, 12, 13, 14 or 15.

        17.    Section 409A.    To the extent that the Employee otherwise would be entitled to any payment (whether pursuant to this Agreement or otherwise) during the six months beginning on the Expiration Date that would be subject to the additional tax imposed under Section 409A of the Code ("Section 409A"), (x) the payment shall not be made to the Employee during such six month period and (y) the payment, together with interest at the applicable federal rate provided for in Section 7872(f)(2) of the Code shall be paid to the Employee on the earlier of the six-month anniversary of the Expiration Date or the Employee's death or Disability. Similarly, to the extent that the Employee otherwise would be entitled to any benefit (other than a payment) during the six months beginning on the Expiration Date that would be subject to the Section 409A additional tax, the benefit shall be delayed and shall begin being provided (together, if applicable, with an adjustment to compensate the Employee for the delay) on the earlier of the six-month anniversary of the Expiration Date, or the Employee's death or Disability.

        18.    Limited Arbitration.    In the event that the Employee is terminated by the Company hereunder for Cause, the Employee shall have the right to give notice to the Company of his decision to arbitrate whether or not such termination was for Cause or without Cause, provided that the Employee provides the Company with written notice of his intent to arbitrate such dispute within thirty (30) days of the date of termination. Each party shall select one arbitrator, and the two arbitrators thereby selected shall select a third arbitrator. The arbitration shall take place in Providence County, Rhode Island or such other place as the parties shall agree, under the then-current Commercial Arbitration Rules of the American Arbitration Association. The decision of a majority of the three arbitrators will be final and binding on the parties to this Agreement. The arbitrators will only have the authority to determine whether such termination was for Cause or without Cause, and will not have the authority to award any damages whatsoever. Following such decision, the parties agree that all of the terms of this Agreement shall continue to govern the parties, including, without limitation, the restrictive covenants in Sections 10 through 15 and any severance payments or benefits, if any, to be provided by the Company to the Employee.

        19.    Conflict.    The Employee hereby represents and warrants to the Company that neither the execution or delivery of this Agreement by him nor the performance by him of his duties hereunder shall constitute a default, breach or violation of any understanding, contract or commitment, written or

10

oral, express or implied, to which the Employee is a party or to which the Employee is or may be bound, including, without limitation, any understanding, contract or commitment with any present or former employer. The Employee hereby agrees to indemnify and hold the Company harmless from and against any and all claims, losses, damages, liabilities, costs and expenses (including, without limitation, attorneys fees and expenses) incurred by the Company in connection with any default, breach or violation by the Employee of any such understanding, contract or commitment.

        20.    Binding Effect.    This Agreement shall be binding upon and inure to the benefit of the parties hereto and their respective heirs, successors and assigns, except that the Employee may not assign any of his rights or delegate any of his duties hereunder without the prior written consent of the Company (which may be granted or withheld in the Company's sole and absolute discretion).

        21.    Entire Agreement.    This Agreement constitutes the entire understanding of the parties relating to the subject matter hereof and supersedes and cancels any and all prior agreements, understandings, arrangements, promises and commitments, whether written or oral, express or implied, relating to the subject matter hereof, including, without limitation, that certain Employment Agreement dated as of March 1, 1997 between American Greetings Corporation and the Employee, as assigned to Magnivision, Inc. as of July 29, 2004 (the "Prior Agreement"), that certain Employment Agreement dated as of October 1, 2004 between Magnivision Inc. and the Employee (the "2004 Agreement"), the Original Agreement and all such prior agreements, understandings, arrangements, promises and commitments, including, without limitation, the Prior Agreement, the 2004 Agreement and the Original Agreement, are hereby canceled and terminated. The Employee hereby acknowledges that any compensation or benefits the Employee otherwise may have been entitled to under the Prior Agreement, the 2004 Agreement and the Original Agreement are hereby waived. The Company hereby acknowledges that any rights of Magnivision or obligations of the Employee under the Prior Agreement, the 2004 Agreement and Original Agreement are hereby waived.

        22.    Amendment.    This Agreement may not be amended, supplemented or modified in whole or in part except by an instrument in writing signed by the party or parties against whom enforcement of such amendment, supplement or modification is sought.

        23.    Survival.    The provisions of Sections 9 through 33 hereof shall survive the termination or expiration of this Agreement.

        24.    Notices.    Any notice, request or other document required or permitted to be given under this Agreement shall be in writing and shall be deemed given (a) upon delivery, if delivered by hand, (b) three (3) days after the date of deposit in the mail, postage prepaid if mailed by U S. certified or registered mail, or (c) on the next business day, if sent by prepaid overnight courier service, in each case, addressed as follows:

If to the Employee, to the address
set forth below his name on the
signature page hereto.

If to the Company, to:

FGX International Inc.
Attention: CEO
500 George Washington Highway
Smithfield, Rhode Island 02917

Any party may change the address to which notice shall be sent by giving notice of such change of address to the other parties in the manner provided above.

        25.    Waivers.    The failure or delay of any party to enforce any provision of this Agreement shall in no way affect the right of such party to enforce the same or any other provision of this Agreement.

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The waiver by any party of any breach of any provision of this Agreement shall not be construed as a waiver by such party of any succeeding breach of such provision or a waiver by such party of a breach of any other provision. The granting of any consent or approval by any party in any one instance shall not be construed to waive or limit the need for such consent or approval in any other or subsequent instance.

        26.    Governing Law and Jurisdiction.    This Agreement shall be construed in accordance with and governed by the laws of the State of Rhode Island applicable to contracts executed and to be wholly performed within such State (without regard to the choice of law provisions thereof). Each party hereby irrevocably and unconditionally consents and submits to the exclusive jurisdiction of the courts of the State of Rhode Island sitting in Providence County, Rhode Island and of the United States District Court for the District of Rhode Island for any actions, suits or proceedings arising out of or relating to this Agreement and the transactions contemplated hereby and each party agrees not to commence any action, suit or proceeding relating thereto except in such courts (except as set forth in Section 18 above). Each party further agrees that any service of process, summons, notice or document sent by U.S. registered mail to its address set forth herein shall be effective service of process for any action, suit or proceeding brought against it in any such court. Each party irrevocably and unconditionally waives any objection to the laying of venue of any action, suit or proceeding arising out of this Agreement or the transactions contemplated hereby in such courts, and irrevocably and unconditionally waives and agrees not to plead or claim in any such court that any action, suit or proceeding brought in any such court has been brought in an inconvenient forum.

        27.    Severability.    If any term or provision of this Agreement shall be determined by a court of competent jurisdiction to be illegal, invalid or unenforceable for any reason, the remaining provisions of this Agreement shall remain enforceable and the invalid, illegal or unenforceable provisions shall be modified so as to be valid and enforceable and shall be enforced.

        28.    Assignment.    The rights and obligations of the parties under this Agreement shall inure to the benefit of and shall be binding upon the successors and permitted assigns of the parties. Notwithstanding anything contained herein to the contrary, the Company shall have the right to assign this Agreement to any member of the FGX Group or any third party who acquires the Company or substantially all of the assets of the Company. Except as otherwise set forth in this Agreement, neither party may assign his or its rights or obligations under this Agreement without the prior written consent of the other party.

        29.    Third Party Beneficiaries.    Each of the parties hereto agree that each member of the FGX Group is and shall be deemed an intended third party beneficiary of the Company's rights under Sections 10 through 16 of this Agreement with full rights to enforce the provisions thereof as if a signatory hereto.

        30.    Section Headings.    Section headings are included in this Agreement for convenience of reference only, and shall in no way affect the meaning or interpretation of this Agreement.

        31.    Counterparts.    This Agreement may be executed in two or more counterparts, each of which shall be deemed an original, but all of which taken together shall constitute one and the same instrument.

        32.    Number of Days.    In computing the number of days for purposes of this Agreement; all days shall be counted, including Saturdays, Sundays and holidays; provided, however, if the final day of any time period falls on a Saturday, Sunday or holiday on which federal banks in the United States are or may elect to be closed, then the final day should be deemed the next day which is not a Saturday, Sunday or such holiday.

        33.    Attorneys' Fees.    In any action brought to enforce any provision of this Agreement, the prevailing party shall be entitled to recover reasonable attorneys' fees and costs from the other party to

12

the action or proceeding. For purposes of this Agreement, the "prevailing party" shall be deemed to be that party who obtains substantially the result sought, whether by settlement, mediation, judgment, arbitration or otherwise, and "attorneys' fees" shall include, without limitation, the actual attorneys' fees incurred in retaining counsel for advice, negotiations, suit, or other legal proceeding, including mediation and arbitration.

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IN WITNESS WHEREOF the parties have executed this Agreement as of the day and year first written above.

FGX INTERNATIONAL INC.
By:	/s/ Alec Taylor Name: Alec Taylor Title: Chief Executive Officer
EMPLOYEE
By:	/s/ Steven Crellin Name: Steven Crellin Address: 10 Hales Pond Lane Wrentham, MA 02093

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EXHIBIT B

PRIOR INVENTIONS

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EXECUTIVE EMPLOYEE BENEFITS

1.

Pre-Tax Medical—eligible the 1^st of the month following 30 days of employment. Open Enrollment is January of each year.



2.

Pre-Tax Dental—eligible the 1^st of the month following 30 days of employment. Open Enrollment is January of each year.



3.

Life Insurance after 30 days of employment. This benefit is company paid and pays two times annual salary over $60,000 up to an aggregate of $400,000. Supplemental units of this life insurance for spouse and children will soon be available through payroll deductions.



4.

401K Plan eligible the 1^st of the month



(4)

. The company will match 25% of the first 6% of salary deducted by eligible employees. Also eligible for such other deferred compensation and/or savings plans generally offered to executives of the Company.



5.

Paid Time Off "PTO." Twenty (20) Days per year based on the Company's PTO policy.



6.

Company Paid Long Term Disability for salary of $75,000 and over.



7.

Vision Reimbursement of up to $100 per year for the purchase of eyeglasses or contacts for the employee as well as each family member enrolled in the company's healthcare plan.



8.

Annual auto allowance of $11,400.00 paid weekly to begin upon termination of Magnivision automobile lease.

        These Executive Employee Benefits may be modified or changed by the Company from time to time at the discretion of the Board.

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EXHIBIT 10.3

AMENDED AND RESTATED EMPLOYMENT AGREEMENT

        This Amended and Restated Employment Agreement (the "Agreement"), dated as of February 18, 2008, is entered into by and between FGX International Inc., a Delaware corporation with a mailing address of 500 George Washington Highway, Smithfield, Rhode Island 02917 (the "Company"), and John H. Flynn, Jr., an individual with a residence address of 52 Second Street, Newport, Rhode Island 02840 ("Executive").

INTRODUCTION

        The Company, AAi.FosterGrant Inc., a Rhode Island corporation that was merged into the Company, and Executive are parties to a certain Amended and Restated Employment Agreement dated April 10, 2006 (the "Original Agreement"). The Company and Executive desire to amend and restate the Original Agreement to modify certain of the terms and conditions set forth therein.

AGREEMENT

        In consideration of the premises and mutual promises herein below set forth, the parties hereby agree as follows:

        1.    Employment Period.    The term of Executive's Employment by the Company pursuant to this Agreement (the "Employment Period") shall commence on the date hereof (the "Effective Date") and shall continue until terminated as provided herein. For purposes of this Agreement, "Termination Date" means the date on which the Employment Period ends.

        2.    Employment; Duties.    Subject to the terms and conditions set forth herein, Executive shall serve as President of the Company and of FGX International Holdings Limited, a British Virgin Islands corporation and the indirect parent of the Company ("FGX Holdings"), (FGX Holdings, together with the direct and indirect subsidiaries of FGX Holdings, the "FGX Group") during the Employment Period. The duties assigned and authority granted to Executive shall be as set forth in the By-laws of the Company and as determined by the Chief Executive Officer from time to time. Executive agrees to perform his duties for the FGX Group diligently, competently, and in a good faith manner. Executive may also engage in civic and charitable activities to the extent they are not inconsistent with Executive's duties hereunder.

        3.    Salary and Bonus.

        (a)    Base Salary.    Executive shall be entitled to receive a base salary from the Company during the Employment Period at the rate of no less than Three Hundred Seventy Thousand and 00/100 Dollars ($370,000) per annum (as from time to time, if at all increased, the "Salary"). Executive's Salary may not be decreased. In addition, the Board of Directors of the Company may further increase Executive's Salary from time to time in their discretion, based upon the Company's performance and Executive's particular contributions.

        (b)    Bonus.    Executive shall be eligible for an annual cash bonus of up to fifty percent (50%) of his Salary under the Company's Executive Incentive Compensation Plan ("Annual Target Bonus Amount") during the Employment Period, subject to the discretion of the Company's Board of Directors.

        4.    Other Benefits.

        (a)    Insurance and Other Benefits.    During the Employment Period Executive shall be entitled to participate in, and shall receive the maximum benefits available under, the Company's insurance programs (including health, supplemental health and life insurance) and any ERISA benefit plans, as the same may be adopted and/or amended from time to time, and shall receive all other benefits that are provided by the Company to other senior executives. The Company shall purchase

a disability insurance policy, in which the maximum monthly benefit payable pursuant to such policy, based upon Executive's monthly Salary, shall become payable after a six-month period of disability. The Company shall contribute the maximum amount permitted under current law and under the terms of the applicable plan for Executive's account under the Company's qualified and non-qualified 401(k) Plan, Supplemental 401(k) Plan, and any other Company pension or retirement plan as in effect from time to time during the Employment Period. Notwithstanding the foregoing, Executive shall be entitled to life insurance in the amount of, at a minimum, two times Salary, up to an aggregate benefit of $400,000.

        (b)    Vacation.    Executive shall be entitled to five (5) weeks paid vacation annually, to be taken at such time(s) as shall not, in the reasonable judgment of the Company's Board of Directors, interfere with the Executive's fulfillment of his duties hereunder and otherwise in accordance with the Company's policies and procedures in effect from time to time, including the Company's policies and procedures with respect to the payment for or carryover of accrued and unused vacation time.

        (c)    Automobile Allowance.    During the Employment Period the Company shall provide Executive with a monthly automobile allowance consistent with the plan adopted or to be adopted by the Company for other senior executives but in all events the monthly automobile allowance shall be no less than that in existence as of the Effective Date.

        (d)    Stock Options.    Executive acknowledges that he has been granted stock options to purchase ordinary shares of FGX Holdings on the terms and subject to the conditions set forth in that certain Time-Based Incentive Stock Option Agreement dated September 29, 2004, which agreement shall remain in full force and effect and unchanged hereby.

        5.    Termination by the Company With Cause.    Upon prior written notice to Executive, the Company may terminate Executive's employment if any of the following events shall occur (any of the following events shall constitute "Cause" for all purposes hereof):

        (a)   the conviction of Executive for a crime involving fraud or moral turpitude;

        (b)   deliberate dishonesty of Executive with respect to the Company or any of its subsidiaries; or

        (c)   the refusal of Executive to follow the reasonable and lawful written instructions of the Chief Executive Officer of the Company with respect to the services to be rendered and the manner of rendering such services by Executive, provided such refusal is material and repetitive and is not justified or excused either by the terms of this Agreement or by actions taken by the Company in violation of thus Agreement.

        6.    Termination by Executive; Termination by the Company Without Cause.

        6.1    Notice/Events.

        (a)    Termination by Executive.    Executive may terminate his employment at any time by providing written notice to the Company.

        (b)    Termination by the Company Without Cause.    The Company may terminate Executive's employment at any time, without Cause by providing written notice to Executive. As used in this Agreement, the term "without Cause" shall mean termination for any reason not specified in Section 5 or Section 7 hereof.

        6.2    Executive's Right-to-Terminate.    Executive may terminate Executive's employment for Good Reason at any time during the term of this Agreement. For purposes of this Agreement, "Good Reason" shall mean any of the following (without Executive's express written consent):

        (a)   the assignment to Executive by the Company of any duties materially inconsistent with Executive's status with the Company or a material alteration in the nature or status of Executive's responsibilities from those in effect on the date hereof, or a material reduction in

Executive's titles or offices as in effect on the date hereof, or any removal of Executive from, or any failure to reelect Executive to, any of such positions, except in connection with the termination of his employment for disability or for any reason specified in Section 5 hereof or as a result of Executive's death or by Executive other than for Good Reason;

        (b)   a reduction by the Company in Executive's Salary as in effect on the date hereof or as the same may be increased from time to time during the term of this Agreement;

        (c)   except if such action applies to all senior executive officers of the Company generally, any failure by the Company to continue in effect its present Executive Incentive Compensation Plan, any fringe benefits, the taking of any action by the Company which would, directly or indirectly, materially reduce Executive's benefits or deprive Executive of any fringe benefits enjoyed by Executive at the date hereof, or the failure by the Company to provide Executive with the number of paid vacation days to which Executive is entitled at the date hereof;

        (d)   a relocation of the Company's principal executive offices to a location more than 50 miles from their current location in, or the Company's requiring Executive to be based anywhere other than the Company's principal executive offices; or

        (e)   any material breach, which remains uncured for twenty (20) days after reasonable notice, by the Company of any provisions of this Agreement.

        6.3    Severance.

        (a)    Without Cause.    If the Company terminates Executive's employment without Cause, or if Executive terminates his employment pursuant to Section 6.2 hereof, then, subject to Section 8, commencing on the date of termination of employment, the Company shall provide Executive with a severance package which shall consist of the following: (i) for a period equal to two (2) years after the date of termination (i) payment on the first business day of each month of an amount equal to one-twelfth of Executive's then current Salary under Section 3(a) hereof; (ii) payment on the first business day of each month of an amount equal to one-twelfth of Executive's Annual Target Bonus Amount under the Company's Executive Incentive Compensation Plan for the year of termination; and (iii) continuation of all benefits under Section 4 (a) hereof; provided, however, that the amount of any severance payments hereunder shall be reduced by the amount of income otherwise earned by Executive during the two year period following termination and provided, further that benefits under Section 4(a) shall be discontinued as of the date on which Executive is provided comparable benefits from any other source.

        (b)    General Release.    As a condition precedent to receiving any severance payment, Executive shall execute a general release of any and all claims which Executive or his heirs, executors, agents or assigns might have against the Company, its subsidiaries, affiliates, successors, assigns and its past, present and future employees, officers, directors, agents and attorneys, except for claims arising under this Agreement or any employee benefit plan (other than any employee benefit plan providing a benefit in the nature of a severance benefit) in which Executive participates or for any right to indemnification to which Executive may be entitled as an officer and director of the Company.

        (c)    Withholding.    All payments made by the Company under this Agreement shall be net of any tax or other amounts required to be withheld by the Employer under applicable law.

        (d)    Certain Reductions of Payments by the Company.

        (1)   Anything in this Agreement to the contrary notwithstanding, in the event it shall be determined that any payment or distribution by the Company to or for the benefit of the Executive, whether paid or payable or distributed or distributable pursuant to the terms of this Agreement or otherwise (a "Payment"), would constitute an "excess

parachute payment" within the meaning of Section 280G(b) of the U.S. Internal Revenue Code (the "Code"), and thus would result in the Executive incurring an excise tax under Section 4999 of the Code, then the aggregate present value of amounts payable or distributable to or for the benefit of the Executive pursuant to this Agreement (such payments or distributions pursuant to this Agreement are hereinafter referred to as "Agreement Payments") shall be reduced to the Reduced Amount, but only if and to the extent that the after-tax value to the Executive of reduced Agreement Payments would exceed the after-tax value to the Executive of the Agreement Payments received by the Executive without application of such reduction. The "Reduced Amount" shall be an amount expressed in present value which maximizes the aggregate present value of Agreement Payments without causing any Payment to be nondeductible by the Company because of Section 280G of the Code. Anything to the contrary notwithstanding, if the Reduced Amount is zero and it is determined further that any Payment which is not an Agreement Payment would nevertheless be nondeductible by the Company for Federal income tax purposes because of Section 280G of the Code, then the aggregate present value of Payments' which are not Agreement Payments shall also be reduced (but not below zero) to an amount expressed in present value which maximizes the aggregate present value of Payments without causing any Payment to be nondeductible by the Company because of Section 280G of the Code. For purposes of this Section 6(c)(iv), present value shall be determined in accordance with Section 280G(d)(4) of the Code. Thus, for illustrative purposes only, if the Executive's average W-2 compensation for the five (5) years prior to the year in which a Change in Control occurs (the "Base Amount") was $500,000, and the value of the payments and benefits that are contingent upon the Change in Control (the "Parachute Payments") was $1,510,000, the Executive would have an excess parachute payment within the meaning of Section 280G(b) of the Code since the value of the parachute payments ($1,510,000) would be greater than three (3) times the Executive's Base Amount ($1,500,000). The amount of the excess parachute payment would be $1,010,000 (the amount by which the value of the parachute payments exceeds one (1) times the Base Amount), and if the aggregate amount of the parachute payments was not reduced, the Executive would incur an excise tax under Section 4999 of the Code equal to 20% of the excess parachute payment (or $202,000). This excess parachute payment could be avoided if instead, the value of the parachute payments was reduced by $10,001 to $1,499,999 (since the value of the parachute payments then would be less than three (3) times the Base Amount). Since the Executive would receive a greater after tax amount, under the foregoing example, if his parachute payments were reduced by $10,001 (to $1,499,999) than he would if his parachute payments were not reduced and the Executive incurred a $202,000 excise tax (reducing his parachute payments to $1,308,000) on the excess parachute payment, the Executive's parachute payments would be reduced under this provision to $1,499,999 (by $10,001) to avoid any excess parachute payments.

        (2)   All determinations required to be made under this Section 6(c)(iv) shall be made by the Company's accountants for the Company's last fiscal year or, at the mutual agreement of the Executive and the Company, any other nationally or regionally recognized firm of independent public accountants (the "Accounting Firm"), which shall provide detailed supporting calculations both to the Company and the Executive within twenty (20) business days of the date of termination or such earlier time as is requested by the Company and an opinion to the Executive that he has substantial authority not to report any excise tax on his Federal income tax return with respect to any Payments. Any such determination by the Accounting Firm shall be binding upon the Company and the Executive. The Executive shall determine which and how much of the Payments shall be eliminated or reduced consistent with the requirements of this Section 6(c)(iv), provided that, if the Executive does not make such determination within ten business days of the receipt of the calculations made by the Accounting Firm, the Company shall elect which and how much of the Payments shall be eliminated or reduced consistent with the

requirements of this Section 6(c)(iv) and shall notify the Executive promptly of such election. Within five business days thereafter, the Company shall pay to or distribute to or for the benefit of the Executive such amounts as are then due to the Executive under this Agreement. All fees and expenses of the Accounting Firm incurred in connection with the determinations contemplated by this Section 6(c)(iv) shall be borne by the Company.

        (3)   As a result of the uncertainty in the application of Section 280G of the Code at the time of the initial determination by the Accounting Firm hereunder, it is possible that Payments will have been made by the Company which should not have been made ("Overpayment") or that additional Payments which will not have been made by the Company could have been made ("Underpayment"), in each case, consistent with the calculations required to be made hereunder. In the event that the Accounting Firm, based upon the assertion of a deficiency by the Internal Revenue Service against the Executive which the Accounting Firm believes has a high probability of success, determines that an Overpayment has been made, any such Overpayment paid or distributed by the Company to or for the benefit of the Executive shall be treated for all purposes as a loan ab initio to the Executive which the Executive shall repay to the Company together with interest at the applicable federal rate provided for in Section 7872(f)(2) of the Code; provided, however, that no such loan shall be deemed to have been made and no amount shall be payable by the Executive to the Company if and to the extent such deemed loan and payment would not either reduce the amount on which the Executive is subject to tax under Section 1 and Section 4999 of the Code or generate a refund of such taxes. In the event that the Accounting Firm, based upon controlling precedent or other substantial authority, determines that an Underpayment has occurred, any such Underpayment shall be promptly paid by the Company to or for the benefit of the Executive together with interest at the applicable federal rate provided for in Section 7872(f)(2) of the Code.

        7.    Death or Disability.    In the event of Executive's death or disability, the Employment Period will automatically terminate effective as of the date of such death or disability. As used in this Agreement, the term "disability" shall mean inability on the part of Executive for a period of more than six (6) months in the aggregate during any twelve (12) consecutive month period to perform the services contemplated under this Agreement. A determination of disability shall be made by a physician satisfactory to both Executive and the Company, provided that if Executive and the Company do not agree on a physician, Executive and the Company shall each select a physician and these two physicians together shall select a third physician, whose determination as to disability shall be binding on all parties.

        8.    Change in Control.

        (a)   If Executive's employment is terminated by the Company without Cause or by Executive for Good Reason within six (6) months before and in anticipation of, or twelve (12) months after, a Change in Control (as defined in Paragraph (b) of this Section 8), Executive shall be entitled to receive a supplemental bonus payment (the "Change in Control Payment") from the Company equal to two (2) times the sum of Executive's then current Salary and Executive's Annual Target Bonus Amount under the Company's Executive Incentive Compensation Plan for the year of termination. The Change in Control Payment shall be paid to Executive within fifteen (15) days after: (i) the Change in Control if Executive's employment was terminated within six (6) months before the Change in Control; or (ii) the termination of Executive's employment by the Company if Executive's employment terminates within twelve (12) months after the Change in Control. Executive shall also be entitled to continuation of all benefits under Section 4(a) hereof, ending on the earlier of (x) the two (2) year anniversary of the termination date and (v) the date on which Executive is provided comparable benefits from any other source. In addition, all stock options held by Executive shall vest and become immediately exercisable. If Executive is entitled to a Change in Control Payment, Executive shall not have any rights to receive any severance payments or benefits pursuant to Section 6(c) hereof. If Executive's employment by the Company terminates within six (6) months prior to the Change in Control and Executive received severance payments

pursuant to Section 6(c) hereof, any amounts so paid by the Company to Executive shall be deducted from any Change in Control Payment otherwise payable to Executive pursuant to this Section 8(a).

        (b)   A "Change in Control" will be deemed to have occurred if (i) a Takeover Transaction occurs, or (ii) any election of directors of FGX Holdings takes place (whether by the directors then in office or by the stockholders at a meeting or by written consent) and a majority of the directors in the office following such election are individuals who were not nominated by a vote of two-thirds of the members of the Board of Directors immediately preceding such election, or (iii) FGX Holdings effectuates a complete liquidation of FGX Holdings or a sale or disposition of all or substantially all of its assets. A "Change in Control" shall not be deemed to include, the recapitalization of FGX Holdings or any transactions related thereto, consummated on or prior to the Effective Date.

        (c)   A "Takeover Transaction" shall mean (i) a merger or consolidation of FGX Holdings with, or an acquisition of FGX Holdings or all or substantially all of its assets by, any other corporation, other than a merger, consolidation or acquisition in which the individuals who were members of the Board of Directors of FGX Holdings immediately prior to such transaction continue to constitute a majority of the Board of Directors of the surviving corporation (or, in the case of an acquisition involving a holding company, constitute a majority of the Board of Directors of the holding company) for a period of not less than twelve (12) months following the closing of such transaction, or (ii) when any person, including any "group" as such term is defined in Rule 13d-3 under the Securities Exchange Act of 1934, as amended (the "Exchange Act"), becomes after the date hereof the "beneficial owner" (as defined in Rule 13d-3 under the Exchange Act) of securities of FGX Holdings representing more than fifty percent (50%) of the total number of votes that may be cast for the election of directors of FGX Holdings, excluding (i) any person that is excluded from the definition of "beneficial owner" under Rule 16(a)-1(a)(l) under the Exchange Act and (ii) any person (including any such group) that consists of or is controlled by (within the meaning of the definition of "affiliate" in Rule 144 under the Securities Act of 1933, as amended (an "Affiliate")) any person that is a shareholder of FGX Holdings on the Effective Date or any Affiliate of such person.

        9.    Non-Competition.    During the Employment Period and after termination of Executive's employment hereunder, whether or not such termination is without Cause or for Good Reason, Executive shall not be involved in the Restricted Business Activities, as defined below, for the period ending two (2) years after the date of termination of Executive's employment (the "Non-compete Period") provided that the Company has not otherwise breached its obligations under the Agreement. As used in this Agreement, the term "Restricted Business Activities" shall mean any business which markets and sells to customers of a class or category to which the FGX Group markets and sells at the time Executive's employment terminated products or services marketed and sold by the FGX Group at such time or products or services which at such time the FGX Group was actively considering marketing and selling to such customers. During the Non-compete Period, Executive shall not, without the written approval of the Company, directly or indirectly, either as an individual, partner, joint venturer, employee or agent for any person, company, corporation or association, or as an officer, director or stockholder of a corporation or otherwise, enter into or engage in or have a proprietary interest in the Restricted Business Activities other than the ownership of (a) the stock of the Company then held by Executive, and (b) no more than five percent (5%) of the securities of any other publicly-held company.

        Executive recognizes and agrees that because a violation by him of his obligations under this Section 9 will cause irreparable harm to the FGX Group that would be difficult to quantify and for which money damages would be inadequate, any party included in the definition of the FGX Group shall have the right to injunctive relief to prevent or restrain any such violation, without the necessity of posting a bond. The Non-compete Period will be extended by the duration of any violation by Executive of any of his obligations under this Section 9.

        Executive expressly agrees that the character, duration and scope of his obligations under this Section 9 are reasonable in light of the circumstances as they exist at the date upon which this Agreement has been executed. However, should a determination nonetheless be made by a court of competent jurisdiction at a later date that the character, duration or geographical scope of such obligations is unreasonable in light of the circumstances as they then exist, then it is the intention of both Executive and the Company that Executive's obligations under this Section 9 shall be construed by the court in such a manner as to impose only those restrictions on the conduct of Executive which are reasonable in light of the circumstances as they then exist and necessary to assure the Company of the intended benefit of Executive's obligations under this Section 9.

        10.    Confidentiality Covenants.

        (a)   Executive understands that any party of the FGX Group may impart to him confidential business information, including but not limited to designs, financial information, personnel information, real estate information, and the like (collectively "Confidential Information"). Executive hereby acknowledges FGX Group's exclusive ownership of such Confidential Information. So long as the Confidential Information is not in the public domain and except to the extent Executive receives Confidential Information from a third party not known to the Executive to be under an obligation of confidentiality, Executive agrees as follows: (1) only to use the Confidential Information to provide services to the FGX Group; (2) only to communicate the Confidential Information to fellow employees, agents and representatives on a need-to-know basis and (3) not to otherwise disclose or use any Confidential Information. Upon demand by Company or upon termination of Executive's employment, Executive will deliver to Company all manuals, photographs, recordings, and any other instrument or device by which, through which, or on which Confidential Information has been recorded and/or preserved, which are in my Executive's possession, custody or control.

        (b)   The Company will not disclose the terms and conditions of Executive's employment, unless it is required by law to do so.

        11.    Section 409A.    To the extent that the Executive otherwise would be entitled to any payment (whether pursuant to this Agreement or otherwise) during the six (6) months beginning on the Termination Date that would be subject to the additional tax imposed under Section 409A of the Code ("Section 409A"), (x) the payment shall not be made to the Executive during such six (6) month period and (y) the payment, together with interest at the applicable federal rate provided for in Section 7872(f)(2) of the Code shall be paid to the Executive on the earlier of the six-month anniversary of the Termination Date or the Executive's death or disability. Similarly, to the extent that the Executive otherwise would be entitled to any benefit (other than a payment) during the six months beginning on the Termination Date that would be subject to the Section 409A additional tax, the benefit shall be delayed and shall begin being provided (together, if applicable, with an adjustment to compensate the Executive for the delay) on the earlier of the six-month anniversary of the Termination Date, or the Executive's death or disability.

        12.    Governing Law/Jurisdiction.    This Agreement shall be governed by and interpreted and governed in accordance with the laws of the State of Rhode Island. The parties agree that this Agreement was made and entered into in Rhode Island and each party hereby consents to the jurisdiction of a competent court in Rhode Island to hear any dispute arising out of this Agreement.

        13.    Entire Agreement.    This Agreement constitutes the entire agreement between the parties hereto with respect to the subject matter hereof and thereof and supersedes and cancels any and all previous agreements, written and oral, regarding the subject matter hereof between the parties hereto, including but not limited to the Original Agreement. The Executive hereby acknowledges that any compensation or benefits the Executive otherwise may have been entitled to under the Original Agreement are hereby waived. Company hereby acknowledges that any of its rights or obligations of the Executive under the Original Agreement are hereby waived. This Agreement shall not be changed, altered, modified or amended, except by a written agreement signed by both parties hereto.

        14.    Notices.    All notices, requests, demands and other communications required or permitted to be given or made under this Agreement shall be in writing and shall be deemed to have been given if delivered by hand, sent by generally recognized overnight courier service, telex or telecopy, or certified mail, return receipt requested.

(a)

to the Company at:
500 George Washington Highway
Smithfield, Rhode Island 02917
Attn: CEO



(b)

to Executive at:
52 Second Street
Newport, Rhode Island 02840

        Any such notice or other communication will be considered to have been given (i) on the date of delivery in person, (ii) on the third day after mailing by certified mail, provided that receipt of delivery is confirmed in writing, (iii) on the first business day following delivery to a commercial overnight courier or (iv) on the date of facsimile transmission (telecopy) provided that the giver of the notice obtains telephone confirmation of receipt.

        Either party may, by notice given to the other party in accordance with this Section, designate another address or person for receipt of notices hereunder.

        15.    Severability.    If any term or provision of this Agreement, or the application thereof to any person or under any circumstance, shall to any extent be invalid or unenforceable, the remainder of this Agreement, or the application of such terms to the persons or under circumstances other than those as to which it is invalid or unenforceable, shall be considered severable and shall not be affected thereby, and each term of this Agreement shall be valid and enforceable to the fullest extent permitted by law. The invalid or unenforceable provisions shall, to the extent permitted by law, be deemed amended and given such interpretation as to achieve the economic intent of this Agreement.

        16.    Waiver.    The failure of any party to insist in any one instance or more upon strict performance of any of the terms and conditions hereof, or to exercise any right or privilege herein conferred, shall not be construed as a waiver of such terms, conditions, rights or privileges, but same shall continue to remain in full force and effect. Any waiver by any party of any violation of, breach of or default under any provision of this Agreement by the other party shall not be construed as, or constitute, a continuing waiver of such provision, or waiver of any other violation of, breach of or default under any other provision of this Agreement.

        17.    Successors and Assigns.    This Agreement shall be binding upon the Company and any successors and assigns of the Company and shall inure to the benefit of Executive and his heirs, personal representations and assigns.

        18.    Indemnification.    The Company shall indemnify Executive to the maximum extent permitted under applicable law against all liabilities and expenses, including amounts paid in satisfaction of judgments, in compromise, or as fines and penalties, and counsel fees, reasonably incurred by him in connection with the defense or disposition of any civil, criminal, administrative, or investigative action, suit or other proceeding, whether civil or criminal, in which he may be involved or with which he may be threatened, while an officer or director of the Company or any of its subsidiaries or thereafter, by reason of his being or having been an officer or director of the Company or any of the Company's subsidiaries. Expenses (including attorneys' fees) incurred by Executive in defending any such action, suit or other proceeding shall be paid by the Company in advance of the final disposition of such action, suit or proceeding upon receipt of an undertaking by or on behalf of Executive to repay such amount if it shall be ultimately determined that he is not entitled to be indemnified by the Company. The right of indemnification provided herein shall not be exclusive of or affect any other rights to which Executive may be entitled. The provisions hereof shall survive expiration or termination of this Agreement for any reason whatsoever.

        19.    Counterparts.    This Agreement may be executed in counterparts and by facsimile, each of which shall be an original with the same effect as if the signatures thereto and hereto were upon the same instrument.

        20.    Third Party Beneficiaries.    Each of the parties hereto agree that each party of the FGX Group is and shall be deemed an intended third party beneficiary of the Company's rights under Section 9 and 10 of this Agreement with full rights to enforce the provisions thereof as if a signatory thereto.

        IN WITNESS WHEREOF, the parties have executed this Agreement as of the date first written above.

FGX INTERNATIONAL INC.
By:	/s/ Alec Taylor
Name: Alec Taylor Title: Chief Executive Officer
EXECUTIVE
By:	/s/ John H. Flynn, Jr.
Name: John H. Flynn, Jr. Address: 52 Second Street Newport, RI 02840

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EXHIBIT 10.3

EX-10.26

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EXHIBIT 10.26

EMPLOYMENT AGREEMENT

        This Employment Agreement (the "Agreement") is entered into and shall be effective as of January 31, 2008, by and among FGX International Inc., a Delaware corporation with a mailing address of 500 George Washington Highway, Smithfield, Rhode Island 02917 (the "Company"), and Richard W. Kornhauser, an individual currently with a residence in the State of Tennessee ("Executive").

AGREEMENT

        In consideration of the premises and mutual promises herein below set forth, the parties hereby agree as follows:

        1.    Employment Period.    The term of Executive's Employment by the Company pursuant to this Agreement (the "Employment Period") shall commence on the date hereof (the "Effective Date") and shall continue until terminated as provided herein. For purposes of this agreement "Termination Date" means the date on which the Employment Period ends.

        2.    Employment; Duties.    Subject to the terms and conditions set forth herein, the Executive shall serve as the Executive Vice President, Chief Marketing Officer of the Company, and of FGX International Holdings Limited, a British Virgin Islands corporation and the indirect parent of the Company ("FGX Holdings"), during the Employment Period. The duties assigned and authority granted to Executive shall be as set forth in the By-laws of the Company and FGX Holdings and those that are typically assigned and/or afforded to a chief marketing officer, and such other duties and responsibilities as may otherwise reasonably be assigned to him by the Chief Executive Officer from time to time. Executive agrees to perform his duties for the Company diligently, competently and in a good faith manner. Notwithstanding anything to the contrary set forth herein, the Executive shall be permitted during the Employment Period to (a) engage in civic and charitable activities to the extent they are not inconsistent with Executive's duties hereunder and (b) serve as a member of the board of directors of not more than two additional for profit corporations.

        3.    Salary and Bonus.

        a.    Base Salary.    Executive shall be entitled to receive a base salary from the Company during the Employment Period at the rate of Two Hundred Fifty Thousand Dollars ($250,000) per annum (as from time to time, if at all, increased, the "Base Salary"). The Base Salary may be increased from time to time during the Employment Period, at the same time and under the same circumstances as other Executive Vice Presidents of the Company. The initial review of the Base Salary will occur in July, 2009. In addition, the Board of Directors, or Compensation Committee, of the Company or its parent corporation (collectively, the "Board of Directors"), may further increase Executive's Base Salary from time to time in their discretion, based upon the Company's performance and Executive's particular contributions.

        b.    Bonus.    Executive shall be eligible for and shall receive a cash bonus for the plan year 2008, and thereafter during each year of Executive's employment, subject to the discretion of the Company's Board of Director's, of up to fifty percent (50%) of his Base Salary ("Annual Target Bonus Amount") under the Company's executive incentive compensation plan (the "Executive Incentive Compensation Plan") on account of the services rendered by him during each calendar year during the Employment Period and the attainment of certain performance goals and successful completion of certain initiatives established by the Company. The cash bonus shall be paid on or before the later of (i) March 15 of the year following the calendar year for which the bonus was earned and (ii) the date on which the Board of Directors has been able to determine within a reasonable degree of certainty the amount of the bonus. The Board of Directors may from time to time increase the Annual Target Bonus Amount.

        c.    Supplemental Bonus.    Provided that Executive is still employed by the Company at the time of payment, Executive shall be paid a one-time cash bonus of Twenty Five Thousand Dollars

($25,000), which bonus shall be paid in two equal installments on each of (i) March 31, 2008 and (ii) June 30, 2008.

        4.    Other Benefits.

        a.    Insurance and Other Benefits.    During the Employment Period, Executive shall be entitled to participate in, and shall receive the maximum benefits available under, the Company's insurance programs (including health, supplemental health and life insurance) and any ERISA benefit plans, as the same may be adopted and/or amended from time to time, and shall receive all other benefits that are provided by the Company to other senior executives.

        b.    Paid Time Off.    Executive shall be entitled to fifteen (15) days of paid time off annually in accordance with the Company's paid time off policies in effect from time to time, to be taken at such time(s) as shall not, in the reasonable judgment of the Chief Executive Officer of the Company, interfere with Executive's fulfillment of his duties hereunder. Executive shall be entitled to as many holidays, sick days and personal days as are generally provided by the Company from time to time to its employees in accordance with the Company's policies as in effect from time to time.

        c.    Automobile Allowance.    During the Employment Period, the Company shall provide Executive with a monthly automobile allowance consistent with the plan adopted or to be adopted by the Company for other senior executives. As of the Effective Date, the monthly automobile allowance provided to Executive shall be $900.00.

        d.    Relocation/Temporary Living Allowance.    The Company shall reimburse Executive up to Seventy Five Thousand Dollars ($75,000) for (i) reasonable expenses related to the relocation of Executive and his family from Tennessee to the Rhode Island area, and (ii) reasonable temporary Rhode Island area living expenses for Executive that are incurred prior to such relocation. It is the expectation of the Company that Executive will relocate to the Rhode Island area by July 18, 2008. Temporary Rhode Island area living expenses incurred after July 18, 2008 will not be reimbursed by the Company. To be eligible for reimbursement, an expense must be an IRS allowable expense and Executive must submit actual receipts for such expense to the Company. Executive understands that the reimbursement of some or all of the expenses referenced above may be taxable to Executive. If Executive voluntarily provides notice of termination of Executive's employment pursuant to Section 6(a)(i) of this Agreement within twelve (12) months from the date of relocation to the Rhode Island area, Executive shall promptly refund to the Company the amounts reimbursed to Executive pursuant to this Section 4(e) (the "Reimbursement Amount"), provided that the Reimbursement Amount shall be reduced by an amount equal to (x) one-twelfth of the Reimbursement Amount, multiplied by (y) the number of full calendar months Executive worked for the Company following the date of relocation. To the extent that Executive fails to refund the Reimbursement Amount due to the Company, Executive agrees that the Company may offset such amount against any monies due to Executive by the Company, in addition to any other legal remedies.

        5.    Termination by the Company With Cause.    Upon prior written notice to Executive, the Company may terminate Executive's employment if any of the following events shall occur (any of the following events shall constitute "Cause" for all purposes hereof):

        a.     the conviction of Executive for a crime involving fraud or moral turpitude;

        b.     deliberate dishonesty of Executive with respect to the Company or any of its subsidiaries or affiliates; or

        c.     the refusal of Executive to follow the reasonable and lawful written instructions of the Chief Executive Officer of the Company with respect to the services to be rendered and the manner of rendering such services by Executive, provided such instructions are in accordance with

2

the duties of the Executive under this Agreement and provided further that such refusal is material and repetitive and is not justified or excused either by the terms of this Agreement or by actions taken by the Company in violation of this Agreement.

        6.    Termination by Executive; Termination by the Company Without Cause.

        a.    Notice/Events:

        i.    Termination by Executive.    Executive may terminate his employment at any time by providing written notice to the Company.

        ii.    Termination by the Company Without Cause.    The Company may terminate Executive's employment at any time, without Cause by providing written notice to Executive. As used in this Agreement, the term "without Cause" shall mean termination for any reason not specified in Section 5 or Section 7 hereof.

        b.    Executive's Right-to-Terminate.    Executive may terminate Executive's employment for Good Reason at any time during the term of this Agreement. For purposes of this Agreement, "Good Reason" shall mean any of the following (without Executive's express written consent):

        i.      the assignment to Executive by the Company of any duties materially inconsistent with Executive's status with the Company or a material alteration in the nature or status of Executive's responsibilities from those in effect on the date hereof, or a material reduction in Executive's titles as in effect on the date hereof, or any removal of Executive from, or any failure to reelect Executive to, any of such positions, except in connection with the termination of his employment for disability or for any reason specified in Section 5 hereof or as a result of Executive's death or by Executive other than for Good Reason;

        ii.     a reduction by the Company in Executive's Base Salary as in effect on the date hereof or as the same may be increased from time to time during the term of this Agreement;

        iii.    except if such action applies to all senior executive officers of the Company generally, any failure by the Company to continue in effect its present Executive Incentive Compensation Plan, any fringe benefits, the taking of any action by the Company which would, directly or indirectly, materially reduce Executive's benefits or deprive Executive of any fringe benefits enjoyed by Executive at the date hereof, or the failure by the Company to provide Executive with the number of paid vacation days to which Executive is entitled at the date hereof;

        iv.    a relocation of the Company's principal executive offices to a location more than 50 miles from their current location, or the Company's requiring Executive to be based anywhere other than the Company's principal executive offices; or

        v.     any material breach, which remains uncured for twenty (20) days after reasonable notice, by the Company of any provisions of this Agreement.

        c.    Severance.

        i.    Without Cause.    If the Company terminates Executive's employment without Cause, or if Executive terminates his employment pursuant to Section 6(b) hereof, then, subject to Section 8, commencing on the date of termination of employment, the Company shall provide Executive with a severance package which shall consist of the following: (i) for a period equal to one (1) year after the date of termination (x) payment on the first business day of each month of an amount equal to one-twelfth of Executive's then current Salary under Section 3(a) hereof; (y) payment on the first business day of each month of an amount equal to one-twelfth of Executive's Annual Target Bonus Amount under the Company's Executive Incentive Compensation Plan for the year of termination (assuming for purposes of calculating

3

such amount that the percentage of Salary payable as a bonus to Executive on account of the year of termination will be the same percentage of Salary paid as a bonus to Executive on account of the immediately preceding year, or the percentage of Salary paid as a bonus reasonably certain to be paid to Executive for the recently concluded or substantially completed fiscal year if no bonus was paid to Executive on account of the immediately preceding year); and (z) continuation of all benefits under Section 4(a) hereof; provided, however, that the amount of any severance payments hereunder shall be reduced by the amount of income otherwise earned by Executive from alternative employment during the one year period following termination and provided, further that benefits under Section 4(a) shall be discontinued as of the date on which Executive is provided comparable benefits from any other source.

        ii.    General Release.    As a condition precedent to receiving any severance payment, Executive shall execute a general release of any and all claims which Executive or his heirs, executors, agents or assigns might have against the Company, its subsidiaries, affiliates, successors, assigns and its past, present and future employees, officers, directors, agents and attorneys, except for claims arising under this Agreement or any employee benefit plan (other than any employee benefit plan providing a benefit in the nature of a severance benefit) in which Executive participates or for any right to indemnification to which Executive may be entitled under this Agreement or as an officer and director of the Company.

        iii.    Withholding.    All payments made by the Company under this Agreement shall be net of any tax or other amounts required to be withheld by the Employer under applicable law.

        iv.    Certain Reductions of Payments by the Company.

        1.     Anything in this Agreement to the contrary notwithstanding, in the event it shall be determined that any payment or distribution by the Company to or for the benefit of the Executive, whether paid or payable or distributed or distributable pursuant to the terms of this Agreement or otherwise (a "Payment"), would constitute an "excess parachute payment" within the meaning of Section 280G(b) of the U.S. Internal Revenue Code (the "Code"), and thus would result in the Executive incurring an excise tax under Section 4999 of the Code, then the aggregate present value of amounts payable or distributable to or for the benefit of the Executive pursuant to this Agreement (such payments or distributions pursuant to this Agreement are hereinafter referred to as "Agreement Payments") shall be reduced to the Reduced Amount, but only if and to the extent that the after-tax value to the Executive of reduced Agreement Payments would exceed the after-tax value to the Executive of the Agreement Payments received by the Executive without application of such reduction. The "Reduced Amount" shall be an amount expressed in present value which maximizes the aggregate present value of Agreement Payments without causing any Payment to be nondeductible by the Company because of Section 280G of the Code. Anything to the contrary notwithstanding, if the Reduced Amount is zero and it is determined further that any Payment which is not an Agreement Payment would nevertheless be nondeductible by the Company for Federal income tax purposes because of Section 280G of the Code, then the aggregate present value of Payments' which are not Agreement Payments shall also be reduced (but not below zero) to an amount expressed in present value which maximizes the aggregate present value of Payments without causing any Payment to be nondeductible by the Company because of Section 280G of the Code. For purposes of this Section 6(c)(iv), present value shall be determined in accordance with Section 280G(d)(4) of the Code. Thus, for illustrative purposes only, if the Executive's average W-2 compensation for the five (5) years prior to the year in which a change in control occurs (the "Base Amount")

4

was $500,000, and the value of the payments and benefits that are contingent upon the change in control (the "Parachute Payments") was $1,510,000, the Executive would have an excess parachute payment within the meaning of Section 280G(b) of the Code since the value of the parachute payments ($1,510,000) would be greater than three (3) times the Executive's Base Amount ($1,500,000). The amount of the excess parachute payment would be $1,010,000 (the amount by which the value of the parachute payments exceeds one (1) times the Base Amount), and if the aggregate amount of the parachute payments was not reduced, the Executive would incur an excise tax under Section 4999 of the Code equal to 20% of the excess parachute payment (or $202,000). This excess parachute payment could be avoided if instead, the value of the parachute payments was reduced by $10,001 to $1,499,999 (since the value of the parachute payments then would be less than three (3) times the Base Amount). Since the Executive would receive a greater after tax amount, under the foregoing example, if his parachute payments were reduced by $10,001 (to $1,499,999) than he would if his parachute payments were not reduced and the Executive incurred a $202,000 excise tax (reducing his parachute payments to $1,308,000) on the excess parachute payment, the Executive's parachute payments would be reduced under this provision to $1,499,999 (by $10,001) to avoid any excess parachute payments.

        2.     All determinations required to be made under this Section 6(c)(iv) shall be made by the Company's accountants for the Company's last fiscal year or, at the mutual agreement of the Executive and the Company, any other nationally or regionally recognized firm of independent public accountants (the "Accounting Firm"), which shall provide detailed supporting calculations both to the Company and the Executive within twenty (20) business days of the date of termination or such earlier time as is requested by the Company and an opinion to the Executive that he has substantial authority not to report any excise tax on his Federal income tax return with respect to any Payments. Any such determination by the Accounting Firm shall be binding upon the Company and the Executive. The Executive shall determine which and how much of the Payments shall be eliminated or reduced consistent with the requirements of this Section 6(c)(iv), provided that, if the Executive does not make such determination within ten business days of the receipt of the calculations made by the Accounting Firm, the Company shall elect which and how much of the Payments shall be eliminated or reduced consistent with the requirements of this Section 6(c)(iv) and shall notify the Executive promptly of such election. Within five business days thereafter, the Company shall pay to or distribute to or for the benefit of the Executive such amounts as are then due to the Executive under this Agreement. All fees and expenses of the Accounting Firm incurred in connection with the determinations contemplated by this Section 6(c)(iv) shall be borne by the Company.

        3.     As a result of the uncertainty in the application of Section 280G of the Code at the time of the initial determination by the Accounting Firm hereunder, it is possible that Payments will have been made by the Company which should not have been made ("Overpayment") or that additional Payments which will not have been made by the Company could have been made ("Underpayment"), in each case, consistent with the calculations required to be made hereunder. In the event that the Accounting Firm, based upon the assertion of a deficiency by the Internal Revenue Service against the Executive which the Accounting Firm believes has a high probability of success, determines that an Overpayment has been made, any such Overpayment paid or distributed by the Company to or for the benefit of the Executive shall be repaid to the Company; provided, however, that no amount shall be payable by the Executive to the Company if and to the extent such payment would not either reduce the amount on which the Executive is subject to tax under Section 1 and Section 4999 of the Code or generate a refund of such taxes. In the event that the Accounting Firm, based upon controlling precedent or other substantial

5

authority, determines that an Underpayment has occurred, any such Underpayment shall be promptly paid by the Company to or for the benefit of the Executive together with interest at the applicable federal rate provided for in Section 7872(f)(2) of the Code.

        7.    Death or Disability.    In the event of Executive's death or disability, the Employment Period will automatically terminate effective as of the date of such death or disability. As used in this Agreement, the term "disability" shall mean inability on the part of Executive for a period of more than six (6) months in the aggregate during any twelve (12) consecutive month period to perform the services contemplated under this Agreement. A determination of disability shall be made by a physician satisfactory to both Executive and the Company, provided that if Executive and the Company do not agree on a physician, Executive and the Company shall each select a physician and these two physicians together shall select a third physician, whose determination as to disability shall be binding on all parties.

        8.    Change in Control.

        a.     If Executive's employment is terminated by the Company without Cause or by Executive for Good Reason within six (6) months before and in anticipation of, or twelve (12) months after, a Change in Control (as defined in Paragraph (b) of this Section 8), Executive shall be entitled to receive a supplemental bonus payment (the "Change in Control Payment") from the Company equal to one (1) times the sum of Executive's then current Salary and Executive's Annual Target Bonus Amount (assuming for purposes of calculating such amount that the percentage of Salary payable as a bonus to Executive on account of the year of termination will be the same percentage of Salary paid as a bonus to Executive on account of the immediately preceding year, or the percentage of Salary paid as a bonus reasonably certain to be paid to Executive for the recently concluded or substantially completed fiscal year if no bonus was paid to Executive on account of the immediately preceding year) under the Company's Executive Incentive Compensation Plan for the year of termination. The Change in Control Payment shall be paid to Executive within fifteen (15) days after: (i) the Change in Control if Executive's employment was terminated within six (6) months before the Change in Control; or (ii) the termination of Executive's employment by the Company if Executive's employment terminates within twelve (12) months after the Change in Control. Executive shall also be entitled to continuation of all benefits under Section 4(a) hereof, ending on the earlier of (x) the one year anniversary of the termination date and (v) the date on which Executive is provided comparable benefits from any other source. In addition, all stock options, restricted stock, restricted stock units and other equity-based interests held by Executive shall vest and become immediately exercisable. If Executive is entitled to a Change in Control Payment and benefits under this Section 8(a), Executive shall not have any rights to receive any severance payments or benefits pursuant to Section 6(c) hereof. If Executive's employment by the Company terminates within six (6) months prior to the Change in Control and Executive received severance payments pursuant to Section 6(c) hereof, any amounts so paid by the Company to Executive shall be deducted from any Change in Control Payment otherwise payable to Executive pursuant to this Section 8(a).

        b.     A "Change in Control" will be deemed to have occurred if (i) a Takeover Transaction occurs, or (ii) any election of directors of FGX Holdings takes place (whether by the directors then in office or by the stockholders at a meeting or by written consent) and a majority of the directors in office following such election are individuals who were not nominated by a vote of two-thirds of the members of the Board of Directors immediately preceding such election, or (iii) FGX Holdings effectuates a complete liquidation of FGX Holdings or a sale or disposition of all or substantially all of its assets. A "Change in Control" shall not be deemed to include, the recapitalization of FGX Holdings or any transactions related thereto, consummated on or prior to the Effective Date.

6

        c.     A "Takeover Transaction" shall mean (i) a merger or consolidation of FGX Holdings with, or an acquisition of FGX Holdings or all or substantially all of either of its assets by, any other corporation, other than a merger, consolidation or acquisition in which the individuals who were members of the Board of Directors of FGX Holdings immediately prior to such transaction continue to constitute a majority of the Board of Directors of the surviving corporation (or, in the case of an acquisition involving a holding company, constitute a majority of the Board of Directors of the holding company) for a period of not less than twelve (12) months following the closing of such transaction, or (ii) when any person, including any "group" as such term is defined in Rule 13d-3 under the Securities Exchange Act of 1934, as amended (the "Exchange Act"), becomes after the date hereof the "beneficial owner" (as defined in Rule 13d-3 under the Exchange Act) of securities of FGX Holdings representing more than fifty percent (50%) of the total number of votes that may be cast for the election of directors of FGX Holdings, as applicable, excluding (i) any person that is excluded from the definition of "beneficial owner" under Rule 16(a)-1(a)(1) under the Exchange Act and (ii) any person (including any such group) that consists of or is controlled by (within the meaning of the definition of "affiliate" in Rule 144 under the Securities Act of 1933, as amended (an "Affiliate")) any person that is a shareholder of FGX Holdings on the Effective Date or any Affiliate of such person.

        9.    Non-Competition.    During the Employment Period and after termination of Executive's employment hereunder, whether or not such termination is without Cause or for Good Reason, Executive shall not be involved in the Restricted Business Activities, as defined below, for the period ending twelve (12) months after the date of termination of Executive's employment (the "Non-compete Period") provided that the Company has not otherwise breached its obligations under the Agreement. As used in this Agreement, the term "Restricted Business Activities" shall mean any business which markets and sells to customers of a class or category to which FGX Holdings or any of its subsidiaries, markets and sells at the time Executive's employment terminated products or services marketed and sold by FGX Holdings or any of its subsidiaries at such time or products or services which at such time FGX Holdings or any of its subsidiaries was actively considering marketing and selling to such customers. During the Non-compete Period, Executive shall not, without the written approval of the Company, directly or indirectly, either as an individual, partner, joint venturer, employee or agent for any person, company, corporation or association, or as an officer, director or stockholder of a corporation or otherwise, enter into or engage in or have a proprietary interest in the Restricted Business Activities other than the ownership of (a) the stock of FGX Holdings then held by Executive, and (b) no more than five percent (5%) of the securities of any other publicly-held company.

        Executive recognizes and agrees that because a violation by him of his obligations under this Section 9 will cause irreparable harm to FGX Holdings or any of its subsidiaries that would be difficult to quantify and for which money damages would be inadequate, any party included in the definition of FGX Holdings or any of its subsidiaries shall have the right to injunctive relief to prevent or restrain any such violation, without the necessity of posting a bond. The Non-compete Period will be extended by the duration of any violation by Executive of any of his obligations under this Section 9.

        Executive expressly agrees that the character, duration and scope of his obligations under this Section 9 are reasonable in light of the circumstances as they exist at the date upon which this Agreement has been executed. However, should a determination nonetheless be made by a court of competent jurisdiction at a later date that the character, duration or geographical scope of such obligations is unreasonable in light of the circumstances as they then exist, then it is the intention of both Executive and the Company that Executive's obligations under this Section 9 shall be construed by the court in such a manner as to impose only those restrictions on the conduct of Executive which are reasonable in light of the circumstances as they then exist and necessary to assure the Company of the intended benefit of Executive's obligations under this Section 9.

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        10.    Confidentiality Covenants.    The Company will not disclose the terms and conditions of Executive's employment, unless it is required by law to do so.

        11.    Section 409A.    To the extent that the Executive otherwise would be entitled to any payment (whether pursuant to this Agreement or otherwise) during the six (6) months beginning on the Termination Date that would be subject to the additional tax imposed under Section 409A of the Code ("Section 409A"), (x) the payment shall not be made to the Executive during such six (6) month period and (y) the payment, together with interest at the applicable federal rate provided for in Section 7872(f)(2) of the Code shall be paid to the Executive on the earlier of the six-month anniversary of the Termination Date or the Executive's death. Similarly, to the extent that the Executive otherwise would be entitled to any benefit (other than a payment) during the six months beginning on the Termination Date that would be subject to the Section 409A additional tax, the benefit shall be delayed and shall begin being provided (together, if applicable, with an adjustment to compensate the Executive for the delay) on the earlier of the six-month anniversary of the Termination Date, or the Executive's death.

        12.    Governing Law/Jurisdiction.    This Agreement shall be governed by and interpreted and governed in accordance with the laws of the State of Rhode Island. The parties agree that this Agreement was made and entered into in Rhode Island and each party hereby consents to the jurisdiction of a competent court in Rhode Island to hear any dispute arising out of this Agreement.

        13.    Entire Agreement.    This Agreement constitutes the entire agreement between the parties hereto with respect to the subject matter hereof and thereof and supersedes and cancels any and all previous agreements, written and oral, regarding the subject matter hereof between the parties hereto, with the exception of the Proprietary Rights Agreement with the Company signed by Executive. This Agreement shall not be changed, altered, modified or amended, except by a written agreement signed by both parties hereto.

        14.    Notices.    All notices, requests, demands and other communications required or permitted to be given or made under this Agreement shall be in writing and shall be deemed to have been given if delivered by hand, sent by generally recognized overnight courier service, telex or telecopy, or certified mail, return receipt requested.

(a)

to the Company at:
500 George Washington Highway
Smithfield, Rhode Island 02917
Attn: Chief Executive Officer



(b)

to Executive at:
the last home address appearing on the Company's records

        Any such notice or other communication will be considered to have been given (i) on the date of delivery in person, (ii) on the third day after mailing by certified mail, provided that receipt of delivery is confirmed in writing, (iii) on the first business day following delivery to a commercial over-night courier or (iv) on the date of facsimile transmission (telecopy) provided that the giver of the notice obtains telephone confirmation of receipt.

        Either party may, by notice given to the other party in accordance with this Section, designate another address or person for receipt of notices hereunder.

        15.    Severability.    If any term or provision of this Agreement, or the application thereof to any person or under any circumstance, shall to any extent be invalid or unenforceable, the remainder of this Agreement, or the application of such terms to the persons or under circumstances other than those as to which it is invalid or unenforceable, shall be considered severable and shall not be affected thereby, and each term of this Agreement shall be valid and enforceable to the fullest extent permitted

8

by law. The invalid or unenforceable provisions shall, to the extent permitted by law, be deemed amended and given such interpretation as to achieve the economic intent of this Agreement.

        16.    Waiver.    The failure of any party to insist in any one instance or more upon strict performance of any of the terms and conditions hereof, or to exercise any right or privilege herein conferred, shall not be construed as a waiver of such terms, conditions, rights or privileges, but same shall continue to remain in full force and effect. Any waiver by any party of any violation of, breach of or default under any provision of this Agreement by the other party shall not be construed as, or constitute, a continuing waiver of such provision, or waiver of any other violation of, breach of or default under any other provision of this Agreement.

        17.    Successors and Assigns.    This Agreement shall be binding upon the Company and any successors and assigns of the Company and shall inure to the benefit of Executive and his heirs, personal representations and assigns.

        18.    Indemnification.    The Company shall indemnify Executive to the maximum extent permitted under applicable law against all liabilities and expenses, including amounts paid in satisfaction of judgments, in compromise, or as fines and penalties, and counsel fees, reasonably incurred by him in connection with the defense or disposition of any civil, criminal, administrative, or investigative action, suit or other proceeding, whether civil or criminal, in which he may be involved or with which he may be threatened, while an officer or director of the Company or FGX Holdings or any of their direct or indirect subsidiaries or affiliates or thereafter, by reason of his being or having been an officer or director of the Company or FGX Holdings or any of the their direct or indirect subsidiaries or affiliates. Expenses (including attorneys' fees) incurred by Executive in defending any such action, suit or other proceeding shall be paid by the Company in advance of the final disposition of such action, suit or proceeding upon receipt of an undertaking by or on behalf of Executive to repay such amount if it shall be ultimately determined that he is not entitled to be indemnified by the Company. The right of indemnification provided herein shall not be exclusive of or affect any other rights to which Executive may be entitled. The provisions hereof shall survive expiration or termination of this Agreement for any reason whatsoever.

        19.    Counterparts.    This Agreement may be executed in counterparts and by facsimile, each of which shall be an original with the same effect as if the signatures thereto and hereto were upon the same instrument.

        20.    Third Party Beneficiaries.    Each of the parties hereto agree that FGX Holdings and each of its subsidiaries is and shall be deemed an intended third party beneficiary of the Company's rights under Section 9 of this Agreement with full rights to enforce the provisions thereof as if a signatory hereto.

        21.    Attorney's Fees.    In any action or proceeding brought to enforce any provision of this Agreement, the prevailing party shall be entitled to recover reasonable attorneys' fees and costs from the other party to the action or proceeding. For purposes of this Agreement, the "prevailing party" shall be deemed to be that party who obtains substantially the result sought, whether by settlement, mediation, judgment or otherwise, and "attorneys' fees" shall include, without limitation, the actual attorneys' fees incurred in retaining counsel for advice, negotiations, suit, appeal or other legal proceeding, including mediation and arbitration.

[Signatures Appear on Next Page]

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        IN WITNESS WHEREOF, the parties have executed this Agreement as of the date first written above.

FGX INTERNATIONAL INC.
By:	/s/ Alec Taylor

Name:	Alec Taylor
Title:	Chief Executive Officer

EXECUTIVE

/s/ Richard W. Kornhauser

Name: Richard W. Kornhauser

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EXHIBIT 10.27

REVOLVING CREDIT AND TERM LOAN AGREEMENT

dated as of December 19, 2007

among

FGX INTERNATIONAL INC.
as Borrower

FGX INTERNATIONAL HOLDINGS LIMITED AND
FGX INTERNATIONAL LIMITED
as Parent Guarantors

THE LENDERS FROM TIME TO TIME PARTY HERETO,

SUNTRUST BANK,
as Administrative Agent

BRANCH BANKING AND TRUST COMPANY,
as Syndication Agent

and

TD BANKNORTH N.A.,
as Documentation Agent

SUNTRUST ROBINSON HUMPHREY, INC.,
as Sole Lead Arranger and Sole Book Manager

TABLE OF CONTENTS

			Page
ARTICLE I
DEFINITIONS; CONSTRUCTION			1
	Section 1.1.	Definitions	1
	Section 1.2.	Classifications of Loans and Borrowings	22
	Section 1.3.	Accounting Terms and Determination	22
	Section 1.4.	Terms Generally	22
ARTICLE II
AMOUNT AND TERMS OF THE COMMITMENTS			23
	Section 2.1.	General Description of Facilities	23
	Section 2.2.	Revolving Loans	23
	Section 2.3.	Procedure for Revolving Borrowings	23
	Section 2.4.	Swingline Commitment	24
	Section 2.5.	Term Loans	25
	Section 2.6.	Funding of Borrowings	25
	Section 2.7.	Interest Elections	26
	Section 2.8.	Optional Reduction and Termination of Commitments	27
	Section 2.9.	Repayment of Loans	27
	Section 2.10.	Evidence of Indebtedness	28
	Section 2.11.	Optional Prepayments	28
	Section 2.12.	Mandatory Prepayments	29
	Section 2.13.	Interest on Loans	30
	Section 2.14.	Fees	31
	Section 2.15.	Computation of Interest and Fees	31
	Section 2.16.	Inability to Determine Interest Rates	32
	Section 2.17.	Illegality	32
	Section 2.18.	Increased Costs	32
	Section 2.19.	Funding Indemnity	33
	Section 2.20.	Taxes	34
	Section 2.21.	Payments Generally; Pro Rata Treatment; Sharing of Set-offs	35
	Section 2.22.	Letters of Credit	37
	Section 2.23.	Increase of Commitments; Additional Lenders	40
	Section 2.24.	Mitigation of Obligations	41
	Section 2.25.	Replacement of Lenders	41
	Section 2.26.	Delinquent Lender	42
ARTICLE III
CONDITIONS PRECEDENT TO LOANS AND LETTERS OF CREDIT			43
	Section 3.1.	Conditions To Effectiveness	43
	Section 3.2.	Each Credit Event	46
	Section 3.3.	Delivery of Documents	46
ARTICLE IV
REPRESENTATIONS AND WARRANTIES			46
	Section 4.1.	Existence; Power	46
	Section 4.2.	Organizational Power; Authorization	47
	Section 4.3.	Governmental Approvals; No Conflicts	47
	Section 4.4.	Financial Statements	47
	Section 4.5.	Litigation and Environmental Matters	48
	Section 4.6.	Compliance with Laws and Agreements	48

	Section 4.7.	Investment Company Act, Etc.	48
	Section 4.8.	Taxes	48
	Section 4.9.	Margin Regulations	48
	Section 4.10.	ERISA	48
	Section 4.11.	Ownership of Property	49
	Section 4.12.	Disclosure	49
	Section 4.13.	Labor Relations	49
	Section 4.14.	Subsidiaries	50
	Section 4.15.	Solvency	50
	Section 4.16.	Collateral Documents	50
	Section 4.17.	OFAC	51
	Section 4.18.	Patriot Act	51
	Section 4.19.	Holding Companies	51
	Section 4.20.	Post-Closing	51
ARTICLE V
AFFIRMATIVE COVENANTS			52
	Section 5.1.	Financial Statements and Other Information	52
	Section 5.2.	Notices of Material Events	53
	Section 5.3.	Existence; Conduct of Business	54
	Section 5.4.	Compliance with Laws, Etc.	54
	Section 5.5.	Payment of Obligations	55
	Section 5.6.	Books and Records	55
	Section 5.7.	Visitation, Inspection, Etc.	56
	Section 5.8.	Maintenance of Properties; Insurance	56
	Section 5.9.	Use of Proceeds and Letters of Credit	56
	Section 5.10.	Additional Subsidiaries and Collateral	56
	Section 5.11.	Cash Management	58
	Section 5.12.	Casualty and Condemnation	58
	Section 5.13.	Further Assurances	58
	Section 5.14.	Holding Company Status	58
ARTICLE VI
FINANCIAL COVENANTS			59
	Section 6.1.	Leverage Ratio	59
	Section 6.2.	Fixed Charge Coverage Ratio	59
ARTICLE VII
NEGATIVE COVENANTS			59
	Section 7.1.	Indebtedness and Preferred Equity	59
	Section 7.2.	Negative Pledge	60
	Section 7.3.	Fundamental Changes	60
	Section 7.4.	Investments, Loans, Etc.	61
	Section 7.5.	Restricted Payments	62
	Section 7.6.	Sale of Assets	62
	Section 7.7.	Transactions with Affiliates	62
	Section 7.8.	Restrictive Agreements	62
	Section 7.9.	Sale and Leaseback Transactions	63
	Section 7.10.	Hedging Transactions	63
	Section 7.11.	Amendment to Material Documents	63

ii

	Section 7.12.	Accounting Changes	63
	Section 7.13.	Lease Obligations	63
	Section 7.14.	Government Regulation	63
ARTICLE VIII
EVENTS OF DEFAULT			64
	Section 8.1.	Events of Default	64
	Section 8.2.	Application of Proceeds from Collateral	66
	Section 8.3.	Termination of Facilities	66
ARTICLE IX
THE ADMINISTRATIVE AGENT			67
	Section 9.1.	Appointment of Administrative Agent	67
	Section 9.2.	Nature of Duties of Administrative Agent	67
	Section 9.3.	Lack of Reliance on the Administrative Agent	68
	Section 9.4.	Certain Rights of the Administrative Agent	68
	Section 9.5.	Reliance by Administrative Agent	68
	Section 9.6.	The Administrative Agent in its Individual Capacity	68
	Section 9.7.	Successor Administrative Agent	69
	Section 9.8.	Withholding Tax	69
	Section 9.9.	Administrative Agent May File Proofs of Claim	69
	Section 9.10.	Loan Documents; Collateral Documents	70
	Section 9.11.	Collateral and Guaranty Matters	70
	Section 9.12.	Right to Realize on Collateral and Enforce Guarantee	70
	Section 9.13.	Documentation Agent; Syndication Agent.	71
ARTICLE X
MISCELLANEOUS			71
	Section 10.1.	Notices	71
	Section 10.2.	Waiver; Amendments	73
	Section 10.3.	Expenses; Indemnification	75
	Section 10.4.	Successors and Assigns	76
	Section 10.5.	Governing Law; Jurisdiction; Consent to Service of Process	79
	Section 10.6.	WAIVER OF JURY TRIAL	80
	Section 10.7.	Right of Setoff	80
	Section 10.8.	Counterparts; Integration	80
	Section 10.9.	Survival	80
	Section 10.10.	Severability	81
	Section 10.11.	Confidentiality	81
	Section 10.12.	Interest Rate Limitation	82
	Section 10.13.	Waiver of Effect of Corporate Seal	82
	Section 10.14.	Patriot Act	82
	Section 10.15.	Location of Closing	82

iii

Schedules
	Schedule I	—	Applicable Margin and Applicable Percentage
	Schedule II	—	Commitment Amounts
	Schedule 4.5	—	Environmental Matters
	Schedule 4.11	—	Real Estate
	Schedule 4.14	—	Subsidiaries
	Schedule 4.16	—	Filing Offices
	Schedule 7.1	—	Outstanding Indebtedness
	Schedule 7.2	—	Existing Liens
	Schedule 7.4	—	Existing Investments
Exhibits
	Exhibit A	—	Form of Assignment and Acceptance
	Exhibit 2.3	—	Form of Notice of Revolving Borrowing
	Exhibit 2.4	—	Form of Notice of Swingline Borrowing
	Exhibit 2.7	—	Form of Notice of Continuation/Conversion
	Exhibit 3.1(b)(iv)	—	Form of Secretary's Certificate
	Exhibit 3.1(b)(vii)	—	Form of Officer's Certificate
	Exhibit 5.1(c)	—	Form of Compliance Certificate

iv

REVOLVING CREDIT AND TERM LOAN AGREEMENT

THIS REVOLVING CREDIT AND TERM LOAN AGREEMENT (this "Agreement") is made and entered into as of December 19, 2007, by and among FGX INTERNATIONAL HOLDINGS LIMITED, a British Virgin Islands business company ("Holdings"), FGX INTERNATIONAL LIMITED, a British Virgin Islands business company ("International"), FGX INTERNATIONAL INC., a Delaware corporation (the "Borrower"), the several banks and other financial institutions and lenders from time to time party hereto (the "Lenders"), and SUNTRUST BANK, in its capacity as administrative agent for the Lenders (the "Administrative Agent"), as issuing bank (the "Issuing Bank") and as swingline lender (the "Swingline Lender").

WITNESSETH:

WHEREAS, the Borrower has requested that the Lenders make term loans in an aggregate principal amount equal to $100,000,000 to the Borrower and that the Lenders establish a $75,000,000 revolving credit facility in favor of the Borrower;

WHEREAS, subject to the terms and conditions of this Agreement, the Lenders, the Issuing Bank and the Swingline Lender, to the extent of their respective Commitments as defined herein, are willing severally to make the term loans to the Borrower and to establish the requested revolving credit facility, letter of credit subfacility and the swingline subfacility in favor of the Borrower.

NOW, THEREFORE, in consideration of the premises and the mutual covenants herein contained, the Borrower, the Lenders, the Administrative Agent, the Issuing Bank and the Swingline Lender agree as follows:

ARTICLE I

DEFINITIONS; CONSTRUCTION

        Section 1.1.    Definitions.    In addition to the other terms defined herein, the following terms used herein shall have the meanings herein specified (to be equally applicable to both the singular and plural forms of the terms defined):

        "Acquired EBITDA" shall mean, with respect to any Acquired Entity or Business for any period, the amount for such period of Consolidated EBITDA of such Acquired Entity or Business, all as determined on a consolidated basis for such Acquired Entity or Business in a manner not inconsistent with GAAP.

        "Acquired Entity or Business" shall have the meaning provided in the definition of the term Consolidated EBITDA.

        "Acquisition" shall mean (a) any Investment by the Borrower or any of its Subsidiaries in any other Person pursuant to which such Person shall become a Subsidiary of the Borrower or any of its Subsidiaries or shall be merged with the Borrower or any of its Subsidiaries or (b) any acquisition by the Borrower or any of its Subsidiaries of the assets of any Person (other than a Subsidiary of the Borrower) that constitute all or substantially all of the assets of such Person or a division or business unit of such Person. With respect to a determination of the amount of an Acquisition, such amount shall include all consideration (including any deferred payments) set forth in the applicable agreements governing such Acquisition as well as the assumption of any Indebtedness in connection therewith.

        "Additional Commitment Amount" shall have the meaning given to such term in Section 2.23.

        "Additional Lender" shall have the meaning given to such term in Section 2.23.

        "Adjusted LIBO Rate" shall mean, with respect to each Interest Period for a Eurodollar Borrowing, the rate per annum obtained by dividing (i) LIBOR for such Interest Period by (ii) a percentage equal to 1.00 minus the Eurodollar Reserve Percentage.

        "Administrative Agent" shall have the meaning assigned to such term in the opening paragraph hereof.

        "Administrative Questionnaire" shall mean, with respect to each Lender, an administrative questionnaire in the form prepared by the Administrative Agent and submitted to the Administrative Agent duly completed by such Lender.

        "Affiliate" shall mean, as to any Person, any other Person that directly, or indirectly through one or more intermediaries, Controls, is Controlled by, or is under common Control with, such Person. For the purposes of this definition, "Control" shall mean the power, directly or indirectly, either to (i) vote 10% or more of the securities having ordinary voting power for the election of directors (or persons performing similar functions) of a Person or (ii) direct or cause the direction of the management and policies of a Person, whether through the ability to exercise voting power, by control or otherwise. The terms "Controlling", "Controlled by", and "under common Control with" have the meanings correlative thereto.

        "Aggregate Revolving Commitment Amount" shall mean the aggregate principal amount of the Aggregate Revolving Commitments from time to time. On the Closing Date, the Aggregate Revolving Commitment Amount is $75,000,000.

        "Aggregate Revolving Commitments" shall mean, collectively, all Revolving Commitments of all Lenders at any time outstanding.

        "Applicable Lending Office" shall mean, for each Lender and for each Type of Loan, the "Lending Office" of such Lender (or an Affiliate of such Lender) designated for such Type of Loan in the Administrative Questionnaire submitted by such Lender or such other office of such Lender (or an Affiliate of such Lender) as such Lender may from time to time specify to the Administrative Agent and the Borrower as the office by which its Loans of such Type are to be made and maintained.

        "Applicable Margin" shall mean, with respect to interest on all Revolving Loans and Term Loans outstanding on any date and the LC Fee, a percentage per annum determined by reference to the Leverage Ratio in effect on such date as set forth on Schedule I; provided, that a change in the Applicable Margin resulting from a change in the Leverage Ratio shall be effective on the second Business Day after which the Borrower delivers each of the financial statements required by Section 5.1(a) and (b) and the Compliance Certificate required by Section 5.1(c); provided further, that if at any time the Borrower shall have failed to deliver such financial statements and such Compliance Certificate when so required, the Applicable Margin shall be at Level VI as set forth on Schedule I until such time as such financial statements and Compliance Certificate are delivered, at which time the Applicable Margin shall be determined as provided above. Notwithstanding the foregoing, the Applicable Margin from the Closing Date until the financial statements and Compliance Certificate for the Fiscal Quarter ending December 31, 2007 are required to be delivered in accordance with Section 5.1(b) shall be at Level IV as set forth on Schedule I. In the event that, prior to the indefeasible payment in full of the Obligations, any financial statement or Compliance Certificate delivered hereunder is shown to be inaccurate (regardless of whether this Agreement or the Commitments are in effect when such inaccuracy is discovered), and such inaccuracy, if corrected, would have led to the application of a higher Applicable Margin based upon the pricing grid set forth on Schedule I (the "Accurate Applicable Margin") for any period that such financial statement or Compliance Certificate covered, then (i) the Borrower shall immediately deliver to the Administrative Agent a corrected financial statement or Compliance Certificate, as the case may be, for such period, (ii) the Applicable Margin shall be adjusted such that after giving effect to the corrected financial statements or Compliance Certificate, as the case may be, the Applicable Margin shall be reset to the Accurate Applicable Margin based upon the pricing grid set forth on Schedule I for such period and (iii) the

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Borrower shall immediately pay to the Administrative Agent, for the account of the Lenders, the accrued additional interest owing as a result of such Accurate Applicable Margin for such period. The provisions of this definition shall not limit the rights of the Administrative Agent and the Lenders with respect to Section 2.13(c) or Article VIII.

        "Applicable Percentage" shall mean, with respect to the Commitment Fee as of any date, the percentage per annum determined by reference to the Leverage Ratio in effect on such date as set forth on Schedule I; provided, that a change in the Applicable Percentage resulting from a change in the Leverage Ratio shall be effective on the second Business Day after which the Borrower delivers each of the financial statements required by Section 5.1(a) and (b) and the Compliance Certificate required by Section 5.1(c); provided further, that if at any time the Borrower shall have failed to deliver such financial statements and such Compliance Certificate, the Applicable Percentage shall be at Level VI as set forth on Schedule I until such time as such financial statements and Compliance Certificate are delivered, at which time the Applicable Percentage shall be determined as provided above. Notwithstanding the foregoing, the Applicable Percentage for the Commitment Fee from the Closing Date until the financial statements and Compliance Certificate for the Fiscal Quarter ending December 31, 2007 are required to be delivered shall be at Level IV as set forth on Schedule I. In the event that, prior to the indefeasible payment in full of the Obligations, any financial statement or Compliance Certificate delivered hereunder is shown to be inaccurate (regardless of whether this Agreement or the Commitments are in effect when such inaccuracy is discovered), and such inaccuracy, if corrected, would have led to the application of a higher Applicable Percentage based upon the pricing grid set forth on Schedule I (the "Accurate Applicable Percentage") for any period that such financial statement or Compliance Certificate covered, then (i) the Borrower shall immediately deliver to the Administrative Agent a corrected Financial Statement or Compliance Certificate, as the case may be, for such period, (ii) the Applicable Percentage shall be adjusted such that after giving effect to the corrected financial statements or Compliance Certificate, as the case may be, the Applicable Percentage shall be reset to the Accurate Applicable Percentage based upon the pricing grid set forth on Schedule I for such period and (iii) the Borrower shall immediately pay to the Administrative Agent, for the account of the Lenders, the accrued additional commitment fee owing as a result of such Accurate Applicable Percentage for such period. The provisions of this definition shall not limit the rights of the Administrative Agent and the Lenders with respect to Section 2.13(c) or Article VIII.

        "Approved Fund" shall mean any Person (other than a natural Person) that is (or will be) engaged in making, purchasing, holding or otherwise investing in commercial loans and similar extensions of credit in the ordinary course of its business and that is administered or managed by (i) a Lender, (ii) an Affiliate of a Lender or (iii) an entity or an Affiliate of an entity that administers or manages a Lender.

        "Approved Line of Business" shall mean any of the lines of business in which the Borrower and its Subsidiaries are engaged on the Closing Date and other lines of business reasonably related thereto, including without limitation the distribution of any non-food consumer products through the existing distribution channels of the Borrower and its Subsidiaries and the distribution of eyewear, accessories and other similar products through new distribution channels.

        "Assignment and Acceptance" shall mean an assignment and acceptance entered into by a Lender and an assignee (with the consent of any party whose consent is required by Section 10.4(b)) and accepted by the Administrative Agent, in the form of Exhibit A attached hereto or any other form approved by the Administrative Agent.

        "Availability Period" shall mean the period from the Closing Date to but excluding the Revolving Commitment Termination Date.

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        "Base Rate" shall mean the higher of (i) the per annum rate which the Administrative Agent publicly announces from time to time to be its prime lending rate, as in effect from time to time, and (ii) the Federal Funds Rate, as in effect from time to time, plus one-half of one percent (0.50%). The Administrative Agent's prime lending rate is a reference rate and does not necessarily represent the lowest or best rate charged to customers. The Administrative Agent may make commercial loans or other loans at rates of interest at, above or below the Administrative Agent's prime lending rate. Each change in the Administrative Agent's prime lending rate shall be effective from and including the date such change is publicly announced as being effective.

        "Borrower" shall have the meaning given in the introductory paragraph hereof.

        "Borrowing" shall mean a borrowing consisting of (i) Loans of the same Class and Type, made, converted or continued on the same date and in the case of Eurodollar Loans, as to which a single Interest Period is in effect, or (ii) a Swingline Loan.

        "Business Day" shall mean (i) any day other than a Saturday, Sunday or other day on which commercial banks in Atlanta, Georgia and New York, New York are authorized or required by law to close and (ii) if such day relates to a Borrowing of, a payment or prepayment of principal or interest on, a conversion of or into, or an Interest Period for, a Eurodollar Loan or a notice with respect to any of the foregoing, any day on which banks are open for dealings in dollar deposits are carried on in the London interbank market.

        "Capital Expenditures" shall mean, for any period, without duplication, (i) the additions to property, plant and equipment and other capital expenditures of the Borrower and its Subsidiaries that are (or would be) set forth on a consolidated statement of cash flows of the Borrower for such period prepared in accordance with GAAP and (ii) Capital Lease Obligations incurred by the Borrower and its Subsidiaries during such period.

        "Capital Lease Obligations" of any Person shall mean all obligations of such Person to pay rent or other amounts under any lease (or other arrangement conveying the right to use) of real or personal property, or a combination thereof, which obligations are required to be classified and accounted for as capital leases on a balance sheet of such Person under GAAP, and the amount of such obligations shall be the capitalized amount thereof determined in accordance with GAAP.

        "Capital Stock" means all shares, options, warrants, general or limited partnership interests, membership interests or other equivalents (regardless of how designated) of or in a corporation, partnership, limited liability company or equivalent entity whether voting or nonvoting, including common stock, preferred stock, ordinary shares or any other "equity security" (as such term is defined in Rule 3a11-1 of the General Rules and Regulations promulgated by the Securities and Exchange Commission under the Securities Exchange Act of 1934).

        "Change in Control" shall mean the occurrence of one or more of the following events: (a) any sale, lease, exchange or other transfer (in a single transaction or a series of related transactions) of all or substantially all of the assets of Holdings to any Person or "group" (within the meaning of the Securities Exchange Act of 1934 and the rules of the Securities and Exchange Commission thereunder in effect on the date hereof); (b) the acquisition of ownership, directly or indirectly, beneficially or of record, by any Person or "group" (within the meaning of the Securities Exchange Act of 1934 and the rules of the Securities and Exchange Commission thereunder as in effect on the date hereof), other than the Sponsor, of 30% or more of the outstanding shares of the voting Capital Stock of Holdings; (c) occupation of more than 50% of the seats (other than vacant seats) on the board of directors of Holdings by Persons who were neither (i) nominated by the current board of directors or (ii) appointed by directors so nominated; and (d) Holdings ceases to own and control, directly and indirectly, all of the economic and voting rights associated with all of the outstanding Capital Stock of the Borrower.

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        "Change in Law" shall mean (i) the adoption of any applicable law, rule or regulation after the date of this Agreement, (ii) any change in any applicable law, rule or regulation, or any change in the interpretation or application thereof, by any Governmental Authority after the date of this Agreement, or (iii) compliance by any Lender (or its Applicable Lending Office) or the Issuing Bank (or for purposes of Section 2.18(b), by the parent corporation of such Lender or the Issuing Bank, if applicable) with any request, guideline or directive (whether or not having the force of law) of any Governmental Authority made or issued after the date of this Agreement.

        "Class", when used in reference to any Loan or Borrowing, refers to whether such Loan, or the Loans comprising such Borrowing, are Revolving Loans, Swingline Loans or Term Loans, and when used in reference to any Commitment, refers to whether such Commitment is a Revolving Commitment, a Swingline Commitment or a Term Loan Commitment.

        "Closing Date" shall mean the date on which the conditions precedent set forth in Section 3.1 and Section 3.2 have been satisfied or waived in accordance with Section 10.2.

        "Code" shall mean the Internal Revenue Code of 1986, as amended and in effect from time to time.

        "Collateral" shall mean all tangible and intangible property, real and personal, of any Loan Party pledged or purported to be pledged pursuant to the Collateral Documents.

        "Collateral Access Agreement" shall mean each landlord waiver or bailee agreement granted to, and in form and substance reasonably acceptable to, the Administrative Agent.

        "Collateral Documents" shall mean, collectively, the Guaranty and Security Agreement, the Mortgages, the other Real Estate Documents, the Controlled Account Agreements, the Perfection Certificate, all Copyright Security Agreements, all Patent Security Agreements, all Trademark Security Agreements, all Collateral Access Agreements, and all other instruments and agreements now or hereafter securing or perfecting the Liens securing the whole or any part of the Obligations or any Guarantee thereof, all UCC financing statements, fixture filings, stock powers, and all other documents, instruments, agreements and certificates executed and delivered by any Loan Party to the Administrative Agent and the Lenders in connection with the foregoing.

        "Commitment" shall mean a Revolving Commitment, a Swingline Commitment or a Term Loan Commitment or any combination thereof (as the context shall permit or require).

        "Commitment Fee" shall mean the fee payable pursuant to Section 2.14(b).

        "Compliance Certificate" shall mean a certificate from the principal executive officer or the principal financial officer of the Borrower in the form of, and containing the certifications set forth in, the certificate attached hereto as Exhibit 5.1(c).

        "Consolidated EBITDA" shall mean, for any Person and its Subsidiaries for any period, an amount equal to the sum of (i) Consolidated Net Income for such period plus (ii) to the extent deducted in determining Consolidated Net Income for such period, and without duplication, (A) Consolidated Interest Expense, (B) income tax expense determined on a consolidated basis in accordance with GAAP, (C) depreciation and amortization determined on a consolidated basis in accordance with GAAP, (D) management fees paid to the Sponsor for periods prior to the Closing Date, and (E) all other non-cash charges acceptable to the Administrative Agent, determined on a consolidated basis in accordance with GAAP, in each case for such period, including without limitation the $1,900,000 non-cash charge made in 2007 prior to the Closing Date and up to an additional $2,500,000 of non-cash charges made in 2007 or 2008, each related to the lease of warehouse space at 3700 Commerce Parkway, Miramar, Florida; provided, however, that (x) there shall be included in determining Consolidated EBITDA for any period, without duplication, (A) the Acquired EBITDA of any Person or business, or attributable to any property or asset,

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acquired by any Loan Party during such period to the extent not subsequently sold, transferred, abandoned or otherwise disposed by any Loan Party (each such Person, business, property or asset acquired and not subsequently so disposed of, an "Acquired Entity or Business"), based on the actual Acquired EBITDA of such Acquired Entity or Business for such period (including the portion thereof occurring prior to such acquisition or conversion); provided, further, that to the extent included in Consolidated Net Income, there shall be excluded in determining Consolidated EBITDA for any period the Disposed EBITDA of any Person, property, business or asset sold, transferred, abandoned or otherwise disposed of, closed or classified as discontinued operations by any Loan Party during such period (each such Person, property, business or asset so sold or disposed of, a "Disposed Entity or Business"), based on the actual Disposed EBITDA of such Disposed Entity or Business for such period (including the portion thereof occurring prior to such sale, transfer or disposition or conversion). Unless otherwise specified herein, Consolidated EBITDA shall mean Consolidated EBITDA of Holdings and its Subsidiaries.

        "Consolidated Fixed Charges" shall mean, for Holdings and its Subsidiaries for any period, the sum (without duplication) of (i) Consolidated Interest Expense for such period, (ii) scheduled principal payments made on Consolidated Total Debt during such period, and (iii) Restricted Payments paid during such period; provided, however, that for periods ending on or prior to December 31, 2008, Consolidated Interest Expense and scheduled principal payment made on Consolidated Total Debt shall be measured for the period commencing on the Closing Date and ending on the last day of such period, divided by the number of days in such period and multiplied by 365.

        "Consolidated Interest Expense" shall mean, for Holdings and its Subsidiaries for any period determined on a consolidated basis in accordance with GAAP, the sum of (i) total interest expense, including without limitation the interest component of any payments in respect of Capital Lease Obligations capitalized or expensed during such period (whether or not actually paid during such period) plus (ii) the net amount payable (or minus the net amount receivable) with respect to Hedging Transactions during such period (whether or not actually paid or received during such period).

        "Consolidated Net Income" shall mean, for Holdings and its Subsidiaries for any period, the net income (or loss) of Holdings and its Subsidiaries for such period determined on a consolidated basis in accordance with GAAP, but excluding therefrom (to the extent otherwise included therein) (i) any extraordinary gains or losses, (ii) any gains attributable to write-ups of assets, (iii) any equity interest of Holdings or its Subsidiaries in the unremitted earnings of any Person that is not a Subsidiary and (iv) any income (or loss) of any Person accrued prior to the date it becomes a Subsidiary or is merged into or consolidated with Holdings or its Subsidiaries on the date that such Person's assets are acquired by Holdings or its Subsidiaries.

        "Consolidated Total Debt" shall mean, as of any date, all Indebtedness of Holdings and its Subsidiaries measured on a consolidated basis as of such date, but excluding Indebtedness of the type described in subsection (xi) of the definition thereto.

        "Contractual Obligation" of any Person shall mean any provision of any security issued by such Person or of any agreement, instrument or undertaking under which such Person is obligated or by which it or any of the property in which it has an interest is bound.

        "Controlled Account Agreements" shall mean each tri-party agreement by and among a Loan Party, the Administrative Agent and a depositary bank or securities intermediary at which such Loan Party maintains a deposit account, bank account or investment account, granting "control" over such deposit accounts and investment accounts to the Administrative Agent in a manner that perfects the Lien of the Administrative Agent under the UCC.

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        "Controlled Account" shall have meaning set forth in Section 5.11.

        "Copyright" shall have the meaning assigned to such term in the Guaranty and Security Agreement.

        "Copyright Security Agreements" shall mean, collectively, the Copyright Security Agreements executed by the Loan Parties owning Copyrights or licenses of Copyrights in favor of the Administrative Agent, on behalf of itself and Lenders, both on the Closing Date and thereafter.

        "Default" shall mean any condition or event that, with the giving of notice or the lapse of time or both, would constitute an Event of Default.

        "Default Interest" shall have the meaning set forth in Section 2.13(c).

        "Disposed EBITDA" shall mean, with respect to any Disposed Entity or Business for any period, the amount for such period of Consolidated EBITDA of such Disposed Entity or Business, all as determined on a consolidated basis for such Disposed Entity or Business in a manner not inconsistent with GAAP.

        "Disposed Entity or Business" shall have the meaning provided in the definition of the term Consolidated EBITDA.

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        "Dollar(s)" and the sign "$" shall mean lawful money of the United States of America.

        "Domestic Subsidiary" shall mean any Subsidiary that is organized under the laws of one of the fifty states of the United States or the District of Columbia.

        "Environmental Indemnity" shall mean that certain Environmental Indemnity Agreement, dated as of the date hereof, executed by the Borrower and all Loan Parties with respect to the Real Estate subject to the Mortgages.

        "Environmental Laws" shall mean all laws, rules, regulations, codes, ordinances, orders, decrees, judgments, injunctions, notices or binding agreements issued, promulgated or entered into by or with any Governmental Authority, relating in any way to the environment, preservation or reclamation of natural resources, the management, Release or threatened Release of any Hazardous Material or to health and safety matters.

        "Environmental Liability" shall mean any liability, contingent or otherwise (including any liability for damages, costs of environmental investigation and remediation, costs of administrative oversight, fines, natural resource damages, penalties or indemnities), of the Borrower or any Subsidiary directly or indirectly resulting from or based upon (i) any actual or alleged violation of any Environmental Law, (ii) the generation, use, handling, transportation, storage, treatment or disposal of any Hazardous Materials, (iii) any actual or alleged exposure to any Hazardous Materials, (iv) the Release or threatened Release of any Hazardous Materials or (v) any contract, agreement or other consensual arrangement pursuant to which liability is assumed or imposed with respect to any of the foregoing.

        "ERISA" shall mean the Employee Retirement Income Security Act of 1974, as amended from time to time, and any successor statute.

        "ERISA Affiliate" shall mean any trade or business (whether or not incorporated), which, together with the Borrower, is treated as a single employer under Section 414(b) or (c) of the Code or, solely for the purposes of Section 302 of ERISA and Section 412 of the Code, is treated as a single employer under Section 414 of the Code.

        "ERISA Event" shall mean (i) any "reportable event", as defined in Section 4043 of ERISA or the regulations issued thereunder with respect to a Plan (other than an event for which the 30-day notice period is waived); (ii) the existence with respect to any Plan of an "accumulated funding deficiency" (as defined in Section 412 of the Code or Section 302 of ERISA), whether or not waived; (iii) the filing pursuant to Section 412(d) of the Code or Section 303(d) of ERISA of an application for a waiver of the minimum funding standard with respect to any Plan; (iv) the incurrence by the Borrower or any of its ERISA Affiliates of any liability under Title IV of ERISA with respect to the termination of any Plan; (v) the receipt by the Borrower or any ERISA Affiliate from the PBGC or a plan administrator appointed by the PBGC of any notice relating to an intention to terminate any Plan or Plans or to appoint a trustee to administer any Plan; (vi) the incurrence by the Borrower or any of its ERISA Affiliates of any liability with respect to the withdrawal or partial withdrawal from any Plan or Multiemployer Plan; or (vii) the receipt by the Borrower or any ERISA Affiliate of any notice, or the receipt by any Multiemployer Plan from the Borrower or any ERISA Affiliate of any notice, concerning the imposition of Withdrawal Liability or a determination that a Multiemployer Plan is, or is expected to be, insolvent or in reorganization, within the meaning of Title IV of ERISA.

        "Eurodollar" when used in reference to any Loan or Borrowing, refers to whether such Loan, or the Loans comprising such Borrowing, bears interest at a rate determined by reference to the Adjusted LIBO Rate.

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        "Eurodollar Reserve Percentage" shall mean the aggregate of the maximum reserve percentages (including, without limitation, any emergency, supplemental, special or other marginal reserves) expressed as a decimal (rounded upwards to the next 1/100^th of 1%) in effect on any day to which the Administrative Agent is subject with respect to the Adjusted LIBO Rate pursuant to regulations issued by the Board of Governors of the Federal Reserve System (or any Governmental Authority succeeding to any of its principal functions) with respect to eurocurrency funding (currently referred to as "eurocurrency liabilities" under Regulation D). Eurodollar Loans shall be deemed to constitute eurocurrency funding and to be subject to such reserve requirements without benefit of or credit for proration, exemptions or offsets that may be available from time to time to any Lender under Regulation D. The Eurodollar Reserve Percentage shall be adjusted automatically on and as of the effective date of any change in any reserve percentage.

        "Event of Default" shall have the meaning provided in Article VIII.

        "Excluded Taxes" shall mean with respect to the Administrative Agent, any Lender, the Issuing Bank or any other recipient of any payment to be made by or on account of any obligation of the Borrower hereunder, (a) income or franchise taxes imposed on (or measured by) its net income by the United States of America, or by the jurisdiction under the laws of which such recipient is organized or in which its principal office is located or, in the case of any Lender, in which its Applicable Lending Office is located, (b) any branch profits taxes imposed by the United States of America or any similar tax imposed by any other jurisdiction in which any Lender is located and (c) in the case of a Foreign Lender, any withholding tax that (i) is imposed on amounts payable to such Foreign Lender at the time such Foreign Lender becomes a party to this Agreement, (ii) is imposed on amounts payable to such Foreign Lender at any time that such Foreign Lender designates a new lending office, other than taxes that have accrued prior to the designation of such lending office that are otherwise not Excluded Taxes, and (iii) is attributable to such Foreign Lender's failure to comply with Section 2.20(e).

        "Existing Credit Agreement" shall mean that certain Credit Agreement, dated as of December 29, 2005, by and among Holdings, International, the Borrower, the lenders from time to time parties thereto and JPMorgan Chase Bank, N.A., as Administrative Agent, as amended or modified from time to time.

        "Existing Lenders" shall mean all lenders parties to the Existing Credit Agreement on the Closing Date.

        "Fantasma" shall mean Fantasma Hong Kong Limited, a Hong Kong Subsidiary of the Borrower.

        "Federal Funds Rate" shall mean, for any day, the rate per annum (rounded upwards, if necessary, to the next 1/100^th of 1%) equal to the weighted average of the rates on overnight Federal funds transactions with member banks of the Federal Reserve System arranged by Federal funds brokers, as published by the Federal Reserve Bank of New York on the next succeeding Business Day or if such rate is not so published for any Business Day, the Federal Funds Rate for such day shall be the average rounded upwards, if necessary, to the next 1/100^th of 1% of the quotations for such day on such transactions received by the Administrative Agent from three Federal funds brokers of recognized standing selected by the Administrative Agent.

        "Fee Letter" shall mean that certain fee letter, dated as of November 15, 2007, executed by SunTrust Robinson Humphrey, Inc. and SunTrust Bank and accepted by Borrower.

        "Fiscal Quarter" shall mean any fiscal quarter of the Borrower.

        "Fiscal Year" shall mean any fiscal year of the Borrower.

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        "Fixed Charge Coverage Ratio" shall mean, as of any date, the ratio of (a) Consolidated EBITDA less the actual amount paid by Holdings and its Subsidiaries in cash on account of Capital Expenditures and income tax expense to (b) Consolidated Fixed Charges, in each case measured for the four consecutive Fiscal Quarters ending on or immediately prior to such date.

        "Foreign Lender" shall mean any Lender that is not a United States person under Section 7701(a)(30) of the Code.

        "Foreign Subsidiary" shall mean any Subsidiary that is organized under the laws of a jurisdiction other than one of the fifty states of the United States or the District of Columbia.

        "GAAP" shall mean generally accepted accounting principles in the United States applied on a consistent basis and subject to the terms of Section 1.3.

        "Governmental Authority" shall mean the government of the United States of America, any other nation or any political subdivision thereof, whether state or local, and any agency, authority, instrumentality, regulatory body, court, central bank or other entity exercising executive, legislative, judicial, taxing, regulatory or administrative powers or functions of or pertaining to government.

        "Guarantee" of or by any Person (the "guarantor") shall mean any obligation, contingent or otherwise, of the guarantor guaranteeing or having the economic effect of guaranteeing any Indebtedness or other obligation of any other Person (the "primary obligor") in any manner, whether directly or indirectly and including any obligation, direct or indirect, of the guarantor (i) to purchase or pay (or advance or supply funds for the purchase or payment of) such Indebtedness or other obligation or to purchase (or to advance or supply funds for the purchase of) any security for the payment thereof, (ii) to purchase or lease property, securities or services for the purpose of assuring the owner of such Indebtedness or other obligation of the payment thereof, (iii) to maintain working capital, equity capital or any other financial statement condition or liquidity of the primary obligor so as to enable the primary obligor to pay such Indebtedness or other obligation or (iv) as an account party in respect of any letter of credit or letter of guaranty issued in support of such Indebtedness or obligation; provided, that the term "Guarantee" shall not include endorsements for collection or deposit in the ordinary course of business. The amount of any Guarantee shall be deemed to be an amount equal to the stated or determinable amount of the primary obligation in respect of which Guarantee is made or, if not so stated or determinable, the maximum reasonably anticipated liability in respect thereof (assuming such Person is required to perform thereunder) as determined by such Person in good faith. The term "Guarantee" used as a verb has a corresponding meaning.

        "Guarantor" shall mean each of Holdings, International and the Subsidiary Loan Parties.

        "Guaranty and Security Agreement" shall mean the Guaranty and Security Agreement, dated as of the date hereof, made by the Loan Parties in favor of the Administrative Agent for the benefit of the Secured Parties.

        "Hazardous Materials" shall mean all explosive or radioactive substances or wastes and all hazardous or toxic substances, wastes or other pollutants, including petroleum or petroleum distillates, asbestos or asbestos containing materials, polychlorinated biphenyls, radon gas, infectious or medical wastes and all other substances or wastes of any nature regulated pursuant to any Environmental Law.

        "Hedging Obligations" of any Person shall mean any and all obligations of such Person, whether absolute or contingent and howsoever and whensoever created, arising, evidenced or acquired under (i) any and all Hedging Transactions, (ii) any and all cancellations, buy backs, reversals, terminations or assignments of any Hedging Transactions and (iii) any and all renewals,

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extensions and modifications of any Hedging Transactions and any and all substitutions for any Hedging Transactions.

        "Hedging Transaction" of any Person shall mean (a) any transaction (including an agreement with respect to any such transaction) now existing or hereafter entered into by such Person that is a rate swap transaction, swap option, basis swap, forward rate transaction, commodity swap, commodity option, equity or equity index swap or option, bond option, interest rate option, foreign exchange transaction, cap transaction, floor transaction, collar transaction, currency swap transaction, cross-currency rate swap transaction, currency option, spot transaction, credit protection transaction, credit swap, credit default swap, credit default option, total return swap, credit spread transaction, repurchase transaction, reverse repurchase transaction, buy/sell-back transaction, securities lending transaction, or any other similar transaction (including any option with respect to any of these transactions) or any combination thereof, whether or not any such transaction is governed by or subject to any master agreement and (b) any and all transactions of any kind, and the related confirmations, which are subject to the terms and conditions of, or governed by, any form of master agreement published by the International Swaps and Derivatives Association, Inc., any International Foreign Exchange Master Agreement, or any other master agreement (any such master agreement, together with any related schedules, a "Master Agreement"), including any such obligations or liabilities under any Master Agreement.

        "Holdings" shall have the meaning given in the introductory paragraph hereof.

        "Indebtedness" of any Person shall mean, without duplication (i) all obligations of such Person for borrowed money, (ii) all obligations of such Person evidenced by bonds, debentures, notes or other similar instruments, (iii) all obligations of such Person in respect of the deferred purchase price of property or services (other than trade payables incurred in the ordinary course of business; provided, that for purposes of Section 8.1(f), trade payables overdue by more than 150 days shall be included in this definition except to the extent that any of such trade payables are being disputed in good faith and by appropriate measures), (iv) all obligations of such Person under any conditional sale or other title retention agreement(s) relating to property acquired by such Person, (v) all Capital Lease Obligations of such Person, (vi) all obligations, contingent or otherwise, of such Person in respect of letters of credit, acceptances or similar extensions of credit, (vii) all Guarantees of such Person of the type of Indebtedness described in clauses (i) through (vi) above, (viii) all Indebtedness of a third party secured by any Lien on property owned by such Person, whether or not such Indebtedness has been assumed by such Person, (ix) all obligations of such Person, contingent or otherwise, to purchase, redeem, retire or otherwise acquire for value any Capital Stock of such Person, (x) Off-Balance Sheet Liabilities and (xi) all Hedging Obligations. The Indebtedness of any Person shall include the Indebtedness of any partnership or joint venture in which such Person is a general partner or a joint venturer, except to the extent that the terms of such Indebtedness provide that such Person is not liable therefor.

        "Indemnified Taxes" shall mean Taxes other than Excluded Taxes.

        "Information Memorandum" shall mean the Confidential Information Memorandum dated November, 2007 relating to the Borrower and the transactions contemplated by this Agreement and the other Loan Documents.

        "Interest Period" shall mean with respect to (i) any Swingline Borrowing, such period as the Swingline Lender and the Borrower shall mutually agree and (ii) any Eurodollar Borrowing, a period of one, two, three or six months; provided, that:

        (i)    the initial Interest Period for such Borrowing shall commence on the date of such Borrowing (including the date of any conversion from a Borrowing of another Type), and each

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Interest Period occurring thereafter in respect of such Borrowing shall commence on the day on which the next preceding Interest Period expires;

        (ii)   if any Interest Period would otherwise end on a day other than a Business Day, such Interest Period shall be extended to the next succeeding Business Day, unless such Business Day falls in another calendar month, in which case such Interest Period would end on the next preceding Business Day;

        (iii)  any Interest Period which begins on the last Business Day of a calendar month or on a day for which there is no numerically corresponding day in the calendar month at the end of such Interest Period shall end on the last Business Day of such calendar month;

        (iv)  each principal installment of the Term Loans shall have an Interest Period ending on each installment payment date and the remaining principal balance (if any) of the Term Loans shall have an Interest Period determined as set forth above; and

        (v)   no Interest Period may extend beyond the Revolving Commitment Termination Date, unless on the Revolving Commitment Termination Date the aggregate outstanding principal amount of Term Loans is equal to or greater than the aggregate principal amount of Eurodollar Loans with Interest Periods expiring after such date, and no Interest Period may extend beyond the Maturity Date.

        "International" shall have the meaning in the introductory paragraph hereof.

        "Investments" shall have the meaning set forth in Section 7.04.

        "Issuing Bank" shall mean SunTrust Bank, in its capacity as the issuer of Letters of Credit pursuant to Section 2.22.

        "Joint Ventures" shall mean any Person in which one or more Loan Parties owns 50% or less of the Capital Stock.

        "LC Commitment" shall mean that portion of the Aggregate Revolving Commitment Amount that may be used by the Borrower for the issuance of Letters of Credit in an aggregate face amount not to exceed $5,000,000.

        "LC Disbursement" shall mean a payment made by the Issuing Bank pursuant to a Letter of Credit.

        "LC Documents" shall mean all applications, agreements and instruments relating to the Letters of Credit, but excluding the Letters of Credit.

        "LC Exposure" shall mean, at any time, the sum of (i) the aggregate undrawn amount of all outstanding Letters of Credit at such time, plus (ii) the aggregate amount of all LC Disbursements that have not been reimbursed by or on behalf of the Borrower at such time. The LC Exposure of any Lender shall be its Pro Rata Share of the total LC Exposure at such time.

        "LC Fee" shall mean the fee payable pursuant to Section 2.14(c).

        "Lenders" shall have the meaning assigned to such term in the opening paragraph of this Agreement and shall include, where appropriate, the Swingline Lender and each Additional Lender that joins this Agreement pursuant to Section 2.23.

        "Letter of Credit" shall mean any stand-by letter of credit issued pursuant to Section 2.22 by the Issuing Bank for the account of the Borrower pursuant to the LC Commitment.

        "Leverage Ratio" shall mean, as of any date, the ratio of (i) Consolidated Total Debt as of such date to (ii) Consolidated EBITDA for the four consecutive Fiscal Quarters ending on or immediately prior to such date.

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        "LIBOR" shall mean, for any Interest Period with respect to a Eurodollar Loan, the rate per annum (rounded upwards, if necessary, to the nearest 1/100 of 1%) appearing on Reuters Screen LIBOR01 Page (or any successor page) as the London interbank offered rate for deposits in Dollars at approximately 11:00 a.m. (London, England time) two Business Days prior to the first day of such Interest Period for a term comparable to such Interest Period. If for any reason such rate is not available, LIBOR shall be, for any Interest Period, the rate per annum reasonably determined by the Administrative Agent as the rate of interest at which Dollar deposits in the approximate amount of the Eurodollar Loan comprising part of such borrowing would be offered by the Administrative Agent to major banks in the London interbank Eurodollar market at their request at or about 10:00 a.m. two Business Days prior to the first day of such Interest Period for a term comparable to such Interest Period.

        "Lien" shall mean any mortgage, pledge, security interest, lien (statutory or otherwise), charge, encumbrance, hypothecation, assignment, deposit arrangement, or other arrangement having the practical effect of any of the foregoing or any preference, priority or other security agreement or preferential arrangement of any kind or nature whatsoever (including any conditional sale or other title retention agreement and any capital lease having the same economic effect as any of the foregoing).

        "Loan Documents" shall mean, collectively, this Agreement, the Collateral Documents, the LC Documents, the Fee Letter, the Milberg Intercreditor Agreement all Notices of Borrowing, all Notices of Conversion/Continuation, all Compliance Certificates, all UCC financing statements, all stock powers and similar instruments of transfer, any promissory notes issued hereunder and any and all other instruments, agreements, documents and writings executed in connection with any of the foregoing.

        "Loan Parties" shall mean Holdings, International, the Borrower and the Subsidiary Loan Parties.

        "Loans" shall mean all Term Loans, Revolving Loans and Swingline Loans in the aggregate or any of them, as the context shall require.

        "Material Adverse Effect" shall mean, with respect to any event, act, condition or occurrence of whatever nature (including any adverse determination in any litigation, arbitration, or governmental investigation or proceeding), whether singularly or in conjunction with any other event or events, act or acts, condition or conditions, occurrence or occurrences whether or not related, resulting in a material adverse change in, or a material adverse effect on, (i) the business, results of operations, financial condition, assets, liabilities or prospects of the Borrower and its Subsidiaries taken as a whole, (ii) the ability of the Loan Parties to perform any of their respective obligations under the Loan Documents, (iii) the rights and remedies of the Administrative Agent, the Issuing Bank, Swingline Lender, and the Lenders under any of the Loan Documents or (iv) the legality, validity or enforceability of any of the Loan Documents.

        "Material Indebtedness" shall mean any Indebtedness (other than the Loans and Letters of Credit) and Hedging Obligations of the Borrower or any of its Subsidiaries, individually or in an aggregate principal amount exceeding $3,000,000. For purposes of determining the amount of attributed Indebtedness from Hedging Obligations, the "principal amount" of any Hedging Obligations at any time shall be the Net Mark-to-Market Exposure of such Hedging Obligations.

        "Maturity Date" shall mean, with respect to the Term Loans, the earlier of (i) December 19, 2012 or (ii) the date on which the principal amount of all outstanding Term Loans have been declared or automatically have become due and payable (whether by acceleration or otherwise).

        "Milberg" shall mean Milberg Factors, Inc.

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        "Milberg Agreement" shall mean, collectively, (i) that certain Account Receivable Non-Notification Non-Lending Factoring Agreement dated as of March 1, 2007, between Borrower and Milberg and (ii) that certain Account Receivable Non-Notification Non-Lending Factoring Agreement dated as of March 1, 2007, between Quantum and Milberg.

        "Milberg Intercreditor Agreement" shall mean, collectively, (i) that certain Intercreditor Agreement, dated as of the Closing Date, between Administrative Agent and Milberg relating to the Borrower, (ii) that certain Acknowledgement and Consent, dated as of the Closing Date, between Administrative Agent and Borrower, (iii) that certain Intercreditor Agreement, dated as of the Closing Date, between Administrative Agent and Milberg relating to Quantum, and (iv) that certain Acknowledgement and Consent, dated as of the Closing Date, between Administrative Agent and Quantum.

        "Moody's" shall mean Moody's Investors Service, Inc.

        "Mortgaged Properties" shall mean, collectively, the Real Estate subject to the Mortgages.

        "Mortgages" shall mean each mortgage, leasehold mortgage, deed of trust, leasehold deed of trust, deed to secure debt, leasehold deed to secure debt or other real estate security documents delivered by any Loan Party to Administrative Agent, all in form and substance satisfactory to Administrative Agent.

        "Multiemployer Plan" shall have the meaning set forth in Section 4001(a)(3) of ERISA.

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        "Net Mark-to-Market Exposure" of any Person shall mean, as of any date of determination with respect to any Hedging Obligation, the excess (if any) of all unrealized losses over all unrealized profits of such Person arising from such Hedging Obligation. "Unrealized losses" shall mean the fair market value of the cost to such Person of replacing the Hedging Transaction giving rise to such Hedging Obligation as of the date of determination (assuming the Hedging Transaction were to be terminated as of that date), and "unrealized profits" means the fair market value of the gain to such Person of replacing such Hedging Transaction as of the date of determination (assuming such Hedging Transaction were to be terminated as of that date).

        "Notices of Borrowing" shall mean, collectively, the Notices of Revolving Borrowing and the Notices of Swingline Borrowing.

        "Notice of Conversion/Continuation" shall mean the notice given by the Borrower to the Administrative Agent in respect of the conversion or continuation of an outstanding Borrowing as provided in Section 2.7(b).

        "Notice of Revolving Borrowing" shall have the meaning as set forth in Section 2.3.

        "Notice of Swingline Borrowing" shall have the meaning as set forth in Section 2.4.

        "Obligations" shall mean (a) all amounts owing by the Loan Parties to the Administrative Agent, the Issuing Bank, any Lender (including the Swingline Lender) or SunTrust Robinson Humphrey, Inc. as the Lead Arranger pursuant to or in connection with this Agreement or any other Loan Document or otherwise with respect to any Loan or Letter of Credit, including without limitation, all principal, interest (including any interest accruing after the filing of any petition in bankruptcy or the commencement of any insolvency, reorganization or like proceeding relating to the Borrower, whether or not a claim for post-filing or post-petition interest is allowed in such proceeding), all reimbursement obligations, fees, expenses, indemnification and reimbursement payments, costs and expenses (including all fees and expenses of counsel to the Administrative Agent, the Issuing Bank and any Lender (including the Swingline Lender) incurred pursuant to this Agreement or any other Loan Document), whether direct or indirect, absolute or contingent, liquidated or unliquidated, now existing or hereafter arising hereunder or thereunder, (b) all Hedging Obligations owed by any Loan Party to any Lender or Affiliate of any Lender, and (c) all Treasury Management Obligations between any Loan Party and any Lender or Affiliate of any Lender, together with all renewals, extensions, modifications or refinancings of any of the foregoing.

        "Off-Balance Sheet Liabilities" of any Person shall mean (i) any repurchase obligation or liability of such Person with respect to accounts or notes receivable sold by such Person, (ii) any liability of such Person under any sale and leaseback transactions that do not create a liability on the balance sheet of such Person, (iii) any Synthetic Lease Obligation or (iv) any obligation arising with respect to any other transaction which is the functional equivalent of or takes the place of borrowing but which does not constitute a liability on the balance sheet of such Person.

        "OSHA" shall mean the Occupational Safety and Health Act of 1970, as amended from time to time, and any successor statute.

        "Other Taxes" shall mean any and all present or future stamp or documentary taxes or any other excise or property taxes, charges or similar levies arising from any payment made hereunder or from the execution, delivery or enforcement of, or otherwise with respect to, this Agreement or any other Loan Document.

        "Participant" shall have the meaning set forth in Section 10.4(d).

        "Patent" shall have the meaning assigned to such term in the Guaranty and Security Agreement.

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        "Patent Security Agreements" shall mean, collectively, the Patent Security Agreements executed by the Loan Parties owning Patents or licenses of Patents in favor of the Administrative Agent, on behalf of itself and Lenders, both on the Closing Date and thereafter.

        "Payment Office" shall mean the office of the Administrative Agent located at 303 Peachtree Street, N.E., Atlanta, Georgia 30308, or such other location as to which the Administrative Agent shall have given written notice to the Borrower and the other Lenders.

        "PBGC" shall mean the Pension Benefit Guaranty Corporation referred to and defined in ERISA, and any successor entity performing similar functions.

        "Perfection Certificate" shall have the meaning assigned to such term in the Guaranty and Security Agreement.

        "Permitted Acquisition" shall mean an acquisition by the Borrower or any of its Subsidiaries of a majority of the Capital Stock or other ownership interests of another entity, or the assets of another entity or a division or other business segment or unit thereof, whether through purchase, merger, or other business combination or transaction, provided that (i) the entity or business so acquired is in an Approved Line of Business, (ii) the board of directors (or the equivalent thereof)of the Person whose assets or stock is being acquired has approved the acquisition, (iii) on the date of such acquisition and after giving effect thereto, no Default or Event of Default shall have occurred and be continuing, and all representations and warranties of each Loan Party set forth in the Loan Documents shall be and remain true and correct in all material respects, (iv) after giving effect to such acquisition, the Leverage Ratio for the Borrower and its Subsidiaries would not exceed 3.0:1.00, and the Borrower and its Subsidiaries shall otherwise be in compliance, on a Pro Forma Basis, with all covenants contained in Articles VI and VII, which shall be recomputed as of the day of the most recently ended Fiscal Quarter (for which financial statements are required to have been delivered) as if such acquisition has occurred of the first day of each relevant period for testing compliance, and the Borrower shall have delivered to the Administrative Agent a certificate of the chief financial officer or treasurer to such effect; and (v) each Loan Party shall be Solvent after giving effect to such acquisition and shall have executed and delivered, or caused its Subsidiaries to execute and deliver, all guarantees, collateral documents and other related documents required under Sections 5.10 and 5.14; provided, further, that no acquisition shall be permitted without the prior written approval of the Administrative Agent and the Required Lenders where the total consideration paid (including all Indebtedness incurred or assumed and any Capital Stock issued or delivered as consideration) exceeds $50,000,000 in any Fiscal Year.

        "Permitted Encumbrances" shall mean:

        (i)    Liens imposed by law for taxes not yet due or which are being contested in good faith by appropriate proceedings diligently conducted and with respect to which adequate reserves are being maintained in accordance with GAAP;

        (ii)   statutory Liens of landlords, carriers, warehousemen, mechanics, materialmen and other Liens imposed by law in the ordinary course of business for amounts not yet due or which are being contested in good faith by appropriate proceedings and with respect to which adequate reserves are being maintained in accordance with GAAP;

        (iii)  pledges and deposits made in the ordinary course of business in compliance with workers' compensation, unemployment insurance and other social security laws or regulations;

        (iv)  deposits to secure the performance of bids, trade contracts, leases, statutory obligations, surety and appeal bonds, performance bonds and other obligations of a like nature, in each case in the ordinary course of business;

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        (v)   judgment and attachment liens not giving rise to an Event of Default or Liens created by or existing from any litigation or legal proceeding that are currently being contested in good faith by appropriate proceedings and with respect to which adequate reserves are being maintained in accordance with GAAP;

        (vi)  customary rights of set-off, revocation, refund or chargeback under deposit agreements or under the Uniform Commercial Code or common law of banks or other financial institutions where the Borrower or any of its Subsidiaries maintains deposits (other than deposits intended as cash collateral) in the ordinary course of business but only to the extent such rights are not prohibited by the terms of any Controlled Account Agreement; and

        (vii) easements, zoning restrictions, rights-of-way and similar encumbrances on real property imposed by law or arising in the ordinary course of business that do not secure any monetary obligations and do not materially detract from the value of the affected property or materially interfere with the ordinary conduct of business of the Borrower and its Subsidiaries taken as a whole;

provided, that the term "Permitted Encumbrances" shall not include any Lien securing Indebtedness.

        "Permitted Investments" shall mean:

        (i)    direct obligations of, or obligations the principal of and interest on which are unconditionally guaranteed by, the United States (or by any agency thereof to the extent such obligations are backed by the full faith and credit of the United States), in each case maturing within one year from the date of acquisition thereof;

        (ii)   commercial paper having the highest rating, at the time of acquisition thereof, of S&P or Moody's and in either case maturing within six months from the date of acquisition thereof;

        (iii)  certificates of deposit, bankers' acceptances and time deposits maturing within 180 days of the date of acquisition thereof issued or guaranteed by or placed with, and money market deposit accounts issued or offered by, any domestic office of any commercial bank organized under the laws of the United States or any state thereof which has a combined capital and surplus and undivided profits of not less than $500,000,000;

        (iv)  fully collateralized repurchase agreements with a term of not more than 30 days for securities described in clause (i) above and entered into with a financial institution satisfying the criteria described in clause (iii) above; and

        (v)   mutual funds investing solely in any one or more of the Permitted Investments described in clauses (i) through (iv) above.

        "Person" shall mean any individual, partnership, firm, corporation, association, joint venture, limited liability company, trust or other entity, or any Governmental Authority.

        "Philips Environmental Indemnity Agreement" shall mean, collectively, (i) that certain Environmental Indemnity Agreement, dated as of February 10, 1998, between Philips Electronics North America Corporation and the Borrower and (ii) that certain Settlement Agreement and Covenant Not To Sue, dated as of December 22, 1997, among the State of Rhode Island, Philips Electronics North America Corporation and the Borrower, in each case as amended, restated, supplemented or otherwise modified from time to time.

        "Plan" shall mean any employee pension benefit plan (other than a Multiemployer Plan) subject to the provisions of Title IV of ERISA or Section 412 of the Code or Section 302 of ERISA, and in respect of which the Borrower or any ERISA Affiliate is (or, if such plan were

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terminated, would under Section 4069 of ERISA be deemed to be) an "employer" as defined in Section 3(5) of ERISA.

        "Pro Forma Basis" means, for purposes of calculating compliance with respect to a proposed Acquisition, that such transaction shall be deemed to have occurred as of the first day of the four fiscal-quarter period ending as of the most recent fiscal quarter end preceding the date of such transaction. For purposes of any such calculation in respect of any Acquisition, (a) any Indebtedness incurred or assumed in connection with such transaction that is not retired in connection with such transaction (i) shall be deemed to have been incurred as of the first day of the applicable period and (ii) if such Indebtedness has a floating or formula rate, shall have an implied rate of interest for the applicable period for purposes of this definition determined by utilizing the rate which is or would be in effect with respect to such Indebtedness as at the relevant date of determination, (b) income statement items (whether positive or negative) and capital expenditures attributable to the Person or property acquired shall be included beginning as of the first day of the applicable period and (c) no adjustments for unrealized synergies shall be included.

        "Pro Rata Share" shall mean (i) with respect to any Commitment of any Lender at any time, a percentage, the numerator of which shall be such Lender's Commitment (or if such Commitments have been terminated or expired or the Loans have been declared to be due and payable, such Lender's Revolving Credit Exposure or Term Loan, as applicable), and the denominator of which shall be the sum of such Commitments of all Lenders (or if such Commitments have been terminated or expired or the Loans have been declared to be due and payable, all Revolving Credit Exposure or Term Loans, as applicable, of all Lenders) and (ii) with respect to all Commitments of any Lender at any time, the numerator of which shall be the sum of such Lender's Revolving Commitment (or if such Revolving Commitments have been terminated or expired or the Loans have been declared to be due and payable, such Lender's Revolving Credit Exposure) and Term Loan and the denominator of which shall be the sum of all Lenders' Revolving Commitments (or if such Revolving Commitments have been terminated or expired or the Loans have been declared to be due and payable, all Revolving Credit Exposure of all Lenders funded under such Commitments) and Term Loans.

        "Real Estate" shall mean all real property owned or leased by the Borrower and its Subsidiaries.

        "Real Estate Documents" shall mean, collectively, the Mortgages, the Environmental Indemnity, and all other documents, instruments, agreements and certificates executed and delivered by any Loan Party to the Administrative Agent and the Lenders in connection with the foregoing.

        "Regulation D" shall mean Regulation D of the Board of Governors of the Federal Reserve System, as the same may be in effect from time to time, and any successor regulations.

        "Regulation T" shall mean Regulation T of the Board of Governors of the Federal Reserve System, as the same may be in effect from time to time, and any successor regulations.

        "Regulation U" shall mean Regulation U of the Board of Governors of the Federal Reserve System, as the same may be in effect from time to time, and any successor regulations.

        "Regulation X" shall mean Regulation X of the Board of Governors of the Federal Reserve System, as the same may be in effect from time to time, and any successor regulations.

        "Related Parties" shall mean, with respect to any specified Person, such Person's Affiliates and the respective managers, administrators, trustees, partners, directors, officers, employees, agents, advisors or other representatives of such Person and such Person's Affiliates.

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        "Release" shall mean any release, spill, emission, leaking, dumping, injection, pouring, deposit, disposal, discharge, dispersal, leaching or migration into the environment (including ambient air, surface water, groundwater, land surface or subsurface strata) or within any building, structure, facility or fixture.

        "Required Lenders" shall mean, at any time, Lenders holding more than 50% of the aggregate outstanding Revolving Commitments and Term Loans at such time or if the Lenders have no Revolving Commitments outstanding, then Lenders holding more than 50% of the Revolving Credit Exposure and Term Loans.

        "Required Revolving Lenders" shall mean, at any time, Lenders holding more than 50% of the aggregate outstanding Revolving Commitments at such time or if the Lenders have no Revolving Commitments outstanding, then Lenders holding more than 50% of the Revolving Credit Exposure.

        "Requirement of Law" for any Person shall mean the articles or certificate of incorporation, bylaws, partnership certificate and agreement, or limited liability company certificate of organization and agreement, as the case may be, and other organizational and governing documents of such Person, and any law, treaty, rule or regulation, or determination of a Governmental Authority, in each case applicable to or binding upon such Person or any of its property or to which such Person or any of its property is subject.

        "Responsible Officer" shall mean any of the president, the chief executive officer, the chief operating officer, the chief financial officer, the treasurer or a vice president of the Borrower or such other representative of the Borrower as may be designated in writing by any one of the foregoing with the consent of the Administrative Agent; and, with respect to the financial covenants only, the chief financial officer or the treasurer of the Borrower.

        "Restricted Payment" shall have the meaning set forth in Section 7.5.

        "Revolving Commitment" shall mean, with respect to each Lender, the commitment of such Lender to make Revolving Loans to the Borrower and to acquire participations in Letters of Credit and Swingline Loans in an aggregate principal amount not exceeding the amount set forth with respect to such Lender on Schedule II, as such schedule may be amended pursuant to Section 2.23, or in the case of a Person becoming a Lender after the Closing Date, the amount of the assigned "Revolving Commitment" as provided in the Assignment and Acceptance executed by such Person as an assignee, or the joinder executed by such Person, in each case as such commitment may subsequently be increased or decreased pursuant to terms hereof.

        "Revolving Commitment Termination Date" shall mean the earliest of (i) December 19, 2012, (ii) the date on which the Revolving Commitments are terminated pursuant to Section 2.8 and (iii) the date on which all amounts outstanding under this Agreement have been declared or have automatically become due and payable (whether by acceleration or otherwise).

        "Revolving Credit Exposure" shall mean, with respect to any Lender at any time, the sum of the outstanding principal amount of such Lender's Revolving Loans, LC Exposure and Swingline Exposure.

        "Revolving Loan" shall mean a loan made by a Lender (other than the Swingline Lender) to the Borrower under its Revolving Commitment, which may either be a Base Rate Loan or a Eurodollar Loan.

        "S&P" shall mean Standard & Poor's, a Division of the McGraw-Hill Companies.

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        "Secured Parties" shall mean the Administrative Agent, the Lenders, the holders of Hedging Obligations that constitute Obligations and the holders of Treasury Management Obligations that constitute Obligations.

        "Solvent" shall mean, with respect to any Person on a particular date, that on such date (a) the fair value of the property of such Person is greater than the total amount of liabilities, including subordinated and contingent liabilities, of such Person; (b) the present fair saleable value of the assets of such Person is not less than the amount that will be required to pay the probable liability of such Person on its debts and liabilities, including subordinated and contingent liabilities as they become absolute and matured; (c) such Person does not intend to, and does not believe that it will, incur debts or liabilities beyond such Person's ability to pay as such debts and liabilities mature; and (d) such Person is not engaged in a business or transaction, and is not about to engage in a business or transaction, for which such Person's property would constitute an unreasonably small capital. The amount of contingent liabilities (such as litigation, guaranties and pension plan liabilities) at any time shall be computed as the amount that, in light of all the facts and circumstances existing at the time, represents the amount that would reasonably be expected to become an actual or matured liability.

        "Sponsor" shall mean Berggruen Holdings North America Ltd. or any of its Affiliates.

        "Subsidiary" shall mean, with respect to any Person (the "parent"), any corporation, partnership, joint venture, limited liability company, association or other entity the accounts of which would be consolidated with those of the parent in the parent's consolidated financial statements if such financial statements were prepared in accordance with GAAP as of such date, as well as any other corporation, partnership, joint venture, limited liability company, association or other entity (i) of which securities or other ownership interests representing more than 50% of the equity or more than 50% of the ordinary voting power, or in the case of a partnership, more than 50% of the general partnership interests are, as of such date, owned, controlled or held, or (ii) that is, as of such date, otherwise controlled, by the parent or one or more subsidiaries of the parent or by the parent and one or more subsidiaries of the parent. Unless otherwise indicated, all references to "Subsidiary" hereunder shall mean a Subsidiary of Holdings.

        "Subsidiary Loan Party" shall mean any Subsidiary that executes or becomes a party to the Guaranty and Security Agreement.

        "Swingline Commitment" shall mean the commitment of the Swingline Lender to make Swingline Loans in an aggregate principal amount at any time outstanding not to exceed $10,000,000.

        "Swingline Exposure" shall mean, with respect to each Lender, the principal amount of the Swingline Loans in which such Lender is legally obligated either to make a Base Rate Loan or to purchase a participation in accordance with Section 2.4, which shall equal such Lender's Pro Rata Share of all outstanding Swingline Loans.

        "Swingline Lender" shall mean SunTrust Bank.

        "Swingline Loan" shall mean a loan made to the Borrower by the Swingline Lender under the Swingline Commitment.

        "Swingline Rate" shall mean the Base Rate or such other interest rate (and with respect to a Swingline Loan that is a Eurodollar Loan, for any Interest Period) as may be mutually agreed between the Swingline Lender and the Borrower.

        "Synthetic Lease" shall mean a lease transaction under which the parties intend that (i) the lease will be treated as an "operating lease" by the lessee pursuant to Statement of Financial

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Accounting Standards No. 13, as amended and (ii) the lessee will be entitled to various tax and other benefits ordinarily available to owners (as opposed to lessees) of like property.

        "Synthetic Lease Obligations" shall mean, with respect to any Person, the sum of (i) all remaining rental obligations of such Person as lessee under Synthetic Leases which are attributable to principal and, without duplication, (ii) all rental and purchase price payment obligations of such Person under such Synthetic Leases assuming such Person exercises the option to purchase the lease property at the end of the lease term.

        "Taxes" shall mean any and all present or future taxes, levies, imposts, duties, deductions, charges or withholdings imposed by any Governmental Authority.

        "Term Loan" shall have the meaning set forth in Section 2.5.

        "Term Loan Commitment" shall mean, with respect to each Lender, the obligation of such Lender to make a Term Loan hereunder on the Closing Date, in a principal amount not exceeding the amount set forth with respect to such Lender on Schedule II. The aggregate principal amount of the Term Loan Commitments of all Lenders on the Closing Date is $100,000,000.

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        "Trademark" shall have the meaning assigned to such term in the Guaranty and Security Agreement.

        "Trademark Security Agreements" shall mean, collectively, the Trademark Security Agreements executed by the Loan Parties owning Trademarks or licenses of Trademarks in favor of the Administrative Agent, on behalf of itself and Lenders, both on the Closing Date and thereafter.

"Treasury Management Obligations" shall mean, collectively, all obligations and other liabilities of any Loan Parties pursuant to any agreements governing the provision to such Loan Parties of treasury or cash management services, including deposit accounts, funds transfer, automated clearing house, zero balance accounts, returned check concentration, controlled disbursement, lockbox, account reconciliation and reporting and trade finance services.

        "Type", when used in reference to a Loan or Borrowing, refers to whether the rate of interest on such Loan, or on the Loans comprising such Borrowing, is determined by reference to the Adjusted LIBO Rate or the Base Rate.

        "Uniform Commercial Code" or "UCC" shall mean the Uniform Commercial Code as in effect from time to time in the State of New York; provided, that to the extent that the Uniform Commercial Code is used to define any term herein or in any Loan Document and such term is defined differently in different Articles or Divisions of the Uniform Commercial Code, the definition of such term contained in Article or Division 9 shall govern; provided further, that in the event that, by reason of mandatory provisions of law, any or all of the attachment, perfection or priority of, or remedies with respect to, the Administrative Agent's or any Lender's Lien on any Collateral is governed by the Uniform Commercial Code as enacted and in effect in a jurisdiction other than the State of New York, the term "Uniform Commercial Code" shall mean the Uniform Commercial Code as enacted and in effect in such other jurisdiction solely for purposes of the provisions thereof relating to such attachment, perfection, priority or remedies and for purposes of definitions related to such provisions.

        "Withdrawal Liability" shall mean liability to a Multiemployer Plan as a result of a complete or partial withdrawal from such Multiemployer Plan, as such terms are defined in Part I of Subtitle E of Title IV of ERISA.

        Section 1.2.    Classifications of Loans and Borrowings.    For purposes of this Agreement, Loans may be classified and referred to by Class (e.g. a "Revolving Loan" or "Term Loan") or by Type (e.g. a "Eurodollar Loan" or "Base Rate Loan") or by Class and Type (e.g. "Revolving Eurodollar Loan"). Borrowings also may be classified and referred to by Class (e.g. "Revolving Borrowing") or by Type (e.g. "Eurodollar Borrowing") or by Class and Type (e.g. "Revolving Eurodollar Borrowing").

        Section 1.3.    Accounting Terms and Determination.    Unless otherwise defined or specified herein, all accounting terms used herein shall be interpreted, all accounting determinations hereunder shall be made, and all financial statements required to be delivered hereunder shall be prepared, in accordance with GAAP as in effect from time to time, applied on a basis consistent with the most recent audited consolidated financial statement of the Borrower delivered pursuant to Section 5.1 (a); provided, that if the Borrower notifies the Administrative Agent that the Borrower wishes to amend any covenant in Article VI to eliminate the effect of any change in GAAP on the operation of such covenant (or if the Administrative Agent notifies the Borrower that the Required Lenders wish to amend Article VI for such purpose), then the Borrower's compliance with such covenant shall be determined on the basis of GAAP in effect immediately before the relevant change in GAAP became effective, until either such notice is withdrawn or such covenant is amended in a manner satisfactory to the Borrower and the Required Lenders.

        Section 1.4.    Terms Generally.    The definitions of terms herein shall apply equally to the singular and plural forms of the terms defined. Whenever the context may require, any pronoun shall include

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the corresponding masculine, feminine and neuter forms. The words "include", "includes" and "including" shall be deemed to be followed by the phrase "without limitation". The word "will" shall be construed to have the same meaning and effect as the word "shall". In the computation of periods of time from a specified date to a later specified date, the word "from" means "from and including" and the word "to" means "to but excluding". Unless the context requires otherwise (i) any definition of or reference to any agreement, instrument or other document herein shall be construed as referring to such agreement, instrument or other document as it was originally executed or as it may from time to time be amended, restated, supplemented or otherwise modified (subject to any restrictions on such amendments, supplements or modifications set forth herein), (ii) any reference herein to any Person shall be construed to include such Person's successors and permitted assigns, (iii) the words "hereof", "herein" and "hereunder" and words of similar import shall be construed to refer to this Agreement as a whole and not to any particular provision hereof, (iv) all references to Articles, Sections, Exhibits and Schedules shall be construed to refer to Articles, Sections, Exhibits and Schedules to this Agreement and (v) all references to a specific time shall be construed to refer to the time in New York, New York, unless otherwise indicated.

ARTICLE II

AMOUNT AND TERMS OF THE COMMITMENTS

        Section 2.1.    General Description of Facilities.    Subject to and upon the terms and conditions herein set forth, (i) the Lenders hereby establish in favor of the Borrower a revolving credit facility pursuant to which each Lender severally agrees (to the extent of such Lender's Revolving Commitment) to make Revolving Loans to the Borrower in accordance with Section 2.2, (ii) the Issuing Bank agrees to issue Letters of Credit in accordance with Section 2.22, (iii) the Swingline Lender agrees to make Swingline Loans in accordance with Section 2.4, (iv) each Lender agrees to purchase a participation interest in the Letters of Credit and the Swingline Loans pursuant to the terms and conditions hereof; provided, that in no event shall the aggregate principal amount of all outstanding Revolving Loans, Swingline Loans and outstanding LC Exposure exceed at any time the Aggregate Revolving Commitment Amount from time to time in effect; and (v) each Lender severally agrees to make a Term Loan to the Borrower in a principal amount not exceeding such Lender's Term Loan Commitment on the Closing Date.

        Section 2.2.    Revolving Loans.    Subject to the terms and conditions set forth herein, each Lender severally agrees to make Revolving Loans, ratably in proportion to its Pro Rata Share, to the Borrower, from time to time during the Availability Period, in an aggregate principal amount outstanding at any time that will not result in (a) such Lender's Revolving Credit Exposure exceeding such Lender's Revolving Commitment or (b) the aggregate Revolving Credit Exposures of all Lenders exceeding the Aggregate Revolving Commitment Amount. During the Availability Period, the Borrower shall be entitled to borrow, prepay and reborrow Revolving Loans in accordance with the terms and conditions of this Agreement; provided, that the Borrower may not borrow or reborrow should there exist a Default or Event of Default at the time of such borrowing or reborrowing.

        Section 2.3.    Procedure for Revolving Borrowings.

        The Borrower shall give the Administrative Agent written notice (or telephonic notice promptly confirmed in writing) of each Revolving Borrowing substantially in the form of Exhibit 2.3 (a "Notice of Revolving Borrowing") (x) prior to 11:00 a.m. on the requested date of each Base Rate Borrowing and (y) prior to 11:00 a.m. three (3) Business Days prior to the requested date of each Eurodollar Borrowing. Each Notice of Revolving Borrowing shall be irrevocable and shall specify: (i) the aggregate principal amount of such Borrowing, (ii) the date of such Borrowing (which shall be a Business Day), (iii) the Type of such Revolving Loan comprising such Borrowing and (iv) in the case of a Eurodollar Borrowing, the duration of the initial Interest Period applicable thereto (subject to the provisions of the

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definition of Interest Period). Each Revolving Borrowing shall consist entirely of Base Rate Loans or Eurodollar Loans, as the Borrower may request. The aggregate principal amount of each Eurodollar Borrowing shall be not less than $1,000,000 or a larger multiple of $100,000, and the aggregate principal amount of each Base Rate Borrowing shall not be less than $500,000 or a larger multiple of $100,000; provided, that Base Rate Loans made pursuant to Section 2.4 or Section 2.22(d) may be made in lesser amounts as provided therein. At no time shall the total number of Eurodollar Borrowings comprising Revolving Borrowings outstanding at any time exceed six. Promptly following the receipt of a Notice of Revolving Borrowing in accordance herewith, the Administrative Agent shall advise each Lender of the details thereof and the amount of such Lender's Revolving Loan to be made as part of the requested Revolving Borrowing.

        Section 2.4.    Swingline Commitment.

        (a)   Subject to the terms and conditions set forth herein, the Swingline Lender agrees to make Swingline Loans to the Borrower, from time to time during the Availability Period, in an aggregate principal amount outstanding at any time not to exceed the lesser of (i) the Swingline Commitment then in effect and (ii) the difference between the Aggregate Revolving Commitment Amount and the aggregate Revolving Credit Exposures of all Lenders; provided, that the Swingline Lender shall not be required to make a Swingline Loan to refinance an outstanding Swingline Loan. The Borrower shall be entitled to borrow, repay and reborrow Swingline Loans in accordance with the terms and conditions of this Agreement.

        (b)   The Borrower shall give the Administrative Agent written notice (or telephonic notice promptly confirmed in writing) of each Swingline Borrowing substantially in the form of Exhibit 2.4 attached hereto ("Notice of Swingline Borrowing") prior to 10:00 a.m. on the requested date of each Swingline Borrowing. Each Notice of Swingline Borrowing shall be irrevocable and shall specify: (i) the principal amount of such Swingline Loan, (ii) the date of such Swingline Loan (which shall be a Business Day) and (iii) the account of the Borrower to which the proceeds of such Swingline Loan should be credited. The Administrative Agent will promptly advise the Swingline Lender of each Notice of Swingline Borrowing. Each Swingline Loan shall accrue interest at the Swingline Rate and shall have an Interest Period (subject to the definition thereof) as agreed between the Borrower and the Swingline Lender. The aggregate principal amount of each Swingline Loan shall be not less than $100,000 or a larger multiple of $50,000, or such other minimum amounts agreed to by the Swingline Lender and the Borrower. The Swingline Lender will make the proceeds of each Swingline Loan available to the Borrower in Dollars in immediately available funds at the account specified by the Borrower in the applicable Notice of Swingline Borrowing not later than 1:00 p.m. on the requested date of such Swingline Loan.

        (c)   The Swingline Lender, at any time and from time to time in its sole discretion, may, but in no event no less frequently than once each calendar week shall, on behalf of the Borrower (which hereby irrevocably authorizes and directs the Swingline Lender to act on its behalf), give a Notice of Revolving Borrowing to the Administrative Agent, with a copy to the Borrower, requesting the Lenders (including the Swingline Lender) to make Base Rate Loans in an amount equal to the unpaid principal amount of any Swingline Loan. Each Lender will make the proceeds of its Base Rate Loan included in such Borrowing available to the Administrative Agent for the account of the Swingline Lender in accordance with Section 2.6, which will be used solely for the repayment of such Swingline Loan.

        (d)   If for any reason a Base Rate Borrowing may not be (as determined in the sole discretion of the Administrative Agent), or is not, made in accordance with the foregoing provisions, then each Lender (other than the Swingline Lender) shall purchase an undivided participating interest in such Swingline Loan in an amount equal to its Pro Rata Share thereof on the date that such Base Rate Borrowing should have occurred. On the date of such required purchase, each Lender

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shall promptly transfer, in immediately available funds, the amount of its participating interest to the Administrative Agent for the account of the Swingline Lender. If such Swingline Loan bears interest at a rate other than the Base Rate, such Swingline Loan shall automatically become a Base Rate Loan on the effective date of any such participation and interest shall become payable on demand.

        (e)   Each Lender's obligation to make a Base Rate Loan pursuant to Section 2.4(c) or to purchase the participating interests pursuant to Section 2.4(d) shall be absolute and unconditional and shall not be affected by any circumstance, including without limitation (i) any setoff, counterclaim, recoupment, defense or other right that such Lender or any other Person may have or claim against the Swingline Lender, the Borrower or any other Person for any reason whatsoever, (ii) the existence of a Default or an Event of Default or the termination of any Lender's Revolving Commitment, (iii) the existence (or alleged existence) of any event or condition which has had or could reasonably be expected to have a Material Adverse Effect, (iv) any breach of this Agreement or any other Loan Document by the Borrower, the Administrative Agent or any Lender or (v) any other circumstance, happening or event whatsoever, whether or not similar to any of the foregoing. If such amount is not in fact made available to the Swingline Lender by any Lender, the Swingline Lender shall be entitled to recover such amount on demand from such Lender, together with accrued interest thereon for each day from the date of demand thereof (i) at the Federal Funds Rate until the second Business Day after such demand and (ii) at the Base Rate at all times thereafter. Until such time as such Lender makes its required payment, the Swingline Lender shall be deemed to continue to have outstanding Swingline Loans in the amount of the unpaid participation for all purposes of the Loan Documents. In addition, such Lender shall be deemed to have assigned any and all payments made of principal and interest on its Loans and any other amounts due to it hereunder, to the Swingline Lender to fund the amount of such Lender's participation interest in such Swingline Loans that such Lender failed to fund pursuant to this Section 2.4, until such amount has been purchased in full.

        Section 2.5.    Term Loans.    Subject to the terms and conditions set forth herein, each Lender severally agrees to make a single loan ("Term Loan") to the Borrower on the Closing Date in a principal amount not to exceed the Term Loan Commitment of such Lender; provided, that if for any reason the full amount of such Lender's Term Loan Commitment is not fully drawn on the Closing Date, the undrawn portion thereof shall automatically be cancelled. The Term Loans may be, from time to time, Base Rate Loans or Eurodollar Loans or a combination thereof; provided, that on the Closing Date all Term Loans shall be Base Rate Loans. The aggregate principal amount of each Eurodollar Loan shall be not less than $1,000,000 or a larger multiple of $100,000, and the aggregate principal amount of each Base Rate Loan shall not be less than $500,000 or a larger multiple of $100,000. At no time shall the total number of Eurodollar Loans comprising Term Loan Borrowings outstanding at any time exceed six. The execution and delivery of this Agreement by the Borrower and the satisfaction of all conditions precedent pursuant to Section 3.1 shall be deemed to constitute the Borrower's request to borrow the Term Loans on the Closing Date.

        Section 2.6.    Funding of Borrowings.

        (a)   Each Lender will make available each Loan to be made by it hereunder on the proposed date thereof by wire transfer in immediately available funds by 11:00 a.m. to the Administrative Agent at the Payment Office; provided, that the Swingline Loans will be made as set forth in Section 2.4. The Administrative Agent will make such Loans available to the Borrower by promptly crediting the amounts that it receives, in like funds by the close of business on such proposed date, to an account maintained by the Borrower with the Administrative Agent or at the Borrower's option, by effecting a wire transfer of such amounts to an account designated by the Borrower to the Administrative Agent.

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        (b)   Unless the Administrative Agent shall have been notified by any Lender prior to 5:00 p.m. one (1) Business Day prior to the date of a Borrowing in which such Lender is to participate that such Lender will not make available to the Administrative Agent such Lender's share of such Borrowing, the Administrative Agent may assume that such Lender has made such amount available to the Administrative Agent on such date, and the Administrative Agent, in reliance on such assumption, may make available to the Borrower on such date a corresponding amount. If such corresponding amount is not in fact made available to the Administrative Agent by such Lender on the date of such Borrowing, the Administrative Agent shall be entitled to recover such corresponding amount on demand from such Lender together with interest at the Federal Funds Rate until the second Business Day after such demand and thereafter at the Base Rate. If such Lender does not pay such corresponding amount within three Business Days of the date of the Borrowing, the Borrower shall repay such corresponding amount, together with accrued interest at the interest rate applicable to the Borrowing related to such corresponding amount. Nothing in this subsection shall be deemed to relieve any Lender from its obligation to fund its Pro Rata Share of any Borrowing hereunder or to prejudice any rights which the Borrower may have against any Lender as a result of any default by such Lender hereunder.

        (c)   All Revolving Borrowings and Term Loans shall be made by the Lenders on the basis of their respective Pro Rata Shares. No Lender shall be responsible for any default by any other Lender in its obligations hereunder, and each Lender shall be obligated to make its Loans provided to be made by it hereunder, regardless of the failure of any other Lender to make its Loans hereunder.

        Section 2.7.    Interest Elections.

        (a)   Each Borrowing initially shall be of the Type specified in the applicable Notice of Borrowing, and in the case of a Eurodollar Borrowing and shall have an initial Interest Period as specified in such Notice of Borrowing. Thereafter, the Borrower may elect to convert such Borrowing into a different Type or to continue such Borrowing, and in the case of a Eurodollar Borrowing, may elect Interest Periods therefor, all as provided in this Section 2.7. The Borrower may elect different options with respect to different portions of the affected Borrowing, in which case each such portion shall be allocated ratably among the Lenders holding Loans comprising such Borrowing, and the Loans comprising each such portion shall be considered a separate Borrowing. This Section shall NOT apply to Swingline Borrowings, which may not be converted or continued.

        (b)   To make an election pursuant to this Section 2.7, the Borrower shall give the Administrative Agent prior written notice (or telephonic notice promptly confirmed in writing) of each Borrowing substantially in the form of Exhibit 2.7 attached hereto (a "Notice of Conversion/Continuation") that is to be converted or continued, as the case may be, (x) prior to 10:00 a.m. one (1) Business Day prior to the requested date of a conversion into a Base Rate Borrowing and (y) prior to 11:00 a.m. three (3) Business Days prior to a continuation of or conversion into a Eurodollar Borrowing. Each such Notice of Conversion/Continuation shall be irrevocable and shall specify (i) the Borrowing to which such Notice of Continuation/Conversion applies and if different options are being elected with respect to different portions thereof, the portions thereof that are to be allocated to each resulting Borrowing (in which case the information to be specified pursuant to clauses (iii) and (iv) shall be specified for each resulting Borrowing); (ii) the effective date of the election made pursuant to such Notice of Continuation/Conversion, which shall be a Business Day, (iii) whether the resulting Borrowing is to be a Base Rate Borrowing or a Eurodollar Borrowing; and (iv) if the resulting Borrowing is to be a Eurodollar Borrowing, the Interest Period applicable thereto after giving effect to such election, which shall be a period contemplated by the definition of "Interest Period". If any such Notice of Continuation/Conversion requests a Eurodollar Borrowing but does not specify an Interest Period, the Borrower shall be deemed to have selected

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an Interest Period of one month. The principal amount of any resulting Borrowing shall satisfy the minimum borrowing amount for Eurodollar Borrowings and Base Rate Borrowings set forth in Section 2.3.

        (c)   If, on the expiration of any Interest Period in respect of any Eurodollar Borrowing, the Borrower shall have failed to deliver a Notice of Conversion/ Continuation, then, unless such Borrowing is repaid as provided herein, the Borrower shall be deemed to have elected to convert such Borrowing to a Base Rate Borrowing. No Borrowing may be converted into, or continued as, a Eurodollar Borrowing if a Default or an Event of Default exists, unless the Administrative Agent and each of the Lenders shall have otherwise consented in writing. No conversion of any Eurodollar Loans shall be permitted except on the last day of the Interest Period in respect thereof.

        (d)   Upon receipt of any Notice of Conversion/Continuation, the Administrative Agent shall promptly notify each Lender of the details thereof and of such Lender's portion of each resulting Borrowing.

        Section 2.8.    Optional Reduction and Termination of Commitments.

        (a)   Unless previously terminated, all Revolving Commitments (including the Swingline Commitment and the LC Commitment) shall terminate on the Revolving Commitment Termination Date. The Term Loan Commitments shall terminate on the Closing Date upon the making of the Term Loans pursuant to Section 2.5.

        (b)   Upon at least three (3) Business Days' prior written notice (or telephonic notice promptly confirmed in writing) to the Administrative Agent (which notice shall be irrevocable), the Borrower may reduce the Aggregate Revolving Commitments in part or terminate the Aggregate Revolving Commitments in whole; provided, that (i) any partial reduction shall apply to reduce proportionately and permanently the Revolving Commitment of each Lender, (ii) any partial reduction pursuant to this Section 2.8 shall be in an amount of at least $5,000,000 and any larger multiple of $1,000,000, and (iii) no such reduction shall be permitted which would reduce the Aggregate Revolving Commitment Amount to an amount less than the outstanding Revolving Credit Exposures of all Lenders. Any such reduction in the Aggregate Revolving Commitment Amount below the principal amount of the Swingline Commitment or the LC Commitment shall result in a dollar for dollar reduction (rounded to the next lowest integral multiple of $100,000) in the Swingline Commitment or the LC Commitment, as the case may be.

        Section 2.9.    Repayment of Loans.

        (a)   The outstanding principal amount of all Revolving Loans shall be due and payable (together with accrued and unpaid interest thereon) on the Revolving Commitment Termination Date.

        (b)   The principal amount of each Swingline Borrowing shall be due and payable (together with accrued and unpaid interest thereon) on the Revolving Commitment Termination Date.

        (c)   The Borrower unconditionally promises to pay to the Administrative Agent, for the account of the Lenders holding Term Loans, quarterly installments of the Term Loan on the last of

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each March, June, September and December, commencing on March 31, 2008, each such installment to be in the amount set forth below:

Installment Date	Aggregate Principal Amount
March 31, 2008, June 30, 2008, September 30, 2008 and December 30, 2008	$	1,875,000
March 31, 2009, June 30, 2009, September 30, 2009 and December 30, 2009	$	3,750,000
March 31, 2010, June 30, 2010, September 30, 2010 and December 30, 2010	$	4,375,000
March 31, 2011, June 30, 2011, September 30, 2011 and December 30, 2011	$	6,875,000
March 31, 2012, June 30, 2012, and September 30, 2012	$	8,125,000

provided, that, to the extent not previously paid, the aggregate unpaid principal balance of the Term Loans shall be due and payable on the Maturity Date.

        Section 2.10.    Evidence of Indebtedness.    (a) Each Lender shall maintain in accordance with its usual practice appropriate records evidencing the Indebtedness of the Borrower to such Lender resulting from each Loan made by such Lender from time to time, including the amounts of principal and interest payable thereon and paid to such Lender from time to time under this Agreement. The Administrative Agent shall maintain appropriate records in which shall be recorded (i) the Revolving Commitment and Term Loan Commitment of each Lender, (ii) the amount of each Loan made hereunder by each Lender, the Class and Type thereof and the Interest Period applicable thereto, (iii) the date of each continuation thereof pursuant to Section 2.7, (iv) the date of each conversion of all or a portion thereof to another Type pursuant to Section 2.7, (v) the date and amount of any principal or interest due and payable or to become due and payable from the Borrower to each Lender hereunder in respect of such Loans and (vi) both the date and amount of any sum received by the Administrative Agent hereunder from the Borrower in respect of the Loans and each Lender's Pro Rata Share thereof. The entries made in such records shall, absent manifest error, be prima facie evidence of the existence and amounts of the obligations of the Borrower therein recorded; provided, that the failure or delay of any Lender or the Administrative Agent in maintaining or making entries into any such record or any error therein shall not in any manner affect the obligation of the Borrower to repay the Loans (both principal and unpaid accrued interest) of such Lender in accordance with the terms of this Agreement.

        (b)   This Agreement evidences the obligation of the Borrower to repay the Loans and is being executed as a "noteless" credit agreement. However, at the request of any Lender (including the Swingline Lender) at any time, the Borrower agrees that it will prepare, execute and deliver to such Lender a promissory note payable to the order of such Lender (or, if requested by such Lender, to such Lender and its registered assigns) and in a form approved by the Administrative Agent. Thereafter, the Loans evidenced by such promissory note and interest thereon shall at all times (including after assignment permitted hereunder) be represented by one or more promissory notes in such form payable to the order of the payee named therein (or, if such promissory note is a registered note, to such payee and its registered assigns).

        Section 2.11.    Optional Prepayments.    The Borrower shall have the right at any time and from time to time to prepay any Borrowing, in whole or in part, without premium or penalty, by giving irrevocable written notice (or telephonic notice promptly confirmed in writing) to the Administrative Agent no later than (i) in the case of prepayment of any Eurodollar Borrowing, 11:00 a.m. not less than three (3) Business Days prior to any such prepayment, (ii) in the case of any prepayment of any

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Base Rate Borrowing, not less than one Business Day prior to the date of such prepayment, and (iii) in the case of Swingline Borrowings, prior to 11:00 a.m. on the date of such prepayment. Each such notice shall be irrevocable and shall specify the proposed date of such prepayment and the principal amount of each Borrowing or portion thereof to be prepaid. Upon receipt of any such notice, the Administrative Agent shall promptly notify each affected Lender of the contents thereof and of such Lender's Pro Rata Share of any such prepayment. If such notice is given, the aggregate amount specified in such notice shall be due and payable on the date designated in such notice, together with accrued interest to such date on the amount so prepaid in accordance with Section 2.13(d); provided, that if a Eurodollar Borrowing is prepaid on a date other than the last day of an Interest Period applicable thereto, the Borrower shall also pay all amounts required pursuant to Section 2.19. Each partial prepayment of any Loan (other than a Swingline Loan) shall be in a minimum amount of $1,000,000 and integral multiples of $500,000 (except that prepayments of Swingline Loans shall be in the same multiples permitted for borrowings of Swingline Loans pursuant to Section 2.4). Each prepayment of a Borrowing shall be applied ratably to the Loans comprising such Borrowing, and in the case of a prepayment of a Term Loan Borrowing, to principal installments in inverse order of maturity.

        Section 2.12.    Mandatory Prepayments.

        (a)   Immediately upon receipt by the Borrower or any of its Subsidiaries of proceeds of any sale or disposition by the Borrower or such Subsidiary of any of its assets, or proceeds from any casualty insurance policies or eminent domain, condemnation or similar proceedings (excluding proceeds from the sale of assets in the ordinary course of business, proceeds from the sale of obsolete equipment and proceeds from the sale of other assets, from casualty insurance policies, eminent domain, condemnation or similar proceeds, in an aggregate amount not to exceed $5,000,000 in any Fiscal Year and proceeds from casualty insurance policies, eminent domain, condemnation or similar proceeds reinvested in business of the Borrower and its Subsidiaries within three hundred sixty (360) days following receipt thereof), the Borrower shall prepay the Obligations in an amount equal to all such proceeds (excluding the proceeds described in the foregoing parenthetical) net of commissions and other reasonable and customary transaction costs, fees and expenses properly attributable to such transaction and payable by such Borrower in connection therewith (in each case, paid to non-Affiliates). Any such prepayment shall be applied in accordance with paragraph (c) below.

        (b)   If the Borrower or any of its Subsidiaries issues any Indebtedness or equity securities (other than Indebtedness permitted under Section 7.1, equity securities issued to and pledged by a Loan Party pursuant to the Guaranty and Security Agreement and equity securities and options of the Borrower issued in connection with the consummation of a Permitted Acquisition) then no later than the Business Day following the date of receipt of the proceeds thereof, Borrower shall prepay the Obligations in an amount equal to all such proceeds, net of underwriting discounts and commissions and other reasonable costs paid to non-Affiliates in connection therewith. Any such prepayment shall be applied in accordance with paragraph (c) below.

        (c)   Any prepayments made by the Borrower pursuant to Sections 2.12(a) or (b) above shall be applied as follows: first, to Administrative Agent's fees and reimbursable expenses then due and payable pursuant to any of the Loan Documents; second, to all reimbursable expenses of the Lenders and all fees and reimbursable expenses of the Issuing Bank then due and payable pursuant to any of the Loan Documents, pro rata to the Lenders and the Issuing Bank based on their respective pro rata shares of such fees and expenses; third, to interest and fees then due and payable hereunder, pro rata to the Lenders based on their respective pro rata shares of such interest and fees; fourth, to the principal balance of the Term Loans, until the same shall have been paid in full, pro rata to the Lenders based on their Pro Rata Shares of the Term Loans, and applied to installments of the Term Loans in inverse order of maturity; fifth, to the principal

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balance of the Swing Line Loans, until the same shall have been paid in full, to the Swingline Lender, sixth, to the principal balance of the Revolving Loans (applied first to Base Rate Loans and then to Eurodollar Loans), until the same shall have been paid in full, pro rata to the Lenders based on their respective Revolving Commitments and seventh, to cash collateralize the Letters of Credit in accordance with Section 2.22(g) in an amount in cash equal to the LC Exposure as of such date plus any accrued and unpaid fees thereon. The Revolving Commitments of the Lenders shall not be permanently reduced by the amount of any prepayments made pursuant to clauses fifth through seventh above, unless an Event of Default has occurred and is continuing and the Required Revolving Lenders so request.

        (d)   If at any time the Revolving Credit Exposure of all Lenders exceeds the Aggregate Revolving Commitment Amount, as reduced pursuant to Section 2.8 or otherwise, the Borrower shall immediately repay Swingline Loans and Revolving Loans in an amount equal to such excess, together with all accrued and unpaid interest on such excess amount and any amounts due under Section 2.19. Each prepayment shall be applied first to the Swingline Loans to the full extent thereof, second to the Base Rate Loans to the full extent thereof, and finally to Eurodollar Loans to the full extent thereof. If after giving effect to prepayment of all Swingline Loans and Revolving Loans, the Revolving Credit Exposure of all Lenders exceeds the Aggregate Revolving Commitment Amount, the Borrower shall deposit in an account with the Administrative Agent, in the name of the Administrative Agent and for the benefit of the Issuing Bank and the Lenders, an amount in cash equal to such excess plus any accrued and unpaid fees thereon to be held as collateral for the LC Exposure. Such account shall be administered in accordance with Section 2.22(g) hereof.

        Section 2.13.    Interest on Loans.

        (a)   The Borrower shall pay interest on each Base Rate Loan at the Base Rate in effect from time to time and on each Eurodollar Loan at the Adjusted LIBO Rate for the applicable Interest Period in effect for such Loan, plus, in each case, the Applicable Margin in effect from time to time.

        (b)   The Borrower shall pay interest on each Swingline Loan at the Swingline Rate in effect from time to time.

        (c)   While an Event of Default exists or after acceleration, at the option of the Required Lenders, the Borrower shall pay interest ("Default Interest") with respect to all Eurodollar Loans at the rate otherwise applicable for the then-current Interest Period plus an additional 2% per annum until the last day of such Interest Period, and thereafter, and with respect to all Base Rate Loans and all other Obligations hereunder (other than Loans), at the rate in effect for Base Rate Loans, plus an additional 2% per annum.

        (d)   Interest on the principal amount of all Loans shall accrue from and including the date such Loans are made to but excluding the date of any repayment thereof. Interest on all outstanding Base Rate Loans shall be payable quarterly in arrears on the last day of each March, June, September and December and on the Revolving Commitment Termination Date or the Maturity Date, as the case may be. Interest on all outstanding Eurodollar Loans shall be payable on the last day of each Interest Period applicable thereto, and, in the case of any Eurodollar Loans having an Interest Period in excess of three months or 90 days, respectively, on each day which occurs every three months or 90 days, as the case may be, after the initial date of such Interest Period, and on the Revolving Commitment Termination Date or the Maturity Date, as the case may be. Interest on each Swingline Loan shall be payable on the maturity date of such Loan, which shall be the last day of the Interest Period applicable thereto, and on the Revolving Commitment Termination Date. Interest on any Loan which is converted into a Loan of another Type or which is repaid or prepaid shall be payable on the date of such conversion or on the date

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of any such repayment or prepayment (on the amount repaid or prepaid) thereof. All Default Interest shall be payable on demand.

        (e)   The Administrative Agent shall determine each interest rate applicable to the Loans hereunder and shall promptly notify the Borrower and the Lenders of such rate in writing (or by telephone, promptly confirmed in writing). Any such determination shall be conclusive and binding for all purposes, absent manifest error.

        Section 2.14.    Fees.

        (a)   The Borrower shall pay to the Administrative Agent for its own account the fees in the amounts and at the times previously agreed upon in writing by the Borrower and the Administrative Agent.

        (b)   The Borrower agrees to pay to the Administrative Agent for the account of each Lender a commitment fee (the "Commitment Fee"), which shall accrue at the Applicable Percentage per annum (determined daily in accordance with Schedule I) on the daily amount of the unused Revolving Commitment of such Lender during the Availability Period. For purposes of computing Commitment Fees, the Revolving Commitment of each Lender shall be deemed used to the extent of the outstanding Revolving Loans and LC Exposure, but not Swingline Exposure, of such Lender.

        (c)   The Borrower agrees to pay (i) to the Administrative Agent, for the account of each Lender, a letter of credit fee with respect to its participation in each Letter of Credit (the "LC Fee"), which shall accrue at a rate per annum equal to the Applicable Margin for Eurodollar Loans then in effect on the average daily amount of such Lender's LC Exposure attributable to such Letter of Credit during the period from and including the date of issuance of such Letter of Credit to but excluding the date on which such Letter of Credit expires or is drawn in full (including without limitation any LC Exposure that remains outstanding after the Revolving Commitment Termination Date) and (ii) to the Issuing Bank for its own account a fronting fee, which shall accrue at the rate of 0.125% per annum on the average daily amount of the LC Exposure (excluding any portion thereof attributable to unreimbursed LC Disbursements) during the Availability Period (or until the date that such Letter of Credit is irrevocably cancelled, whichever is later), as well as the Issuing Bank's standard fees with respect to issuance, amendment, renewal or extension of any Letter of Credit or processing of drawings thereunder. Notwithstanding the foregoing, if the Required Lenders elect to increase the interest rate on the Loans to the Default Interest pursuant to Section 2.13(c), the rate per annum used to calculate the LC Fee pursuant to clause (i) above shall automatically be increased by an additional 2% per annum.

        (d)   The Borrower shall pay to the Administrative Agent, for the ratable benefit of each Lender, the upfront fees previously agreed upon by the Borrower and the Administrative Agent, which shall be due and payable on the Closing Date.

        (e)   Accrued fees under paragraphs (b) and (c) above shall be payable quarterly in arrears on the last day of each March, June, September and December, commencing on December 31, 2007 and on the Revolving Commitment Termination Date (and if later, the date the Loans and LC Exposure shall be repaid in their entirety); provided further, that any such fees accruing after the Revolving Commitment Termination Date shall be payable on demand.

        Section 2.15.    Computation of Interest and Fees.

        All computations of interest and fees hereunder shall be made on the basis of a year of 360 days for the actual number of days (including the first day but excluding the last day) occurring in the period for which such interest or fees are payable (to the extent computed on the basis of days

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elapsed). Each determination by the Administrative Agent of an interest amount or fee hereunder shall be made in good faith and, except for manifest error, shall be final, conclusive and binding for all purposes.

        Section 2.16.    Inability to Determine Interest Rates.    If prior to the commencement of any Interest Period for any Eurodollar Borrowing,

        (i)    the Administrative Agent shall have determined (which determination shall be conclusive and binding upon the Borrower) that, by reason of circumstances affecting the relevant interbank market, adequate means do not exist for ascertaining LIBOR for such Interest Period, or

        (ii)   the Administrative Agent shall have received notice from the Required Lenders that the Adjusted LIBO Rate does not adequately and fairly reflect the cost to such Lenders (or Lender, as the case may be) of making, funding or maintaining their (or its, as the case may be) Eurodollar Loans for such Interest Period,

the Administrative Agent shall give written notice (or telephonic notice, promptly confirmed in writing) to the Borrower and to the Lenders as soon as practicable thereafter. Until the Administrative Agent shall notify the Borrower and the Lenders that the circumstances giving rise to such notice no longer exist, (i) the obligations of the Lenders to make Eurodollar Revolving Loans or to continue or convert outstanding Loans as or into Eurodollar Loans shall be suspended and (ii) all such affected Loans shall be converted into Base Rate Loans on the last day of the then current Interest Period applicable thereto unless the Borrower prepays such Loans in accordance with this Agreement. Unless the Borrower notifies the Administrative Agent at least one (1) Business Day before the date of any Eurodollar Revolving Borrowing for which a Notice of Revolving Borrowing or Notice of Continuation/Conversion has previously been given that it elects not to borrow on such date, then such Revolving Borrowing shall be made as a Base Rate Borrowing.

        Section 2.17.    Illegality.    If any Change in Law shall make it unlawful or impossible for any Lender to make, maintain or fund any Eurodollar Loan and such Lender shall so notify the Administrative Agent, the Administrative Agent shall promptly give notice thereof to the Borrower and the other Lenders, whereupon until such Lender notifies the Administrative Agent and the Borrower that the circumstances giving rise to such suspension no longer exist, the obligation of such Lender to make Eurodollar Revolving Loans, or to continue or convert outstanding Loans as or into Eurodollar Loans, shall be suspended. In the case of the making of a Eurodollar Revolving Borrowing, such Lender's Revolving Loan shall be made as a Base Rate Loan as part of the same Revolving Borrowing for the same Interest Period and if the affected Eurodollar Loan is then outstanding, such Loan shall be converted to a Base Rate Loan either (i) on the last day of the then current Interest Period applicable to such Eurodollar Loan if such Lender may lawfully continue to maintain such Loan to such date or (ii) immediately if such Lender shall determine that it may not lawfully continue to maintain such Eurodollar Loan to such date. Notwithstanding the foregoing, the affected Lender shall, prior to giving such notice to the Administrative Agent, designate a different Applicable Lending Office if such designation would avoid the need for giving such notice and if such designation would not otherwise be disadvantageous to such Lender in the good faith exercise of its discretion.

        Section 2.18.    Increased Costs.

        (a)   If any Change in Law shall:

        (i)    impose, modify or deem applicable any reserve, special deposit or similar requirement that is not otherwise included in the determination of the Adjusted LIBO Rate hereunder against assets of, deposits with or for the account of, or credit extended by, any Lender (except any such reserve requirement reflected in the Adjusted LIBO Rate) or the Issuing Bank; or

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        (ii)   impose on any Lender or on the Issuing Bank or the eurodollar interbank market any other condition affecting this Agreement or any Eurodollar Loans made by such Lender or any Letter of Credit or any participation therein;

and the result of either of the foregoing is to increase the cost to such Lender of making, converting into, continuing or maintaining a Eurodollar Loan or to increase the cost to such Lender or the Issuing Bank of participating in or issuing any Letter of Credit or to reduce the amount received or receivable by such Lender or the Issuing Bank hereunder (whether of principal, interest or any other amount), then the Borrower shall promptly pay, upon written notice from and demand by such Lender on the Borrower (with a copy of such notice and demand to the Administrative Agent), to the Administrative Agent for the account of such Lender, within ten (10) days after the date of such notice and demand, additional amount or amounts sufficient to compensate such Lender or the Issuing Bank, as the case may be, for such additional costs incurred or reduction suffered.

        (b)   If any Lender or the Issuing Bank shall have determined that on or after the date of this Agreement any Change in Law regarding capital requirements has or would have the effect of reducing the rate of return on such Lender's or the Issuing Bank's capital (or on the capital of such Lender's or the Issuing Bank's parent corporation) as a consequence of its obligations hereunder or under or in respect of any Letter of Credit to a level below that which such Lender or the Issuing Bank or such Lender's or the Issuing Bank's parent corporation could have achieved but for such Change in Law (taking into consideration such Lender's or the Issuing Bank's policies or the policies of such Lender's or the Issuing Bank's parent corporation with respect to capital adequacy) then, from time to time, within ten (10) days after receipt by the Borrower of written demand by such Lender (with a copy thereof to the Administrative Agent), the Borrower shall pay to such Lender such additional amounts as will compensate such Lender or the Issuing Bank or such Lender's or the Issuing Bank's parent corporation for any such reduction suffered.

        (c)   A certificate of a Lender or the Issuing Bank setting forth the amount or amounts necessary to compensate such Lender or the Issuing Bank or such Lender's or the Issuing Bank's parent corporation, as the case may be, specified in paragraph (a) or (b) of this Section 2.18 shall be delivered to the Borrower (with a copy to the Administrative Agent) and shall be conclusive, absent manifest error. The Borrower shall pay any such Lender or the Issuing Bank, as the case may be, such amount or amounts within ten (10) days after receipt thereof.

        (d)   Failure or delay on the part of any Lender or the Issuing Bank to demand compensation pursuant to this Section 2.18 shall not constitute a waiver of such Lender's or the Issuing Bank's right to demand such compensation; provided, that the Borrower shall not be required to compensate a Lender or the Issuing Bank under this Section 2.18 for any increased costs or reductions incurred more than 180 days prior to the date that such Lender or the Issuing Bank notifies the Borrower of such increased costs or reductions and of such Lender's or the Issuing Bank's intention to claim compensation therefor; provided further, that if the Change in Law giving rise to such increased costs or reductions is retroactive, then such 180-day period shall be extended to include the period of such retroactive effect.

        Section 2.19.    Funding Indemnity.    In the event of (a) the payment of any principal of a Eurodollar Loan other than on the last day of the Interest Period applicable thereto (including as a result of an Event of Default), (b) the conversion or continuation of a Eurodollar Loan other than on the last day of the Interest Period applicable thereto, or (c) the failure by the Borrower to borrow, prepay, convert or continue any Eurodollar Loan on the date specified in any applicable notice (regardless of whether such notice is withdrawn or revoked), then, in any such event, the Borrower shall compensate each Lender, within five (5) Business Days after written demand from such Lender, for any loss, cost or expense attributable to such event. In the case of a Eurodollar Loan, such loss,

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cost or expense shall be deemed to include an amount determined by such Lender to be the excess, if any, of (A) the amount of interest that would have accrued on the principal amount of such Eurodollar Loan if such event had not occurred at the Adjusted LIBO Rate applicable to such Eurodollar Loan for the period from the date of such event to the last day of the then current Interest Period therefor (or in the case of a failure to borrow, convert or continue, for the period that would have been the Interest Period for such Eurodollar Loan) over (B) the amount of interest that would accrue on the principal amount of such Eurodollar Loan for the same period if the Adjusted LIBO Rate were set on the date such Eurodollar Loan was prepaid or converted or the date on which the Borrower failed to borrow, convert or continue such Eurodollar Loan. A certificate as to any additional amount payable under this Section 2.19 submitted to the Borrower by any Lender (with a copy to the Administrative Agent) shall be conclusive, absent manifest error.

        Section 2.20.    Taxes.

        (a)   Any and all payments by or on account of any obligation of the Borrower hereunder shall be made free and clear of and without deduction for any Indemnified Taxes or Other Taxes; provided, that if the Borrower shall be required to deduct any Indemnified Taxes or Other Taxes from such payments, then (i) the sum payable shall be increased as necessary so that after making all required deductions (including deductions applicable to additional sums payable under this Section 2.20) the Administrative Agent, any Lender or the Issuing Bank (as the case may be) shall receive an amount equal to the sum it would have received had no such deductions been made, (ii) the Borrower shall make such deductions and (iii) the Borrower shall pay the full amount deducted to the relevant Governmental Authority in accordance with applicable law.

        (b)   In addition, the Borrower shall pay any Other Taxes to the relevant Governmental Authority in accordance with applicable law.

        (c)   The Borrower shall indemnify the Administrative Agent, each Lender and the Issuing Bank, within ten (10) days after written demand therefor, for the full amount of any Indemnified Taxes or Other Taxes paid by the Administrative Agent, such Lender or the Issuing Bank, as the case may be, on or with respect to any payment by or on account of any obligation of the Borrower hereunder (including Indemnified Taxes or Other Taxes imposed or asserted on or attributable to amounts payable under this Section 2.20) and any penalties, interest and reasonable expenses arising therefrom or with respect thereto, whether or not such Indemnified Taxes or Other Taxes were correctly or legally imposed or asserted by the relevant Governmental Authority. A certificate as to the amount of such payment or liability delivered to the Borrower by a Lender or the Issuing Bank, or by the Administrative Agent on its own behalf or on behalf of a Lender or the Issuing Bank, shall be conclusive absent manifest error.

        (d)   As soon as practicable after any payment of Indemnified Taxes or Other Taxes by the Borrower to a Governmental Authority, the Borrower shall deliver to the Administrative Agent the original or a certified copy of a receipt issued by such Governmental Authority evidencing such payment, a copy of the return reporting such payment or other evidence of such payment reasonably satisfactory to the Administrative Agent.

        (e)   Any Foreign Lender that is entitled to an exemption from or reduction of withholding tax under the Code or any treaty to which the United States is a party, with respect to payments under this Agreement shall deliver to the Borrower (with a copy to the Administrative Agent), at the time or times prescribed by applicable law, such properly completed and executed documentation prescribed by applicable law or reasonably requested by the Borrower as will permit such payments to be made without withholding or at a reduced rate. Without limiting the generality of the foregoing, each Foreign Lender agrees that it will deliver to the Administrative Agent and the Borrower (or in the case of a Participant, to the Lender from which the related participation shall have been purchased), as appropriate, two (2) duly completed copies of (i) Internal Revenue

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Service Form W-8 ECI, or any successor form thereto, certifying that the payments received from the Borrower hereunder are effectively connected with such Foreign Lender's conduct of a trade or business in the United States; or (ii) Internal Revenue Service Form W-8 BEN, or any successor form thereto, certifying that such Foreign Lender is entitled to benefits under an income tax treaty to which the United States is a party which reduces the rate of withholding tax on payments of interest; or (iii) Internal Revenue Service Form W-8 BEN, or any successor form prescribed by the Internal Revenue Service, together with a certificate (A) establishing that the payments to the Foreign Lender from the Borrower hereunder qualify as "portfolio interest" exempt from U.S. withholding tax under Code section 871(h) or 881(c), and (B) stating that (1) the Foreign Lender is not a bank for purposes of Code section 881(c)(3)(A), or the obligation of the Borrower hereunder is not, with respect to such Foreign Lender, a loan agreement entered into in the ordinary course of its trade or business, within the meaning of that section; (2) the Foreign Lender is not a 10% shareholder of the Borrower within the meaning of Code section 871(h)(3) or 881(c)(3)(B); and (3) the Foreign Lender is not a controlled foreign corporation that is related to the Borrower within the meaning of Code section 881(c)(3)(C); or (iv) such other Internal Revenue Service forms as may be applicable to the Foreign Lender, including Forms W-8 IMY or W-8 EXP. Each such Foreign Lender shall deliver to the Borrower and the Administrative Agent such forms on or before the date that it becomes a party to this Agreement (or in the case of a Participant, on or before the date such Participant purchases the related participation). In addition, each such Foreign Lender shall deliver such forms promptly upon the obsolescence or invalidity of any form previously delivered by such Foreign Lender. Each such Foreign Lender shall promptly notify the Borrower and the Administrative Agent at any time that it determines that it is no longer in a position to provide any previously delivered certificate to the Borrower (or any other form of certification adopted by the Internal Revenue Service for such purpose).

        (f)    If any Lender reasonably determines that it has actually and finally realized, by reason of a refund, deduction or credit of any Taxes paid or reimbursed by the Borrower pursuant to subsection (a) or (c) above in respect of payments under the Loan Documents, a current monetary benefit that it would otherwise not have obtained and that would result in the total payments under this Section 2.18 exceeding the amount needed to make such Lender whole, such Lender shall pay to the Borrower, with reasonable promptness following the date upon which it actually realizes such benefit, an amount equal to the lesser of the amount of such benefit or the amount of such excess, in each case net of all reasonable out of pocket expenses incurred in securing such refund, deduction or credit.

        Section 2.21.    Payments Generally; Pro Rata Treatment; Sharing of Set-offs.

        (a)   The Borrower shall make each payment required to be made by it hereunder (whether of principal, interest, fees or reimbursement of LC Disbursements, or of amounts payable under Sections 2.18, 2.19 or 2.20, or otherwise) prior to 12:00 noon on the date when due, in immediately available funds, free and clear of any defenses, rights of set-off, counterclaim, or withholding or deduction of taxes. Any amounts received after such time on any date may, in the discretion of the Administrative Agent, be deemed to have been received on the next succeeding Business Day for purposes of calculating interest thereon. All such payments shall be made to the Administrative Agent at the Payment Office, except payments to be made directly to the Issuing Bank or Swingline Lender as expressly provided herein and except that payments pursuant to Sections 2.18, 2.19 and 2.20 and 10.3 shall be made directly to the Persons entitled thereto. The Administrative Agent shall distribute any such payments received by it for the account of any other Person to the appropriate recipient promptly following receipt thereof. If any payment hereunder shall be due on a day that is not a Business Day, the date for payment shall be extended to the next succeeding Business Day, and, in the case of any payment accruing interest, interest thereon shall be made payable for the period of such extension. All payments hereunder shall be made in Dollars.

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        (b)   If at any time insufficient funds are received by and available to the Administrative Agent to pay fully all amounts of principal, unreimbursed LC Disbursements, interest and fees then due hereunder, such funds shall be applied (i) first, towards payment of interest and fees then due hereunder, ratably among the parties entitled thereto in accordance with the amounts of interest and fees then due to such parties, and (ii) second, towards payment of principal and unreimbursed LC Disbursements then due hereunder, ratably among the parties entitled thereto in accordance with the amounts of principal and unreimbursed LC Disbursements then due to such parties.

        (c)   If any Lender shall, by exercising any right of set-off or counterclaim or otherwise, obtain payment in respect of any principal of or interest on any of its Revolving Loans or participations in LC Disbursements or Swingline Loans that would result in such Lender receiving payment of a greater proportion of the aggregate amount of its Revolving Credit Exposure and accrued interest and fees thereon than the proportion received by any other Lender with respect to its Revolving Credit Exposure, then the Lender receiving such greater proportion shall purchase (for cash at face value) participations in the Revolving Credit Exposure of other Lenders to the extent necessary so that the benefit of all such payments shall be shared by the Lenders ratably in accordance with the aggregate amount of principal of and accrued interest on their respective Revolving Credit Exposure; provided, that (i) if any such participations are purchased and all or any portion of the payment giving rise thereto is recovered, such participations shall be rescinded and the purchase price restored to the extent of such recovery, without interest, and (ii) the provisions of this paragraph shall not be construed to apply to any payment made by the Borrower pursuant to and in accordance with the express terms of this Agreement or any payment obtained by a Lender as consideration for the assignment of or sale of a participation in any of its Revolving Credit Exposure to any assignee or participant, other than to the Borrower or any Subsidiary or Affiliate thereof (as to which the provisions of this paragraph shall apply). The Borrower consents to the foregoing and agrees, to the extent it may effectively do so under applicable law, that any Lender acquiring a participation pursuant to the foregoing arrangements may exercise against the Borrower rights of set-off and counterclaim with respect to such participation as fully as if such Lender were a direct creditor of the Borrower in the amount of such participation.

        (d)   Unless the Administrative Agent shall have received notice from the Borrower prior to the date on which any payment is due to the Administrative Agent for the account of the Lenders or the Issuing Bank hereunder that the Borrower will not make such payment, the Administrative Agent may assume that the Borrower has made such payment on such date in accordance herewith and may, in reliance upon such assumption, distribute to the Lenders or the Issuing Bank, as the case may be, the amount or amounts due. In such event, if the Borrower has not in fact made such payment, then each of the Lenders or the Issuing Bank, as the case may be, severally agrees to repay to the Administrative Agent forthwith on demand the amount so distributed to such Lender or Issuing Bank with interest thereon, for each day from and including the date such amount is distributed to it to but excluding the date of payment to the Administrative Agent, at the greater of the Federal Funds Rate and a rate determined by the Administrative Agent in accordance with banking industry rules on interbank compensation.

        (e)   If any Lender shall fail to make any payment required to be made by it hereunder, then the Administrative Agent may, in its discretion (notwithstanding any contrary provision hereof), apply any amounts thereafter received by the Administrative Agent for the account of such Lender to satisfy such Lender's obligations under such Sections until all such unsatisfied obligations are fully paid.

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        Section 2.22.    Letters of Credit.

        (a)   During the Availability Period, the Issuing Bank, in reliance upon the agreements of the other Lenders pursuant to Section 2.22(d), agrees to issue, at the request of the Borrower, Letters of Credit for the account of the Borrower on the terms and conditions hereinafter set forth; provided, that (i) each Letter of Credit shall expire on the earlier of (A) the date one year after the date of issuance of such Letter of Credit (or in the case of any renewal or extension thereof, one year after such renewal or extension) and (B) the date that is five (5) Business Days prior to the Revolving Commitment Termination Date; and (ii) the Borrower may not request any Letter of Credit, if, after giving effect to such issuance (A) the aggregate LC Exposure would exceed the LC Commitment or (B) the aggregate Revolving Credit Exposure of all Lenders would exceed the Aggregate Revolving Commitment Amount. Each Lender shall be deemed to, and hereby irrevocably and unconditionally agrees to, purchase from the Issuing Bank without recourse a participation in each Letter of Credit equal to such Lender's Pro Rata Share of the aggregate amount available to be drawn under such Letter of Credit on the date of issuance with respect to all other Letters of Credit. Each issuance of a Letter of Credit shall be deemed to utilize the Revolving Commitment of each Lender by an amount equal to the amount of such participation.

        (b)   To request the issuance of a Letter of Credit (or any amendment, renewal or extension of an outstanding Letter of Credit), the Borrower shall give the Issuing Bank and the Administrative Agent irrevocable written notice at least three (3) Business Days prior to the requested date of such issuance specifying the date (which shall be a Business Day) such Letter of Credit is to be issued (or amended, extended or renewed, as the case may be), the expiration date of such Letter of Credit, the amount of such Letter of Credit, the name and address of the beneficiary thereof and such other information as shall be necessary to prepare, amend, renew or extend such Letter of Credit. In addition to the satisfaction of the conditions in Article III, the issuance of such Letter of Credit (or any amendment which increases the amount of such Letter of Credit) will be subject to the further conditions that such Letter of Credit shall be in such form and contain such terms as the Issuing Bank shall approve and that the Borrower shall have executed and delivered any additional applications, agreements and instruments relating to such Letter of Credit as the Issuing Bank shall reasonably require; provided, that in the event of any conflict between such applications, agreements or instruments and this Agreement, the terms of this Agreement shall control.

        (c)   At least two Business Days prior to the issuance of any Letter of Credit, the Issuing Bank will confirm with the Administrative Agent (by telephone or in writing) that the Administrative Agent has received such notice and if not, the Issuing Bank will provide the Administrative Agent with a copy thereof. Unless the Issuing Bank has received notice from the Administrative Agent on or before the Business Day immediately preceding the date the Issuing Bank is to issue the requested Letter of Credit directing the Issuing Bank not to issue the Letter of Credit because such issuance is not then permitted hereunder because of the limitations set forth in Section 2.22(a) or that one or more conditions specified in Article III are not then satisfied, then, subject to the terms and conditions hereof, the Issuing Bank shall, on the requested date, issue such Letter of Credit in accordance with the Issuing Bank's usual and customary business practices.

        (d)   The Issuing Bank shall examine all documents purporting to represent a demand for payment under a Letter of Credit promptly following its receipt thereof. The Issuing Bank shall notify the Borrower and the Administrative Agent of such demand for payment and whether the Issuing Bank has made or will make a LC Disbursement thereunder; provided, that any failure to give or delay in giving such notice shall not relieve the Borrower of its obligation to reimburse the Issuing Bank and the Lenders with respect to such LC Disbursement. The Borrower shall be irrevocably and unconditionally obligated to reimburse the Issuing Bank for any LC Disbursements paid by the Issuing Bank in respect of such drawing, without presentment, demand or other

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formalities of any kind. Unless the Borrower shall have notified the Issuing Bank and the Administrative Agent prior to 11:00 a.m. on the Business Day immediately prior to the date on which such drawing is honored that the Borrower intends to reimburse the Issuing Bank for the amount of such drawing in funds other than from the proceeds of Revolving Loans, the Borrower shall be deemed to have timely given a Notice of Revolving Borrowing to the Administrative Agent requesting the Lenders to make a Base Rate Borrowing on the date on which such drawing is honored in an exact amount due to the Issuing Bank; provided, that for purposes solely of such Borrowing, the conditions precedent set forth in Section 3.2 hereof shall not be applicable. The Administrative Agent shall notify the Lenders of such Borrowing in accordance with Section 2.3, and each Lender shall make the proceeds of its Base Rate Loan included in such Borrowing available to the Administrative Agent for the account of the Issuing Bank in accordance with Section 2.6. The proceeds of such Borrowing shall be applied directly by the Administrative Agent to reimburse the Issuing Bank for such LC Disbursement.

        (e)   If for any reason a Base Rate Borrowing may not be (as determined in the sole discretion of the Administrative Agent), or is not, made in accordance with the foregoing provisions, then each Lender (other than the Issuing Bank) shall be obligated to fund the participation that such Lender purchased pursuant to subsection (a) in an amount equal to its Pro Rata Share of such LC Disbursement on and as of the date which such Base Rate Borrowing should have occurred. Each Lender's obligation to fund its participation shall be absolute and unconditional and shall not be affected by any circumstance, including without limitation (i) any setoff, counterclaim, recoupment, defense or other right that such Lender or any other Person may have against the Issuing Bank or any other Person for any reason whatsoever, (ii) the existence of a Default or an Event of Default or the termination of the Aggregate Revolving Commitments, (iii) any adverse change in the condition (financial or otherwise) of the Borrower or any of its Subsidiaries, (iv) any breach of this Agreement by the Borrower or any other Lender, (v) any amendment, renewal or extension of any Letter of Credit or (vi) any other circumstance, happening or event whatsoever, whether or not similar to any of the foregoing. On the date that such participation is required to be funded, each Lender shall promptly transfer, in immediately available funds, the amount of its participation to the Administrative Agent for the account of the Issuing Bank. Whenever, at any time after the Issuing Bank has received from any such Lender the funds for its participation in a LC Disbursement, the Issuing Bank (or the Administrative Agent on its behalf) receives any payment on account thereof, the Administrative Agent or the Issuing Bank, as the case may be, will distribute to such Lender its Pro Rata Share of such payment; provided, that if such payment is required to be returned for any reason to the Borrower or to a trustee, receiver, liquidator, custodian or similar official in any bankruptcy proceeding, such Lender will return to the Administrative Agent or the Issuing Bank any portion thereof previously distributed by the Administrative Agent or the Issuing Bank to it.

        (f)    To the extent that any Lender shall fail to pay any amount required to be paid pursuant to paragraphs (d) or (e) of this Section on the due date therefor, such Lender shall pay interest to the Issuing Bank (through the Administrative Agent) on such amount from such due date to the date such payment is made at a rate per annum equal to the Federal Funds Rate; provided, that if such Lender shall fail to make such payment to the Issuing Bank within three (3) Business Days of such due date, then, retroactively to the due date, such Lender shall be obligated to pay interest on such amount at the rate set forth in Section 2.13(c).

        (g)   If any Event of Default shall occur and be continuing, on the Business Day that the Borrower receives notice from the Administrative Agent or the Required Lenders demanding the deposit of cash collateral pursuant to this paragraph, the Borrower shall deposit in an account with the Administrative Agent, in the name of the Administrative Agent and for the benefit of the Issuing Bank and the Lenders, an amount in cash equal to the LC Exposure as of such date plus

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any accrued and unpaid fees thereon; provided, that the obligation to deposit such cash collateral shall become effective immediately, and such deposit shall become immediately due and payable, without demand or notice of any kind, upon the occurrence of any Event of Default with respect to the Borrower described in clause (g) or (h) of Section 8.1. Such deposit shall be held by the Administrative Agent as collateral for the payment and performance of the obligations of the Borrower under this Agreement. The Administrative Agent shall have exclusive dominion and control, including the exclusive right of withdrawal, over such account. Borrower agrees to execute any documents and/or certificates to effectuate the intent of this paragraph. Other than any interest earned on the investment of such deposits, which investments shall be made at the option and sole discretion of the Administrative Agent and at the Borrower's risk and expense, such deposits shall not bear interest. Interest and profits, if any, on such investments shall accumulate in such account. Moneys in such account shall be applied by the Administrative Agent to reimburse the Issuing Bank for LC Disbursements for which it had not been reimbursed and to the extent so applied, shall be held for the satisfaction of the reimbursement obligations of the Borrower for the LC Exposure at such time or, if the maturity of the Loans has been accelerated, with the consent of the Required Lenders, be applied to satisfy other obligations of the Borrower under this Agreement and the other Loan Documents. If the Borrower is required to provide an amount of cash collateral hereunder as a result of the occurrence of an Event of Default, such amount (to the extent not so applied as aforesaid) shall be returned to the Borrower within three Business Days after all Events of Default have been cured or waived.

        (h)   Upon the request of any Lender, but no more frequently than quarterly, the Issuing Bank shall deliver (through the Administrative Agent) to each Lender and the Borrower a report describing the aggregate Letters of Credit then outstanding. Upon the request of any Lender from time to time, the Issuing Bank shall deliver to such Lender any other information reasonably requested by such Lender with respect to each Letter of Credit then outstanding.

        (i)    The Borrower's obligation to reimburse LC Disbursements hereunder shall be absolute, unconditional and irrevocable and shall be performed strictly in accordance with the terms of this Agreement under all circumstances whatsoever and irrespective of any of the following circumstances:

        (i)    Any lack of validity or enforceability of any Letter of Credit or this Agreement;

        (ii)   The existence of any claim, set-off, defense or other right which the Borrower or any Subsidiary or Affiliate of the Borrower may have at any time against a beneficiary or any transferee of any Letter of Credit (or any Persons or entities for whom any such beneficiary or transferee may be acting), any Lender (including the Issuing Bank) or any other Person, whether in connection with this Agreement or the Letter of Credit or any document related hereto or thereto or any unrelated transaction;

        (iii)  Any draft or other document presented under a Letter of Credit proving to be forged, fraudulent or invalid in any respect or any statement therein being untrue or inaccurate in any respect;

        (iv)  Payment by the Issuing Bank under a Letter of Credit against presentation of a draft or other document to the Issuing Bank that does not comply with the terms of such Letter of Credit;

        (v)   Any other event or circumstance whatsoever, whether or not similar to any of the foregoing, that might, but for the provisions of this Section 2.22, constitute a legal or equitable discharge of, or provide a right of setoff against, the Borrower's obligations hereunder; or

        (vi)  The existence of a Default or an Event of Default.

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Neither the Administrative Agent, the Issuing Bank, the Lenders nor any Related Party of any of the foregoing shall have any liability or responsibility by reason of or in connection with the issuance or transfer of any Letter of Credit or any payment or failure to make any payment thereunder (irrespective of any of the circumstances referred to above), or any error, omission, interruption, loss or delay in transmission or delivery of any draft, notice or other communication under or relating to any Letter of Credit (including any document required to make a drawing thereunder), any error in interpretation of technical terms or any consequence arising from causes beyond the control of the Issuing Bank; provided, that the foregoing shall not be construed to excuse the Issuing Bank from liability to the Borrower to the extent of any actual direct damages (as opposed to special, indirect (including claims for lost profits or other consequential damages), or punitive damages, claims in respect of which are hereby waived by the Borrower to the extent permitted by applicable law) suffered by the Borrower that are caused by the Issuing Bank's failure to exercise due care when determining whether drafts or other documents presented under a Letter of Credit comply with the terms thereof. The parties hereto expressly agree, that in the absence of gross negligence or willful misconduct on the part of the Issuing Bank (as finally determined by a court of competent jurisdiction), the Issuing Bank shall be deemed to have exercised due care in each such determination. In furtherance of the foregoing and without limiting the generality thereof, the parties agree that, with respect to documents presented that appear on their face to be in substantial compliance with the terms of a Letter of Credit, the Issuing Bank may, in its sole discretion, either accept and make payment upon such documents without responsibility for further investigation, regardless of any notice or information to the contrary, or refuse to accept and make payment upon such documents if such documents are not in strict compliance with the terms of such Letter of Credit.

        (j)    Unless otherwise expressly agreed by the Issuing Bank and the Borrower when a Letter of Credit is issued and subject to applicable laws, performance under Letters of Credit by the Issuing Bank, its correspondents, and the beneficiaries thereof will be governed by (i) either (x) the rules of the "International Standby Practices 1998" (ISP98) (or such later revision as may be published by the Institute of International Banking Law & Practice on any date any Letter of Credit may be issued) or (y) the rules of the "Uniform Customs and Practices for Documentary Credits" (1993 Revision), International Chamber of Commerce Publication No. 500 (or such later revision as may be published by the International Chamber of Commerce on any date any Letter of Credit may be issued) and (ii) to the extent not inconsistent therewith, the governing law of this Agreement set forth in Section 10.5.

        Section 2.23.    Increase of Commitments; Additional Lenders.

        (a)   Borrower may, upon written notice to the Administrative Agent (who shall promptly provide a copy of such notice to each Lender), propose to increase the Aggregate Revolving Commitments by an amount not to exceed $50,000,000 (the amount of any such increase, the "Additional Commitment Amount"); provided that (i) no Default or Event of Default shall have occurred and be continuing at the time of such request and (ii) no Commitment of any Lender will be increased without the consent of such Lender, which shall be given or withheld in its sole discretion. If one or more of the Lenders is not increasing its applicable Commitment, then, with notice to the Administrative Agent and the other Lenders, another one or more financial institutions, approved by the Borrower (an "Additional Lender"), may commit to provide an amount equal to the aggregate principal amount of the Additional Commitment Amount that will not be provided by the existing Lenders; provided, however, that (i) any Additional Lender must be acceptable to the Administrative Agent, which acceptance will not be unreasonably withheld or delayed and (ii) the new Commitment of each Additional Lender shall be at least $5,000,000. The sum of the increases in the Revolving Commitments of the existing Lenders pursuant to this

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subsection (a) plus the Revolving Commitments of the Additional Lenders shall not in the aggregate exceed the amount of the Additional Commitment Amount.

        (b)   An increase in the aggregate amount of the Revolving Commitments pursuant to this Section 2.23 shall become effective upon the receipt by the Administrative Agent of a supplement or joinder in form and substance satisfactory to the Administrative Agent executed by the Borrower, by each Additional Lender and by each other Lender whose Revolving Commitment is to be increased, setting forth the new Revolving Commitments of such Lenders and setting forth the agreement of each Additional Lender to become a party to this Agreement and to be bound by all the terms and provisions hereof, and such evidence of appropriate corporate authorization on the part of the Borrower with respect to the increase in the Revolving Commitments and such opinions of counsel for the Borrower with respect to the increase in the Revolving Commitments as the Administrative Agent may reasonably request.

        (c)   Upon the acceptance of any such supplement or joinder by the Administrative Agent, the Aggregate Revolving Commitment Amount shall automatically be increased by the amount of the Revolving Commitments added through such supplement or joinder and Schedule II shall automatically be deemed amended to reflect the Revolving Commitments of all Lenders after giving effect to the addition of such Revolving Commitments.

        (d)   Upon any increase in the aggregate amount of the Revolving Commitments pursuant to this Section 2.23 that is not pro rata among all Lenders, (x) within five (5) Business Days, in the case of any Base Rate Loans then outstanding, and at the end of the then current Interest Period with respect thereto, in the case of any Eurodollar Loans then outstanding, the Borrower shall prepay such Loans in their entirety and, to the extent the Borrower elects to do so and subject to the conditions specified in Article III, the Borrower shall reborrow Loans from the Lenders in proportion to their respective Revolving Commitments after giving effect to such increase, until such time as all outstanding Loans are held by the Lenders in proportion to their respective Commitments after giving effect to such increase and (y) effective upon such increase, the amount of the participations held by each Lender in each Letter of Credit and Swingline Loan then outstanding shall be adjusted automatically such that, after giving effect to such adjustments, the Lenders shall hold participations in each such Letter of Credit and Swingline Loan in proportion to their respective Revolving Commitments.

        Section 2.24.    Mitigation of Obligations.    If any Lender requests compensation under Section 2.18, or if the Borrower is required to pay any additional amount to any Lender or any Governmental Authority for the account of any Lender pursuant to Section 2.20, then such Lender shall use reasonable efforts to designate a different lending office for funding or booking its Loans hereunder or to assign its rights and obligations hereunder to another of its offices, branches or affiliates, if, in the sole judgment of such Lender, such designation or assignment (i) would eliminate or reduce amounts payable under Section 2.18 or Section 2.20, as the case may be, in the future and (ii) would not subject such Lender to any unreimbursed cost or expense and would not otherwise be disadvantageous to such Lender. The Borrower hereby agrees to pay all costs and expenses incurred by any Lender in connection with such designation or assignment.

        Section 2.25.    Replacement of Lenders.

        (a)   If any Lender requests compensation under Section 2.18, or if the Borrower is required to pay any additional amount to any Lender or any Governmental Authority of the account of any Lender pursuant to Section 2.20, or if any Lender defaults in its obligation to fund Loans or participations hereunder, then the Borrower may, at its sole expense and effort, upon notice to such Lender and the Administrative Agent, require such Lender to assign and delegate, without recourse (in accordance with and subject to the restrictions set forth in Section 10.4(b) all its interests, rights and obligations under this Agreement to an assignee that shall assume such

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obligations (which assignee may be another Lender); provided, that (i) the Borrower shall have received the prior written consent of the Administrative Agent, which consent shall not be unreasonably withheld, (ii) such Lender shall have received payment of an amount equal to the outstanding principal amount of all Loans owed to it, accrued interest thereon, accrued fees and all other amounts payable to it hereunder, from the assignee (in the case of such outstanding principal and accrued interest) and from the Borrower (in the case of all other amounts) and (iii) in the case of a claim for compensation under Section 2.18 or payments required to be made pursuant to Section 2.20, such assignment will result in a reduction in such compensation or payments. A Lender shall not be required to make any such assignment and delegation if, prior thereto, as a result of a waiver by such Lender or otherwise, the circumstances entitling the Borrower to require such assignment and delegation cease to apply.

        (b)   In the event that Borrower requests that this Agreement or any other Loan Document be modified, amended or waived in a manner that would require the consent of all Revolving Lenders pursuant to Section 10.2(b) and such amendment is approved by the Required Revolving Lenders, or that would require the consent of all Lenders pursuant to Section 10.2(b) and such amendment is approved by the Required Lenders, then the Borrower may, at its sole expense and effort, upon notice to the Lenders withholding their consent (the "Non-Consenting Lenders") and the Administrative Agent, require the Non-Consenting Lenders to assign and delegate, without recourse (in accordance with and subject to the restrictions set forth in Section 10.4(b)) all of their interests, rights and obligations under this Agreement to one or more assignees that shall assume such obligations (which assignee may be another Lender); provided, that (i) the Borrower shall have received the prior written consent of the Administrative Agent, which consent shall not be unreasonably withheld, (ii) such Non-Consenting Lender shall have received payment of an amount equal to the outstanding principal amount of all Loans owed to it, accrued interest thereon, accrued fees and all other amounts payable to it hereunder, from the assignee (in the case of such outstanding principal and accrued interest) and from the Borrower (in the case of all other amounts) and (iii) after giving effect to such assignments, the amendment, modification or waiver will be approved by all Lenders. A Non-Consenting Lender shall not be required to make any such assignment and delegation if, prior thereto, the circumstances entitling the Borrower to require such assignment and delegation cease to apply.

        Section 2.26.    Delinquent Lender.

        (a)   If for any reason any Lender shall fail or refuse to abide by its obligations under this Agreement, including without limitation its obligation to make available such Lender's Pro Rata Share of any Loans, expenses or setoff or to fund its participation interest in the Swingline Loans or L/C Obligations (a "Delinquent Lender") and such failure is not cured within ten (10) days of receipt from the Administrative Agent of written notice thereof, then, in addition to the rights and remedies that may be available to the other Lenders, the Borrower or any other party at law or in equity, and not at limitation thereof, (i) such Delinquent Lender's right to participate in the administration of, or decision-making rights related to, the Obligations, this Agreement or the other Loan Documents shall be suspended during the pendency of such failure or refusal, and (ii) a Delinquent Lender shall be deemed to have assigned any and all payments due to it from the Borrower, whether on account of outstanding Loans, interest, fees or otherwise, to the remaining non-delinquent Lenders for application to, and reduction of, their proportionate shares of all outstanding Obligations until, as a result of application of such assigned payments the Lenders' respective Pro Rata Shares of all outstanding Obligations shall have returned to those in effect immediately prior to such delinquency and without giving effect to the nonpayment causing such delinquency. The Delinquent Lender's decision-making and participation rights and rights to payments as set forth in clauses (i) and (ii) hereinabove shall be restored only upon the payment by the Delinquent Lender of its Pro Rata Share of any Obligations, any participation obligation, or

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expenses as to which it is delinquent, together with interest thereon at the Federal Funds rate plus 50 basis points from the date when originally due until the date upon which any such amounts are actually paid.

        (b)   Each Delinquent Lender shall indemnify the Administrative Agent and each non-delinquent Lender from and against any and all loss, damage or expenses, including but not limited to reasonable attorneys' fees and funds advanced by the Administrative Agent or by any non-delinquent Lender, on account of a Delinquent Lender's failure to timely fund its Pro Rata Share of a Loan or to otherwise perform its obligations under the Loan Documents.

ARTICLE III

CONDITIONS PRECEDENT TO LOANS AND LETTERS OF CREDIT

        Section 3.1.    Conditions To Effectiveness.    The obligations of the Lenders (including the Swingline Lender) to make Loans and the obligation of the Issuing Bank to issue any Letter of Credit hereunder shall not become effective until the date on which each of the following conditions is satisfied (or waived in accordance with Section 10.2).

        (a)   The Administrative Agent shall have received all fees and other amounts due and payable on or prior to the Closing Date, including reimbursement or payment of all out-of-pocket expenses (including reasonable fees, charges and disbursements of counsel to the Administrative Agent) required to be reimbursed or paid by the Borrower hereunder, under any other Loan Document and under any agreement with the Administrative Agent or SunTrust Robinson Humphrey, Inc., as Lead Arranger.

        (b)   The Administrative Agent (or its counsel) shall have received the following, each to be in form and substance satisfactory to the Administrative Agent:

        (i)    a counterpart of this Agreement signed by or on behalf of each party hereto or written evidence satisfactory to the Administrative Agent (which may include telecopy or e-mail transmission of a signed signature page of this Agreement) that such party has signed a counterpart of this Agreement;

        (ii)   the Guaranty and Security Agreement duly executed by Holdings, International, the Borrower and all Domestic Subsidiaries of the Borrower, together with (A) UCC financing statements and other applicable documents under the laws of the jurisdictions with respect to the perfection of the Liens granted under the Guaranty and Security Agreement, as requested by the Administrative Agent in order to perfect such Liens, (B) copies of favorable UCC, tax, judgment and fixture lien search reports in all necessary or appropriate jurisdictions and under all legal and trade names of the Loan Parties requested by the Lenders, indicating that there are no prior Liens on any of the Collateral other than Permitted Encumbrances, (C) a Perfection Certificate duly completed and executed by the Borrower, (D) original stock certificates evidencing all issued and outstanding shares of Capital Stock pledged to the Administrative Agent to the Guaranty and Security Agreement and stock powers or other appropriate instruments of transfer executed in blank, and (E) duly executed Copyright Security Agreements, Patent Security Agreements and Trademark Security Agreements, if applicable; provided, however, that (i) the Capital Stock of Envision Eyewear and Accessories (Shenzhen)  Co., Ltd., a Chinese corporation, shall not be pledged and (ii) the pledge of voting Capital Stock of any Foreign Subsidiary of the Borrower shall be limited to a pledge of 65% of such voting Capital Stock.

        (iii)  copies of duly executed payoff letters, in form and substance satisfactory to Administrative Agent, executed by each of the Existing Lenders or the agent thereof, including authorization to file UCC termination statements, and accompanied by such

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executed cancellations, releases and other terminations, in form and substance satisfactory to the Administrative Agent, releasing all other Liens of the Existing Lenders upon any of the assets of Holdings and its Subsidiaries;

        (iv)  a certificate of the Secretary or Assistant Secretary of each Loan Party in the form of Exhibit 3.1(b)(iv), attaching and certifying copies of its bylaws and of the resolutions of its board of directors, or partnership agreement or limited liability company agreement, or comparable organizational documents and authorizations, authorizing the execution, delivery and performance of the Loan Documents to which it is a party and certifying the name, title and true signature of each officer of such Loan Party executing the Loan Documents to which it is a party;

        (v)   certified copies of the articles or certificate of incorporation, certificate of organization or limited partnership, or other registered organizational documents of each Loan Party, together with certificates of good standing or existence, as may be available from the Secretary of State of the jurisdiction of organization of such Loan Party and each other jurisdiction where such Loan Party is required to be qualified to do business as a foreign corporation;

        (vi)  favorable written opinions of Greenberg Traurig, LLP, Edwards Angell Palmer & Dodge LLP and Ogier LLP, counsel to the Loan Parties, addressed to the Administrative Agent, the Issuing Bank and each of the Lenders, and covering such matters relating to the Loan Parties, the Loan Documents and the transactions contemplated herein as the Administrative Agent or the Required Lenders shall reasonably request;

        (vii) a certificate dated the Closing Date and signed by a Responsible Officer, in the form of Exhibit 3.1(b)(vii) certifying that after giving effect to the funding of the Term Loan and any initial Revolving Credit Advance, (x) no Default or Event of Default exists, (y) all representations and warranties of each Loan Party set forth in the Loan Documents are true and correct and (z) since the date of the financial statements of Holdings described in Section 4.4, there shall have been no change which has had or could reasonably be expected to have a Material Adverse Effect;

        (viii)  a certificate, dated the Closing Date and signed by the chief financial officer of each Loan Party, confirming that each Loan Party is Solvent before and after giving effect to the funding of the Term Loan and any initial Revolving Credit Advance;

        (ix)  a duly executed Notice of Borrowing and a duly executed funds disbursement agreement, together with a report setting forth the sources and uses of the proceeds hereof;

        (x)   certified copies of all consents, approvals, authorizations, registrations and filings and orders required or advisable to be made or obtained under any Requirement of Law, or by any Contractual Obligation of each Loan Party, in connection with the execution, delivery, performance, validity and enforceability of the Loan Documents or any of the transactions contemplated thereby, and such consents, approvals, authorizations, registrations, filings and orders shall be in full force and effect and all applicable waiting periods shall have expired, and no investigation or inquiry by any governmental authority regarding the Commitments or any transaction being financed with the proceeds thereof shall be ongoing;

        (xi)  copies of (A) the internally prepared quarterly financial statements of Holdings and its Subsidiaries on a consolidated basis for the Fiscal Quarter ending on September 30, 2007, (B) the audited consolidated financial statements for Holdings and its Subsidiaries for the Fiscal Year ending December 31, 2006 and (C) all press releases issued since September 30, 2007;

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        (xii) [reserved];

        (xiii)  copies of all agreements, indentures or notes governing the terms of any Material Indebtedness, and all other material agreements, documents and instruments to which any Loan Party or any of its assets are bound;

        (xiv) duly executed Collateral Access Agreements with respect to all Collateral of the Loan Parties at locations that are not owned by the Loan Parties in fee simple (other than locations that consisting solely of sales offices, locations where Collateral is held on consignment and locations where the aggregate book value of all tangible Collateral is less than $7,500,000);

        (xv) [reserved];

        (xvi) a duly executed Mortgage covering all Real Estate owned by the Borrower and the Guarantors and duly executed counterparts of the other Real Estate Documents together with: (a) title insurance policies, current as-built ALTA/ACSM Land Title surveys certified to the Administrative Agent, in each case relating to such Real Estate and satisfactory in form and substance to Administrative Agent; (b) if requested by the Administrative Agent, (A) a policy of flood insurance that (1) covers any parcel of improved real property in a flood hazard area that is encumbered by any Mortgage, (2) is written in an amount not less than the outstanding principal amount of the Indebtedness secured by such Mortgage reasonably allocable to such real property or the maximum limit of coverage made available with respect to the particular type of property under the National Flood Insurance Act of 1968, whichever is less, and (3) has a term ending not later than the maturity of the Indebtedness secured by such Mortgage and (B) confirmation that the Borrower has received the notice required pursuant to Section 208(e)(3) of Regulation H of the Board; (c) an opinion of counsel in each state in which such Mortgaged Property is located in form and substance and from counsel satisfactory to Administrative Agent, and (d) a duly executed Environmental Indemnity with respect thereto;

        (xvii)  Environmental site assessment reports on all of the owned Real Estate in the possession of the Loan Parties on the Closing Date, all in form and substance satisfactory to Administrative Agent, and the Administrative Agent shall have further received such environmental review and audit reports, including Phase II reports, with respect to the Real Estate of any Loan Party as the Administrative Agent shall have requested, and the Administrative Agent shall be satisfied, with the contents of all such environmental reports;

        (xviii)  the Milberg Intercreditor Agreement duly executed by the Borrower, Quantum and Milberg, together with an authorization to file UCC amendments to all UCC financing statements naming Milberg as secured party and a Loan Party as debtor; and

        (xix) certificates of insurance issued on behalf of insurers of the Borrower and all Guarantors, in form and detail acceptable to the Administrative Agent, describing in reasonable detail the types and amounts of insurance (property and liability) maintained by the Loan Parties, including coverage of all tangible Collateral, naming the Administrative Agent as loss payee or additional insured, as appropriate.

        Each Lender shall be deemed to have for purposes of determining compliance with the conditions specified in this Section 3.1, consented to, approved or accepted or to be satisfied with, each document or other matter required hereunder to be consented to or approved by or acceptable or satisfactory to a Lender, unless the Administrative Agent shall have received notice from such Lender prior to the date hereof specifying its objection thereto.

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        Section 3.2.    Each Credit Event.    The obligation of each Lender to make a Loan on the occasion of any Borrowing and of the Issuing Bank to issue, amend, renew or extend any Letter of Credit is subject to the satisfaction of the following conditions:

        (a)   at the time of and immediately after giving effect to such Borrowing or the issuance, amendment, renewal or extension of such Letter of Credit, as applicable, no Default or Event of Default shall exist;

        (b)   at the time of and immediately after giving effect to such Borrowing or the issuance, amendment, renewal or extension of such Letter of Credit, as applicable, all representations and warranties of each Loan Party set forth in the Loan Documents shall be true and correct in all material respects on and as of the date of such Borrowing or the date of issuance, amendment, extension or renewal of such Letter of Credit, in each case before and after giving effect thereto;

        (c)   since the date of the financial statements of Holdings described in Section 4.4, there shall have been no change which has had or could reasonably be expected to have a Material Adverse Effect;

        (d)   no Loan Party shall be subject to any law, regulation, or list of any Government Authority of the United States (including, without limitation, the U.S. Office of Foreign Asset Control list) that prohibits or limits the Lenders or the Administrative Agent from making any advance or extension of credit to Borrower or from otherwise conducting business with the Loan Parties;

        (e)   the Borrower shall have delivered the required Notice of Borrowing; and

        (f)    the Administrative Agent shall have received such other documents, certificates, information or legal opinions as the Administrative Agent or the Required Lenders may reasonably request, all in form and substance reasonably satisfactory to the Administrative Agent or the Required Lenders.

        Each Borrowing and each issuance, amendment, extension or renewal of any Letter of Credit shall be deemed to constitute a representation and warranty by the Borrower, Holdings and International on the date thereof as to the matters specified in paragraphs (a), (b) and (c) of this Section 3.2.

        Section 3.3.    Delivery of Documents.    All of the Loan Documents, certificates, legal opinions and other documents and papers referred to in this Article III, unless otherwise specified, shall be delivered to the Administrative Agent for the account of each of the Lenders and in sufficient counterparts or copies for each of the Lenders and shall be in form and substance satisfactory in all respects to the Administrative Agent.

ARTICLE IV

REPRESENTATIONS AND WARRANTIES

        Each of the Borrower, Holdings and International represents and warrants to the Administrative Agent and each Lender as follows:

        Section 4.1.    Existence; Power.    Each of Holdings, International, the Borrower, the other Loan Parties, FGX Europe Limited and FGX Canada Corp. (i) is duly organized, validly existing and in good standing as a corporation, partnership, limited liability company, or BVI business company under the laws of the jurisdiction of its organization, (ii) has all requisite power and authority to carry on its business as now conducted, and (iii) is duly qualified to do business, and is in good standing, in each jurisdiction where such qualification is required, except where a failure to be so qualified could not reasonably be expected to result in a Material Adverse Effect.

        Section 4.2.    Organizational Power; Authorization.    The execution, delivery and performance by each Loan Party of the Loan Documents to which it is a party are within such Loan Party's

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organizational powers and have been duly authorized by all necessary organizational, and if required, shareholder, partner or member, action. This Agreement has been duly executed and delivered by the Borrower, Holdings and International, and constitutes, and each other Loan Document to which any Loan Party is a party, when executed and delivered by such Loan Party, will constitute, valid and binding obligations of such Loan Party (as the case may be), enforceable against it in accordance with their respective terms, except as may be limited by applicable bankruptcy, insolvency, reorganization, moratorium, or similar laws affecting the enforcement of creditors' rights generally and by general principles of equity.

        Section 4.3.    Governmental Approvals; No Conflicts.    The execution, delivery and performance by the Borrower, Holdings and International of this Agreement, and by each Loan Party of the other Loan Documents to which it is a party (a) do not require any consent or approval of, registration or filing with, or any action by, any Governmental Authority, except those as have been obtained or made and are in full force and effect, and the filing of the Loan Documents with the SEC after the Closing Date, (b) will not violate any Requirements of Law applicable to Holdings, International, the Borrower or any of their Subsidiaries or any judgment, order or ruling of any Governmental Authority, (c) will not violate or result in a default under any indenture, agreement or other instrument binding on Holdings, International, the Borrower or any of their Subsidiaries or any of its assets or give rise to a right thereunder to require any payment to be made by the Borrower, Holdings, International or any of their Subsidiaries and (d) will not result in the creation or imposition of any Lien on any asset of Holdings, International, the Borrower or any of their Subsidiaries, except Liens (if any) created under the Loan Documents.

        Section 4.4.    Financial Statements.    (i) The audited consolidated balance sheet of Holdings and its Subsidiaries as of December 31, 2006 and the related consolidated statements of income, shareholders' equity and cash flows for the Fiscal Year then ended prepared by KPMG LLC and (ii) the unaudited consolidated balance sheet of Holdings and its Subsidiaries as of September 30, 2007, and the related unaudited consolidated statements of income and cash flows for the Fiscal Quarter and year-to-date period then ending, fairly present the consolidated financial condition of Holdings and its Subsidiaries as of such dates and the consolidated results of operations for such periods in conformity with GAAP consistently applied, subject to year end audit adjustments and the absence of footnotes in the case of the statements referred to in clause (ii). Since December 31, 2006, there have been no changes with respect to Holdings and its Subsidiaries which have had or could reasonably be expected to have, singly or in the aggregate, a Material Adverse Effect.

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        Section 4.5.    Litigation and Environmental Matters.

        (a)   No litigation, investigation or proceeding of or before any arbitrators or Governmental Authorities is pending against or, to the knowledge of the Borrower, Holdings or International, threatened against or affecting Holdings, International, the Borrower or any of their Subsidiaries (i) as to which there is a reasonable possibility of an adverse determination that could reasonably be expected to have, either individually or in the aggregate, a Material Adverse Effect or (ii) which in any manner draws into question the validity or enforceability of this Agreement or any other Loan Document.

        (b)   Except for the matters set forth on Schedule 4.5, neither Holdings, International, the Borrower nor any of their Subsidiaries (i) has failed to comply with any Environmental Law or to obtain, maintain or comply with any permit, license or other approval required under any Environmental Law, which failure to comply, obtain or maintain could reasonably be expected to have a Material Adverse Effect, (ii) has become subject to any Environmental Liability that could reasonably be expected to have a Material Adverse Effect, (iii) has received notice of any claim with respect to any Environmental Liability that could reasonably be expected to have a Material Adverse Effect or (iv) knows of any basis for any Environmental Liability that could reasonably be expected to have a Material Adverse Effect.

        Section 4.6.    Compliance with Laws and Agreements.    Each of Holdings, International, the Borrower and each Subsidiary is in compliance with (a) all Requirements of Law and all judgments, decrees and orders of any Governmental Authority and (b) all indentures, agreements or other instruments binding upon it or its properties, except, in each case, where non-compliance, either singly or in the aggregate, could not reasonably be expected to result in a Material Adverse Effect.

        Section 4.7.    Investment Company Act, Etc.    Neither Holdings, International, the Borrower nor any of their Subsidiaries is (a) an "investment company" or is "controlled" by an "investment company", as such terms are defined in, or subject to regulation under, the Investment Company Act of 1940, as amended, or (b) otherwise subject to any other regulatory scheme limiting its ability to incur debt or requiring any approval or consent from or registration or filing with, any Governmental Authority in connection therewith.

        Section 4.8.    Taxes.    Holdings, International, the Borrower and their Subsidiaries have timely filed or caused to be filed all Federal income tax returns and all other material tax returns that are required to be filed by them, and have paid all taxes shown to be due and payable on such returns or on any assessments made against it or its property and all other taxes, fees or other charges imposed on it or any of its property by any Governmental Authority, except where the same are currently being contested in good faith by appropriate proceedings and for which Holdings, International, the Borrower or such Subsidiary, as the case may be, has set aside on its books adequate reserves in accordance with GAAP. The charges, accruals and reserves on the books of Holdings, International, the Borrower and their Subsidiaries in respect of such taxes are adequate, and no tax liabilities that could be materially in excess of the amount so provided are anticipated.

        Section 4.9.    Margin Regulations.    None of the proceeds of any of the Loans or Letters of Credit will be used, directly or indirectly, for "purchasing" or "carrying" any "margin stock" with the respective meanings of each of such terms under Regulation U for any purpose that violates the provisions of the Regulations T, U or X. None of the Loan Parties nor their Subsidiaries is engaged principally, or as one of its important activities, in the business of extending credit for the purpose of purchasing or carrying "margin stock."

        Section 4.10.    ERISA.    No ERISA Event has occurred or is reasonably expected to occur that, when taken together with all other such ERISA Events for which liability is reasonably expected to occur, could reasonably be expected to result in a Material Adverse Effect. The present value of all

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accumulated benefit obligations under each Plan (based on the assumptions used for purposes of Statement of Financial Standards No. 87) did not, as of the date of the most recent financial statements reflecting such amounts, exceed the fair market value of the assets of such Plan, and the present value of all accumulated benefit obligations of all underfunded Plans (based on the assumptions used for purposes of Statement of Financial Standards No. 87) did not, as of the date of the most recent financial statements reflecting such amounts, exceed the fair market value of the assets of all such underfunded Plans.

        Section 4.11.    Ownership of Property.

        (a)   Each of Holdings, International, the Borrower and their Subsidiaries has good title to, or valid leasehold interests in, all of its real and personal property material to the operation of its business, including all such properties reflected in the most recent audited consolidated balance sheet of Holdings referred to in Section 4.4 or purported to have been acquired by Holdings, International, the Borrower or any Subsidiary after said date (except as sold or otherwise disposed of in the ordinary course of business), in each case free and clear of Liens prohibited by this Agreement. All leases that individually or in the aggregate are material to the business or operations of Holdings, International, the Borrower and their Subsidiaries are valid and subsisting and are in full force.

        (b)   Each of Holdings, International, the Borrower and their Subsidiaries owns, or is licensed, or otherwise has the right, to use, all patents, trademarks, service marks, trade names, copyrights and other intellectual property material to its business, and the use thereof by Holdings, International, the Borrower and their Subsidiaries does not infringe in any material respect on the rights of any other Person.

        (c)   The properties of Holdings, International, the Borrower and their Subsidiaries are insured with financially sound and reputable insurance companies which are not Affiliates of Holdings or the Borrower, in such amounts with such deductibles and covering such risks as are customarily carried by companies engaged in similar businesses and owning similar properties in localities where Holdings, International, the Borrower or any applicable Subsidiary operates.

        (d)   All Real Estate of the Borrower and its Subsidiaries owned in fee or leased as of the Closing Date is listed on Schedule 4.11. No Mortgage encumbers improved Real Estate that is located in an area that has been identified by the Secretary of Housing and Urban Development as an area having special flood hazards within the meaning of the National Flood Insurance Act of 1968 unless flood insurance available under such Act has been obtained.

        Section 4.12.    Disclosure.    Each of Holdings, International and the Borrower has disclosed to the Lenders all agreements, instruments, and corporate or other restrictions to which Holdings, International, the Borrower or any of their Subsidiaries is subject, and all other matters known to any of them, that, individually or in the aggregate, could reasonably be expected to result in a Material Adverse Effect. Neither the Information Memorandum nor any of the reports (including without limitation all reports that Holdings is required to file with the Securities and Exchange Commission), financial statements, certificates or other information furnished by or on behalf of the Borrower to the Administrative Agent or any Lender in connection with the negotiation or syndication of this Agreement or any other Loan Document or delivered hereunder or thereunder (as modified or supplemented by any other information so furnished) contains any material misstatement of fact or omits to state any material fact necessary to make the statements therein, taken as a whole, in light of the circumstances under which they were made, not misleading.

        Section 4.13.    Labor Relations.    There are no strikes, lockouts or other material labor disputes or grievances against Holdings, International, the Borrower or any of their Subsidiaries, or, to the knowledge of Holdings, International or the Borrower, threatened against or affecting Holdings,

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International, the Borrower or any of their Subsidiaries, and no significant unfair labor practice, charges or grievances are pending against Holdings, International, the Borrower or any of their Subsidiaries, or to the knowledge of Holdings, International or the Borrower, threatened against any of them before any Governmental Authority. All payments due from Holdings, International, the Borrower or any of their Subsidiaries pursuant to the provisions of any collective bargaining agreement have been paid or accrued as a liability on the books of Holdings, International, the Borrower or any such Subsidiary, except where the failure to do so could not reasonably be expected to have a Material Adverse Effect.

        Section 4.14.    Subsidiaries.Schedule 4.14 sets forth the name of, the ownership interest of Holdings, International and the Borrower in, the jurisdiction of incorporation or organization of, and the type of, each Subsidiary (excluding Fantasma) and identifies each Subsidiary that is a Subsidiary Loan Party, in each case as of the Closing Date. Fantasma has no material assets or operations and has liabilities of less than $100,000.

        Section 4.15.    Solvency.    After giving effect to the execution and delivery of the Loan Documents, the making of the Loans under this Agreement, and the repayment of the Refinanced Indebtedness, the Loan Parties on a consolidated basis are Solvent.

        Section 4.16.    Collateral Documents.

        (a)   The Guaranty and Security Agreement is effective to create in favor of the Administrative Agent, for the ratable benefit of the Lenders, a legal, valid and enforceable security interest in the Collateral (as defined in the Guaranty and Security Agreement). When financing statements in appropriate form are filed in the offices specified on Schedule 2 to the Perfection Certificate, the Guaranty and Security Agreement shall constitute a fully perfected Lien on, and security interest in, all right, title and interest of the grantors thereunder in such Collateral (other than the Intellectual Property (as defined in the Guaranty and Security Agreement)), in each case prior and superior in right to any other Person, other than with respect to Liens expressly permitted by Section 7.2. When the certificates evidencing all Capital Stock pledged pursuant to the Guaranty and Security Agreement are delivered to the Administrative Agent, together with appropriate stock powers or other similar instruments of transfer duly executed in blank, the Liens in such Capital Stock shall be fully perfected first priority security interests, perfected by "control" as defined in the UCC. The foregoing representations shall be given only on the Closing Date as to the Loan Parties existing on the Closing Date, and as to Loan Parties joining the Guaranty and Security Agreement after the Closing Date, on the date such Loan Parties so join.

        (b)   When the filings in clause (a) above are made and when the Patent Security Agreement and Trademark Security Agreement filed in the United States Patent and Trademark Office and the Copyright Security Agreement is filed in the United States Copyright Office, the Guaranty and Security Agreement shall constitute a fully perfected Lien on, and security interest in, all right, title and interest of the Loan Parties in the Intellectual Property (as defined in the Guaranty and Security Agreement) in which a security interest may be perfected by filing, recording or registering a security agreement, financing statement or analogous document in the United States Patent and Trademark Office or the United States Copyright Office, as applicable, in each case prior and superior in right to any other Person. The foregoing representations shall be given only on the Closing Date for the Patent Security Agreements, Trademark Security Agreements and Copyright Security Agreements delivered pursuant to Section 3.1 and for any future Patent Security Agreements, Trademark Security Agreements and Copyright Security Agreements, on the date such documents are delivered pursuant to Section 5.10.

        (c)   Each Mortgage, when duly executed and delivered by the relevant Loan Party, will be effective to create, subject to the exceptions listed in each title insurance policy covering such Mortgage, in favor of the Administrative Agent, for the ratable benefit of the Lenders, a legal,

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valid and enforceable Lien on all of the Loan Parties' right, title and interest in and to the Mortgaged Properties thereunder and the proceeds thereof, and when the Mortgages are filed in the offices specified on Schedule 4.16, the Mortgages shall constitute a Lien on, and security interest in, all right, title and interest of the Loan Parties in such Mortgaged Properties and the proceeds thereof, in each case prior and superior in right to any other Person, other than with respect to the rights of Persons pursuant to Liens expressly permitted by Section 7.2. The foregoing representations shall be given only on the Closing Date for the Mortgage delivered pursuant to Section 3.1 and for any future Mortgage, on the date such Mortgage is delivered pursuant to Section 5.10.

        Section 4.17.    OFAC.    No Loan Party (i) is a person whose property or interest in property is blocked or subject to blocking pursuant to Section 1 of Executive Order 13224 of September 23, 2001 Blocking Property and Prohibiting Transactions With Persons Who Commit, Threaten to Commit, or Support Terrorism (66 Fed. Reg. 49079 (2001)), (ii) engages in any dealings or transactions prohibited by Section 2 of such executive order, or is otherwise associated with any such person in any manner violative of Section 2, or (iii) is a person on the list of Specially Designated Nationals and Blocked Persons or subject to the limitations or prohibitions under any other U.S. Department of Treasury's Office of Foreign Assets Control regulation or executive order.

        Section 4.18.    Patriot Act.    Each Loan Party is in compliance, in all material respects, with (i) the Trading with the Enemy Act, as amended, and each of the foreign assets control regulations of the United States Treasury Department (31 CFR, Subtitle B, Chapter V, as amended) and any other enabling legislation or executive order relating thereto, and (ii) the Uniting And Strengthening America By Providing Appropriate Tools Required To Intercept And Obstruct Terrorism (USA Patriot Act of 2001). No part of the proceeds of the Loans will be used, directly or indirectly, for any payments to any governmental official or employee, political party, official of a political party, candidate for political office, or anyone else acting in an official capacity, in order to obtain, retain or direct business or obtain any improper advantage, in violation of the United States Foreign Corrupt Practices Act of 1977, as amended.

        Section 4.19.    Holding Companies.    Holdings is a holding company, has no assets other than the Capital Stock of International, and no liabilities. International is a holding company, has no assets other than the Capital Stock of the Borrower and Envision Eyewear and Accessories (Shenzhen) Co., Ltd., and no liabilities.

        Section 4.20.    Post-Closing.

        (a)   Within 30 days after the Closing Date, Borrower will deliver evidence that all Liens filed on Holdings and International by JPMorgan Chase Bank, Wilmington Trust Company and Bear Stearns with the Register of Mortgages and Charges in the British Virgin Islands have been terminated.

        (b)   Within 30 days after the Closing Date, Borrower will deliver duly executed Controlled Account Agreements with each bank and securities intermediary (including without limitation with Bank of America) that maintains deposit accounts, bank accounts and investment accounts on behalf of any Loan Party on the Closing Date, together with favorable written opinions of counsel of Greenberg Traurig, LLP, counsel to the Loan Parties, addressed to the Administrative Agent, the Issuing Bank and each of the Lenders, and covering such matters relating to the Controlled Account Agreements and the transactions contemplated therein as the Administrative Agent or the Required Lenders shall reasonably request.

        (c)   Within 30 days after the Closing Date, Borrower will deliver a lender's loss payable endorsement in form and substance reasonably satisfactory to the Administrative Agent.

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        (d)   Promptly after the Closing Date, the Mortgage delivered on the Closing Date with respect to Borrower's real property located in the Town of Smithfield, Rhode Island shall be recorded in the real estate records of Providence County, Rhode Island, and no later than 90 days after the Closing Date, the Borrower shall use its best efforts to deliver or cause to be delivered to the Administrative Agent the final title insurance policy with respect thereto, dated as of the date and time of recording of such Mortgage and in the form of the pro forma title policy delivered at closing.

        (e)   Within 90 days after the Closing Date, Borrower will deliver to the Administrative Agent a stock certificate for 650 shares of ordinary stock of FGX Canada Corp., evidencing 65% of the Capital Stock of FGX Canada Corp., in replacement of Certificate No. 3 (delivered to the Agent on the Closing Date and which evidences 100% of the capital stock of such entity), together with a stock power executed in blank.

        (f)    Within 180 days after the Closing Date, which may be extend to 270 days with the consent of the Administrative Agent, Borrower will deliver an endorsement to the title insurance policy on the Mortgage in Smithfield, Rhode Island, removing the Notice of Federal Tax Lien recorded on December 5, 2005 at 1:11 pm in Book 484 at Page 724 in the amount of $24,237.54, plus interest and penalties thereon.

        (g)   No later than the first anniversary of the Closing Date, or such later date to which the Administrative Agent may agree, evidence that the Borrower has received all necessary consents and approvals identified on the zoning certificates issued by the Town of Smithfield Building and Zoning Office on December 12, 2006 and delivered to Borrower, as a prerequisite to designating the use of Borrower's real property located at 500 George Washington Highway, Smithfield, Rhode Island as "Office and Light Manufacturing".

        For purposes of this Article IV, all references to a Subsidiary in Sections 4.1, 4.3, 4.5, 4.6, 4.7, 4.8, and 4.11, shall be deemed to exclude Fantasma.

ARTICLE V
AFFIRMATIVE COVENANTS

        Each of the Borrower, Holdings and International covenants and agrees that so long as any Lender has a Commitment hereunder or any Obligation remains unpaid or outstanding:

        Section 5.1.    Financial Statements and Other Information.    The Borrower will deliver to the Administrative Agent and each Lender:

        (a)   as soon as available and in any event within 90 days after the end of each Fiscal Year of Holdings, a copy of the annual audited report for such Fiscal Year for Holdings and its Subsidiaries, containing a consolidated balance sheet of Holdings and its Subsidiaries as of the end of such Fiscal Year and the related consolidated statements of income, stockholders' equity and cash flows (together with all footnotes thereto) of Holdings and its Subsidiaries for such Fiscal Year, setting forth in each case in comparative form the figures for the previous Fiscal Year, all in reasonable detail and reported on by KPMG, LLP or other independent public accountants of nationally recognized standing (without a "going concern" or like qualification, exception or explanation and without any qualification or exception as to scope of such audit) to the effect that such financial statements present fairly in all material respects the financial condition and the results of operations of Holdings and its Subsidiaries for such Fiscal Year on a consolidated basis in accordance with GAAP and that the examination by such accountants in connection with such consolidated financial statements has been made in accordance with generally accepted auditing standards;

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        (b)   as soon as available and in any event within 45 days after the end of each Fiscal Quarter of Holdings, an unaudited consolidated balance sheet of Holdings and its Subsidiaries as of the end of such Fiscal Quarter and the related unaudited consolidated statements of income and cash flows of Holdings and its Subsidiaries for such Fiscal Quarter and the then elapsed portion of such Fiscal Year, setting forth in each case in comparative form the figures for the corresponding quarter and the corresponding portion of Holding's previous Fiscal Year;

        (c)   concurrently with the delivery of the financial statements referred to in clauses (a) and (b) above, a Compliance Certificate of the principal executive officer or the principal financial officer of the Borrower, (i) certifying as to whether there exists a Default or Event of Default on the date of such certificate, and if a Default or an Event of Default then exists, specifying the details thereof and the action which the Borrower has taken or proposes to take with respect thereto, (ii) setting forth in reasonable detail calculations demonstrating compliance with the financial covenants set forth in Article VI and, (iii) specifying any change in the identity of the Subsidiaries as of the end of such Fiscal Year or Fiscal Quarter from the Subsidiaries identified to the Lenders on the Closing Date or as of the most recent Fiscal Year or Fiscal Quarter, as the case may be;

        (d)   concurrently with the delivery of the financial statements referred to in clause (a) above, (i) a certificate of the accounting firm that reported on such financial statements stating whether they obtained any knowledge during the course of their examination of such financial statements of any Default or Event of Default (which certificate may be limited to the extent required by accounting rules or guidelines) and (ii) a certificate of the chief financial officer or the chief legal officer of Borrower, (A) setting forth the information required pursuant to Section 1, 2, 7, 8 and 9 of the Perfection Certificate or confirming that there has been no change in such information since the date of the Perfection Certificate delivered on the Closing Date or the date of the most recent certificate delivered pursuant to this Section and (B) certifying that all Uniform Commercial Code financing statements (including fixture filings, as applicable) or other appropriate filings, recordings or registrations, including all refilings, rerecordings and reregistrations, containing a description of the Collateral have been filed of record in each governmental, municipal or other appropriate office in each jurisdiction identified pursuant to clause (i) above to the extent necessary to protect and perfect the security interests under the Collateral Documents for a period of not less than 18 months after the date of such certificate (except as noted therein with respect to any continuation statements to be filed within such period)

        (e)   promptly after the same become publicly available, copies of all periodic and other reports, proxy statements and other materials filed with the Securities and Exchange Commission, or any Governmental Authority succeeding to any or all functions of said Commission, or with any national securities exchange, or distributed by Holdings to its shareholders generally, as the case may be;

        (f)    concurrently with the delivery of the financial statements referred to in subsection (a) above, a pro forma budget for the succeeding Fiscal Year, containing an income statement, balance sheet and statement of cash flows; and

        (g)   promptly following any request therefor, such other information regarding the results of operations, business affairs and financial condition of the Borrower, Holdings, International or any Subsidiary as the Administrative Agent or any Lender may reasonably request.

        Section 5.2.    Notices of Material Events.    The Borrower, Holdings and International will furnish to the Administrative Agent and each Lender prompt written notice of the following:

        (a)   the occurrence of any Default or Event of Default;

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        (b)   the filing or commencement of any action, suit or proceeding by or before any arbitrator or Governmental Authority against or, to the knowledge of the Borrower, Holdings or International, affecting the Borrower, Holdings, International or any Subsidiary which, if adversely determined, could reasonably be expected to result in a Material Adverse Effect;

        (c)   the occurrence of any event or any other development by which the Borrower, Holdings, International or any Subsidiary (i) fails to comply with any Environmental Law or to obtain, maintain or comply with any permit, license or other approval required under any Environmental Law, (ii) becomes subject to any Environmental Liability, (iii) receives notice of any claim with respect to any Environmental Liability, or (iv) becomes aware of any basis for any Environmental Liability and in each of the preceding clauses, which individually or in the aggregate, could reasonably be expected to result in a Material Adverse Effect;

        (d)   the occurrence of any ERISA Event that alone, or together with any other ERISA Events that have occurred, could reasonably be expected to result in liability of Holdings and its Subsidiaries in an aggregate amount exceeding $500,000;

        (e)   the occurrence of any default or event of default, or the receipt by Borrower, Holdings, International or any of their Subsidiaries of any written notice of an alleged default or event of default, with respect to any Material Indebtedness of the Borrower or any of its Subsidiaries;

        (f)    any levy of an attachment, execution or other process against any of the property or assets, real or personal, of the Borrower, Holdings, International or any of their Subsidiaries, which property and assets in the aggregate have a book or market value in excess of $500,000;

        (g)   any loss, damage, or destruction to the Collateral, or the commencement of any action or proceeding for the taking of property under the power of eminent domain, condemnation or similar proceedings in the amount of $500,000 or more, whether or not covered by insurance;

        (h)   at least thirty (30) days' prior written notice of any change (i) in any Loan Party's corporate name or in any trade name used to identify it in the conduct of its business or in the ownership of its properties, (ii) in any Loan Party's chief executive office, its principal place of business, any office in which it maintains books or records relating to Collateral owned by it or any office or facility at which Collateral owned by it is located (including the establishment of any such new office or facility), (iii) in any Loan Party's type of organization (through conversion or merger), (iv) in any Loan Party's federal taxpayer identification number or organizational number or (v) in any Loan Party's jurisdiction of organization; Borrower also agrees promptly to notify the Administrative Agent if any material portion of the Collateral is damaged or destroyed; and

        (i)    any other development that results in, or could reasonably be expected to result in, a Material Adverse Effect.

Each notice delivered under this Section 5.2 shall be accompanied by a written statement of a Responsible Officer setting forth the details of the event or development requiring such notice and any action taken or proposed to be taken with respect thereto.

        Section 5.3.    Existence; Conduct of Business.    The Borrower, Holdings, and International will, and will cause each of their Subsidiaries to, do or cause to be done all things reasonably necessary to preserve, renew and maintain in full force and effect its legal existence and its respective rights, licenses, permits, privileges, franchises, patents, copyrights, trademarks and trade names that the Borrower reasonably believes are material to the conduct of its business and will continue to engage in the Approved Lines of Business; provided, that nothing in this Section 5.3 shall prohibit any merger, consolidation, liquidation or dissolution permitted under Section 7.3.

        Section 5.4.    Compliance with Laws, Etc.    The Borrower, Holdings and International will, and will cause each of their Subsidiaries to, comply with all laws, rules, regulations and requirements of any

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Governmental Authority applicable to its business and properties, including without limitation, all Environmental Laws, ERISA and OSHA, except where the failure to do so, either individually or in the aggregate, could not reasonably be expected to result in a Material Adverse Effect.

        Section 5.5.    Payment of Obligations.    The Borrower, Holdings and International will, and will cause each of their Subsidiaries to, pay and discharge at or before maturity, all of its obligations and liabilities (including, without limitation all taxes, assessments and other governmental charges, levies and all other claims that could result in a statutory Lien) before the same shall become delinquent or in default, except where (a) the validity or amount thereof is being contested in good faith by appropriate proceedings, (b) the Borrower, Holdings, International or such Subsidiary has set aside on its books adequate reserves with respect thereto in accordance with GAAP and (c) the failure to make payment pending such contest could not reasonably be expected to result in a Material Adverse Effect.

        Section 5.6.    Books and Records.    The Borrower, Holdings and International will, and will cause each of their Subsidiaries to, keep proper books of record and account in which full, true and correct entries shall be made of all dealings and transactions in relation to its business and activities to the extent necessary to prepare the consolidated financial statements of Holdings in conformity with GAAP.

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        Section 5.7.    Visitation, Inspection, Etc.    The Borrower, Holdings and International will, and will cause each of their Subsidiaries to, permit any representative of the Administrative Agent or any Lender, to visit and inspect its properties and the Collateral, to examine its books and records, to conduct audits and field examinations of the Collateral and to make copies and take extracts therefrom, and to discuss its affairs, finances and accounts with any of its officers and with its independent certified public accountants, all at such reasonable times and as often as the Administrative Agent or any Lender may reasonably request after reasonable prior notice to the Borrower; provided, however, if an Event of Default has occurred and is continuing, no prior notice shall be required.

        Section 5.8.    Maintenance of Properties; Insurance.    The Borrower, Holdings and International will, and will cause each of their Subsidiaries to, (a) keep and maintain all property material to the conduct of its business in good working order and condition, ordinary wear and tear excepted, (b) maintain with financially sound and reputable insurance companies (i) insurance with respect to its properties and business, and the properties and business of its Subsidiaries, against loss or damage of the kinds customarily insured against by the companies in the same or similar businesses operating in the same or similar locations and (ii) all insurance required to be maintained pursuant to the Collateral Documents, and will, upon request of the Administrative Agent, furnish to each Lender at reasonable intervals a certificate of an Responsible Officer of Borrower setting forth the nature and extent of all insurance maintained by the Borrower, Holdings, International and their Subsidiaries in accordance with this Section, and (c) at all times shall name the Administrative Agent as additional insured on all liability insurance policies of the Borrower, Holdings, International and their Subsidiaries and as loss payee (pursuant to the loss payee endorsement approved by the Administrative Agent) on all casualty and property insurance policies of Borrower, Holdings, International and their Subsidiaries.

        Section 5.9.    Use of Proceeds and Letters of Credit.    The Borrower will use the proceeds of all Loans to refinance existing Indebtedness on the Closing Date, to finance Permitted Acquisitions and working capital needs, and for other general corporate purposes of Holdings and its Subsidiaries. No part of the proceeds of any Loan will be used, whether directly or indirectly, for any purpose that would violate any rule or regulation of the Board of Governors of the Federal Reserve System, including Regulations T, U or X. All Letters of Credit will be used for general corporate purposes.

        Section 5.10.    Additional Subsidiaries and Collateral.

        (a)   In the event that, subsequent to the Closing Date, any Person becomes a Domestic Subsidiary, whether pursuant to an acquisition or otherwise, (x) the Borrower shall promptly notify the Administrative Agent and the Lenders of the creation or acquisition of such Domestic Subsidiary and (y) within thirty (30) days thereafter, the Borrower shall cause such Person (i) to join the Guaranty and Security Agreement as a new Subsidiary Loan Party by executing and delivering to the Administrative Agent a supplement to the Guaranty and Security Agreement, (ii) to grant Liens in favor of the Administrative Agent in all of its personal property by joining the Guaranty and Security Agreement, executing and delivering Copyright Security Agreement, Patent Security Agreement and Trademark Security Agreement (as applicable) and to file, or at the request of the Administrative Agent to authorize the filing of, all such UCC financing statements or similar instruments required by the Administrative Agent to perfect Liens in favor of the Administrative Agent and granted under any of the Loan Documents, (iii) to grant Liens in favor of the Administrative Agent in all fee ownership and leasehold interests in Real Estate, (iv) if such Domestic Subsidiary owns Capital Stock in another Person, to become a party to a pledge agreement to pledge such Capital Stock, and (v) to deliver all such other documentation (including without limitation, lien searches, title insurance policies, surveys, environmental reports, legal opinions, and certified organizational documents) and to take all such other actions as such Subsidiary would have been required to deliver and take pursuant to Section 3.1 if such Subsidiary had been a Loan Party on the Closing Date. In addition, within thirty (30) days after the date such

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Person becomes a Subsidiary of the Borrower, the Borrower shall, or shall cause the Subsidiary owning such Person, to pledge all of the Capital Stock of such Person to the Administrative Agent as security for the Obligations by executing and delivering a pledge agreement, in form and substance satisfactory to the Administrative Agent, and to deliver the original stock certificates evidencing such Capital Stock to the Administrative Agent, together with appropriate stock powers executed in blank.

        (b)   In the event that, subsequent to the Closing Date, any Person becomes a Foreign Subsidiary of the Borrower, whether pursuant to an acquisition or otherwise, (x) the Borrower shall promptly notify the Administrative Agent and the Lenders thereof and (y) no later than sixty (60) days after such Person becomes a Foreign Subsidiary, or if the Administrative Agent determines in its sole discretion that the Borrower is working in good faith, such longer period as the Administrative Agent shall permit not to exceed sixty (60) additional days, the Borrower shall, or shall cause any of its Domestic Subsidiary owning such Person, (i) to pledge all of the Capital Stock of such Foreign Subsidiary (or if the pledge of all of the voting Capital Stock of such Foreign Subsidiary would result in materially adverse tax consequences, then such pledge shall be limited to sixty-five percent (65%) of the voting Capital Stock and one hundred percent (100%) of the non-voting Capital Stock owned by the Borrower or any Domestic Subsidiary, as applicable) to the Administrative Agent as security for the Obligations pursuant to a pledge agreement in form and substance satisfactory to the Administrative Agent and the Required Lenders, (ii) to deliver the original stock certificates evidencing such pledged Capital Stock, together with appropriate stock powers executed in blank and (iii) to deliver all such other documentation (including without limitation, lien searches, legal opinions, landlord waivers, and certified organizational documents) and to take all such other actions as Borrower or such Domestic Subsidiary would have been required to deliver and take pursuant to Section 3.1 if such Foreign Subsidiary had been a Foreign Subsidiary on the Closing Date.

        (c)   The Borrower agrees that, following the delivery of any Collateral Documents required to be executed and delivered by this Section 5.10, the Administrative Agent shall have a valid and enforceable, first priority perfected Lien on the property required to be pledged pursuant to clause (a) and (b) above, free and clear of all Liens other than Permitted Encumbrances. All actions to be taken pursuant to this Section 5.10 shall be at the expense of the Borrower or the applicable Loan Party, and shall be taken to the reasonable satisfaction of the Administrative Agent.

        (d)   To the extent otherwise permitted hereunder, if any Loan Party proposes to acquire a fee ownership in Real Estate after the Closing Date, it shall at the time of such acquisition provide to the Administrative Agent all Real Estate Documents requested by the Administrative Agent granting the Administrative Agent a first priority Lien on such Real Estate, together with environmental audits, mortgage title insurance policies, real property survey, opinion(s) and, if required by the Administrative Agent, supplemental casualty insurance and flood insurance, and such other documents, instruments or agreements reasonably requested by the Administrative Agent, in each case, in form and substance reasonably satisfactory to the Administrative Agent.

        (e)   No Loan Party will maintain tangible Collateral with a book value of more than $7,500,000 in the aggregate at any location not owned by a Loan Party unless it shall first have provided to the Administrative Agent a copy of such lease and a landlord's agreement or bailee letter, as applicable, from the landlord of any leased property or bailee with respect to any warehouse or other location where such Collateral will be stored or located, which agreement or letter shall be reasonably satisfactory in form and substance to the Administrative Agent.

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        Section 5.11.    Cash Management.    The Borrower shall, and shall cause its Subsidiaries to:

        (a)   establish and maintain all of their domestic deposit accounts, bank accounts and investment accounts (each, a "Controlled Account") with the Administrative Agent or with other financial institutions and securities intermediaries that (together with the applicable Loan Party) have executed and delivered to the Administrative Agent a Controlled Account Agreement, in form and substance reasonably acceptable to the Administrative Agent; each Controlled Account shall be a cash collateral account, with all cash, checks and other similar items of payment in such account securing payment of the Obligations, and in which Borrower and each of its Subsidiaries shall have granted a valid first priority perfected Lien to Administrative Agent, on behalf of itself and Lenders;

        (b)   deposit promptly, and in any event no later than ten (10) Business Days after the date of receipt thereof, all cash, checks, drafts or other similar items of payment relating to or constituting payments made in respect of any and all accounts and other Collateral into Controlled Accounts; and

        (c)   at any time after the occurrence and during the continuance of an Event of Default, at the request of the Required Lenders, the Borrower will, and will cause each other Loan Party to, cause all payments constituting proceeds of accounts or other Collateral to be directed into lockbox accounts under agreements in form and substance satisfactory to the Administrative Agent.

        Section 5.12.    Casualty and Condemnation.    Borrower (a) will furnish to the Administrative Agent and the Lenders prompt written notice of any casualty or other insured damage to any material portion of any Collateral or the commencement of any action or preceding for the taking of any material portion of any Collateral or any part thereof or interest therein under power of eminent domain or by condemnation or similar proceeding and (b) will ensure that the net cash proceeds of any such event (whether in the form of insurance proceeds, condemnation awards or otherwise) are collected and applied in accordance with the applicable provisions of this Agreement and the Collateral Documents.

        Section 5.13.    Further Assurances.    Borrower, Holdings and International will, and will cause each Subsidiary Loan Party to, execute any and all further documents, financing statements, agreements and instruments, and take all such further actions (including the filing and recording of financing statements, fixture filings, mortgages, deeds of trust and other documents), which may be required under any applicable law, or which the Administrative Agent or the Required Lenders may reasonably request, to effectuate the transactions contemplated by the Loan Documents or to grant, preserve, protect or perfect the Liens created by the Collateral Documents or the validity or priority of an such Lien, all at the expense of the Loan Parties. Borrower also agrees to provide to the Administrative Agent, from time to time upon request, evidence reasonably satisfactory to the Administrative Agent as to the perfection and priority of the Liens created or intended to be created by the Collateral Documents.

        Section 5.14.    Holding Company Status.    Each of Holdings and International shall remain passive holding companies, shall not directly acquire after the Closing Date any Capital Stock or other assets, and shall incur no liabilities or Indebtedness other than pursuant to the Loan Documents, except to the extent expressly permitted in Section 7.3.

For purposes of this Article V, all references to a Subsidiary in Sections 5.2, 5.3, 5.4, 5.5, 5.6, 5.7, 5.8, 5.9 and 5.11 shall be deemed to exclude Fantasma.

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ARTICLE VI

FINANCIAL COVENANTS

        Each of the Borrower, Holdings and International covenants and agrees that so long as any Lender has a Commitment hereunder or any Obligation remains unpaid or outstanding:

        Section 6.1.    Leverage Ratio.    The Borrower, Holdings and International will maintain at all times a Leverage Ratio of not greater than (i) for each Fiscal Quarter ending on or prior to the Saturday closest to December 31, 2008, 3.25:1.0 and (ii) for each Fiscal Quarter ending thereafter, 3.00:1.0.

        Section 6.2.    Fixed Charge Coverage Ratio.    The Borrower, Holdings and International will maintain, as of the end of each Fiscal Quarter, commencing with the Fiscal Quarter ending December 31, 2007, a Fixed Charge Coverage Ratio of not less than 1.25:1.00.

ARTICLE VII

NEGATIVE COVENANTS

        Each of the Borrower, Holdings and International covenants and agrees that so long as any Lender has a Commitment hereunder or any Obligation remains outstanding:

        Section 7.1.    Indebtedness and Preferred Equity.    Each of the Borrower, Holdings and International will not, and will not permit any of their Subsidiaries to, create, incur, assume or suffer to exist any Indebtedness, except:

        (a)   Indebtedness created pursuant to the Loan Documents;

        (b)   Indebtedness of the Borrower and its Subsidiaries existing on the date hereof and set forth on Schedule 7.1 and extensions, renewals and replacements of any such Indebtedness that do not increase the outstanding principal amount thereof (immediately prior to giving effect to such extension, renewal or replacement) or shorten the maturity or the weighted average life thereof;

        (c)   Indebtedness of the Borrower or any Subsidiary incurred to finance the acquisition, construction or improvement of any fixed or capital assets, including Capital Lease Obligations, and any Indebtedness assumed in connection with the acquisition of any such assets or secured by a Lien on any such assets prior to the acquisition thereof; provided, that such Indebtedness is incurred prior to or within 90 days after such acquisition or the completion of such construction or improvements or extensions, renewals, and replacements of any such Indebtedness that do not increase the outstanding principal amount thereof (immediately prior to giving effect to such extension, renewal or replacement) or shorten the maturity or the weighted average life thereof; provided further, that the aggregate principal amount of such Indebtedness does not exceed $1,500,000 at any time outstanding;

        (d)   Indebtedness of Borrower or any Subsidiary Loan Party borrowed from Holdings or any of its Subsidiaries, and Guarantees by Holdings or any of its Subsidiaries of Indebtedness of the Borrower and any Subsidiary Loan Party;

        (e)   Indebtedness of Holdings, International and any Foreign Subsidiaries borrowed from Holdings or any of its Subsidiaries and Guarantees by Holdings or any of its Subsidiaries of Indebtedness of Holdings, International and its Foreign Subsidiaries; provided, however, that such Indebtedness borrowed from the Borrower and the Subsidiary Loan Parties and Guarantees by the Borrower and the Subsidiary Loan Parties shall be subject to the limitations of Section 7.4(e);

        (f)    Indebtedness of any Person which becomes a Subsidiary after the date of this Agreement; provided, that such Indebtedness exists at the time that such Person becomes a Subsidiary and is not created in contemplation of or in connection with such Person becoming a Subsidiary;

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        (g)   Hedging Obligations permitted by Section 7.10; and

        (h)   other unsecured Indebtedness of Holdings and its Subsidiaries in an aggregate principal amount not to exceed $2,500,000 at any time outstanding.

Borrower, Holdings and International will not, and will not permit any Subsidiary to, issue any preferred stock or other preferred equity interests that (i) matures or is mandatorily redeemable pursuant to a sinking fund obligation or otherwise, (ii) is or may become redeemable or repurchaseable by Holdings, International, Borrower or such Subsidiary at the option of the holder thereof, in whole or in part or (iii) is convertible or exchangeable at the option of the holder thereof for Indebtedness or preferred stock or any other preferred equity interests described in this paragraph, on or prior to, in the case of clause (i), (ii) or (iii), the first anniversary of the Revolving Commitment Termination Date.

        Section 7.2.    Negative Pledge.    The Borrower, Holdings and International will not, and will not permit any of their Subsidiaries to, create, incur, assume or suffer to exist any Lien on any of its assets or property now owned or hereafter acquired or, except:

        (a)   Liens securing the Obligations, provided, however, that no Liens may secure Hedging Obligations without securing all other Obligations on a basis at least pari passu with such Hedging Obligations and subject to the priority of payments set forth in Section 2.21 and Section 8.2 of this Agreement

        (b)   Permitted Encumbrances;

        (c)   any Liens on any property or asset of the Borrower or any Subsidiary existing on the Closing Date set forth on Schedule 7.2; provided, that such Lien shall not apply to any other property or asset of the Borrower or any Subsidiary;

        (d)   purchase money Liens upon or in any fixed or capital assets to secure the purchase price or the cost of construction or improvement of such fixed or capital assets or to secure Indebtedness incurred solely for the purpose of financing the acquisition, construction or improvement of such fixed or capital assets (including Liens securing any Capital Lease Obligations); provided, that (i) such Lien secures Indebtedness permitted by Section 7.1(c), (ii) such Lien attaches to such asset concurrently or within 90 days after the acquisition, improvement or completion of the construction thereof; (iii) such Lien does not extend to any other asset; and (iv) the Indebtedness secured thereby does not exceed the cost of acquiring, constructing or improving such fixed or capital assets;

        (e)   any Lien (i) existing on any asset of any Person at the time such Person becomes a Subsidiary of the Borrower, (ii) existing on any asset of any Person at the time such Person is merged with or into the Borrower or any Subsidiary of the Borrower or (iii) existing on any asset prior to the acquisition thereof by the Borrower or any Subsidiary of the Borrower; provided, that any such Lien was not created in the contemplation of any of the foregoing and any such Lien secures only those obligations which it secures on the date that such Person becomes a Subsidiary or the date of such merger or the date of such acquisition; and

        (f)    extensions, renewals, or replacements of any Lien referred to in paragraphs (a) through (e) of this Section 7.2; provided, that the principal amount of the Indebtedness secured thereby is not increased and that any such extension, renewal or replacement is limited to the assets originally encumbered thereby.

        Section 7.3.    Fundamental Changes.

        (a)   The Borrower, Holdings and International will not, and will not permit any Subsidiary to, merge into or consolidate into any other Person, or permit any other Person to merge into or consolidate with it, or sell, lease, transfer or otherwise dispose of (in a single transaction or a

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series of transactions) all or substantially all of its assets (in each case, whether now owned or hereafter acquired) or all or substantially all of the stock of any of its Subsidiaries (in each case, whether now owned or hereafter acquired) or liquidate or dissolve; provided, that if at the time thereof and immediately after giving effect thereto, no Default or Event of Default shall have occurred and be continuing (i) the Borrower, any Guarantor or any Subsidiary may merge with a Person if the Borrower (or such Guarantor if the Borrower is not a party to such merger, or such Subsidiary if the Borrower and the Guarantors are not parties to such merger) is the surviving Person, (ii) any Subsidiary of the Borrower may merge into another Subsidiary of the Borrower; provided, that if any party to such merger is a Subsidiary Loan Party, the Subsidiary Loan Party shall be the surviving Person, (iii) any Subsidiary of the Borrower may sell, transfer, lease or otherwise dispose of all or substantially all of its assets to the Borrower or to a Subsidiary Loan Party, (iv) any Subsidiary of the Borrower (other than a Subsidiary Loan Party) may liquidate or dissolve if Holdings determines in good faith that such liquidation or dissolution is in the best interests of the Borrower, International or Holdings and is not materially disadvantageous to the Lenders and (v) the interests of the Loan Parties in the Joint Ventures existing on the Closing Date may be sold in accordance with Section 7.6(c); provided, that any such merger involving a Person that is not a wholly-owned Subsidiary immediately prior to such merger shall not be permitted unless also permitted by Section 7.4. Notwithstanding the foregoing, Fantasma may be liquidated or dissolved.

        (b)   The Borrower will not, and will not permit any of its Subsidiaries to, engage in any business other than Approved Lines of Business. Holdings and International will not engage in any business.

        Section 7.4.    Investments, Loans, Etc.    The Borrower, Holdings and International will not, and will not permit any of their Subsidiaries to, purchase, hold or acquire (including pursuant to any merger with any Person that was not a wholly-owned Subsidiary prior to such merger), any Capital Stock, evidence of indebtedness or other securities (including any option, warrant, or other right to acquire any of the foregoing) of, make or permit to exist any loans or advances to, Guarantee any obligations of, or make or permit to exist any investment or any other interest in, any other Person (all of the foregoing being collectively called "Investments"), or purchase or otherwise acquire (in one transaction or a series of transactions) any assets of any other Person that constitute a business unit, or create or form any Subsidiary, except:

        (a)   Investments (other than Permitted Investments) existing on the date hereof and set forth on Schedule 7.4 (including Investments in Subsidiaries);

        (b)   Permitted Investments;

        (c)   Permitted Acquisitions;

        (d)   Guarantees by Holdings and its Subsidiaries constituting Indebtedness permitted by Section 7.1;

        (e)   Investments made by Borrower in or to any Subsidiary and by any Subsidiary of Borrower in or to Borrower or another Subsidiary, Investments made by International in its Subsidiaries and Investments made by Holdings in its Subsidiaries; provided, that the aggregate amount of Investments made by the Borrower and its Subsidiary Loan Parties in or to, and Guarantees by the Borrower and its Subsidiary Loan Parties of Indebtedness of, any Foreign Subsidiary (other than International), shall not exceed $50,000,000 at any time outstanding;

        (f)    loans or advances to employees, officers or directors of the Borrower or any Subsidiary in the ordinary course of business for travel, relocation and related expenses; provided, however, that the aggregate amount of all such loans and advances does not exceed $500,000 at any time;

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        (g)   Hedging Transactions permitted by Section 7.10; and

        (h)   Other Investments which in the aggregate do not exceed $1,000,000 in any Fiscal Year.

        Section 7.5.    Restricted Payments.    The Borrower, Holdings and International will not, and will not permit their Subsidiaries to, declare or make, or agree to pay or make, directly or indirectly, any dividend or distribution on any class of its Capital Stock, or make any payment on account of, or set apart assets for a sinking or other analogous fund for, the purchase, redemption, retirement, defeasance or other acquisition of, any shares of Capital Stock or Indebtedness subordinated to the Obligations or any Guarantee thereof or any options, warrants, or other rights to purchase such Capital Stock or such Indebtedness, whether now or hereafter outstanding (each, a "Restricted Payment"), except for (i) dividends payable by the Borrower, International and Holdings solely in shares of any class of its common stock or ordinary shares, (ii) Restricted Payments made by any Subsidiary to the Borrower or to another Subsidiary, on at least a pro rata basis with any other shareholders if such Subsidiary is not wholly owned by the Borrower and other wholly owned Subsidiaries, (iii) so long as no Event of Default has occurred and is continuing, redemptions and buy backs by Holdings of any of its Capital Stock, and (iv) the issuance of options or any other equity compensation awarded pursuant to the FGX International Holdings Limited 2007 Incentive Compensation Plan.

        Section 7.6.    Sale of Assets.    The Borrower, Holdings and International will not, and will not permit any of their Subsidiaries to, convey, sell, lease, assign, transfer or otherwise dispose of, any of its assets, business or property, whether now owned or hereafter acquired, or, in the case of any Subsidiary, issue or sell any shares of such Subsidiary's Capital Stock to any Person other than the Borrower or a Subsidiary Loan Party, except:

        (a)   the sale or other disposition for fair market value of obsolete or worn out property or other property not necessary for operations disposed of in the ordinary course of business;

        (b)   the sale of inventory and Permitted Investments in the ordinary course of business;

        (c)   the sale by the Loan Parties of all interests in the Joint Ventures owned by Loan Parties on the Closing Date, so long as the net cash proceeds thereof are applied to repay the Obligations in accordance with Section 2.12;

        (d)   the sale or other disposition of such other assets in an aggregate amount not to exceed $5,000,000 in any Fiscal Year; and

        (e)   the sale of accounts receivable to Milberg on the terms set forth in the Milberg Agreement.

        Section 7.7.    Transactions with Affiliates.    The Borrower, Holdings and International will not, and will not permit any of their Subsidiaries to, sell, lease or otherwise transfer any property or assets to, or purchase, lease or otherwise acquire any property or assets from, or otherwise engage in any other transactions with, any of its Affiliates, except (a) in the ordinary course of business at prices and on terms and conditions not less favorable to the Borrower, Holdings, International or such Subsidiary than could be obtained on an arm's-length basis from unrelated third parties, (b) transactions between or among the Loan Parties not involving any other Affiliates and (c) any Restricted Payment permitted by Section 7.5.

        Section 7.8.    Restrictive Agreements.    The Borrower, Holdings and International will not, and will not permit any Subsidiary to, directly or indirectly, enter into, incur or permit to exist any agreement that prohibits, restricts or imposes any condition upon (a) the ability of the Borrower, Holdings, International or any Subsidiary to create, incur or permit any Lien upon any of its assets or properties, whether now owned or hereafter acquired, or (b) the ability of any Subsidiary to pay dividends or other distributions with respect to its Capital Stock, to make or repay loans or advances to the Borrower or any other Subsidiary, to Guarantee Indebtedness of the Borrower or any other Subsidiary or to transfer

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any of its property or assets to the Borrower or any Subsidiary of the Borrower; provided, that (i) the foregoing shall not apply to restrictions or conditions imposed by law or by this Agreement or any other Loan Document, (ii) the foregoing shall not apply to customary restrictions and conditions contained in agreements relating to the sale of a Subsidiary pending such sale, provided such restrictions and conditions apply only to the Subsidiary that is sold and such sale is permitted hereunder, (iii) clause (a) shall not apply to restrictions or conditions imposed by any agreement relating to secured Indebtedness permitted by this Agreement if such restrictions and conditions apply only to the property or assets securing such Indebtedness and (iv) clause (a) shall not apply to customary provisions in leases and other contracts restricting the assignment thereof.

        Section 7.9.    Sale and Leaseback Transactions.    The Borrower, Holdings and International will not, and will not permit any of their Subsidiaries to, enter into any arrangement, directly or indirectly, whereby it shall sell or transfer any property, real or personal, used or useful in its business, whether now owned or hereinafter acquired, and thereafter rent or lease such property or other property that it intends to use for substantially the same purpose or purposes as the property sold or transferred.

        Section 7.10.    Hedging Transactions.    The Borrower, Holdings and International will not, and will not permit any of their Subsidiaries to, enter into any Hedging Transaction, other than Hedging Transactions entered into by the Borrower and its Subsidiaries in the ordinary course of business to hedge or mitigate risks to which the Borrower or any Subsidiary is exposed in the conduct of its business or the management of its liabilities. Solely for the avoidance of doubt, the Borrower acknowledges that a Hedging Transaction entered into under which the Borrower or any of its Subsidiaries is or may become obliged to make any payment (i) in connection with the purchase by any third party of any Capital Stock or any Indebtedness or (ii) as a result of changes in the market value of any Capital Stock or any Indebtedness) is not a Hedging Transaction entered into in the ordinary course of business to hedge or mitigate risks.

        Section 7.11.    Amendment to Material Documents.    The Borrower, Holdings and International will not, and will not permit any of their Subsidiaries to, amend, modify or waive any of its rights in a manner materially adverse to the Lenders or the Borrower under (a) its certificate of incorporation, bylaws or other organizational documents, (b) the Phillips Environmental Indemnity Agreement, and (c) the Milberg Agreement, but excluding any customer contracts that the Loan Parties enter into with their clients.

        Section 7.12.    Accounting Changes.    The Borrower, Holdings and International will not, and will not permit any of their Subsidiaries to, make any significant change in accounting treatment or reporting practices, except as required by GAAP, or change the fiscal year of the Borrower, Holdings, International or of any of their Subsidiaries, except to change the fiscal year of a Subsidiary to conform its fiscal year to that of the Borrower or to change its Fiscal Year to a calendar year.

        Section 7.13.    Lease Obligations.    The Borrower, Holdings and International will not, and will not permit any Subsidiary to, create or suffer to exist any obligations for the payment under operating leases or agreements to lease (but excluding any obligations under leases required to be classified as capital leases under GAAP having a term of five years or more) which would cause the present value of the direct or contingent liabilities of the Consolidated Companies under such leases or agreements to lease, on a consolidated basis, to exceed $2,000,000 in the aggregate in any Fiscal Year.

        Section 7.14.    Government Regulation.    The Borrower, Holdings and International shall not fail to provide documentary and other evidence of the identity of the Loan Parties as may be requested by Lenders or the Administrative Agent at any time to enable Lenders or the Administrative Agent to verify the identity of the Loan Parties or to comply with any applicable law or regulation, including, without limitation, Section 326 of the USA Patriot Act of 1 U.S.C. Section 5318.

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ARTICLE VIII

EVENTS OF DEFAULT

        Section 8.1.    Events of Default.    If any of the following events (each an "Event of Default") shall occur:

        (a)   the Borrower shall fail to pay any principal of any Loan or of any reimbursement obligation in respect of any LC Disbursement when and as the same shall become due and payable, whether at the due date thereof or at a date fixed for prepayment or otherwise; or

        (b)   the Borrower shall fail to pay any interest on any Loan or any fee or any other amount (other than an amount payable under clause (a) of this Section 8.1) payable under this Agreement or any other Loan Document, when and as the same shall become due and payable, and such failure shall continue unremedied for a period of five (5) days; or

        (c)   any representation or warranty made or deemed made by or on behalf of the Borrower, Holdings, International or any Subsidiary in or in connection with this Agreement or any other Loan Document (including the Schedules attached thereto) and any amendments or modifications hereof or waivers hereunder, or in any certificate, report, financial statement or other document submitted to the Administrative Agent or the Lenders by any Loan Party or any representative of any Loan Party pursuant to or in connection with this Agreement or any other Loan Document shall prove to be incorrect in any material respect when made or deemed made or submitted; or

        (d)   the Borrower, Holdings or International shall fail to observe or perform any covenant or agreement contained in Section 5.2(a), Section 5.3 (with respect to the Borrower's existence) or Articles VI or VII; or

        (e)   any Loan Party shall fail to observe or perform any covenant or agreement contained in this Agreement (other than those referred to in clauses (a), (b) and (d) above) or any other Loan Document, and such failure shall remain unremedied for 30 days after the earlier of (i) any officer of the Borrower, Holdings or International becomes aware of such failure, or (ii) notice thereof shall have been given to the Borrower by the Administrative Agent or any Lender; or

        (f)    the Borrower, Holdings, International or any Subsidiary (whether as primary obligor or as guarantor or other surety) shall fail to pay any principal of, or premium or interest on, any Material Indebtedness that is outstanding, when and as the same shall become due and payable (whether at scheduled maturity, required prepayment, acceleration, demand or otherwise), and such failure shall continue after the applicable grace period, if any, specified in the agreement or instrument evidencing or governing such Indebtedness; or any other event shall occur or condition shall exist under any agreement or instrument relating to such Indebtedness and shall continue after the applicable grace period, if any, specified in such agreement or instrument, if the effect of such event or condition is to accelerate, or permit the acceleration of, the maturity of such Indebtedness; or any such Indebtedness shall be declared to be due and payable, or required to be prepaid or redeemed (other than by a regularly scheduled required prepayment or redemption), purchased or defeased, or any offer to prepay, redeem, purchase or defease such Indebtedness shall be required to be made, in each case prior to the stated maturity thereof; or

        (g)   the Borrower, Holdings, International or any Subsidiary shall (i) commence a voluntary case or other proceeding or file any petition seeking liquidation, reorganization or other relief under any federal, state or foreign bankruptcy, insolvency or other similar law now or hereafter in effect or seeking the appointment of a custodian, trustee, receiver, liquidator or other similar official of it or any substantial part of its property, (ii) consent to the institution of, or fail to contest in a timely and appropriate manner, any proceeding or petition described in clause (i) of this Section 8.1, (iii) apply for or consent to the appointment of a custodian, trustee, receiver,

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liquidator or other similar official for the Borrower, Holdings, International or any such Subsidiary or for a substantial part of its assets, (iv) file an answer admitting the material allegations of a petition filed against it in any such proceeding, (v) make a general assignment for the benefit of creditors, or (vi) take any action for the purpose of effecting any of the foregoing; or

        (h)   an involuntary proceeding shall be commenced or an involuntary petition shall be filed seeking (i) liquidation, reorganization or other relief in respect of the Borrower, Holdings, International or any Subsidiary or its debts, or any substantial part of its assets, under any federal, state or foreign bankruptcy, insolvency or other similar law now or hereafter in effect or (ii) the appointment of a custodian, trustee, receiver, liquidator or other similar official for the Borrower, Holdings, International or any Subsidiary or for a substantial part of its assets, and in any such case, such proceeding or petition shall remain undismissed for a period of 60 days or an order or decree approving or ordering any of the foregoing shall be entered; or

        (i)    the Borrower, Holdings, International or any Subsidiary shall become unable to pay, shall admit in writing its inability to pay, or shall fail to pay, its debts as they become due; or

        (j)    an ERISA Event shall have occurred that, in the opinion of the Required Lenders, when taken together with other ERISA Events that have occurred, could reasonably be expected to result in liability to the Borrower, Holdings, International and the Subsidiaries in an aggregate amount exceeding $7,500,000; or

        (k)   any judgments or orders for the payment of money for which the aggregate amount of such judgments and orders that is not covered by insurance or bonded exceeds $7,500,000 shall be rendered against the Borrower, Holdings, International or any Subsidiary, and either (i) enforcement proceedings shall have been commenced by any creditor upon such judgment or order or (ii) there shall be a period of 30 consecutive days during which a stay of enforcement of such judgment or order, by reason of a pending appeal or otherwise, shall not be in effect; or

        (l)    any non-monetary judgment or order shall be rendered against the Borrower, Holdings, International or any Subsidiary that could reasonably be expected to have a Material Adverse Effect, and there shall be a period of 30 consecutive days during which a stay of enforcement of such judgment or order, by reason of a pending appeal or otherwise, shall not be in effect; or

        (m)  a Change in Control shall occur or exist; or

        (n)   any provision of the Guaranty and Security Agreement shall for any reason cease to be valid and binding on, or enforceable against, any Loan Party, or any Loan Party shall so state in writing, or any Loan Party shall seek to terminate its obligation under the Guaranty and Security Agreement; and

        (o)   any Lien purported to be created under any Collateral Document shall fail or cease to be, or shall be asserted by any Loan Party not to be, a valid and perfected Lien on any Collateral, with the priority required by the applicable Collateral Documents, except as a result of (i) the Administrative Agent's failure to take any action reasonably requested by Borrower in order to maintain a valid and perfected Lien on any Collateral or (ii) any action taken by the Administrative Agent to release any Lien on any Collateral;

then, and in every such event (other than an event with respect to the Borrower described in clause (g) or (h) of this Section 8.1) and at any time thereafter during the continuance of such event, the Administrative Agent may, and upon the written request of the Required Lenders shall, by notice to the Borrower, take any or all of the following actions, at the same or different times: (i) terminate the Commitments, whereupon the Commitment of each Lender shall terminate immediately, (ii) declare the principal of and any accrued interest on the Loans, and all other Obligations owing hereunder, to be, whereupon the same shall become, due and payable

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immediately, without presentment, demand, protest or other notice of any kind, all of which are hereby waived by the Borrower, (iii) exercise all remedies contained in any other Loan Document, and (iv) exercise any other remedies available at law or in equity; and that, if an Event of Default specified in either clause (g) or (h) shall occur, the Commitments shall automatically terminate and the principal of the Loans then outstanding, together with accrued interest thereon, and all fees, and all other Obligations shall automatically become due and payable, without presentment, demand, protest or other notice of any kind, all of which are hereby waived by the Borrower.

        Section 8.2.    Application of Proceeds from Collateral.    All proceeds from each sale of, or other realization upon, all or any part of the Collateral by any Secured Party after an Event of Default arises shall be applied as follows:

        (a)   first, to the reimbursable expenses of the Administrative Agent incurred in connection with such sale or other realization upon the Collateral, until the same shall have been paid in full;

        (b)   second, to the fees and other reimbursable expenses of the Administrative Agent, Swingline Lender and the Issuing Bank then due and payable pursuant to any of the Loan Documents, until the same shall have been paid in full;

        (c)   third, to all reimbursable expenses, if any, of the Lenders then due and payable pursuant to any of the Loan Documents, until the same shall have been paid in full;

        (d)   fourth, to the fees due and payable under Section 2.14(b) and (c) of the Credit Agreement and interest then due and payable under the terms of the Credit Agreement, until the same shall have been paid in full;

        (e)   fifth, to the aggregate outstanding amount of the Revolving Credit Exposure, the Term Loans, Net Mark-to-Market Exposure and Treasury Management Obligations of the Loan Parties (to the extent that such Net Mark-to-Market Exposure and Treasury Management Obligations are included as "Obligations"), until the same shall have been paid in full, allocated pro rata among the Lenders and any Affiliates of Lenders that hold Net Mark-to-Market Exposure and Treasury Management Obligations, based on their respective pro rata shares of the aggregate amount of such Revolving Credit Exposure, Term Loans, Net Mark-to-Market Exposure and Treasury Management Obligations;

        (f)    sixth, to additional cash collateral for the aggregate amount of all outstanding Letters of Credit until the aggregate amount of all cash collateral held by the Administrative Agent pursuant to this Agreement is at least 105% of the LC Exposure after giving effect to the foregoing clause fifth; and

        (g)   to the extent any proceeds remain, to the Borrower.

All amounts allocated pursuant to the foregoing clauses third through fifth to the Lenders as a result of amounts owed to the Lenders under the Loan Documents shall be allocated among, and distributed to, the Lenders pro rata based on their respective Pro Rata Shares within each clause; provided, however, that all amounts allocated to that portion of the LC Exposure comprised of the aggregate undrawn amount of all outstanding Letters of Credit pursuant to clause fifth and sixth shall be distributed to the Administrative Agent, rather than to the Lenders, and held by the Administrative Agent in an account in the name of the Administrative Agent for the benefit of the Issuing Bank and the Lenders as cash collateral for the LC Exposure, such account to be administered in accordance with Section 2.22(g).

        Section 8.3.    Termination of Facilities.    If any Loan Party is or becomes subject at any time to any law, regulation, or list of any Government Authority of the United States (including, without limitation, the U.S. Office of Foreign Asset Control list) that prohibits the Lenders or the Administrative Agent from making any advance or extension of credit to Borrower or from otherwise conducting business with the Loan Parties, then the Administrative Agent may, and upon the written request of the

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Required Lenders shall, by notice to the Borrower, take any or all of the following actions, at the same or different times: (i) terminate the Commitments, whereupon the Commitment of each Lender shall terminate immediately, and (ii) declare the principal of and any accrued interest on the Loans, and all other Obligations owing hereunder, to be, whereupon the same shall become, due and payable immediately, without presentment, demand, protest or other notice of any kind, all of which are hereby waived by the Borrower.

ARTICLE IX

THE ADMINISTRATIVE AGENT

        Section 9.1.    Appointment of Administrative Agent.

        (a)   Each Lender irrevocably appoints SunTrust Bank as the Administrative Agent and authorizes it to take such actions on its behalf and to exercise such powers as are delegated to the Administrative Agent under this Agreement and the other Loan Documents, together with all such actions and powers that are reasonably incidental thereto. The Administrative Agent may perform any of its duties hereunder or under the other Loan Documents by or through any one or more sub-agents or attorneys-in-fact appointed by the Administrative Agent. The Administrative Agent and any such sub-agent or attorney-in-fact may perform any and all of its duties and exercise its rights and powers through their respective Related Parties. The exculpatory provisions set forth in this Article IX shall apply to any such sub-agent or attorney-in-fact and the Related Parties of the Administrative Agent, any such sub-agent and any such attorney-in-fact and shall apply to their respective activities in connection with the syndication of the credit facilities provided for herein as well as activities as Administrative Agent.

        (b)   The Issuing Bank shall act on behalf of the Lenders with respect to any Letters of Credit issued by it and the documents associated therewith until such time and except for so long as the Administrative Agent may agree at the request of the Required Lenders to act for the Issuing Bank with respect thereto; provided, that the Issuing Bank shall have all the benefits and immunities (i) provided to the Administrative Agent in this Article IX with respect to any acts taken or omissions suffered by the Issuing Bank in connection with Letters of Credit issued by it or proposed to be issued by it and the application and agreements for letters of credit pertaining to the Letters of Credit as fully as if the term "Administrative Agent" as used in this Article IX included the Issuing Bank with respect to such acts or omissions and (ii) as additionally provided in this Agreement with respect to the Issuing Bank.

        Section 9.2.    Nature of Duties of Administrative Agent.    The Administrative Agent shall not have any duties or obligations except those expressly set forth in this Agreement and the other Loan Documents. Without limiting the generality of the foregoing, (a) the Administrative Agent shall not be subject to any fiduciary or other implied duties, regardless of whether a Default or an Event of Default has occurred and is continuing, (b) the Administrative Agent shall not have any duty to take any discretionary action or exercise any discretionary powers, except those discretionary rights and powers expressly contemplated by the Loan Documents that the Administrative Agent is required to exercise in writing by the Required Lenders (or such other number or percentage of the Lenders as shall be necessary under the circumstances as provided in Section 10.2), and (c) except as expressly set forth in the Loan Documents, the Administrative Agent shall not have any duty to disclose, and shall not be liable for the failure to disclose, any information relating to the Loan Parties or any of their Subsidiaries that is communicated to or obtained by the Administrative Agent or any of its Affiliates in any capacity. The Administrative Agent shall not be liable for any action taken or not taken by it, its sub-agents or attorneys-in-fact with the consent or at the request of the Required Lenders (or such other number or percentage of the Lenders as shall be necessary under the circumstances as provided in Section 10.2) or in the absence of its own gross negligence or willful misconduct. The Administrative Agent shall not be responsible for the negligence or misconduct of any sub-agents or attorneys-in-fact

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selected by it with reasonable care. The Administrative Agent shall not be deemed to have knowledge of any Default or Event of Default unless and until written notice thereof (which notice shall include an express reference to such event being a "Default" or "Event of Default" hereunder) is given to the Administrative Agent by the Borrower or any Lender, and the Administrative Agent shall not be responsible for or have any duty to ascertain or inquire into (i) any statement, warranty or representation made in or in connection with any Loan Document, (ii) the contents of any certificate, report or other document delivered hereunder or thereunder or in connection herewith or therewith, (iii) the performance or observance of any of the covenants, agreements, or other terms and conditions set forth in any Loan Document, (iv) the validity, enforceability, effectiveness or genuineness of any Loan Document or any other agreement, instrument or document, or (v) the satisfaction of any condition set forth in Article III or elsewhere in any Loan Document, other than to confirm receipt of items expressly required to be delivered to the Administrative Agent. The Administrative Agent may consult with legal counsel (including counsel for the Borrower) concerning all matters pertaining to such duties.

        Section 9.3.    Lack of Reliance on the Administrative Agent.    Each of the Lenders, the Swingline Lender and the Issuing Bank acknowledges that it has, independently and without reliance upon the Administrative Agent, any Issuing Bank or any other Lender and based on such documents and information as it has deemed appropriate, made its own credit analysis and decision to enter into this Agreement. Each of the Lenders, the Swingline Lender and the Issuing Bank also acknowledges that it will, independently and without reliance upon the Administrative Agent, any Issuing Bank or any other Lender and based on such documents and information as it has deemed appropriate, continue to make its own decisions in taking or not taking of any action under or based on this Agreement, any related agreement or any document furnished hereunder or thereunder.

        Section 9.4.    Certain Rights of the Administrative Agent.    If the Administrative Agent shall request instructions from the Required Lenders with respect to any action or actions (including the failure to act) in connection with this Agreement, the Administrative Agent shall be entitled to refrain from such act or taking such act, unless and until it shall have received instructions from such Lenders; and the Administrative Agent shall not incur liability to any Person by reason of so refraining. Without limiting the foregoing, no Lender shall have any right of action whatsoever against the Administrative Agent as a result of the Administrative Agent acting or refraining from acting hereunder in accordance with the instructions of the Required Lenders where required by the terms of this Agreement.

        Section 9.5.    Reliance by Administrative Agent.    The Administrative Agent shall be entitled to rely upon, and shall not incur any liability for relying upon, any notice, request, certificate, consent, statement, instrument, document or other writing (including any electronic message, posting or other distribution) believed by it to be genuine and to have been signed, sent or made by the proper Person. The Administrative Agent may also rely upon any statement made to it orally or by telephone and believed by it to be made by the proper Person and shall not incur any liability for relying thereon. The Administrative Agent may consult with legal counsel (including counsel for the Borrower), independent public accountants and other experts selected by it and shall not be liable for any action taken or not taken by it in accordance with the advice of such counsel, accountants or experts.

        Section 9.6.    The Administrative Agent in its Individual Capacity.    The bank serving as the Administrative Agent shall have the same rights and powers under this Agreement and any other Loan Document in its capacity as a Lender as any other Lender and may exercise or refrain from exercising the same as though it were not the Administrative Agent; and the terms "Lenders", "Required Lenders", "Required Revolving Lenders", or any similar terms shall, unless the context clearly otherwise indicates, include the Administrative Agent in its individual capacity. The bank acting as the Administrative Agent and its Affiliates may accept deposits from, lend money to, and generally engage in any kind of business with the Borrower or any Subsidiary or Affiliate of the Borrower as if it were not the Administrative Agent hereunder.

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        Section 9.7.    Successor Administrative Agent.

        (a)   The Administrative Agent may resign at any time by giving notice thereof to the Lenders and the Borrower. Upon any such resignation, the Required Lenders shall have the right to appoint a successor Administrative Agent, subject to the approval by the Borrower provided that no Default or Event of Default shall exist at such time. If no successor Administrative Agent shall have been so appointed, and shall have accepted such appointment within 30 days after the retiring Administrative Agent gives notice of resignation, then the retiring Administrative Agent may, on behalf of the Lenders and the Issuing Bank, appoint a successor Administrative Agent, which shall be a commercial bank organized under the laws of the United States of America or any state thereof or a bank which maintains an office in the United States, having a combined capital and surplus of at least $500,000,000.

        (b)   Upon the acceptance of its appointment as the Administrative Agent hereunder by a successor, such successor Administrative Agent shall thereupon succeed to and become vested with all the rights, powers, privileges and duties of the retiring Administrative Agent, and the retiring Administrative Agent shall be discharged from its duties and obligations under this Agreement and the other Loan Documents. If within 45 days after written notice is given of the retiring Administrative Agent's resignation under this Section 9.7 no successor Administrative Agent shall have been appointed and shall have accepted such appointment, then on such 45^th day (i) the retiring Administrative Agent's resignation shall become effective, (ii) the retiring Administrative Agent shall thereupon be discharged from its duties and obligations under the Loan Documents and (iii) the Required Lenders shall thereafter perform all duties of the retiring Administrative Agent under the Loan Documents until such time as the Required Lenders appoint a successor Administrative Agent as provided above. After any retiring Administrative Agent's resignation hereunder, the provisions of this Article IX shall continue in effect for the benefit of such retiring Administrative Agent and its representatives and agents in respect of any actions taken or not taken by any of them while it was serving as the Administrative Agent.

        Section 9.8.    Withholding Tax.    To the extent required by any applicable law, the Administrative Agent may withhold from any interest payment to any Lender an amount equivalent to any applicable withholding tax. If the Internal Revenue Service or any authority of the United States or other jurisdiction asserts a claim that the Administrative Agent did not properly withhold tax from amounts paid to or for the account of any Lender (because the appropriate form was not delivered, was not properly executed, or because such Lender failed to notify the Administrative Agent of a change in circumstances that rendered the exemption from, or reduction of, withholding tax ineffective, or for any other reason), such Lender shall indemnify the Administrative Agent (to the extent that the Administrative Agent has not already been reimbursed by the Borrower and without limiting the obligation of the Borrower to do so) fully for all amounts paid, directly or indirectly, by the Administrative Agent as tax or otherwise, including penalties and interest, together with all expenses incurred, including legal expenses, allocated staff costs and any out of pocket expenses.

        Section 9.9.    Administrative Agent May File Proofs of Claim.

        (a)   In case of the pendency of any receivership, insolvency, liquidation, bankruptcy, reorganization, arrangement, adjustment, composition or other judicial proceeding relative to any Loan Party, the Administrative Agent (irrespective of whether the principal of any Loan or any Revolving Credit Exposure shall then be due and payable as herein expressed or by declaration or otherwise and irrespective of whether the Administrative Agent shall have made any demand on the Borrower) shall be entitled and empowered, by intervention in such proceeding or otherwise

        (b)   (a) to file and prove a claim for the whole amount of the principal and interest owing and unpaid in respect of the Loans or Revolving Credit Exposure and all other Obligations that are owing and unpaid and to file such other documents as may be necessary or advisable in order

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to have the claims of the Lenders, Issuing Bank and the Administrative Agent (including any claim for the reasonable compensation, expenses, disbursements and advances of the Lenders, Issuing Bank and the Administrative Agent and its agents and counsel and all other amounts due the Lenders, Issuing Bank and the Administrative Agent under Section 10.3) allowed in such judicial proceeding; and

        (c)   to collect and receive any monies or other property payable or deliverable on any such claims and to distribute the same; and

        (d)   any custodian, receiver, assignee, trustee, liquidator, sequestrator or other similar official in any such judicial proceeding is hereby authorized by each Lender and the Issuing Bank to make such payments to the Administrative Agent and, if the Administrative Agent shall consent to the making of such payments directly to the Lenders and the Issuing Bank, to pay to the Administrative Agent any amount due for the reasonable compensation, expenses, disbursements and advances of the Administrative Agent and its agents and counsel, and any other amounts due the Administrative Agent under Section 10.3.

Nothing contained herein shall be deemed to authorize the Administrative Agent to authorize or consent to or accept or adopt on behalf of any Lender or the Issuing Bank any plan of reorganization, arrangement, adjustment or composition affecting the Obligations or the rights of any Lender or to authorize the Administrative Agent to vote in respect of the claim of any Lender in any such proceeding.

        Section 9.10.    Loan Documents; Collateral Documents.    Each Lender hereby authorizes the Administrative Agent to execute on behalf of all Lenders all Loan Documents and the other Collateral Documents, and the parties hereto acknowledge that such Loan Documents and Collateral Documents are binding upon them.

        Section 9.11.    Collateral and Guaranty Matters.    The Lenders irrevocably authorize the Administrative Agent, at its option and in its discretion:

        (a)   to release any Lien on any property granted to or held by the Administrative Agent under any Loan Document (i) upon termination of all Revolving Commitments and payment in full of all Obligations (other than contingent indemnification obligations) and the expiration or termination of all Letters of Credit (or the cash collateralization of such Letters of Credit on terms acceptable to the Administrative Agent and the Issuing Bank), (ii) that is sold or to be sold as part of or in connection with any sale permitted hereunder or under any other Loan Document, or (iii) if approved, authorized or ratified in writing in accordance with Section 10.2;

        (b)   to release any Guarantor from its obligations under the Guaranty and Security Agreement if such Person ceases to be a Subsidiary as a result of a transaction permitted hereunder; and

Upon request by the Administrative Agent at any time, the Required Lenders will confirm in writing the Administrative Agent's authority to release its interest in particular types or items of property, or to release any Guarantor from its obligations under the Guaranty and Security Agreement pursuant to this Section 9.11. In each case as specified in this Section 9.11, the Administrative Agent is authorized to, at the Borrower's expense, execute and deliver to the applicable Loan Party such documents as such Loan Party may reasonably request to evidence the release of such item of Collateral from the Liens granted under the Collateral Documents, or to release such Guarantor from its obligations under the Guaranty and Security Agreement, in each case in accordance with the terms of the Loan Documents and this Section 9.11.

        Section 9.12.    Right to Realize on Collateral and Enforce Guarantee.    Anything contained in any of the Loan Documents to the contrary notwithstanding, the Borrower, the Administrative Agent and each

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Lender hereby agree that (i) no Lender shall have any right individually to realize upon any of the Collateral or to enforce the Collateral Documents, it being understood and agreed that all powers, rights and remedies hereunder and under the Collateral Documents may be exercised solely by the Administrative Agent, and (ii) in the event of a foreclosure by the Administrative Agent on any of the Collateral pursuant to a public or private sale or other disposition, the Administrative Agent or any Lender may be the purchaser or licensor of any or all of such Collateral at any such sale or other disposition and the Administrative Agent, as agent for and representative of the Lenders (but not any Lender or Lenders in its or their respective individual capacities unless Required Lenders shall otherwise agree in writing) shall be entitled, for the purpose of bidding and making settlement or payment of the purchase price for all or any portion of the Collateral sold at any such public sale, to use and apply any of the Obligations as a credit on account of the purchase price for any collateral payable by the Administrative Agent at such sale or other disposition.

        Section 9.13.    Documentation Agent; Syndication Agent.    Each Lender hereby designates TD Banknorth N.A. as Documentation Agent and agrees that the Documentation Agent shall have no duties or obligations under any Loan Documents to any Lender or any Loan Party. Each Lender hereby designates Branch Banking and Trust Company as Syndication Agent and agrees that the Syndication Agent shall have no duties or obligations under any Loan Documents to any Lender or any Loan Party.

ARTICLE X

MISCELLANEOUS

        Section 10.1.    Notices.

        (a)   Written Notices.

        (i)    Except in the case of notices and other communications expressly permitted to be given by telephone, all notices and other communications to any party herein to be effective shall be in writing and shall be delivered by hand or overnight courier service, mailed by certified or registered mail or sent by telecopy, as follows:

To the Borrower, Holdings or International:	FGX International Inc. 500 George Washington Highway Smithfield, Rhode Island 02917 Attention: Anthony Di Paola Telecopy Number: (401) 232-7235
With a copy to:	Greenberg Traurig 200 Park Avenue, PO Box 677 Florham Park, NJ 07932-0677 Attention: Jeffrey M. Rosenthal Telecopy Number: (973) 301-8410
	and
	FGX International Inc. 500 George Washington Highway Smithfield, Rhode Island 02917 Attention: General Counsel

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To the Administrative Agent or Swingline Lender:	SunTrust Bank 303 Peachtree Street, N. E. Atlanta, Georgia 30308 Attention: Laura Kahn Telecopy Number: (404) 230-5528
With a copy to:	SunTrust Bank Agency Services 303 Peachtree Street, N. E./ 25th Floor Atlanta, Georgia 30308 Attention: Ms. Dorris Folsom Telecopy Number: (404) 658-4906
	and
	King & Spalding LLP 1180 Peachtree Street, N.W. Atlanta, Georgia 30309 Attention: Carolyn Z. Alford Telecopy Number: (404) 572-5100
To the Issuing Bank:	SunTrust Bank 25 Park Place, N. E./Mail Code 3706 16th Floor Atlanta, Georgia 30303 Attention: Standby Letter of Credit Dept. Telecopy Number: (404) 588-8129
To the Swingline Lender:	SunTrust Bank Agency Services 303 Peachtree Street, N.E./25th Floor Atlanta, Georgia 30308 Attention: Ms. Dorris Folsom Telecopy Number: (404) 658-4906
To any other Lender:	the address set forth in the Administrative Questionnaire or the Assignment and Acceptance Agreement executed by such Lender

Any party hereto may change its address or telecopy number for notices and other communications hereunder by notice to the other parties hereto. All such notices and other communications shall, when transmitted by overnight delivery, or faxed, be effective when delivered for overnight (next-day) delivery, or transmitted in legible form by facsimile machine, respectively, or if mailed, upon the third Business Day after the date deposited into the mail or if delivered, upon delivery; provided, that notices delivered to the Administrative Agent, the Issuing Bank or the Swingline Lender shall not be effective until actually received by such Person at its address specified in this Section 10.1.

        (ii)   Any agreement of the Administrative Agent, the Issuing Bank or the Lenders herein to receive certain notices by telephone or facsimile is solely for the convenience and at the request of the Borrower. The Administrative Agent, the Issuing Bank and the Lenders shall be entitled to rely on the authority of any Person purporting to be a Person authorized by the Borrower to give such notice and the Administrative Agent, the Issuing Bank and the Lenders shall not have any liability to the Borrower or other Person on account of any action taken or

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not taken by the Administrative Agent, the Issuing Bank and the Lenders in reliance upon such telephonic or facsimile notice. The obligation of the Borrower to repay the Loans and all other Obligations hereunder shall not be affected in any way or to any extent by any failure of the Administrative Agent, the Issuing Bank and the Lenders to receive written confirmation of any telephonic or facsimile notice or the receipt by the Administrative Agent, the Issuing Bank and the Lenders of a confirmation which is at variance with the terms understood by the Administrative Agent, the Issuing Bank and the Lenders to be contained in any such telephonic or facsimile notice.

        (b)   Electronic Communications.

        (i)    Notices and other communications to the Lenders and the Issuing Bank hereunder may be delivered or furnished by electronic communication (including e-mail and Internet or intranet websites) pursuant to procedures approved by Administrative Agent, provided that the foregoing shall not apply to notices to any Lender or the Issuing Bank pursuant to Article II unless such Lender, the Issuing Bank (as applicable) and Administrative Agent have agreed to receive notices under such Section by electronic communication and have agreed to the procedures governing such communications. Administrative Agent or Borrower may, in its discretion, agree to accept notices and other communications to it hereunder by electronic communications pursuant to procedures approved by it; provided that approval of such procedures may be limited to particular notices or communications.

        (ii)   Unless Administrative Agent otherwise prescribes, (i) notices and other communications sent to an e-mail address shall be deemed received upon the sender's receipt of an acknowledgement from the intended recipient (such as by the "return receipt requested" function, as available, return e-mail or other written acknowledgement); provided that if such notice or other communication is not sent during the normal business hours of the recipient, such notice or communication shall be deemed to have been sent at the opening of business on the next Business Day for the recipient, and (ii) notices or communications posted to an Internet or intranet website shall be deemed received upon the deemed receipt by the intended recipient at its e-mail address as described in the foregoing clause (i) of notification that such notice or communication is available and identifying the website address therefor.

        Section 10.2.    Waiver; Amendments.

        (a)   No failure or delay by the Administrative Agent, the Issuing Bank or any Lender in exercising any right or power hereunder or any other Loan Document, and no course of dealing between the Borrower, Holdings or International on the one hand and the Administrative Agent or any Secured Party, shall operate as a waiver thereof, nor shall any single or partial exercise of any such right or power or any abandonment or discontinuance of steps to enforce such right or power, preclude any other or further exercise thereof or the exercise of any other right or power hereunder or thereunder. The rights and remedies of the Administrative Agent, the Issuing Bank and the Lenders hereunder and under the other Loan Documents are cumulative and are not exclusive of any rights or remedies provided by law. No waiver of any provision of this Agreement or any other Loan Document or consent to any departure by any Loan Party therefrom shall in any event be effective unless the same shall be permitted by paragraph (b) of this Section 10.2, and then such waiver or consent shall be effective only in the specific instance and for the purpose for which given. Without limiting the generality of the foregoing, the making of a Loan or the issuance of a Letter of Credit shall not be construed as a waiver of any Default or Event of Default, regardless of whether the Administrative Agent, any Lender or the Issuing Bank may have had notice or knowledge of such Default or Event of Default at the time.

        (b)   No amendment or waiver of any provision of this Agreement or the other Loan Documents, nor consent to any departure by any Loan Party therefrom, shall in any event be

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effective unless the same shall be in writing and signed by the Borrower and the Required Lenders or the Borrower and the Administrative Agent with the consent of the Required Lenders and then such waiver or consent shall be effective only in the specific instance and for the specific purpose for which given; provided, that no amendment or waiver shall: (i) increase the Commitment of any Lender without the written consent of such Lender, (ii) reduce the principal amount of any Loan or LC Disbursement or reduce the rate of interest thereon, or reduce any fees payable hereunder, without the written consent of each Lender affected thereby (excluding any mandatory prepayments required under Section 2.12, which shall require only Required Lenders), (iii) postpone the date fixed for any payment of any principal of, or interest on, any Loan or LC Disbursement or interest thereon or any fees hereunder or reduce the amount of, waive or excuse any such payment, or postpone the scheduled date for the termination or reduction of any Commitment, without the written consent of each Lender affected thereby, (iv) change Section 2.21(b) or (c) or Section 8.2 in a manner that would alter the pro rata sharing of payments required thereby, without the written consent of each Lender, (v) change any of the provisions of this Section 10.2 or the definition of "Required Lenders", "Required Revolving Lenders" or any other provision hereof specifying the number or percentage of Lenders which are required to waive, amend or modify any rights hereunder or make any determination or grant any consent hereunder, without the consent of each Lender; (vi) release any guarantor or limit the liability of any such guarantor under any guaranty agreement, without the written consent of each Lender; (vii) release all or substantially all collateral (if any) securing any of the Obligations or agree to subordinate any Lien in such collateral to any other creditor of any Loan Party or any Subsidiary thereof, without the written consent of each Lender or (viii) waive a Default or Event of Default for purposes of issuing a Letter of Credit or funding any Revolving Credit Advance, without the consent of the Required Revolving Lenders; provided further, that no such agreement shall amend, modify or otherwise affect the rights, duties or obligations of the Administrative Agent, the Swingline Lender or the Issuing Bank without the prior written consent of such Person. Notwithstanding anything contained herein to the contrary, this Agreement may be amended and restated without the consent of any Lender (but with the consent of the Borrower and the Administrative Agent) if, upon giving effect to such amendment and restatement, such Lender shall no longer be a party to this Agreement (as so amended and restated), the Commitments of such Lender shall have terminated (but such Lender shall continue to be entitled to the benefits of Sections 2.18, 2.19, 2.20 and 10.3), such Lender shall have no other commitment or other obligation hereunder and shall have been paid in full all principal, interest and other amounts owing to it or accrued for its account under this Agreement.

        (c)   No notice to or demand on Borrower shall entitle Borrower to any other or further notice or demand in the same, similar or other circumstances. Each holder of a Note shall be bound by any amendment, modification, waiver or consent authorized as provided herein, whether or not a Note shall have been marked to indicate such amendment, modification, waiver or consent and any consent by a Lender, or any holder of a Note, shall bind any Person subsequently acquiring a Note, whether or not a Note is so marked.

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        Section 10.3.    Expenses; Indemnification.

        (a)   The Borrower shall pay (i) all reasonable, out-of-pocket costs and expenses of the Administrative Agent and its Affiliates, including the reasonable fees, charges and disbursements of counsel for the Administrative Agent and its Affiliates, in connection with the syndication of the credit facilities provided for herein, the preparation and administration of the Loan Documents and any amendments, modifications or waivers thereof (whether or not the transactions contemplated in this Agreement or any other Loan Document shall be consummated), (ii) all reasonable out-of-pocket expenses incurred by the Issuing Bank in connection with the issuance, amendment, renewal or extension of any Letter of Credit or any demand for payment thereunder and (iii) all out-of-pocket costs and expenses (including, without limitation, the reasonable fees, charges and disbursements of outside counsel and the allocated cost of inside counsel) incurred by the Administrative Agent, the Issuing Bank or any Lender in connection with the enforcement or protection of its rights in connection with this Agreement, including its rights under this Section 10.3, or in connection with the Loans made or any Letters of Credit issued hereunder, including all such out-of-pocket expenses incurred during any workout, restructuring or negotiations in respect of such Loans or Letters of Credit.

        (b)   The Borrower, Holdings and International shall, jointly and severally, indemnify the Administrative Agent (and any sub-agent thereof), each Lender, the Issuing Bank and each Related Party of any of the foregoing Persons (each such Person being called an "Indemnitee") against, and hold each Indemnitee harmless from, any and all losses, claims, damages, liabilities and related expenses (including the fees, charges and disbursements of any counsel for any Indemnitee), and shall indemnify and hold harmless each Indemnitee from all fees and time charges and disbursements for attorneys who may be employees of any Indemnitee, incurred by any Indemnitee or asserted against any Indemnitee by any third party or by any Loan Party arising out of, in connection with, or as a result of (i) the execution or delivery of this Agreement, any other Loan Document or any agreement or instrument contemplated hereby or thereby, the performance by the parties hereto of their respective obligations hereunder or thereunder or the consummation of the transactions contemplated hereby or thereby, (ii) any Loan or Letter of Credit or the use or proposed use of the proceeds therefrom (including any refusal by the Issuing Bank to honor a demand for payment under a Letter of Credit if the documents presented in connection with such demand do not strictly comply with the terms of such Letter of Credit), (iii) the use by any Person of any information or materials obtained through Intralinks or any other Internet Web Sites, (iv) any actual or alleged presence or Release of Hazardous Materials on or from any property owned or operated by any Loan Party or any of its Subsidiaries, or any Environmental Liability related in any way to any Loan Party or any of its Subsidiaries, or (v) any actual or prospective claim, litigation, investigation or proceeding relating to any of the foregoing, whether based on contract, tort or any other theory, whether brought by a third party or by any Loan Party, and regardless of whether any Indemnitee is a party thereto, provided that such indemnity shall not, as to any Indemnitee, be available to the extent that such losses, claims, damages, liabilities or related expenses (x) are determined by a court of competent jurisdiction by final and nonappealable judgment to have resulted from the gross negligence or willful misconduct of such Indemnitee or (y) result from a claim brought by any Loan Party against an Indemnitee for breach in bad faith of such Indemnitee's obligations hereunder or under any other Loan Document, in each case so long as such Loan Party has obtained a final and nonappealable judgment in its favor on such claim as determined by a court of competent jurisdiction. No Indemnitee shall be liable for any damages arising from the use by others of any information or other materials obtained through Intralinks or any other Internet or intranet website, except as a result of such Indemnitee's gross negligence or willful misconduct as determined by a court of competent jurisdiction in a final and nonappealable judgment.

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        (c)   The Borrower, Holdings and International shall jointly and severally pay, and hold the Administrative Agent, the Issuing Bank and each of the Lenders harmless from and against, any and all present and future stamp, documentary, and other similar taxes with respect to this Agreement and any other Loan Documents, any Collateral described therein, or any payments due thereunder, and save the Administrative Agent, the Issuing Bank and each Lender harmless from and against any and all liabilities with respect to or resulting from any delay or omission to pay such taxes.

        (d)   To the extent that the Borrower fails to pay any amount required to be paid to the Administrative Agent, the Issuing Bank or the Swingline Lender under clauses (a), (b) or (c) hereof, each Lender severally agrees to pay to the Administrative Agent, the Issuing Bank or the Swingline Lender, as the case may be, such Lender's Pro Rata Share (determined as of the time that the unreimbursed expense or indemnity payment is sought) of such unpaid amount; provided, that the unreimbursed expense or indemnified payment, claim, damage, liability or related expense, as the case may be, was incurred by or asserted against the Administrative Agent, the Issuing Bank or the Swingline Lender in its capacity as such.

        (e)   To the extent permitted by applicable law, none of the Borrower, Holdings or International shall assert, and hereby waives, any claim against any Indemnitee, on any theory of liability, for special, indirect, consequential or punitive damages (as opposed to actual or direct damages) arising out of, in connection with or as a result of, this Agreement or any agreement or instrument contemplated hereby, the transactions contemplated therein, any Loan, any Letter of Credit or the use of proceeds thereof.

        (f)    All amounts due under this Section 10.3 shall be payable promptly after written demand therefor.

        Section 10.4.    Successors and Assigns.

        (a)   The provisions of this Agreement shall be binding upon and inure to the benefit of the parties hereto and their respective successors and assigns permitted hereby, except that neither the Borrower, Holdings or International may not assign or otherwise transfer any of its rights or obligations hereunder without the prior written consent of the Administrative Agent and each Lender, and no Lender may assign or otherwise transfer any of its rights or obligations hereunder except (i) to an assignee in accordance with the provisions of paragraph (b) of this Section, (ii) by way of participation in accordance with the provisions of paragraph (d) of this Section or (iii) by way of pledge or assignment of a security interest subject to the restrictions of paragraph (f) of this Section (and any other attempted assignment or transfer by any party hereto shall be null and void). Nothing in this Agreement, expressed or implied, shall be construed to confer upon any Person (other than the parties hereto, their respective successors and assigns permitted hereby, Participants to the extent provided in paragraph (d) of this Section and, to the extent expressly contemplated hereby, the Related Parties of each of the Administrative Agent and the Lenders) any legal or equitable right, remedy or claim under or by reason of this Agreement.

        (b)   Any Lender may at any time assign to one or more assignees all or a portion of its rights and obligations under this Agreement (including all or a portion of its Commitments, Loans and other Revolving Credit Exposure at the time owing to it); provided that any such assignment shall be subject to the following conditions:

        (i)    Minimum Amounts.

        (A)  in the case of an assignment of the entire remaining amount of the assigning Lender's Commitments, Loans and other Revolving Credit Exposure at the time owing to it or in the case of an assignment to a Lender, an Affiliate of a Lender or an Approved Fund, no minimum amount need be assigned; and

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        (B)  in any case not described in paragraph (b)(i)(A) of this Section, the aggregate amount of the Commitment (which for this purpose includes Loans and Revolving Credit Exposure outstanding thereunder) or, if the applicable Commitment is not then in effect, the principal outstanding balance of the Loans and Revolving Credit Exposure of the assigning Lender subject to each such assignment (determined as of the date the Assignment and Acceptance with respect to such assignment is delivered to the Administrative Agent or, if "Trade Date" is specified in the Assignment and Acceptance, as of the Trade Date) shall not be less than $1,000,000, unless each of the Administrative Agent and, so long as no Event of Default has occurred and is continuing, the Borrower otherwise consents (each such consent not to be unreasonably withheld or delayed).

        (ii)   Proportionate Amounts.    Each partial assignment shall be made as an assignment of a proportionate part of all the assigning Lender's rights and obligations under this Agreement with respect to the Loans, other Revolving Credit Exposure or the Commitments assigned, except that this clause (ii) shall not prohibit any Lender from assigning all or a portion of its rights and obligations among separate Commitments on a non-pro rata basis.

        (iii)  Required Consents.    No consent shall be required for any assignment except to the extent required by paragraph (b)(i)(B) of this Section and, in addition:

        (A)  the consent of the Borrower (such consent not to be unreasonably withheld or delayed) shall be required unless (x) an Event of Default has occurred and is continuing at the time of such assignment or (y) such assignment is to a Lender, an Affiliate of a Lender or an Approved Fund;

        (B)  the consent of the Administrative Agent (such consent not to be unreasonably withheld or delayed) shall be required for assignments to a Person that is not a Lender with a Commitment; and

        (C)  the consent of the Issuing Bank (such consent not to be unreasonably withheld or delayed) shall be required for any assignment that increases the obligation of the assignee to participate in exposure under one or more Letters of Credit (whether or not then outstanding), and the consent of the Swingline Lender (such consent not to be unreasonably withheld or delayed) shall be required for any assignment in respect of the Revolving Commitments.

        (iv)  Assignment and Acceptance.    The parties to each assignment shall deliver to the Administrative Agent (A) a duly executed Assignment and Acceptance, (B) a processing and recordation fee of $3,500, (C) an Administrative Questionnaire unless the assignee is already a Lender and (D) the documents required under Section 2.20 if such assignee is a Foreign Lender.

        (v)   No Assignment to Borrower.    No such assignment shall be made to the Borrower or any of the Borrower's Affiliates or Subsidiaries.

        (vi)  No Assignment to Natural Persons.    No such assignment shall be made to a natural person.

        (vii) No Assignment to Competitor.    No such assignment shall be made to a competitor of the Loan Parties.

Subject to acceptance and recording thereof by the Administrative Agent pursuant to paragraph (c) of this Section 10.4, from and after the effective date specified in each Assignment and Acceptance, the assignee thereunder shall be a party to this Agreement and, to the extent of the interest assigned by such Assignment and Acceptance, have the rights and obligations of a Lender under this Agreement, and the assigning Lender thereunder shall, to the extent of the

77

interest assigned by such Assignment and Acceptance, be released from its obligations under this Agreement (and, in the case of an Assignment and Acceptance covering all of the assigning Lender's rights and obligations under this Agreement, such Lender shall cease to be a party hereto) but shall continue to be entitled to the benefits of Sections 2.18, 2.19, 2.20 and 10.3 with respect to facts and circumstances occurring prior to the effective date of such assignment. Any assignment or transfer by a Lender of rights or obligations under this Agreement that does not comply with this paragraph shall be treated for purposes of this Agreement as a sale by such Lender of a participation in such rights and obligations in accordance with paragraph (d) of this Section 10.4. If the consent of the Borrower to an assignment is required hereunder (including a consent to an assignment which does not meet the minimum assignment thresholds specified above), the Borrower shall be deemed to have given its consent five Business Days after the date notice thereof has actually been delivered by the assigning Lender (through the Administrative Agent) to the Borrower, unless such consent is expressly refused by the Borrower prior to such fifth Business Day.

        (c)   The Administrative Agent, acting solely for this purpose as an agent of the Borrower, shall maintain at one of its offices in Atlanta, Georgia a copy of each Assignment and Acceptance delivered to it and a register for the recordation of the names and addresses of the Lenders, and the Commitments of, and principal amount of the Loans and Revolving Credit Exposure owing to, each Lender pursuant to the terms hereof from time to time (the "Register"). Information contained in the Register with respect to any Lender shall be available for inspection by such Lender at any reasonable time and from time to time upon reasonable prior notice; information contained in the Register shall also be available for inspection by the Borrower at any reasonable time and from time to time upon reasonable prior notice. In establishing and maintaining the Register, Administrative Agent shall serve as Company's agent solely for tax purposes and solely with respect to the actions described in this Section, and the Borrower hereby agrees that, to the extent SunTrust Bank serves in such capacity, SunTrust Bank and its officers, directors, employees, agents, sub-agents and affiliates shall constitute "Indemnitees."

        (d)   Any Lender may at any time, without the consent of, or notice to, any Loan Party, the Administrative Agent, the Swingline Lender or the Issuing Bank sell participations to any Person (other than a natural person, the Borrower or any of the Borrower's Affiliates or Subsidiaries) (each, a "Participant") in all or a portion of such Lender's rights and/or obligations under this Agreement (including all or a portion of its Commitment and/or the Loans owing to it); provided that (i) such Lender's obligations under this Agreement shall remain unchanged, (ii) such Lender shall remain solely responsible to the other parties hereto for the performance of such obligations and (iii) each Loan Party, the Administrative Agent, the Lenders, the Issuing Bank, and the Swingline Lender shall continue to deal solely and directly with such Lender in connection with such Lender's rights and obligations under this Agreement.

        (e)   Any agreement or instrument pursuant to which a Lender sells such a participation shall provide that such Lender shall retain the sole right to enforce this Agreement and to approve any amendment, modification or waiver of any provision of this Agreement; provided that such agreement or instrument may provide that such Lender will not, without the consent of the Participant, agree to any amendment, modification or waiver with respect to the following to the extent affecting such Participant: (i) increase the Commitment of any Lender without the written consent of such Lender, (ii) reduce the principal amount of any Loan or LC Disbursement or reduce the rate of interest thereon, or reduce any fees payable hereunder, without the written consent of each Lender affected thereby, (iii) postpone the date fixed for any payment of any principal of, or interest on, any Loan or LC Disbursement or interest thereon or any fees hereunder or reduce the amount of, waive or excuse any such payment, or postpone the scheduled date for the termination or reduction of any Commitment, without the written consent of each

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Lender affected thereby, (iv) change Section 2.21(b) or (c) in a manner that would alter the pro rata sharing of payments required thereby, without the written consent of each Lender, (v) change any of the provisions of this Section 10.4 or the definition of "Required Lenders" or "Required Revolving Lenders" or any other provision hereof specifying the number or percentage of Lenders which are required to waive, amend or modify any rights hereunder or make any determination or grant any consent hereunder, without the consent of each Lender; (vi) release any guarantor or limit the liability of any such guarantor under any guaranty agreement without the written consent of each Lender except to the extent such release is expressly provided under the terms of such guaranty agreement; or (vii) release all or substantially all collateral (if any) securing any of the Obligations. Subject to paragraph (e) of this Section 10.4, the Borrower agrees that each Participant shall be entitled to the benefits of Sections 2.18, 2.19, and 2.20 to the same extent as if it were a Lender and had acquired its interest by assignment pursuant to paragraph (b) of this Section 10.4. To the extent permitted by law, each Participant also shall be entitled to the benefits of Section 10.7 as though it were a Lender, provided such Participant agrees to be subject to Section 2.21 as though it were a Lender.

        (f)    A Participant shall not be entitled to receive any greater payment under Section 2.18 and Section 2.20 than the applicable Lender would have been entitled to receive with respect to the participation sold to such Participant, unless the sale of the participation to such Participant is made with the Borrower's prior written consent. A Participant that would be a Foreign Lender if it were a Lender shall not be entitled to the benefits of Section 2.20 unless the Borrower is notified of the participation sold to such Participant and such Participant agrees, for the benefit of the Borrower, to comply with Section 2.20(e) as though it were a Lender.

        (g)   Any Lender may at any time pledge or assign a security interest in all or any portion of its rights under this Agreement to secure obligations of such Lender, including without limitation any pledge or assignment to secure obligations to a Federal Reserve Bank; provided that no such pledge or assignment shall release such Lender from any of its obligations hereunder or substitute any such pledgee or assignee for such Lender as a party hereto.

        Section 10.5.    Governing Law; Jurisdiction; Consent to Service of Process.

        (a)   This Agreement and the other Loan Documents shall be construed in accordance with and be governed by the law (without giving effect to the conflict of law principles thereof except for Sections 5-1401 and 5-1402 of the New York General Obligations Law) of the State of New York.

        (b)   Each of the Borrower, Holdings and International hereby irrevocably and unconditionally submits, for itself and its property, to the exclusive jurisdiction of the United States District Court of the Southern District of New York, and of the Supreme Court of the State of New York sitting in New York County and any appellate court from any thereof, in any action or proceeding arising out of or relating to this Agreement or any other Loan Document or the transactions contemplated hereby or thereby, or for recognition or enforcement of any judgment, and each of the parties hereto hereby irrevocably and unconditionally agrees that all claims in respect of any such action or proceeding may be heard and determined in such New York state court or, to the extent permitted by applicable law, such Federal court. Each of the parties hereto agrees that a final judgment in any such action or proceeding shall be conclusive and may be enforced in other jurisdictions by suit on the judgment or in any other manner provided by law. Nothing in this Agreement or any other Loan Document shall affect any right that the Administrative Agent, the Issuing Bank or any Lender may otherwise have to bring any action or proceeding relating to this Agreement or any other Loan Document against the Borrower, Holdings and International or their properties in the courts of any jurisdiction.

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        (c)   Each of the Borrower, Holdings and International irrevocably and unconditionally waives any objection which it may now or hereafter have to the laying of venue of any such suit, action or proceeding described in paragraph (b) of this Section 10.5 and brought in any court referred to in paragraph (b) of this Section 10.5. Each of the parties hereto irrevocably waives, to the fullest extent permitted by applicable law, the defense of an inconvenient forum to the maintenance of such action or proceeding in any such court.

        (d)   Each party to this Agreement irrevocably consents to the service of process in the manner provided for notices in Section 10.1. Nothing in this Agreement or in any other Loan Document will affect the right of any party hereto to serve process in any other manner permitted by law.

        Section 10.6.    WAIVER OF JURY TRIAL.    EACH PARTY HERETO IRREVOCABLY WAIVES, TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, ANY RIGHT IT MAY HAVE TO A TRIAL BY JURY IN ANY LEGAL PROCEEDING DIRECTLY OR INDIRECTLY ARISING OUT OF THIS AGREEMENT OR ANY OTHER LOAN DOCUMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY OR THEREBY (WHETHER BASED ON CONTRACT, TORT OR ANY OTHER THEORY). EACH PARTY HERETO (A) CERTIFIES THAT NO REPRESENTATIVE, AGENT OR ATTORNEY OF ANY OTHER PARTY HAS REPRESENTED, EXPRESSLY OR OTHERWISE, THAT SUCH OTHER PARTY WOULD NOT, IN THE EVENT OF LITIGATION, SEEK TO ENFORCE THE FOREGOING WAIVER, AND (B) ACKNOWLEDGES THAT IT AND THE OTHER PARTIES HERETO HAVE BEEN INDUCED TO ENTER INTO THIS AGREEMENT AND THE OTHER LOAN DOCUMENTS BY, AMONG OTHER THINGS, THE MUTUAL WAIVERS AND CERTIFICATIONS IN THIS SECTION.

        Section 10.7.    Right of Setoff.    In addition to any rights now or hereafter granted under applicable law and not by way of limitation of any such rights, each Lender and the Issuing Bank shall have the right, at any time or from time to time upon the occurrence and during the continuance of an Event of Default, without prior notice to the Borrower, Holdings or International any such notice being expressly waived by the Borrower, Holdings or International to the extent permitted by applicable law, to set off and apply against all deposits (general or special, time or demand, provisional or final) of the Borrower, Holdings and International at any time held or other obligations at any time owing by such Lender and the Issuing Bank to or for the credit or the account of the Borrower, Holdings or International against any and all Obligations held by such Lender or the Issuing Bank, as the case may be, irrespective of whether such Lender or the Issuing Bank shall have made demand hereunder and although such Obligations may be unmatured. Each Lender and the Issuing Bank agree promptly to notify the Administrative Agent and the Borrower after any such set-off and any application made by such Lender and the Issuing Bank, as the case may be; provided, that the failure to give such notice shall not affect the validity of such set-off and application. Each Lender and the Issuing Bank agrees to apply all amounts collected from any such set-off to the Obligations before applying such amounts to any other Indebtedness or other obligations owed by the Loan Parties and any of its Subsidiaries to such Lender or Issuing Bank.

        Section 10.8.    Counterparts; Integration.    This Agreement may be executed by one or more of the parties to this Agreement on any number of separate counterparts (including by telecopy), and all of said counterparts taken together shall be deemed to constitute one and the same instrument. This Agreement, the Fee Letter, the other Loan Documents, and any separate letter agreement(s) relating to any fees payable to the Administrative Agent and its Affiliates constitute the entire agreement among the parties hereto and thereto regarding the subject matters hereof and thereof and supersede all prior agreements and understandings, oral or written, regarding such subject matters.

        Section 10.9.    Survival.    All covenants, agreements, representations and warranties made by the Borrower, Holdings and International herein and in the certificates or other instruments delivered in

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connection with or pursuant to this Agreement shall be considered to have been relied upon by the other parties hereto and shall survive the execution and delivery of this Agreement and the making of any Loans and issuance of any Letters of Credit, regardless of any investigation made by any such other party or on its behalf and notwithstanding that the Administrative Agent, the Issuing Bank or any Lender may have had notice or knowledge of any Default or incorrect representation or warranty at the time any credit is extended hereunder, and shall continue in full force and effect as long as the principal of or any accrued interest on any Loan or any fee or any other amount payable under this Agreement is outstanding and unpaid or any Letter of Credit is outstanding and so long as the Commitments have not expired or terminated. The provisions of Sections 2.18, 2.19, 2.20, and 10.3 and Article IX shall survive and remain in full force and effect regardless of the consummation of the transactions contemplated hereby, the repayment of the Loans, the expiration or termination of the Letters of Credit and the Commitments or the termination of this Agreement or any provision hereof. All representations and warranties made herein, in the certificates, reports, notices, and other documents delivered pursuant to this Agreement shall survive the execution and delivery of this Agreement and the other Loan Documents, and the making of the Loans and the issuance of the Letters of Credit.

        Section 10.10.    Severability.    Any provision of this Agreement or any other Loan Document held to be illegal, invalid or unenforceable in any jurisdiction, shall, as to such jurisdiction, be ineffective to the extent of such illegality, invalidity or unenforceability without affecting the legality, validity or enforceability of the remaining provisions hereof or thereof; and the illegality, invalidity or unenforceability of a particular provision in a particular jurisdiction shall not invalidate or render unenforceable such provision in any other jurisdiction.

        Section 10.11.    Confidentiality.    Each of the Administrative Agent, the Issuing Bank and the Lenders agrees to take normal and reasonable precautions to maintain the confidentiality of any information relating to the Loan Parties or any of its Subsidiaries or any of their respective businesses, to the extent designated in writing as confidential and provided to it by the Loan Parties or any Subsidiary, other than any such information that is available to the Administrative Agent, the Issuing Bank or any Lender on a nonconfidential basis prior to disclosure by the Loan Parties or any of its Subsidiaries, except that such information may be disclosed (i) to any Related Party of the Administrative Agent, the Issuing Bank or any such Lender, including, without limitation, accountants, legal counsel and other advisors, (ii) to the extent required by applicable laws or regulations or by any subpoena or similar legal process, (iii) to the extent requested by any regulatory agency or authority purporting to have jurisdiction over it (including any self-regulatory authority such as the National Association of Insurance Commissioners), (iv) to the extent that such information becomes publicly available other than as a result of a breach of this Section 10.11, or which becomes available to the Administrative Agent, the Issuing Bank, any Lender or any Related Party of any of the foregoing on a non-confidential basis from a source other than the Loan Parties, (v) in connection with the exercise of any remedy hereunder or under any other Loan Documents or any suit, action or proceeding relating to this Agreement or any other Loan Documents or the enforcement of rights hereunder or thereunder, (vii) subject to an agreement containing provisions substantially the same as those of this Section 10.11, to (A) any assignee of or Participant in, or any prospective assignee of or Participant in, any of its rights or obligations under this Agreement, or (B) any actual or prospective party (or its Related Parties) to any swap or derivative or similar transaction under which payments are to be made by reference to the Loan Parties and their obligations, this Agreement or payments hereunder, (viii) any rating agency, (ix) the CUSIP Service Bureau or any similar organization, or (x) with the consent of the Borrower. Any Person required to maintain the confidentiality of any information as provided for in this Section 10.11 shall be considered to have complied with its obligation to do so if such Person has exercised the same degree of care to maintain the confidentiality of such information as such Person would accord its own confidential information.

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        Section 10.12.    Interest Rate Limitation.    Notwithstanding anything herein to the contrary, if at any time the interest rate applicable to any Loan, together with all fees, charges and other amounts which may be treated as interest on such Loan under applicable law (collectively, the "Charges"), shall exceed the maximum lawful rate of interest (the "Maximum Rate") which may be contracted for, charged, taken, received or reserved by a Lender holding such Loan in accordance with applicable law, the rate of interest payable in respect of such Loan hereunder, together with all Charges payable in respect thereof, shall be limited to the Maximum Rate and, to the extent lawful, the interest and Charges that would have been payable in respect of such Loan but were not payable as a result of the operation of this Section 10.12 shall be cumulated and the interest and Charges payable to such Lender in respect of other Loans or periods shall be increased (but not above the Maximum Rate therefor) until such cumulated amount, together with interest thereon at the Federal Funds Rate to the date of repayment (to the extent permitted by applicable law), shall have been received by such Lender.

        Section 10.13.    Waiver of Effect of Corporate Seal.    Each of the Borrower, Holdings and International represents and warrants that neither it nor any other Loan Party is required to affix its corporate seal to this Agreement or any other Loan Document pursuant to any requirement of law or regulation, agrees that this Agreement is delivered by each of the Borrower, Holdings and International under seal and waives any shortening of the statute of limitations that may result from not affixing the corporate seal to this Agreement or such other Loan Documents.

        Section 10.14.    Patriot Act.    The Administrative Agent and each Lender hereby notifies the Loan Parties that pursuant to the requirements of the USA PATRIOT Act (Title III of Pub. L. 107-56 (signed into law October 26, 2001)) (the "Patriot Act"), it is required to obtain, verify and record information that identifies each Loan Party, which information includes the name and address of such Loan Party and other information that will allow such Lender or the Administrative Agent, as applicable, to identify such Loan Party in accordance with the Patriot Act. Each Loan Party shall, and shall cause each of its Subsidiaries to, provide to the extent commercially reasonable, such information and take such other actions as are reasonably requested by the Administrative Agent or any Lender in order to assist the Administrative Agent and the Lenders in maintaining compliance with the Patriot Act.

        Section 10.15.    Location of Closing.    Each Lender acknowledges and agrees that it has delivered, with the intent to be bound, its executed counterparts of this Agreement to the Administrative Agent, c/o King & Spalding LLP, 1185 Avenue of the Americas, New York, New York 10036. Each of the Borrower, Holdings and International acknowledges and agrees that it has delivered, with the intent to be bound, its executed counterparts of this Agreement and each other Loan Document, together with all other documents, instruments, opinions, certificates and other items required under Section 3.1, to the Administrative Agent, c/o King & Spalding LLP, 1185 Avenue of the Americas, New York, New York 10036. All parties agree that closing of the transactions contemplated by this Credit Agreement has occurred in New York.

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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed by their respective authorized officers as of the day and year first above written.

FGX INTERNATIONAL INC.
By	/s/ Anthony Di Paola
	Name:	Anthony Di Paola
	Title:	EVP, CFO, Treasurer
FGX INTERNATIONAL HOLDINGS LIMITED
By	/s/ Anthony Di Paola
	Name:	Anthony Di Paola
	Title:	EVP, CFO, Treasurer
FGX INTERNATIONAL LIMITED
By	/s/ Anthony Di Paola
	Name:	Anthony Di Paola
	Title:	EVP, CFO, Treasurer

[SIGNATURE PAGE TO REVOLVING CREDIT AND TERM LOAN AGREEMENT]

SUNTRUST BANK as Administrative Agent, as Issuing Bank, as Swingline Lender and as a Lender
By	/s/ Laura Kahn
	Name:	Laura Kahn
	Title:	Managing Director

[SIGNATURE PAGE TO REVOLVING CREDIT AND TERM LOAN AGREEMENT]

ALLIED IRISH BANKS, p.l.c., as a Lender
By	/s/ Mags Brennan
	Name:	Mags Brennan
	Title:	SVP/Director
ALLIED IRISH BANKS, p.l.c. as a Lender
By	/s/ Norbert Galligan
	Name:	Norbert Galligan
	Title:	VP

[SIGNATURE PAGE TO REVOLVING CREDIT AND TERM LOAN AGREEMENT]

BANK OF AMERICA, NA, as a Lender
By	/s/ Richard MacDonald
	Name:	Richard MacDonald
	Title:	Vice President

[SIGNATURE PAGE TO REVOLVING CREDIT AND TERM LOAN AGREEMENT]

BRANCH BANKING AND TRUST COMPANY, as a Lender
By	/s/ Roger Eric Searles
	Name:	Roger Eric Searles
	Title:	Assistant Vice President

[SIGNATURE PAGE TO REVOLVING CREDIT AND TERM LOAN AGREEMENT]

BROWN BROTHERS HARRIMAN & CO., as a Lender
By	/s/ Suzanne L. Dwyer
	Name:	Suzanne L. Dwyer
	Title:	SVP

[SIGNATURE PAGE TO REVOLVING CREDIT AND TERM LOAN AGREEMENT]

COMMERCE BANK, N.A., as a Lender
By	/s/ Richard A. Zimmerman
	Name:	Richard A. Zimmerman
	Title:	Vice President

[SIGNATURE PAGE TO REVOLVING CREDIT AND TERM LOAN AGREEMENT]

RAYMOND JAMES BANK, FSB, as a Lender
By	/s/ Thomas F Macina
	Name:	Thomas F Macina
	Title:	Executive Vice President

[SIGNATURE PAGE TO REVOLVING CREDIT AND TERM LOAN AGREEMENT]

TD BANKNORTH N.A., as a Lender
By	/s/ John Mercier
	Name:	John Mercier
	Title:	Senior Vice President

[SIGNATURE PAGE TO REVOLVING CREDIT AND TERM LOAN AGREEMENT]

Schedule I

APPLICABLE MARGIN AND APPLICABLE PERCENTAGE

Pricing Level		Leverage Ratio	Applicable Margin for Eurodollar Loans	Applicable Margin for Base Rate Loans	Applicable Percentage for Commitment Fee
	I	Less than 1.00:1.00	1.00% per annum	0.00% per annum	0.20% per annum
	II	Greater than or equal to 1.00:1.00, but less than 1.50:1.00	1.25% per annum	0.25% per annum	0.25% per annum
	III	Greater than or equal to 1.50:1.00, but less than 2.00:1.00	1.50% per annum	0.50% per annum	0.30% per annum
	IV	Greater than or equal to 2.00:1.00, but less than 2.50:1.00	1.75% per annum	0.75% per annum	0.30% per annum
	V	Greater than or equal to 2.50:1.00, but less than 3.00:1.00	2.00% per annum	1.00% per annum	0.40% per annum
	VI	Greater than or equal to 3.00:1.00	2.25% per annum	1.25% per annum	0.50% per annum

Schedule II

COMMITMENT AMOUNTS

Lender	Revolving Commitment Amount		Term Loan Commitment Amount
SunTrust Bank	$	15,000,000.00	$	24,571,428.60
Branch Banking and Trust Company	$	12,857,142.90	$	17,142,857.10
TD Banknorth N.A.	$	12,857,142.90	$	17,142,857.10
Bank of America, N.A.	$	10,714,285.70	$	14,285,714.30
Raymond James Bank, FSB	$	8,571,428.60	$	11,428,571.40
Commerce Bank, N.A.	$	6,428,571.40	$	8,571,428.60
Brown Brothers Harriman & Co.	$	5,142,857.10	$	6,857,142.90
Allied Irish Banks, p.l.c.	$	3,428,571.40	$	0,000,000.00
Total	$	75,000,000.00	$	100,000,000.00

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EXHIBIT 10.27

EX-21.1

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EXHIBIT 21.1

Subsidiaries of FGX International Holdings Limited

Name of Subsidiary	Jurisdiction of Organization	Fictitious Name
FGX International Limited	British Virgin Islands	None.
Envision Eyewear and Accessories (Shenzhen) Company Limited	China	None.
FGX International Inc.	Delaware	None.
Quantum Optics, Inc.	Delaware	None.
FGX Canada Corp.	Nova Scotia, Canada	None.
FGX Europe Limited	United Kingdom	None.
AAi/Joske's S. de R.L. de C.V. (joint venture)	Mexico	None.
Foster Grant Hong Kong Limited	Hong Kong	None.
Fantasma Hong Kong Limited	Hong Kong	None.

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EXHIBIT 21.1

EX-23.1

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EXHIBIT 23.1

CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

The Board of Directors
FGX International Holdings Limited:

        We consent to the incorporation by reference in the registration statement (No. 333-148083) on Form S-8 of FGX International Holdings Limited of our reports dated March 13, 2008, with respect to the consolidated balance sheets of FGX International Holdings Limited and subsidiaries as of December 29, 2007 and December 30, 2006, and the related consolidated statements of operations, shareholders' equity (deficit) and comprehensive income (loss), and cash flows for the fiscal years ended December 29, 2007, December 30, 2006 and December 31, 2005 and the related consolidated financial statement schedule, which reports appear in the December 29, 2007, annual report on Form 10-K of FGX International Holdings Limited. Our report refers to a change in the accounting for uncertain tax positions in 2007 and to a change in the accounting for share-based payments in 2006.

Providence, Rhode Island
March 13, 2008 /s/ KPMG LLP

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EXHIBIT 23.1

CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

EX-31.1

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Exhibit 31.1

CERTIFICATION PURSUANT TO
SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002

I, Alec Taylor, Chief Executive Officer of FGX International Holdings Limited, certify that:

1.

I have reviewed this annual report on Form 10-K of FGX International Holdings Limited;

2.

Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3.

Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4.

The registrant's other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the registrant and have:

(a)

Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b)

Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(c)

Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and

5.

The registrant's other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of registrant's board of directors (or persons performing the equivalent functions):

(a)

All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and

(b)

Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.

March 13, 2008	/s/  ALEC TAYLOR Alec Taylor
	Title:	Chief Executive Officer (principal executive officer)

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Exhibit 31.1

CERTIFICATION PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002

EX-31.2

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Exhibit 31.2

CERTIFICATION PURSUANT TO
SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002

I, Anthony Di Paola, Chief Financial Officer of FGX International Holdings Limited, certify that:

1.

I have reviewed this annual report on Form 10-K of FGX International Holdings Limited;

2.

Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3.

Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4.

The registrant's other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the registrant and have:

(a)

Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b)

Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(c)

Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and

5.

The registrant's other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of registrant's board of directors (or persons performing the equivalent functions):

(a)

All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and

(b)

Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.

March 13, 2008	/s/  ANTHONY DI PAOLA Anthony Di Paola
	Title:	Chief Financial Officer (principal financial officer)

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Exhibit 31.2

CERTIFICATION PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002

EX-32.1

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Exhibit 32.1

CERTIFICATION PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

        Pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, the undersigned officer of FGX International Holdings Limited (the "Company") certifies that, to his knowledge, the Annual Report on Form 10-K of the Company for the year ended December 29, 2007 fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934 and information contained in that Form 10-K fairly presents, in all material respects, the financial condition and results of operations of the Company.

Date: March 13, 2008 /s/  ALEC TAYLOR Alec Taylor
Chief Executive Officer

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Exhibit 32.1

CERTIFICATION PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

EX-32.2

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Exhibit 32.2

CERTIFICATION PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

        Pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, the undersigned officer of FGX International Holdings Limited (the "Company") certifies that, to his knowledge, the Annual Report on Form 10-K of the Company for the year ended December 29, 2007 fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934 and information contained in that Form 10-K fairly presents, in all material respects, the financial condition and results of operations of the Company.

Date: March 13, 2008 /s/  ANTHONY DI PAOLA Anthony Di Paola
Chief Financial Officer

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Exhibit 32.2

CERTIFICATION PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002