10-K

UNITED STATES SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

Form 10-K

(Mark One)
þ	ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
	For the Fiscal Year Ended December 31, 2005
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 001-12776

REFAC OPTICAL GROUP

(Exact name of registrant as specified in its charter)

Delaware	13-1681234
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification No.)

One Bridge Plaza, Suite 550

Fort Lee, New Jersey 07024-7102

(Address of principal executive offices) (Zip Code)

Registrant’s telephone number, including area code: (201) 585-0600

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

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

Common Stock, par value $.001 per share

(Title of Class)

      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 þ

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

      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 þ          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.     o

      Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer. See definition of “accelerated filer and large accelerated filer” in Rule 12b-2 of the Exchange Act.

      Large accelerated filer o          Accelerated filer o          Non-accelerated filer þ

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

      The aggregate market value of the voting stock held by non-affiliates of the registrant, based upon the closing sale price of the registrant’s common stock on June 30, 2005, the last day of the registrant’s most recently completed second fiscal quarter, was $4,301,073.

      The number of shares outstanding of the registrant’s Common Stock, par value $.001 per share, as of March 24, 2006 was 17,856,377.

DOCUMENTS INCORPORATED BY REFERENCE

      Proxy Statement for Annual Meeting of Stockholders included in Amendment No. 1 to Registration Statement on Form S-4, filed on February 14, 2006.

TABLE OF CONTENTS

PART I
	Item 1. Business
	Item 1A. Risk Factors
	Item 2. Properties
	Item 3. Legal Proceedings
	Item 4. Submission of Matters to a Vote of Security Holders
PART II
	Item 5. Market for the Company’s Common Stock, 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 Operation
	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. Controls and Procedures
	Item 9B. Other Information
PART III
	Item 10. Directors and Executive Officers of the Registrant
	Item 11. Executive Compensation
	Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholders Matters
	Item 13. Certain Relationships and Related Transactions
	Item 14. Principal Accounting Fees and Services
PART IV
	Item 15. Exhibits and Financial Statement Schedules
SIGNATURES
EXHIBIT INDEX
EX-10.14: AMENDMENT TO EMPLOYMENT AGREEMENT
EX-10.27: LOAN AND SECURITY AGREEMENT
EX-10.28: AMENDMENT TO LOAN AND SECURITY AGREEMENT
EX-10.29: AMENDMENT TO LOAN AND SECURITY AGREEMENT
EX-10.30: AMENDMENT TO LOAN AND SECURITY AGREEMENT
EX-10.31: AMENDMENT TO LOAN AND SECURITY AGREEMENT
EX-10.32: AMENDMENT TO LOAN AND SECURITY AGREEMENT
EX-10.35: AMENDMENT TO LICENSED DEPARTMENT AGREEMENT
EX-10.36: AMENDMENT TO LICENSED DEPARTMENT AGREEMENT
EX-10.37: AMENDMENT TO LICENSED DEPARTMENT AGREEMENT
EX-10.38: AMENDMENT TO LICENSED DEPARTMENT AGREEMENT
EX-10.40: AMENDMENT TO PARTICIPATING PROVIDER AGREEMENT
EX-10.41: AMENDMENT TO PARTICIPATING PROVIDER AGREEMENT
EX-10.42: AMENDMENT TO PARTICIPATING PROVIDER AGREEMENT
EX-10.77: SURRENDER OF LEASE
EX-21.1: SUBSIDIARIES
EX-23.1: CONSENT OF GRANT THORNTON LLP
EX-31.1: CERTIFICATION
EX-31.2: CERTIFICATION
EX-32.1: CERTIFICATION

PART I

Item 1. Business

Background

      Refac Optical Group (formerly known as Refac) (together with its subsidiaries, is referred to herein as “we”, “us”, “our”, “Company” or ”Registrant”) was incorporated in the State of Delaware in 1952. For most of our history, we were engaged in intellectual property licensing activities. During the period from 1997 to 2002, we were also engaged in the business of product development and graphic design and had invested these creative resources, together with our licensing skills, in certain product development ventures. As a result of a corporate repositioning, during 2002, we disposed of our then operating segments with the exception of our licensing business and we have limited the operations of that segment to managing certain existing license agreements and related contracts.

      On February 28, 2003, we completed a merger (the “Palisade Merger”) with a wholly-owned subsidiary of Palisade Concentrated Equity Partnership, L.P. (“Palisade”), immediately following which Palisade owned approximately 80% of our outstanding shares. On May 19, 2003, pursuant to the terms of a stock purchase agreement, Palisade acquired an additional 3,469,387 shares of our common stock at a price of $4.90 per share, or an aggregate price of approximately $17 million. From January 27, 2004 to March 21, 2005, we sought acquisition opportunities in the asset management sector of the financial services industry, but were unable to find an appropriate opportunity.

      On March 21, 2005, our Board of Directors (the “Board”) decided to broaden the scope of the acquisition search to include other industries and, on April 8, 2005, we announced that we had entered into acquisition discussions with two affiliated companies, U.S. Vision, Inc. (“U.S. Vision”) and OptiCare Health Systems, Inc. (“OptiCare”). Both of these companies are engaged in the retail optical industry and, on June 20, 2005, in anticipation of these acquisitions, we hired J. David Pierson, as our President and Chief Operating Officer and engaged Cole Limited, Inc. a consulting firm headed by Jeffrey A. Cole. Messrs. Pierson and Cole have extensive experience in the retail optical industry.

      On August 22, 2005, we signed merger agreements to acquire U.S. Vision and OptiCare and the mergers (the “Mergers”) were completed on March 6, 2006. As a result of the Mergers, we have become a leader in the retail optical industry and the sixth largest retail optical chain in the United States. We operate at 543 locations in 47 states and Canada, consisting of 517 licensed departments, eight freestanding stores, 18 eye health centers and professional optometric practices, two surgery centers, one of which is a laser correction center, and two manufacturing laboratories. Of the 517 licensed departments, 351 are located at J.C. Penney stores, 67 at Sears, 49 in regional department stores, 30 at The Bay, a division of Hudson’s Bay Company, Canada’s oldest and largest traditional department store retailer, 13 departments at Meijer, and, most recently, 7 at Macy’s. These licensed departments are full-service retail vision care stores that offer an extensive selection of designer brands and private label prescription eyewear, contact lenses, sunglasses, ready-made readers and accessories.

      With our acquisitions of U.S. Vision and OptiCare, on March 6, 2006, we changed our name to Refac Optical Group to better reflect our new businesses. As a result of the Company’s acquisitions of U.S. Vision and OptiCare on March 6, 2006, the Company’s results for 2005 are not indicative of the results to be expected for any future periods.

      Prior to the completion of the Mergers, Palisade owned approximately 90% of the Company’s shares, 88% of U.S. Vision’s shares and 84% of OptiCare’s shares on an as-converted to common basis. Following the Mergers, Palisade owns approximately 88% of our outstanding shares.

Licensing Business (Pre-Merger)

      Prior to the completion of the Mergers on March 6, 2006, the Company’s primary business was patent and technology licensing.

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      Since 1952, we have been performing patent and technology licensing, which includes the negotiation and administration of licenses and joint ventures involving patents, know-how and related trademarks. However, during the last seven fiscal years, we have not undertaken any new technology licensing projects and, in August 2002, we sold our Heli-Coil and Dodge licensing rights and Gough licensing property. Since then, we have limited our licensing activities to managing our remaining license agreements and related contracts.

      During the fiscal year ended December 31, 2005, we had $1,500,000 in non-recurring income relating to a certain lawsuit brought by one of our former licensing clients against Taco Bell Corp., which represented approximately 62% of our total revenues from continuing operations. In addition, our contract with Patlex Corporation (“Patlex”) accounted for approximately 26% of our total revenues from continuing operations in 2005. Our income under this contract is based upon revenues derived by Patlex from the licensing of two laser patents, the most significant of which (U.S. Patent No. 4,704,583) expired in November 2004. The remaining patent (U.S. Patent No. 4,746,201) expired in May 2005. Patlex has informed us that it does not expect to receive any additional licensing revenues and, as a result, the Patlex income will not continue in 2006. We estimate that operating revenues from our remaining client and license agreements will aggregate less than $200,000 in 2006 and the loss or termination of any of these agreements would not have a material adverse effect on our business.

      Patents and Trademarks. We do not own any patents or trademarks that we deem important to our patent and technology licensing business.

      Employees. As of December 31, 2005, we had a total of five full-time employees.

Financial Information About Segments

      Not applicable.

Financial Information About Foreign and Domestic Operations

      The Company’s current licensing business is conducted entirely in the United States. Information concerning the aggregate of the Company’s foreign source revenues from domestic operations for the three years ended December 31, 2005 is set forth in Note 11 of the Notes to the Company’s Financial Statements, included herein.

Retail Optical Business (Post-Merger)

      Following the Mergers on March 6, 2006, our primary business is now the retail optical business. We will operate this business through our newly-acquired subsidiaries, U.S. Vision and OptiCare.

U.S. Vision

      U.S. Vision is a leading store-within-a-store retailer of optical products and services in the United States. As of February 2, 2006, it operated 525 locations in 47 states and Canada, consisting of 517 licensed department and 8 freestanding stores. As the primary optical licensee of J.C. Penney, U.S. Vision operates 351 retail optical departments in J.C. Penney department stores. In addition, U.S. Vision operates 67 Sears retail optical departments, 49 retail optical departments in regional department stores, 30 optical departments at The Bay, a division of Hudson’s Bay Company, Canada’s oldest and largest traditional department store retailer and 13 departments within Meijer, a family owned and operated grocery and general merchandise retailer superstore operating stores throughout the Midwest and 7 retail optical departments within Macy’s department stores. U.S. Vision believes that it has excellent relationships with the host stores in which it operates.

      Its leased retail optical departments typically range in size from 500 to 800 square feet and are often located within the host department store near the host store’s other licensed departments such as the beauty salon and photography studio. To the extent possible, U.S. Vision’s stores follow a standard merchandise layout plan which is designed to emphasize fashion, invite customer browsing and enhance the customer’s

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shopping experience. Within each host department store, U.S. Vision’s optical departments are similar in appearance and are operated under uniform standards and procedures. When a leased department prototype design for host stores is changed, these changes are applied to all of U.S. Vision’s new and major remodels in retail optical departments.

      U.S. Vision also has 8 freestanding stores, which generally range in size from 900 to 1,400 square feet. U.S. Vision’s focus is on its leased department optical stores and it has not opened any freestanding stores during the past five years. As the leases for its existing freestanding stores expire, U.S. Vision evaluates whether the store’s contribution to profit before overhead warrants a short-term lease extension or renewal for a term not exceeding one-year. If so, it seeks to negotiate such extension or renewal with the landlord.

      U.S. Vision’s optical departments carry a full selection of men’s, women’s and children’s eyeglass frames, including designer and private label brands, a complete line of spectacle lenses, a complete line of contact lenses, plano and prescription sunglasses, ready made readers and ancillary products for eyeglasses and contact lenses. U.S. Vision also offers its customers a wide variety of value-added eyewear features and services such as lightweight, virtually unbreakable polycarbonate lenses, including progressive lenses and photochromic lenses, as well as scratch resistant and anti-reflective coatings.

      U.S. Vision’s results of operations are affected by seasonal fluctuations in sales and operating profits. Its fiscal year ends on January 31st and the first fiscal quarter ending on April 30th is generally its strongest and most profitable quarter while the last fiscal quarter ending on January 31st is generally its weakest.

      The chart below gives a breakdown of U.S. Vision’s stores by state and Canadian provinces:

United States

	Number
State	of Stores
Alabama		8
Alaska		1
Arizona		7
Arkansas		10
California		48
Colorado		6
Connecticut		6
Delaware		2
Florida		41
Georgia		14
Idaho		2
Illinois		33
Indiana		13
Iowa		2
Kansas		2
Kentucky		9
Louisiana		6
Maine		6
Maryland		13
Massachusetts		1
Michigan		25
Minnesota		13
Mississippi		2

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		Number
State		of Stores
Missouri			11
Montana			3
Nebraska			2
Nevada			2
New Hampshire			8
New Jersey			14
New Mexico			2
New York			18
North Carolina			7
North Dakota			6
Ohio			24
Oregon			3
Pennsylvania			40
South Carolina			3
South Dakota			2
Tennessee			7
Texas			30
Utah			3
Vermont			1
Virginia			12
Washington			10
West Virginia			3
Wisconsin			12
Wyoming			2
	Total		495

Canada

		Number
Province		of Stores
Alberta			6
British Columbia			4
Manitoba			2
Ontario			11
Quebec			6
Saskatchewan			1
	Total		30

On-Site Independent Optometrists

      U.S. Vision believes the presence of the optometrists offering eye exams at its stores helps to generate eyeglass sales, leads to repeat customers and reinforces the quality and professionalism of each store. Accordingly, it has arrangements with licensed optometrists to provide eye examination services at or adjacent to its retail locations in those states where it is permitted. These independent optometrists sublease space and equipment from U.S. Vision or from the host store. U.S. Vision and the optometrists do not share in each other’s revenues.

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Pricing

      U.S. Vision maintains a promotional pricing strategy, which stresses a quality product delivered at a competitive price. Its frames and lenses are generally competitively priced, with prices varying based on market locations. While it typically earns a higher percentage gross margin on its private-label lines, designer frames generally command premium prices, resulting in higher gross profit dollars per transaction.

Marketing and Advertising

      U.S. Vision engages in a variety of marketing and promotional efforts to maintain and strengthen its customer base. Its advertising program is targeted at the department store consumer and is designed to convey a message of value, fashion, convenience and trust to its customer base. U.S. Vision works closely with each of its host stores to design advertising programs that convey this message in a manner consistent with that of the host store, targeted at its specific customer base. These advertising promotions generally mention the availability of on-site professional eye examinations and U.S. Vision’s acceptance, as a participating provider of managed vision care benefits, of the discounts and allowances offered by managed vision care plans. These targeted inserts are mailed to selected customers based on previous spending patterns at the host store. U.S. Vision augments these programs by providing local advertising in individual geographic markets. It has an in-house advertising department, which enables it to respond quickly to fashion trends, competitor advertising and promotional initiatives.

Material Contracts and Relationships

      Managed Vision Care. Since 1991, U.S. Vision has been a participating provider of managed vision care benefits primarily through Cole Managed Vision (“CMV”), a national vision care program operated by a subsidiary of Luxottica Group S.p.A., (“Luxottica”) a leading operator of retail optical stores and a competitor of U.S. Vision. U.S. Vision’s business is materially dependent upon the revenues that it derives through this relationship and during the fiscal years ended January 31, 2006, 2005 and 2004, participants of CMV accounted for approximately 22%, 29% and 38%, respectively, of U.S. Vision’s revenues. U.S. Vision’s participating provider agreement with CMV terminates on December 31, 2008 and there is no assurance that CMV, Luxottica or U.S. Vision will be willing to renew or extend the agreement. During the term of the current agreement, U.S. Vision generally cannot become a participating provider in any other managed vision network without permission of CMV. Luxottica, which also owns EyeMed Vision Care, a leading managed vision care organization, recently announced that it was integrating its EyeMed Vision Care and CMV into one managed vision care company. As a result of this integration, the number of CMV plans is being reduced, which adversely affects the amount of revenues that U.S. Vision is expected to derive through this managed vision care relationship. U.S. Vision is currently in discussions with Luxottica regarding this situation but no assurances can be given as to the outcome of such discussions.

      Relationship with Host Stores. U.S. Vision’s primary host store relationship is with J.C. Penney where it currently maintains 351 stores under a lease which expires on December 1, 2007 but can be renewed by either party for an additional three year period to December 1, 2010. Notwithstanding the above, J.C. Penney has the right to terminate, without cause, up to 40 optical departments in any calendar year. This limitation, however, does not apply if J.C. Penney closes an entire J.C. Penney department store, either temporarily or permanently. In addition, the lease requires the approval of J.C. Penney for any sale or transfer of the majority of the capital stock or assets of U.S. Vision. This lease provides for an adjustment in the rent should U.S. Vision enter into a relationship with another national chain of department stores or large chain of discount stores on terms which are more favorable to that host store.

      Although U.S. Vision’s leases with most of its other host stores are terminable upon relatively short notice, it has never had a lease terminated other than in connection with a store closing, relocation or major remodeling. These leases also provide for monthly lease payments based upon the net sales at each location.

      Patents and Trademarks. Except for its host store department license agreements (See “Material Contracts and Relationships — Relationships with Host Stores” above), U.S. Vision does not own any patents, trademarks, licenses, franchises and/or concessions that it deems important to its business.

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      Purchasing. As a leading retailer of eyewear in the United States, U.S. Vision purchases significant quantities of frames, lenses and contact lenses from its suppliers. During fiscal 2005 (i.e. the year ended January 31, 2006), U.S. Vision’s three largest suppliers, accounted for approximately 34%, 16% and 6%, respectively, its total merchandise purchases. U.S. Vision believes that frames, lenses and contact lenses are readily available at competitive prices from other suppliers.

      Under the terms of a long-term supply agreement, U.S. Vision is required to purchase certain amounts of its merchandise requirements from one of its vendors at market rates. This vendor provided U.S. Vision with extended payment terms for initial purchases of merchandise under this agreement in the sum of $4 million, which amount is evidenced by a 6% promissory note due November 1, 2007.

      U.S. Vision also has a long-term supply agreement with another vendor that requires it to purchase a certain percentage of its merchandise requirements from this vendor at market rates. This vendor has also provided U.S. Vision with extended payment terms for initial purchases of merchandise under its agreement with U.S. Vision in the sum of $3 million, which amount is evidenced by a 6% promissory note due April 15, 2007. However, this note provides for an increase in the interest rate from 6% to 16% if U.S. Vision fails to reach specified purchase targets which, to date, it has failed to meet and will not meet during the remaining term of the promissory note. This vendor has waived the higher interest rate through January 31, 2005. The Company and U.S. Vision are in discussions with this vendor to resolve the purchase obligations and the amount of interest due under the note.

      In connection with a long-term supply for eyeglass frames with a third vendor, U.S. Vision received a loan from this vendor in the sum of $3 million, which is evidenced by a 6% promissory note due January 31, 2008. Due to this vendor’s insolvency and its inability to give U.S. Vision adequate assurance of performance of its obligations under the frame supply agreement, U.S. Vision maintains that this vendor has repudiated such agreement. It has been able to purchase its frame requirements from other vendors and intends to hold this vendor accountable for any damages caused by its breach.

      Each of the promissory notes due to U.S. Vision’s merchandise vendors is subordinate to U.S. Vision’s obligations to Commerce Bank, N.A., which become due January 31, 2008. Further, the supply agreements with U.S. Vision’s merchandise vendors provide for the automatic extension of the due date for all amounts subject to the initial extended payment terms or loan, as the case may be, to match the term of any extension of the supply agreements.

      Optical Laboratory. U.S. Vision operates a 60,000 square foot modern optical laboratory and lens grinding facility adjacent to its headquarters in Glendora, New Jersey. Customer orders for prescription eyewear, sunglasses and contact lenses are transmitted daily from each of the store locations to the central laboratory. For its U.S. locations, customer orders are placed at the retail stores and are transmitted in real-time into the central optical laboratory through U.S. Vision’s point of service “POS” system. At the laboratory, the lenses are ground, cut, finished and custom fitted to optical frames in the size and style selected by the customer. The finished eyewear is then shipped to the retail store for delivery to the customer, overnight if premium service is specified and, if not, within a few working days. Most prescription lenses are completed from semi-finished polycarbonate or plastic lenses obtained from third-party suppliers. These lenses are finished in a highly technical process that grinds the surface of the lens to fit the prescription utilizing modern grinding equipment, much of it computer-guided. The lenses are then custom fitted to optical frames in the size and style selected by the customer. Other prescriptions, including many standard prescriptions, can be manufactured by cutting and edging a pre-finished lens, also purchased from a third-party supplier, to fit the frames selected. Contact lenses, accessories and non-prescription sunglass orders are filled from available stock and shipped to the retail optical departments.

      Management Information Systems. U.S. Vision has an integrated management information system, which includes a point-of-service order entry system at each of its U.S. optical stores, and manufacturing and financial systems at its corporate headquarters. This integrated system facilitates the transmission of the order to the laboratory and provides U.S. Vision’s stores with the capability to capture sales and customer information, including prescription data, enhancing its ability to monitor sales and merchandise trends and to improve customer service after the sale. In addition, the automated order entry system enables the stores to

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validate, at the time of sale, whether a particular frame selected by the customer is in stock and whether the combination of the customer’s prescription, selected lenses and frame is within manufacturing tolerances.

      Competition. In general, the retail optical industry is highly competitive and fragmented. U.S. Vision principally operates as a store-within-a-store optical retailer under the licensed brands of the host stores with which it has license or lease agreements. Principal competitors in this segment include Cole National (Sears Optical, Target and BJ’s Wholesale Club), Wal-Mart, National Vision, Inc. (Wal-Mart and Fred Meyer), Costco and Shopko.

      In addition to the store-within-a-store optical retailers, U.S. Vision competes with (i) national and regional optical retail chains; (ii) independent practitioners (including opticians, optometrists and ophthalmologists who operate an optical dispensary within their practice) and (iii) health maintenance organizations. Additionally, U.S. Vision faces the possibility of a decreased demand for eyeglasses and contact lenses as advances in, and the acceptability of, vision correction technologies, including laser surgery and other surgical vision correction procedures continue to grow.

      Several of U.S. Vision’s competitors have significantly greater financial resources than it does. The retail optical industry engages in price-related promotions as a standard marketing practice and some of U.S. Vision’s competitors are able to pursue more aggressive pricing and promotional strategies (at the expense of profits) for longer periods of time than U.S. Vision can.

      Government Regulation. U.S. Vision is subject to a variety of federal, state and local laws, rules and regulations affecting the health care industry and the delivery of health care services. State and local legal requirements vary widely among jurisdictions and are subject to frequent change. Federal legal requirements are also subject to change.

      Relationships between U.S. Vision and independent optometrists and ophthalmologists are subject to federal, state and local laws and regulations. State laws generally prohibit the practice of medicine and optometry by unlicensed practitioners. In addition, many states prohibit medical practitioners and optometrists from splitting fees with business corporations such as U.S. Vision and prohibit the practice of medicine and optometry by corporate entities. Some states have enacted laws governing the ability of ophthalmologists and optometrists to enter into contracts to provide professional services with business corporations or lay persons. Some states prohibit U.S. Vision from computing its fee for rent, equipment leases and management services provided by it based on a percentage of the gross revenue of the ophthalmologists and the optometrists. Such requirements are particularly comprehensive in California and Texas, where U.S. Vision operates 48 and 29 stores, respectively. Further, some states restrict the location of optometric offices in relation to optical stores and regulate advertising and the solicitation of prospective patients.

      Relationships between U.S. Vision and independent ophthalmologists and optometrists are also subject to the fraud and abuse provisions of the federal Social Security Act which include the “anti-kickback” laws. The anti-kickback laws prohibit the offering, payment, solicitation or receipt of any direct or indirect remuneration for the referral of Medicare or Medicaid patients or for the ordering or providing of Medicare of Medicaid covered services, items or equipment. Violations of these laws may result in substantial civil or criminal penalties for individuals or entities and exclusion from participation in the Medicare and Medicaid programs. Several states, including states in which U.S. Vision operates, have adopted similar laws that cover patients with private health insurance coverage as well as those covered by government programs. Although management believes that it is not in violation of the anti-kickback laws, the applicability of these provisions has been subject to only limited judicial and regulatory interpretation. In addition, certain of U.S. Vision’s products must comply with standards set by the FDA.

      U.S. Vision, as well as the independent optometrists providing services in or adjacent to its stores, from time to time receives inquiries from regulatory bodies regarding compliance with applicable state and local regulations. If U.S. Vision’s relationships with ophthalmologists and optometrists are challenged, it may be required to alter the manner in which it conducts its business. There can be no assurance that a review of U.S. Vision’s business by courts or regulatory authorities will not result in determinations that could adversely

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affect operations or that new laws, regulations or interpretations of current laws and regulations will not have a material adverse effect on U.S. Vision’s business, financial condition or results of operation.

      Employees. As of February 2, 2006, U.S. Vision had 2,037 full-time and part-time employees of which, 1,554 were employed in retail outlets, 372 were employed in manufacturing and distribution and 111 were employed in administrative, marketing and managerial positions. U.S. Vision is not a party to a collective bargaining agreement.

OptiCare

      OptiCare is an integrated eye care services company that operates through two divisions, which are referred to herein as “Consumer Vision” and ”Managed Vision”. Consumer Vision sells retail optical products to consumers and owns and/or operates integrated eye health centers, professional optometric practices and surgical facilities in the State of Connecticut. Managed Vision, which is based in Rocky Mount, North Carolina, contracts with insurers, employer groups, managed care plans, HMOs and other third-party payers to manage claims payment and other administrative services of eye health benefits for contracting parties in fifteen states and to provide insurance coverage relating to certain eye care products and services.

Consumer Vision

      All of Consumer Vision’s operations are located in the State of Connecticut where it is the second largest optical retailer. It provides eye care services and products to consumers and patients through a total of 18 retail optical locations and two surgery centers, one of which is a laser correction center. In its integrated eye health centers, comprehensive eye care services are provided by ophthalmologists and optometrists. Consumer Vision seeks to grow by maximizing the revenue potential of existing locations and operations and acquiring additional locations. Its operations are medically driven. OptiCare conducts all of the management, billing, systems and related procedures for the operation of these facilities.

      Customers and Patients. Customers and patients are individuals who typically come to Consumer Vision for eye exams, spectacle frames, corrective lenses, surgery and non-prescription eyewear, such as sunglasses. Consumer Vision is not dependent upon customers or patients of any particular age, gender, ethnic origin or from any particular community or economic strata.

      Professional Services. For Consumer Vision’s integrated eye health centers, professional optometric practices and surgical centers, it contracts with a professional corporation, OptiCare P.C., which employs ophthalmologists and optometrists, to provide surgical, medical, optometric and other professional services to patients. Pursuant to a Professional Services and Support Agreement which covers this relationship, Consumer Vision provides certain management services to OptiCare P.C., which it deems to be, and refers to as, its “professional affiliate.” Through nine integrated eye health centers, comprehensive eye care services are provided to patients. These services include medical and surgical treatment of eye diseases and disorders by ophthalmologists, and vision measuring and non-surgical eye care correction and treatment services by optometrists.

      Professional Optometric Practices. Consumer Vision’s professional optometric practice locations provide vision correction services by optometrists, and/or sell eyeglasses and other optical products. These facilities are either free-standing or are located within Consumer Vision’s fully integrated eye health centers. OptiCare’s professional optometric practices provide all customary optical goods. Consumer Vision operates 18 retail optical locations (nine of those facilities also offer medical services and are referred to as the “integrated eye health centers” discussed above).

      Surgical Centers. Consumer Vision owns and operates two surgery centers, one of which is a laser correction center. In its ambulatory surgery center in Waterbury, Connecticut, ophthalmic surgeons perform a range of eye care surgical procedures, including cataract surgery and surgical treatment of glaucoma, macular degeneration and diabetic retinopathy. In its laser center in Danbury, Connecticut, OptiCare uses a VISX excimer laser for the correction of nearsightedness, farsightedness and astigmatism. In these centers, Consumer Vision bills patients (or their insurers, HMOs, Medicare, Medicaid or other responsible third-party

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payers) for use of the surgery facility. The surgeons bill the patients separately for their services. For laser correction, patients are billed directly and, generally, Consumer Vision is not reimbursed by third-party payers. Consumer Vision’s ambulatory facility in Waterbury is state licensed and approved for the payment of facility fees by most health plans and is Medicare approved.

      Optical Laboratory. Consumer Vision has a manufacturing facility in which lenses are surfaced and or edged to specifications and supplied to all of its locations. Additionally, the lab manufacturing services are integrated into two Managed Vision programs that are administered in Connecticut.

      During the three fiscal years ended December 31, 2005, the percentage of OptiCare’s consolidated revenues from the sale of optical products and professional eye care services was as follows:

	Year Ended
	December 31,
Product or Services	2005		2004		2003
Optical products		28%		27%		25%
Professional eye care services		27%		27%		25%

      Purchasing. On January 12, 2005, effective as of December 31, 2004, OptiCare sold its Distribution Division to AECC/ Pearlman Buying Group, LLC and Wise Optical LLC, entities formed by Dean J. Yimoyines, M.D., its Chief Executive Officer and Chairman who is also the President and Chief Executive Officer of its professional affiliate, OptiCare P.C. In connection with such sale, OptiCare entered into a supply agreement with a four year commitment to purchase, on a non-exclusive basis $4.2 million of optical products per year through AECC/ Pearlman Buying Group, LLC from certain designated manufacturers and suppliers. This annual commitment includes the purchase of approximately $1.3 million of contact lenses a year from Wise Optical LLC. Under the supply agreement, OptiCare is also obligated to pay AECC/ Pearlman Buying Group, LLC an annual fee based on the total of all purchases it makes under the supply agreement. If the supply agreement is terminated because of OptiCare’s default, OptiCare must make a buyout payment of between $0.8 million and $0.2 million depending on when the supply agreement is terminated. As a result of this supply agreement, Consumer Vision purchases most of its eyeglass frames, ophthalmic lenses, contact lenses and other optical goods and devices through AECC Pearlman Buying Group, LLC.

      Competition. The most direct competition for Consumer Vision is with independent ophthalmologists and optometrists, as well as with regional operators of retail optical locations. Retail optical operators compete on price, service, product availability and location. While several of Consumer Vision’s competitors have greater financial and other resources than it has or may charge less for certain services than it does, Consumer Vision believes the integrated nature of its business model provides significant competitive advantages in the marketplace.

      Government Regulation. In addition to the federal, state and local laws, rules and regulations described in “U.S. Vision — Government Regulation” above, Consumer Vision is subject to the following:

      Corporate Practice of Ophthalmology and Optometry. The laws of Connecticut prohibit the practice of ophthalmology and optometry by corporations that are not owned entirely by licensed physicians specializing in ophthalmology and optometrists. Consumer Vision’s Professional Services and Support Agreement with OptiCare P.C., its professional affiliate, specifically provides that all decisions required by law to be made by licensed ophthalmologists or optometrists shall be made only by such licensed persons, and that Consumer Vision shall not engage in any services or activities which would constitute the practice of ophthalmology or optometry. If health care regulations and their interpretations change in the future, Consumer Vision may have to revise the terms of such agreement to comply with regulatory changes.

      Surgical Facility Regulations. Its licensed ophthalmic outpatient surgical facility in Waterbury, Connecticut is subject to the terms of Certificate of Need approvals from the Office of Health Care Access and licensure under the provisions of the Connecticut Public Health Code. The facility also is a participating provider under the federal Medicare and Connecticut Medicaid programs and has provider agreements with various commercial and governmental third-party payers. Violation of any of the terms

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and conditions of the Certificate of Need approvals and the Connecticut Public Health Code license governing the facility’s operation could result in fines or other sanctions against the facility and its operators, including Consumer Vision being enjoined or precluded from further operation of the facility. Failure to adhere to the terms of participation for the Medicare or Medicaid programs or a violation of billing or other requirements for the public and private third-party payment programs governing the facility could result in civil or criminal sanctions against the facility and its operators, refund obligations or claims denials and/or termination or exclusion from participation in Medicare, Medicaid or other payer programs. The structure of relationships involving the facility and clinicians providing services in conjunction with the facility also is subject to federal fraud and abuse statutes (including the anti-kickback statute) and related state and federal authorities.

      Excimer Laser Regulation. Medical devices, including the excimer laser used in OptiCare’s Danbury, Connecticut laser surgery center, are subject to regulation by the U.S. Food and Drug Administration (“FDA”). Failure to comply with applicable FDA requirements could subject Consumer Vision, its affiliated providers or laser manufacturers to enforcement action, product seizures, recalls, withdrawal of approvals and civil and criminal penalties. Further, failure to comply with regulatory requirements could result in a limitation on, or prohibition of, Consumer Vision’s use of excimer lasers. Currently, the FDA recognizes that physicians may, in their medical judgment, determine that a particular FDA approved laser is appropriate to use for a particular procedure, even if such use has not been evaluated by the FDA. The FDA’s policy on such non-FDA approved use is that it falls under the practice of medicine and is not within the jurisdiction of the FDA. If the FDA was to adversely change its policy with regard to non-FDA approved uses, or take any other adverse regulatory action, it could have a detrimental effect on Consumer Vision’s use of excimer lasers.

      Regulation of Laser Vision Marketing. The marketing and promotion of laser correction and other vision correction surgery procedures in the U.S. is subject to regulation by the FDA and the Federal Trade Commission (“FTC”). The FDA and FTC have released a joint communiqué on the requirements for marketing these procedures in compliance with the laws administered by both agencies. The FTC staff also issued more detailed staff guidance on the marketing and promotion of these procedures. It has been monitoring marketing activities in this area through a non-public inquiry to identify activities that may require further FTC attention. The FDA has traditionally taken the position that the promotion and advertising of lasers by manufacturers and physicians should be limited to the uses approved by the FDA. Although the FDA does not prevent non-approved uses of excimer lasers, the FDA reserves the right to regulate advertising and promotion of non-FDA-approved uses.

      Prohibitions of Certain Referrals. The Omnibus Budget Reconciliation Act of 1993 includes a provision that significantly expands the scope of the Ethics in Patient Referral Act, also known as the “Stark Law.” The provisions of the Stark Law originally prohibited a physician from referring a Medicare or Medicaid patient to any entity for the provision of clinical laboratory services if the physician or a family member of the physician had an ownership interest in or compensation relationship with the entity. Revisions to the Stark Law since 1993 prohibit a referral to an entity in which the physician or a family member has a prohibited ownership interest or compensation relationship if the referral is for any of a list of “designated health services,” which includes “prosthetic devices.” Under federal authority and the standards imposed by various state Medicaid programs, eyeglasses and contact lenses for patients who have undergone certain ophthalmic procedures would be considered prosthetic devices covered by the Stark Law and regulations. The Stark regulations provide that the prohibition of referrals for these types of eyewear does not apply if the arrangement between the physician and the eyewear seller conforms to the Medicare and Medicaid anti-kickback statute (42 USC Section 1320a-7b), referred to as the Anti-Kickback Statute, and other regulatory requirements. There can be no assurance that future interpretations of such laws and future regulations promulgated thereunder will not affect OptiCare’s existing relationship with its professional affiliate.

      Advertising Restrictions. Many states have laws that prohibit licensed eye care professionals from using advertising that includes any name other than their own, or from advertising in any manner that is likely to mislead a person to believe that a non-licensed professional is eligible to be engaged in the

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delivery of eye care services. Advertising is prohibited if it is undertaken in a manner that is deemed inappropriate for a professional or likely to mislead. There are regulatory requirements in Connecticut delineating certain specific advertising requirements with which Consumer Vision must comply.

      Health Insurance Portability and Accountability Act — Administrative Simplification. This federal statute and its regulations, discussed below in “Managed Vision — Government Regulation” are also applicable to the Consumer Vision.

      Interpretation and Implications. The laws described above provide for civil and criminal penalties and have been subject to limited judicial and regulatory interpretation. They are enforced by regulatory agencies that are vested with broad discretion in interpreting their meaning. OptiCare’s agreements and activities have not been examined by federal or state authorities under these laws and regulations. There can be no assurance that review of OptiCare’s business arrangements will not result in determinations that adversely affect its operations or that certain material agreements between it and eye care providers or third-party payers will not be held invalid and unenforceable. Any limitation on OptiCare’s ability to continue operating in the manner in which it has operated in the past could have an adverse effect on OptiCare’s business, financial condition and results of operations.

Managed Vision

      On January 31, 2006, the boards of directors of the Company and OptiCare approved a plan to sell Managed Vision. Also on that date, the Company, OptiCare and a nationally recognized managed care provider entered into a non-binding letter of intent regarding the sale. We currently expect to complete the sale of Managed Vision by June 30, 2006, although such completion is contingent upon negotiation of definitive documentation, regulatory approvals and satisfaction of customary closing conditions. Pending such sale, operations of the Managed Vision Division will continue in the ordinary course.

      Managed Vision contracts with insurers, employer groups, managed care plans, HMOs and other third-party payers to manage claims payment and administration of eye health benefits for those contracting parties in Connecticut, Colorado, Florida, Georgia, Louisiana, Mississippi, Missouri, New Jersey, New York, North Carolina, Oklahoma, South Carolina, Tennessee, Texas and Wisconsin. The typical range of benefits administered includes well eye exams, prescription optical products and medical and surgical services related to eye care. Most of Managed Vision’s contracts have terms of one to three years and contain an automatic renewal provision for additional one-year periods and grant either party the right to terminate the contract upon 90 to 180 days’ notice. During 2005, Managed Vision’s contract with United HealthCare accounted for approximately 13%, of OptiCare’s consolidated revenues and the loss of this customer would have a material adverse effect on Managed Vision.

      As of December 31, 2005, Managed Vision administered eye care benefit programs, delivered through networks of eye care professionals nationwide, for enrollees under capitation (i.e., payment by an insurer to a managed care entity or network of a fixed amount) and/or fee-for-service arrangements.

      Products and Services. Managed Vision administers vision benefits for health plans under capitation and fee-for-service arrangements. Benefits administered under these programs are for well vision, preventive exams and optical hardware in addition to medical and surgical eye care benefits. Managed Vision assumes partial or full financial risk with respect to the majority of the enrollees for which it administers vision benefits. It also offers a “Direct-to-Employer” program, which includes (i) insurance coverage for well vision, preventive examinations and optical hardware through Fidelity Security Life Insurance Company and through its captive insurance company, OptiCare Vision Insurance Company, Inc., (ii) Section 125 vision which allows qualified groups and individuals to participate in vision programs for well vision, preventive examinations and optical hardware on a pre-tax basis and/or (iii) administers benefits on a fee basis for well vision, preventive examinations and optical hardware for qualified groups which are self-funded.

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      The following are the principal components of Managed Vision’s operations:

•  Provider Contracting — Upon obtaining a managed care contract, Managed Vision typically defines and/or develops a network of ophthalmologists, optometrists and opticians, facilities and anesthesiologists to provide the eye care services required under the contract.

•  Provider Credentialing — Under several contracts, Managed Vision “credentials” eye care professionals (i.e., establish to both its, and the third-party payer’s satisfaction, the credentials of such professionals) who provide the eye care services specified under the contract to the third-party payer’s members. In addition to its network enrollment process, Managed Vision credentials when requested by the health plan or as required by state law consistent with the standards established by those plans or applicable law. In those instances, Managed Vision undertakes a review process on each prospective eye care professional, which includes obtaining a copy of the state license and Drug Enforcement Agency number, verifying hospital privileges, liability insurance and board certification and reviewing work history.

•  Claims Payment — For most contracted payers, Managed Vision pays claims to its network providers for services rendered in the fulfillment of vision benefits for members. Managed Vision also has Internet capabilities for authorizations (if needed), direct claim submission and claim tracking. Additionally, Managed Vision accepts claims via electronic data interchange, enabling providers to send claims through their own practice management software.

•  Systems — To enhance its claims payment administration, Managed Vision utilizes proprietary systems, which allow it to strictly follow Center for Medicare and Medicaid Services’ rules for payment of eye care claims. In addition, Managed Vision has posted on-line its clinical criteria for treatment of every eye care condition for which it provides covered services. Managed Vision’s providers can use its secure web server to check these criteria and to inform themselves of new or modified criteria as changes occur.

•  Utilization Management — Managed Vision’s Utilization Management staff ensures that established clinical criteria are followed in provision of services and benefits to members. Using proprietary clinical criteria for eye care procedures that are based on Center for Medicare and Medicaid Services’ local carrier policy and the American Academy of Ophthalmology’s guidelines; Managed Vision works with eye care professionals to determine appropriate eye care treatments.

•  Plan Member Relations — Service representatives answer plan members’ questions relating to their benefits and the status of their claims and help resolve complaints relating to their eye care treatment.

•  Provider Relations — Managed Vision continuously educates providers concerning the various plan benefits being administered. In addition, with the assistance of Managed Vision’s staff, providers may obtain any required authorizations prior to performing certain eye care procedures.

•  Quality Management — Managed Vision’s Quality Management Department tracks complaints and concerns and conducts surveys for members, providers and payers to ensure that all parties are satisfied with the services and the service levels provided. Department personnel also recommend, or take, steps to address conditions from which valid complaints have arisen. In addition, Managed Vision performs retrospective-outcome studies and other quality assessment studies on the care rendered by its network of providers.

•  Claim Data Analysis — Managed Vision’s financial analysts review claim and other data to provide feedback to management and to the insurance companies and other payers with which it has claims payment contracts concerning its performance, enabling management to maintain profitability while providing excellent service.

      Competition. Generally, managed care organizations compete on the basis of administrative strength, size, quality and geographic coverage of their provider networks, marketing abilities, information systems, operating efficiencies and price. Managed Vision competes with several regional and national eye health companies, which provide services to health plans, associations, employer groups and various other payers. It

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also competes for managed care contracts with HMOs, PPOs and private insurers. Many of Managed Vision’s competitors have larger provider networks and greater financial and other resources than Managed Vision. Its largest competitor is Vision Service Plan of America.

      Government Regulation. Managed Vision is subject to the following legal requirements and regulations:

      Licensing Requirements. Many states impose licensure requirements on health insurance companies, HMOs and other companies that engage in the business of insurance, pre-paid health care or defined managed care activities. In some states, these laws do not apply to the discounted fee-for-service or capitation programs between insurers and provider networks contracting with those insurers. Certain states, however, such as Texas, where Managed Vision works on a capitated basis, require that the risk-bearing entity (e.g., the managed care company) be licensed for capitated arrangements. As a risk-bearing entity, Managed Vision is currently licensed and operates its capitated arrangements through a wholly-owned, single-service HMO subsidiary, AECC Total Vision Health Plan of Texas, Inc. (“AECC”).

      If Managed Vision is required to become licensed under the laws of states other than Texas for its managed care vision benefits products, the licensure process could be lengthy and time consuming. In states where Managed Vision already is conducting such business, unless the regulatory authority permits it to continue to operate while the licensure process is progressing, Managed Vision could suffer losses of revenue that would result in material adverse changes in its business while the licensing process is pending. In addition, licensing requirements may mandate strict financial and other requirements Managed Vision may not immediately be able to meet and which, if waivers or other exemptions are not available, might cause Managed Vision to withdraw from those states or otherwise cause a material adverse change to its business, operations or financial position. The same risks may not apply to the same degree for Managed Vision’s Direct-to-Employer suite of products due to its relationship with Fidelity Security Life Insurance Company, which is licensed to write life and health insurance in all 50 states (except in New York, where it may write only reinsurance). Once licensed, Managed Vision would be subject to regulatory compliance and required to report to the licensing authority.

      Some states require licensing for companies providing administrative services in connection with a managed care business. Managed Vision currently holds third-party administrator licenses in Florida, North Carolina, South Carolina and Texas. Managed Vision may seek licenses in the states which they are required for eye care networks, if needed. In the event such licensure is required and Managed Vision is unable to obtain a license, Managed Vision may be forced to withdraw from that state, which could have a material adverse effect on its business.

      Managed Vision has a Preferred Provider Network license in Connecticut, an Organized Delivery System Certification in New Jersey and an Individual Practice Association in New York.

      The licensing requirements described can also serve as a barrier to entry to competition in states where such licensure is required.

      Regulation of OptiCare’s Captive Insurance Subsidiary. OptiCare Vision Insurance Company is a licensed Captive Insurance Company domiciled in South Carolina. It is subject to regulation and supervision by the South Carolina Department of Insurance, which requires OptiCare to maintain $500,000 of unencumbered capital and surplus via a letter of credit.

      Regulation of OptiCare’s HMO Subsidiary. AECC is a licensed single service HMO. It is subject to regulation and supervision by the Texas Department of Insurance, which has broad administrative powers relating to standards of solvency, minimum capital and surplus requirements, maintenance of required reserves, payment of dividends, statutory accounting and reporting practices and other financial and operational matters. The Texas Department of Insurance requires that stipulated amounts of paid-in-capital and surplus be maintained at all times. AECC is required by terms of an Order of the Commissioner of Insurance, dated August 12, 1999, as modified in November 2003, to maintain a minimum net worth of $500,000. Dividends payable to OptiCare by its Texas HMO subsidiary are generally limited to the lesser of 10% of statutory-basis capital and surplus or net income of the preceding year excluding realized capital gains.

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In addition, OptiCare’s agreement with the Texas Department of Insurance required OptiCare to pledge investments of $250,000 at December 31, 2004 and December 31, 2003.

      Preferred Provider Networks. Managed Vision is registered as a preferred provider network (“PPN”) with the Department of Insurance of Connecticut. Many states have provider network licensure registration requirements and many of these mandate that an organization have specified financial reserves or insolvency protections and provide financial reporting and disclosures to state officials.

      “Any Willing Provider” Laws. Some states have adopted, and others are considering, legislation that requires managed care networks to include any qualified and licensed provider who is willing to abide by the terms of the network’s contracts. These laws could limit Managed Vision’s ability to develop effective managed care networks in such states. However, Managed Vision believes that if such legislation were adopted that the unique medical management and eye care claim data analysis services it offers would provide great value to its clients.

      Health Insurance Portability and Accountability Act — Administrative Simplification. The Health Insurance Portability and Accountability Act (“HIPAA”), passed in 1996 by Congress, requires the Department of Health and Human Services (“HHS”) to enact standards for information sharing, security and the use, disclosure and confidentiality of patients’ protected health information. The HHS, in its administrative simplification provisions, has published three sets of final regulations implementing healthcare transactions and privacy standards under HIPAA. These regulations apply to what are termed “covered entities” (i.e., health plan, health care clearinghouse and healthcare provider) and, under terms of the regulations, in certain instances Managed Vision may be a covered entity and in other instances Managed Vision may be classified as a “business associate” of an independent covered entity. In addition, state laws may place additional limitations on the use or disclosure of patients’ information.

      In addition to its administrative simplification provisions, HIPAA also imposes criminal penalties for fraud against any healthcare benefit program, for theft or embezzlement involving healthcare and for false statements in connection with the payment of any health benefits. Although Managed Vision does not know of any current violations of the fraud and abuse provisions of HIPAA, if it were found to be in violation of these provisions, the government could seek penalties against it including exclusion from participation in government payer programs. Significant fines could cause liquidity problems for Managed Vision and adversely affect its results of operations.

OptiCare Trademarks, Domain Names and Assumed Names

      OptiCare owns the following U.S. trademark registrations: OPTICARE and the miscellaneous curve design, which is the OptiCare Health Systems, Inc. logo; EYE CARE FOR A LIFETIME; EYEWEAR AND EYE CARE FOR A LIFETIME; CONNECTICUT VISION CORRECTION; LOSE THE GLASSES, KEEP THE VISION; THE DIFFERENCE IS CLEAR; and KEEPING YOU AHEAD OF THE CURVE. OptiCare also maintains a common law trademark in CLAIM IT.

      OptiCare owns the following domain names: opticare.com; opticare.net; opticare-ehn.com; opticarevisionplan.com; myvisionplan.com; opticarenas.net; ncfbvision.com; ncfbvision.net; opticarevisionplans.net; opticarevisionplan.net; and opticare-ehn.net.

      Except for the “OptiCare” mark which is used by and important to, the operations of both Consumer Vision and Managed Vision, OptiCare’s business is not dependent on any individual trademark or trade name.

OptiCare Employees

      As of February 2, 2006, OptiCare, together with its professional affiliate, had approximately 332 employees, including 78 ophthalmologists, optometrists and opticians and 38 ophthalmic assistants. These numbers include an aggregate of approximately 38 part-time personnel who work fewer than 30 hours per week. Of the 332 employees, 59 work in Managed Vision. OptiCare is not a party to any collective bargaining agreement.

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Item 1A.     Risk Factors

Successful Integration will be Complex and Time-Consuming.

      Successful integration of the Company, OptiCare and U.S. Vision will require, among other things, implementing a strategic plan for the combined companies. We may not accomplish this integration successfully and any diversion of management’s attention to the integration effort and any difficulty encountered in combining or coordinating operations could cause the interruption of, or a loss of momentum in, the activities of any or all of the companies’ businesses. Furthermore, employee morale may suffer, and we may have difficulty retaining key personnel. There is no assurance that we will be able to maintain or renew all of OptiCare’s and U.S. Vision’s current contracts and relationships.

We May not be able to Compete Effectively with Other Eye Care Distributors and Other Eye Care Services Companies which Have More Resources and Experience than us.

      On October 4, 2004, Luxottica, the parent of LensCrafters and the world leader in the design, manufacture and distribution of prescription frames and sunglasses in the mid- and premium-price categories, acquired Cole National, a leading optical retailer which also operates CMV, a major national vision program. Prior to this acquisition, Luxottica was already the dominant optical retailer in the United States with more sales and resources than its competitors. Its acquisition of Cole National substantially lessens the ability of retail optical companies, including us as a result of the mergers, to successfully compete with it.

      In addition, some companies in the retail optical business have substantially greater financial, technical, managerial, marketing and other resources and experience than we do. As a result, these other companies may compete more effectively than us and our subsidiaries. We compete with other businesses, including other eye care services companies, hospitals, individual ophthalmology and optometry practices, other ambulatory surgery and laser vision correction centers, managed care companies, eye care clinics and providers of retail optical products. Companies in other health care industry segments, including managers of hospital-based medical specialties or large group medical practices, may become competitors in providing surgery and laser centers, as well as competitive eye care-related services.

      The failure to compete effectively with these and other competitors could have a material adverse effect on our business, financial condition and results of operations. The retail optical industry engages in price-related promotions as a standard marketing practice. Several competitors have greater financial and other resources than we do, which may enable such competitors to pursue more aggressive pricing and promotional strategies at the expense of profits for longer periods of time than we can.

      We also face the possibility of a decreased demand for eyeglasses and contact lenses as advances in, and the acceptability of, vision correction technologies, including laser surgery and other surgical vision correction procedures, continue to grow.

U.S. Vision’s Business is Materially Dependent Upon the Revenues that it Derives as a Participating Provider under its Agreement with CMV

      U.S. Vision’s business is materially dependent upon the revenues that it derives as a participating provider through CMV. This business accounted for approximately 22% of U.S. Vision’s revenue for the fiscal year ended January 31, 2006. Luxottica, which owns CMV and also owns EyeMed Vision Care, a leading managed vision care organization, recently announced that it was integrating the operations of EyeMed Vision Care and CMV. U.S. Vision’s participating provider agreement with CMV expires on December 31, 2008. As a result of this integration, it appears unlikely that U.S. Vision will be able to renew or extend its agreement with CMV or enter into a comparable agreement with EyeMed Vision Care. We are seeking various agreements and studying various alternatives to minimize the effect of such termination on our business. However no assurance can be given that we will be able to enter into other agreements or find suitable alternatives. If we are not able to do so and the CMV agreement is terminated, there will likely be a material adverse impact on our business, operations and/or financial condition.

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Our Business is Subject to Health Care Regulations, Which Could Materially Adversely Affect Our Business, Financial Condition and Results of Operations.

      The businesses is currently subject to extensive federal and state governmental regulation and supervision. These regulations include, but are not limited to:

•  anti-kickback statutes;

•  self-referral laws;

•  insurance and licensor requirements associated with the managed care business;

•  civil false claims acts;

•  corporate practice of medicine restrictions;

•  fee-splitting laws;

•  facility license requirements and certificates of need;

•  regulation of medical devices, including laser vision correction and other refractive surgery procedures;

•  FDA and FTC guidelines for marketing laser vision correction; and

•  regulation of personally identifiable health information.

      We have no assurance that these laws and regulations will not change or be interpreted in the future either to restrict or adversely affect its business activities.

Changes in the Regulatory Environment Applicable to the Retail Eye Care Business, Including Health-Care Cost Containment Efforts by Medicare, Medicaid and Other Third-Party Payers may Adversely Affect the Company’s Profits.

      The health care industry has experienced a trend toward cost containment as government and private third-party payers seek to impose lower reimbursement and utilization rates and negotiate reduced payment schedules with service providers. Our revenues will be subject to pre-determined Medicare reimbursement rates for certain products and services, and decreases in Medicare reimbursement rates could have an adverse effect on our results of operations if we cannot offset these reductions through increases in revenues or decreases in operating costs. To some degree, prices for health care services and products are driven by Medicare reimbursement rates, so that non-Medicare business is also affected by changes in Medicare reimbursement rates. In addition, federal and state governments are currently considering various types of health care initiatives and comprehensive revisions to the health care and health insurance systems. Some of the proposals under consideration, or others that may be introduced, could, if adopted, have a material adverse effect on our business, financial condition and results of operations following the mergers.

Risks Related to the Eye Care Industry, Including the Cost and Availability of Medical Malpractice Insurance, and Possible Adverse Long-Term Experience With Laser and Other Surgical Vision Correction Could Have a Material Adverse Effect on Our Business, Financial Condition and Results of Operations

      The provision of eye care services entails the potentially significant risk of physical injury to patients and an inherent risk of potential malpractice, product liability and other similar claims. Insurance may not be adequate to satisfy claims or protect the combined company and its affiliated eye care providers, and this coverage may not continue to be available at acceptable costs. A partially or completely uninsured claim against us or our subsidiaries following the mergers could have a material adverse effect on the business, financial condition and results of operations.

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Managed Care Companies Face Increasing Threats of Private-Party Litigation, Including Class Actions, Over the Scope of Care for Which Managed Care Companies Must Pay.

      Several large national managed care companies have been the target of class action lawsuits alleging fraudulent practices in the determination of health care coverage policies for their beneficiaries. Such lawsuits have, thus far, been aimed solely at full service managed care plans and not companies that specialize in specific segments, such as eye care. We cannot assure you that private party litigation, including class action suits, will not target eye care in the future, or that the combined company will not otherwise be affected by such litigation following the mergers.

Loss of the Services of Key Management Personnel Could Adversely Affect the Company’s Business.

      The successful completion of the mergers and integration of OptiCare and U.S. Vision depends upon the continued services of certain executive officers of the Company, OptiCare and U.S. Vision. We believe that the loss of certain of such executive officers during this period could have a material adverse effect on our business, financial condition and results of operations.

Palisade Owns Sufficient Shares of the Company’s Common Stock to Control the Company’s Board of Directors and Control the Outcome of any Stockholder Vote.

      Palisade currently owns approximately 88% of our common stock and therefore will determine the outcome of all corporate matters requiring stockholder approval, including the election of all of our directors and material transactions.

Conflicts of Interest May Arise Between Palisade and the Company.

      Conflicts of interest may arise between us and Palisade and its affiliates in areas relating to past, ongoing and future relationships and other matters. These potential conflicts of interest include corporate opportunities, potential acquisitions or financing transactions, sales or other dispositions by Palisade of the shares of our stock held by it, and the exercise by Palisade of its ability to control our management and affairs. In addition one of our directors is an officer of PCM and a member of Holdings, both of which are affiliates of Palisade. There can be no assurance that any conflicts that may arise between Palisade and us that will not have a material adverse effect on our business, financial condition and results of operations or our other stockholders.

      In connection with the formation of a new private equity partnership, PCM intends to consult with a group of senior experienced operating executives to assist it in the screening and selection of investment opportunities as well as ongoing monitoring and management of portfolio companies. Included in this group are Eugene K. Bolton, a director; Clark A. Johnson, a director and an owner of a 5% preferred, non-voting equity interest in PCM; Melvin Meskin, a director; Mark S. Newman, a director; and Jeffrey D. Serkes, a director. In most instances, it is expected that these persons would be compensated directly by the portfolio companies.

      Pursuant to employment agreements entered into on April 1, 2005, each of Robert L. Tuchman, the Company’s Senior Vice President and General Counsel, and Raymond A. Cardonne, Jr., the Company’s Chief Financial Officer, may enter into separate arrangements for his own account with PCM and/or any of its affiliated companies that are engaged in private equity or investment management pursuant to which he may become a member, partner, officer, director or stockholder of such entity or may provide consulting or professional services thereto provided that such activities do not materially interfere with the regular performance of his duties and responsibilities under his respective employment agreement. Messrs. Tuchman and Cardonne also have interests in the general partner of a private equity partnership recently formed by PCM.

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OptiCare and U.S. Vision Have Not Had Profitable Operations in Recent Years, and We Cannot Assure that the Company will be Profitable.

      In recent years, OptiCare’s and U.S. Vision’s operations have not been profitable. OptiCare had net losses of $12.3 million and $8.3 million for the years ended December 31, 2003 and December 31, 2004, respectively. U.S. Vision had net losses of $4.22 million and $531,000 for the years ended January 31, 2004 and January 31, 2005, respectively. We cannot assure that efforts to improve profitability through, among other things, economies of scale and cost-efficiencies, will be successful or that the combined company will be profitable following the mergers.

If We Fail to Execute Our Growth Strategy, We May Not Be Profitable.

      We intend to expand our operations through organic growth, strategic acquisitions and/or other business combination transactions in the eye care industry. We believe that OptiCare can become the largest optical retailer in the State of Connecticut by acquiring additional locations in existing markets to fill in excess capacity as well as in new markets within the State of Connecticut.

      U.S. Vision is already one of the leading store-within-a-store optical retailers in the United States. Refac believes that there is opportunity for U.S. Vision to increase the number of stores within the existing host stores in which it operates as well as open new host store relationships. We also intend to explore the possibility of acquiring one or more free standing optical chains that might become available for sale. There can be no assurance that any or all of these growth initiatives will prove to be profitable.

      Additionally, the growth strategy of the combined company depends in part on its ability to expand and successfully implement an integrated business model. We expect that this growth strategy will result in increased responsibilities for management and additional demands on management, operating and financial systems and resources. The combined company’s ability to expand will also depend upon its ability to hire and train additional staff and managerial personnel, and adapt, as necessary, its structure to comply with present or future legal requirements affecting arrangements with ophthalmologists and optometrists.

      If we are unable to make strategic acquisitions in the eye care industry and implement its internal growth strategy following the mergers, its business, financial condition, results of operations and ability to achieve and sustain profitability could be materially adversely affected.

OptiCare’s Business is Substantially Dependent on a Professional Services and Support Agreement with a Professional Affiliate.

      The laws of the State of Connecticut (in which OptiCare conducts all of its operations) as well as some other states prohibit corporations that are not owned entirely by eye care professionals from (i) employing eye care professionals, (ii) receiving for their own account reimbursements from third-party payers for health care services rendered by licensed professionals; (iii) controlling clinical decision-making; or (iv) engaging in other activities that constitute the practice of ophthalmology or optometry. To comply with Connecticut law, OptiCare’s wholly-owned subsidiary, OptiCare Eye Health Centers, Inc., is party to a Professional Services and Support Agreement with OptiCare, P.C., a Connecticut professional corporation, of which Dr. Yimoyines, the current Chairman and Interim Chief Executive Officer of OptiCare, is the sole stockholder. Under this agreement, OptiCare, P.C. employs medical personnel and performs all ophthalmology and optometry services at OptiCare’s facilities in Connecticut.

      Conflicts of interests may also arise in connection with the Professional Services and Support Agreement, because Dean J. Yimoyines, the Chairman and Interim Chief Executive Officer of OptiCare, is the sole stockholder of OptiCare, P.C., the counterparty to such agreement.

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If OptiCare’s Managed Vision Care Division Fails to Negotiate Profitable Capitated Fee Arrangements, it Could Have A Material Adverse Effect on the Results of Operations and Financial Condition of the Combined Company.

      Under some managed care contracts, known as “capitation” contracts, health care providers accept a fixed payment per member per month, whether or not a person covered by a managed care plan receives any services, and the health care provider is obligated to provide all necessary covered services to the patients covered under the agreement. Many of these contracts pass part of the financial risk of providing care from the payer, i.e., an HMO, health insurer, employee welfare plan or self-insured employer, to the provider. The growth of capitation contracts in markets which OptiCare serves could result in less certainty with respect to profitability and require a higher level of actuarial acumen than OptiCare currently uses to evaluate such contracts. We do not know whether OptiCare will be able to continue to negotiate arrangements on a capitated or other risk-sharing basis that prove to be profitable, or to pass the financial risks of providing care to other parties, or to accurately predict utilization or the costs of rendering services. In addition, changes in federal or state regulations of these contracts may limit OptiCare’s ability to transfer financial risks away from itself. Any such developments could have a material adverse effect on the business, financial condition and results of operations of the combined company following the mergers.

U.S. Vision’s Revenues Depend Largely Upon its Lease Arrangement with J.C. Penney Company, Inc.

      For the fiscal year ended January 31, 2005, 96.2% of U.S. Vision’s net sales were derived from sales in optical centers located within department stores. For the same period, net sales attributable to optical centers located within J.C. Penney stores represented approximately 69.3% of U.S. Vision’s sales. U.S. Vision is indirectly dependent on the operations and financial success of its host department stores. A decline in the sales, customer traffic or overall financial performance of J.C. Penney and its other host department stores, could have a material adverse effect on U.S. Vision’s business. It is anticipated that U.S. Vision will continue to rely upon several host stores for a majority of its revenues following the mergers. However, we cannot assure you that U.S. Vision will be able to maintain its relationships with Sears or its other host stores on favorable terms, if at all, following the mergers.

      U.S. Vision’s optical centers within J.C. Penney stores are subject to a master lease that expires in December 2007, but either party has the option to extend the term of the lease until December 2010. The master lease may be terminated early, but no more than 40 of U.S. Vision’s J.C. Penney optical centers may be closed by J.C. Penney in any calendar year for any reason, excluding any U.S. Vision stores closed by J.C. Penney as a result of a temporary or permanent closing of a J.C. Penney department store.

      The lease requires U.S. Vision to pay additional license fees to J.C. Penney should it enter into a licensed department agreement or similar arrangement with a national chain of department stores or large chain of discount stores that provides for more favorable terms and conditions relating to the amount and payment of license fees.

      A substantial change in U.S. Vision’s relationship with J.C. Penney resulting in the termination or change of optical center leases would have a material adverse effect on U.S. Vision’s business, financial condition and/or results of operations.

U.S. Vision’s Revenues Also Depend Upon its Lease Arrangements with Other Department Stores.

      Many of U.S. Vision’s retail optical departments located within other department stores are subject to lease arrangements that permit lease termination on short notice. There can be no assurance that any lease between U.S. Vision and a host store will not be terminated or its terms adversely changed. A substantial change in U.S. Vision’s relationship with one or more of its host department stores resulting in the termination or change of optical center leases could have a material adverse effect on its business, prospects, financial condition or results of operations.

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U.S. Vision’s Business is Materially Dependent upon a Single Laboratory.

      U.S. Vision finishes all of its merchandise at its optical laboratory, distribution and lens grinding facility. An interruption in production at the facility is likely to have a material adverse effect on the combined company’s business, financial condition or results of operations.

Failure to Have Vision Care Professionals Available in or Near U.S. Vision’s Vision Centers Would Adversely Affect its Ability to Win Managed Care and Host Store Contracts, and Could Prevent U.S. Vision From Operating in Some States.

      U.S. Vision’s business and marketing strategies emphasize the availability of independent optometrists in close proximity to its vision centers. Accordingly, U.S. Vision has made arrangements with licensed optometrists to provide eye examination services at or adjacent to its retail locations in those states where it is permitted. These independent optometrists sublease space and equipment from U.S. Vision or from the host store. While U.S. Vision and the optometrists do not share in each other’s revenues, U.S. Vision believes the presence of the optometrists offering eye exams at its stores helps to generate sales, leads to repeat customers and reinforces the quality and professionalism of each store. Any difficulties or delays in securing the services of these professionals could adversely affect its business.

Compliance with Section 404 of the Sarbanes-Oxley Act of 2002 is Likely to be Costly.

      Absent an additional extension from the Securities and Exchange Commission or change in its regulations, over the next year, the Company will need to document and test its internal control procedures in order to satisfy the requirements of Section 404 of the Sarbanes-Oxley Act of 2002. This law requires annual management assessments of the effectiveness of our internal controls over financial reporting and, commencing with fiscal year 2007, a report by our independent auditors addressing these assessments. Our efforts to comply with this law will result in significant added expense and a diversion of management time from strategic activities to compliance activities.

Item 2.     Properties

Corporate

      The Company maintains its corporate executive offices at One Bridge Plaza, Fort Lee, New Jersey 07024 in leased premises encompassing approximately 4,800 gross rentable square feet. The lease for these premises expires on June 30, 2009.

      The Company also leases approximately 26,000 gross rentable square feet located at The Hudson River Pier, 115 River Road, Edgewater, New Jersey 07020 under a sublease which expires on November 15, 2009. These premises had previously been used by the Company for its corporate headquarters and the creative studios for its product development and graphic design business segments, which were sold in 2002. As of the date of this report, approximately 15,500 and 9,200 gross rentable square feet have been subleased through October 31, 2009 and November 14, 2009, respectively. However, since November 2005, the Company has been in litigation with one of the subtenants. This subtenant is expected to surrender the 9,574 gross rentable square feet it is subleasing by the end of May 2006 and the Company is actively looking for a new subtenant for this space.

U.S. Vision

      U.S. Vision owns a 20,000 square foot facility in Glendora, New Jersey, which serves as its corporate headquarters, a neighboring 24,000 square foot distribution facility, a neighboring 60,000 square foot optical laboratory, and a neighboring 1,800 square foot corporate annex used to support its corporate headquarters.

      U.S. Vision’s 8 freestanding store locations are subject to lease arrangements which contain varying terms and are not subject to short notice lease termination provisions. The leases provide for monthly base lease payments plus, under certain circumstances, include an additional rent provision based on a percentage of U.S. Vision’s sales at each location. U.S. Vision’s current focus is on its leased department optical stores and it

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has not opened any freestanding stores during the past five fiscal years. As the leases for its existing freestanding stores expire, U.S. Vision evaluates whether the store’s contribution to profit before overhead warrants a short-term lease extension or renewal for a term not exceeding one-year, in which case it seeks to negotiate such extension or renewal with the landlord.

OptiCare

      OptiCare has executive offices in Waterbury, Connecticut and Rocky Mount, North Carolina.

      The Waterbury facility, which contains corporate offices and an integrated eye health center, is leased under three separate leases with remaining terms of six, six and eight years, respectively. These leases have renewal options of 20, 20 and 10 years, respectively. The combined base rent is $807,000 per year for a total of 44,000 square feet.

      The facility in Rocky Mount which contains OptiCare’s office for its Managed Vision Division is leased under one lease which began on August 1, 2002 and expires on August 1, 2007. The base rent for this facility is $146,000 per year for 15,000 square feet.

      The facilities in Waterbury, Connecticut described above are each leased from parties that are affiliated or associated with OptiCare’s Interim Chief Executive Officer. In addition, the Interim Chief Executive Officer or a related party has a minority ownership interest in OptiCare’s properties in Norwalk and New Milford, Connecticut.

      OptiCare leases 17 additional offices in the state of Connecticut for its Consumer Vision operation. These leases have remaining terms of up to ten years. Many of these leases are also subject to renewal options. OptiCare believes its properties are adequate and suitable for its business as presently conducted.

Item 3.     Legal Proceedings

      OptiVest, LLC v. OptiCare Health Systems, Inc., OptiCare Eye Health Centers, Inc. (“OEHC”) and Dean Yimoyines was filed in the Superior Court, Judicial District of Waterbury, Connecticut on or about January 14, 2002. Plaintiff is a Connecticut limited liability corporation that entered into an Asset Purchase Agreement for certain of OptiCare’s assets for $11,000,000, subject to a reduction if the working capital, as of the closing date, was less than $4,500,000. OptiCare believes it properly terminated the Asset Purchase Agreement based upon Plaintiff’s failure to obtain a financing commitment and to close within the time parameters of the asset Purchase Agreement. Plaintiff claims that it incurred expenses in investigating the purchase of assets under the Asset Purchase Agreement and that OptiCare misled Plaintiff with respect to OptiCare’s financial condition. Furthermore, Plaintiff alleges that OptiCare breached terms of the Asset Purchase Agreement and engaged in innocent misrepresentation, negligent misrepresentation, intentional and fraudulent misrepresentation and unfair trade practices with respect to the Asset Purchase Agreement. As a result of the foregoing, Plaintiff claims to have suffered damages. Plaintiff seeks specific performance of the Asset Purchase Agreement and an injunction prohibiting OptiCare from interfering with concluding the transactions contemplated by the Asset Purchase Agreement.

      By an Arbitration Agreement, dated as of January 30, 2004, the parties have agreed to arbitrate the controversy. In connection with the arbitration, on March 29, 2006, Plaintiff submitted a report claiming that its damages are no less than $15,440,000. OptiCare believes that Plaintiff’s claims are without merit and that OptiCare has meritorious defenses to Plaintiff’s claims. The hearing is currently expected to take place in June 2006.

      In the normal course of business, the Company and its subsidiaries are both a plaintiff and defendant in lawsuits incidental to their current and former operations. Such matters are subject to many uncertainties, and outcomes are not predictable with assurance. Consequently, the ultimate aggregate amount of monetary liability or financial impact with respect to these matters at December 31, 2005 cannot be ascertained. The Company’s management is of the opinion that, after taking into account the merits of defenses and established reserves, the ultimate resolution of these matters will not have a material adverse effect in relation to the Company’s consolidated financial position or results of operations.

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

      None.

PART II

Item 5. Market for the Company’s Common Stock, Related Stockholder Matters and Issuer Purchases of Equity Securities

      The Company’s common stock is listed on the American Stock Exchange and it had 617 stockholders of record as of March 24, 2006. The Company did not pay any cash dividends during the two year period ended December 31, 2005 and does not intend to pay any cash dividends to stockholders in the foreseeable future.

      The following table reflects the high and low closing stock prices of the common stock by calendar quarter the fiscal years ended December 31 2004 and 2005.

	2005				2004
	High		Low		High		Low
First quarter	$	4.25	$	4.10	$	5.06	$	4.72
Second quarter		6.10		4.10		4.80		4.68
Third quarter		8.00		5.86		4.83		4.65
Fourth quarter		8.50		7.85		4.66		4.11

EQUITY COMPENSATION PLANS

      The following table sets forth information as of December 31, 2005, with respect to compensation plans (including individual compensation arrangements) under which equity securities of the Company are authorized for issuance:

	Number of Securities
	to be Issued		Weighted Average		Number of Securities
	Upon Exercise of		Exercise Price of		Remaining Available
Plan Category	Outstanding Options		Outstanding Options		for Future Issuance
	(a)		(b)		(c)
Equity compensation plans approved by security holders		523,500	$	5.75		5,000
Equity compensation plans not approved by security holders(1)		50,000	$	4.92		—
Total		573,500	$	5.68		5,000

(1)  The Company granted to Cole Limited, Inc. (“CL”), an option to purchase 50,000 shares of the Company’s common stock at a per share exercise price of $4.92, which was equal to the fair market value of the Company’s common stock on the date of the grant. Although this option was not issued pursuant to any option plan, it is governed by the same terms set forth in the Company’s 2003 Stock Incentive Plan.

SALE OF UNREGISTERED SECURITIES

      On July 18, 2005, the Company sold and issued 50,000 shares of its common stock to Cole Limited, Inc. (“CL”) at a price of $4.92 per share, or an aggregate price of approximately $245,000, pursuant to the Stock Purchase Agreement (the “Stock Purchase Agreement”), dated June 20, 2005, between the Company and CL. On the date that the parties entered into the Stock Purchase Agreement, the closing price of the Company’s common stock on the American Stock Exchange was $4.92. The purpose of the stock purchase transaction was to provide the Company with additional working capital. The shares sold to CL were not registered in reliance on the exemption set forth in Section 4(2) of the Securities Act of 1933, as amended (the “Securities Act”). In the Stock Purchase Agreement, CL made representations that: (i) it is an

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accredited investor within the meaning of Rule 501 of Regulation D promulgated under the Securities Act, (ii) CL acquired the shares for its own account for investment only and had no intention of selling or distributing any of such shares, (iii) CL reviewed all information which it deemed to be important in connection with the transaction, recognized that the transaction involves risk and did not rely on any representation or warranty of the Company other than as specified in the Stock Purchase Agreement and (iv) CL recognized that the Company is relying on such representations so that the transaction is exempt from registration under the Securities Act. The certificate representing the shares issued to CL pursuant to the Stock Purchase Agreement include a customary legend that the shares are not registered under the Securities Act.

      On June 20, 2005, the Company also entered into a Consulting Agreement (the “Consulting Agreement”) with CL, a consulting firm headed by Jeffrey A. Cole. The Consulting Agreement has a term of one year starting June 1, 2005 and provides for CL to advise the Company on its optical interests and the operations of its subsidiaries and divisions, including developing a strategic plan, assisting on acquisition opportunities, assisting in financing and advising on corporate and retail operations. Under the Consulting Agreement, CL receives annual compensation of $100,000, payable in equal monthly installments, plus reimbursement for certain reasonable expenses. Concurrently with the execution of the Consulting Agreement, CL received options to purchase 50,000 shares of the Company’s common stock with an exercise price of $4.92, the fair market value on the date of grant. One third of such options vested upon the date of grant, and one-third vested on October 1, 2005 and the remaining one-third vested on February 1, 2006. On January 18, 2006, Mr. Cole was elected to the Company’s Board of Directors and its Executive Committee.

ISSUER PURCHASES OF EQUITY SECURITIES

								Maximum
						Total Number of		Number of Shares
						Shares Purchased as		that may yet be
		Total Number of		Average Price		Part of Publicly		Purchased Under
Period		Shares Purchased		Paid per Share		Announced Plans(1)		the Plans
September 1 - September 30			16,330	$	8.29		16,330		634,132
October 1 - October 31			10,580	$	8.29		10,580		623,552
November 1 - November 30			18,495	$	8.29		18,495		605,057
December 1 - December 31			20,162	$	8.29		20,162		584,895
	Total		65,567	$	8.29		65,567

(1)  Pursuant to the Company’s merger agreement (the “Palisade Merger Agreement”), dated as of August 19, 2002, as amended, with Palisade, certain stockholders hold a non-transferable right to sell their shares of Company common stock to the Company for a price determined based upon the Company’s liquid distributable assets (“LDA”) as of June 30, 2005. Such calculation has been made and finalized at $8.29 per share. This right to sell the shares is non-transferable and is limited to stockholders who held their shares continuously from the date of the Palisade Merger through August 8, 2005, the date that the LDA calculation was finalized. The Company has restricted $4,849,000 of its cash and investments being held to maturity as of December 31, 2005 to maintain the Contingent Fund (as defined in the Palisade Merger Agreement). As of December 31, 2005 a total of 65,567 shares have been redeemed for a total amount of $544,000. Any Contingent Fund amounts that are related to Payment Rights that are not properly exercised on or before September 30, 2006 will become unrestricted. See Note 2 to the financial statements.

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Item 6. Selected Financial Data

REFAC OPTICAL GROUP AND SUBSIDIARIES

SELECTED FINANCIAL INFORMATION

	Year Ended December 31,
	2005			2004			2003			2002			2001
	(In thousands, except per share amounts)
Revenues	$	2,409		$	1,779		$	1,804		$	6,415		$	4,840
Net income (loss) from continuing operations	$	(925	)	$	(239	)	$	(1,534	)	$	2,511		$	2,764
Income (loss) from discontinued operations — net of taxes		—		$	14		$	38		$	(1,697	)	$	(1,680	)
Loss from cumulative effect of change in accounting principle — net of taxes		—			—			—		$	(2,083	)		—
Net income (loss)	$	(925	)	$	(225	)	$	(1,496	)	$	(1,269	)	$	1,084
Income (loss) per common share from continuing operations — basic	$	(0.13	)	$	(0.03	)	$	(0.27	)	$	0.66		$	0.73
Income (loss) per common share from discontinued operations — basic		—			—		$	0.01		$	(0.44	)	$	(0.44	)
Loss per common share from cumulative effect of change in accounting principle — basic		—			—			—		$	(0.55	)		—
Income (loss) per common share on net income — basic	$	(0.13	)	$	(0.03	)	$	(0.26	)	$	(0.33	)	$	0.29
Income (loss) per common share from continuing operations — diluted	$	(0.13	)	$	(0.03	)	$	(0.27	)	$	0.66		$	0.73
Income (loss) per common share from discontinued operations — diluted		—			—		$	0.01		$	(0.44	)	$	(0.44	)
Loss per common share from cumulative effect of change in accounting principle — diluted		—			—			—		$	(0.55	)		—
Income (loss) per common share on net income — diluted	$	(0.13	)	$	(0.03	)	$	(0.26	)	$	(0.33	)	$	0.29

	As of December 31,
	2005		2004		2003		2002		2001
Total assets	$	37,326	$	38,768	$	39,023	$	24,292	$	24,387
Dividends		—		—		—		—		—
Stockholders’ Equity	$	30,764	$	31,197	$	31,898	$	21,340	$	22,592

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Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operation

      As a result of a corporate repositioning, during 2002, the Company disposed of its then operating segments, with the exception of its licensing business, and it has limited the operations of that segment to managing certain existing license agreements and related contracts. On February 28, 2003, the Company completed the Palisade Merger. On March 28, 2003, the Company entered into a stock purchase agreement with Palisade, which closed on May 19, 2003. The purpose of the stock purchase transaction was to provide the Company with additional capital for making acquisitions. From January 27, 2004 to March 21, 2005, the Company focused its acquisition efforts on opportunities in the asset management sector of the financial services industry.

      On March 21, 2005, the Company’s Board of Directors (the “Board”) decided to broaden the scope of the acquisition search to include other industries and, on April 8, 2005, the Company announced that it had entered into acquisition discussions with two affiliated companies, U.S. Vision, Inc. and OptiCare Health Systems, Inc. On August 22, 2005, the Company signed merger agreements with U.S. Vision and OptiCare and the transactions were completed on March 6, 2006. As a result of these acquisitions, the Company has become a leader in the retail optical industry and the sixth largest retail optical chain in the United States. It operates at 543 locations in 47 states and Canada, consisting of 517 licensed departments, eight freestanding stores, 18 eye health centers and professional optometric practices, two surgery centers, one of which is a laser correction center, and two manufacturing laboratories. Of the 517 licensed departments, 351 are located at J.C. Penney stores, 67 at Sears, 49 in regional department stores, 30 at The Bay, a division of Hudson’s Bay Company, Canada’s oldest and largest traditional department store retailer, 13 departments at Meijer, and, most recently, seven at Macy’s. These licensed departments are full-service retail vision care stores that offer an extensive selection of designer brands and private label prescription eyewear, contact lenses, sunglasses, ready-made readers and accessories.

      Prior to the completion of the transactions, the Company, U.S. Vision and OptiCare were all controlled by Palisade. Following the transactions, Palisade owns approximately 88% of the Company’s outstanding shares.

      The Company’s fiscal year ends on the last day of December in each year. As used in this Item 7, references to 2005, 2004 and 2003 shall mean the Company’s fiscal year ended on December 31 of such year. As a result of the Company’s acquisitions of U.S. Vision and OptiCare on March 6, 2006, the Company’s results for 2005 are not indicative of the results to be expected for any future periods.

Results of Continuing Operations

      Revenues from continuing operations for 2005 were $2,409,000 as compared to $1,779,000 for the same period in 2004. Revenues from licensing-related activities increased by $735,000 during 2005, primarily due to the non-recurring settlement payment of $1,500,000 relating to a lawsuit brought by a former client of Refac Licensing, Inc. against Taco Bell Corp., partially offset by a decrease revenues from its agreement with Patlex Corporation (“Patlex”) of $759,000. Offsetting the increase in licensing-related revenues was a decrease in revenues from related party consulting of $105,000.

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      Revenues from continuing operations for 2004 were $1,779,000 as compared to $1,804,000 for the same period in 2003. Revenues from licensing-related activities decreased by $165,000 during 2004, mostly related to the termination of the Company’s agreement with OXO International (“OXO”) (see Note 14C to the financial statements), offset by an increase in revenues from its agreement with Patlex. OXO accounted for $360,000 of the Company’s licensing-related revenue during 2003. Offsetting the decline in licensing-related revenues were revenues from related party consulting which increased by $140,000. Revenues from continuing operations are summarized as follows:

	For the Years Ended
	December 31,
Description	2005		2004		2003
Revenues from licensing-related activities		97%		90%		98%
Consulting income		3%		10%		2%
Total		100%		100%		100%

      The Company’s income from its contract with Patlex was variable and was based upon revenues derived by Patlex from the licensing of two laser patents. The larger revenue producing of the two patents licensed by Patlex is the Gas Discharge Laser Patent (U.S. Patent No. 4,704,583), which expired on November 3, 2004. The other patent is the Brewster’s Angle Patent (U.S. Patent No. 4,746,201) which expired on May 24, 2005. As a result of the expiration of these patents, the Patlex income will not continue in 2006. Other license agreements are expected to provide gross revenues of less than $200,000 in 2006 and to decrease significantly thereafter.

      Expenses from licensing-related activities consist principally of amounts paid to licensors at contractually-stipulated percentages of the Company’s specific patent and product revenues and, in addition, include expenses related to the administration of licensing relationships and contracts. These expenses decreased by $6,000 in 2005 as compared to 2004 and increased by $5,000 in 2004 as compared to 2003. As a percentage of licensing revenues, these expenses were 5%, 8% and 7% in 2005, 2004 and 2003, respectively.

      Selling, General and Administrative (“SG&A”) Expenses — General and administrative expenses increased by $1,548,000 in 2005 as compared to 2004. This increase is primarily due to merger-related costs of $1,219,000, an increase in salaries of $560,000, an increase in consulting fees of $157,000, which relate to the consulting agreement with Jeff Cole and the related expensing of a stock option granted to him, and a decline in subleasing income, resulting in increased rental expense of $258,000. Such increases were partially offset by decreases in management incentive compensation of $478,000 and recruitment fee expenses of $308,000.

      These expenses decreased by $1,610,000 in 2004 as compared to 2003. This reduction is primarily the result of the absence in 2004 of certain non-recurring expenses that were incurred in 2003, such as merger-related costs of $484,000 and accelerated depreciation of leasehold improvements associated with a reduction of the Company’s leased premises in Edgewater, New Jersey of $273,000, and decreases in management incentive compensation of $1,136,000 and professional fees of $208,000 offset by the amortization of $350,000 in executive search firm retainer fees and amounts payable under the Retirement Agreement with the Company’s founder and former chief executive officer of $100,000.

      Dividends, Interest and Other Income — Dividend and interest income for 2005 was $1,095,000 as compared to $477,000 for the same period in 2004 primarily as a result of rising interest rates. Other expense in 2005 consisted primarily of an increase in the estimated loss on its leasehold in Edgewater, NJ.

      Dividend and interest income for 2004 was $477,000 as compared to $323,000 for the same period in 2003. Dividend and interest income increased by $154,000 during 2004, mostly related to rising interest rates. Additionally, in 2004, the Company had $105,000 in other income which consisted of income from a settlement with one of its subtenants, (see Note 14D to the financial statements) offset by an estimated loss on its leasehold in Edgewater, New Jersey.

      Income Taxes — In 2005, the Company had a loss before taxes from continuing operations of $866,000 and a net tax provision of $59,000. The effective income tax rate on continuing operations in 2005 of (7%)

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differs from the federal statutory rate of 34% principally due to merger related costs, which were expensed for financial reporting purposes but are not deductible for income tax purposes. In 2004 and 2003, the effective tax rate on continuing operations was 35% and 31%, respectively. The effective tax rate for 2004 differs from the federal statutory rate of 34% principally due to the dividend received exclusion. The effective tax rate for 2003 was affected by expenses, principally merger related, which were expensed for financial reporting purposes but are not deductible for income tax purposes.

      During 2004, the Company received a federal income tax refund of $579,000 resulting from carrying back a net operating loss incurred in 2003. During 2003, the Company received federal income tax refunds of $4,254,000 resulting from carrying back a net capital loss incurred in 2002 with respect to its sale of Refac International, Ltd. (“RIL”) and its 2002 net operating loss. In accordance with a requirement to examine refund claims over $2,000,000, the IRS reviewed the Company’s tax returns for tax years 1997 through 2003. This examination was concluded in June 2005 with the Company and IRS agreeing to a $121,000 reduction in the refund claim, which, together with interest, the Company has paid. After taking into account this agreement, the Company had an excess of $43,000 in its reserve for the examination which it credited to tax expense as of June 30, 2005.

      As of December 31, 2005, the Company had deferred tax assets relating to the State of New Jersey aggregating $251,000 of which $168,000 is attributable to New Jersey net operating loss carryforwards which can be applied against any New Jersey taxable income the Company might earn during the seven year period after the year in which such carryforward was recognized for tax purposes. The Company cannot determine whether it will generate any New Jersey taxable income. Due to such uncertainty, the Company has estimated that none of its New Jersey related deferred taxes assets will be realized and has established a full valuation allowance. The need for a valuation allowance will continue to be reviewed periodically and adjusted as necessary.

      As of December 31, 2005, the Company had federal deferred tax assets aggregating $859,000 of which $348,000 is attributable to federal net operating loss carryforwards which can be used during the twenty year period after the year in which such carryforward was recognized for tax purposes. No valuation allowance has been taken for the Company’s federal deferred tax assets. The need for a valuation allowance will continue to be reviewed periodically and adjusted as necessary.

      Inflation — The Company’s income from licensing operations has not in the past been materially affected by inflation due to the variable nature of the majority of the payments received. Income from current licensing activities is derived from domestic sources only.

      Results of Discontinued Operations — In furtherance of its 2002 corporate repositioning, the Company sold its Creative Consulting Services and Manufacture and Marketing of Consumer Products groups in the third quarter of 2002. Income from discontinued operations in 2003 and 2004 were principally attributable to the receipt of variable purchase price payments in connection with the sale of the Company’s Product Design Group.

Liquidity and Capital Resources

      The following table sets forth the Company’s cash and cash equivalents, available for sale securities and investments being held to maturity (exclusive of the restricted cash and investments being held to maturity discussed below) for 2005, 2004 and 2003:

Description		2005		2004		2003
Cash and cash equivalents		$	5,384,000	$	457,000	$	799,000
Available for sale securities			—		1,000,000		1,000,000
Investments being held to maturity			24,229,000		29,342,000		28,682,000
	Total	$	29,613,000	$	30,799,000	$	30,481,000

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      Operating activities used $644,000 of cash during 2005. The principal use of net cash flows from operating activities during such period were merger related expenses ($1,220,000) and the payment of management incentive compensation ($818,000), offset by the receipt of a $1,500,000 settlement payment relating to a lawsuit brought by a former client of RL against Taco Bell Corp.

      Investing activities provided $5,775,000 of cash during 2005 principally from the redemption of investments being held to maturity and available for sale securities, offset by the issuance of a $1,000,000 unsecured loan to OptiCare.

      Financing activities for 2005 used $204,000 as a result of the stockholders exercising their Payment Rights (see below), partially offset by the sale of common stock in a private placement and the exercise of stock options.

      The Company believes its liquidity position is adequate to meet all of its current operating needs and existing obligations. However, the Company cannot predict what acquisition or business development opportunities will become available to it and the amount of capital resources that may be required to take advantage of any such opportunities. The Company does not have any long-term debt and has not established any acquisition-related lines of credit.

      As of December 31, 2005, the Company’s portfolio of investments being held to maturity consists of U.S. Treasury Notes bought with an original maturity of six months or less. The portfolio is invested in short-term securities to minimize interest rate risk and facilitate rapid deployment in support of the Company’s acquisition plans.

      Pursuant to the Company’s merger agreement (the “Palisade Merger Agreement”), dated as of August 19, 2002, as amended, with Palisade, certain stockholders hold a non-transferable right to sell their shares of Company common stock to the Company (the “Payment Right”) for a price which is dependent upon the Company’s liquid distributable assets (“LDA”) as of June 30, 2005. Such calculation has been made and finalized at $8.29 per share. This right to sell the shares is non-transferable and is limited to stockholders who held their shares continuously from the date of the Palisade Merger through August 8, 2005, the date that the LDA calculation was finalized. The Company has restricted $4,849,000 of its cash and investments being held to maturity as of December 31, 2005 to maintain the Contingent Fund (as defined in the Palisade Merger agreement). Since the Company does not have direct access to stockholder trading information, the Company has not reduced the Contingent Fund based upon a trading estimate. The Contingent Fund will be adjusted if the Company becomes aware of any actual sales of common stock issued in connection with the Palisade Merger. As of December 31, 2005, this amount is being shown as a short-term asset on the balance sheet as the exercise period, as extended by the Company, for the Payment Right is until September 30, 2006. As of December 31, 2005 a total of 65,567 shares have been redeemed for a total amount of $544,000. As of March 24, 2006, the closing price of the Company’s common stock was $8.15 per share. Any Contingent Fund amounts that are related to Payment Rights that are not properly exercised on or before September 30, 2006 will become unrestricted.

Contractual Obligations

      The Company has commitments under leases covering its facilities (see Note 6A to the financial statements) and under a 1996 Retirement Agreement with its founder and former chief executive officer, which provides an annuity of $100,000 per annum during his life as well as medical and health benefits for him and his spouse during their lives. Provision was made for amounts payable under the Retirement Agreement in the Company’s 1996 financial statements based upon his then life expectancy. As of December 31, 2003, such liability was fully amortized. Starting in 2004, such amounts payable are being expensed.

28

      The following table represents the Company’s future material, long-term contractual obligations as of December 31, 2005:

	Payments Due By Period
			Less than						More than
Contractual Obligations	Total		One Year		1 - 3 Years		3 - 5 Years		5 Years
	(In thousands)
Operating lease Obligations	$	2,407,000	$	614,000	$	1,272,000	$	521,000		—
Consulting Agreement (see Note 7)		42,000		42,000		—		—		—
Management Incentive Compensation (see Note 6B)		421,000		421,000		—		—		—

      The obligation table above does not reflect income from sublease agreements.

Critical Accounting Policies

      As a result of the terms of the Palisade Merger, a projection of the Company’s projected “Liquid Distributable Assets” (as defined in the Palisade Merger Agreement and referred to herein as “LDA”) has been required for the calculation of the Payment Right, and the related Contingent Fund and temporary equity account as well as the management incentive compensation accrual. The calculation of the final LDA has been completed and the related Payment Right, Contingent Fund and management incentive compensation accrual have been updated to reflect the final calculation.

New Accounting Pronouncements

      In May 2005, the Financial Accounting Standards Board (“FASB”) issued FASB Statement No. 154, “Accounting Changes and Error Corrections, a replacement of APB Opinion No. 20, Accounting Changes and FASB Statement No. 3, Reporting Accounting Changes in Interim Financial Statements” (“FAS 154”). FAS 154 provides guidance on the accounting for and reporting of accounting changes and error corrections. It establishes, unless impracticable, retrospective application as the required method for reporting a change in accounting principle in the absence of explicit transition requirements specific to the newly adopted accounting principle. FAS 154 also provides guidance for determining whether retrospective application of a change in accounting principle is impracticable and for reporting a change when retrospective application is impracticable. The provisions of FAS 154 are effective for accounting changes and corrections of errors made in fiscal periods beginning after December 15, 2005. The adoption of the provisions of FAS 154 is not expected to have a material impact on the Company’s financial position or results of operations.

      In December 2004, the Financial Accounting Standards Board issued SFAS No. 123(R) — Share-Based Payment, which is a revision of SFAS No. 123, Accounting for Stock-Based Compensation. SFAS No. 123(R) supersedes APB Opinion No. 25, Accounting for Stock Issued to Employees, and amends SFAS No. 95, Statement of Cash Flows. SFAS No. 123(R) requires all share-based payments to employees, including grants of employee stock options, to be recognized in the income statement based on the fair value of the instruments issued. As originally issued in 1995, Statement 123 established as preferable the fair-value-based method of accounting for share-based payment transactions with employees. However, that Statement permitted entities the option of continuing to apply the guidance in Opinion 25, as long as the footnotes to the financial statements disclosed what net income would have been had the preferable fair-value-based method been used.

      Statement 123(R) allows for two alternative transition methods. The first method is the modified prospective application whereby compensation cost for the portion of awards for which the requisite service has not yet been rendered that are outstanding as of the adoption date will be recognized over the remaining service period. The compensation cost for that portion of awards will be based on the grant-date fair value of those awards as calculated for pro forma disclosures under Statement 123, as originally issued. All new awards and awards that are modified, repurchased, or cancelled after the adoption date will be accounted for under the provisions of Statement 123(R). The second method is the modified retrospective application, which requires that the Company restates prior period financial statements. The modified retrospective application

29

may be applied either to all prior periods or only to prior interim periods in the year of adoption of this statement. The new standard will be effective for the Company as of the first quarter in the fiscal year ended December 31, 2006. The Company is still evaluating the impact the adoption of this standard will have on its financial statements.

FORWARD LOOKING STATEMENTS

      This document includes certain statements of the Company that may constitute “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended, and which are made pursuant to the Private Securities Litigation Reform Act of 1995. These forward-looking statements and other information relating to the Company are based upon the beliefs of management and assumptions made by and information currently available to the Company. Forward-looking statements include statements concerning plans, objectives, goals, strategies, future events, or performance, as well as underlying assumptions and statements that are other than statements of historical fact. When used in this document, the words “expects,” “anticipates,” “estimates,” “plans,” “intends,” “projects,” “predicts,” “believes,” “may” or “should,” and similar expressions, are intended to identify forward-looking statements. These statements reflect the current view of the Company’s management with respect to future events and are subject to numerous risks, uncertainties, and assumptions. Many factors could cause the actual results, performance or achievements of the Company to be materially different from any future results, performance, or achievements that may be expressed or implied by such forward-looking statements, including the risk factors listed in Item 1A above.

      Other factors and assumptions not identified above could also cause the actual results to differ materially from those set forth in the forward-looking statements. Although the Company believes these assumptions are reasonable, no assurance can be given that they will prove correct. Accordingly, you should not rely upon forward-looking statements as a prediction of actual results. Further, the Company undertakes no obligation to update forward-looking statements after the date they are made or to conform the statements to actual results or changes in the Company’s expectations.

Item 7A. Quantitative and Qualitative Disclosures About Market Risk

      As of December 31, 2005, the Company had investments held to maturity, including restricted investments held to maturity, of $28,871,000 primarily consisting of U.S. treasury bills with original maturities at the date of purchase of six months or less. These highly liquid investments are subject to interest rate and interest income risk and will decrease in value if market interest rates increase. Because the Company has the positive intent and ability to hold these investments until maturity, it does not expect any decline in value of its investments caused by market interest rate changes. Declines in interest rates over time will, however, reduce our interest income. The Company has no derivative instruments, debt, or foreign operations. It does not use derivative financial instruments in its investment portfolio.

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Item 8. Financial Statements and Supplementary Data

REFAC OPTICAL GROUP

BALANCE SHEETS

			December 31,
			2005			2004
			(Amounts in thousands,
			except share and per
			share data)
ASSETS
Current Assets
	Cash and cash equivalents		$	5,384		$	457
	Royalties and accounts receivable			68			286
	Notes receivable — current portion			29			64
	Investments being held to maturity			24,229			29,342
	Income taxes receivable			—			23
	Prepaid expenses, deferred income taxes and other current assets			569			803
	Restricted cash and investments being held to maturity			4,849			5,416
		Total current assets		35,128			36,391
Property and equipment — net				558			747
Available for sale securities				—			1,000
Notes receivable				1,078			141
Deferred income taxes and other assets				563			489
		Total Assets	$	37,326		$	38,768
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current Liabilities
	Accounts payable and accrued expenses		$	1,067		$	685
	Deferred revenue			149			142
	Deferred incentive compensation			421			1,239
	Other liabilities			76			89
		Total current liabilities		1,713			2,155
Temporary Equity				4,849			5,416
Stockholders’ Equity
Common stock, $.001 par value; authorized 20,000,000 shares; issued 7,051,393 as of December 31, 2005 and 6,993,393 as of December 31, 2004				7			7
Additional paid-in capital				23,368			22,238
Unearned compensation				(89	)
Retained earnings				8,523			9,448
Treasury stock, at cost, 88,673 and 22,656 shares of common stock, $.001 par value at December 31, 2005 and 2004, respectively				(738	)		(159	)
Receivable from issuance of common stock				(308	)		(337	)
		Total stockholders’ equity		30,764			31,197
		Total Liabilities and Stockholders’ Equity	$	37,326		$	38,768

The accompanying notes are an integral part of these financial statements.

31

REFAC OPTICAL GROUP

STATEMENTS OF OPERATIONS

			Years Ended December 31,
			2005			2004			2003
			(Amounts in thousands, except
			share and per share data)
Revenues
	Licensing-related activities		$	2,344		$	1,609		$	1,774
	Related party consulting services			65			170			30
Total revenues				2,409			1,779			1,804
Costs and Expenses
	Licensing-related activities			118			124			119
	Selling, general and administrative expenses			4,154			2,606			4,216
Total costs and expenses				4,272			2,730			4,335
Other Income and Expenses
	Dividend and interest income			1,095			477			323
	Other income (expense)			(98	)		105			—
Total other income and expenses				997			582			323
Loss before provision for taxes on income				(866	)		(369	)		(2,208	)
Provision (benefit) for taxes on income				59			(130	)		(674	)
Net loss from continuing operations				(925	)		(239	)		(1,534	)
Gain from discontinued operations — net of provision for taxes of $0, $15 and $21, respectively				—			14			38
Net loss			$	(925	)	$	(225	)	$	(1,496	)
Basic and diluted earnings (loss) per share:
	From continuing operations		$	(0.13	)	$	(0.03	)	$	(0.27	)
	From discontinued operations			—			—			0.01
		Total	$	(0.13	)	$	(0.03	)	$	(0.26	)
Basic and diluted weighted average shares outstanding				7,009,638			6,992,105			5,717,128

The accompanying notes are an integral part of the financial statements.

32

REFAC OPTICAL GROUP

STATEMENTS OF CASH FLOWS

			Years Ended December 31,
			2005			2004			2003
			(Amounts in thousands)
Cash Flows from Operating Activities
	Net loss		$	(925	)	$	(225	)	$	(1,496	)
	Adjustments to reconcile net loss to net cash provided by (used in) operating activities:
		Depreciation and amortization		180			169			422
		Amortization of unearned compensation		100			—			—
		Loss on settlement agreement		—			13			—
		Loss on disposal of assets		14			—			—
		Deferred income taxes and other assets		167			(171	)		149
		Compensation expense related to director options		—			—			48
		Loss on sale of assets		—			2			6
		Loss associated with appraisal rights settlement		—			—			29
		Income tax benefit on stock option exercise		28			24			—
	(Increase) decrease in assets:
		Royalties and accounts receivable		218			192			189
		Prepaid expenses and other current assets		(41	)		(41	)		(414	)
		Security deposit		—			(10	)		—
		Income taxes receivable		23			613			3,273
		Deferred incentive compensation		34			331			1,632
	Increase (decrease) in liabilities:
		Accounts payable and accrued expenses		382			(8	)		495
		Deferred revenue		7			(3	)		10
		Deferred incentive compensation		(818	)		(107	)		(1,054	)
		Other liabilities		(13	)		(109	)		(21	)
Net cash provided by (used in) operating activities				(644	)		670			3,268
Cash Flows from Investing Activities
	Proceeds from (purchase of) investments being held to maturity			5,682			(1,332	)		(21,711	)
	Proceeds from (purchase of) available for sale securities			1,000			—			(1,000	)
	Proceeds from (issuance of) notes receivable			(902	)		289			213
	Proceeds on disposal of assets			—			—			2
	Additions to property and equipment			(5	)		(141	)		(24	)
Net cash provided by (used in) investing activities				5,775			(1,184	)		(22,520	)
Cash Flows from Financing Activities
	Proceeds from sale of common stock			246			—			16,869
	Purchase of treasury stock			(579	)		—			—
	Appraisal rights settlement cost			—			—			(187	)
	Proceeds from repayment of officer loan			29			28			—
	Proceeds from exercise of stock options			100			144			39
Net cash provided by (used in) financing activities				(204	)		172			16,721
Net increase (decrease) in cash and cash equivalents				4,927			(342	)		(2,531	)
Cash and cash equivalents at beginning of year				457			799			3,330
Cash and cash equivalents at end of year			$	5,384		$	457		$	799

The accompanying notes are an integral part of the financial statements.

33

REFAC OPTICAL GROUP

STATEMENT OF CHANGES IN STOCKHOLDERS’ EQUITY

	Common Stock						Common Stock																			Receivable
	Par Value $.10						Par Value $.001				Additional									Treasury Stock						from Issuance
											Paid-In			Unearned			Retained									of Common
	Shares			Amount			Shares		Amount		Capital			Compensation			Earnings			Shares			Amount			Stock
	(Amounts in thousands, except share data)
Balance, December 31, 2002		5,453,637		$	545			—		—	$	9,991					$	25,043			1,655,626		$	(13,874	)	$	(365	)
Issuance of common stock upon exercise of stock options		1,500										4
Merger		(5,455,137	)		(545	)		3,512,006		4		542						(13,874	)		(1,655,626	)		13,874
Modification of non- employee director stock options												48
Appraisal rights settlement												(14	)								22,656			(159	)
Issuance of common stock upon exercise of stock options								2,000		—		35
Stock issuance to Palisade								3,469,387		3		16,878
Net Loss																		(1,496	)
Balance, December 31, 2003		—			—			6,983,393	$	7	$	22,742					$	9,673			22,656		$	(159	)	$	(365	)
Issuance of common stock upon exercise of stock options								10,000				144
Tax benefit from exercise of stock option												24
Temporary Equity												(672	)
Net Loss																		(225	)
Balance, December 31, 2004		—			—			6,993,393	$	7	$	22,238					$	9,448			22,656		$	(159	)	$	(337	)
Proceeds from stock purchase								50,000				246
Issuance of common stock upon exercise of stock options								8,000				100
Stock options granted for services												189		$	(189	)
Amortization of unearned compensation															100
Tax benefit from exercise of stock option												28
Repayment of note receivable from officer																										$	29
Temporary Equity												567
Purchase of 65,567 shares of common stock held as treasury stock																					65,567		$	(579	)
Net Loss																	$	(925	)
Balance, December 31, 2005		—			—			7,051,393	$	7	$	23,368		$	(89	)	$	8,523			88,223		$	(738	)	$	(308	)

The accompanying notes are an integral part of the financial statements.

34

REFAC OPTICAL GROUP

NOTES TO FINANCIAL STATEMENTS

Note 1 — Business and Summary of Significant Accounting Policies

      For most of its history, Refac Optical Group (formerly known as Refac and referred to herein as the “Company”) was engaged in intellectual property licensing activities. During the period from 1997 to 2002, it was also engaged in product development and graphic design and invested these creative resources, together with its licensing skills, in certain product development ventures. The Company operates solely in the United States.

      On March 6, 2006, the Company completed its acquisitions of two retail optical companies, U.S. Vision, Inc. (“U.S. Vision”) and OptiCare Health Systems, Inc. (“OptiCare”) that were affiliates under common control. The Company also changed its name to Refac Optical Group to better reflect its new businesses. As a result of these acquisitions, the Company’s results for 2005 are not indicative of the results to be expected for any future periods. See Note 3.

     A. Basis of Presentation

      As a result of a corporate repositioning, during 2002, the Company disposed of its then operating segments with the exception of its licensing business and it has limited the operations of that segment to managing certain existing license agreements and related contracts. The statements of operations for the periods reflect the restatement for discontinued operations.

      On August 19, 2002, the Company entered into a merger agreement with Palisade Concentrated Equity Partnership, L.P. (“Palisade”), which provided for the merger (the “Palisade Merger”) of a Palisade subsidiary with the Company. On February 28, 2003, the Company’s stockholders adopted the merger agreement, as amended, (the “Palisade Merger Agreement”) and the Palisade Merger was consummated. See Note 2.

      On March 28, 2003, the Company entered into a stock purchase agreement with Palisade, which closed on May 19, 2003. Pursuant thereto, Palisade acquired an additional 3,469,387 new shares of the Company’s common stock, at a price of $4.90 per share, or an aggregate price of approximately $17,000,000. Following the completion of the stock purchase transaction, Palisade’s ownership increased to approximately 90% of the Company’s outstanding shares. The purpose of the stock purchase transaction was to provide the Company with additional capital for making acquisitions.

      In accordance with Statement of Financial Accounting Standards (“SFAS”) 144, “Accounting for the Impairment or Disposal of Long-Lived Assets” the Creative Consulting Services and Manufacture and Marketing of Consumer Products groups are included in the statement of operations as discontinued operations, net of taxes, as they were sold in 2002 pursuant to the Company’s repositioning.

      The Company’s operations in the licensing of intellectual property rights are not considered held for sale because of the Company’s intent to manage certain outstanding licensing-related agreements through their termination. While the Company’s licensing operations are still considered a continuing business, it has not undertaken any new technology licensing projects during the current or preceding seven fiscal years and, given the current focus of the Company, it will not undertake any such projects in the future. The statement of operations reflects the results of the licensing of intellectual property rights in its results of continuing operations.

     B. Investments

      The Company categorizes and accounts for its investment holdings as “Held to maturity securities” or “Available for sale securities.” Held to maturity securities are recorded at their amortized cost. This categorization is based upon the Company’s positive intent and ability to hold these securities to maturity. Available for sale securities are recorded at cost which approximates fair value due to the nature of the instrument. Such securities consisted entirely of a variable cumulative preferred stock from a single issuer with

35

REFAC OPTICAL GROUP

NOTES TO FINANCIAL STATEMENTS — (Continued)

a dividend rate which is determined by an auction method every forty-nine days. Dividends from such securities are reported in dividend and interest income.

     C. Income Taxes

      The Company accounts for income taxes in accordance with SFAS 109, “Accounting for Income Taxes.” Deferred income taxes arise from temporary differences in the basis of assets and liabilities for financial reporting and income tax purposes and from net operating loss carryforwards. SFAS 109 requires that a valuation allowance be established when it is more likely than not that all or a portion of a deferred tax asset will not be realized. In forming a conclusion as to a valuation allowance, the Company reviews and considers all available positive and negative evidence, including the Company’s current and past performance, the market environment in which the company operates, length of carryback and carryforward periods and existing business or acquisitions that are likely to result in future profits.

     D. Accounts Receivable

      Receivables generally represent royalties receivable due from licensees. Other receivables consist of various amounts due from others in the ordinary course of business. The Company does not currently have an allowance for doubtful accounts but continually reevaluates based on historical experience and the aging of the related accounts and notes receivable.

     E. Stock Based-Compensation

      The Company has adopted the disclosure provisions of SFAS No. 148, “Accounting for Stock-Based Compensation — Transition and Disclosure, an amendment of FASB Statement No. 123.” The Statement requires prominent disclosures in both annual and interim financial statements regarding the method of accounting for stock-based employee compensation and the effect of the method used on reported results. The Company accounts for stock compensation awards under the intrinsic method of Accounting Principles Board (APB) Opinion No. 25 (see Note 10). Opinion No. 25 requires compensation cost to be recognized based on the excess, if any, between the quoted market price of the stock at the date of grant and the amount an employee must pay to acquire the stock. All options awarded under all of our plans are granted with an exercise price equal to the fair market value on the date of the grant. The following table presents the effect on the Company’s net earnings and earnings per share for the years ended December 31, 2005, 2004 and 2003 had it adopted the fair value method of accounting for stock-based compensation under SFAS No. 123, “Accounting for Stock-Based Compensation.”

		2005			2004			2003
Net loss, as reported		$	(925,000	)	$	(225,000	)	$	(1,496,000	)
Less: Total stock-based employee and director compensation expense determined under fair value based on methods for awards granted, modified, or settled, net of related tax effects			(269,000	)		(103,000	)		(150,000	)
Add: Additional compensation expense for modification of non-employee director stock options, net of related tax effect			—			—			48,000
Pro forma net loss		$	(1,194,000	)	$	(328,000	)	$	(1,598,000	)
Loss per share, as reported
	Basic and diluted	$	(0.13	)	$	(0.03	)	$	(0.26	)
Pro forma loss per share
	Basic and diluted	$	(0.17	)	$	(0.05	)	$	(0.28	)

36

REFAC OPTICAL GROUP

NOTES TO FINANCIAL STATEMENTS — (Continued)

      The fair value of each option grant is estimated as of the date of grant using the Black-Scholes option-pricing model with the following weighted-average assumptions used for grants in 2005, 2004 and 2003, respectively: no dividend yields; expected volatility of 44, 48 and 56 percent; risk-free interest rates of 3.9, 4.0 and 2.5 percent; and expected lives of 5.0, 4.7 and 4.5 years. The weighted-average fair value of options granted were $2.01, $2.17 and $2.20 per share for the years ended December 31, 2005, 2004 and 2003, respectively.

     F. Earnings Per Share

      The following reconciles basic and diluted shares used in earnings per share computations:

	2005		2004		2003
Basic shares		7,009,638		6,992,105		5,717,128
Dilution: Stock options and warrants		—		—		—
Diluted shares		7,009,638		6,992,105		5,717,128

      There are 175,851, 217,750 and 139,500 options, respectively, excluded from the earnings per share computation for the twelve month periods ended December 31, 2005, 2004 and 2003, since their effect would be anti-dilutive.

     G. Cash and Cash Equivalents

      The Company considers all highly liquid investments and debt instruments purchased with an original maturity of less than three months to be cash equivalents.

     H. Revenue Recognition

      Royalty revenue is recognized when earned in accordance with the terms of the related license agreement. Nonrecurring lump sum payments that represent settlements of licensing-related claims are recognized when the settlements occur and collectibility is reasonably assured. Consulting revenues are recognized as services are performed.

     I. Using Estimates in Financial Statements

      In preparing financial statements in conformity with accounting principles generally accepted in the United States of America, management is required to make estimates and assumptions that affect the reported amount of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the financial statements as well as revenues and expenses during the reporting period. Actual results could differ from those estimates.

     J. Intangibles

      Patents are amortized on a straight-line basis over their statutory life or expected useful life, whichever is shorter. The carrying amount and accumulated amortization of these patents is as follows:

		December 31,
		2005		2004
Patents		$	3,000	$	3,000
Less: accumulated amortization			1,000		1,000
	Total	$	2,000	$	2,000

37

REFAC OPTICAL GROUP

NOTES TO FINANCIAL STATEMENTS — (Continued)

     K. Property and Equipment

      Items capitalized as property, plant and equipment, including improvements to existing facilities, are recorded at cost. All maintenance and repair costs are charged to operations as incurred. When assets are sold or otherwise disposed of, the costs and accumulated depreciation or amortization are removed from the accounts and any resulting gain or loss is reflected in operations.

      Property and equipment are stated at cost, less accumulated depreciation. Depreciation is provided for on a straight-line basis with the estimated useful lives ranging from three to seven years. Leasehold improvements are amortized over the lives of the respective leases.

     L. Reclassifications

      Certain reclassifications have been made to the prior period financial statements to conform them to the current presentation.

     M. Fair Value of Financial Instruments

      The Company’s financial instruments principally consist of cash and cash equivalents, notes receivable and marketable securities. The carrying amount of cash and cash equivalents approximate fair value due to the short-term maturity of the instruments. Notes receivable are recorded at fair value due to the interest rates on these notes approximating current market interest rates. Marketable securities include investments held to maturity and available for sale securities. Investments held to maturity are recorded at amortized cost, which approximates fair value, because their short-term maturity results in the interest rates on these securities approximating current market interest rates. The Company’s available for sale securities are recorded at cost which approximates fair value due to the nature of the instrument.

     N. New Accounting Pronouncements

      In May 2005, the Financial Accounting Standards Board (“FASB”) issued FASB Statement No. 154, “Accounting Changes and Error Corrections, a replacement of APB Opinion No. 20, Accounting Changes and FASB Statement No. 3, Reporting Accounting Changes in Interim Financial Statements” (“FAS 154”). FAS 154 provides guidance on the accounting for and reporting of accounting changes and error corrections. It establishes, unless impracticable, retrospective application as the required method for reporting a change in accounting principle in the absence of explicit transition requirements specific to the newly adopted accounting principle. FAS 154 also provides guidance for determining whether retrospective application of a change in accounting principle is impracticable and for reporting a change when retrospective application is impracticable. The provisions of FAS 154 are effective for accounting changes and corrections of errors made in fiscal periods beginning after December 15, 2005. The adoption of the provisions of FAS 154 is not expected to have a material impact on the Company’s financial position or results of operations.

      In December 2004, the Financial Accounting Standards Board issued SFAS No. 123(R) — Share-Based Payment, which is a revision of SFAS No. 123, Accounting for Stock-Based Compensation. SFAS No. 123(R) supersedes APB Opinion No. 25, Accounting for Stock Issued to Employees, and amends SFAS No. 95, Statement of Cash Flows. SFAS No. 123(R) requires all share-based payments to employees, including grants of employee stock options, to be recognized in the income statement based on the fair value of the instruments issued. As originally issued in 1995, Statement 123 established as preferable the fair-value-based method of accounting for share-based payment transactions with employees. However, that Statement permitted entities the option of continuing to apply the guidance in Opinion 25, as long as the footnotes to the financial statements disclosed what net income would have been had the preferable fair-value-based method been used.

38

REFAC OPTICAL GROUP

NOTES TO FINANCIAL STATEMENTS — (Continued)

      Statement 123(R) allows for two alternative transition methods. The first method is the modified prospective application whereby compensation cost for the portion of awards for which the requisite service has not yet been rendered that are outstanding as of the adoption date will be recognized over the remaining service period. The compensation cost for that portion of awards will be based on the grant-date fair value of those awards as calculated for pro forma disclosures under Statement 123, as originally issued. All new awards and awards that are modified, repurchased, or cancelled after the adoption date will be accounted for under the provisions of Statement 123(R). The second method is the modified retrospective application, which requires that the Company restates prior period financial statements. The modified retrospective application may be applied either to all prior periods or only to prior interim periods in the year of adoption of this statement. The new standard will be effective for the Company as of the first quarter in the fiscal year ended December 31, 2006. The Company is still evaluating the impact the adoption of this standard will have on its financial statements.

Note 2 — Palisade Merger

      On February 28, 2003, the Company completed a merger with a wholly-owned subsidiary of Palisade which is referred to herein as the Palisade Merger. Under the terms of the Palisade Merger, for each share of the Company’s common stock, par value $.10 per share (“Old Refac Common Stock”), owned immediately prior to the effective time of the merger, stockholders (other than Palisade and stockholders who properly exercised appraisal rights) received or are expected to receive (i) $3.60 in cash, (ii) 0.2 shares of common stock, par value $.001 per share (“Common Stock”), and (iii) the non-transferable right (the “Payment Right”) to sell the shares of the Common Stock to the Company for a price (the “Payment Amount”) which depends upon the Company’s liquid distributable assets (“LDA”) as of June 30, 2005. This right to sell the shares is limited to stockholders who held their shares at the completion of the Palisade Merger and continued to hold their shares until August 8, 2005, the date that the amount of liquid distributable assets as of June 30, 2005 was finalized.

      The Company has treated the Palisade Merger as a recapitalization for accounting purposes and has adjusted the difference in the par value of the Old Refac Common Stock and the Common Stock from common stock to additional paid-in capital. Pursuant to the Palisade Merger Agreement, the treasury stock owned by the Company at the effective time of the Palisade Merger has been cancelled with a corresponding decrease to the Company’s retained earnings.

      As the Payment Right represents a non-transferable right of stockholders to sell to the Company their shares of Common Stock received in the Palisade Merger for cash, the Payment Amount ($8.29 per share) has been reflected on the balance sheet as temporary equity with a similar amount reducing additional paid-in capital. Subsequent changes in the estimated number of shares still having this Payment Right will be computed on a quarterly basis through September 30, 2006. Based upon same, the Company will decrease the temporary equity amount with an offsetting increase in additional paid-in capital.

      Pursuant to the Palisade Merger Agreement, the Company has restricted a portion of its cash and investments being held to maturity to maintain the Contingent Fund (as defined in the Palisade Merger Agreement) reserved to pay the Payment Amount. As of December 31, 2005, this amount is being shown as a short-term asset on the balance sheet as the exercise period, as extended by the Company, for the Payment Right is until September 30, 2006.

      As of December 31, 2005, stockholders holding an aggregate of 65,567 shares have exercised their Payment Rights. Any Contingent Fund amounts that are related to Payment Rights that are not properly exercised on or before September 30, 2006 will become unrestricted.

      In April 2003, the Company settled a claim with dissenting stockholders which had demanded appraisal rights in connection with the Palisade Merger. Under the terms of the settlement, the Company purchased

39

REFAC OPTICAL GROUP

NOTES TO FINANCIAL STATEMENTS — (Continued)

113,280 shares of Old Refac Common Stock held by such dissenting stockholders for $595,000 or $5.25 per share. The Company then exchanged these shares for the merger consideration consisting of $408,000 and 22,656 shares of Common Stock. No other stockholders have appraisal rights with respect to the Palisade Merger.

Note 3 — Acquisition of U.S. Vision and OptiCare

      On March 6, 2006 the Company completed its acquisitions of U.S. Vision, Inc. and OptiCare Health Systems, Inc. The Company also changed its name to Refac Optical Group to better reflect its new businesses. Since Palisade had a controlling interest in each of the Company, U.S. Vision and OptiCare, the acquisitions are deemed to be a combination of entities under common control and will be accounted for in a manner similar to a pooling of interests. Since the acquisitions occurred subsequent to December 31, 2005, these financial statements are not restated to reflect the acquisitions. However, the acquisitions will be reflected in the Company’s restated combined/consolidated financial statements when such financial statements are issued for a period that includes the date the transactions were consummated.

      Prior to the completion of the transactions, the Company, OptiCare and U.S. Vision were all controlled by Palisade, which owned approximately 88% and 84% (on fully diluted basis), of U.S. Vision and OptiCare, respectively. Following the transactions, Palisade owns approximately 88% of the Company’s outstanding shares.

      In connection with the acquisition of OptiCare, Palisade received approximately 0.0403 shares of Company common stock for each share of OptiCare common stock owned by it immediately prior to the transaction and preferred stockholders received 0.0403 shares of Company common stock for each share of OptiCare common stock issued to them upon conversion of OptiCare preferred stock. All other shares of OptiCare common stock outstanding immediately prior to the transaction were converted into the right to receive 0.0472 shares of Company common stock. In the U.S. Vision transaction, U.S. Vision stockholders received 0.4141 shares of the Company’s common stock for each share of U.S. Vision common stock.

      Upon completion of the transactions, 4.5 million and 6.6 million shares were issued to OptiCare and U.S. Vision shareholders, respectively, and the Company now has approximately 18 million shares outstanding.

Note 4 — Related Party Transactions

      Palisade Capital Management, L.L.C. (“PCM”), on behalf of itself and/or its portfolio companies, requests, from time to time, that the Company provide certain consulting services. In consideration for these services, during the period from July 1, 2003 to March 31, 2005, PCM paid the Company a basic monthly retainer of $5,000, subject to quarterly adjustment based upon the services actually rendered during such quarter. Under this arrangement, the Company earned $21,000 for services rendered during 2005.

      Pursuant to employment agreements entered into on April 1, 2005, each of Robert L. Tuchman, currently the Company’s Senior Vice President and General Counsel and Raymond A. Cardonne, its Chief Financial Officer may enter into separate arrangements for his own account with Palisade and/or any of its affiliated companies that are engaged in private equity or investment management pursuant to which he may become a member, partner, officer, director or stockholder of such entity or may provide consulting or professional services thereto provided that such activities do not materially interfere with the regular performance of his duties and responsibilities under such employment agreement. Given this new arrangement, the Company has not provided any services to PCM after the quarter ended March 31, 2005 and does not expect to do so in the future unless such services can be rendered by employees other than such officers.

      From February 2004 to July 2005, the Company provided consulting services directly to Neurologix, Inc., a public company in which PCM beneficially owns approximately 26% of the outstanding capital stock, at a

40

REFAC OPTICAL GROUP

NOTES TO FINANCIAL STATEMENTS — (Continued)

basic monthly retainer of $5,000, subject to quarterly adjustment based upon the services actually rendered during such quarter. Under this arrangement, the Company earned $44,000 for services rendered during 2005.

      On September 1, 2005, the Company entered into a loan agreement and promissory note with OptiCare and its affiliate OptiCare Eye Health Centers, Inc., pursuant to which the Company loaned to OptiCare and OptiCare Eye Health Centers, Inc. the principal amount of $1,000,000. The note, as amended, is payable on January 25, 2007. Interest is payable on the note on a monthly basis at a rate equal to the base rate of Citibank, N.A., plus 5.5%. Additionally, on September 1, 2005, the Company entered into a subordination agreement with OptiCare and certain affiliates of OptiCare and CapitalSource Finance LLC, the lender under OptiCare’s credit agreement, pursuant to which the Company agreed to subordinate its rights to the payment of the note in favor of CapitalSource. The Company also loaned OptiCare an additional amount of $1,400,000 on January 25, 2006, the original date on which OptiCare’s term loan became due. The interest rate for this second loan is the greater of (i) 9% or (ii) the base rate of Citibank, N.A. plus 3.5%, which is the same as the interest rate that was under OptiCare’s term loan with CapitalSource. The maturity date of the second loan is also January 25, 2007.

      Other related party transactions include management indebtedness (see Note 6B), and maintenance of brokerage accounts at Palisade Capital Securities (“PCS”), an affiliate of Palisade and PCM, for the Company’s marketable securities (principally, treasury notes being held to maturity). Additionally, as more fully described in Note 3, the Company recently completed the acquisitions of two affiliated companies, U.S. Vision and OptiCare. Prior to the acquisitions, Palisade owned approximately 88% and 84% (on fully diluted basis), of U.S. Vision and OptiCare, respectively. Following the transaction Palisade owns approximately 88% of the Company’s outstanding common stock.

Note 5 — Income Taxes

      Tax Refund — During 2004, the Company received a federal income tax refund of $579,000 resulting from carrying back a net operating loss incurred in 2003. During 2003, the Company received federal income tax refunds of $4,254,000 resulting from carrying back a net capital loss incurred in 2002 with respect to its sale of Refac International, Ltd. (“RIL”) and its 2002 net operating loss. In accordance with a requirement to examine refund claims over $2,000,000, the IRS reviewed the Company’s tax returns for tax years 1997 through 2003. This examination was concluded in June 2005 with the Company and IRS agreeing to a $121,000 reduction in the refund claim, which, together with interest, the Company has paid. At December 31, 2004, the Company had established a reserve for this examination of $281,000. After taking into account this agreement, and its related deferred tax impact, the Company had an excess of $43,000 in its reserve for the examination which it credited to tax expense as of June 30, 2005.

      Income Tax Provision — The provision (benefit) for taxes on income from continuing operations for the years ended December 31, 2005, 2004 and 2003 were as follows:

	2005			2004			2003
Federal	$	(138,000	)	$	34,000		$	(730,000	)
Deferred		197,000			(164,000	)		96,000
State and local		—			—			(40,000	)
	$	59,000		$	(130,000	)	$	(674,000	)

41

REFAC OPTICAL GROUP

NOTES TO FINANCIAL STATEMENTS — (Continued)

      The provision (benefit) for taxes on income from continuing operations for the years ended December 31, 2005, 2004 and 2003 differed from the amount computed by applying the statutory federal income tax rate of 34% as follows:

	2005			2004			2003
Statutory rate		(34	)%		(34	)%		(34	)%
Permanent differences related to merger		48	%		—			5	%
State and local		—			—			(2	)%
Dividend Received Exclusion		—			(1	)%		—
Settlement of federal income tax examination		(5	)%		—			—
Other		(2	)%		—			—
Provision (benefit) for taxes on income		7	%		(35	)%		(31	)%

      Deferred Taxes — Deferred income taxes arise from temporary differences in the basis of assets and liabilities for financial reporting and income tax purposes. The tax effect of temporary differences that gave rise to deferred tax assets are as follows:

			December 31,
			2005		2004
Deferred tax assets:
	Assets transferred to the Company from former subsidiaries		$	60,000	$	201,000
	Management incentive compensation and bonuses			259,000		482,000
	Federal and state net operating loss carryforwards			516,000		480,000
	Deferred rent and contingent loss on leasehold			98,000		67,000
	Unearned Compensation			40,000		—
	Depreciation, insurance policies and other			136,000		84,000
		Total deferred tax assets		1,109,000		1,314,000
	Less: Valuation allowance			251,000		287,000
		Net deferred tax assets	$	859,000	$	1,027,000

      As of December 31, 2005, the Company had deferred tax assets relating to the State of New Jersey aggregating $251,000 of which $168,000 is attributable to New Jersey net operating loss carryforwards which can be applied against any New Jersey taxable income the Company might earn during the seven year period after the year in which such carryforward was recognized for tax purposes. Due to the uncertainty surrounding the timing and amounts of future New Jersey taxable income, the Company has estimated that none of its New Jersey related deferred taxes assets will be realized and has established a full valuation allowance. The need for a valuation allowance will continue to be reviewed periodically and adjusted as necessary.

      As of December 31, 2005, the Company had federal deferred tax assets aggregating $859,000 of which $348,000 is attributable to federal net operating loss carryforwards of $1,023,000, which can be used during the twenty year period after the year in which such carryforward was recognized for tax purposes. No valuation allowance has been taken for the Company’s federal deferred tax assets based upon the Company’s capital position and its acquisitions of U.S. Vision and OptiCare (see Note 3). The need for a valuation allowance will continue to be reviewed periodically and adjusted as necessary.

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REFAC OPTICAL GROUP

NOTES TO FINANCIAL STATEMENTS — (Continued)

Note 6 — Commitments

     A. Leasehold Obligations

      In May 1999, the Company relocated its corporate offices and creative studio to newly constructed leased facilities in Edgewater, New Jersey pursuant to a lease that expires on November 16, 2009. In October 2001, the Company subleased two units consisting of approximately 5,882 and approximately 5,706 rentable square feet, together with furniture, for an annualized payment of $270,000, which sublease expired on May 31, 2005.

      In March 2002, the Company announced that it was repositioning itself for sale or liquidation and, in furtherance thereof, it sold its Product Design and Graphic Design Groups. In connection with such sales, in August 2002, the Company entered into a sublease with DM2, the purchaser of its Graphic Design Group, covering approximately 3,492 feet of rentable space and, in September 2002, it entered into a sublease with PG, the purchaser of its Product Design Group, covering approximately 9,574 square feet of rentable space. In February 2003, the Company and its landlord amended the master lease to reduce the rentable square footage by approximately 9,757 square feet and the aggregate rent payable over the then remaining term of the lease by $840,000.

      In October 2004, the sublease with PG was terminated by mutual agreement (see Note 14D for more information regarding such settlement) and, in August 2005, the sublease with DM2 was terminated by mutual agreement (see Note 14A for more information regarding such settlement).

      In January 2005, the Company subleased the 9,574 rentable square foot unit previously occupied by PG to a new tenant under a sublease which extends through October 31, 2009 with rental payments that commenced in June 2005. Since November 16, 2005, the Company has been in litigation with this subtenant. Pursuant to a Lease Termination and Surrender Agreement, as amended, this subtenant has agreed to surrender of the premises by the end of May 2006, with payment of rent until such surrender. Such agreement does not affect the pending civil litigation commenced by this subtenant alleging (i) breach of contract and unjust enrichment; (ii) fraud in the inducement; and (iii) misrepresentation. The Company believes that this suit is without merit and has counterclaimed for an amount equal to the balance of the rent due under the sublease.

      In May 2005, the Company subleased the 5,882 rentable square foot unit to a new subtenant under a sublease which extends through October 31, 2009 with rental payments commencing in September 2005. The base rent for the remaining term of the sublease is $484,000.

      On August 30, 2005, the Company entered into an amendment of its master lease, effective as of November 1, 2005, pursuant to which it paid the landlord $30,000, surrendered the 5,706 and 3,492 rentable square feet units in exchange for another unit represented as encompassing 9,757 gross rentable square feet. Simultaneously with this amendment to the master lease, it subleased this unit to a new subtenant under a sublease which extends through November 14, 2009 with rental payments commencing in November 15, 2005. The total rent for the remaining term of this sublease is $654,000.

      After giving effect to the August 30, 2005 amendment, the base rent for the remaining term of the master lease is $1,836,000. The annual base rent for 2006 is $474,000, subject to real estate tax escalations and a maximum cost of living increase of 2.5% per annum.

      From May 1, 2003 through June 18, 2004, the Company occupied approximately 1,185 gross rentable square feet in Fort Lee, New Jersey under a sublease with PCS, an affiliate of PCM, at a monthly rent of $3,000. On June 19, 2004, the Company relocated to new space in the same building encompassing 4,751 gross rentable square feet under a direct lease with the landlord. This lease expires on June 30, 2009 and provides for a five-year renewal option. Under the lease, the Company paid $55,000 toward the construction of the premises. As of December 31, 2005, the base rent for the balance of the initial term aggregated $482,000, subject to escalations for increases in real estate taxes and operating costs.

43

REFAC OPTICAL GROUP

NOTES TO FINANCIAL STATEMENTS — (Continued)

      The following table reflects the net rental expense (income) covering all Company facilities for the years ended December 31, 2003, 2004 and 2005.

					Net Rent
	Rental		Sublease		Expense
Year	Expense		Income		(Income)
2003	$	508,000	$	592,000	$	(84,000	)
2004	$	525,000	$	548,000	$	(23,000	)
2005	$	591,000	$	352,000	$	239,000

      The future minimum rental payments required under operating leases for fiscal 2006 through fiscal 2009 are $614,000 in 2006, $629,000 in 2007, $643,000 in 2008 and $521,000 in 2009 when all leases terminate. These future minimum lease payments do not include future sublease rental income for fiscal 2006 through fiscal 2009 of $417,000 in 2006, $298,000 in 2007, $302,000 in 2008, $264,000 in 2009 when all subleases terminate.

      Based upon a discounted cash flow analysis as of December 31, 2004, the Company determined that the projected expenses of its leasehold in Edgewater, New Jersey exceeded the projected income by $96,000. Accordingly, the Company recorded a contingent loss, and established a corresponding reserve. The Company updates the analysis on a quarterly basis, and for the year ended December 31, 2005, it has recorded a contingent loss of $92,000, along with a corresponding increase to the reserve. As of December 31, 2005, the reserve was $188,000. Such analysis will continue to be updated quarterly during the balance of the term of the leasehold.

      The cash amount reflected on the Company’s balance sheet includes $76,000 held as security deposit by the Company for its subtenants.

     B. Employment Agreements and Incentive Compensation

      On June 20, 2005, the Company hired a new President and Chief Operating Officer who was promoted to President and Chief Executive Officer on the closing of the U.S. Vision and OptiCare mergers. The employment agreement with this officer has an initial term of two years that is automatically renewed unless terminated by either party. Under the agreement, the officer will be paid a base salary of $350,000 and will be eligible to earn a target annual bonus in an amount equal to 50% of his base salary with the opportunity for an additional payment if targets are exceeded. A portion of any annual bonus may be paid in the form of equity, as determined by the Board of Directors in its sole discretion. The officer received a signing bonus equal to $7,000 and is entitled to reimbursement of relocation costs up to a maximum of $75,000. Concurrent with the execution of the agreement, the officer received options to purchase 150,000 shares of the Company’s common stock with an exercise price of $4.92 per share, which was equal to the fair market value of the underlying stock on the date of grant, with one-third vesting on the date of grant. The balance of two-thirds will vest as follows: one-third on June 20, 2006 and one-third on June 20, 2007.

      The Company is party to an employment agreement with its former Chief Executive Officer (who is its current Senior Vice President, General Counsel, Secretary and Chairman of the Executive Committee of the Company’s Board of Directors) which became effective as of April 1, 2005 and has a term ending on December 31, 2006. Under this agreement, in 2005, the officer’s base salary was $325,000 plus a cash bonus of $150,000 which is payable on March 31, 2006. The officer’s annual base salary was increased to $350,000 as of January 1, 2006. Concurrent with the execution of the agreement, the officer received an option to purchase 100,000 shares of the Company’s common stock at $4.12 per share, which was equal to the fair market value of the underlying stock on the date of grant, with one-third vesting on the date of grant. The balance of two-thirds will vest as follows: one-third on April 1, 2006 and one-third on the earlier of the termination of his employment agreement or April 1, 2007.

44

REFAC OPTICAL GROUP

NOTES TO FINANCIAL STATEMENTS — (Continued)

      Under his prior employment agreement, upon completion of the Palisade Merger, the officer received a signing bonus of $800,000 and retention payments totaling $500,000. In November 2003, this employment agreement was amended to extend the term from March 31, 2004 to March 31, 2005 and to recast the schedule for the retention bonuses so that they became payable in fifteen (15) equal consecutive monthly installments of $33,000 commencing on January 1, 2004. The officer received the final $100,000 in such retention payments during the first quarter of 2005.

      In addition, he is entitled to incentive compensation equal to an aggregate of 16% of “GLDA”. “GLDA” is defined in the employment agreement as the sum of the following:

•  the LDA of the Company as of June 30, 2005, as calculated under the Palisade Merger Agreement, plus

•  the signing bonus, retention and incentive compensation payments paid or payable to him and the signing bonus and incentive compensation payments paid or payable to the Company’s Vice President as a result of the Palisade Merger, less

•  the sum of $17,844,000.

      In August 2005 this incentive compensation was determined to be equal to $1,002,000, of which $581,000 was paid and $421,000 is being deferred until March 2006.

      In 1996, the officer exercised options previously granted under the Company’s 1990 Stock Option Plan to purchase 100,000 shares of Old Refac Common Stock. In connection with such exercise, the Company provided the officer with a loan of $375,000 (which was reduced to $365,000 after the officer paid back $10,000). The note, as modified in March 2002, bears interest at the rate of 6% per annum and is payable in ten (10) equal annual installments commencing on December 31, 2004. As of December 31, 2005, the note was current and the principal balance was $308,000.

      The Company is also party to an employment agreement with its Senior Vice President and Chief Financial Officer. The officer’s current employment agreement became effective as of April 1, 2005 and has a term ending on December 31, 2007, as amended. Under this agreement, in 2005, the officer’s base salary was $200,000 plus a cash bonus of $75,000, which is payable on March 31, 2006. The officer’s annual base salary was increased to $250,000 as of January 1, 2006. Concurrent with the execution of the agreement, the officer received options to purchase 50,000 shares of the Company’s common stock with an exercise price of $4.12 per share, which was equal to the fair market value of the underlying stock on the date of grant, with one-third vesting on the date of grant. The balance of two-thirds will vest as follows: one-third on April 1, 2006 and one-third on April 1, 2007. Under his prior employment agreement, upon completion of the Palisade Merger, the officer received a signing bonus of $314,000. In addition, in August, 2005 he received $251,000 in incentive compensation, which is an aggregate of 4% of “GLDA.” “GLDA” is determined in the same manner as under the Chief Executive Officer’s employment agreement.

     C. Deferred Compensation/ Post-Retirement Benefits

      On December 13, 1996, the Company entered into a retirement agreement with its then Chairman and Chief Executive Officer. For a period of three years, from July 1, 1997 to June 30, 2000, the former chairman acted as a consultant to the Company. The retirement agreement also provides for an annuity of $100,000 per annum during his life; medical and health benefits for him and his spouse during their lives; and office facilities, equipment and personnel support for two years following his consulting services. In 1996, the Company expensed $445,000 for such retirement benefits, which represented the present value of the expected payments, following the consultancy period, based upon his then estimated life expectancy and recorded the corresponding liability. The Company began making payments during the second half of 2000 which had the

45

REFAC OPTICAL GROUP

NOTES TO FINANCIAL STATEMENTS — (Continued)

effect of reducing the liability to zero as of December 31, 2003. Starting in January 2004, payments are being treated as a current charge in the year made.

Note 7 — Consulting Agreement

      On June 20, 2005, the Company entered into a Consulting Agreement (the ”Consulting Agreement”) with Cole Limited, Inc. (“CL”), a consulting firm headed by Jeffrey A. Cole. The Consulting Agreement has a term of one year starting June 1, 2005 and requires CL to advise the Company on its optical interests and the operations of its subsidiaries and divisions, including developing a strategic plan, assisting on acquisition opportunities, assisting in financing and advising on corporate and retail operations. In consideration for these services, the Company has agreed to pay CL $100,000, in equal monthly installments, plus reimbursement for certain reasonable expenses. Concurrently with the execution of the Consulting Agreement, CL received options to purchase 50,000 shares of the Company’s common stock with an exercise price of $4.92, the fair market value on the date of grant. One third of such options vested upon the date of grant, and one-third vested on October 1, 2005 and the remaining one-third vested on February 1, 2006. Under EITF 96-18, the stock options granted to CL are being accounted for under variable accounting. Under such accounting, the Company is required, on a quarterly basis, to recognize additional or less expense relating to any unvested options depending on increases or decreases in the fair value of such options measured at the end of a quarterly period. The Company has expensed $100,000 for these stock options during the year ended December 31, 2005. The Company appointed Mr. Cole to its Board of Directors on January 19, 2006.

      In addition, on June 20, 2005, the Company and CL entered into a stock purchase agreement whereby CL agreed to purchase 50,000 shares of the Company’s common stock at a price of $4.92 per share in a private placement transaction. The stock purchase was completed on July 19, 2005.

Note 8 — Investments Held to Maturity

      Investments held to maturity at December 31, 2005 consist of U.S. Treasury Notes with an amortized cost of $28,871,000. All U.S. Treasury Notes mature in 2006. Pursuant to the Palisade Merger Agreement the Company has restricted $4,642,000 of its investments being held to maturity to maintain the Contingent Fund (as defined in the Palisade Merger Agreement). Investments held to maturity at December 31, 2004 consisted of U.S. Treasury Notes and corporate bonds with an amortized cost of $34,758,000.

Note 9 — Property and Equipment

      Property and equipment consists of the following:

	December 31,
	2005			2004
Leasehold improvements	$	932,000		$	932,000
Furniture and fixtures		195,000			352,000
Computer software and equipment		80,000			70,000
Office and other equipment		23,000			23,000
		1,230,000			1,377,000
Less: Accumulated depreciation		(672,000	)		(630,000	)
	$	558,000		$	747,000

      Depreciation and amortization aggregated $180,000, $169,000, and $422,000 for the years ended December 31, 2005, 2004 and 2003, respectively.

46

REFAC OPTICAL GROUP

NOTES TO FINANCIAL STATEMENTS — (Continued)

Note 10 — Stockholders’ Equity

Stock Option Plans

      The Company measures compensation under FAS 123, which allows the use of the intrinsic value approach under Accounting Principles Board (APB) Opinion No. 25.

      In May 1990, stockholders approved the 1990 Stock Option and Incentive Plan (the “1990 Plan”) that authorized the issuance of up to 300,000 shares of Old Refac Common Stock, and, in May 1997, the 1990 Plan was amended to provide for a 100,000 share increase in the number of authorized shares. As of March 14, 2000, no further grants were allowed under the 1990 Plan. Upon the closing of the Palisade Merger, the 1990 Plan was terminated.

      In May 1998, the stockholders approved the 1998 Stock Option and Incentive Plan (the “1998 Plan”) that authorized the issuance of up to 300,000 shares of Old Refac Common Stock. On January 23, 2003, the 1998 Plan was amended, effective as of the Palisade Merger, to provide that in the event that the services of a non-employee director terminate for any reason, all director options that are outstanding and held by such non-employee director at the time of such termination shall remain exercisable by such non-employee director for the remainder of the original term of such director option. As a result of this amendment, the options held by certain directors were re-measured and a compensation expense of approximately $48,000 was recorded in the year ended December 31, 2003. Upon the closing of the Palisade Merger, the 1998 Plan was terminated.

      In addition to the 1990 Plan and the 1998 Plan outlined above, in January 1998, the Company granted an employee options to purchase 50,000 shares of Old Refac Common Stock which were canceled in January 2002. Warrants to purchase 200,000 shares of Old Refac Common Stock which were issued in 1997 expired in April 2002 and non-qualified stock options to purchase 165,000 shares of Old Refac Common Stock issued in 1997 have been forfeited or cancelled as of December 2004.

      The table below summarizes all option activity for the pre-merger options with respect to the Old Refac Common Stock, excluding the warrant:

				Weighted					Weighted					Weighted
				Average					Average					Average
				Exercise					Exercise					Exercise
	2005			Price		2004			Price		2003			Price
Outstanding at beginning of year		182,500		$	7.45		232,500		$	6.47		244,000		$	6.32
Options granted		—			—		—			—		—			—
Options exercised		(40,000	)		2.50		(50,000	)		2.88		(11,500	)		3.42
Options forfeited		—			—		—			—		—			—
Outstanding at end of year		142,500		$	8.84		182,500		$	7.45		232,500		$	6.47
Exercisable at end of year		142,500		$	8.84		182,500		$	7.45		232,500		$	6.47

47

REFAC OPTICAL GROUP

NOTES TO FINANCIAL STATEMENTS — (Continued)

      The following table summarizes all option data for the pre-merger options with respect to the Old Refac Common Stock as of December 31, 2005:

						Weighted		Weighted				Weighted
Price Range				Outstanding at		Average		Average		Exercisable at		Average
				December 31,		Contract Life		Exercise		December 31,		Exercise
Minimum		Maximum		2005		(Years)		Price		2005		Price
$	3.50	$	5.90		7,500		3.96	$	3.81		7,500	$	3.81
$	5.91	$	7.10		10,000		2.96	$	6.88		10,000	$	6.88
$	7.11	$	9.50		125,000		1.20	$	9.30		125,000	$	9.30
	Total				142,500		1.47	$	8.84		142,500	$	8.84

      Pursuant to the Palisade Merger Agreement, upon the exercise of any pre-merger options, the optionee is entitled to receive the following: (i) if the option was exercised on or prior to June 30, 2005, the Merger Consideration as defined in the Palisade Merger Agreement or (ii) if the option is exercised after June 30, 2005, $3.60 in cash (from Palisade) and 0.2 shares of the Company’s post-merger common stock, par value $.001 per share (“Common Stock”).

      In June 2003, the stockholders approved the 2003 Stock Option and Incentive Plan (the “2003 Plan”) that authorizes the issuance of up to 500,000 shares of Common Stock. On March 6, 2006, the stockholders approved an amendment to the 2003 Plan which increased the number of shares authorized for issuance by 750,000. As a result of this amendment, a total of 1,250,000 shares are authorized for issuance under the 2003 Plan. The 2003 Plan authorizes the issuance of various incentives to employees (including officers and directors) including stock options, stock appreciation rights, and restricted performance stock awards. The 2003 Plan allows the Board to determine type, shares and terms of the grants. The table below summarizes all option activity for options granted to employees and directors under the 2003 Plan after the Palisade Merger:

			Weighted				Weighted				Weighted
			Average				Average				Average
			Exercise				Exercise				Exercise
	2005		Price		2004		Price		2003		Price
Outstanding at beginning of year		195,000	$	4.66		150,000	$	4.64		—	$	—
Options granted		300,000		4.52		45,000		4.72		150,000		4.64
Options exercised		—		—		—		—		—		—
Options forfeited		—		—		—		—		—		—
Outstanding at end of year		495,000	$	4.57		195,000	$	4.66		150,000	$	4.64
Exercisable at end of year		280,003	$	4.60		115,001	$	4.65		5,000	$	4.64

      The following table summarizes the data, as of December 31, 2005, for options granted after the Palisade Merger under the 2003 Plan:

						Weighted		Weighted				Weighted
Price Range				Outstanding at		Average		Average		Exercisable at		Average
				December 31,		Contract Life		Exercise		December 31,		Exercise
Minimum		Maximum		2005		(Years)		Price		2005		Price
$	4.10	$	4.70		265,000		8.38	$	4.28		163,335	$	4.38
$	4.71	$	5.20		230,000		4.87	$	4.91		116,668	$	4.92
	Total				495,000		6.75	$	4.57		280,003	$	4.60

48

REFAC OPTICAL GROUP

NOTES TO FINANCIAL STATEMENTS — (Continued)

Preferred Stock

      The Company has 1,000,000 shares of preferred stock, $.001 par value per share, authorized, none of which have been issued.

Note 11 — Concentrations

      The Company had a contract with Patlex which accounted for approximately 26%, 76% and 56% of the Company’s total revenues from continuing operations for 2005, 2004 and 2003, respectively. The Company’s income from its contract with Patlex was variable and was based upon revenues derived by Patlex from the licensing of two laser patents. The more significant of the two patents licensed by Patlex Corporation was the Gas Discharge Laser Patent, which expired in November 2004. The other patent expired in May 2005. As a result of the expiration of these patents the Company does not expect any income from Patlex in 2006.

Note 12 — Wrench versus Taco Bell Litigation

      By Agreement, dated as of January 31, 2002, the Company and Ms. Arlene Scanlan, who was then President of Refac Licensing, Inc. (“RL”), agreed to a termination of her employment agreement and stock options and to a conveyance of her 19% interest in RL to the Company. This termination agreement required Ms. Scanlan to pay the Company 50% of the first $3,000,000 that she received relating to a certain lawsuit brought by a former licensing client of RL against Taco Bell Corp. On January 27, 2005, the lawsuit was settled and on February 4, 2005 the Company received payment of $1,500,000, representing the Company’s share of the settlement. This amount was recorded as revenue from licensing-related activities in the fiscal quarter ended March 31, 2005.

Note 13 — Accounts Payable and Accrued Expenses

      Accounts payable and accrued expenses consist of the following:

	Years Ended December 31,
	2005		2004
Accounts payable	$	206,000	$	10,000
Amounts payable under service agreements		69,000		71,000
Accounting and auditing		123,000		91,000
Deferred rent		57,000		72,000
Legal		52,000		28,000
Tax reserve		—		281,000
Reserve on rental loss		188,000		96,000
Management bonuses		228,000		—
Merger expenses		118,000		—
Other		26,000		36,000
Total	$	1,067,000	$	685,000

Note 14 — Business and Asset Dispositions

     A. Sale of the Graphic Design Group

      In furtherance of its 2002 corporate repositioning, on August 5, 2002, the Company sold certain assets, including certain accounts receivable, furniture and equipment, customer lists and goodwill, subject to certain liabilities, of its Graphic Design Group to DM2, LLC (“DM2”), a company formed by its president and

49

REFAC OPTICAL GROUP

NOTES TO FINANCIAL STATEMENTS — (Continued)

former owner, David Annunziato. The transaction was effective as of August 1, 2002 and the purchase price was $371,000 consisting of a cash payment of $54,000 and a secured 6% promissory note for $317,000, payable in sixty (60) equal consecutive monthly installments of $6,000 commencing on January 1, 2003. As of June 30, 2005, the unpaid balance under this note was $182,000. In connection with this sale, the Company also entered into a sublease with DM2 for 3,492 square feet of commercial rentable space through November 14, 2009 which, as of June 30, 2005 had an aggregate remaining rent obligation of $398,000.

      In June 2005, DM2 defaulted on the note and the sublease and threatened to file for bankruptcy protection. On August 3, 2005, the Company entered into a settlement agreement with DM2 which provided for the cancellation of the promissory note and the termination of the Company’s security interest in DM2’s machinery, equipment, furniture, fixtures and accounts receivables in consideration of DM2’s payment to the Company of the sum of $75,000 and issuance of a new promissory note in the principal amount of $116,000. This new note is payable in forty-eight (48) equal consecutive monthly installments commencing September 15, 2005 of approximately $2,400 each, plus interest at the rate of 6% per annum on the unpaid balance and is jointly and severally guaranteed by Mr. Annunziato and his wife. The Company also agreed to a termination of the sublease and, on August 19, 2005, DM2 vacated and surrendered the premises and conveyed to the Company all of its right, title and interest in and to all of the furniture and fixtures located at such premises. The security deposit in the sum of $20,000 held by the Company under the sublease was applied to unpaid rent and damages.

     B. Sale of Licensing-Related Assets

      On August 19, 2002, RIL sold its Gough licensing property and royalties receivable to Gough Holdings (Engineering), Ltd. (“GHE”) for $450,000, payable in five semi-annual installments, without interest, commencing September 30, 2002. GHE paid the first two installments aggregating $140,000 but asked the Company for an accommodation on the $100,000 third installment which was due on September 30, 2003. The Company agreed to accept payment of $30,000 in cash and GHE’s promissory note for the balance of $70,000. This note was payable in seven (7) equal consecutive monthly installments of $10,000 each, with interest at the rate of 10% per annum, with the first installment becoming due on November 1, 2003. On April 14, 2004, the Company and GHE entered into a discounted payment settlement agreement pursuant to which the Company received $215,000 on April 15, 2004. In connection with this settlement, the Company recorded a loss of $12,000 in the first quarter of 2004.

     C. OXO International

      On September 20, 2002, RIL amended its agreement with OXO International (“OXO”), a division of World Kitchen, Inc. This amendment, which was approved by the court overseeing OXO’s bankruptcy, provided for payments to the Company of $550,000 of which $10,000 was for past due royalties; $180,000 for royalties for the six month period ending December 31, 2002 and $360,000 for royalties for the year ending December 31, 2003. In February 2004, OXO made the final payment due under this obligation.

     D. Sale of the Product Design Group

      On September 20, 2002, RIL sold its Product Design Group to Product Genesis, LLC (“PG”) for a variable purchase price based upon 2¹/2 % of net revenues up to an aggregate of $300,000. Due to the uncertainties of collection of the purchase price, the Company did not allocate any cost basis to this contract right and recorded the $36,000 received in 2003 from PG as income from such discontinued operations. In December 2003, PG notified the Company that it was discontinuing its product design operations and, in January 2004, it advised the Company that it had entered into an agreement with Factors NY, LLC, a company wholly-owned by a former employee of PG, to purchase the goodwill and certain assets of PG.

50

REFAC OPTICAL GROUP

NOTES TO FINANCIAL STATEMENTS — (Continued)

Pursuant to an agreement, dated February 10, 2004, PG paid the Company the sum of $30,000 in full settlement of the contingent balance of the variable purchase price.

      The Company also entered into a sublease with PG for 9,574 square feet of commercial rentable space with a termination date of November 15, 2009. On December 22, 2003, by lease amendment, the Company released its security interest in PG’s machinery, equipment, furniture, fixtures and chattel located at the leased premises in consideration of a cash security deposit in the sum of $75,000. PG’s sale of the business referred to in the preceding paragraph did not include this sublease.

      On July 6, 2004, PG, through a turnaround consultant, notified the Company that due to extreme financial hardship, neither PG nor its affiliated companies, Product Genesis, Inc. (“PG-INC”) and Product Genesis Business Trust (“PGBT”), which had guaranteed PG’s obligations under the sublease, would be able to pay the rent for July 2004, or any further rent or be further bound by the sublease. No further rental payments were made after such notice.

      On October 5, 2004, the Company entered into a settlement agreement with PG, PG-INC and PGBT whereby it agreed to a termination of the sublease and a mutual release in consideration of the application of the $75,000 security deposit to rent, the payment of $150,000 in cash and $50,000 over a period of thirty-five months commencing on November 1, 2004. PG paid the $50,000, which was evidenced by a promissory note, in full in November 2004. In addition, under the settlement agreement PG conveyed title to the Company to all of the furniture and equipment it had left at the premises and waived a claim it had against the Company for reimbursement of $20,000 in leasehold construction costs it had incurred.

     E. Sale of RIL

      On September 30, 2002, the Company completed the transfer of the assets and assumption of the liabilities of its subsidiary, RIL, to the Company, excluding the capital stock of Refac Consumer Products, Inc. (“RCP”), a manufacturer of a line of consumer electronics products, and certain trademarks, patents and a patent application relating to RCP’s business. After such transfer, the Company sold RIL to RCP Products, LLC, a limited liability company established by a former employee, for $50,000 plus a variable purchase price based upon 2¹/2 % of the revenues received in excess of $1,000,000 from the sale of its consumer electronics products during the eight year period commencing January 1, 2003, up to a maximum of $150,000 in any given year and a cumulative total of $575,000. Due to the uncertainties of collection of the purchase price, the Company has not allocated any cost basis to this contract right and will record any monies that it may receive from RCP Products, LLC with respect thereto as income from such discontinued operations. As of December 31, 2005, the Company has not received any variable purchase price payments and, based upon information provided by the purchaser, it does not expect to receive any such payments in the future.

Note 15 — Unaudited Selected Quarterly Financial Data

	2005
	First		Second			Third			Fourth
	Quarter		Quarter			Quarter			Quarter
Total revenues	$	1,839,000	$	189,000		$	326,000			55,000
Cost of revenues		28,000		33,000			29,000			28,000
Net income (loss) from continuing operations		882,000		(614,000	)		(454,000	)		(739,000	)
Net income (loss)	$	882,000	$	(614,000	)	$	(454,000	)	$	(739,000	)
Net income (loss) from continuing operations per basic and diluted shares	$	0.13	$	(0.09	)	$	(0.06	)		(0.11	)
Net income (loss) per basic and diluted shares	$	0.13	$	(0.09	)	$	(0.06	)		(0.11	)

51

REFAC OPTICAL GROUP

NOTES TO FINANCIAL STATEMENTS — (Continued)

	2004
	First			Second			Third		Fourth
	Quarter			Quarter			Quarter		Quarter
Total revenues	$	403,000		$	491,000		$	519,000	$	366,000
Cost of revenues		31,000			30,000			31,000		32,000
Net income (loss) from continuing operations		(174,000	)		(39,000	)		126,000		(152,000	)
Net income (loss)	$	(169,000	)	$	(39,000	)	$	131,000	$	(148,000	)
Net income (loss) from continuing operations per basic and diluted shares	$	(0.02	)	$	(0.01	)	$	0.02	$	(0.02	)
Net income (loss) per basic and diluted shares	$	(0.02	)	$	(0.01	)	$	0.02	$	(0.02	)

52

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

Board of Directors and Stockholders of

Refac Optical Group

      We have audited the accompanying balance sheets of Refac Optical Group (formerly Refac) as of December 31, 2005 and 2004 and the related statements of operations, stockholders’ equity, and cash flows for each of the three years in the period ended December 31, 2005. These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these financial statements based on our audits.

      We conducted our audits in accordance with the 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. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. Our audits included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, 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 financial statements referred to above present fairly, in all material respects, the financial position of Refac Optical Group as of December 31, 2005 and 2004, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2005 in conformity with accounting principles generally accepted in the United States of America.

/s/ GRANT THORNTON LLP

New York, New York

March 17, 2006

53

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

      None.

Item 9A. Controls and Procedures

      (a) Disclosure Controls and Procedures. The Company’s Chief Executive Officer and Chief Financial Officer have evaluated the effectiveness of the Company’s disclosure controls and procedures (as such term is defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended (the “Exchange Act”)) as of the end of the period covered by this report. Based on such evaluation, the Company’s Chief Executive Officer and Chief Financial Officer have concluded that, as of the end of such period, the Company’s disclosure controls and procedures are effective.

      (b) Internal Control Over Financial Reporting. There have not been any changes in the Company’s internal control over financial reporting (as such term is defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) during the fourth fiscal quarter of 2005 that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.

Item 9B. Other Information

      None.

PART III

Item 10. Directors and Executive Officers of the Registrant

      The Board is currently comprised of twelve directors. On March 6, 2006, the Company amended its certificate of incorporation to eliminate the classified board structure. The current term of office of each director will end at Refac’s 2007 annual meeting of stockholders, and all directors will thereafter be elected for one-year terms at annual meeting of stockholders.

      There are no family relationships between any of the directors or executive officers of the Company nor were there any special arrangements or understandings regarding the selection of any director or executive officer, except that the nominees to the Board were recommended by Palisade, the Company’s controlling shareholder.

Executive Officers

      Information with respect to the executive officers of the Company is set forth below.

			Served in Such
			Position or Office
Name	Age		Continually Since		Position(1)
J. David Pierson		59		2005	President and Chief Executive Officer(2)
Robert L. Tuchman		63		1991	Senior Vice President, General Counsel, Secretary and Chairman of the Executive Committee of the Board.(3)
Raymond A. Cardonne, Jr.		39		1997	Senior Vice President, Chief Financial Officer and Treasurer(4)

NOTES:

(1)	Each executive officer’s term of office is until the next organizational meeting of the Board (traditionally held immediately after the Annual Meeting of Stockholders of the Company) and until the election and qualification of his or her successor. However, the Board has the discretion to replace officers at any time.
(2)	Mr. Pierson joined the Company as its President and Chief Operating Officer on June 20, 2005 and was appointed its President and Chief Executive Officer on March 6, 2006. From 1996 to 2001, he served as

54

	President of Licensed Brands for Cole National, a leading optical retailer. During his tenure with Cole National, he led the expansion of vision care products and services from 650 stores to more than 1,100 under the banners of Sears Optical, Target and BJ’s Wholesale Clubs. Through more than thirty years in retailing, Mr. Pierson has managed operations, merchandising, strategic planning and implementation in a variety of positions with Sears, Target Stores and Federated Department Stores. Most recently, from March 2001 to April 2004, he served as the Chairman, President and Chief Executive Officer of CPI Corporation (NYSE: CPY), which provides portrait photography services in over 1,000 studios throughout the United States, Puerto Rico and Canada principally under license agreements with Sears. During the period after he left CPI Corporation and before joining Refac, he served as a consultant to several companies, including some in the retail optical business.
(3)	Mr. Tuchman, has been a director of the Company since 1991 and is chairman of the board’s executive committee. Since March 6, 2006, when J. David Pierson succeeded Mr. Tuchman as Chief Executive Officer, Mr. Tuchman has been serving as the Company’s Senior Vice President, General Counsel and Secretary. Previously, he served as the Company’s President from 1991 until June 2005, Chief Executive Officer from 1997 to March 6, 2006 and Chairman from 1997 until March 2003.
(4)	Mr. Cardonne joined the Company in 1997 and became Chief Financial Officer and Treasurer of the Company in August 2000. He served as Secretary of the Company from November 1998 until March 2006. Prior to joining the Company, from December 1994 through November 1997, Mr. Cardonne was a Vice President at Technology Management & Funding, L.P. From August 1993 to December 1994, he worked for NEPA Venture Funds, an early-stage venture capital firm, and the Lehigh Small Business Development Center. He previously worked at Ford Electronics & Refrigeration Corporation from January 1990 to July 1993.

      The additional information required by this item has been included in the Company’s Proxy Statement for its 2006 annual meeting of stockholders included in its Amendment No. 1 to definitive Registration Statement on Form S-4 filed with the SEC on February 14, 2006 and is hereby incorporated herein by reference.

Item 11. Executive Compensation

      The information required by this item has been included in the Company’s Proxy Statement for its 2006 annual meeting of stockholders included in its Amendment No. 1 to definitive Registration Statement on Form S-4 filed with the SEC on February 14, 2006 and is hereby incorporated herein by reference. Subsequent to the effective date of such registration statement, on March 6, 2006, the Company’s Board of Directors awarded Robert L. Tuchman, it Chief Executive Officer during 2005 and Raymond A Cardonne, its Chief Financial Officer cash bonuses of $150,000 and $75,000, respectively. These bonuses are in recognition of services performed during 2005 and are payable on or about March 31, 2006.

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

      The information required by this item has been included in the Company’s Proxy Statement for its 2006 annual meeting of stockholders included in its Amendment No. 1 to definitive Registration Statement on Form S-4 filed with the SEC on February 14, 2006 and is hereby incorporated herein by reference.

Item 13. Certain Relationships and Related Transactions

      The information required by this item has been included in the Company’s Proxy Statement for its 2006 annual meeting of stockholders included in its Amendment No. 1 to definitive Registration Statement on Form S-4 filed with the SEC on February 14, 2006 and is hereby incorporated herein by reference.

55

Item 14. Principal Accounting Fees and Services

      The following table sets forth the aggregate fees billed to Refac for the fiscal years ended December 31, 2005 and 2004 by Refac’s principal accounting firm, Grant Thornton LLP:

Description	2005		2004
Audit Fees	$	175,000	$	110,000
Audit related fees		62,000		—
Tax fees		29,000		72,000
Total	$	266,000	$	182,000

      Audit Fees. In fiscal 2005 and 2004, these services consisted of fees billed for professional services rendered for the audit of Refac’s financial statements and review of the interim financial statements included in quarterly reports. The services also included work related to the issuance of a consent with regards to filings under the Securities Act of 1933, as amended.

      Audit Related Fees. Audit Related Fees consist primarily of fees incurred in connection with the work related to acquisitions of U.S. Vision and OptiCare.

      Tax Fees. The tax fees related to professional services billed for tax compliance and tax advice and primarily consisted of assistance in an IRS examination, preparation of various tax returns and advice on other tax-related matters.

      SEC rules require all audit and non-audit engagements provided by our independent auditor, Grant Thornton LLP, be approved by Refac’s audit committee or be entered into pursuant to pre-approval policies and procedures established by Refac’s audit committee.

      Refac’s audit committee has considered such non-audit fees, and has determined that such fees are compatible with maintaining Grant Thornton LLP’s independence. Refac’s audit committee has adopted a pre-approval policy that grants the chairman of the Refac audit committee the sole authority to approve up to $10,000 in non-budgeted services. All other services must be approved by the Refac audit committee. None of the services provided by the independent auditors was pre-approved by the audit committee under paragraph (c)(7)(i)(C) of Rule 2-01 of Regulation S-X.

PART IV

Item 15. Exhibits and Financial Statement Schedules

(a)(1) Financial Statements.

      Included within.

(a)(3) Exhibits.

      See (b) below.

(b) Exhibits.

      See the Exhibit Index, which is incorporated by reference herein.

56

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.

Refac

Dated: March 31, 2006 By:  /s/ J. David Pierson
J. David Pierson, President
and Chief Executive Officer

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

Dated: March 31, 2006	By:	/s/ J. David Pierson       J. David Pierson, President and Chief Executive Officer (Principal Executive Officer)
Dated: March 31, 2006	/s/ Raymond A. Cardonne, Jr.       Raymond A. Cardonne, Jr., Senior Vice President, Chief Financial Officer and Treasurer (Principal Financial Officer)
Dated: March 31, 2006	/s/ Robert L. Tuchman       Robert L. Tuchman, Senior Vice President, General Counsel, Secretary and Director
Dated: March 31, 2006	/s/ Eugene K. Bolton       Eugene K. Bolton, Director
Dated: March 31, 2006	/s/ Jeffrey A. Cole       Jeffrey A. Cole, Director
Dated: March 31, 2006	/s/ Dennison T. Veru       Dennison T. Veru, Director
Dated: March 31, 2006	/s/ Clark A. Johnson       Clark A. Johnson, Chairman
Dated: March 31, 2006	/s/ Mark N. Kaplan       Mark N. Kaplan, Director

57

Dated: March 31, 2006	/s/ Joseph W. Marino       Joseph W. Marino, Director
Dated: March 31, 2006	/s/ Melvin Meskin       Melvin Meskin, Director
Dated: March 31, 2006	/s/ Mark S. Newman       Mark S. Newman, Director
Dated: March 31, 2006	/s/ Jeffrey D. Serkes       Jeffrey D. Serkes, Director
Dated: March 31, 2006	/s/ David C. Stone       David C. Stone, Director
Dated: March 31, 2006	/s/ Dean J. Yimoyines       Dean J. Yimoyines, Director

58

EXHIBIT INDEX

Exhibit
No.			Exhibit
	3	.1	Restated Certificate of Incorporation of the Company. Incorporated by reference to Appendix C to the Company’s Amendment No. 1 to Registration Statement on Form S-4, filed with the SEC on February 14, 2006, SEC file number 333-130328.
	3	.2	Amended and Restated By-laws of the Company. Incorporated by reference to Exhibit 3.1 to the Company’s Current Report on Form 8-K filed with the SEC on March 6, 2006, SEC file number 001-12776.
	4	.1	Form of Warrant dated January 25, 2002, issued to CapitalSource Finance, LLC, for the purchase of up to 11,800 shares of the Company’s common stock, incorporated herein by reference to the Registrant’s Current Report on Form 8-K filed on February 11, 2002, Exhibit 3.6.
	10	.1	Agreement and Plan of Merger, dated as of August 19, 2002, by and among Palisade Concentrated Equity Partnership, L.P., Palisade Merger Corp. and Refac. Incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K filed with the SEC on August 21, 2002, SEC file number 001-12776.
	10	.2	Amendment No. 1 to the Agreement and Plan of Merger, dated as of October 21, 2002, by and among Palisade Concentrated Equity Partnership, L.P., Palisade Merger Corp. and Refac. Incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K filed with the SEC on October 24, 2002, SEC file number 001-12776.
	10	.3	Amendment No. 2 to the Agreement and Plan of Merger, dated as of December 12, 2002, by and among Palisade Concentrated Equity Partnership, L.P., Palisade Merger Corp. and Refac. Incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K filed with the SEC on December 16, 2002, SEC file number 001-12776.
	10	.4	Amendment No. 3 to the Agreement and Plan of Merger, dated as of January 23, 2003, by and among Palisade Concentrated Equity Partnership, L.P., Palisade Merger Corp. and Refac. Incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K filed with the SEC on January 24, 2003, SEC file number 001-12776.
	10	.5	Fifth Amended and Restated Employment Agreement between Robert L. Tuchman and Refac, dated as of November 7, 2003. Incorporated by reference to Exhibit 10 (a) to the Company’s Quarterly Report on Form 10-Q filed with the SEC on November 12, 2003, SEC file number 001-12776.*
	10	.6	Amended and Restated Employment Agreement between Raymond A. Cardonne, Jr. and Refac, dated as of November 7, 2003. Incorporated by reference to Exhibit 10 (b) to the Company’s Quarterly Report on Form 10-Q filed with the SEC on November 12, 2004, SEC file number 001-12776.*
	10	.7	2003 Stock Incentive Plan. Incorporated by reference to Exhibit B to the Company’s Proxy Statement for its 2003 Annual Meeting of Stockholders, filed with the SEC on April 22, 2003, SEC file number 001-12776.*
	10	.8	Amendment No. 1 to 2003 Stock Incentive Plan. Incorporated by reference to Exhibit F to Amendment No. 1 to Registration Statement on Form S-4, filed on February 14, 2006, SEC file number 333-130328.*
	10	.9	1998 Stock Incentive Plan. Incorporated by reference to Exhibit A to the Company’s Proxy Statement for its 1998 Annual Meeting of Stockholders, filed with the SEC on March 31, 1998, SEC file number 001-12776.*
	10	.10	First Amendment to the Refac Technology Development Corporation 1998 Stock Incentive Plan, dated as of January 23, 2003. Incorporated by reference to Exhibit 10.6 to the Company’s Current Report on Form 8-K filed with the SEC on January 24, 2003, SEC file number 001-12776.*
	10	.11	1990 Stock Option and Incentive Plan. Incorporated by reference to Exhibit A to the Company’s Proxy Statement for its 1990 Annual Meeting of Stockholders, filed with the SEC on April 23, 1990, SEC file number 0-7704.*
	10	.12	Employment Agreement with Robert L. Tuchman, dated April 1, 2005. Incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K, filed with the SEC on April 6, 2005, SEC file number 001-12776.
	10	.13	Employment Agreement with Raymond A. Cardonne, Jr., dated April 1, 2005. Incorporated by reference to Exhibit 10.2 to the Company’s Current Report on Form 8-K, filed with the SEC on April 6, 2005, SEC file number 001-12776.

Exhibit
No.			Exhibit
	10	.14	Amendment No. 1, dated March 30, 2006, to Employment Agreement with Raymond A. Cardonne, Jr., dated April 1, 2005.**
	10	.15	Stock Option Agreement with Robert L. Tuchman, dated April 1, 2005. Incorporated by reference to Exhibit 10.3 to the Company’s Current Report on Form 8-K, filed with the SEC on April 6, 2005, SEC file number 001-12776.
	10	.16	Stock Option Agreement with Raymond A. Cardonne, Jr., dated April 1, 2005. Incorporated by reference to Exhibit 10.4 to the Company’s Current Report on Form 8-K, filed with the SEC on April 6, 2005, SEC file number 001-12776.
	10	.17	Employment Agreement with J. David Pierson, dated June 20, 2005. Incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K, filed with the SEC on June 24, 2005, SEC file number 001-12776.
	10	.18	Stock Option Agreement with J. David Pierson, dated June 20, 2005. Incorporated by reference to Exhibit 10.2 to the Company’s Current Report on Form 8-K, filed with the SEC on June 24, 2005, SEC file number 001-12776.
	10	.19	Consulting Agreement with Cole Limited, Inc., dated June 20, 2005. Incorporated by reference to Exhibit 10.3 to the Company’s Current Report on Form 8-K, filed with the SEC on June 24, 2005, SEC file number 001-12776.
	10	.20	Stock Option Agreement with Cole Limited, Inc., dated June 20, 2005. Incorporated by reference to Exhibit 10.4 to the Company’s Current Report on Form 8-K, filed with the SEC on June 24, 2005, SEC file number 001-12776.
	10	.21	Stock Purchase Agreement with Cole Limited, Inc., dated June 20, 2005. Incorporated by reference to Exhibit 10.5 to the Company’s Current Report on Form 8-K, filed with the SEC on June 24, 2005, SEC file number 001-12776.
	10	.22	Agreement and Plan of Merger, dated as of August 22, 2005, by and among Refac, OptiCare Merger Sub, Inc. and OptiCare Health Systems, Inc. Incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K, filed with the SEC on August 23, 2005, SEC file number 001-12776.
	10	.23	Agreement and Plan of Merger, dated as of August 22, 2005, by and among Refac, USV Merger Sub, Inc. and U.S. Vision, Inc. Incorporated by reference to Exhibit 10.2 to the Company’s Current Report on Form 8-K, filed with the SEC on August 23, 2005, SEC file number 001-12776.
	10	.24	Amendment No. 1 to Merger Agreement, dated as of November 11, 2005, by and among Refac, OptiCare Merger Sub, Inc. and OptiCare Health Systems, Inc. Incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K, filed with the SEC on November 15, 2005, SEC file number 001-12776.
	10	.25	Amendment No. 1 to Merger Agreement, dated as of December 5, 2005, by and among Refac, U.S. Vision Merger Sub, Inc. and U.S. Vision, Inc. Incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K, filed with the SEC on December 8, 2005, SEC file number 001-12776.
	10	.26	Form of License/ Lease Agreement, by and between Sears Roebuck & Co. and U.S. Vision. Incorporated by reference to Amendment No. 1 to the U.S. Vision’s Form S-1 (Reg. No. 333-35819) filed with the SEC on October 29, 1997.
	10	.27	Loan and Security Agreement between U.S. Vision and Commerce Bank, dated as of October 30, 2002.**
	10	.28	Amendment No. 1, dated May 30, 2003, to the Loan and Security Agreement, dated as of October 30, 2002, between U.S. Vision and Commerce Bank.**
	10	.29	Amendment No. 2, dated April 5, 2004, to the Loan and Security Agreement, dated as of October 30, 2002, between U.S. Vision and Commerce Bank.**
	10	.30	Amendment No. 3, dated January 31, 2005, to the Loan and Security Agreement, dated as of October 30, 2002, between U.S. Vision and Commerce Bank.**
	10	.31	Amendment No. 4, dated August 25, 2005, to the Loan and Security Agreement, dated as of October 30, 2002, between U.S. Vision and Commerce Bank.**
	10	.32	Amendment No. 5, dated October 31, 2005, to the Loan and Security Agreement, dated as of October 30, 2002, between U.S. Vision and Commerce Bank.**

Exhibit
No.			Exhibit
	10	.33	Licensed Department Agreement, dated as of February 1, 1995 between J.C. Penney Corporation, Inc. and U.S. Vision. Incorporated by reference to Amendment No. 1 to U.S. Vision’s Form S-1 (Reg. No. 333-35819) filed with the SEC on October 29, 1997.
	10	.34	Amendment No. 1 to the Licensed Department Agreement, dated as of December 18, 1996, by and between J.C. Penney Corporation, Inc. and U.S. Vision. Incorporated by reference to Amendment No. 1 to U.S. Vision’s Form S-1 (Reg. No. 333-35819) filed with the SEC on October 29, 1997.
	10	.35	Amendment No. 2, dated April 13, 1998, to the Licensed Department Agreement, dated as of February 1, 1995, by and between J.C. Penney Corporation, Inc. and U.S. Vision.**
	10	.36	Amendment No. 3, dated September 30, 2002, to the Licensed Department Agreement, dated as of February 1, 1995, by and between J.C. Penney Corporation, Inc. and U.S. Vision.**
	10	.37	Amendment No. 4, dated May 22, 2003, to the Licensed Department Agreement, dated as of February 1, 1995, by and between J.C. Penney Corporation, Inc. and U.S. Vision.**
	10	.38	Amendment No. 5, dated September 2003, to the Licensed Department Agreement, dated as of February 1, 1995, by and between J.C. Penney Corporation, Inc. and U.S. Vision.**
	10	.39	Participating Provider Agreement, dated as of June 1, 1997, between U.S. Vision, Inc. and Cole Vision Corporation. Incorporated by reference to Amendment No. 1 to U.S. Vision’s Form S-1 (Reg. No. 333-35819) filed with the SEC on October 29, 1997.
	10	.40	Amendment No. 2, dated as of October 30, 2002 to the Participating Provider Agreement, dated as of June 1, 1997, between U.S. Vision, Inc. and Cole Vision Corporation.**
	10	.41	Amendment No. 3, dated as of December 19, 2003, to the Participating Provider Agreement, dated as of June 1, 1997, between U.S. Vision, Inc. and Cole Vision Corporation.**
	10	.42	Amendment No. 4, dated as of February 6, 2004, to the Participating Provider Agreement, dated as of June 1, 1997, between U.S. Vision, Inc. and Cole Vision Corporation.**
	10	.43	Amended and Restated 2002 Stock Incentive Plan incorporated herein by reference to Registrant’s Quarterly Report on Form 10-Q filed August 14, 2002, Exhibit 4.4.*
	10	.44	Vision Care Capitation Agreement between OptiCare Eye Health Centers, Inc. and Blue Cross & Blue Shield of Connecticut, Inc. (and its affiliates), dated October 23, 1999. Incorporated by reference to OptiCare’s Registration Statement 333-78501, Exhibit 10.9.
	10	.45	Eye Care Services Agreement between OptiCare Eye Health Centers, Inc. and Anthem Health Plans, Inc. (d/b/a Anthem Blue Cross and Blue Shield of Connecticut), effective November 1, 1998. Incorporated by reference to OptiCare’s Registration Statement 333-78501, Exhibit 10.10.
	10	.46	Contracting Provider Services Agreement, dated April 26, 1996 and amendment thereto dated as of January 1, 1999, between Blue Cross and Blue Shield of Connecticut, Inc., and OptiCare Eye Health Centers, Inc. Incorporated by reference to OptiCare’s Registration Statement 333-78501, Exhibit 10.11.
	10	.47	Form of Employment Agreement between OptiCare and Dean J. Yimoyines, M.D., effective August 13, 1999, incorporated herein by reference to OptiCare’s Registration Statement 333-78501, Exhibit 10.11.*
	10	.48	Lease Agreement, dated September 1, 1995, by and between French’s Mill Associates, as landlord, and OptiCare Eye Health Centers, Inc. as tenant, for premises located at 87 Grandview Avenue, Waterbury, Connecticut. Incorporated by reference to OptiCare’s Registration Statement 333-78501, Exhibit 10.17.
	10	.49	Lease Agreement, dated September 30, 1997, by and between French’s Mill Associates II, LLP, as landlord, and OptiCare Eye Health Center, P.C., as tenant, for premises located at 160 Robbins Street, Waterbury, Connecticut (upper level). Incorporated by reference to OptiCare’s Registration Statement 333-78501, Exhibit 10.18.
	10	.50	Lease Agreement, dated September 1, 1995 and Amendment to lease dated September 30, 1997, by and between French’s Mill Associates II, LLP, as landlord, and OptiCare Eye Health Center, P.C., as tenant, for premises located at 160 Robbins Street, Waterbury, Connecticut (lower level). Incorporated by reference to OptiCare’s Registration Statement 333-78501, Exhibit 10.19.
	10	.51	Second Amendment to Lease Agreement, dated September 30, 1997, by and between French’s Mill Associates II, LLP, as landlord, and OptiCare Eye Health Center, Inc., as tenant, for premises located at 160 Robbins Street, Waterbury, Connecticut. Incorporated by reference to OptiCare’s Quarterly Report on Form 10-Q filed on August 12, 2003, Exhibit 10.4.

Exhibit
No.			Exhibit
	10	.52	Lease Agreement, dated August 1, 2002, by and between Harrold-Barker Investment Company, as landlord, and OptiCare Health Systems, Inc., as tenant, for premises located at 110 and 112 Zebulon Court, Rocky Mount, North Carolina. Incorporated by reference to OptiCare’s Annual Report on Form 10-K filed on March 18, 2003, Exhibit 10.12.
	10	.53	Form of Health Services Organization Agreement between PrimeVision Health, Inc. and eye care providers, incorporated herein by reference to OptiCare’s Registration Statement 333-78501, Exhibit 10.21.
	10	.54	Professional Services and Support Agreement, dated December 1, 1995, between OptiCare Eye Health Centers, Inc. and OptiCare P.C., a Connecticut professional corporation, incorporated herein by reference to OptiCare’s Registration Statement 333-78501, Exhibit 10.22.
	10	.55	Amendment No. 1, dated January 12, 2005, to the Professional Services and Support Agreement dated December 1, 1995, incorporated herein by reference to OptiCare’s Annual Report on Form 10-K filed on April 1, 2005, Exhibit 10.10.
	10	.56	Employment Agreement between OptiCare and Jason M. Harrold, effective July 1, 2000, incorporated herein by reference to OptiCare’s Quarterly Report on Form 10-Q filed on August 14, 2000, Exhibit 10.10.*
	10	.57	OptiCare Directors’ and Officers’ Trust Agreement, dated November 7, 2001, between OptiCare and Norman S. Drubner, Esq., as Trustee, incorporated herein by reference to OptiCare’s Annual Report on Form 10-K filed on November 29, 2001, Exhibit 10.52.*
	10	.58	Agreement for Consulting Services between Morris Anderson and Associates, Ltd. and OptiCare, dated April 16, 2001, incorporated herein by reference to the OptiCare’s Annual Report on Form 10-K filed on November 19, 2001, Exhibit 10.53.
	10	.59	Subordinated Pledge and Security Agreement, dated as of January 25, 2002, by OptiCare (including certain of its subsidiaries) as grantor, and Palisade Concentrated Equity Partnership, L.P., as secured party and agent for the other secured party (Linda Yimoyines), securing the senior secured subordinated notes made by OptiCare to the secured parties dated January 25, 2002, incorporated herein by reference to OptiCare’s Current Report on Form 8-K filed on February 11, 2002, Exhibit 10.6.
	10	.60	Registration Rights Agreement, dated January 25, 2002, covering common stock held by Palisade, common stock issuable on conversion of the Series B Preferred Stock and exercise of the warrants issued to Palisade, Linda Yimoyines and CapitalSource Finance, L.L.C., incorporated herein by reference to OptiCare’s Current Report on Form 8-K filed on February 11, 2002, Exhibit 10.7.
	10	.61	Amendment No. 1, dated May 12, 2003, to the Registration Rights Agreement dated January 25, 2002, incorporated herein by reference to OptiCare’s Quarterly Report on Form 10-Q filed on August 12, 2003, Exhibit 10.2.
	10	.62	Amendment No. 2, dated January 12, 2005, to the Registration Rights Agreement dated January 25, 2002.*
	10	.63	Subordination Agreement, dated January 25, 2002, among Palisade Concentrated Equity Partnership, L.P., Linda Yimoyines, CapitalSource Finance, L.L.C. and OptiCare, incorporated herein by reference to OptiCare’s Current Report on Form 8-K filed on February 11, 2002, Exhibit 10.8.
	10	.64	Term Note B, dated November 14, 2003, by and between OptiCare, OptiCare Eye Health Centers, Inc., PrimeVision Health, Inc. (individually and collectively as borrower) and CapitalSource Finance, L.L.C. (as lender), incorporated herein by reference to OptiCare’s Current Report on Form 8-K filed on November 19, 2003, Exhibit 10.2.
	10	.65	Asset Purchase Agreement, dated as of August 1, 2002, by and among OptiCare, PrimeVision Health, Inc. and Optometric Eye Care Center, P.A., incorporated herein by reference to OptiCare’s Current Report on Form 8-K filed on August 27, 2002, Exhibit 2.
	10	.66	Asset Purchase Agreement, dated as of February 7, 2003, by and among the Wise Optical Vision Group, Inc. and OptiCare Acquisition Corp., incorporated herein by reference to OptiCare’s Current Report on Form 8-K filed on February 10, 2003, Exhibit 2.
	10	.67	Joinder Agreement and First Amendment, dated as of February 7, 2003, to the Amended and Restated Revolving Credit, Term Loan and Security Agreement, originally dated as of January 25, 2003, by and between OptiCare, OptiCare Eye Health Centers, Inc., PrimeVision Health, Inc. and CapitalSource Finance, L.L.C., incorporated herein by reference to OptiCare’s Current Report on Form 8-K filed February 10, 2003, Exhibit 99.2.

Exhibit
No.			Exhibit
	10	.68	Second Amended and Restated Revolving Credit, Term Loan and Security Agreement, dated as of March 29, 2004, by and between OptiCare, OptiCare Eye Health Centers, Inc., PrimeVision Health, Inc. OptiCare Acquisition Corporation and CapitalSource Finance, L.L.C., incorporated herein by reference to OptiCare’s Annual Report on Form 10-K filed on March 30, 2004, Exhibit 10.44.
	10	.69	Waiver and First Amendment to Second Amended and Restated Revolving Credit, Term Loan and Security Agreement, dated as of August 16, 2004, by and between OptiCare, OptiCare Eye Health Centers, Inc., PrimeVision Health, Inc., OptiCare Acquisition Corporation and CapitalSource Finance LLC., incorporated herein by reference to OptiCare’s Quarterly Report on Form 10-Q filed on November 15, 2004, Exhibit 10.1.
	10	.70	Second Amendment to Second Amended and Restated Revolving Credit, Term Loan and Security Agreement, dated as of August 27, 2004, by and between OptiCare, OptiCare Eye Health Centers, Inc., PrimeVision Health, Inc., OptiCare Acquisition Corporation and CapitalSource Finance LLC., incorporated herein by reference to OptiCare’s Current Report on Form 8-K filed on September 1, 2004, Exhibit 10.1.
	10	.71	Letter Agreement, dated as of August 27, 2004, by and between OptiCare, OptiCare Eye Health Centers, Inc., PrimeVision Health, Inc., OptiCare Acquisition Corporation, CapitalSource Finance LLC and Palisade Concentrated Equity Partnership, L.P., incorporated herein by reference to OptiCare’s Current Report on Form 8-K filed on September 1, 2004, Exhibit 10.2.
	10	.72	Third Amendment to Second Amended and Restated Revolving Credit, Term Loan and Security Agreement, dated as of January 12, 2005, by and between OptiCare, OptiCare eye Health Centers, Inc., PrimeVision Health, Inc., OptiCare Acquisition Corporation and CapitalSource Finance LLC, incorporated herein by reference to OptiCare’s Annual Report on Form 10-K filed on April 1, 2005, Exhibit 10.50.
	10	.73	Asset Purchase Agreement, dated as of January 12, 2005, between OptiCare Acquisition Corp., Wise Optical, LLC and AECC/ Pearlman Buying Group, LLC, incorporated herein by reference to OptiCare’s Annual Report on Form 10-K filed on April 1, 2005, Exhibit 10.52.
	10	.74	Transition Agreement, dated as of January 12, 2005 between Dr. Dean J. Yimoyines and OptiCare, incorporated herein by reference to OptiCare’s Annual Report on Form 10-K filed on April 1, 2005, Exhibit 10.53.
	10	.75	Supply Agreement, dated as of January 12, 2005, by and among OptiCare Eye Health Centers, Inc., Wise Optical, LLC and AECC/ Pearlman Buying Group, LLC, incorporated herein by reference to OptiCare’s Annual Report on Form 10-K filed on April 1, 2005, Exhibit 10.54.
	10	.76	Employment Agreement, dated as of January 12, 2005, by and between OptiCare P.C. and Dr. Dean J. Yimoyines, incorporated herein by reference to OptiCare’s Annual Report on Form 10-K filed on April 1, 2005, Exhibit 10.55.
	10	.77	Surrender of Lease Agreement, dated as of October 21, 2005, between Mack-Cali So. West Realty Associates L.L.C. and OptiCare Acquisition Corp.**
	21	.1	Subsidiaries of the Registrant.**
	23	.1	Consent of Grant Thornton LLP.**
	31	.1	Rule 13a-15(e)/15(d)-15(e) Certification, Chief Executive Officer.**
	31	.2	Rule 13a-15(e)/15(d)-15(e) Certification, Chief Financial Officer.**
	32	.1	Section 1350 Certification, Chief Executive & Chief Financial Officers.**

*  Management or compensatory plan.

**  Filed herewith

EX-10.14

                                                                   Exhibit 10.14


                       AMENDMENT TO EMPLOYMENT AGREEMENT


     AMENDMENT to the Employment Agreement (the "Employment Agreement"), dated
April 1, 2005, between Refac Optical Group (formerly known as Refac and referred
to hereunder as "Refac") and Raymond A. Cardonne, Jr. ("CARDONNE").


                              W I T N E S S E T H:
                              - - - - - - - - - -


     WHEREAS, CARDONNE is currently employed by REFAC pursuant to the Employment
Agreement; and

     WHEREAS, the parties hereto desire to extend the term of the Employment
Agreement from December 31, 2006 to December 31, 2007 and increase the base
salary from $200,000 to $250,000:

     NOW, THEREFORE, in consideration of the premises and the respective
agreements of the parties herein contained, the parties hereto, intending to be
legally bound, agree as follows:

     1.   Article 2 of the Employment Agreement is hereby amended to provide
that the term of CARDONNE'S Employment Agreement will end on December 31, 2007.
Article 2, as amended hereby, reads in its entirety as follows:

          2.   Term.  The employment of CARDONNE by REFAC hereunder will
     continue until December 31, 2007, unless further extended by agreement of
     CARDONNE and REFAC or until sooner terminated as hereinafter provided.


     2.   Article 5(a) of the Employment Agreement is hereby amended to provide
that CARDONNE'S base salary will be $250,000 from January 1, 2006 for the
duration of the Term of the Employment Agreement.  Article 5(a), as amended
hereby, reads in its entirety as follows:

          5.   Base Salary and Incentive Compensation.

               (a)   Base Salary. During the Employment Period, CARDONNE's
        salary will be $250,000 per annum ("Base Salary"). Payment of such
        salary will be made in accordance with REFAC's customary pay practices
        for senior officers and will be subject to such payroll deductions as
        are required by law or by the terms of any applicable benefit plan of
        REFAC.


     All of the remaining terms and conditions of the Employment Agreement shall
be unaffected and shall remain in full force and effect.

     IN WITNESS WHEREOF, the parties have executed this Amendment to the
Employment Agreement.


                                                /s/ Raymond A. Cardonne Jr.
                                                ---------------------------
                                                Raymond A. Cardonne, Jr.

                                                Dated: March 30, 2006



                                                REFAC OPTICAL GROUP


                                            By: /s/ Robert L. Tuchman
                                                ---------------------------
                                                Robert L. Tuchman
                                                Senior Vice President

                                                Dated: March 30, 2006

EX-10.27

                                                                   Exhibit 10.27

                           LOAN AND SECURITY AGREEMENT

                                  By and Among

                               U.S. VISION, INC.,
                        STYL-RITE OPTICAL MFG. CO., INC.,
                               USV OPTICAL, INC.,
                           U.S. VISION HOLDINGS, INC.,
                             9072-8411 QUEBEC, INC.,
                         d/b/a, Optik Pro Baie 2000, and
                        HEALTH EYE CARE STATISTICS, INC.
                                   as Obligors

                                       and

                           COMMERCE BANK, N.A., Lender

                             as of October 30, 2002



                           LOAN AND SECURITY AGREEMENT

     This LOAN AND SECURITY AGREEMENT (the "Agreement") is made as of October
30, 2002, by and among COMMERCE BANK, N.A. (the "Lender") and U.S. VISION, INC.,
a Delaware corporation ("U.S. Vision"), STYL-RITE OPTICAL MFG. CO., INC., a
Florida corporation ("Styl"), USV OPTICAL, INC., a Texas corporation ("USV"),
and U.S. VISION HOLDINGS, INC., a Delaware corporation ("Holdings"; U.S. Vision,
Styl, USV, and Holdings, individually, a "Borrower" and, collectively, the
"Borrowers"), and 9072-8411 QUEBEC, INC. "Optik Pro Baie 2000" ("Optik Pro"),
and HEALTH EYE CARE STATISTICS, INC. ("Health"; and together with Optik Pro,
individually, a "Guarantor" and, collectively, the "Guarantors"; each Borrower
and Guarantor, individually, an "Obligor" and, collectively, the "Obligors").

                                   BACKGROUND

     Simultaneously with the execution hereof, U.S. Vision and Kayak Acquisition
Corp., a Delaware corporation ("Kayak"), will consummate the transactions
contemplated by the Agreement and Plan of Merger by and between Kayak and U.S.
Vision dated May 14, 2002 (the "Agreement and Plan of Merger") pursuant to
which, inter alia, Kayak will merge with and into U.S. Vision and the separate
corporate existence of Kayak will cease and U.S. Vision will be the surviving
company (the "Merger").

     In connection with the Merger, the Lender has agreed to make available to
Borrowers, subject to the terms and provisions hereof, certain Loans, as more
fully hereinafter described.

     NOW, THEREFORE, in consideration of the mutual covenants and premises set
forth herein, and for other good and valuable consideration, the receipt and
sufficiency of which is hereby mutually acknowledged, the parties hereto,
intending to be legally bound hereby, agree as follows:

     1. DEFINITIONS, CERTAIN RULES OF CONSTRUCTION

          1.1 Defined Terms. Each initially capitalized term used herein shall
have the meaning set forth in the recitals hereto, in EXHIBIT A attached hereto
and made a part hereof, or as otherwise set forth in the Agreement, for the
purposes hereof and for each of the Loan Documents. All initially capitalized
terms not otherwise defined herein shall have the meanings ascribed thereto in
the Uniform Commercial Code as enacted in the State of New Jersey.

          1.2 Accounting Reports and Principles. The character or amount of any
asset, liability, account or reserve and of any item of income or expense to be
determined, and any consolidation or other accounting computation to be made,
and the construction of any definition containing a financial term, including,
but not limited to, capitalized terms not otherwise defined herein, pursuant to
this Agreement or any other Loan Document, shall be construed, determined or
made, as the case may be, in accordance with GAAP, consistently applied, unless
such principles are inconsistent with any express provision of this Agreement.



          1.3 Business Day. Whenever any payment or other Obligation hereunder,
under the Notes or any other Loan Document, is due on a day other than a
Business Day, such shall be paid or performed on the Business Day next following
the prescribed due date, except as otherwise specifically provided for herein to
the contrary, and such extension of time shall be included in the computation of
interest and charges. Any reference made herein or in any other Loan Document to
an hour of day shall refer to the then-prevailing time in Cherry Hill, New
Jersey unless specifically provided herein to the contrary.

          1.4 Obligors' Authorization to Charge Accounts. Whenever Obligors are
obligated hereunder, under the Notes or any other Loan Document, to make
payments of any nature to Lender, including payments of principal, interest and
Lender's Costs, Lender, on Lender's behalf, shall be entitled, and Obligors
hereby authorize Lender, on Lender's behalf, to debit from any Deposit Account
of any Obligor maintained with Lender or any Affiliate of Lender, the amount of
such payment due; provided, however, that in the event there are insufficient
funds in such accounts to pay all currently due payments to Lender, Obligors
shall pay to Lender the difference when such payment is due.

          1.5 Lender's Costs. Borrowers shall, within 15 days of Lender's
request, pay Lender all Lender's Costs incurred by Lender through the date of
such request. Until paid, all past due and owing interest payments, fees and
Lender's Costs shall be deemed to be part of the principal balance of the Line
of Credit, bear interest at either the Term Interest Rate or the Line Interest
Rate, whichever is higher, and be secured by the Borrowers' Collateral and
guaranteed by the Guarantors pursuant to the Guarantors' respective Guaranty and
Surety Agreements which shall be secured by the Movable Hypothec and the General
Security Agreement. The Obligations of Borrowers under this Section shall
survive the termination of this Agreement and the payment of the Notes.

     2. THE LOAN

          2.1 Line of Credit.

               2.1.1 Line Established. Provided that no Event of Default or
Potential Default has occurred and is continuing, and subject to the terms and
conditions set forth herein, commencing on the Closing Date and expiring on the
day next preceding the Line Termination Date, unless Borrowers shall have
terminated this Agreement, upon Borrowers' request from time-to-time, Lender
hereby commits to extend one or more Advances to Borrowers, the aggregate of
which outstanding at any one time shall not exceed Seventeen Million Five
Hundred Thousand Dollars ($17,500,000) to be used exclusively for general
working capital purposes of Borrowers. Prior to the Line Termination Date and,
subject to the provisions of this Agreement, Borrowers may borrow, repay and
reborrow under the Line.

               2.1.2 Line of Credit Note. On the date hereof and to evidence the
Indebtedness under the Line, Borrowers shall execute and deliver to Lender the
Line of Credit Note.

               2.1.3 Advances. Provided that no Event of Default or Potential
Default has occurred and is continuing, and subject to the terms and conditions
set forth herein,


                                       2



Borrowers may request Advances under the Line in accordance with the following
provisions. Borrowers shall give the Lender notice in the form of EXHIBIT B
hereto (a "Notice of Borrowing") not later than (i) 2:00 p.m. on the Closing
Date with respect to the initial Advance, and (ii) not later than 12:00 noon on
the same Business Day, of each Prime Rate Advance and each LIBOR Rate Advance
after the Closing Date, of Borrowers' intention to borrow, specifying (a) the
date of such Advance, which shall be a Business Day, (b) the amount of such
Advance, which shall be in a principal amount of not less than One Hundred
Thousand Dollars ($100,000), and (c) whether the Advance is to be a LIBOR Rate
Advance or Prime Rate Advance or a combination thereof. Notices of Borrowing
received after 12:00 noon, other than Notices of Borrowing received prior to
2:00 p.m. on the Closing Date, shall be deemed received on the next Business
Day.

               2.1.4 Interest Rate Options. Subject to the provisions of this
Paragraph, at the election of the Borrowers, the principal balance of each
Advance shall bear interest at Prime plus One Hundred Fifty (150) basis points
(the "Prime Rate") or at LIBOR, as determined in accordance with Paragraph 2.1.5
below, plus Three Hundred Seventy Five (375) basis points (the "LIBOR Rate");
provided, however, that in no event shall the applicable interest rate be less
than Five and One Half Percent (5.5%) per annum. The Borrowers shall select
whether an Advance will accrue interest at the Prime Rate (a "Prime Rate
Advance") or at the LIBOR Rate (a "LIBOR Rate Advance") at the time a Notice of
Borrowing is given pursuant to Paragraph 2.1.3. Any Advance or any portion
thereof as to which the Borrowers shall not have duly specified an interest rate
as provided herein shall conclusively be deemed to be a Prime Rate Advance. All
interest on the Line shall be calculated on the basis of a 360 day year for the
actual number of days elapsed in each period.

               2.1.5 LIBOR Rate Interest Period. Other than with respect to
Advances extended at Closing, in connection with each LIBOR Rate Advance, no
later than 12:00 p.m. (New Jersey time) two Business Days prior to the end of
each calendar month, the Borrowers shall select monthly the interest rate
applicable to the current 30-day LIBOR period which shall then constitute LIBOR
for the succeeding calendar month to be applicable to the LIBOR Rate and all
LIBOR Rate Advances outstanding and which may become outstanding during the
succeeding calendar month. The Borrowers shall give the Lender notice of
Borrowers' selection under this Paragraph in the Form of the Notice of
Borrowing. If Borrowers fail to make an election hereunder for any month, the
previous election made under this Paragraph shall apply for that month.

               2.1.6 Facility Fee. As long as there is any outstanding
Obligation under the Line of Credit, commencing on November 30, 2002, for the
period between the Closing Date and November 30, 2002, and on each December 31,
March 31, June 30 and September 30 thereafter, Borrowers shall jointly and
severally pay to Lender, within three (3) days after the close of each such
period, a fee in an amount equal to one quarter of one percent (0.25%) per annum
calculated on the basis of a 360 day year for the actual number of days elapsed
in each period of the average daily unused portion of the Line of Credit. Any
permanent reductions of the Maximum Available Credit will be taken into account
in the calculation of the Facility Fee.

               2.1.7 Line Closing Fee. Simultaneously with the execution of this
Agreement, Borrowers shall pay to Lender a Line Closing Fee in the amount of One
Hundred


                                       3



Seventy Five Thousand Dollars ($175,000). Borrowers acknowledge and agree that
such Line Closing Fee is deemed fully earned upon the payment thereof and is
non-refundable in all events.

               2.1.8 Principal and Interest Payments. Until the Indebtedness
associated with the Line of Credit is paid in full, interest alone shall be paid
monthly in arrears at the applicable Line Interest Rate on the first day of the
month following the month in which the first Advance is made and thereafter on
the first day of each consecutive month. Anything to the contrary herein
notwithstanding all unpaid principal of the Line and all interest accrued
thereon shall be paid in full by the Borrowers not later than the Line
Termination Date.

               2.1.9 Maximum Available Credit. The outstanding principal balance
of the Line of Credit shall not exceed, at any time, Seventeen Million Five
Hundred Thousand Dollars ($17,500,000) (the "Maximum Available Credit").
Borrowers jointly and severally covenant and agree to immediately repay, without
notice or demand, any principal balance of the Line of Credit in excess of the
Maximum Available Credit. Borrowers may from time to time, at their option,
permanently reduce the Maximum Available Credit on 5 Business Days' prior
written notice to Lender. All such reductions shall be in minimum amounts of
$1,000,000 and integral multiples thereof and such reductions may not reduce the
Maximum Available Credit below the amount of the Advances then outstanding.

               2.1.10 Extension of Line Termination Date. No earlier than 90
days prior to each annual anniversary date of the date hereof Borrowers may
request in writing that the Lender extend the Line Termination Date for a period
of one year beyond the then current Line Termination Date; whereupon, in its
sole and absolute discretion, Lender may decide to extend the Line Termination
Date for such period. Lender shall provide notice to Borrowers of Lender's
decision with respect to Borrowers' request to extend the Line Termination Date
no later than forty-five (45) days after receipt of Borrowers' written request
therefore; provided, however, that if Lender fails to respond to Borrowers'
extension request within such forty-five (45) day period, Borrowers' request
shall be deemed conclusively denied and the then current Line Termination Date
shall not be extended.

          2.2 Term Loan.

               2.2.1 Term Loan Established. On the date hereof, the Lender shall
advance to Borrowers the sum of Fifteen Million Dollars ($15,000,000) as the
Term Loan. The proceeds of the Term Loan shall be used by Borrowers exclusively
to finance the Cash-Out.

               2.2.2 Term Note. On the date hereof and to evidence the
Indebtedness under the Term Loan, Borrowers shall execute and deliver to Lender
the Term Note.

               2.2.3 Term Interest Rate. The aggregate outstanding principal
balance of the Term Loan shall bear interest at a fixed rate of interest of Nine
Percent (9%) per annum. All interest on the Term Loan shall be calculated on the
basis of a 360 day year for the actual number of days elapsed in each period.

               2.2.4 Term Loan Closing Fee. Simultaneously with the execution of
this Agreement, Borrowers shall pay to Lender with regard to the Term Loan, a
Term Loan Closing Fee in the amount of One Hundred Fifty Thousand Dollars
($150,000). Borrowers acknowledge


                                       4



and agree that such Term Loan Closing Fee is deemed fully earned upon the
payment thereof and is non-refundable in all events.

               2.2.5 Principal and Interest Payments. Interest at the Term
Interest Rate on the outstanding principal balance of the Term Loan shall be
payable on the first day of each month from and after the Closing Date until
such principal balance is paid in full. Principal under the Term Loan shall be
paid in the following installments:

          Principal payments in the amount of Four Hundred Thousand Dollars
          ($400,000) shall be due and payable on each of January 31, 2003, April
          30, 2003, July 31, 2003 and October 31, 2003;

          Principal payments in the amount of Six Hundred Seventy-Five Thousand
          Dollars ($675,000) shall be due and payable on each of January 31,
          2004, April 30, 2004, July 31, 2004 and October 31, 2004;

          Principal payments in the amount of Eight Hundred Twenty-Five Thousand
          Dollars ($825,000) shall be due and payable on each of January 31,
          2005, April 30, 2005, July 31, 2005 and October 31, 2005;

          Principal payments in the amount of Nine Hundred Twenty-Five Thousand
          Dollars ($925,000) shall be due and payable on each of January 31,
          2006, April 30, 2006, July 31, 2006, October 31, 2006, January 31,
          2007, April 30, 2007, July 31, 2007, and October 31, 2007.

               2.2.6 Prepayment under the Term Loan. The Term Loan may be
prepaid in whole or in part and from time to time without premium or penalty,
provided, however, that any prepayment of the Term Loan must be accompanied by
the payment of interest on the amount prepaid accrued through the date of
prepayment. Any prepayment will reduce the aggregate principal amount of the
Term Loan and will have no effect on the next scheduled payment due in
accordance with the terms of this Agreement and the Term Note; provided,
however, that if the next scheduled payment due is greater than the unpaid
aggregate principal amount of the Term Loan (the "Unpaid Balance"), such payment
shall be equal to the Unpaid Balance.

               2.2.7 Payments Under the Cole Documents. Upon the exercise of the
Option (each as defined therein) under the Cole Note or the ROFR (each as
defined therein) under the Cole Agreement, and subject to the limited right of
setoff as respectively provided therein, all net proceeds otherwise respectively
payable to the Borrowers thereunder (the "Net Cole Proceeds") shall be payable
by Cole National directly to the Lender and shall be credited by the Lender with
the following order of priority: (i) against any Lender's Costs then
outstanding; (ii) against accrued but unpaid interest under the Term Loan; and
(iii) against unpaid principal under the Term Loan; provided, however, that if
at the time of the payment of the Net Cole Proceeds an Event of Default or a
Potential Event of Default has occurred and is continuing, then and in such
event, Lender may apply the Net Cole Proceeds to such of the Obligations and in
such order as Lender may elect. Subject to the foregoing, and provided, no Event
of Default or a Potential Event of Default has occurred and is continuing, in
the event that the Lender applies the


                                       5



Net Cole Proceeds to the outstanding principal balance due under the Term Loan,
notwithstanding the amortization thereof as set forth in Paragraph 2.2.5 hereof,
the remaining principal balance shall be amortized in equal quarterly
installments over the number of full calendar quarters between (a) the date of
the application of the Net Cole Proceeds to the outstanding principal balance
due under the Term Loan and (b) the Term Loan Termination Date. Interest at the
Term Loan Interest Rate shall continue to be paid on the outstanding principal
balance of the Term Loan on the first day of each month. Borrowers covenant and
agree to execute and deliver to Lender an Amended and Restated Term Loan Note
consistent with the forgoing and to pay to Lender all Lender's costs associated
with all of the foregoing.

          2.3 General Provisions Applicable to the Loans.

               2.3.1 Payments. All payments hereunder shall be made by Obligors
in Dollars to Lender without defense, setoff or counterclaim in immediately
available funds and delivered to Lender not later than 2:00 p.m. on the date
due, at Lender's address set forth in Section 9.1 hereof, or such other place as
shall be designated in writing by Lender. Funds received by Lender after that
time shall be deemed to have been paid by Obligors on the next succeeding
Business Day.

               2.3.2 Late Charge; Default Rate of Interest. Obligors shall pay
to Lender a late charge of five (5%) percent of any payment of principal,
interest, fees, charges or Lender's Costs which is more than fifteen (15) days
past due. In addition, any principal payment on the Loans not paid when due, and
to the extent permitted by applicable law, any interest payment on the Loans not
paid when due, and any other amount due to Lender under this Agreement or any
other Loan Document not paid when due (including Lender's Costs), in any case
whether at stated maturity, acceleration or otherwise, shall thereafter bear
interest payable upon demand at a rate per annum which is three (3%) percent
plus the highest applicable Interest Rate, if any. Such default rate of interest
shall continue only for so long as the monetary default applicable thereto
continues.

               2.3.3 Maximum Rate of Interest. Notwithstanding anything to the
contrary herein or in any other Loan Document, no effective rate of interest
hereunder shall exceed the maximum effective rate of interest permitted by
applicable law or Rule. Obligors hereby agree to give Lender written notice in
the event that any Obligor has actual knowledge that any interest payment made
to Lender hereunder or under any other Loan Document will cause the total
interest payments collected in any one year to be usurious under applicable law
or Rule, and Lender hereby agrees not to knowingly collect any interest from
Obligors in the form of fees or otherwise which would render either of the Loans
usurious. In the event that interest hereunder or under any other Loan Document
would be usurious in the opinion of Lender, Lender reserves the right to reduce
the interest payable by Obligors. This Paragraph shall survive the repayment of
the Loans.

               2.3.4 Obligations Absolute. The Obligations of Borrowers and
Obligors, as the case may be, under this Agreement and each of the other Loan
Documents shall be joint, several, absolute, unconditional and irrevocable, and
shall be performed strictly in accordance with the terms hereof, as amended
according to clause (ii) of this Paragraph, under all circumstances whatsoever,
including without limitation the following circumstances: (i) any lack


                                       6



of validity or enforceability of the Loan Documents or any other agreement or
document relating thereto; (ii) any amendment or waiver of or any consent to or
departure from the Loan Documents or any document relating thereto if Borrowers
or Obligors, as the case may be, have consented to any such amendment; and (iii)
the existence of any claim other than claims arising solely from Lender's gross
negligence or willful misconduct, defense or other right which Obligors may have
at any time against Lender or any other person or entity, whether in connection
with this Agreement, the transactions described herein or any unrelated
transaction. Obligors understand and agree that no payment by Obligors under any
other agreement (whether voluntary or otherwise) shall constitute a defense to
their Obligations hereunder.

               2.3.5 Assessment. If Lender shall reasonably determine that (i)
any current law or Rule, the adoption or imposition of any law or Rule, any
change in any law or Rule, or the adoption, imposition or change in the
interpretation or administration thereof by a governmental authority, central
bank or comparable agency charged with the interpretation and administration
thereof, or (ii) compliance with any guideline or directive generally applicable
to national banks whether or not having the force of law, including without
limitation with respect to special deposits, capital adequacy, risk based
capital, capital or reserve maintenance, capital ratio, or similar requirements,
or any deposits or other liabilities taken or entered into by Lender (including
the capital adequacy guidelines promulgated by the Board of Governors of the
Federal Reserve System) may result in (A) an increase to Lender of the cost of
making or maintaining the Loans, or to impose upon Lender or increase any
capital requirement applicable as a result of the making or maintenance of the
Loans, or (B) a reduction of the rate of return or amounts receivable hereunder
as a consequence of its obligations pursuant to this Agreement to a level below
that which Lender could have achieved but for such adoption, imposition, change
or compliance, taking into consideration Lender's policies with respect to
capital adequacy (which adoption, imposition, change, or increase in capital
requirements or reduction in amounts receivable may be determined by Lender's
reasonable allocation of the aggregate of such cost increase, capital increase
or imposition of reductions in amounts receivable resulting from such events),
or (C) subjecting the Lender to any tax, duty, charge or withholding on or from
payments due from Obligors (excluding federal taxation of the overall net income
of Lender), or changes in the basis of taxation of payments to Lender in respect
of the Loans or other amounts due to Lender hereunder, then, from time to time,
Obligors shall pay to Lender, within ten (10) Business Days of demand by Lender,
such additional amounts as will be necessary to restore the rate of return to
Lender from the date of such change, together with interest on such amount from
the 10th Business Day after demand until payment thereof in full at the Interest
Rate. Lender shall be entitled to compensation pursuant to this Paragraph by
submitting a certificate claiming compensation and setting forth (accompanied by
calculations in reasonable detail) the increased cost, reduction in amounts
receivable or additional amount or amounts necessary to compensate Lender
hereunder for any reduction in return on capital, which certificate shall be
conclusive absent manifest error. Failure on the part of Lender to demand
compensation for any increased costs or reduction in amounts received or
receivable or reduction in return on capital with respect to any period shall
not constitute a waiver of Lender's right to demand compensation with respect to
such period or any other period. The protection of this Paragraph shall be
available to Lender regardless of any possible contention of the invalidity or
inapplicability of any law or Rule or other change or condition which shall have
occurred or been imposed.

               2.3.6 Conditional Payment. All funds received by Lender from
Obligors


                                       7



will be subject to Lender's standard clearing procedures and clearing periods
for uncollected funds as such procedures and clearing periods may change from
time-to-time. Obligors waive any rights they may have to direct the application
of any and all payments at any time or times hereafter received by Lender on
account of the Indebtedness. Obligors agree that Lender shall have the
continuing exclusive right to apply and reapply such payments in any manner, as
Lender may deem advisable, notwithstanding any entry by Lender upon its books;
provided, however, that so long as no Lenders' Costs, interest, principal or any
other amount owing under this Agreement and the other Loan Documents is due and
no Potential Default or Event of Default has occurred and is continuing,
Obligors may direct the prepayment of the Term Loan in accord with Paragraph
2.2.6 hereof.

               2.3.7 Action by Obligors. Obligors agree and hereby confirm that
(i) other than U.S. Vision, all of the Obligors are wholly owned either directly
or indirectly by U.S. Vision, and all Obligors have shared management and
financial support; and (ii) any request made or other function made or performed
by U.S. Vision in connection with this Agreement or the other Loan Documents
shall be deemed made or performed by and on behalf of all Obligors.

               2.3.8 Participations. Obligors agree that Lender may sell
participations in the Obligations to financial institutions and other Persons
who lend money in the ordinary course of their business, and therefore: (i)
Lender may from time to time provide financial and other information concerning
the Obligors to any participant or prospective participant; and (ii) should any
participant default under its obligations to fund any portion of its interest in
the Term Loan, Lender will have no obligation to fund the Term Loan to the
extent of such participant's share thereof.

               2.3.9 Canadian Interest Act Conversion. Notwithstanding any other
provision of this Agreement, for the purposes of the Canadian Interest Act and
disclosure thereunder, wherever interest to be paid by any under this Agreement
is to be calculated on the basis of a year of a 360 day year or any other period
of time that is less than a calendar year, the yearly rate of interest to which
the rate determined pursuant to such calculation is equivalent is the rate so
determined multiplied by the actual number of days elapsed in the calendar year
in which the same is to be ascertained and divided by either 360 or such other
period of time, as the case may be.

               2.3.10 Termination of Facility. The Borrowers may terminate this
Agreement at any time prior to the Line Termination Date or the Term Loan
Termination Date upon at least 10 Business Days' notice to the Lender without
premium or penalty after (i) the payment in full of all outstanding Advances
under the Line of Credit, together with accrued interest thereon, (ii) the
payment of the Term Loan, together with accrued interest thereon, and (iii) the
satisfaction of all other Obligations, including, without limitation, the
payment in full in cash or cash equivalent of all Indebtedness, Lender's Costs
and all other costs under this Agreement or the Loan Documents.

     3. SECURITY

          3.1 Collateral Generally.


                                       8



               3.1.1 Security Interest in All Assets. As security for the prompt
payment and discharge of all of the Indebtedness and the performance of all of
the Obligations, Borrowers hereby grant to Lender a security interest in, and
first Lien on, All Assets of Borrowers, now owned or hereafter acquired, whether
or not earned by performance, all books and records pertaining thereto
(including without limitation all manual and computer records, runs, printouts,
disks, software and other computer-prepared information of every kind) and all
insurance proceeds in connection therewith, together with all cash and non-cash
proceeds and products thereof, wherever located, whether now owned or hereafter
acquired or arising (the "Borrowers' Collateral").

               3.1.2 Security Interest in All Assets of Guarantors. As security
for the performance of all of the Guarantors' Obligations and pursuant to the
General Security Agreement of the Health and the Movable Hypothec, Guarantors
have granted to Lender a security interest in, and first Lien on, All Assets of
Guarantors, now owned or hereafter acquired, whether or not earned by
performance, all books and records pertaining thereto (including, without
limitation, all manual and computer records, runs, printouts, disks, software
and other computer-prepared information of every kind) and all insurance
proceeds in connection therewith, together with all cash and non-cash proceeds
and products thereof, wherever located, whether now owned or hereafter acquired
or arising (the "Guarantors' Collateral").

               3.1.3 Priority of Liens. Except for Permitted Liens set forth on
Schedule 3.1.3, all Liens in favor of Lender in the Collateral shall be first
perfected priority Liens. Obligors shall pay and discharge when due all taxes,
levies, and other charges upon said Collateral and upon the goods evidenced by
any documents constituting Collateral and shall indemnify and defend Lender
against, and save Lender harmless from, all claims of any Person with respect to
the Collateral. This indemnity shall include reasonable attorneys' fees and
expenses as well as costs of investigation.

               3.1.4 Financing Statements and Other Documents. Obligors hereby
authorize Lender or its agent to file any and all Financing Statements. Further,
Obligors agree to execute and deliver any other documents, instruments, or
agreements reasonably requested by Lender, to create, perfect or keep perfected
any security interest under the Uniform Commercial Code as adopted in any state
or province having jurisdiction over the Collateral, including, without
limitation, any Financing Statements, continuation statements or termination
statements and any other security instruments or agreements as Lender may
reasonably require in connection with this Agreement and the other Loan
Documents, including, without limitation, the Movable Hypothec. Borrowers hereby
appoint Lender as Borrowers' attorneys-in-fact to execute and file in Borrowers'
name all documents and instruments which Lender may deem necessary or
appropriate to perfect and continue perfected the security interest in the
Collateral created by this Agreement or any of the other Loan Documents.

          3.2 Lockboxes. Each of the Obligors shall establish and maintain
lockboxes (each a Lockbox and collectively, the "Lockboxes") and non-interest
bearing depository accounts (each a "Cash Collateral Account" and collectively
the "Cash Collateral Accounts") with Lender subject to the provisions of this
subparagraph and the respective Lockbox Agreement. Unless otherwise prohibited
by applicable law, all collections of Accounts shall be paid directly by Account
Debtors into the respective Lockboxes and then deposited into Lender's


                                       9



respective Cash Collateral Accounts for such Obligor. Provided no Potential
Default or Event of Default has occurred and is continuing, on a daily basis and
at the election of the Obligors, cleared funds in the Cash Collateral Accounts
shall be transferred to Obligors' concentration operating account at Lender or
applied to reduce the outstanding Indebtedness under the Notes. Upon the
occurrence and continuance of an Event of Default or Potential Default, Lender
may retain all funds in the Cash Collateral Accounts and shall have the right to
use such funds in accordance with Section 8.3 hereof. In the event that
collections of Accounts and proceeds of other Collateral are received at any
time by any of the Obligors, such collections shall be held in trust for the
benefit of Lender and shall be remitted, in the form received, to Lender for
deposit into such Obligor's Cash Collateral Account immediately upon receipt by
Obligors.

          3.3 Maintenance of Collateral. Obligors shall maintain, preserve,
protect and keep in good order and condition, ordinary wear and tear excepted,
all Collateral, and from time to time, make all necessary or appropriate
repairs, replacements and improvements thereto. If Obligors shall hereafter
acquire Collateral which, under applicable law, is required to be registered or
certified, Obligors shall cause such Collateral to be registered or certified
properly in the name of Obligors, as the case may be, and cause all motor
vehicles or other equipment the ownership of which, under applicable law, is
evidenced by a certificate of title to be properly titled in Obligors' name, and
to have Lender's Lien on such motor vehicles and other equipment properly noted
on the certificate of title with respect thereto and deliver such certificates
of title to Lender. On behalf of Obligors, Lender may, but shall not be
obligated to pay and discharge taxes and/or Liens pertaining to the Collateral
and pay for the repair of any such Collateral, the maintenance and preservation
thereof and for insurance thereon if Obligors shall fail to do so, unless an
Event of Default shall have occurred in which case Lender need not request
Obligors to do so. Obligors agree to reimburse Lender, within three (3) Business
Days after notice thereof from Lender to Obligors, for any payment so made.

          3.4 Searches. Lender will have received prior to or at Closing, and
thereafter from time to time, UCC, judgment, federal and state tax and real
estate, pending litigation and bankruptcy Lien searches, or their Canadian
equivalent, against each Obligor, the cost of which shall constitute Lenders'
Costs, showing that Lender's security interests in and Liens on the Collateral,
as granted in this Agreement, the Movable Hypothec and the General Security
Agreement, shall be, upon perfection, security interests in and Liens thereon
with the priority rights agreed to in this Agreement, the Movable Hypothec and
the General Security Agreement, and the Collateral is not subject to any Liens,
claims and encumbrances except for Permitted Liens.

          3.5 Inspection, Appraisal and Audit of Collateral. So long as any
portion of the Indebtedness remains outstanding and unpaid or any of the
Obligations remain unperformed, Lender shall have the right at any time and from
time-to-time, as Lender deems necessary in its sole discretion to inspect,
conduct audits, valuations and other tests and to obtain appraisals of the
Collateral. Such inspections, audits, valuations and appraisals shall occur no
more than twice annually, unless an Event of Default or Potential Default shall
have occurred, after which any such inspection, audit, valuation or appraisal
may be performed as frequently as reasonably determined by Lender. In each case,
such inspection, audits, valuations and appraisals shall be performed by persons
selected by Lender at reasonable cost, shall constitute a portion of Lender's
Costs, and shall be made at any reasonable time, during normal business hours,


                                       10



twentyfour (24) hours subsequent to the provision of notice to Obligors.

     4. CONDITIONS PRECEDENT

     The performance by Lender of any of its obligations hereunder is subject to
the following conditions precedent:

          4.1 Closing Deliveries. At or prior to Closing, Obligors shall deliver
or cause to be delivered to Lender, executed where applicable and in form and
substance satisfactory to Lender and its counsel, in addition to this Agreement,
the following documents, instruments and agreements and the following conditions
shall have been satisfied:

               4.1.1 The Line of Credit Note;

               4.1.2 The Term Note;

               4.1.3 The Post-Closing Agreement;

               4.1.4 Insurance certificates meeting the criteria set forth in
Paragraph 6.1.3 hereof;

               4.1.5 Financing Statements identifying Obligors as debtors, and
Lender as secured party to be filed in all jurisdictions required to perfect
Lender's security interest in the Collateral in which perfection can be achieved
by the filing of a financing statement;

               4.1.6 UCC, judgment, federal and state tax, real estate, pending
litigation and bankruptcy lien searches against each Obligor performed by a
company designated by Lender, the cost of which shall constitute Lenders' Costs;

               4.1.7 Copies of the Penney's Agreement, the Sears Agreement and
the Vision One Agreement, certified by a Specified Officer to be true and
correct copies of the originals thereof (other than with respect to the Sears
Agreement as specified therein) and to be in full force and effect on the date
hereof;

               4.1.8 Each of the Transactional Documents with any amendments
thereto, certified by a Specified Officer to be true and correct copies of the
originals thereof, and to be in full force and effect on the date hereof, and
evidence in form and substance satisfactory to Lender that the respective
transactions contemplated thereby have been consummated and fully funded, other
than to the extent funding is required hereunder;

               4.1.9 A certificate of the Secretary of each Obligor, certifying
to and attaching true, correct and complete copies of (i) resolutions of such
Obligor's Board of Directors authorizing the borrowing hereunder, granting the
security interests herein, and the execution and delivery of the Loan Documents,
(ii) authorizing resolutions as to the Merger, (iii) Certificate of
Incorporation for such Obligor, (iv) such Obligor's Bylaws, (v) incumbency and
signatures of the officers of such Obligor authorized to execute and deliver the
Loan Documents, (vi) a currently issued good standing, subsistence or existence
certificate from each state in which such Obligor is organized and where such
Obligor conducts business where the failure to


                                       11



be so qualified could constitute a Material Adverse Effect;

               4.1.10 An opinion of Ballard Spahr Andrews & Ingersoll, LLP and
an opinion of Sayles, Lidji & Werbner addressed to Lender, each with respect to
the Line of Credit, Term Loan and the Transactional Documents, in form and
substance satisfactory to Lender in its sole and absolute discretion;

               4.1.11 Payment of the Line Closing Fee and the Term Loan Closing
Fee;

               4.1.12 Payment of all Lender's Costs incurred in connection with
the extension of the credit facilities and the transactions contemplated hereby;

               4.1.13 All documents, agreements and arrangements required by
Lender with respect to the Collateral;

               4.1.14 Copy of the Agreement and Plan of Merger with any
amendments thereto, certified by a Specified Officer to be true and correct
copies of the originals thereof and to be in full force and effect on the date
hereof;

               4.1.15 Evidence satisfactory to the Lender that all of the
conditions to the effectiveness of the Merger set forth in Article VI of the
Agreement and Plan of Merger have been met;

               4.1.16 The Lockbox Agreement;

               4.1.17 Each of the Canadian Collateral Documents; and

               4.1.18 Such additional documents or instruments as the Lender may
require.

          4.2 Advances After the Date Hereof. Lender shall not be required to
make any requested Advance unless on each Funding Date (i) Obligors deliver or
cause to be delivered to Lender, executed where applicable, and in form and
substance satisfactory to Lender and its counsel, the following documents and
instruments, and (ii) the following conditions shall have been satisfied:

               4.2.1 The representations and warranties set forth in Article 5
of this Agreement shall be true and correct in all material respects on and as
of such date with the same effect as though made on and as of such date, and
each Notice of Borrowing shall be deemed a reaffirmation thereof;

               4.2.2 No Event of Default or Potential Default shall have
occurred and be continuing hereunder or under any other Loan Document;

               4.2.3 No Material Adverse Change shall have occurred and then be
in existence;

               4.2.4 All Lender's Costs then due shall have been paid by
Obligors.


                                       12



Obligors authorize Lender to deduct such Lender's Costs from the Advance and
agree to indemnify and hold Lender harmless from and against any and all claims,
other than claims arising from Lender's willful misconduct or gross negligence,
for any such Lender's Costs; and

               4.2.5 Obligors will have delivered to Lender such additional
documents or instruments as Lender may reasonably require.

     5. REPRESENTATIONS AND WARRANTIES.

          5.1 Obligors represent and warrant to Lender as follows:

               5.1.1 Incorporation, Good Standing, Due Qualification. Each
Obligor is a corporation duly organized, validly existing, subsisting or in good
standing under the laws of each respective Obligor's state or province of
incorporation as shown on Schedule 5.1.1 hereto; has all power and authority
necessary to own and operate its properties and to carry on its business as it
is now engaged and where and as contemplated; and is duly qualified as a foreign
corporation to do business in, and is in good standing in, every jurisdiction
where the nature of Obligors' business requires such qualification;

               5.1.2 Power and Authority. The making, execution, issuance and
performance by each Obligor of this Agreement, the Notes and each of the other
Loan Documents to which such Obligor is a party is within the corporate powers
of such Obligor, and have been duly authorized by all necessary corporate action
by such Obligor;

               5.1.3 Legally Enforceable Agreement. This Agreement and each of
the other Loan Documents to which Obligors are, individually or in the
aggregate, a party, constitute the legal, valid and binding Obligations of
Obligors, enforceable against Obligors in accordance with their respective
terms;

               5.1.4 Priority of Liens; Condition of Collateral. With the
exception of Permitted Liens, Obligors own the Collateral free and clear of all
Liens and upon perfection of Lender's security interest in such Collateral,
Lender will have a security interest and Movable Hypothec in, and first priority
Lien on, all of the Collateral subject only to Permitted Liens, if any. With
respect to each Obligor (i) its chief executive office (or in the Province of
Quebec, its head office) is located in the state or province identified in
Schedule 5.1.4(i) hereto, (ii) its exact legal name as set forth in such
Obligor's organizational documents as filed in the state or province of such
Obligor's formation is as set forth in the first Paragraph of this Agreement and
any names, other than such name, trade styles or designation under which each
Obligor does business as such or has done business within the five (5) years
immediately preceding the date hereof, is also as identified in as such in
Schedule 5.1.4(ii) hereto, and (iii) its tax identification number (or Canadian
equivalent) is as identified on Schedule 5.1.4(iii) hereto. Obligors have
registered all fictitious names listed on Schedule 5.1.4(ii);

               5.1.5 Leases. Schedule 5.1.5 hereto accurately sets forth all
locations occupied or utilized by each Obligor as lessee, together with the name
and address of the lessor and, if other than the lessor, the record owner
thereof, and the date of the applicable lease; all such leases are in full force
and effect and each Obligor is in material compliance with the terms


                                       13



of each lease;

               5.1.6 Store Count and Sales Volume. Schedule 5.1.6 hereto
accurately sets forth by Obligor all of such Obligor's store locations and the
volume of sales for each location;

               5.1.7 Real Property. Schedule 5.1.7 hereto accurately sets forth
all Real Property;

               5.1.8 No Violation. The execution, delivery and performance by
Obligors of the Loan Documents does not, and will not by the passage of time,
the giving of notice or otherwise, to Obligors' knowledge (i) violate any
provision of any law or regulation, (ii) violate the Certificate or Articles of
Incorporation or Bylaws of any Obligor, (iii) violate any judgment, order,
decree, agreement, trust or other indenture or instrument to which any Obligor
is a party or by which any of its property is bound, or (iv) result in or
require the creation or imposition of any Lien with respect to any property now
owned or hereafter acquired, other than Liens arising under the Loan Documents.
Obligors are not in default with respect to any judgment, writ, injunction,
decree, rule or regulation of any governmental authority;

               5.1.9 Penney's Agreement; Sears Agreement; Vision One Agreement.
True, correct and complete copies of each of the Penney's Agreement, the Sears
Agreement, and the Vision One Agreement have been delivered to Lender pursuant
to Article 4 hereof, are each in full force and effect in the respective forms
thereof as certified and delivered to the Lender on the date hereof and have not
been terminated or amended nor to the knowledge of any of the Obligors are any
such actions pending or threatened;

               5.1.10 Financial Condition. The financial statements of Obligors
heretofore furnished to Lender are true, complete and correct in all material
respects, have been prepared in accordance with GAAP, consistently applied, and
present fairly the financial condition of Obligors as of the dates thereof, and
the results of Obligors' operations for the periods therein ended. Since the
date of the most recent financial statements provided by Obligors to Lender,
there has been no Material Adverse Change, individually or in the aggregate, in
the financial condition of Obligors;

               5.1.11 No Litigation. There are no actions, suits or proceedings
pending, or, to the knowledge of any Obligor, threatened against or affecting
any Obligor or any of its assets, and no Obligor is in default in the
performance of any agreement to which any Obligor is a party or by which any
Obligor is bound specifically including, but not limited to, the Penney's
Agreement, the Sears Agreement and the Vision One Agreement, and there is no
order, writ, injunction, or any decree of any court, or any federal, state,
municipal or other government agency or instrumentality, domestic or foreign,
which if adversely determined with respect to any of the foregoing suits,
proceedings, defaults, orders, writings, injunctions or decrees would have a
Material Adverse Effect on Obligors, individually or in the aggregate;

               5.1.12 Compliance. Obligors have all authorizations, consents,
approvals, licenses, and exceptions from, and have made all registrations and
filings with, and all reports to, all Governmental Agencies (collectively, the
"Governmental Approvals") necessary for the


                                       14



conduct of their respective businesses, and the conduct of their respective
business is not and has not been in violation of any such Governmental Approvals
or any applicable federal or state law, Rule or regulation, including ERISA, the
failure of which to obtain or to comply with would, in any such case, have a
Material Adverse Effect on Obligors, individually or in the aggregate. Obligors
do not require any Governmental Approvals to enter into, or perform under, this
Agreement, the Notes, or any other Loan Document to which such Obligor is a
party. There are no actions or investigations pending or, to the knowledge of
the Obligors, threatened against or affecting any Obligor before any
Governmental Agency, which could result in a Material Adverse Change in such
Obligor's business, prospects or the ability of Obligors to conduct their
respective businesses in a manner consistent with past operations and financial
results;

               5.1.13 Compliance with Regulations O, T, U and X. No Obligor 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 (within
the meanings of Regulations O, T, U and X of the Board of Governors of the
Federal Reserve System);

               5.1.14 Taxes. Each Obligor has paid, when due, all taxes,
governmental charges and assessments levied against any Obligor or any of its
assets, except for taxes, charges or assessments which are not overdue or which
are being contested in good faith and by appropriate proceedings with adequate
reserves therefor being available or having been set aside;

               5.1.15 Environmental Matters.

                    5.1.15.1 To the best of Obligors' knowledge and after
reasonable investigation, the Real Property owned, leased or operated by the
Obligors now, or in the past, does not contain, and has not previously
contained, any Hazardous Materials in amounts or concentrations which (i)
constitute or constituted a violation of applicable Environmental Laws, or (ii)
could give rise to liability under applicable Environmental Laws;

                    5.1.15.2 The Obligors and Real Property and all operations
conducted in connection therewith are in compliance, and have been in
compliance, with all applicable Environmental Laws, and, to the best of
Obligors' knowledge and after reasonable investigation, there is no
contamination at, under or about such properties or such operations which could
interfere with the continued operation of such properties or materially impair
the fair saleable value thereof;

                    5.1.15.3 The Obligors have not received any notice of
violation, alleged violation, non-compliance, liability or potential liability
regarding environmental matters, Hazardous Materials, or compliance with
Environmental Laws, nor do the Obligors have knowledge or reason to believe that
any such notice will be received or is being threatened;

                    5.1.15.4 To the best of Obligors' knowledge and after
reasonable investigation, Hazardous Materials have not been transported or
disposed of to or from the Real Property, leased or operated by the Obligors in
violation of, or in a manner or to a location which could give rise to liability
under, Environmental Laws, nor have any Hazardous Materials been generated,
treated, stored or disposed of at, on or under any of such properties in


                                       15



violation of, or in a manner that could give rise to liability under, any
applicable Environmental Laws;

                    5.1.15.5 No judicial proceedings or governmental or
administrative action is pending, or, to the knowledge of the Obligors
threatened, under any Environmental Law to which any Obligor is or will be named
as a party, nor are there any consent decrees or other decrees, consent orders,
administrative orders or other orders, or other administrative or judicial
requirements outstanding under any Environmental Law with respect to any
Obligor, its operation or the Real Property; and

                    5.1.15.6 There has been no release, or to the best of the
Obligor's knowledge, threat of release, of Hazardous Materials at or from
properties owned, leased or operated by the Obligors, now or in the past, in
violation of or in amounts or in a manner that could give rise to liability
under Environmental Laws.

               5.1.16 Debt and Guaranties. Except as set forth on Schedule
5.1.16 hereto, Obligors have no Debt, nor has any Obligor guaranteed the payment
or performance of any debts or obligations of any other Person except for the
guarantee of checks or other negotiable instruments for collection in the
ordinary course of such Obligor's business;

               5.1.17 Stock Ownership. The outstanding capital stock of Obligors
is owned beneficially and of record as set forth in Schedule 5.1.17. All of the
outstanding shares of capital stock of Obligors have been duly authorized and
are validly issued, fully paid and non-assessable and are not subject to any
right or claim of rescission, and have been offered, sold and issued by each
respective Obligor in compliance with all applicable federal and state
securities laws;

               5.1.18 Transactional Documents.

                    5.1.18.1 True, correct and complete copies of each of the
Transactional Documents have been delivered to Lender pursuant to Article 4
hereof, are each in full force and effect in the respective forms thereof as
certified and delivered to the Lender on the date hereof and have not been
terminated or amended nor to the knowledge of any of the Obligors are any such
actions pending or threatened;

                    5.1.18.2 Obligors have the full corporate power and
authority to execute and deliver each of the Transactional Documents and to
consummate all of the Transactions. The execution and delivery by Obligors of
the Transactional Documents and performance by Obligors of the Transactions have
been duly authorized by the Board of Directors of each of the Obligors and no
other corporate action on the part of any Obligor is necessary to authorize such
execution, delivery and performance. Each Transactional Document is a legal,
valid and binding obligation of the Obligors which are parties thereto,
enforceable against each such Obligor in accordance with its respective terms,
except to the extent that enforceability may be limited by applicable
bankruptcy, insolvency, moratorium or other similar laws affecting the
enforcement of creditor's rights generally and by the effect of general
principles of equity (regardless of whether enforcement is considered in
proceeding at law or in equity; and


                                       16



                    5.1.18.3 No Obligor has any knowledge of any existing facts
or circumstances that may cause Obligors to be unable to consummate the
Transactions;

               5.1.19 Solvency.

                    5.1.19.1 The present fair saleable value of the assets of
each Obligor after giving effect to the funding of the Loans hereunder exceeds
the amount that will be required to be paid on or in respect of the Debts and
other liabilities (including contingent liabilities) of Obligors as they mature,

                    5.1.19.2 The assets of Obligors do not constitute
unreasonably small capital for Obligors to conduct their business as now
conducted and as proposed to be conducted, including the capital needs of
Obligors,

                    5.1.19.3 Obligors do not intend to, nor do Obligors believe
that they will, incur Debts beyond their ability to pay such Debts as they
mature (taking into account the timing and amounts of cash to be received by
Obligors and of amounts to be payable on or in respect of Debt of Obligors). The
cash available to Obligors, after taking into account all other anticipated uses
of the cash of Obligors, is anticipated to be sufficient to pay all amounts on
or in respect of the Indebtedness when the Indebtedness or any part thereof is
required to be paid, and

                    5.1.19.4 The aggregate fair value of Obligors' assets
exceeds the aggregate of all their liabilities;

               5.1.20 Labor Matters. Except to the extent set forth on Schedule
5.1.20 hereto, (i) Obligors individually or in the aggregate are not a party to
any collective bargaining agreements, (ii) Obligors have not experienced any
strike, labor dispute, slowdown or work stoppage as a result of labor
disagreements which would have a Material Adverse Effect on the value of the
Collateral, or on the enforceability of such Borrower's Obligations or
Guarantors' Obligations or the Indebtedness (including realizing on such
Collateral and Obligations), (iii) to the best knowledge of each Obligor, after
due inquiry, there is no such strike, dispute, slowdown or work stoppage pending
or threatened against any Obligor which would have a Material Adverse Effect on
any Obligor or the value of the Collateral or the enforceability of the
Indebtedness (including realizing on such Collateral), (iv) no labor petitions
have been filed or union organizing activity conducted during the past six
months pertaining to any Obligor; and (v) each Obligor's relations with such
Obligor's respective employees are satisfactory.

               5.1.21 Investment Company Act. No Obligor is an Investment
Company within the meaning of the Investment Company Act of 1940;

               5.1.22 Public Utility Holding Company Act. No Obligor is a Public
Utility Holding Company within the meaning of the Public Utility Holding Company
Act;

               5.1.23 RICO. No Obligor has engaged in any conduct or taken or
omitted to take any action which violates RICO;

               5.1.24 Acts of God. The business and properties of each Obligor
have not


                                       17



been effected by any fire, explosion, accident, drought, storm, hail,
earthquake, embargo, act of God or of the public enemy, or other casualty
(whether or not covered by insurance) that may have a Material Adverse Effect;

               5.1.25 Other Agreements. No Obligor is in default in any respect
in the performance, observance or fulfillment of any of the obligations,
covenants or conditions contained in any material contract, agreement or
instrument to which it is a party or by which it is bound which may have a
Material Adverse Effect;

               5.1.26 Subsidiaries. U.S. Vision owns, directly or indirectly
through the ownership of another Obligor, all of the issued and outstanding
shares of the capital stock of all other Obligors. All Subsidiaries of Obligors
are parties under this Agreement and Obligors have no Affiliates other than as
set forth on Schedule 5.1.26;

               5.1.27 ERISA. Each Obligor is in compliance in all material
respects with all applicable provisions of ERISA. Neither a Reportable Event nor
a Prohibited Transaction has occurred and is continuing with respect to any
Plan; no notice of intent to terminate a Plan has been filed, nor has any Plan
been terminated; no circumstances exist that constitute grounds under Section
4042 of ERISA entitling the PBGC to institute proceedings to terminate, or
appoint a trustee to administrate, a Plan, nor has the PBGC instituted any such
proceedings; no Obligor nor any ERISA Affiliate has completely or partially
withdrawn under Section 4201 or 4204 of ERISA from a Multi-Employer Plan;
Obligors and each ERISA Affiliate have met their minimum funding requirements
under ERISA with respect to all of their Plans and the present fair market value
of all Plan assets exceeds the present value of all vested benefits under each
Plan, as determined on the most recent valuation date of the Plan and in
accordance with the provisions of ERISA and the regulations thereunder for
calculating the potential liability of each Obligor or any ERISA Affiliate to
the PBGC or the Plan under Title IV of ERISA; and no Obligor or any ERISA
Affiliate has incurred any liability to the PBGC under ERISA;

               5.1.28 Operation of Business. Each of the Obligors possesses all
material licenses, permits, franchises, intellectual property, and trade names,
or rights thereto, to conduct its business substantially as now conducted and as
presently proposed to be conducted, and none of the Obligors is in violation of
any rights of others with respect to any of the foregoing. Nothing has come to
the attention of any Obligor to the effect that (i) any product, process,
method, substance, part or other material presently contemplated to be sold by
or employed by it in connection with such business may infringe any patent,
trademark, service mark, trade name, copyright, license or other right owned by
any other Person or (ii) there is pending or, to such Obligor's knowledge,
threatened any claim or litigation against or affecting it contesting its right
to sell or use any such product, process, method, substance, part or other
material, which infringement, claim or litigation may, in any one case, or would
in the aggregate, have a Material Adverse Effect on the business, properties,
assets, operations or conditions, financial or otherwise, of such Obligor;

               5.1.29 Fiscal Year. The Fiscal Year of Obligors for financial
accounting purposes ends on January 31 of each year;


                                       18



               5.1.30 Accounts. Each Account of each Obligor arises out of a
completed, bona fide sale and delivery of goods or rendition of services by such
Obligor in the ordinary course of business;

               5.1.31 Legal Compliance.

                    5.1.31.1 Each Obligor has complied with all applicable laws
(including rules, regulations, codes, plans, injunctions, judgments, orders,
decrees, rulings, and charges thereunder) of federal, state, local, and foreign
governments (and all agencies thereof, including, without limitation, the SEC,
the National Stock Market ("Nasdaq") and all applicable state securities
regulatory agencies (each a "Blue Sky Agency"), and no action, suit, proceeding,
hearing, investigation, charge, complaint, claim, demand, audit, or notice has
been filed or commenced against any Obligor alleging any failure so to comply.
No disciplinary proceeding with respect to any Obligor or any Obligor's
respective officers is pending before the SEC, the Nasdaq or any Blue Sky
Agency;

                    5.1.31.2 A definitive proxy statement (the "Proxy
Statement") in connection with the merger has been filed by U.S. Vision and
Holdings, with the SEC and a Schedule 13E-3 ("Schedule 13E-3") has been filed by
U.S. Vision, Kayak, George E. Norcross III, William A. Schwartz, Jr., Sandra T.
Norcross, Joseph J. Roberts, Jr., Indiana Pacific Capital Trust, Philip A.
Norcross, George T. Gorman, and Gayle E. Schmidt with the SEC and no order
preventing or suspending the use of the Proxy Statement and Schedule 13E-3 has
been issued by the SEC, and the Proxy Statement and Schedule 13E-3, at the time
of filing thereof, conformed in all material respects to the requirements of the
Securities Exchange Act of 1934 (the "1934 Act") and the rules and regulations
of the SEC thereunder, and does not contain an untrue statement of a material
fact or omit to state a material fact required to be stated therein or necessary
to make the statements therein, in light of the circumstances under which they
were made, not misleading. There is no action, suit, proceeding, inquiry or
investigation before any court, public board, government agency, self-regulatory
organization or body including, without limitation, the SEC, the Nasdaq, and any
Blue Sky Agency, pending or, to the knowledge of any of the Obligors, threatened
against or affecting any of the Obligors, or any of their respective directors
or officers in their capacities as such. There are no facts which, if known by a
potential claimant or Governmental Authority, could give rise to a claim or
proceeding which, if asserted or conducted, the results would be unfavorable to
any of the Obligors; and

               5.1.32 Accuracy of Representations; No Default. The information
set forth herein and on each of the Schedules hereto, and in each of the other
Loan Documents is complete and accurate in all material respects and contains
full and complete disclosure of all pertinent information in connection with
Obligors. None of such information contains any untrue statement of a material
fact or omits to state a material fact necessary to make the information
contained herein or therein not misleading or not incomplete. No Event of
Default or Potential Default hereunder, or under any other Loan Document, has
occurred.

          6. AFFIRMATIVE COVENANTS

          6.1 Obligors' Covenants. So long as any portion of the Indebtedness
remains outstanding and unpaid and any Obligation remains unperformed, or Lender
has any obligation


                                       19



to extend Advances hereunder, Obligors jointly and severally covenant and agree
to do each and all of the following:

               6.1.1 Financial Statements. To furnish, cause to be furnished, or
make available for inspection and review by Lender and in form and substance
satisfactory to Lender:

                    6.1.1.1 Not later than One Hundred Twenty (120) Days
following the close of each Fiscal Year, a statement of income and expense, a
statement of cash flows, and a balance sheet and notes of Obligors as at the end
of such Fiscal Year (and setting forth comparative figures for the previous
Fiscal Year, if any), each prepared in accordance with GAAP and accompanied by
an audit report, without qualification, of an independent certified public
accountant, satisfactory to Lender, in its sole and absolute discretion.
Obligors shall cause to be delivered by its then regularly-engaged independent
certified public accounting firm, together with the year end financial
statements of Obligors, a statement from such accountant to the effect that in
performing its audit of Obligors' financial statements, such accounting firm has
not become aware of any Event of Default or Potential Default;

                    6.1.1.2 not later than Forty-Five (45) Days after the end of
each Fiscal Quarter, management prepared statements of income and expense, a
statement of cash flows, and a balance sheet as at the end of such Fiscal
Quarter (and cumulatively for the Fiscal Year with comparative figures for the
periods in the prior Fiscal Year, if any) each prepared in accordance with GAAP,
subject to normal year-end accruals, except that notes to such financial
statements need not be prepared;

                    6.1.1.3 not later than Thirty (30) Days after the end of
each month, management prepared statements of income and expense and a balance
sheet as at the end of each such month (and cumulatively for the Fiscal Year,
with comparative figures for the periods in the prior Fiscal Year, if any) each
prepared in accordance with past practices;

                    6.1.1.4 not later than Thirty (30) Days after the end of
each Fiscal Year of Obligors, Projections of Obligors for the forthcoming four
Fiscal Years, year-by-year, and for the forthcoming Fiscal Year, month-by-month;

                    6.1.1.5 promptly upon it becoming available, one copy of
each financial statement, report, notice or statement sent by U.S. Vision to the
SEC or its stockholders generally; and

                    6.1.1.6 such data, reports, statements and information,
financial or otherwise, as Lender may request, including without limitation,
monthly consolidated accounts analysis.

                    All financial information provided by Obligors, pursuant to
this Paragraph shall be accompanied by a written statement signed by the
President or Chief Financial Officer of each Obligor, stating that all
information is true, correct and complete in all material respects and that (as
to a statement by Obligors) Obligors have not committed nor does there exist an
Event of Default or Potential Default under this Agreement or any other Loan
Document;


                                       20


               6.1.2 Additional Financial Data. With reasonable promptness
furnish such additional information and data concerning the business and
financial condition of Obligors, as may be reasonably requested by Lender; upon
reasonable prior notice afford Lender or its agents reasonable access to the
financial books and records, computer records and properties of Obligors at all
reasonable times and permit Lender or its agents to make copies and abstracts of
same and to remove such copies and abstracts from Obligors' premises and permit
Lender or its agents the right to converse directly with the independent
accounting firm then engaged by Obligors to prepare their financial statements.
Obligors shall maintain their financial books and other records in accordance
with GAAP;

               6.1.3 Insurance. Maintain, or cause to be maintained at all
times, in full force and effect: (i) worker's compensation insurance, in amounts
required under applicable law; (ii) general liability insurance; (iii)
automobile liability insurance; (iv) business interruption insurance; (v)
employee relations insurance; (vi) broad form fire, theft and extended coverage
covering all of Obligors' real and personal property on a replacement basis in
amounts not less than the amounts sufficient to prevent the imputation of any
co-insurance provisions; and (vii) such other insurance as Lender may from time
to time reasonably require. Each policy of insurance hereunder shall be in
amounts satisfactory to Lender in the exercise of its reasonable credit judgment
and shall be issued by a company or companies reasonably satisfactory to Lender
in the exercise of its reasonable credit judgment, and Obligors shall furnish
Lender with copies of each such policy. Evidence of all such policies shall be
on an Acord 25 and Acord 27 certificates in form satisfactory to Lender in the
exercise of its reasonable credit judgment, shall name Lender as a loss payee
and additional insured, as applicable, shall have premiums prepaid for twelve
(12) months, and shall contain a provision that such policies shall not be
cancelled or materially amended without at least thirty (30) days' prior written
notice to Lender for any and all cancellations and/or amendments, whether
monetary or non-monetary. If the insurance, or any part thereof, shall expire,
or be withdrawn, or become void by reason of Obligors' breach of any condition
thereof, or become void by reason of the value or impairment of the capital of
any company by which the insurance may then be carried, or if for any reason
whatever the insurance shall be unsatisfactory to Lender in the exercise of its
reasonable credit judgment, Obligors shall, at their own expense, place new or
additional insurance satisfactory to Lender in the exercise of its reasonable
credit judgment;

               6.1.4 Taxes. Cause the prompt payment and discharge of all taxes,
governmental charges and assessments levied and assessed or imposed upon any
Obligor, or any of its assets, except as may be contested in good faith with
adequate reserves satisfactory to Lender having been set aside therefor;

               6.1.5 Litigation. Promptly defend all actions, proceedings or
claims which could result in a Material Adverse Effect on Obligors' business,
and promptly notify Lender of the institution of, or any change in, any such
action, proceeding or claim if the same is in excess of One Hundred Fifty
Thousand Dollars ($150,000) for any single action, proceeding or claim and One
Hundred Fifty Thousand Dollars ($150,000) in the aggregate (other than claims
fully covered by insurance). In the event any order, judgment or Lien in an
amount exceeding One Hundred Fifty Thousand Dollars ($150,000) is entered or
filed, while any portion of the Indebtedness remains outstanding and unpaid,
that has not been vacated or the execution of which has not been stayed within
thirty (30) days (or immediately if a writ of execution is


                                       21



filed) following the entry thereof, or that is not fully covered by insurance
satisfactory to Lender, Obligors shall furnish to Lender (i) a bond,
satisfactory to Lender, from an independent, financially responsible corporate
surety company, naming Obligors and Lender as co-payees, or (ii) establish an
escrow account with Lender, in either event in an amount equal to or greater
than the amount of such order, judgment or Lien, plus costs;

               6.1.6 Maintenance of Records. Keep adequate records and books of
account, in which complete entries will be made in accordance with GAAP
consistently applied, affecting all of its financial transactions;

               6.1.7 Maintenance of Properties. Maintain, keep and preserve all
of their properties necessary or useful in the proper conduct of their business
in good working order and condition, ordinary wear and tear and casualty
excepted;

               6.1.8 Notice of Events. Promptly after Obligors become aware,
give written notice to Lender of the occurrence or imminent occurrence of any
event or occurrence which causes or would imminently cause: (i) any
representation or warranty made in Article 5 hereof to be untrue, incomplete or
misleading in any material respect; (ii) an the occurrence of an Event of
Default or Potential Default hereunder or under any other Loan Document; (iii)
any Material Adverse Change, (iv) any casualty to any material property of
Obligors; (v) the institution of, or the issuance of any order, judgment, decree
or other process in, any litigation, investigation, prosecution, proceeding or
other action by any Governmental Agency or other Person against any Obligor,
that does, or could, cause a Material Adverse Change; (vi) any change in
shareholders, directors or officers of Obligors, except as permitted by
Paragraph 7.1.6; and (vii) the termination or amendment of the Penney's
Agreement, the Sears Agreement or the Vision One Agreement;

               6.1.9 Fiscal Year; Principal Executive Office; Existence.
Promptly notify Lender in writing of a change in the Fiscal Year of any Obligor;
notify Lender at least sixty (60) days prior to a change in the location of any
material portion of the Collateral or the principal executive office of any
Obligor; notify Lender at least thirty (30) days prior to any corporate or
entity name change of any Obligor; and maintain in good standing the corporate
existence of each Obligor and all necessary foreign qualifications, where the
failure to do so could constitute a Material Adverse Effect;

               6.1.10 Compliance with Covenants under Transactional Documents.
Comply in all material respects with all covenants and agreements set forth in
each of the Transactional Documents.

               6.1.11 Business. (i) Maintain all licenses in full force and
effect where the failure to do so could constitute a Material Adverse Effect,
(ii) maintain the general character of Obligors' business in the areas in which
it is currently engaged, and not engage in any business unrelated to the
business in which Obligors are currently engaged, (iii) continually operate that
business, and (iv) maintain and comply in all material respects with all
contracts and agreement with third parties, whether written or oral, promptly
notifying Lender in writing of any breach, termination, rescission or
modification thereof by any party thereto;


                                       22



               6.1.12 Maintain Accounts with Lender. Maintain Lender as
Obligors' primary depository for all deposit, checking or similar accounts;

               6.1.13 Additional Security Documents. Provide Lender, at any time
and from time to time on request, with such assignments, certificates of title,
or Financing Statements, and such additional instruments or documents as Lender
may, in Lender's sole and absolute discretion, deem necessary in order to
perfect, protect and maintain the security interest in the Collateral granted to
Lender pursuant to the terms hereof;

               6.1.14 Operation of Business; Collection of Accounts. Diligently
operate the Obligors' business and take all reasonable commercial action to
collect all Accounts in connection therewith;

               6.1.15 Performance of Obligation. Perform, as and when due, and
pay and discharge, at or before maturity, all obligations and liabilities,
except where the same may be contested in good faith by appropriate proceedings,
and appropriate reserves for the accrual of any of the same shall have been
established to the satisfaction of Lender;

               6.1.16 Collateral Audits; Inspection. Permit Lender from time to
time to conduct valuations, inspections, audits and appraisals of the Collateral
and, as provided in Section 3.5 hereof, pay all Lender's Costs in connection
therewith.

               6.1.17 Collateral. (i) Preserve the Collateral in good condition
and order and not permit it to be abused or misused; (ii) not allow any of the
Collateral to be affixed to real estate unless such real estate is subject to a
Lien in favor of the Lender; (iii) upon the request of Lender, deliver all
proceeds of the Collateral to Lender immediately upon receipt in identical form
received without commingling with other property; (iv) take all necessary steps
to preserve the liability of Account Debtors, obligors and secondary parties
whose liabilities are part of the Collateral; and (v) defend the Collateral
against all claims and demands of all persons at any time claiming the same or
any interest therein and, in the event that Lender's security interest in
Obligors' Collateral or any part thereof would be impaired by an adverse
decision, allow Lender to contest or defend any such claim or demand in
Obligors' name;

               6.1.18 Payments. Pay when due (or within applicable grace
periods) all Indebtedness, rental payments and other liabilities and obligations
to third Persons, except when the amount thereof is being contested in good
faith, by appropriate proceedings and with adequate reserves therefore being set
aside on its books. If any Obligor defaults in the payment of any principal or
rental (or installment thereof) of, or interest on, any Debt for money borrowed
in excess of One Hundred Fifty Thousand Dollars ($150,000) in the aggregate or
rental or other obligations in excess of One Hundred Fifty Thousand Dollars
($150,000) in the aggregate, Lender shall have the right, in its sole
discretion, to pay such interest, principal, rental or obligation for the
account of Obligors and shall be reimbursed therefore on demand by Obligors,
with interest at the Default Rate until paid;

               6.1.19 Notice of Events with Respect to the Transactional
Documents. Notify Lender promptly upon becoming aware of (i) the occurrence of
an event of default or an event which would become a default but for the giving
of notice or the passage of time or both,


                                       23



under any of the Transactional Documents, (ii) any fact, condition or event
that, with the giving of notice or passage of time, or both, could become an
event of default or potential default under any of the Transactional Documents
as those terms are defined therein, (iii) the failure of any Obligor to observe
any of its undertakings under any of the Transactional Documents and (iv) any
representation or warranty made in any of the Transactional Documents to be
untrue, incomplete or misleading in any material respect. Obligors agree that
immediately upon becoming aware of any development or other information outside
the ordinary course of business and excluding matters of a general economic,
financial or political nature which may materially and adversely affect their
respective ability to perform under any of the Transactional Documents, they
shall give to Lender notice specifying the nature of such development or
information and such anticipated effect;

               6.1.20 Assignment of Accounts. Upon the occurrence and
continuance of an Event of Default, execute and deliver to Lender formal written
assignments of all of their Accounts weekly, which shall include all Accounts
that have been created since the date of the last assignment, together with
copies of invoices, invoice registers or other evidence of the sale related
thereto. Obligors shall keep accurate and complete records of their Accounts and
all payments and collections thereon and shall submit to Lender on a monthly
basis a sales and collections report from the preceding month, in form
satisfactory to Lender. On or before the last day of each month from and after
the date hereof, Obligors shall deliver to Lender, in form acceptable to Lender,
a detailed aged trial balance of all Accounts existing as of the last day of the
preceding month, specifying the names, addresses, face value, dates of invoices
and due dates for each Account Debtor obligated on an Account so listed
("Schedule of Accounts"), and, upon Lender's request therefore, make available
to Lender copies of proof of delivery and the original copy of all documents,
including, without limitation, repayment histories and present status reports
relating to the Accounts so scheduled and such other matters and information
relating to the status of then existing Accounts as Lender shall request;

               6.1.21 Discounts, Allowances and Credits. Upon the granting of
any discounts, allowances or credits by Obligors, or any of them, that are not
shown on the face of the invoice for the Account involved, promptly report such
discounts, allowances or credits, as the case may be, to Lender and in no event
later than the time of its submission to Lender of the next Schedule of Accounts
as provided in Paragraph 6.1.2. Upon the occurrence and during the continuance
of an Event of Default, Lender shall have the right, but not the obligation, to
settle or adjust all disputes and claims directly with the Account Debtor and to
compromise the amount or extend the time for payment of the Accounts upon such
terms and conditions as Lender may deem advisable, and to charge the
deficiencies, costs and expenses thereof, including attorneys' fees, to
Obligors. If an Account includes a charge for any tax payable to any
Governmental Agency, Lender is authorized, in its sole discretion, to pay the
amount thereof to the proper Governmental Agency for the account of Obligors and
to charge Obligors hereunder therefor. Obligors shall notify Lender if any
Account includes any tax due to any Governmental Agency and, in the absence of
such notice, Lender shall have the right to retain the full proceeds of the
Account and shall not be liable for any taxes to any Governmental Agency that
may be due by Obligors, or any of them, by reason of the sale and delivery
creating the Account. Whether or not a Potential Default or an Event of Default
has occurred, any of Lender's officers, employees or agents shall have the
right, at any time or times hereafter, in the name of Lender, any designee of
Lender or Obligors, to verify the validity, amount or any other matter relating
to any Accounts


                                       24



by mail, telephone, telegraph or otherwise. Obligors shall cooperate fully with
Lender in an effort to facilitate and promptly conclude any such verification
process;

               6.1.22 Collection of Accounts. In order to expedite collection,
Obligors shall (subject to the provisions below) endeavor in the first instance
to make collection of its Accounts for Lender. All remittances received by any
Obligor on account of Accounts (and proceeds of all other Collateral) shall be
held as Lender's property by such Obligor as trustee of an express trust for
Lender's benefit (and in the Province of Quebec, as agent for the Lender) and
such Obligor shall immediately deposit same, in kind, in the Lockbox or the Cash
Collateral Account. Lender retains the right following the occurrence of an
Event of Default, to notify Account Debtors that Accounts have been assigned to
Lender and to collect Accounts directly in its own name and to charge the
collection costs and expenses, including attorneys' fees to Obligors. Lender has
no duty to protect, insure, collect or realize upon the Accounts or preserve
rights in the Accounts;

               6.1.23 Amount in Dispute. Other than accounts receivable due from
Penney's, Sears and Vision One, in the event any amounts due and owing in excess
of Twenty Five Thousand Dollars ($25,000) are in dispute between an Obligor and
any Account Debtor, and with respect to accounts due and payable from Penney's,
Sears or Vision One any amounts due and owing in excess of One Hundred Thousand
Dollars ($100,000), provide Lender with written notice thereof at the time of
submission of the next Schedule of Accounts, explaining in detail the reason for
the dispute, all claims related thereto and the amount in controversy;

               6.1.24 Inventory Reports. Furnish Lender with Inventory reports
for all Inventory at such times as Lender may request, but at least once each
Fiscal Quarter no later than thirty (30) days following the close of such Fiscal
Quarter. Such reports shall be in form and detail satisfactory to Lender;

               6.1.25 Financial Covenants. Comply with the following Financial
Covenants:

                    6.1.25.1 Minimum Tangible Net Worth. Maintain a minimum
Tangible Net Worth, measured as of the last day of each month, of not less than
(i) Seventeen Million Five Hundred Thousand Dollars ($17,500,000) for the period
beginning on the Closing Date and ending on January 30, 2004; (ii) Twenty
Million Five Hundred Thousand Dollars ($20,500,000) for the period beginning on
January 31, 2004 and ending on January 30, 2005; (iii) Twenty-Three Million Five
Hundred Thousand Dollars ($23,500,000) for the period beginning on January 31,
2005 and ending on January 30, 2006; (iv) Twenty-Six Million Five Hundred
Thousand Dollars ($26,500,000) for the period beginning on January 31, 2006 and
ending on January 30, 2007; and (v) Twenty-Nine Million Five Hundred Thousand
Dollars ($33,000,000) for the period beginning on January 31, 2007 and
thereafter;

                    6.1.25.2 Minimum Current Ratio. Maintain a minimum Current
Ratio, measured as of the last day of each month, of not less than (i) 1.50 to
1.00 for the period beginning on January 31, 2003 and ending on January 30,
2004; and (ii) 1.75 to 1.00 for the period beginning on January 31, 2004 and
thereafter;


                                       25



                    6.1.25.3 Minimum Debt Coverage Ratio. Maintain a minimum
Debt Coverage Ratio, measured on a rolling twelve-month basis as of the last day
of each month, of not less than 1.25 to 1.00 for the period beginning on January
31, 2004 and thereafter;

                    6.1.25.4 Minimum Fixed Charge Coverage Ratio. Maintain a
minimum Fixed Charge Coverage Ratio, measured on a rolling twelve-month basis as
of the last day of each month, of not less than 1.00 to 1.00 for the period
beginning on January 31, 2004 and thereafter;

                    6.1.25.5 Maximum Leverage Ratio. Maintain a Maximum Leverage
Ratio, measured as of the last day of each month, of not greater than (i) 2.40
to 1.00 for the period beginning on the Closing Date and ending on January 30,
2004; (ii) 2.20 to 1.00 for the period beginning on January 31, 2004 and ending
on January 30, 2005; (iii) 2.00 to 1.00 for the period beginning on January 31,
2005 and ending on January 30, 2006; (iv) 1.80 to 1.00 for the period beginning
on January 31, 2006 and ending on January 31, 2007; and (v) 1.60 to 1.00 for the
period beginning on January 31, 2007 and thereafter;

                         If, however, there shall occur any changes in any
applicable laws, rules, regulations or GAAP that would affect how the Obligors
calculate any of the foregoing financial covenants, the Lender shall, in its
reasonable discretion, agree to adjust the financial covenants accordingly to
take into account any such change in any applicable laws, rules, regulations or
GAAP that would affect how the Obligors calculate any of the foregoing financial
covenants.

               6.1.26 Legal Compliance. Each Obligor shall comply with all
applicable laws, statutes, rules regulations, codes, plans, injunctions,
judgments, orders, decrees, rulings, and charges of federal, state, local, and
foreign governments (and all agencies thereof, including, without limitation,
the SEC, Nasdaq, ERISA and CERCLA / RCRA) and no action, suit, proceeding,
hearing, investigation, charge, complaint, claim, demand, audit, or notice has
been filed or commenced against any of them alleging any failure so to comply.
No disciplinary proceeding with respect to any Obligor or any Obligor's
respective officers is pending before the SEC, the Nasdaq or any Blue Sky
Agency.

          6.2 Indemnification.

               6.2.1 In General. Obligors hereby agree to indemnify and to
protect, defend, and hold harmless Lender and its Affiliates and participants
and its or their directors, officers, employees, agents, attorneys and
shareholders, from and against any and all losses, damages, expenses or
liabilities of any kind or nature and from any suits, claims, or demands,
including all reasonable counsel fees incurred in investigating, evaluating or
defending such claim but not including any claim, loss, damage, expense or
liability arising solely from Lender's gross negligence or willful misconduct,
suffered by any Obligor and caused by, relating to, arising out of, resulting
from, or in any way connected with this Agreement, the Notes, or the other Loan
Documents and any transaction contemplated herein or therein or arising out of
Obligors' businesses, including, but not limited to, claims based upon any act
or failure to act by Lender in connection with this Agreement, or the other Loan
Documents and any transaction


                                       26



contemplated herein or therein, except to the extent arising solely out of the
gross negligence or willful misconduct of Lender. If Obligors shall have
knowledge of any claim or liability hereby indemnified against, they shall
promptly give written notice thereof to Lender. THIS COVENANT SHALL SURVIVE
PAYMENT OF THE INDEBTEDNESS AND THE TERMINATION OR SATISFACTION OF THIS
AGREEMENT.

               6.2.2 Defense of Claim. Lender shall promptly give Obligors
written notice of all suits or actions instituted against Lender with respect to
which Obligors have indemnified Lender, and Obligors shall timely proceed to
defend any such suit or action. Lender shall also have the right, at the
reasonable expense of Obligors, to participate in or, at Lender's election and
at Obligors' expense, assume the defense or prosecution of such suit, action, or
proceeding, and in the latter event, Obligors may employ counsel and participate
therein. Lender shall have the right to adjust, settle, or compromise any claim,
suit, or judgment after notice to Obligors, unless Obligors desire to litigate
such claim, defend such suit, or appeal such judgment and simultaneously
therewith deposit with Lender additional collateral security sufficient to pay
any judgment rendered, with interest, costs, legal fees and expenses; and the
right of Lender to indemnification under this Agreement shall extend to any
money paid by Lender in settlement or compromise of any such claims, suits, and
judgments in good faith, after notice to Obligors.

               6.2.3 Several Actions. If any suit, action, or other proceeding
is brought by Lender against Obligors for breach of Obligors' covenant of
indemnity herein contained, separate suits may be brought as causes of action
accrue, without prejudice or bar to the bringing of subsequent suits on any
other cause or causes of action, whether theretofore or thereafter accruing.

          6.3 Post-Closing Compliance. Obligors agree to execute, re-execute,
and to use reasonable efforts to cause any applicable third party to execute and
re-execute, and to deliver to Lender any document or instrument signed in
connection herewith or with any other Loan Document which was incorrectly
drafted and/or signed, as well as any document or instrument which should have
been signed at or prior to Closing but which was not so signed. Obligors agree
to comply with any written request of Lender to cause the foregoing to be done
not later than ten days after Obligors' receipt thereof, and failure by Obligors
to so comply shall, at the option of Lender, constitute an Event of Default
hereunder.

     7. NEGATIVE COVENANTS

          7.1 Negative Covenants. As long as any portion of the Indebtedness
shall remain outstanding and unpaid and any of the Obligations remains
unperformed, or Lender has any obligation to make Advances to Borrowers
hereunder, Obligors jointly and severally covenant and agree that, in the
absence of prior written consent of Lender, they will not do, or permit to be
done, any of the following:

               7.1.1 Debt, Liens and Encumbrances. Incur any Debt or Capital
Lease Obligations except for Permitted Debt or create, incur, assume or permit
to exist, any mortgage, Lien, pledge, charge, security interest or other
encumbrance upon the Collateral, or any of their properties or assets,
including, but not limited to, any real property, whether now owned or hereafter
acquired, except for Permitted Liens;


                                       27



               7.1.2 Transfer of Collateral. Other than the creation of
Permitted Liens, any transfer of the Sears Agreement or the interest thereon
pursuant to the Cole Documents, and sales of assets in the ordinary course of
business, or as a consequence of deterioration or obsolescence, sell, enter into
an agreement of sale for, convey, lease, assign, transfer, pledge, grant a
security interest, mortgage or Lien in, or otherwise dispose of any Collateral;

               7.1.3 Combination; Merger. Other than as anticipated by the
transaction Documents, enter into proceedings in total or partial liquidation;
merge, combine or consolidate with or into any unaffiliated entity, or acquire
all or substantially all of the assets or securities of any other Person or
otherwise take any action or omit to take any action which would have a Material
Adverse Effect, individually or in the aggregate, on Obligors or their business;

               7.1.4 Subsidiaries. Create or acquire any Subsidiary (except for
a newly formed Subsidiary not for the purpose of acquiring an existing business
and provided that the Subsidiary executes all instruments and documents in form
and substance satisfactory to Lender joining in this Agreement, the Notes, and
all other Loan Documents designated by Lender, after which such Subsidiary will
be a "Borrower" hereunder);

               7.1.5 Nature of Operations. Substantially change the nature or
operations of their business as conducted on the date hereof;

               7.1.6 Ownership/Management. Make any material change in the
executive management of Obligors or materially change Obligors' corporate
structure, or beneficial or legal ownership of the Obligors, including, but not
limited to, any change in the shareholders, or their respective interests,
except any transfers by any shareholder of any Obligor as of the date hereof to
(a) any Person that has an equity or other ownership interest in any shareholder
of any Obligor as of the date hereof; (b) any dependent of any shareholder of
any Obligor as of the date hereof or a trust formed for the benefit of any such
dependent of any shareholder of any Obligor as of the date hereof of, in any of
the Obligors;

               7.1.7 Penney's Agreement; Sears Agreement; Vision One Agreement.
Amend or terminate the Penney's Agreement, the Sears Agreement (except in
accordance with the provisions of the Cole Documents) or the Vision One
Agreement without the consent of Lender, which consent will not be unreasonably
withheld; provided, however, that the Penney's Agreement, the Sears Agreement or
the Vision One Agreement may be terminated if the Obligors replace the customer
party to such agreement with another customer satisfactory to Lender, in
Lender's sole and absolute discretion, on terms satisfactory to Lender, in
Lender's sole and absolute discretion;

               7.1.8 Transactional Documents. Amend in any material respect or
terminate any of the Transactional Documents;

               7.1.9 Margin Stock. Use any part of the proceeds of the Loan to
purchase or carry, or to reduce, retire or refinance any credit incurred to
purchase or carry, any margin stock (within the meaning of Regulations O, T, U
and X of the Board of Governors of the Federal Reserve System) or to extend
credit to others for the purpose of purchasing or carrying any margin stock. If
requested by Lender, Obligors will furnish Lender statements in conformity


                                       28



with the requirements of Federal Reserve Form U-1 referred to in said
regulation;

               7.1.10 Transactions with Affiliates. Enter into any transaction
or transactions with any Affiliate for less than full value or on terms or
conditions less favorable than could be obtained in an arm's length transaction
with a third party or make any loan or advance to, or guaranty any obligation of
Debt of, any Affiliate; provided, however, that, notwithstanding the foregoing:
(i) Borrowers may not make loans to (a) Optik Pro in an aggregate amount at any
time outstanding in excess of One Million Five Hundred Thousand Dollars
($1,500,000); or (b) Health in an aggregate amount at any time outstanding in
excess of Three Hundred Thousand Dollars ($300,000); (ii) any loan by Borrowers
to either Optik Pro or Health shall be evidenced by a Guarantor's Note payable
to Borrowers; and (iii) each such Guarantor's Note shall be endorsed to Lender
and delivered to Lender.

               7.1.11 Environmental Matters. Use, generate, treat, transport,
store, dispose of, or otherwise introduce any Hazardous Material into or on any
real property owned, leased or occupied by any Obligor, or cause, suffer, allow,
or permit anyone else to do so, in violation of any applicable statute, law,
ordinance rule or regulation;

               7.1.12 Dividends; Distribution. Declare, or make payment of, any
dividend or any distribution to any shareholder of any Obligor in respect of any
capital stock of any Obligor; provided, however, that notwithstanding the
foregoing, Obligors may make interest distributions, if any, payable in
connection with the Obligor's preferred stock so long as (i) no Event of Default
has occurred hereunder, and (ii) the payment thereof would not cause a violation
of any of the Financial Covenants;

               7.1.13 Change in Location of Collateral. Change any location of
any Collateral, other than in the ordinary course of business, without giving
the Lender prior written notice;

               7.1.14 Conduct of Business. Conduct any business under any other
name or entity, other than those listed on Schedule 5.1.4(ii) hereto;

               7.1.15 Leases. Other than leases for Obligors' retail store
facilities, create, incur, assume or suffer to exist any obligation as lessee
for the rental or hire of any real or personal property where the annual
monetary obligations per such lease would exceed the lesser of Two Hundred Fifty
Thousand Dollars ($250,000);

               7.1.16 Sale and Lease Back. Sell, transfer or otherwise dispose
of any material real or personal property to any Person and thereafter directly
or indirectly lease back the same or similar property;

               7.1.17 Investments. Make any loan or advance to any Person or
purchase or otherwise acquire any capital stock, obligations or other securities
of, make any capital contribution to, or otherwise invest in or acquire any
interest in any Person in an aggregate amount in excess of One Hundred Thousand
Dollars ($100,000) annually;

               7.1.18 Guaranties. Other than the Guaranty and Surety Agreements
of Guarantors, assume, guarantee, endorse or otherwise be or become directly or
contingently liable


                                       29



for obligations of any Person, other than Guaranties for the benefit of
operating Affiliates of Obligors, provided that (i) the extension of such
Guaranties would not cause Obligors to violate any of the Financial Covenants;
(ii) such Guaranties are unsecured and the obligations thereunder are
subordinated to the Obligations of the Borrower to Lender hereunder and under
the other Loan Documents; and (iii) such Guaranties do not exceed an aggregate
amount greater than Twenty-Five Thousand Dollars ($25,000) annually;

               7.1.19 Fiscal Year. Change their Fiscal Year;

               7.1.20 Accounting Methods. Unless required by applicable law or
GAAP and upon prior written notice thereof to Lender, make or consent to a
material change in the manner in which the business of Obligors is conducted or
in Obligors' method of accounting, as applicable;

               7.1.21 Capital Expenditures. Incur any capital expenditures in
any Fiscal Year in excess of the lesser of Seven Million Dollars ($7,000,000) in
the aggregate; and

               7.1.22 Stock. Sell, encumber or otherwise dispose of any shares
of capital stock of any Subsidiary.

     8. DEFAULT

          8.1 Events of Default. The occurrence of any one or more of the
following events, conditions or states of affairs, shall constitute an "Event of
Default" hereunder, under the Notes and under each of the other Loan Documents:

               8.1.1 Failure by Obligors to pay any of the Indebtedness, or any
portion thereof when the same becomes due;

               8.1.2 Failure by any Obligor to pay any Lender's Costs when the
same shall be due, and such failure continues within ten days following written
demand therefor;

               8.1.3 Failure by Obligors to be in compliance with any Financial
Covenant.

               8.1.4 Other than as contemplated by Paragraphs 8.1.1, 8.1.2 and
8.1.3 above, the failure by any Obligor to observe or perform any other
agreement, condition, undertaking or covenant in (i) this Agreement, the Notes,
or any other Loan Document, or in any other agreement by and between any Obligor
and Lender, provided the Obligors have not cured the same within twenty (20)
days following written notice thereof from Lender, or (ii) any other material
agreement, lease, mortgage, note or other obligation to which Obligors are a
party or by which Obligors are bound, the failure of which, taken as a whole,
causes a default thereunder and could have a Material Adverse Effect on
Obligors;

               8.1.5 Any material representation or warranty of Obligors made in
this Agreement or any other Loan Document or any statement or information in any
report, certificate, financial statement or other instrument made by Obligors in
connection with making this Agreement, the establishment of the Loans or in
compliance with the provisions hereof or


                                       30



any other Loan Document shall have been false or misleading in any material
respect when so made, deemed made or furnished;

               8.1.6 The occurrence of any Material Adverse Effect;

               8.1.7 Any Obligor discontinues its business operations or
materially changes the nature of its business;

               8.1.8 (i) Any Reportable Event which Lender determines to
constitute grounds for the termination of any Plan by the PBGC or for the
appointment by any United States District Court of a trustee to administer or
liquidate any Plan; (ii) the termination of any Plan described in either Section
414(j) or Section 414(k) of the Internal Revenue Code, the present value of
whose benefits that may be guarantied under Title IV of ERISA exceeds by more
than One Hundred Thousand Dollars ($100,000) the amount of Plan assets allocable
to such benefits; (iii) the appointment by any United States District Court of a
trustee to administer any Plan; (iv) the institution by the PBGC of proceedings
to terminate any Plan; (v) the failure by any Obligor or any member of any
Controlled Group to meet the minimum funding standards established in Section
302 of ERISA; or (vi) the assertion of any claim of, or demand for, withdrawal
liability in excess of One Hundred Thousand Dollars ($100,000) under ERISA by
any multi-employer pension plan to which any Obligor or any member of its
Controlled Group heretofore contributed or currently contributes;

               8.1.9 The Penney's Agreement, the Sears Agreement or the Vision
One Agreement shall terminate for any reason or, material adverse change in the
relationship between Obligors and Penney's, Obligors and Sears, or Obligors and
Vision One shall have occurred, other than pursuant to the exercise by Cole
National or Cole Vision of any rights under the Cole Documents;

               8.1.10 The occurrence of any event of default under any of the
Transactional Documents.

               8.1.11 Any Obligor shall become insolvent or unable to pay its
debts as they mature, or file a voluntary petition or proceeding seeking
liquidation, reorganization or other relief with respect to itself under any
provision of the Bankruptcy Code or any state bankruptcy or insolvency statute,
or make an assignment or any other transfer of assets for the benefit of its
creditors, or apply for or consent to the appointment of a receiver for its
assets, or suffer the filing against its property of any attachment or
garnishment or take any action to authorize any of the foregoing, or an
involuntary case or other proceeding shall be commenced against any Obligor
seeking liquidation, reorganization or other relief with respect to its debts
under the Bankruptcy Code or any other bankruptcy, insolvency or similar law now
or hereafter in effect or seeking the appointment of a trustee, receiver,
liquidator, custodian or other similar official of its or any substantial part
of its property, and such involuntary case or other proceeding shall remain
undismissed and unstayed for a period of sixty (60) days (it being understood
that no delay period applies with respect to any default arising under this
Section by reason of the filing of a voluntary petition by any Obligor under the
Bankruptcy Code or any state bankruptcy or insolvency statute or the making of
an assignment or other transfer of assets for the benefit of Obligors' creditors
or by reason of any Obligor applying for or consenting to


                                       31



the appointment of a receiver for any Obligor's assets); or an order for relief
shall be entered against any Obligor under any provision of the Bankruptcy Code
or any state bankruptcy or insolvency statute as now or hereafter in effect;

               8.1.12 Entry of a final judgment or judgments against any Obligor
by a court of law not fully covered by insurance in an amount exceeding One
Hundred Fifty Thousand Dollars ($150,000) in any single instance or an aggregate
of Three Hundred Thousand Dollars ($300,000) outstanding at any one time,
enforcement of which judgment or judgments has not been stayed, bonded or
dismissed within forty-five days after entry (so long as no execution with
respect to such judgment has been commenced);

               8.1.13 Except for Permitted Liens, imposition of any Lien or
series of Liens against any Obligor or any of the Collateral whether by
operation of law or by consent;

               8.1.14 Other than Permitted Liens, Lender's Lien in any of the
Collateral shall cease to constitute a first Lien on the Collateral or otherwise
cause to be in full force and effect, or the validity or enforceability thereof
shall be contested by any Obligor, or any Obligor shall deny that it has any
further Liability or Obligation under any of the Loan Documents, and the
foregoing has or would have a Material Adverse Effect on any Obligor; and

               8.1.15 Lender believes, in good faith, subject only to its own
business judgment, that the prospect of any payment or performance of any
obligation hereunder is, or shall be impaired.

          8.2 Remedies upon an Event of Default. Upon the occurrence and
continuation of an Event of Default, the Lender may by notice to the Obligors:

               8.2.1 Forthwith suspend all future Advances and declare all
Indebtedness to be immediately due and payable, without protest, demand or other
notice (which are hereby expressly waived by Obligors) and, in addition to the
rights specifically granted hereunder or now or hereafter existing in equity, at
law, by virtue of statute or otherwise (each of which rights may be exercised at
any time and from time to time), Lender may exercise the rights and remedies
available to Lender at law or in equity or under this Agreement, the Notes, and
any of the other Loan Documents or any other agreement by and between any
Obligor and Lender in accordance with the respective provisions thereof;

               8.2.2 Have all the rights of a secured creditor under the Uniform
Commercial Code as enacted in the State of New Jersey in any other jurisdiction
in which any Collateral is located and in any other jurisdiction in which any
Obligor was organized;

               8.2.3 Receive payment from Obligors, as part of the Indebtedness
and Obligations hereby secured, all of the Lender's Costs, with per annum
interest on all of the same at highest Line Interest Rate plus three percent
(3%), from and after demand for the payment thereof until paid;

               8.2.4 (i) receive, open and dispose of all mail addressed to such
Obligor, to notify the post office authorities to change the address for
delivery of mail addressed to such Obligor to such address as Lender may
designate; (ii) endorse the name of Obligors on any


                                       32



notes, acceptances, checks, drafts, money orders or other evidences of payment
or proceeds of the Collateral that may come into Lender's possession; (iii) sign
the name of Obligors on any invoices, documents, drafts against and notices to
Account Debtors of Obligors, assignments and request for verification of
accounts; (iv) execute proofs of claim and loss; (v) execute any endorsements,
assignments or other instruments of conveyance or transfer; (vi) adjust and
compromise any claims under insurance policies; (vii) execute releases; (viii)
collect the Accounts; (ix) notify Account Debtors to make payments directly to
Lender; and (x) do all other acts and things necessary and advisable in the sole
discretion of Lender to carry out and enforce this Agreement. All acts of said
attorney or designee are hereby ratified and approved and said attorney or
designee shall not be liable for any acts of commission or omission, nor for any
error of judgment or mistake of fact or law. Each of these powers of attorney
being coupled with an interest is irrevocable while any of the Indebtedness
shall remain unpaid or Lender has any obligations to make Advances hereunder;
and

               8.2.5 (i) require Obligors at Obligors' expense, to assemble the
Collateral and make it available to Lender at the place or places to be
designated by Lender; (ii) have the right to sell such Collateral at one or more
public or private sales (the requirement of reasonable notice of the time and
place of disposition of such Collateral by Lender shall be conclusively met if
such notice is personally delivered, delivered by overnight courier, facsimiled
or mailed to Obligors' address as specified in this Agreement at least ten days
before the time of the sale or disposition); (iii) bid upon and purchase any or
all of such Collateral at any public sale thereof; and (iv)dispose of all or any
part of such Collateral from time to time, and upon such terms and conditions,
including a credit sale, as it determines in its sole discretion.

          8.3 Application of Proceeds. Any cash proceeds of sale, lease or other
disposition of the Collateral upon an Event of Default shall be applied in the
following order:

               8.3.1 At Lender's sole discretion, to pay part, any or all of any
Obligations including, but not limited to, Lender's Costs, interest, and/or
principal; and

               8.3.2 Any surplus then remaining to Obligors or whomever may be
lawfully entitled thereto.

          8.4 Set-Off Rights Upon Default. In addition to all Liens and rights
of set-off against Obligors' money, securities or other property given to Lender
by law, Obligors acknowledge and agree that Lender, in addition to any remedies
set forth above, shall have the right at any time and from time to time upon the
occurrence and during the continuation of an Event of Default, without notice to
Obligors, to the extent permitted by law (any such notice being expressly waived
by Obligors) and to the fullest extent permitted by applicable Rules, to set
off, to exercise any banker's lien or any right of attachment or garnishment and
apply any and all balances, credits, deposits (general or special, time or
demand, provisional or final), accounts or monies at any time held by Lender and
other indebtedness at any time owing by Lender to or for the account of Obligors
against any and all Indebtedness or other Obligations of Obligors, now or
hereafter existing under this Agreement, the Notes or any other Loan Document,
regardless of whether Lender shall have made any demand hereunder or thereunder.
Every such right of set-off shall be deemed to have been exercised immediately
upon the occurrence of an Event of Default without any action by Lender,
although Lender may enter such set-off on its


                                       33



books and records at a later time.

          8.5 Singular or Multiple Exercise; Non-Waiver. The remedies provided
herein and in the other Loan Documents or otherwise available to Lender at law
or in equity and any powers of attorney therein contained shall be cumulative
and concurrent, and may be pursued singly, successively or together at the sole
discretion of Lender, and may be exercised as often as occasion therefor shall
occur; and the failure to exercise any such right or remedy shall in no event be
construed as a waiver or release of the same.

          8.6 Discontinuance of Remedies. In the event that Lender shall have
proceeded to enforce any right under this Agreement and such proceedings shall
have been discontinued or abandoned for any reason, then and in every such case,
the rights, remedies and obligations of the parties hereto shall remain in full
force and effect.

          8.7 Cumulative Remedies. No delay or omission of Lender to exercise
any right or power arising under this Agreement, the Notes, any Loan Documents
or from any Event of Default or Potential Default shall exhaust or impair any
such right or power or prevent its exercise during the continuance of any other
Event of Default or Potential Default. No waiver by Lender of any Event of
Default, whether such waiver be full or partial, shall extend to or be taken to
effect any subsequent Event of Default, or to impair the rights resulting
therefrom except as may otherwise be provided herein. The remedies provided in
the Loan Documents are cumulative and are not exclusive of any remedies provided
by law.

          8.8 Judgments. Obligors agree that, with respect to any judgments
which may be entered against any Obligor by or on behalf of Lender: (i) if for
the purpose of obtaining judgment in any court it is necessary to convert all or
any part of a sum due hereunder in Dollars into Canadian Dollars, the parties
hereto agree, to the fullest extent that they may effectively do so, that the
rate of exchange used shall be that at which, in accordance with normal banking
procedures, the Lender could purchase Dollars with Canadian Dollars on the
Business Day immediately preceding the day on which any such judgment, or any
relevant part thereof, is paid or otherwise satisfied; and (ii) the obligation
of the Obligors in respect to any sum due hereunder in Dollars shall,
notwithstanding any judgment in Canadian Dollars, be discharged only to the
extent that on the Business Day following receipt by Lender of any sum adjudged
to be so due in Canadian Dollars, the Lender may, in accordance with normal
banking procedures, purchase Dollars with Canadian Dollars. If the amount of
Dollars so purchased is less than the sum originally due to the Lender in
Dollars, the Obligors shall, as a separate obligation and notwithstanding any
such judgment, indemnify the Lender against such loss, and if the amount of
Dollars so purchased exceeds the sum originally due to the Lender, the Lender
shall remit such excess to the Obligors so long as no other Indebtedness or
Lenders' Costs are outstanding hereunder.

     9. MISCELLANEOUS

          9.1 Notices. Any notice or other communication hereunder or under any
of the Loan Documents by one party to another shall be in writing and shall be
deemed to have been validly given upon receipt if by hand delivery, overnight
delivery or facsimile with evidence of transmission receipt, to the addresses as
follows:


                                       34



                         
If to any Obligor:          With a copy to:

U.S. Vision, Inc.           Ballard Spahr Andrews & Ingersoll, LLP
Attn: William Schwartz,     Attn: Gerald J. Guarcini, Esquire
Chief Executive Officer     1735 Market Street
1 Harmon Drive              Philadelphia, PA 19103
Glen Oaks Industrial Park   E-mail: guarcini@ballardspahr.com
Glendora, NJ 08029          Phone: (215) 864-8625
E-mail: ws@usvision.com     Fax: (215) 864-9181
Phone: (856) 228-1000
Fax: (856) 232-1848         and

                            Sayles, Lidji & Werbner
                            Attn: Brian M. Lidji, Esquire
                            4400 Renaissance Tower
                            1201 Elm Street
                            Dallas, TX 75270
                            E-mail: blidji@slw.com
                            Phone: (214) 939-8702
                            Fax: (214) 939-8787

If to Bank:                 With a copy to:

Commerce Bank, N.A.         Schnader Harrison Segal & Lewis LLP
Attn: Gerard L. Grady,      Walter B. Ferst, Esquire
Vice President              1600 Market Street, 36th Floor
1701 Route 70 East          Philadelphia, PA 19103
Cherry Hill, NJ 08034       E-mail: wferst@schnader.com
Phone: (856) 751-7519       Phone: (215) 751-2370
Fax: (856) 751-6894         Fax: (215) 751-2205



          9.2 Integration. This Agreement and the other Loan Documents shall be
construed as one agreement; in the event of any inconsistency, this Agreement
shall control over any other Loan Document.

          9.3 Amendment; Modification. Modifications or amendments of or to the
provisions of this Agreement or any other Loan Document shall be effective only
if set forth in a written instrument signed by Lender and any other party sought
to be bound thereby.

          9.4 Survival. The terms of this Agreement and all agreements,
representations, warranties and covenants made by Obligors in any other Loan
Document shall survive the issuance and payment of the Notes and all sums due
hereunder and shall continue so long as any portion of the Indebtedness shall
remain outstanding and unpaid; provided, however, that the covenants set forth
in Sections 6.2 (with respect to indemnification), 9.7, 9.10 and 9.11 (with
respect to damages, jurisdiction, venue and jury trial) hereof shall survive the
payment of the Indebtedness and the termination of this Agreement. Obligors
hereby acknowledge that


                                       35



Lender has relied upon the foregoing in making available the Loan.

          9.5 Closing. Closing hereunder shall occur on October 30, 2002 at the
offices of Schnader Harrison Segal & Lewis LLP, 1600 Market Street, Suite 3600,
Philadelphia, Pennsylvania 19103 or at such other time and place as the parties
hereto may determine.

          9.6 Successors and Assigns; Assignment. This Agreement shall be
binding upon and inure to the benefit of the parties hereto and the respective
successors and assigns of the parties hereto; provided, however that Obligors
may not assign this Agreement, or any rights or duties arising hereunder,
without the express prior written consent of Lender, which may be withheld by
Lender in its sole and absolute discretion, and Lender may assign all or any
part of its rights or duties hereunder without the consent of Obligors.

          9.7 Joint and Several Obligations. Each Borrower is jointly and
severally obligated under this Agreement, the Notes and each of the other Loan
Documents.

          9.8 CERTAIN WAIVERS. NEITHER LENDER NOR ANY ATTORNEY OF LENDER SHALL
BE LIABLE TO OBLIGORS OR ANY AFFILIATE FOR CONSEQUENTIAL DAMAGES ARISING FROM
ANY BREACH OF CONTRACT, TORT OR OTHER WRONG RELATING TO THE ESTABLISHMENT,
ADMINISTRATION OR COLLECTION OF THE OBLIGATIONS RELATING IN ANY WAY TO THIS
AGREEMENT, THE NOTES OR ANY OF THE OTHER LOAN DOCUMENTS OR THE ACTION OR
INACTION OF ANY SUCH PERSONS UNDER ANY ONE OR MORE PROVISIONS HEREOF OR THEREOF.
IN THE EVENT LENDER SEEKS TO TAKE POSSESSION OF ANY OR ALL OF THE COLLATERAL BY
COURT PROCESS OR OTHER METHOD AVAILABLE UNDER THE LAW, OBLIGORS IRREVOCABLY
WAIVE ANY BOND OR ANY SURETY OR SECURITY RELATING THERETO REQUIRED BY ANY
STATUTE, COURT RULE OR OTHERWISE AS AN INCIDENT TO SUCH POSSESSION AND WAIVES
ANY DEMAND FOR POSSESSION PRIOR TO THE COMMENCEMENT OF ANY SUIT OR ACTION TO
RECOVER WITH RESPECT THERETO. OBLIGORS FURTHER WAIVE THE BENEFIT OF ALL
VALUATION, APPRAISEMENT AND EXEMPTIONS LAWS.

          9.9 Releases. Each Obligor acknowledge that it has been represented by
competent counsel in connection with the transactions contemplated hereby and
has been fully advised by such counsel of the full range of rights and
Obligations possessed by Obligors and undertaken and received pursuant to the
terms of this Agreement and the other Loan Documents and, specifically, the
provisions of this Agreement and the other Loan Documents. Obligors hereby
knowingly and, after consultation with counsel, freely acknowledge and agree
that they do not now have nor do they know of any basis for any claim in tort,
contract or otherwise against Lender for breach of any of the terms of any of
the Loan Documents. Obligors acknowledge and agree that this Agreement and the
other Loan Documents were negotiated, executed and delivered freely and with
full and informed knowledge of the consequences of this Agreement and the other
Loan Documents and that they have executed this Agreement and the other Loan
Documents without duress, and that Lender has proceeded in a commercially
reasonable manner in light of all of the facts and circumstances surrounding the
transactions that are the subject of this Agreement and the other Loan
Documents.


                                       36



          9.10 Governing Law. This Agreement shall be construed and enforced in
accordance with the internal laws of the State of New Jersey with respect to
contracts to be entered into and performed within the State of New Jersey.

          9.11 CONSENT TO JURISDICTION AND VENUE. IN ANY LEGAL PROCEEDING
INVOLVING, DIRECTLY OR INDIRECTLY, ANY MATTER ARISING OUT OF OR RELATED TO THIS
AGREEMENT OR THE RELATIONSHIP EVIDENCED HEREBY, EACH OF THE OBLIGORS HEREBY
IRREVOCABLY SUBMITS TO THE NONEXCLUSIVE JURISDICTION OF ANY STATE COURT LOCATED
IN THE STATE OF NEW JERSEY, IN ANY COUNTY IN WHICH LENDER HAS AN OFFICE OR
BRANCH, AND ANY UNITED STATES COURT, AND AGREES NOT TO RAISE ANY OBJECTION TO
SUCH JURISDICTION OR TO THE LAYING OR MAINTAINING OF THE VENUE OF ANY SUCH
PROCEEDING. EACH OF THE OBLIGORS AGREES THAT SERVICE OF PROCESS IN ANY SUCH
PROCEEDING MAY BE DULY EFFECTED UPON SUCH OBLIGOR BY MAILING A COPY THEREOF, BY
REGISTERED MAIL, POSTAGE PREPAID OR BY HAND DELIVERY OR A NATIONALLY RECOGNIZED
OVERNIGHT DELIVERY SERVICE, TO EACH PARTY THERETO.

          9.12 WAIVER OF JURY TRIAL. EACH OF THE OBLIGORS AND LENDER HEREBY
WAIVE TRIAL BY JURY IN ANY LEGAL PROCEEDING INVOLVING, DIRECTLY OR INDIRECTLY,
ANY MATTER (WHETHER SOUNDING IN TORT, CONTRACT OR OTHERWISE) IN ANY WAY ARISING
OUT OF OR RELATED TO THIS AGREEMENT OR ANY OTHER LOAN DOCUMENT OR THE
RELATIONSHIP EVIDENCED HEREBY OR THEREBY. EACH OF THE OBLIGORS ACKNOWLEDGES THAT
THIS PROVISION IS A MATERIAL INDUCEMENT FOR LENDER TO ENTER INTO, ACCEPT AND
RELY UPON THIS AGREEMENT AND THE OTHER LOAN DOCUMENTS.

          9.13 Gender. All references to any gender, including the neuter
gender, shall be deemed to incorporate all other genders.

          9.14 Public Announcement. Lender may announce and publicize the
existence of this Agreement and the extension of credit by Lender to Obligors,
in such media as Lender may, in its sole discretion, from time to time
determine.

          9.15 Relationship of Parties. The relationship of Lender and Obligors
will at all times be that of creditor and obligor. Nothing herein shall be
deemed or construed to confer upon the parties any other relationship including,
but not limited to, any relationship of a partnership or joint venture.

          9.16 Entire Agreement. This Agreement (including the Exhibits and
Schedules hereto) and the other Loan Documents constitute the entire agreement
and understanding between the parties hereto relating to the subject matter
hereof and supersede all prior oral or written understandings.

          9.17 Severability. The invalidity, illegality or unenforceability in
any jurisdiction of any provision in or obligation under this Agreement, the
Notes or the other Loan


                                       37



Documents shall not affect or impair the validity, legality or enforceability of
the remaining provisions or obligations thereunder in any other jurisdiction.

          9.18 Excess Payments. If Obligors shall pay any interest under the
terms of the Notes at a rate higher than the maximum rate allowed by applicable
law, then such excess payment shall be credited as a payment of principal first
to Lender's Costs, then to the Line of Credit, unless Obligors notify Lender in
writing to return the excess payment to Obligors.

          9.19 Partial Invalidity. If any provision of this Agreement shall for
any reason be held to be invalid or unenforceable, such invalidity or
unenforceability shall not affect any other provision hereof, but this Agreement
shall be construed as if such invalid or unenforceable provision had never been
contained herein.

          9.20 Compliance with Rules. Lender shall not be required by operation
or effect of any provision of this Agreement to violate any statute or
regulation under state or federal law, including all Rules.

          9.21 Headings. The heading of any Article, Section, Paragraph or
Clause contained in this Agreement is for convenience of reference only and
shall not be deemed to amplify, limit, modify or give full notice of the
provisions thereof.

          9.22 Counterparts. This Agreement may be signed in counterparts each
of which shall be deemed to be an original and all of which together shall
constitute one and the same agreement.

          9.23 Retention of Documents. Unless otherwise provided herein, any
documents, schedules, invoices or other papers delivered to Lender may be
destroyed or otherwise disposed of by Lender six months after they are delivered
to or received by Lender, unless Obligors request the return of such documents,
schedules, invoices or other papers and makes arrangements, at Obligors'
expense, for their return.

          9.24 Limitations of Obligations of the Obligors. Notwithstanding the
definition of "Obligations" herein, to the extent required to make the
Obligations of a Borrower fully enforceable, the liability of such Borrower
shall be limited to an amount equal to: (i) the lowest amount that would not
render all or a portion of such Borrower's joint and several liabilities, if
any, with respect to such Obligations void, voidable or unenforceable against
such Borrower's creditors or creditor's representatives under any applicable
fraudulent conveyance, fraudulent transfer or similar act or under Section 544
or 548 of the Bankruptcy Code of 1978, as amended, minus (ii) One ($1.00)
Dollar.

          9.25 Cole Documents. Lender acknowledges receipt of a copy of each of
the Cole Documents, and understands that Cole National, Cole Vision, or one or
more Affiliates of either of the foregoing may exercise certain rights to
purchase certain leases or assets constituting the Sears Agreement. The Lender
hereby covenants and agrees that, provided Lender has been given reasonable
assurances that all proceeds payable in connection with the exercise of the
option thereunder (other than amounts permitted to be set-off under the Cole
Note) will be paid directly to Lender as contemplated by Paragraph 2.2.7 hereof,
upon receipt of written notification from Cole National that it or one or more
Affiliates of Cole National is


                                       38



exercising all or any rights under the Cole Documents with respect to the Sears
Assets or Sears Leases (as defined in the Cole Documents), the Lender will
release its security interest in the Sears Assets or Sears Leases and will
execute and deliver to Cole National a proper instrument or instruments and will
duly assign, transfer and deliver to Cole National such part of the Collateral
as may be in the possession of the Lender.

          9.26 Agreement in English. Optik Pro hereby declares having expressly
required that this Agreement, the Movable Hypothec, the Guaranty and Surety
Agreement of Optik Pro and all other documents, agreements and notices related
thereto be drafted in the English language. Optik Pro declare et reconnait avoir
expressement requis que ce contrat de pret et tous les autres documents,
conventions ou avis qui sont afferent soient rediges en langue anglaise.

                  [REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]


                                       39



     IN WITNESS WHEREOF, intending to be legally bound hereby, Obligors and
Lender have executed this Agreement under seal, intending to be legally bound
hereby, the day and year first above written.

BORROWERS / OBLIGORS:                   GUARANTORS / OBLIGORS:

U.S. VISION, INC.                       9072-8411 QUEBEC, INC.
                                        d/b/a "Optik Pro Baie 2000"


By: /s/ Carmen J. Nepa III              By: /s/ Carmen J. Nepa III
    ---------------------------------       ------------------------------------
    Carmen J. Nepa III,                     Carmen J. Nepa III,
    Senior Vice President and               Senior Vice President and
    Chief Financial Officer                 Chief Financial Officer


STYL-RITE OPTICAL MFG. CO., INC.        HEALTH EYE CARE STATISTICS, INC.


By: /s/ William A. Schwartz, Jr.        By: /s/ William A. Schwartz
    ---------------------------------       ------------------------------------
    William A. Schwartz, Jr.,               William A. Schwartz, Jr.,
    President                               President


USV OPTICAL, INC.                       COMMERCE BANK, N.A.


By: /s/ Carmen J. Nepa III              By: /s/ Gerard L. Grady
    ---------------------------------       ------------------------------------
    Carmen J. Nepa III,                     Gerard L. Grady,
    Senior Vice President and               Vice President
    Chief Financial Officer


U.S. VISION HOLDINGS, INC.


By: /s/ Carmen J. Nepa III
    ---------------------------------
    Carmen J. Nepa III,
    Chief Financial Officer


                                       40


                                    EXHIBIT A

                                   DEFINITIONS

          "Accounts" means all rights of a Person to receive payment for the
sale, lease, or provision of goods and services, Health-Care-Insurance
Receivables and all other rights to receive the payment of money, whether or not
earned by performance, shown on the financial reports of such Person as gross
accounts receivable, or otherwise, all as determined in accordance with such
Person's financial policies consistently applied and in conformity with GAAP.

          "Account Debtor" means the Person or Persons obligated under or on
account of an Account.

          "Acquisition Documents" means the Agreement and Plan of Merger, the
Proxy Statement and the Schedule 13E-3.

          "Advance" means any advance of funds under the Line by Lender to
Borrowers.

          "Affiliate" means and refers to, as applied to any Person, any other
Person directly or indirectly controlling, or through one or more Persons
controlled by, or in common control with, that Person. "Control" (including with
correlative meanings, the terms "controlling," "controlled by" and "under common
control with"), as applied to any Person, means the possession, directly or
indirectly, of the power to direct or cause the direction of the management
and/or policies of that Person, whether through the ownership of voting
securities, by contract, or otherwise.

          "Agreement" means this Loan and Security Agreement, as it may be
amended, restated or otherwise modified and in effect from time to time.

          "Agreement and Plan of Merger" has the same meaning ascribed thereto
in the preamble to this Agreement.

          "All Assets" means, for any Person, all Accounts; all of such Person's
deposit accounts with Lender; all contents of the Lockboxes (as defined below);
Cash Collateral Accounts; As-Extracted Collateral; Chattel Paper; Commercial
Tort Claims; Consignments; Contracts; Documents; Encumbrance(s); Equipment;
Inventory (including, but not limited to, all returned or rejected merchandise);
Fixtures; Instruments; Leases, Investment Property, General Intangibles,
including, without limitation, all intellectual property of every kind and
nature; Letter-of-Credit Rights; and all Supporting Obligations. Any capitalized
term used in this paragraph without definition herein shall have the meaning
ascribed thereto in Article 9 of the UCC.

          "Applicable Law" means all applicable provisions of constitutions,
laws, statutes, ordinances, rules, treaties, regulations, permits, licenses,
approvals, interpretations and orders of courts or Governmental Agencies and all
orders and decrees of all courts and arbitrators.

          "Bankruptcy Code" means Title 11 of the United States Code as now or
hereafter



in effect, or any successor statute.

          "Borrowers' Collateral" shall have the meaning ascribed thereto in
Paragraph 3.1.1.

          "Business Day" means any day other than a Saturday, Sunday or day on
which banking institutions in New Jersey are required by law or regulation to
close.

          "Canadian Collateral Documents" means the following: (i) the Guaranty
and Surety Agreements of the respective Guarantors; (ii) the General Security
Agreement; (iii) the Movable Hypothec; and (iv) the Guarantor's Note.

          "Canadian Dollars" means the lawful money of Canada.

          "Capital Expenditures" means expenditures made, or liabilities
incurred, for the acquisition of any fixed assets or improvements, replacements,
substitutions or additions thereto which have a useful life of more than one
year and otherwise confirm with the provisions of GAAP, including the direct or
indirect acquisition of such assets by way of increased product or service
charges, offset items or otherwise, and all Capital Lease Obligations.

          "Capital Lease" means any lease of property (real, personal or mixed)
which, in conformity with GAAP, is or should be accounted for as a capital lease
on the balance sheet of a Person.

          "Capital Lease Obligations" means the aggregate amount of a Person's
obligations under all of such Person's Capital Leases.

          "Cash" means money, currency or a credit balance in a Deposit Account.

          "Cash Collateral Account" has the meaning ascribed thereto in Section
3.2.

          "Cash-Out" means the consideration that each current shareholder and
option holder of U.S. Vision stock will be entitled to receive pursuant to
Section 2.2 of the Agreement and Plan of Merger.

          "CERCLA / RCRA" means the Comprehensive Environmental Response
Compensation and Liability Act of 1980, as amended, and the Resource
Conservation Recovery Act of 1976, as amended.

          "Closing" and "Closing Date" mean the date hereof.

          ""Cole Agreement" means that certain agreement as of even date
herewith among Cole National, Cole Vision and U.S. Vision.

          "Cole Documents" means each of: (i) the Cole Note; (ii) the Cole
Agreement; (iii) the Vision One Agreement; and (iv) the Cole Subordination
Agreement.

          "Cole National" means Cole National Corporation, a Delaware
corporation.

          "Cole Note" means that certain Promissory Note of even date herewith
of



Borrowers in favor of Cole National in the original principal amount of Four
Million Dollars ($4,000,000).

          "Cole Subordination Agreement" means that certain Subordination
Agreement of even date herewith by and between Lender and Cole.

          "Cole Vision" means Cole Vision Corporation, a Delaware corporation.

          "Collateral" means Borrowers' Collateral and Guarantors' Collateral.

          "Collections" shall mean, with respect to any Account, all cash
collections and other cash proceeds of such Account including, without
limitation, all payments by the Account Debtor in respect of such Account and
all cash proceeds of any related security with respect to such Account.

          "Contractual Obligation" means, as to any Person, any provision of any
security issued by such Person or of any agreement, instrument or other
undertaking to which such Person is a party or by which it or any of its
property is bound.

          "Controlled Group" has the meaning given to such term in ERISA.

          "Current Assets" has the meaning ascribed thereto by GAAP.

          "Current Liabilities" has the meaning ascribed thereto by GAAP.

          "Current Ratio" means, as of any date, the ratio of: (i) the aggregate
Current Assets of Obligors to (ii) the aggregate Current Liabilities of
Obligors, all as determined in accordance with GAAP.

          "Debt" has the meaning ascribed thereto by GAAP.

          "Debt Coverage Ratio" means, as of any date, the ratio of: (i)
Obligors' consolidated EBITDA for the Twelve Month Period ending on such date to
(ii) the sum of consolidated Debt Service and Tax Expense of the Obligors for
such Twelve Month Period.

          "Debt Service" means for any Twelve Month Period the sum of (i)
principal payments maturing during such Twelve Month Period on Debt, and (ii)
interest expense on Debt (gross, not net of interest income) paid, payable or
otherwise accrued during such Twelve Month Period.

          "Deposit Account" means a demand, time, savings, passbook or like
account with a federally insured bank or savings and loan association, other
than an account evidenced by a negotiable certificate of deposit.

          "Designated Officer" means Gerard L. Grady, Vice President, or any
other person designated in writing by Lender as its representative for the
purpose of receiving notice under this Agreement.

          "Dollars" and the symbol "$" mean the lawful money of the United
States of



America.

          "EBITDA" means the sum of gross revenues and other proper income
credits, less all proper charges against income other than (i) interest expense
on Debt, (ii) taxes on income, and (iii) depreciation and amortization expense,
all determined in accordance with GAAP; provided that there shall not be
included in such revenues or charges (i) any gains resulting from the write-up
of assets; (ii) any proceeds of any life insurance policy, (iii) any gain or
loss which is classified as "extraordinary" in accordance with GAAP, (iv) any
non-cash expenses and charges, (v) non-cash provisions for reserves for
discontinued operations, and (vi) any gain or loss associated with the sale or
write-down of assets. EBITDA can be less than zero for all purposes of this
Agreement.

          "Environmental Laws" means any and all federal, state and local laws,
statutes, ordinances, rules, regulations, permits, licenses, approvals,
interpretations and orders of courts or Governmental Agencies, relating to the
protection of human health or the environment, including, but not limited to,
requirements pertaining to the manufacture, processing, distribution, use,
treatment, storage, disposal, transportation, handling, reporting, licensing,
permitting, investigation or remediation of Hazardous Materials.

          "ERISA" means the Employee Retirement Income Security Act of 1974, as
amended from time to time.

          "ERISA Affiliate" means each trade or business (whether or not
incorporated and whether or not foreign) which is or may hereafter become a
member of a group of which an Obligor is a member and which is treated as a
single employer under ERISA Section 4001(b)(1), or Internal Revenue Code Section
414.

          "Event of Default" means any event as set forth in Section 8.1 hereof.

          "Facility Fee" has the meaning ascribed thereto in Paragraph 2.1.6 of
this Agreement.

          "Financial Covenant" individually and "Financial Covenants"
collectively mean the financial covenants set forth in Clauses 6.1.25.1,
6.1.25.2, 6.1.25.3, 6.1.25.4 and 6.1.25.5 hereof.

          "Financing Statements" means any and all financing statements and
amendments required or appropriate to perfect and keep perfected any security
interest created under any of the Loan Documents pursuant to (i) the Uniform
Commercial Code as adopted in any state in which any of the Obligors were
organized or in any other jurisdiction having jurisdiction over the Collateral,
and (ii) the laws of Canada.

          "Fiscal Quarter" shall mean the fiscal quarter of Obligors ending on
April 30, July 31, and October 31 of each year and January 31 of the following
year.

          "Fiscal Year" shall mean the fiscal year of Obligors ending on January
31 of each year. For purposes of this Agreement (including, but not limited to,
the Financial Covenants set forth herein), each Fiscal Year will be identified
by the calendar year in which eleven of the twelve calendar months occur during
such Fiscal Year fall (e.g., the 2001 Fiscal Year will be the



fiscal year ending on January 31, 2002).

          "Fixed Charges" means the sum of (i) principal payments on Debt
maturing during the applicable Twelve Month Period, other than Debt incurred
under the Line of Credit; (ii) interest expense (gross, not net of interest
income) during such Twelve Month Period; (iii) Tax Expense (but not below zero)
for such Twelve Month Period; and (iv) Unfunded Capital Expenditures during such
Twelve Month Period.

          "Fixed Charge Coverage Ratio" means, as of any date, the ratio of (i)
Obligors' consolidated EBITDA for the Twelve Month Period ending on such date to
(ii) the Fixed Charges of Obligors for such Twelve Month Period.

          "Funding Date" means a Business Day on which an Advance is funded.

          "GAAP" means generally accepted accounting principles as set forth in
the opinions and pronouncements of the Accounting Principles Board of the
American Institute of Certified Public Accountants and statements and
pronouncements of the Financial Accounting Standards Board as each may from time
to time be in effect, or as set forth in such other statements by such other
Person as may be approved by a significant segment of the accounting profession,
which are applicable to the circumstances as of the date of determination and
which are applied on a consistent basis.

          "General Security Agreement" means that certain General Security
Agreement of even date herewith substantially in the form attached hereto as
EXHIBIT C required by Lender as collateral security for the repayment and
performance of Health's obligations under this Agreement, the Guaranty and
Surety Agreement of Health, and all other Loan Documents.

          "Governmental Agency" means any national government, any state or
political subdivision thereof, and any entity exercising executive, legislative,
judicial, regulatory, supervisory or administrative functions of or pertaining
to government.

          "Guarantor" means individually and "Guarantors" means together
9072-8411 Quebec, Inc. "Optik Pro Baie 2000", a Quebec, Canada corporation, and
Health Eye Care Statistics, Inc., an Ontario, Canada corporation.

          "Guarantors' Collateral" shall have the meaning ascribed thereto in
Paragraph 3.1.2.

          "Guarantors' Obligations" means the obligations of Guarantors under
their respective Guaranty and Surety Agreements, the General Security Agreement,
the Movable Hypothec and the other Loan Documents.

          "Guarantor's Note" means a note in the form of EXHIBIT D, attached
hereto and made a part hereof, evidencing the indebtedness of a Guarantor in
favor of a Borrower pursuant to Paragraph 7.1.10.

          "Guaranty" means any guarantee of the payment or performance of any
indebtedness or other obligation and any other arrangement whereby credit is
extended to one obligor on the basis of any promise of another Person, whether
that promise is expressed in terms



of an obligation to pay the indebtedness of such obligor, or the purchase of an
obligation owed by such obligor, or to purchase goods and services from such
obligor pursuant to a take-or-pay contract, or to maintain the capital, working
capital, solvency or general financial condition of such obligor, whether or not
any such arrangement is listed on the balance sheet of such other Person, or
referred to in a footnote thereto, but shall not include endorsements of items
for collection in the ordinary course of business.

          "Guaranty and Surety Agreements" means the Guaranty and Surety
Agreements of even date herewith of each Guarantor, substantially in the form
attached hereto as EXHIBIT E, secured by All Assets of each Guarantor.

          "Guaranty Obligations" means as to any Person (the "guaranteeing
person") any obligation of the guaranteeing person in respect of any obligation
of another Person (including, without limitation, any bank under any letter of
credit), the creation of which was induced by a reimbursement agreement, counter
indemnity or similar obligation issued by the guaranteeing person, in either
case guaranteeing or in effect guaranteeing any debt, leases, dividends or other
obligations (the "primary obligations") of any other third Person (the "primary
obligor") in any manner, whether directly or indirectly, including, without
limitation, any obligation of the guaranteeing person, whether or not
contingent, (i) to purchase any such primary obligation of any property
constituting direct or indirect security therefor, (ii) to advance or supply
funds (A) for the purchase or payment of any such primary obligation or (B) to
maintain working capital or equity capital of the primary obligor or otherwise
to maintain the net worth or solvency of the primary obligor, (C) to purchase
property, securities or services primarily for the purpose of assuring the owner
of any such primary obligation of the ability of the primary obligor to make
payment of such primary obligation or (iii) otherwise to assure or hold harmless
the owner of any such primary obligation against loss in respect thereof;
provided, however, that the term "Guaranty Obligation" shall not include
endorsements of instruments for deposit or collection in the ordinary course of
business. The amount of any Guaranty Obligation of any guaranteeing person shall
be deemed to be the lower of (i) an amount equal to the stated or determinable
amount of the primary obligation in respect of which such Guaranty Obligation is
made and (ii) the maximum amount for which such guaranteeing person may be
liable pursuant to the terms of the instrument embodying such Guaranty
Obligation, unless such primary obligation and the maximum amount for which such
guaranteeing person may be liable are not stated or determinable, in which case
the amount of such Guaranty Obligation shall be such guaranteeing person's
maximum reasonably anticipated liability in respect thereof as determined by
Obligors in good faith.

          "Hazardous Materials" means any substances or materials: (i) which are
or become defined as hazardous wastes, hazardous substances, pollutants,
contaminants, chemical substances or mixtures or toxic substances or materials
under any Applicable Law; (ii) which are toxic, explosive, corrosive, flammable,
infectious, radioactive, carcinogenic, mutagenic or otherwise harmful to human
health or the environment and are or become regulated by any Governmental
Agency; (iii) the presence of which require investigation or remediation under
any Applicable Law; (iv) the discharge or emission or release of which requires
a permit or license under any Applicable Law or other governmental approval; (v)
which are deemed to constitute a nuisance, a trespass or pose a health or safety
hazard to persons or neighboring properties; (vi) which consist of underground
or aboveground storage tanks, whether empty, filled or partially filled with any
substance; or (vii) which contain, without limitation, asbestos,



polychlorinated biphenyls, urea formaldehyde foam insulation, petroleum
hydrocarbons, petroleum derived substances or waste, crude oil, nuclear fuel,
natural gas or synthetic gas.

          "Indebtedness" means all amounts due from Obligors to the Lender,
including Lender's Costs, pursuant to this Agreement or otherwise arising out of
or in connection with any other Loan Document.

          "Interest Rate" or "Interest Rates" means collectively, the Line
Interest Rate and the Term Interest Rate.

          "Kayak" has the same meaning ascribed thereto in the preamble to this
Agreement.

          "Lender's Costs" means all costs and expenses of any kind paid or
incurred by Lender in connection with the preparation, execution, delivery,
amendment, modification, restatement, administration or termination of this
Agreement, the Notes or any other Loan Document, any amendments hereto or
thereto, any transaction contemplated herein or in any existing or future
related agreements and the preservation, enforcement, defense and protection of
Lender's rights, remedies, obligations and liabilities in any manner concerning
this Agreement, the Notes or any other Loan Document, any transaction
contemplated herein or any existing or future related agreements, including but
not limited to: (i) expenditures of every nature and kind of Obligors, paid or
incurred by Lender pursuant to the provisions of this Agreement, the Notes and
the other Loan Documents; (ii) filing, recording, publication, appraisal,
monitoring, collateral field examinations and search costs specifically
permitted hereunder related to the Collateral, including, but not limited to,
costs paid to perfect, maintain perfected and preserve the existence and
priority of Liens on the Collateral; (iii) after the occurrence of an Event of
Default, all Lender's internal and external administrative costs and costs
incurred in collecting and gaining possession of, maintaining, handling,
preserving, storing, shipping, selling, preparing for sale and advertising to
sell the Collateral, including but not limited to taxes, levies and insurance;
(iv) reasonable attorneys' fees and other reasonable fees and expenses paid or
incurred by Lender (A) in preparing, reviewing and consummating this Agreement
and the other Loan Documents and the transactions contemplated hereby and
thereby, (B) after the date hereof in amending, restating, restructuring,
extending, terminating, preserving, enforcing or determining Lender's rights and
remedies under this Agreement or any other Loan Document, and (C) after the
occurrence of an Event of Default, in enforcing, defending or protecting
Lender's rights, remedies, obligations or liabilities in any manner concerning
this Agreement or any of the other Loan Documents, any transaction contemplated
herein or any existing or future related agreements; (v) any reasonable
attorneys' fees and other reasonable fees and expenses incurred by Lender in
connection with any bankruptcy or insolvency proceeding filed by or against any
Obligor whether such attorneys' fees, other fees or expenses, incurred in the
sole discretion of Lender, are related to the review, determination, protection,
monitoring (including attendance at meetings or hearings) or enforcement by
Lender of the Obligations, including, but not limited to, the preparation and
filing of any proof of claim and without regard to whether Lender files,
responds, or is a party to any application, motion, or other proceeding; and,
(vi) wire transfer charges in such amounts as Lender may from time to time
establish for such service.

          "Liabilities" means all indebtedness that, in accordance with GAAP,
consistently



applied, should be classified as liabilities on a balance sheet of Obligors.

          "LIBOR" means the rate of interest (rounded, if necessary, to the
nearest one hundred-thousandth of a percentage point) for U.S. dollar deposits
of 30, 60 or 90 day maturity as reported on Telerate page 3750 or the equivalent
reporting service as of 11:00 a.m., London time, on the second London Business
Day prior to the date hereof and on each Business Day thereafter (or if not so
reported on any Business Day, then as determined by the Lender from another
recognized source or interbank quotation, or if none is available, as determined
by the Lender).

          "LIBOR Rate" has the same meaning ascribed thereto in Paragraph 2.1.4
of this Agreement. For purposes of this Agreement, LIBOR Rate is used as a
reference rate, determined on a monthly basis, in connection with LIBOR Rate
Advances.

          "LIBOR Rate Advance" means any Advance bearing interest at a rate
based upon the LIBOR Rate as provided in Paragraph 2.1.4 hereof.

          "Lien" means any charge against or interest in property securing
payment of a debt or performance of an obligation owed to any Person, whether
created by agreement, statute, common law or judicial or governmental authority,
legal action or equitable process, or proceeding, including, but not limited to,
any security interest, hypothec, lien, encumbrance, mortgage, assignment,
pledge, conditional sale, lease, consignment or bailment.

          "Line Closing Fee" means the Line closing fee provided for in
Paragraph 2.1.7 hereof.

          "Line Interest Rate" means the per annum rate of interest described
and set forth in Paragraph 2.1.4 hereof.

          "Line" or "Line of Credit" means the credit facility extended by
Lender to Borrowers, pursuant to Article 2 of this Agreement, as the same may
hereafter be modified or amended.

          "Line of Credit Note" means that certain revolving line of credit note
in the form of EXHIBIT F hereto executed by Borrowers in favor of Lender
evidencing Borrowers' obligation to repay Advances on the Line, and any
amendments or restatements thereof or allonges thereto.

          "Line Termination Date" means (i) October 31, 2004, or as extended
pursuant to Paragraph 2.1.10 above, or (ii) such earlier date as Borrowers shall
determine by notice to Lender, or (iii) such other date as Lender and Borrowers
may, from time to time, mutually determine.

          "Loans" means the collective reference to the Line of Credit and Term
Loan extended by Lender in favor of Borrowers.

          "Loan Documents" means this Agreement, the Notes, the Lockbox
Agreement, the Subordination Agreements, the Guaranty and Surety Agreements, the
General Security Agreement, the Movable Hypothec, all Financing Statements, and
any other instrument or document delivered by the Obligors in connection
herewith or therewith, each as amended,



restated or otherwise modified and in effect from time to time.

          "Lockbox Agreement" means the agreement between Obligors and Lender in
the form of EXHIBIT G hereto regarding the creation and maintenance of lockboxes
for the collection of Obligors' Accounts.

          "Lockboxes" means those certain Lockboxes described in Section 3.2
hereof.

          "Material Adverse Change or Effect" means, with respect to each
Obligor, a material adverse change or effect upon Obligor's business, assets,
liabilities, financial condition, results of operations or prospects or
Obligor's ability to perform Obligor's obligations under the Loan Documents in
accordance with their respective terms, as determined by Lender in the exercise
of its reasonable credit judgment.

          "Maximum Available Credit" shall have the meaning ascribed to such
term in Paragraph 2.1.9 hereof.

          "Maximum Leverage Ratio" means, as of any date, the ratio of (i) all
liabilities (other than Subordinated Debt) of the Obligors as of such date to
(ii) the Tangible Net Worth of the Obligors on such date.

          "Movable Hypothec" means the movable hypothec over All Assets located
or deemed by law to be located in the Province of Quebec and an application for
the registration thereof at the Quebec Register of Personal and Movable Real
Rights, substantially in the form of EXHIBIT H attached hereto.

          "Multi-Employer Plan" means a plan as defined in Section 4001(a)(3) of
ERISA to which Obligors or any Affiliate is making or accruing an obligation to
make contributions or has within any of the preceding five years made or accrued
an obligation to make contributions.

          "Nasdaq" has the meaning ascribed thereto in Clause 5.1.31.1 of this
Agreement.

          "Net Cole Proceeds" has the meaning ascribed thereto in Paragraph
2.2.7.

          "NOROB Investor Documents" means the NOROB Investor Notes and the
NOROB Investor Subordination Agreements.

          "NOROB Investor", individually, and "NOROB Investors", collectively,
mean those Persons identified on Schedule 1, attached hereto.

          "NOROB Investor Notes" means the promissory notes of even date
herewith by the NOROB Investors in favor of Borrowers, more fully described on
Schedule 1.

          "NOROB Investor Subordination Agreements" means those certain
Subordination Agreements of even date herewith between each NOROB Investor and
Lender.

          "Notes" means the Line of Credit Note together with the Term Note.

          "Obligation" individually and "Obligations" collectively mean the
Indebtedness



and all covenants and agreements of Obligors contained in, or arising out of or
in connection with, this Agreement or the other Loan Documents.

          "Obligor" and "Obligors" shall have the meanings set forth hereto in
the first paragraph of this Agreement.

          "PBGC" means the Pension Benefit Guaranty Corporation or any entity
succeeding to any or all of its functions under ERISA.

          "Penney's" means J.C. Penney Company, Inc.

          "Penney's Agreement" means the License Agreement dated February 1,
1995 as amended from time-to-time by and between Penney's and U.S. Vision.

          "Permitted Debt" means: (i) the Indebtedness; (ii) trade payables
incurred in the ordinary course of Obligors' business; (iii) purchase money Debt
(including Capital Leases) hereafter incurred by Obligors to finance the
purchase of fixed assets, provided that: (A) the total of all such Debt for all
Obligors taken together shall not exceed an aggregate principal amount of Twelve
Million Dollars ($12,000,000), (B) such Debt when incurred shall not exceed the
purchase price of the asset(s) financed, and (C) no such Debt shall be
refinanced for a principal amount in excess of the principal balance outstanding
thereon at the time of such refinancing; (iv) existing Indebtedness described on
Schedule 5.1.16 attached hereto and any refinancings of such Debt; (v) notes
issued to U.S. Vision shareholders in connection with the Cash-Out; and (vi)
Debt subordinated to Lender pursuant to the Subordination Agreements.
Notwithstanding any other provision of this definition, "Permitted Debt" shall
not include any Debt which, when incurred, would cause the violation of any
Financial Covenant.

          "Permitted Liens" means: (i) Liens for taxes, assessments or
governmental charges or claims which are not overdue or which are being
contested in good faith by appropriate proceedings promptly instituted and
diligently conducted, if a reserve or other appropriate provision, if any, as
shall be reasonably required by Lender, shall have been made therefor; (ii)
Liens of brokers, carriers, warehousemen, mechanics, materialmen, repairmen,
suppliers and other like Liens incurred in the ordinary course of business for
sums not yet delinquent or being contested in good faith by appropriate
proceedings promptly instituted and diligently conducted, if a reserve or other
appropriate provision, if any, as shall be reasonably required by Lender, shall
have been made therefor; (iii) Liens (other than any Lien imposed by ERISA)
incurred or deposits made in the ordinary course of business in connection with
workers' compensation or unemployment insurance and other types of social
security; (iv) Liens incurred or deposits made to secure the performance of
tenders, statutory obligations, surety and appeal bonds, bids, leases,
government contracts, performance and return-of-money bonds and other similar
obligations incurred in the ordinary course of business (exclusive of
obligations for the payment of borrowed money); (v) the rights of tenants under
leases or subleases not interfering with the ordinary conduct of the business of
a Person; (vi) easements, rights-of-way, encroachments, zoning provisions,
covenants, conditions, restrictions and other similar charges, encumbrances and
governmental restrictions not interfering with the ordinary conduct of the
business of a Person; (vii) Liens in favor of Lender pursuant to this Agreement,
the Notes or any Loan Document; (viii) Liens of the Delaware River Port
Authority on the Real Property existing on the date hereof; (ix) liens securing
purchase money Debt for fixed assets and Capital Leases;



and (x) those existing Liens set forth on Schedule 3.1.3 attached hereto.

          "Person" means an individual, corporation, partnership, joint venture,
trust or unincorporated organization, or a government or any political
subdivision thereof.

          "Plan" means any plan described in ERISA Section 3(2) maintained for
employees of an Obligor or any ERISA Affiliate, other than a Multi-employer
Plan.

          "Potential Default" means an event, occurrence or condition which,
with the giving of notice, the lapse of time, or both, constitutes an Event of
Default.

          "Prime" means, as to any day on which a Loan is outstanding, the
fluctuating rate of interest per annum published in the "Money Rates" Section of
the Wall Street Journal on the applicable date or the highest Prime rate if more
than one is published, as such rate may change from day-to-day, such changes to
be effective on the dates of announcement thereof. If the Wall Street Journal
ceases to be published for any reason on any day, or if it ceases to publish a
Prime rate, then the Lender may use any similar published prime or base rate to
determine the interest rate, in its sole discretion. Prime may not necessarily
be the lowest or best rate of interest charged by the Lender.

          "Prime Rate" has the same meaning ascribed thereto in Paragraph 2.1.4
of this Agreement.

          "Prime Rate Advance" means any Advance bearing interest at a rate
based upon the Prime Rate as provided in Paragraph 2.1.4 hereof.

          "Prohibited Transaction" means any transaction described in Section
406 of ERISA which is not exempt by reason of Section 408 of ERISA, and any
transaction described in Section 4975(c) of the Internal Revenue Code which is
not exempt by reason of Section 4975(c)(2) of the Internal Revenue Code.

          "Projections" means Obligors' forecasted (i) balance sheets, (ii)
profit and loss statements, (iii) cash flow statements, (iv) Purchase Money
Debt, and (v) Capital Expenditures, all prepared on a consistent basis with
Obligors' historical financial statements, together with appropriate supporting
details and a statement underlying assumptions.

          "Property" means any interest of any Obligor in any kind of property
or asset, whether real, personal or mixed, or tangible or intangible.

          "Purchase Money Debt" means purchase money Debt (including Capitalized
Lease Obligations) incurred solely for the purchase of fixed assets.

          "Real Property" means all of the real property owned by Obligors,
including, without limitation, all real estate, buildings, improvements, rents,
profits, insurance and condemnation proceeds, and any other property rights and
claims related thereto, as described on Schedule 5.1.7.

          "Reportable Event" means a reportable event described in Section 4043
of ERISA or the regulations thereunder, a withdrawal from a Plan described in
Section 4063 of ERISA, or a



cessation of operations described in Section 4068(f) of ERISA.

          "Requirement of Law" means, as to any Person, the certificate of
incorporation and bylaws, the partnership agreement or other organizational or
governing documents of such Person and any law, treaty, rule or regulation or
determination of any arbitration or a court or other 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.

          "RICO" means the Racketeer Influenced and Corrupt Organizations Act,
as amended by the Comprehensive Crime Control Act of 1984, 18 U.S.C Sections
1961-68.

          "Rule" means and includes any law, rule or regulation binding upon, or
applicable to, Lender as well as any guideline or similar directive issued by a
Governmental Agency having regulatory jurisdiction over Lender which Lender
observes or with which the Lender complies, whether or not such guideline or
directive technically has the force of law.

          "Schwartz" means William A. Schwartz, Jr.

          "Schwartz Documents" means the Schwartz Employment Agreement, the
Schwartz Incentive Stock Option Agreement, and the Schwartz Subordination
Agreement.

          "Schwartz Employment Agreement" means that certain Employment
Agreement dated April 2, 1998 between U.S. Vision and Schwartz, as amended by
that certain First Amendment to Employment Agreement dated September 23, 2002.

          "Schwartz Incentive Stock Option Agreement" means that certain
Incentive Stock Option Agreement dated June 1, 2000 between U.S. Vision and
Schwartz, as amended by that certain First Amendment to Incentive Stock Option
Agreement dated September 23, 2002.

          "Schwartz Subordination Agreement" means that certain Subordination
Agreement of even date herewith by and between Lender and Schwartz.

          "Sears" means Sears, Roebuck and Co.

          "Sears Agreement" means each of the license agreements, substantially
in the form attached hereto as EXHIBIT I, by and between Sears and U.S. Vision
with respect to separate Sears stores.

          "SEC" means the Securities and Exchange Commission.

          "SOLA" means SOLA International, Inc., a Delaware corporation.

          "SOLA Documents" means the SOLA Subordination Agreement and the SOLA
Supply Agreement.

          "SOLA Subordination Agreement" means that certain Subordination
Agreement of even date herewith by and between Lender and SOLA.

          "SOLA Supply Agreement" means that certain Marketing Agreement dated



October 2, 2002 by and between SOLA and U.S. Vision, as amended by that certain
First Amendment to Marketing Agreement of even date herewith, pursuant to which
SOLA will credit Three Million Dollars ($3,000,000) of new money to the account
of U.S. Vision which shall be added to the amount of U.S. Vision's entire
account payable due to SOLA.

          "Solvent" means, as to any Person, that such Person (i) has capital
sufficient to carry on its business and transactions and all business and
transactions in which it is about to engage; (ii) is able to pay its debts as
they mature; or (iii) owns property whose fair saleable value is greater than
the amount required to pay its debts.

          "Specified Officer" means such officer of U.S. Vision as U.S. Vision
may specify to Lender in writing. Each Obligor agrees that any request made or
other function specified herein to be made or performed by a Specified Officer
shall be deemed made or performed by and on behalf of all Obligors.

          "Subordinated Debt" means any Debt of the Obligors subordinated in
right and time of payment and performance of the Obligations on terms
satisfactory to the Lender including, without limitation, the Debt evidenced by
the Cole Note, the Schwartz Employment Agreement, the Schwartz Incentive Stock
Option Agreement, the NOROB Investor Notes and the SOLA Supply Agreement.

          "Subordination Agreements" means, collectively, the Cole Subordination
Agreement, the NOROB Investor Subordination Agreements, the Schwartz
Subordination Agreement and the SOLA Subordination Agreement.

          "Subsidiaries" means any Person of which each Obligor directly or
indirectly through one or more intermediaries (i) owns ownership interests or
stock having ordinary voting power to elect a majority of the Board of Directors
or equivalent managing body of such Person or (ii) owns more than Fifty Percent
(50%) of any other equity or ownership interest in such Person.

          "Tax Expense" means Liabilities of Obligors for local, state, and
federal income taxes.

          "Tangible Net Worth" means the excess of assets over Liabilities plus
Subordinated Debt as would be shown on a combined balance sheet of Obligors,
prepared in accordance with GAAP, consistently applied, provided, however, such
amounts are to be net of amounts carried on the books of Obligors for any of the
following: (A) unamortized debt discount and expense, (B) goodwill (including
any excess cost over net assets of business acquired), experimental or
organization expenses and other like reserves and intangible assets.

          "Term Loan Closing Fee" means the Term Loan Closing Fee provided for
in Paragraph 2.2.4 hereof.

          "Term Interest Rate" means Nine Percent (9%) per annum.

          "Term Loan" means the loan extended by Lender to Borrowers pursuant to
Paragraph 2.2.1 of this Agreement, as the same may hereafter be modified or
amended.



          "Term Loan Termination Date" means October 31, 2007 or such other date
as Lender and Borrowers may, from time to time, mutually determine.

          "Term Note" means that certain promissory note in the form of EXHIBIT
J hereto executed by Borrowers in favor of Lender evidencing Borrowers'
obligation to repay the Term Loan, and any amendments or restatements thereof or
allonges thereto.

          "Transactions" means all of the transactions contemplated by the
Transactional Documents.

          "Transactional Document" individually and "Transactional Documents"
mean collectively, the Cole Documents, the NOROB Investor Documents, the
Schwartz Documents, the SOLA Documents and the Acquisition Documents, together
with all documents, instruments and agreements executed or delivered in
connection therewith and related thereto.

          "Twelve Month Period" means, as of any date, the twelve-month period
ending on such date.

          "UCC" means the Uniform Commercial Code as enacted in the State of New
Jersey and in effect from time to time.

          "Unfunded Capital Expenditures" mean Capital Expenditures which are
not fully funded through Obligors' incurring additional Debt.

          "Vision One" means Vision One, a national vision care program owned by
Cole Vision Corporation.

          "Vision One Agreement" means that certain Participating Provider
Agreement dated as of June 1, 1997 between U.S. Vision and Cole Vision
Corporation, a Delaware corporation, as amended by that certain amendment of
even date herewith.

EX-10.28

                                                                   Exhibit 10.28

                                 FIRST AMENDMENT
                                       TO
                           LOAN AND SECURITY AGREEMENT
                                       AND
                           REAL ESTATE LOAN AGREEMENT

     THIS First Amendment to Loan and Security Agreement and Real Estate Loan
Agreement (collectively, the "First Amendment") is dated as of this 30th day of
May, 2003, by and among COMMERCE BANK, N.A. (the "Lender") and U.S. VISION,
INC., a Delaware corporation ("US Vision"), STYL-RITE OPTICAL MFG. CO., INC., a
Florida corporation ("Styl"), USV OPTICAL, INC., a Texas corporation ("USV"),
and U.S. VISION HOLDINGS, INC., a Delaware corporation ("Holdings" and together
with US Vision, Styl and USV, each individually, a "Borrower" and, collectively,
the "Borrowers"), and 9072-8411 QUEBEC, INC. d/b/a "Optik Pro Baie 2000" ("Optik
Pro"), and HEALTH EYE CARE STATISTICS, INC. ("Health", and together with Optik
Pro, each individually, a "Guarantor" and, collectively, the "Guarantors"; each
Borrower and Guarantor, individually, an "Obligor" and, collectively, the
"Obligors").

                                   BACKGROUND

     The Obligors and the Lender are parties to that certain Loan and Security
Agreement, dated as of October 30, 2002 (said Loan and Security Agreement, as
amended, supplemented, modified and/or restated, being referred to herein as the
"Loan Agreement"). All initially capitalized terms used herein and not otherwise
defined herein shall have the same meaning as ascribed to such terms in the Loan
Agreement.

     US Vision and the Lender are also parties to that certain Loan and Security
Agreement, dated as of September 23, 1999 (said Loan and Security Agreement, as
amended, supplemented, modified and/or restated, being referred to herein as the
"Real Estate Loan Agreement"), and a First Purchase Money Mortgage, Assignment
of Leases, Rents and Other Income and Security Agreement (the "Mortgage", and
together with the Real Estate Loan Agreement, the "Mortgage Documents", and,
together with the Loan Agreement, collectively, the "Loan Documents").

     The Obligors have advised the Lender that pursuant to that certain Stock
Purchase Agreement, dated as of May 30, 2003, by and among US Vision and certain
stockholders of US Vision namely, George E. Norcross, III, an individual, John
C. Norcross, an individual, Donald W. Norcross, an individual, Philip A.
Norcross, an individual, Sandra T. Norcross, an individual, Joseph J. Roberts,
Jr., an individual, Robert Weil, an individual, Susan D. Hudson, an individual,
Indiana Pacific Capital Trust, a New Jersey trust ("IPCT"), and William A.
Schwartz, Jr., an individual (such individuals, together with IPCT, the "Selling
Stockholders") and Palisade Concentrated Equity Partnership, L.P. ("Palisade")
(the "Stock Purchase Agreement"): (i) the Selling Shareholders will sell



6,349,644 shares of US Vision common stock to Palisade; and (ii) Palisade will
purchase from US Vision 3,894,258 newly issued shares of US Vision common stock
contemporaneously with its purchase of the shares of common stock from the
Selling Stockholders. The Stock Purchase Agreement, the agreements ancillary
thereto, including, but not limited to, the Stockholders' Agreement dated as of
the date hereof, by and among US Vision, George E. Norcross, III, William A.
Schwartz, Jr., Gayle E. Schmidt, George T. Gorman, Carmen J. Nepa, III and
Palisade (the "Stockholders' Agreement"), are herein collectively referred to as
the "Subject Transactional Documents", and the transactions contemplated by the
Subject Transactional Documents are herein collectively referred to as the
"Subject Transactions."

     The Obligors have requested that the Lender: (i) consent to the Subject
Transactions; and (ii) make certain amendments and other modifications to the
Loan Documents, and Lender has agreed to do so, expressly, subject to the terms,
conditions and limitations set forth herein.

     NOW, THEREFORE, in consideration of the mutual covenants and premises set
forth herein, and for other good and valuable consideration, the receipt and
sufficiency of which is hereby mutually acknowledged, the parties hereto,
intending to be legally bound hereby, agree as follows:

     1. Lender's Consents. Provided that all of the conditions precedent with
respect to the effectiveness of this First Amendment are fulfilled to the
reasonable satisfaction of the Lender and that each of the representations and
warranties of the Borrowers set forth herein and in each of the other Loan
Documents, are true and correct in all material respects as of the date hereof,
subject to the provisions set forth below, upon the consummation of the Subject
Transactions pursuant to the Subject Transactional Documents, Lender consents to
the items set forth below, and acknowledges that any Events of Default which
would otherwise occur under the Loan Documents and the Mortgage Documents but
for the granting of such consents, are hereby waived, but only to the extent
necessary to effectuate the Subject Transactions without the incurrence of such
Events of Default.

          1.1 Special Advance. Borrowers shall be deemed to have requested an
Advance under the Line of Credit in accordance with the terms of Paragraph 2.1.3
of the Loan Agreement in the amount of Three Million ($3,000,000) Dollars
contemporaneously with the closing of the Subject Transactions (the "Special
Advance"), notwithstanding the provisions of Paragraph 2.1.1 thereof to the
contrary, the proceeds of which shall prepay Borrower's obligations under the
Term Loan in the amount of the Special Advance. The proceeds of the Special
Advance shall be applied by the Lender against the principal portion of the
Indebtedness under the Term Loan in inverse order of maturity, i.e. applying
such Special Advance payment as a credit against the last installments of
principal then due under the Term Loan.

          1.2 Change in Control. Notwithstanding the provisions of Paragraph
7.1.6 of the Loan Agreement, Section 6(f) of the Real Estate Loan Agreement, and


                                        2



Sections 11 and 22(d) of the Mortgage to the contrary, upon the consummation of
the Subject Transactional Documents, Lender consents to:

               1.2.1 The Subject Transactions and the change in beneficial or
legal ownership of the Obligors, including, but not limited to, any change in
the shareholders, or their respective interests, as contemplated by the
consummation of the Subject Transactions; and

               1.2.2 Pursuant to the Stockholders' Agreement, US Vision,
exercising all its rights, and performing all its obligations, to purchase from
George E. Norcross, III, all shares (the "Put and Call Shares") of US Vision's
common stock not sold by George E. Norcross, III to Palisade at the Closing (as
defined in the Stock Purchase Agreement) so long as the aggregate consideration
to be paid by US Vision for the Put and Call Shares does not exceed One Million
Three Hundred Seventy-Nine Thousand Six Hundred Fifty-Eight ($1,379,658) Dollars
and the transactions contemplated by this Paragraph 1.2.2 are otherwise
consummated pursuant to the provisions of either Section 5 or Section 6 of the
Stockholders' Agreement.

          1.3 Loans to Management. Notwithstanding the provisions of Sections
7.1.10 or 7.1.17 of the Loan Agreement to the contrary, upon the consummation of
the Subject Transactions, Lender consents to the extension of credit by US
Vision to William A. Schwartz, Jr., Gayle Schmidt, George Gorman and Carmen Nepa
in an aggregate principal amount not to exceed One Hundred Thousand ($100,000)
Dollars, with each such extension of credit to be evidenced repaid and secured
pursuant to the provisions a Secured Promissory Note substantially in the form
of Exhibit "A" hereto (collectively, the "Management Loans"; and all documents,
instruments and agreements evidencing or securing the management Loans,
collectively, the "Management Debt Instruments"), provided that the Management
Debt Instruments are assigned to the Lender as additional Collateral for the
Obligations pursuant to the provisions of the Assignment of Debt Instruments.

          1.4 NOROB Subordination Agreements. Notwithstanding the provisions of
the respective NOROB Investor Subordination Agreements to the contrary, upon the
consummation of the Subject Transactions and pursuant to Section 1.3(a) of the
Stock Purchase Agreement, Lender consents to the payment in full by US Vision of
the respective NOROB Notes in an aggregate amount not to exceed Three Million
Four Hundred Thousand ($3,400,000) Dollars, provided that upon the payment
thereof all of NOROB Investor Notes are irrevocably cancelled with evidence
thereof delivered to the Lender in form and substance reasonably acceptable to
the Lender.

          1.5 Schwartz Incentive Stock Option Agreement. Notwithstanding the
provisions of the Schwartz Subordination Agreement or Paragraph 7.1.12 of the
Loan Agreement to the contrary, upon the consummation of the Subject
Transactions and pursuant to Section 1.3(b) of the Stock Purchase Agreement,
Lender consents to the payment in full by US Vision of the Option Payment (as
defined in the Stock Purchase Agreement) to William A. Schwartz, Jr., in an
amount not to exceed One Hundred


                                       3



Eighty-Six Thousand ($186,000) Dollars, provided that upon the payment thereof
all obligations of any of the Obligors under the Schwartz Incentive Stock Option
Agreement are irrevocably cancelled with evidence thereof delivered to the
Lender in form and substance acceptable to the Lender.

          1.6 Schwartz Sale Bonus. Notwithstanding the provisions of the
Schwartz Subordination Agreement or Paragraphs 7.1.10 and 7.1.12 of the Loan
Agreement to the contrary, upon the consummation of the Subject Transactions,
pursuant to Section 1.3(b) of the Stock Purchase Agreement, Lender consents to
the payment in installments by US Vision to William A. Schwartz, Jr. over a
30-month period, a Sale Bonus (as defined in the Stock Purchase Agreement) in an
amount not to exceed Seven Hundred Fifty Thousand ($750,000) Dollars, provided
that all obligations with respect thereto under the Schwartz Employment
Agreement dated April 2, 1998, as amended by the First Amendment thereto dated
September 23, 2002 (collectively, the "Original Schwartz Employment Agreement"),
are irrevocably cancelled with evidence thereof delivered to the Lender in form
and substance acceptable to the Lender and replaced by those obligations set
forth in Section 1.3(b) of the Stock Purchase Agreement.

          1.7 Legal Fees and Expenses of Selling Shareholders and Palisade.
Notwithstanding the provisions of Paragraphs 7.1.10 and 7.1.12 of the Loan
Agreement to the contrary, upon the consummation of the Subject Transactions,
Lender consents to the payment by US Vision of certain legal fees and expenses
incurred by the Selling Shareholders and Palisade, respectively, in an amount
not to exceed One Hundred Fifty Thousand ($150,000) Dollars in the aggregate.

          1.8 Payment of the Cole Note. Notwithstanding the provisions of the
Cole Subordination Agreement to the contrary, US Vision may pay the Cole Note in
accordance with the terms thereof so long as: (i) no Event of Default or
Potential Event of Default has occurred and is continuing on the date of the
payment of the Cole Note; (ii) but for the restrictions in the Cole
Subordination Agreement, the payment of the Cole Note would not cause the
occurrence of an Event of Default; (iii) no more than Four Million ($4,000,000)
Dollars of principal together with accrued interest thereon is paid in respect
of the Cole Note in consideration of the full and complete satisfaction of the
obligations of any of the Obligors to Cole National in respect of the Cole Note,
with evidence thereof to be delivered to the Lender in form and substance
acceptable to the Lender within ten (10) days of the payment thereof; and (iv)
Palisade shall have contributed no less than Two Million ($2,000,000) of equity
to US Vision in connection with the Subject Transactions, net of all
disbursements contemplated under the Subject Transactional Documents, and prior
to the payment of the Cole Note, either Palisade shall, or shall cause another
investor reasonably acceptable to the Lender to, have contributed to US Vision
no less than an additional Two Million ($2,000,000) Dollars as equity, or as
subordinated debt, which subordinated debt shall be upon such terms and
conditions as are acceptable to the Lender.

     2. Amendments to the Loan Agreement. The Loan Agreement is hereby amended
as follows:


                                       4



          2.1 The Loan Agreement is hereby amended by adding the following as
Section 2.2.8 of the Loan Agreement:

          2.2.8 Mandatory Prepayment under the Term Loan. Under the terms of
          that certain Customer Alliance Agreement, dated April 15, 2003, by and
          between US Vision and Bausch & Lomb, Inc. ("B&L" and the "B&L Supply
          Agreement", respectively), B&L provided US Vision with extended
          payment terms with respect to the first Three Million ($3,000,000)
          Dollars of contact lenses purchased by US Vision from B&L under the
          terms of the B&L Supply Agreement (the "B&L Deferred Account
          Payable"). The B&L Deferred Account Payable is subordinated to the
          Indebtedness due to the Lender under the Loan Documents pursuant to
          the provisions of that certain Subordination Agreement dated as of
          April 15, 2003, by and among US Vision, B&L and the Lender (the "B&L
          Subordination Agreement"). In the absence of the provisions of the
          Subordination Agreement and the terms of the B&L Deferred Account
          Payable, all B&L invoices for contact lenses purchased by US Vision
          from B&L under the terms of the B&L Supply Agreement would become due
          and payable by US Vision within sixty (60) days after the date of each
          such invoice. Borrowers shall pay to Lender all underlying invoices of
          the B&L Deferred Account Payable which would have otherwise been due
          to B&L if not for the B&L Deferred Account Payable when and as
          otherwise due, the aggregate amount of such payments not to exceed the
          full amount of the B&L Deferred Account Payable. The B&L Payments
          shall be applied by the Lender against the principal portion of the
          Indebtedness under the Term Loan in inverse order of maturity, i.e.
          applying such B&L Payments as a credit against the last installments
          of principal then due under the Term Loan.

          2.2. The following definitions set forth in Exhibit "A" to the Loan
Agreement are each hereby amended and restated in their respective entirety as
follows:

          "Subordinated Debt" means any Debt of the Obligors subordinated in
          right and time of payment and performance of the Obligations pursuant
          to the provisions of the respective Subordination Agreements,
          including, without limitation, the Debt evidenced by the Cole Note,
          the Schwartz Employment Agreement and Section 1.3(b) of the Stock
          Purchase Agreement, the Stockholders' Agreement, the SOLA Supply
          Agreement, the Moulin Frame Supply Agreement (as defined in the Moulin
          Subordination Agreement), and the B&L Supply Agreement.

          "Subordination Agreements" means, collectively, (i) the Cole
          Subordination Agreement, (ii) the Schwartz Subordination Agreement,
          (iii) the SOLA Subordination Agreement, (iv) the Subordination
          Agreement dated as of January 31, 2003, by and among Borrowers,


                                       5



          Lender and Moulin Holdings (H.K.) Co. LTD, and (v) the B&L
          Subordination Agreement.

          2.3 The following definitions are hereby added to the Loan Agreement,
as amended by this First Amendment:

          "Assignment of Debt Instruments" shall mean that certain Assignment of
          Debt Instruments of even date herewith by and among US Vision, William
          A. Schwartz, Jr., Gayle Schmidt, George Gorman, Carmen Nepa and Lender
          in respect of the assignment of the Management Debt Instruments.

          "Management Debt Instruments" shall have the same meaning as ascribed
          to such term in this First Amendment.

     3. Ratification of Loan Documents. Except as expressly provided herein,
each of the terms, conditions and provisions set forth in the respective Loan
Documents are hereby ratified and confirmed herein in full.

     4. Representations and Warranties of the Borrower. Each of the Obligors
represents and warrants to Lender each and all of the following:

          4.1 Each and all of the representations and warranties as set forth in
the Loan Agreement, the Mortgage Documents and the other Loan Documents are
true, correct and complete in all material respects as of the date hereof except
as such representations and warranties expressly relate to a different date. It
is the express intention of the Obligors to hereby ratify, confirm and republish
such representations and warranties as if set forth herein in full;

          4.2 With respect to each of the Obligors none of their respective
articles of incorporation, bylaws or other organizational documents, nor their
respective qualifications to do business have changed in any respect since the
certification thereof was delivered to the Lender on or about October 20, 2002
in connection with the closing under the Loan Agreement and that each is
presently in full force and effect;

          4.3 Each Obligor has full power and authority to execute and deliver
this First Amendment and the Loan Documents, as amended hereby, and this First
Amendment and the other Loan Documents to be executed and delivered in
connection herewith constitute the legal, valid and binding joint and several
obligations of the Obligors parties thereto, enforceable against each of the
Obligors in accordance with their respective terms;

          4.4 No authorization, approval, consent, or other action by, notice
to, or filing with, any Governmental Agency or other Person (other than the
consent of the respective Board of Directors of each Obligor), is required for
the execution, delivery or performance by Obligors of this First Amendment;

          4.5 Subject Transactional Documents.


                                       6



               4.5.1 Upon the execution of the Subject Transactional Documents
and at the Closing (as defined in the Stock Purchase Agreement), true, correct
and complete copies of each of the Subject Transactional Documents will be
delivered to Lender pursuant to Article 5 hereof, and each will be in full force
and effect in the respective forms thereof as certified and delivered to the
Lender and will not have been terminated or amended nor to the knowledge of any
of the Obligors are any such actions pending or threatened;

               4.5.2 Obligors have the full corporate power and authority to
execute and deliver each of the Subject Transactional Documents and to
consummate all of the Subject Transactions. The execution and delivery by
Obligors of the Subject Transactional Documents and performance by Obligors of
the Subject Transactions have been duly authorized by the Board of Directors of
each of the Obligors and no other corporate action on the part of any Obligor is
necessary to authorize such execution, delivery and performance. Upon the
execution of the Subject Transactional Documents and at the Closing (as defined
in the Stock Purchase Agreement), each Subject Transactional Document will be a
legal, valid and binding obligation of the Obligors which are parties thereto,
enforceable against each such Obligor in accordance with its respective terms,
except to the extent that enforceability may be limited by applicable
bankruptcy, insolvency, moratorium or other similar laws affecting the
enforcement of creditor's rights generally and by the effect of general
principles of equity (regardless of whether enforcement is considered in
proceeding at law or in equity;

               4.5.1 No Obligor has any knowledge of any existing facts or
circumstances that may cause Obligors to be unable to consummate the Subject
Transactions;

          4.6 Legal Compliance.

               4.6.1 Each Obligor has complied with all applicable laws
(including rules, regulations, codes, plans, injunctions, judgments, orders,
decrees, rulings, and charges thereunder) of federal, state, local, and foreign
governments (and all agencies thereof, including, without limitation, the SEC
and all applicable state securities regulatory agencies (each a "Blue Sky
Agency"), and no action, suit, proceeding, hearing, investigation, charge,
complaint, claim, demand, audit, or notice has been filed or commenced, or to
the knowledge of any of the Obligors threatened, against any Obligor, or any of
their respective officers, directors or shareholders, alleging any failure so to
comply. No disciplinary proceeding with respect to any Obligor or any Obligor's
respective officers is pending before the SEC or any Blue Sky Agency. To the
knowledge of the Obligors, there are no facts which, if known by a potential
claimant or Governmental Authority, could give rise to a claim or proceeding
which, if asserted or conducted, the results would be unfavorable to any of the
Obligors, and

               4.6.2 To the knowledge of the Obligors, none of the Subject
Transactional Documents contains an untrue statement of a material fact or omit
to state a


                                       7



material fact required to be stated therein or necessary to make the statements
therein, in light of the circumstances under which they were made, not
misleading; and

          4.7 Accuracy of Representations; No Default. The information set forth
herein and on each of the Schedules hereto, and in each of the other Loan
Documents is complete and accurate in all material respects and contains full
and complete disclosure of all pertinent information in connection with
Obligors. None of such information contains any untrue statement of a material
fact or omits to state a material fact necessary to make the information
contained herein or therein not misleading or not incomplete. No Event of
Default or Potential Default hereunder, or under any other Loan Document, has
occurred.

     5. Conditions Precedent to the effectiveness of the Amendments and to
Lender's Consents. As a condition precedent to the effectiveness of this First
Amendment, Obligors shall deliver or cause to be delivered to Lender, executed
where applicable and in form and substance satisfactory to Lender and its
counsel, in addition to this First Amendment, the following documents,
instruments and agreements and the following conditions shall have been
satisfied:

          5.1 The representations and warranties set forth herein and in each of
the other Loan Documents shall be true and correct in all material respects on
and as of the date hereof with the same effect as though made on and as of such
date, except as such representations and warranties relate to a different date;

          5.2 No Event of Default or Potential Default shall have occurred and
be continuing hereunder or under any other Loan Document;

          5.3 No Material Adverse Change shall have occurred since October 30,
2002;

          5.4 As contemplated by Section 1.1 hereof, the Special Advance shall
have been paid to Lender with the proceeds thereof used to reduce the
Indebtedness under the Term Loan in like amount;

          5.5 As contemplated by Section 1.4 hereof, evidence satisfactory to
the Lender that the NOROB Notes have been irrevocably cancelled;

          5.6 As contemplated by Section 1.5 hereof, evidence satisfactory to
the Lender that the Schwartz Incentive Stock Option Agreement are irrevocably
cancelled;

          5.7 As contemplated by Section 1.6 hereof, evidence satisfactory to
the Lender that the obligations with respect to the Sale Bonus under the
Original Schwartz Employment Agreement have been irrevocably cancelled, as the
same may have been replaced by those obligations under Section 1.3(b) of the
Stock Purchase Agreement;

          5.8 As contemplated by Section 2.1 hereof, to the extent that any
portion of the accrued B&L Deferred Account Payable is in excess of sixty (60)
days from


                                       8



invoice, such amount shall have been paid and applied as a credit to the
Indebtedness under the Term Loan;

          5.9 The execution and deliver of the Assignment of Debt Instruments,
together with the delivery of the original Management Debt Instruments duly
endorsed in favor of the Lender;

          5.10 Receipt at the Closing (as defined in the Stock Purchase
Agreement) copies of all completely executed Subject Transactional Documents
certified by all parties thereto to the Lender as being true, correct and
complete copies thereof;

          5.11 Confirmation in form and substance acceptable to the Lender that
the Subject Transactions have been consummated, other than those transactions
contemplated by Sections 1.8 and 2.1 hereof;

          5.12 A certificate of the Secretary of each Obligor, certifying to and
attaching true, correct and complete copies of (i) resolutions of such Obligor's
Board of Directors authorizing the execution, delivery and performance of the
transactions contemplated by this First Amendment and the other Loan Documents
contemplated hereby, (ii) resolutions of such Obligor's Board of Directors
authorizing the execution , delivery and performance of the Subject
Transactional Documents and the Subject transaction contemplated thereby, and
(iii) incumbency and signatures of the officers of such Obligor authorized to
execute and deliver the Loan Documents;

          5.13 A certificate executed by each of the Selling Shareholders, in
form and substance satisfactory to the Lender, certifying to the Lender that at
the closing of the Transactions as contemplated by the Transactional Documents
(each as defined in the Loan Agreement, dated as of October 30, 2002), none of
the Selling Shareholders had received or had any knowledge of any offers to
acquire all, or substantially all of, the capital stock or the business of US
Vision, from the Selling Shareholders or US Vision, other than as disclosed in
US Vision's Proxy Statement to its shareholders concerning the approval of the
Transactions;

          5.14 Opinions of all counsel delivered on behalf of any party under
any of the Subject Transactional Documents, addressed to the Lender;

          5.15 An opinion of Sayles, Lidji & Werbner addressed to Lender,
substantially in the form of those delivered in connection with the closing
under the Loan Agreement and contemplating the amendments to the Loan Documents
as contemplated by this First Amendment, in form and substance satisfactory to
Lender in its sole and absolute discretion;

          5.16 Payment of all Lender's Costs in connection with the negotiation,
drafting and closing of the transactions contemplated hereby accrued to the date
of the execution hereof, together with all reasonably anticipated Lender's Costs
to be reasonably incurred in connection with all post closing items. Obligors
authorize Lender


                                       9



to deduct such Lender's Costs from the Line and agree to indemnify and hold
Lender harmless from and against any and all claims, other than claims arising
from Lender's willful misconduct or gross negligence, for any such Lender's
Costs; and

          5.17 Obligors will have delivered to Lender such additional documents
or instruments as Lender may reasonably require.

     6. Miscellaneous. Other than Section 9.5, the provisions of Article 9 of
the Loan Agreement are hereby incorporated herein and made a part hereof as if
set forth herein in full, and all references therein to the Loan Agreement shall
be deemed to include the Loan Agreement, as amended by this First Amendment.
This First Amendment may be executed in counterpart and delivered by facsimile,
each of which shall constitute and original and collectively one and the same
agreement.


                                       10



     IN WITNESS WHEREOF, intending to be legally bound hereby, Obligors and
Lender have executed this Agreement under seal, intending to be legally bound
hereby, the day and year first above written.

BORROWERS / OBLIGORS:                   GUARANTORS / OBLIGORS:

U.S.VISION, INC.                        9072-8411 QUEBEC,
                                        INC. d/b/a "Optik
                                        Pro Baie 2000"


By: /s/ Carmen J. Nepa III              By: /s/ Carmen J. Nepa III
    ---------------------------------       ------------------------------------
    Carmen J. Nepa III,                     Carmen J. Nepa III,
    Senior Vice President and               Senior Vice President and
    Chief Financial Officer                 Chief Financial Officer


STYL-RITE OPTICAL MFG. CO., INC.        HEALTH EYE CARE
STATISTICS, INC.


By: /s/ William A. Schwartz, Jr.        By: /s/ William A. Schwartz, Jr.
    ----------------------------            ----------------------------
    William A. Schwartz, Jr.,               William A. Schwartz, Jr.,
    President                               President


USV OPTICAL, INC.                       COMMERCE BANK, N.A.


By: /s/ Carmen J. Nepa III              By: /s/ Gerard L. Grady
    ----------------------                  -------------------
    Carmen J. Nepa III,                     Gerard L. Grady,
    Senior Vice President and               Vice President
    Chief Financial Officer


U.S. VISION HOLDINGS, INC.


By: /s/ Carmen J. Nepa III
    ----------------------
    Carmen J. Nepa III,
    Chief Financial Officer


                                       11

EX-10.29

                                                                   Exhibit 10.29

                                SECOND AMENDMENT
                                       TO
                           LOAN AND SECURITY AGREEMENT

     THIS Second Amendment to Loan and Security (the "Second Amendment") is
dated as of this 5th day of April, by and among COMMERCE BANK, N.A. (the
"Lender") and U.S. VISION, INC., a Delaware corporation ("US Vision"), STYL-RITE
OPTICAL MFG. CO., INC., a Florida corporation ("Styl"), USV OPTICAL, INC., a
Texas corporation ("USV"), and U.S. VISION HOLDINGS, INC., a Delaware
corporation ("Holdings" and together with US Vision, Styl and USV, each
individually, a "Borrower" and, collectively, the "Borrowers"), and 9072-8411
QUEBEC, INC. d/b/a "Optik Pro Baie 2000" ("Optik Pro"), and HEALTH EYE CARE
STATISTICS, INC. ("Health", and together with Optik Pro, each individually, a
"Guarantor" and, collectively, the "Guarantors"; each Borrower and Guarantor,
individually, an "Obligor" and, collectively, the "Obligors").

                                   BACKGROUND

     The Obligors and the Lender are parties to that certain Loan and Security
Agreement, dated as of October 30, 2002 (the "Initial Loan Agreement"), as
amended by the First Amendment thereto dated as of May 30, 2003 (the "First
Amendment" and together with the Initial Loan Agreement, collectively, the "Loan
Agreement"). All initially capitalized terms used herein and not otherwise
defined herein shall have the same meaning as ascribed to such terms in the Loan
Agreement.

     US Vision and the Lender are also parties to that certain Loan and Security
Agreement, dated as of September 23, 1999 (said Loan and Security Agreement, as
amended, supplemented, modified and/or restated, being referred to herein as the
"Real Estate Loan Agreement"), and a First Purchase Money Mortgage, Assignment
of Leases, Rents and Other Income and Security Agreement (the "Mortgage", and
together with the Real Estate Loan Agreement, collectively, the "Mortgage
Documents", and, together with the Loan Agreement, collectively, the "Loan
Documents").

     The Obligors have requested that the Lender: (i) extend the Line
Termination Date; (ii) amend certain financial covenants as set forth in the
Loan Documents; (iii) seek certain relief from mandatory pre-payment of the Term
Loan from the proceeds of B&L Deferred Account Payable; and (iv) make certain
amendments and other modifications to the Loan Documents, and Lender has agreed
to do so, upon the condition precedent that Palisade Concentrated Equity
Partnership, L.P., make an additional equity contribution to USVision in the
amount of no less than One Million Five Hundred Thousand ($1,500,000) Dollars,
and expressly, subject to such other the terms, conditions and limitations
hereinafter set forth.



     NOW, THEREFORE, in consideration of the mutual covenants and premises set
forth herein, and for other good and valuable consideration, the receipt and
sufficiency of which is hereby mutually acknowledged, the parties hereto,
intending to be legally bound hereby, agree as follows:

     1. Amendments to the Loan Agreement. Subject to the fulfillment of all of
the conditions precedent to the effectiveness of this Second Amendment, as set
forth in Section 5 hereof, the Loan Agreement is further amended as follows:

          1.1 Amendments to Certain Financial Covenants. Paragraphs 6.1.25.1,
6.1.25.2, 6.1.25.3 and 6.1.25.4 are respectively amended and restated in their
entirety as follows:

          6.1.25.1 Minimum Tangible Net Worth. Maintain a minimum Tangible Net
          Worth, measured as of the last day of each month, of not less than
          Twenty Million Five Hundred Thousand Dollars ($20,500,000) for the
          period beginning on January 31, 2004 and thereafter;

          6.1.25.2 Minimum Current Ratio. Maintain a minimum Current Ratio,
          measured as of the last day of each month, of not less than (i) 1.30
          to 1.00 for the period beginning on January 31, 2003 and ending on
          December 31, 2004; (ii) 1.40 to 1.00 for the period beginning on
          January 31, 2005 and ending on December 31, 2005; and (iii) 1.50 to
          1.00 for the period beginning on January 31, 2006 and thereafter;

          6.1.25.3 Minimum Debt Coverage Ratio. Maintain a minimum Debt Coverage
          Ratio, measured on a rolling twelve-month basis as of the last day of
          each month, of not less than 1.10 to 1.00 for the period beginning on
          January 31, 2005 and thereafter;

          6.1.25.4 Minimum Fixed Charge Coverage Ratio. Maintain a minimum Fixed
          Charge Coverage Ratio, measured on a rolling twelve-month basis as of
          the last day of each month, of not less than 1.00 to 1.00 for the
          period beginning on January 31, 2005 and thereafter;

          1.2 Deletion of Mandatory Prepayment of B&L Deferred Accounts Payable
under the Term Loan. The last two sentences of Paragraph 2.2.8 of the Loan
Agreement as set forth in the First Amendment requiring the Borrowers to prepay
principal under the Term Loan in an amount equal to the proceeds of B&L Deferred
Account Payable are deleted and Borrowers are no longer required to make such
prepayments of principal under the Term Loan.

          1.3 Extension of Line Termination Date. The definition of the Line
Termination Date is hereby amended and restated as follows:

          "Line Termination Date" means (i) October 31, 2005, or as extended


                                        2



          pursuant to Paragraph 2.1.10 above [sic. the Initial Loan Agreement],
          or (ii) such earlier date as Borrowers shall determine by notice to
          Lender, or (iii) such other date as Lender and Borrowers may, from
          time to time, mutually determine.

     2. Additional Equity Contribution of Palisade. As a condition precedent to
the effectiveness of the amendments set forth in Section 1 of this Second
Amendment, Palisade shall have made an additional equity contribution to
USVision in the amount of no less than One Million Five Hundred Thousand
($1,500,000) Dollars (the "Additional Palisade Equity Contribution") and each of
Palisade and USVision shall deliver to the Lender such confirmation thereof upon
the contribution thereof and from time-to-time thereafter, as may be reasonably
acceptable to the Lender.

     3. Ratification of Loan Documents. Except as expressly provided herein,
each of the terms, conditions and provisions set forth in the respective Loan
Documents are hereby ratified and confirmed herein in full.

     4. Representations and Warranties of the Borrower. Each of the Obligors
represents and warrants to Lender each and all of the following:

          4.1 Each and all of the representations and warranties as set forth in
the Loan Agreement, the Mortgage Documents and the other Loan Documents are
true, correct and complete in all material respects as of the date hereof except
as such representations and warranties expressly relate to a different date. It
is the express intention of the Obligors to hereby ratify, confirm and republish
such representations and warranties as if set forth herein in full;

          4.2 With respect to each of the Obligors none of their respective
articles of incorporation, bylaws or other organizational documents, nor their
respective qualifications to do business have changed in any respect since the
certification thereof was delivered to the Lender on or about October 20, 2002
(except as may have otherwise been amended or modified in connection with the
transactions contemplated by the First Amendment and heretofore delivered to the
Lender) in connection with the closing under the Loan Agreement and that each is
presently in full force and effect;

          4.3 Each Obligor has full power and authority to execute and deliver
this Second Amendment and the other Loan Documents, as amended hereby, and this
Second Amendment and the other Loan Documents to be executed and delivered in
connection herewith constitute the legal, valid and binding joint and several
obligations of the Obligors parties thereto, enforceable against each of the
Obligors in accordance with their respective terms;

          4.4 No authorization, approval, consent, or other action by, notice
to, or filing with, any Governmental Agency or other Person (other than the
consent of the respective Board of Directors of each Obligor), is required for
the execution, delivery or performance by Obligors of this Second Amendment;


                                        3



          4.5 Each Obligor has complied with all applicable laws (including
rules, regulations, codes, plans, injunctions, judgments, orders, decrees,
rulings, and charges thereunder) of federal, state, local, and foreign
governments (and all agencies thereof, including, without limitation, the SEC
and all applicable state securities regulatory agencies (each a "Blue Sky
Agency"), and no action, suit, proceeding, hearing, investigation, charge,
complaint, claim, demand, audit, or notice has been filed or commenced, or to
the knowledge of any of the Obligors threatened, against any Obligor, or any of
their respective officers, directors or shareholders, alleging any failure so to
comply. No disciplinary proceeding with respect to any Obligor or any Obligor's
respective officers is pending before the SEC or any Blue Sky Agency. To the
knowledge of the Obligors, there are no facts which, if known by a potential
claimant or Governmental Authority, could give rise to a claim or proceeding
which, if asserted or conducted, the results would be unfavorable to any of the
Obligors; and

          4.6 Accuracy of Representations; No Default. Except as set forth
amended and restated Schedules 5.1.5 [Leases] and 5.1.17 [Stock Ownership], each
of which are attached hereto and made a part hereof, and with respect to
Schedule 5.1.6 [Sales Volumes by Location], except as otherwise previously
disclosed to the Lender by Borrowers financial reporting to the Lender, the
information set forth herein and on each of the Schedules hereto, and in each of
the other Loan Documents is complete and accurate in all material respects and
contains full and complete disclosure of all pertinent information in connection
with Obligors. None of such information contains any untrue statement of a
material fact or omits to state a material fact necessary to make the
information contained herein or therein not misleading or not incomplete. No
Event of Default or Potential Default hereunder, or under any other Loan
Document, has occurred.

     5. Conditions Precedent to the effectiveness of the Amendments and to
Lender's Consents. As conditions precedent to the effectiveness of this Second
Amendment, Obligors shall deliver or cause to be delivered to Lender, executed
where applicable and in form and substance satisfactory to Lender and its
counsel, in addition to this Second Amendment, the following documents,
instruments and agreements and the following conditions shall have been
satisfied:

          5.1 The representations and warranties set forth herein and in each of
the other Loan Documents shall be true and correct in all material respects on
and as of the date hereof with the same effect as though made on and as of such
date, except as such representations and warranties relate to a different date;

          5.2 No Event of Default or Potential Default shall have occurred and
be continuing hereunder or under any other Loan Document;

          5.3 No Material Adverse Change shall have occurred since October 31,
2003;

          5.4 Provided that Lender has advised the Borrowers that Lender has
obtained the approvals contemplated by Section 5.7 hereof, and has either
obtained or has waived the requirements set forth in Section 5.8 hereof,
Palisade shall have made the


                                        4



Additional Palisade Equity Contribution as contemplated by Section 2 hereof, and
each of the USVision and Palisade shall have delivered to the Lender confirming
evidence as may be reasonably acceptable to the Lender;

          5.5 A certificate of the Secretary of each Obligor, certifying to and
attaching true, correct and complete copies of (i) resolutions of such Obligor's
Board of Directors authorizing the execution, delivery and performance of the
transactions contemplated by this Second Amendment and the other Loan Documents
contemplated hereby, and (ii) incumbency and signatures of the officers of such
Obligor authorized to execute and deliver the Loan Documents;

          5.6 Payment of all Lender's Costs in connection with the negotiation,
drafting and closing of the transactions contemplated hereby accrued to the date
of the execution hereof, together with all reasonably anticipated Lender's Costs
to be reasonably incurred in connection with all post closing items. Obligors
authorize Lender to deduct such Lender's Costs from the Line and agree to
indemnify and hold Lender harmless from and against any and all claims, other
than claims arising from Lender's willful misconduct or gross negligence, for
any such Lender's Costs;

          5.7 The Lender shall have obtained such approvals internal and
otherwise, including, but not limited to the Board of Directors of the Lender
and the Lender's holding company; as are required by law, and as the Lender may
otherwise deem necessary or appropriate;

          5.8 Lender shall have obtained the written consent of each of Lender's
participants in the Loans; and

          5.8 Obligors will have delivered to Lender such additional documents
or instruments as Lender may reasonably require.

     6. Miscellaneous. Other than Section 9.5, the provisions of Article 9 of
the Loan Agreement are hereby incorporated herein and made a part hereof as if
set forth herein in full, and all references therein to the Loan Agreement shall
be deemed to include the Loan Agreement, as amended by the First Amendment and
further amended by this Second Amendment. This Second Amendment may be executed
in counterpart and delivered by facsimile, each of which shall constitute and
original and collectively one and the same agreement.


                                        5



     IN WITNESS WHEREOF, intending to be legally bound hereby, Obligors and
Lender have executed this Agreement under seal, intending to be legally bound
hereby, the day and year first above written.

BORROWERS / OBLIGORS:                   GUARANTORS / OBLIGORS:

U.S. VISION, INC.                       9072-8411 QUEBEC, INC.
                                        d/b/a "Optik Pro Baie 2000"


By: /s/ Carmen J. Nepa III              By: /s/ Carmen J. Nepa III
    ---------------------------------       ------------------------------------
    Carmen J. Nepa III,                     Carmen J. Nepa III,
    Executive Vice President                Executive Vice President
    and Chief Financial Officer             and Chief Financial Officer


STYL-RITE OPTICAL MFG. CO., INC.        HEALTH EYE CARE STATISTICS, INC.


By: /s/ William A. Schwartz, Jr.        By: /s/ William A. Schwartz, Jr.
    ---------------------------------       ------------------------------------
    William A. Schwartz, Jr.,               William A. Schwartz, Jr.,
    President                               President


USV OPTICAL, INC.                       LENDER: COMMERCE BANK, N.A.


By: /s/ Carmen J. Nepa III              By: /s/ Gerard L. Grady
    ---------------------------------       ------------------------------------
    Carmen J. Nepa III,                     Gerard L. Grady,
    Executive Vice President                Vice President
    and Chief Financial Officer


U.S. VISION HOLDINGS, INC.


By: /s/ Carmen J. Nepa III
    ---------------------------------
    Carmen J. Nepa III,
    Chief Financial Officer


                                        6

EX-10.30

                                                                   Exhibit 10.30

                                 THIRD AMENDMENT
                                       TO
                           LOAN AND SECURITY AGREEMENT

     THIS Third Amendment to Loan and Security (the "Third Amendment") is dated
as of this, 31st day of January, 2005, by and among COMMERCE BANK, N.A. (the
"Lender") and U.S. VISION, INC., a Delaware corporation ("US Vision"), STYL-RITE
OPTICAL MFG. CO., INC., a Florida corporation ("Styl"), USV OPTICAL, INC., a
Texas corporation ("USV"), and U.S. VISION HOLDINGS, INC., a Delaware
corporation ("Holdings" and together with US Vision, Styl and USV, each
individually, a "Borrower" and, collectively, the "Borrowers"), and 9072-8411
QUEBEC, INC. d/b/a "Optik Pro Baie 2000" ("Optik Pro"), and HEALTH EYE CARE
STATISTICS, INC. ("Health", and together with Optik Pro, each individually, a
"Guarantor" and, collectively, the "Guarantors"; each Borrower and Guarantor,
individually, an "Obligor" and, collectively, the "Obligors").

                                   BACKGROUND

     The Obligors and the Lender are parties to that certain Loan and Security
Agreement, dated as of October 30, 2002 (the "Initial Loan Agreement"), as
amended by the First Amendment thereto dated as of May 30, 2003 (the "First
Amendment") "), as further amended by the Second Amendment thereto dated as of
April 5, [sic. 2004] (the "Second Amendment", and together with the Initial Loan
Agreement, the First Amendment and the Second Amendment, collectively, the "Loan
Agreement"). All initially capitalized terms used herein and not otherwise
defined herein shall have the same meaning as ascribed to such terms in the Loan
Agreement.

     US Vision and the Lender are also parties to that certain Loan and Security
Agreement, dated as of September 23, 1999 (said Loan and Security Agreement, as
amended, supplemented, modified and/or restated, being referred to herein as the
"Real Estate Loan Agreement"), and a First Purchase Money Mortgage, Assignment
of Leases, Rents and Other Income and Security Agreement (the "Mortgage", and
together with the Real Estate Loan Agreement, collectively, the "Mortgage
Documents", and, together with the Loan Agreement, collectively, the "Loan
Documents").

     The Obligors have requested that the Lender: (i) extend the Line
Termination Date; (ii) amend certain financial covenants as set forth in the
Loan Documents; and (iii) make certain amendments and other modifications to the
Loan Documents, and Lender has agreed to do so, upon the condition precedent
that Palisade Concentrated Equity Partnership, L.P., make an additional equity
contribution to USVision in the amount of no less than Two Million ($2,000,000)
Dollars, and expressly, subject to such other terms, conditions and limitations
hereinafter set forth.



     NOW, THEREFORE, in consideration of the mutual covenants and premises set
forth herein, and for other good and valuable consideration, the receipt and
sufficiency of which is hereby mutually acknowledged, the parties hereto,
intending to be legally bound hereby, agree as follows:

     1. Amendments to the Loan Agreement. Subject to the fulfillment of all of
the conditions precedent to the effectiveness of this Third Amendment, as set
forth in Section 5 hereof, the Loan Agreement is further amended as follows:

          1.1 Amendments to Certain Financial Covenants. Paragraphs 6.1.25.3 and
6.1.25.4 are respectively amended and restated in their entirety as follows:

          6.1.25.3 Minimum Debt Coverage Ratio. Maintain a minimum Debt Coverage
          Ratio, measured on a rolling twelve-month basis as of the last day of
          each month, of not less than 1.10 to 1.00 for the period beginning on
          January 31, 2006 and thereafter; and

          6.1.25.4 Minimum Fixed Charge Coverage Ratio. Maintain a minimum Fixed
          Charge Coverage Ratio, measured on a rolling twelve-month basis as of
          the last day of each month, of not less than 1.00 to 1.00 for the
          period beginning on January 31, 2006 and thereafter;

          1.3 Extension of Line Termination Date. The definition of the Line
Termination Date is hereby amended and restated as follows:

          "Line Termination Date" means (i) October 31, 2006, or as extended
          pursuant to Paragraph 2.1.10 above [sic. the Initial Loan Agreement],
          or (ii) such earlier date as Borrowers shall determine by notice to
          Lender, or (iii) such other date as Lender and Borrowers may, from
          time to time, mutually determine.

     2. Additional Equity Contribution of Palisade. As a condition precedent to
the effectiveness of the amendments set forth in Section 1 of this Third
Amendment, Palisade shall have made an additional equity contribution to
USVision in the amount of no less than Two Million ($2,000,000) Dollars (the
"Second Additional Palisade Equity Contribution") and each of Palisade and
USVision shall deliver to the Lender such confirmation thereof upon the
contribution thereof and from time-to-time thereafter, as may be reasonably
acceptable to the Lender.

     3. Ratification of Loan Documents. Except as expressly provided herein,
each of the terms, conditions and provisions set forth in the respective Loan
Documents are hereby ratified and confirmed herein in full.

     4. Representations and Warranties of the Borrower. Each of the Obligors
represents and warrants to Lender each and all of the following:


                                        2



          4.1 Each and all of the representations and warranties as set forth in
the Loan Agreement, the Mortgage Documents and the other Loan Documents are
true, correct and complete in all material respects as of the date hereof except
as such representations and warranties expressly relate to a different date. It
is the express intention of the Obligors to hereby ratify, confirm and republish
such representations and warranties as if set forth herein in full;

          4.2 With respect to each of the Obligors none of their respective
articles of incorporation, bylaws or other organizational documents, nor their
respective qualifications to do business have changed in any respect since the
certification thereof was delivered to the Lender on or about October 20, 2002
(except as may have otherwise been amended or modified in connection with the
transactions contemplated by either the First Amendment, the Second Amendment,
or Third Amendment heretofore delivered to the Lender) in connection with the
closing under the Loan Agreement and that each is presently in full force and
effect;

          4.3 Each Obligor has full power and authority to execute and deliver
this Third Amendment and the other Loan Documents, as amended hereby, and this
Third Amendment and the other Loan Documents to be executed and delivered in
connection herewith constitute the legal, valid and binding joint and several
obligations of the Obligors parties thereto, enforceable against each of the
Obligors in accordance with their respective terms;

          4.4 No authorization, approval, consent, or other action by, notice
to, or filing with, any Governmental Agency or other Person (other than the
consent of the respective Board of Directors of each Obligor), is required for
the execution, delivery or performance by Obligors of this Third Amendment;

          4.5 Each Obligor has complied with all applicable laws (including
rules, regulations, codes, plans, injunctions, judgments, orders, decrees,
rulings, and charges thereunder) of federal, state, local, and foreign
governments (and all agencies thereof, including, without limitation, the SEC
and all applicable state securities regulatory agencies (each a "Blue Sky
Agency"), and no action, suit, proceeding, hearing, investigation, charge,
complaint, claim, demand, audit, or notice has been filed or commenced, or to
the knowledge of any of the Obligors threatened, against any Obligor, or any of
their respective officers, directors or shareholders, alleging any failure so to
comply. No disciplinary proceeding with respect to any Obligor or any Obligor's
respective officers is pending before the SEC or any Blue Sky Agency. To the
knowledge of the Obligors, there are no facts which, if known by a potential
claimant or Governmental Authority, could give rise to a claim or proceeding
which, if asserted or conducted, the results would be unfavorable to any of the
Obligors; and

          4.6 Accuracy of Representations; No Default. Except as set forth in
amended and restated Schedules 3.1.3 [Liens], 5.1.5 [Leases], 5.1.6 [Sales
Volumes by Location] and 5.1.17 [Stock Ownership], each of which are attached
hereto and made a part hereof, the information set forth in each of the Loan
Documents is complete and accurate in all material respects and contains full
and complete disclosure of all pertinent


                                       3



information in connection with Obligors. None of such information contains any
untrue statement of a material fact or omits to state a material fact necessary
to make the information contained herein or therein not misleading or not
incomplete. No Event of Default or Potential Default hereunder, or under any
other Loan Document, has occurred.

     5. Conditions Precedent to the effectiveness of the Amendments and to
Lender's Consents. As conditions precedent to the effectiveness of this Third
Amendment, Obligors shall deliver or cause to be delivered to Lender, executed
where applicable and in form and substance satisfactory to Lender and its
counsel, in addition to this Third Amendment, the following documents,
instruments and agreements and the following conditions shall have been
satisfied:

          5.1 The representations and warranties set forth herein and in each of
the other Loan Documents shall be true and correct in all material respects on
and as of the date hereof with the same effect as though made on and as of such
date, except as such representations and warranties relate to a different date;

          5.2 No Event of Default or Potential Default shall have occurred and
be continuing hereunder or under any other Loan Document;

          5.3 No Material Adverse Change shall have occurred since December 31,
2004;

          5.4 Provided that Lender has advised the Borrowers that Lender has
obtained the approvals contemplated by Section 5.7 hereof, and has either
obtained or has waived the requirements set forth in Section 5.8 hereof,
Palisade shall have made the Second Additional Palisade Equity Contribution as
contemplated by Section 2 hereof, and each of the USVision and Palisade shall
have delivered to the Lender confirming evidence as may be reasonably acceptable
to the Lender;

          5.5 A certificate of the Secretary of each Obligor, certifying to and
attaching true, correct and complete copies of (i) resolutions of such Obligor's
Board of Directors authorizing the execution, delivery and performance of the
transactions contemplated by this Third Amendment and the other Loan Documents
contemplated hereby, and (ii) incumbency and signatures of the officers of such
Obligor authorized to execute and deliver the Loan Documents;

          5.6 Payment of all Lender's Costs in connection with the negotiation,
drafting and closing of the transactions contemplated hereby accrued to the date
of the execution hereof, together with all reasonably anticipated Lender's Costs
to be reasonably incurred in connection with all post closing items. Obligors
authorize Lender to deduct such Lender's Costs from the Line and agree to
indemnify and hold Lender harmless from and against any and all claims, other
than claims arising from Lender's willful misconduct or gross negligence, for
any such Lender's Costs;


                                       4



          5.7 The Lender shall have obtained such approvals internal and
otherwise, including, but not limited to the Board of Directors of the Lender
and the Lender's holding company; as are required by law, and as the Lender may
otherwise deem necessary or appropriate;

          5.8 Lender shall have obtained the written consent of each of Lender's
participants in the Loans; and

          5.8 Obligors will have delivered to Lender such additional documents
or instruments as Lender may reasonably require.

     6. Miscellaneous. Other than Section 9.5, the provisions of Article 9 of
the Loan Agreement are hereby incorporated herein and made a part hereof as if
set forth herein in full, and all references therein to the Loan Agreement shall
be deemed to include the Loan Agreement, as amended by the First Amendment, the
Second Amendment and further amended by this Third Amendment. This Third
Amendment may be executed in counterpart and delivered by facsimile, each of
which shall constitute and original and collectively one and the same agreement.


                                       5



     IN WITNESS WHEREOF, intending to be legally bound hereby, Obligors and
Lender have executed this Agreement under seal, intending to be legally bound
hereby, the day and year first above written.

BORROWERS / OBLIGORS:                   GUARANTORS / OBLIGORS:

U.S. VISION, INC.                       9072-8411 QUEBEC, INC.
                                        d/b/a "Optik Pro Baie 2000"


By: /s/ Carmen J. Nepa III              By: /s/ Carmen J. Nepa III
    ---------------------------------       ------------------------------------
    Carmen J. Nepa III,                     Carmen J. Nepa III,
    Executive Vice President                Executive Vice President
    and Chief Financial Officer             and Chief Financial Officer


STYL-RITE OPTICAL MFG. CO., INC.        HEALTH EYE CARE STATISTICS, INC.


By: /s/ William A. Schwartz, Jr.        By: /s/ William A. Schwartz, Jr.
    ---------------------------------       ------------------------------------
    William A. Schwartz, Jr.,               William A. Schwartz, Jr.,
    President                               President


USV OPTICAL, INC.                       LENDER: COMMERCE BANK, N.A.


By: /s/ Carmen J. Nepa III              By: /s/ Gerard L. Grady
    --------------------------------        ------------------------------------
    Carmen J. Nepa III,                     Gerard L. Grady,
    Executive Vice President                Vice President
    and Chief Financial Officer


U.S. VISION HOLDINGS, INC.


By: /s/ Carmen J. Nepa III
    ---------------------------------
    Carmen J. Nepa III,
    Chief Financial Officer


                                       6

EX-10.31

                                                                   Exhibit 10.31

                                FOURTH AMENDMENT
                                       TO
                           LOAN AND SECURITY AGREEMENT

     THIS Fourth Amendment to Loan and Security (the "Fourth Amendment") is
dated as of this, 25th day of August, 2005, by and among COMMERCE BANK, N.A.
(the "Lender") and U.S. VISION, INC., a Delaware corporation ("US Vision"),
STYL-RITE OPTICAL MFG. CO., INC., a Florida corporation ("Styl"), USV OPTICAL,
INC., a Texas corporation ("USV"), and U.S. VISION HOLDINGS, INC., a Delaware
corporation ("Holdings" and together with US Vision, Styl and USV, each
individually, a "Borrower" and, collectively, the "Borrowers"), and 9072-8411
QUEBEC, INC. d/b/a "Optik Pro Baie 2000" ("Guarantor;" each Borrower and
Guarantor, individually, an "Obligor" and, collectively, the "Obligors").

                                   BACKGROUND

     The Obligors, Health Eye Care Statistics, Inc. ("Health") and the Lender
are parties to that certain Loan and Security Agreement, dated as of October 30,
2002 (the "Initial Loan Agreement"), as amended by the First Amendment thereto
dated as of May 30, 2003 (the "First Amendment"), as further amended by the
Second Amendment thereto dated as of April 5, [sic. 2004] (the "Second
Amendment"), and as further amended by the Third Amendment thereto dated as of
January 31, 2005 (the "Third Amendment", and together with the Initial Loan
Agreement, the First Amendment, the Second Amendment, and this Fourth Amendment,
collectively, the "Loan Agreement"). All initially capitalized terms used herein
and not otherwise defined herein shall have the same meaning as ascribed to such
terms in the Loan Agreement.

     US Vision and the Lender are also parties to that certain Loan and Security
Agreement, dated as of September 23, 1999 (said Loan and Security Agreement, as
amended, supplemented, modified and/or restated, being referred to herein as the
"Real Estate Loan Agreement"), and a First Purchase Money Mortgage, Assignment
of Leases, Rents and Other Income and Security Agreement (the "Mortgage", and
together with the Real Estate Loan Agreement, collectively, the "Mortgage
Documents", and, together with the Loan Agreement, collectively, the "Loan
Documents").

     The Obligors have advised Lender that the dissolution of Health has been
effected and has requested that the Lender: (i) prospectively reduce the Term
Interest Rate from Nine (9%) Percent per annum to Eight (8%) Percent per annum;
(ii) waive and amend Paragraphs 7.1.3, 7.1.6 and 7.1.10 of the Initial Loan
Agreement to permit the Reorganization (as hereinafter defined); and (iii) make
certain amendments and other modifications to the Loan Documents, and Lender has
agreed to do so expressly subject to such other terms, conditions and
limitations hereinafter set forth.



     NOW, THEREFORE, in consideration of the mutual covenants and premises set
forth herein, and for other good and valuable consideration, the receipt and
sufficiency of which is hereby mutually acknowledged, the parties hereto,
intending to be legally bound hereby, agree as follows:

     1. Amendments to the Loan Agreement. Subject to the fulfillment of all of
the conditions precedent to the effectiveness of this Fourth Amendment, as set
forth in Section 4 hereof, the Loan Agreement is further amended as follows:

          1.1 Term Interest Rate. The definition of "Term Interest Rate" is
hereby amended and restated as follows:

          "Term Interest Rate" means Nine (9%) Percent per annum commencing as
          of the extension of the Term Loan through and including the Effective
          Date hereof [sic. the Fourth Amendment] and Eight (8%) Percent per
          annum from and after the Effective Date hereof [sic. the Fourth
          Amendment].

          1.2 Additional Definitions. The following definitions are hereby added
to the Loan Agreement:

          "2005 Reorganization" means the transactions contemplated by that
          certain proposed Agreement and Plan of Merger to be entered into by
          and among Palisade Concentrated Equity Partnership, L.P. ("Palisade"),
          Refac ("REFAC"), USV Merger Sub, Inc., a wholly-owned subsidiary of
          REFAC ("Merger Sub"), US Vision, and the other stockholders of US
          Vision, pursuant to which, inter alia, (A) Merger Sub shall be merged
          with and into US Vision (the "Merger"), and the separate existence of
          Merger Sub will cease and US Vision will continue as the surviving
          corporation and a wholly-owned subsidiary of REFAC, (B) each issued
          and outstanding share of the common stock of US Vision shall be
          converted into the right to receive a to be determined number of fully
          paid and nonassessable shares of common stock of REFAC at the
          effective time of the Merger and (C). each other issued and
          outstanding share of the capital stock of US Vision, as well as each
          share of the capital stock of US Vision owned by US Vision, shall be
          automatically canceled and retired at the effective time of the
          Merger,

          "Amended and Restated Note" means that certain Amended and Restated
          Term Note of even date herewith of the Borrowers in favor of the
          Lender, which amends and restates in its entirety the original Term
          Note dated October 30, 2002 in the original principal amount of
          Fifteen Million ($15,000,000) Dollars which continues to evidence the
          Term Loan and shall continue to constitute one of the Notes.

          1.3 Amendments to Certain Negative Covenants. The following


                                        2



Paragraphs as set forth in the Initial Loan Agreement are each hereby
respectively amended and restated as follows:

               7.1.3 Combination; Merger. Other than as contemplated by the
Transaction Documents and the 2005 Reorganization, enter into proceedings in
total or partial liquidation; merge, combine or consolidate with or into any
unaffiliated entity, or acquire all or substantially all of the assets or
securities of any other Person or otherwise take any action or omit to take any
action which would have a Material Adverse Effect, individually or in the
aggregate, on Obligors or their business;

               7.1.6 Ownership/Management. Other than as contemplated the 2005
Reorganization, make any material change in the executive management of Obligors
or materially change Obligors' corporate structure, or beneficial or legal
ownership of the Obligors, including, but not limited to, any change in the
shareholders, or their respective interests, except any transfers by any
shareholder of any Obligor as of the date hereof to (a) any Person that has an
equity or other ownership interest in any shareholder of any Obligor as of the
date hereof; (b) any dependent of any shareholder of any Obligor as of the date
hereof or a trust formed for the benefit of any such dependent of any
shareholder of any Obligor as of the date hereof of, in any of the Obligors;

               7.1.10 Transactions with Affiliates. Other than as contemplated
the 2005 Reorganization, enter into any transaction or transactions with any
Affiliate for less than full value or on terms or conditions less favorable than
could be obtained in an arm's length transaction with a third party or make any
loan or advance to, or guaranty any obligation of Debt of, any Affiliate; and

          1.4 Additional Reporting Requirements. The following is added to the
end of Section 6.1 of the Loan Agreement:

          6.1.27 Information in respect of REFAC. As and when filed with the
          SEC, cause REFAC to deliver to the Lender a true, correct and complete
          copy of all filings therewith.

          6.1.28 The 2005 Reorganization Closing Documents. Promptly after the
          consummation of the transactions contemplated by the 2005
          Reorganization, but in all events within ten (10) days thereafter,
          deliver to the Lender a closing binder of all material documents
          evidencing the consummation of the transactions contemplated thereby,
          certified by a duly authorized officer of the Borrowers, REFAC and
          Palisade as being a true, correct and complete copy of such documents,
          together with an amended Schedule 5.1.17 to the Loan Agreement.

          1.5 Additional Event of Default. The following shall be added as
Paragraph 8.1.13 to Section 8.1 of the Loan Agreement as an additional Event of
Default, and the remaining Paragraph shall be renumber sequentially:

          8.1.13 Palisade shall either (a) become the beneficial owner of less
          than 50.01% of the voting common stock of REFAC and otherwise cease to
          effectively control the management of REFAC or (b) become the
          beneficial owner of less than 40% of the voting common stock of REFAC.


                                        3



     2. Ratification of Loan Documents. Except as expressly provided herein,
each of the terms, conditions and provisions set forth in the respective Loan
Documents are hereby ratified and confirmed herein in full.

     3. Representations and Warranties of the Borrower. Each of the Obligors
represents and warrants to Lender each and all of the following:

          3.1 Each and all of the representations and warranties as set forth in
the Loan Agreement, the Mortgage Documents and the other Loan Documents are
true, correct and complete in all material respects as of the date hereof except
as such representations and warranties expressly relate to a different date. It
is the express intention of the Obligors to hereby ratify, confirm and republish
such representations and warranties as if set forth herein in full;

          3.2 With respect to each of the Obligors none of their respective
articles of incorporation, bylaws or other organizational documents, nor their
respective qualifications to do business have changed in any respect since the
certification thereof was delivered to the Lender on or about October 20, 2002
(except as may have otherwise been amended or modified in connection with the
transactions contemplated by either the First Amendment, the Second Amendment,
or Third Amendment heretofore delivered to the Lender) in connection with the
closing under the Loan Agreement and that each is presently in full force and
effect;

          3.3 Each Obligor has full power and authority to execute and deliver
this Fourth Amendment and the other Loan Documents, as amended hereby, and this
Fourth Amendment and the other Loan Documents to be executed and delivered in
connection herewith constitute the legal, valid and binding joint and several
obligations of the Obligors parties thereto, enforceable against each of the
Obligors in accordance with their respective terms;

          3.4 No authorization, approval, consent, or other action by, notice
to, or filing with, any Governmental Agency or other Person (other than the
consent of the respective Board of Directors of each Obligor), is required for
the execution, delivery or performance by Obligors of this Fourth Amendment; and

          3.5 Each Obligor has complied with all applicable laws (including
rules, regulations, codes, plans, injunctions, judgments, orders, decrees,
rulings, and charges thereunder) of federal, state, local, and foreign
governments (and all agencies thereof, including, without limitation, the SEC
and all applicable state securities regulatory agencies (each a "Blue Sky
Agency"), and no action, suit, proceeding, hearing, investigation, charge,
complaint, claim, demand, audit, or notice has been filed or commenced, or to
the knowledge of any of the Obligors threatened, against any Obligor, or any of
their respective officers, directors or shareholders, alleging any failure so to
comply. No disciplinary proceeding with respect to any Obligor or any Obligor's
respective officers is pending before the SEC or any Blue Sky Agency. To the
knowledge of the Obligors, there are no facts which, if known by a potential
claimant or


                                        4



Governmental Authority, could give rise to a claim or proceeding which, if
asserted or conducted, the results would be unfavorable to any of the Obligors;
and

          3.6 Accuracy of Representations; No Default. Except as set forth in
amended and restated Schedules 3.1.3 [Liens], 5.1.5 [Leases], 5.1.6 [Sales
Volumes by Location] and 5.1.17 [Stock Ownership], each of which are attached
hereto and made a part hereof, the information set forth in each of the Loan
Documents is complete and accurate in all material respects and contains full
and complete disclosure of all pertinent information in connection with
Obligors. None of such information contains any untrue statement of a material
fact or omits to state a material fact necessary to make the information
contained herein or therein not misleading or not incomplete. No Event of
Default or Potential Default hereunder, or under any other Loan Document, has
occurred.

     4. Conditions Precedent to the effectiveness of the Amendments and to
Lender's Consents. As conditions precedent to the effectiveness of this Fourth
Amendment, Obligors shall deliver or cause to be delivered to Lender, executed
where applicable and in form and substance satisfactory to Lender and its
counsel, in addition to this Fourth Amendment, the following documents,
instruments and agreements and the following conditions shall have been
satisfied:

          4.1 The representations and warranties set forth herein and in each of
the other Loan Documents shall be true and correct in all material respects on
and as of the date hereof with the same effect as though made on and as of such
date, except as such representations and warranties relate to a different date;

          4.2 No Event of Default or Potential Default shall have occurred and
be continuing hereunder or under any other Loan Document;

          4.3 No Material Adverse Change shall have occurred since May 31, 2005;

          4.4 Borrowers shall have executed and delivered to Lender the Amended
and Restated Note;

          4.5 Payment of all Lender's Costs in connection with the negotiation,
drafting and closing of the transactions contemplated hereby accrued to the date
of the execution hereof, together with all reasonably anticipated Lender's Costs
to be reasonably incurred in connection with all post closing items. Obligors
authorize Lender to deduct such Lender's Costs from the Line and agree to
indemnify and hold Lender harmless from and against any and all claims, other
than claims arising from Lender's willful misconduct or gross negligence, for
any such Lender's Costs;

          4.6 The Lender shall have obtained such approvals internal and
otherwise, including, but not limited to the Board of Directors of the Lender
and the Lender's holding company; as are required by law, and as the Lender may
otherwise deem necessary or appropriate;


                                        5



          4.7 Lender shall have obtained the written consent and/or a
Termination of Participation Agreement in form and substance acceptable to the
Lender, from each of Lender's participants in the Loans; and

          4.8 Obligors will have delivered to Lender such additional documents
or instruments as Lender may reasonably require.

     5. Miscellaneous. Other than Section 9.5, the provisions of Article 9 of
the Loan Agreement are hereby incorporated herein and made a part hereof as if
set forth herein in full, and all references therein to the Loan Agreement shall
be deemed to include the Loan Agreement, as amended by the First Amendment, the
Second Amendment, the Third Amendment, and further amended by this Fourth
Amendment. This Fourth Amendment may be executed in counterpart and delivered by
facsimile, each of which shall constitute and original and collectively one and
the same agreement.

                   [BALANCE OF PAGE INTENTIONALLY LEFT BLANK]


                                        6



     IN WITNESS WHEREOF, intending to be legally bound hereby, Obligors and
Lender have executed this Agreement under seal, intending to be legally bound
hereby, the day and year first above written.

BORROWERS / OBLIGORS:                   GUARANTORS / OBLIGORS:

U.S. VISION, INC.                       9072-8411 QUEBEC, INC.
                                        d/b/a "Optik Pro Baie 2000"


By: /s/ Carmen J. Nepa III              By: /s/ Carmen J. Nepa III
    ---------------------------------       ----------------------------------
    Carmen J. Nepa III,                     Carmen J. Nepa III,
    Executive Vice President                Executive Vice President
    and Chief Financial Officer             and Chief Financial Officer


STYL-RITE OPTICAL MFG. CO., INC.


By: /s/ William A. Schwartz, Jr.
    ---------------------------------
    William A. Schwartz, Jr.,
    President


                                        LENDER:

USV OPTICAL, INC.                       COMMERCE BANK, N.A.


By: /s/ Carmen J. Nepa III              By: /s/ Gerard L. Grady
    ---------------------------------       ------------------------------------
    Carmen J. Nepa III,                     Gerard L. Grady,
    Executive Vice President                Vice President
    and Chief Financial Officer


U.S. VISION HOLDINGS, INC.


By: /s/ Carmen J. Nepa III
    ---------------------------------
    Carmen J. Nepa III,
    Chief Financial Officer


                                        7

EX-10.32

                                                                   Exhibit 10.32

                                 FIFTH AMENDMENT
                                       TO
                           LOAN AND SECURITY AGREEMENT

     THIS Fifth Amendment to Loan and Security (the "Fifth Amendment") is dated
as of this, 31st day of October, 2005, by and among COMMERCE BANK, N.A. (the
"Lender") and U.S. VISION, INC., a Delaware corporation ("US Vision"), STYL-RITE
OPTICAL MFG. CO., INC., a Florida corporation ("Styl"), USV OPTICAL, INC., a
Texas corporation ("USV"), and U.S. VISION HOLDINGS, INC., a Delaware
corporation ("Holdings" and together with US Vision, Styl and USV, each
individually, a "Borrower" and, collectively, the "Borrowers"), and 9072-8411
QUEBEC, INC. d/b/a "Optik Pro Baie 2000" ("Guarantor;" each Borrower and
Guarantor, individually, an "Obligor" and, collectively, the "Obligors").

                                   BACKGROUND

     The Obligors, Health Eye Care Statistics, Inc. ("Health") and the Lender
are parties to that certain Loan and Security Agreement, dated as of October 30,
2002 (the "Initial Loan Agreement"), as amended by the First Amendment thereto
dated as of May 30, 2003 (the "First Amendment"), as further amended by the
Second Amendment thereto dated as of April 5, [sic. 2004] (the "Second
Amendment"), as further amended by the Third Amendment thereto dated as of
January 31, 2005 (the "Third Amendment"), and as further amended by the Fourth
Amendment thereto dated as of August 25, 2005 (the "Fourth Amendment", and
together with the Initial Loan Agreement, the First Amendment, the Second
Amendment, the Third Amendment, the Fourth Amendment, and this Fifth Amendment,
collectively, the "Loan Agreement"). All initially capitalized terms used herein
and not otherwise defined herein shall have the same meaning ascribed to such
terms in the Loan Agreement.

     US Vision and the Lender are also parties to that certain Loan and Security
Agreement, dated as of September 23, 1999 (said Loan and Security Agreement, as
amended, supplemented, modified and/or restated, being referred to herein as the
"Real Estate Loan Agreement"), and a First Purchase Money Mortgage, Assignment
of Leases, Rents and Other Income and Security Agreement (the "Mortgage", and
together with the Real Estate Loan Agreement, collectively, the "Mortgage
Documents", and, together with the Loan Agreement, collectively, the "Loan
Documents").

     The Obligors have requested, and subject to the terms conditions and
provisions set forth herein, Lender has agreed to extend the Line Termination
Date from October 31, 2006 to October 31, 2007.

     NOW, THEREFORE, in consideration of the mutual covenants and premises set
forth herein, and for other good and valuable consideration, the receipt and
sufficiency of



which is hereby mutually acknowledged, the parties hereto, intending to be
legally bound hereby, agree as follows:

     1. Extension of Line Termination Date. Notwithstanding the provisions of
Paragraph 2.1.10 of the Loan Agreement to the contrary, the Line Termination
Date is hereby extended from October 31, 2006 to October 31, 2007.

     2. Ratification of Loan Documents. Except as expressly provided herein,
each of the terms, conditions and provisions set forth in the respective Loan
Documents are hereby ratified and confirmed herein in full.

     3. Representations and Warranties of the Borrower. Each of the Obligors
represents and warrants to Lender each and all of the following:

          3.1 Each and all of the representations and warranties as set forth in
the Loan Documents are true, correct and complete in all material respects as of
the date hereof except as such representations and warranties expressly relate
to a different date. It is the express intention of the Obligors to hereby
ratify, confirm and republish such representations and warranties as if set
forth herein in full;

          3.2 With respect to each of the Obligors, none of their respective
articles of incorporation, bylaws or other organizational documents, nor their
respective qualifications to do business have changed in any respect since the
certification thereof was delivered to the Lender on or about October 20, 2002
(except as may have otherwise been amended or modified in connection with the
transactions contemplated by either the First Amendment, the Second Amendment,
the Third Amendment, or the Fourth Amendment heretofore delivered to the Lender)
in connection with the closing under the Loan Agreement and that each is
presently in full force and effect;

          3.3 Each Obligor has full power and authority to execute and deliver
this Fifth Amendment and the other Loan Documents, as amended hereby, and this
Fifth Amendment and the other Loan Documents to be executed and delivered in
connection herewith constitute the legal, valid and binding joint and several
obligations of the Obligors parties thereto, enforceable against each of the
Obligors in accordance with their respective terms;

          3.4 No authorization, approval, consent, or other action by, notice
to, or filing with, any Governmental Agency or other Person (other than the
consent of the respective Board of Directors of each Obligor), is required for
the execution, delivery or performance by Obligors of this Fifth Amendment; and

          3.5 Each Obligor has complied with all applicable laws (including
rules, regulations, codes, plans, injunctions, judgments, orders, decrees,
rulings, and charges thereunder) of federal, state, local, and foreign
governments (and all agencies thereof, including, without limitation, the SEC
and all applicable state securities regulatory agencies (each a "Blue Sky
Agency"), and no action, suit, proceeding, hearing, investigation, charge,
complaint, claim, demand, audit, or notice has been filed or


                                        2



commenced, or to the knowledge of any of the Obligors threatened, against any
Obligor, or any of their respective officers, directors or shareholders,
alleging any failure so to comply. No disciplinary proceeding with respect to
any Obligor or any Obligor's respective officers is pending before the SEC or
any Blue Sky Agency. To the knowledge of the Obligors, there are no facts which,
if known by a potential claimant or Governmental Authority, could give rise to a
claim or proceeding which, if asserted or conducted, the results would be
unfavorable to any of the Obligors; and

          3.6 Accuracy of Representations; No Default. The information set forth
in each of the Loan Documents, as last amended by the Fourth Amendment, is
complete and accurate in all material respects and contains full and complete
disclosure of all pertinent information in connection with Obligors. None of
such information contains any untrue statement of a material fact or omits to
state a material fact necessary to make the information contained herein or
therein not misleading or not incomplete. No Event of Default or Potential
Default hereunder, or under any other Loan Document, has occurred.

     4. Conditions Precedent to the effectiveness of the Amendments and to
Lender's Consents. As conditions precedent to the effectiveness of this Fifth
Amendment, Obligors shall deliver or cause to be delivered to Lender, executed
where applicable and in form and substance satisfactory to Lender and its
counsel, in addition to this Fifth Amendment, the following documents,
instruments and agreements and the following conditions shall have been
satisfied:

          4.1 The representations and warranties set forth herein and in each of
the other Loan Documents shall be true and correct in all material respects on
and as of the date hereof with the same effect as though made on and as of such
date, except as such representations and warranties relate to a different date;

          4.2 No Event of Default or Potential Default shall have occurred and
be continuing hereunder or under any other Loan Document;

          4.3 No Material Adverse Change shall have occurred since August 31,
2005;

          4.4 Payment of all Lender's Costs in connection with the negotiation,
drafting and closing of the transactions contemplated hereby accrued to the date
of the execution hereof, together with all reasonably anticipated Lender's Costs
to be reasonably incurred in connection herewith. Obligors authorize Lender to
deduct such Lender's Costs from the Line and agree to indemnify and hold Lender
harmless from and against any and all claims, other than claims arising from
Lender's willful misconduct or gross negligence, for any such Lender's Costs;
and

          4.5 Obligors will have delivered to Lender such additional documents
or instruments as Lender may reasonably require.


                                        3



     5. Miscellaneous. Other than Section 9.5, the provisions of Article 9 of
the Loan Agreement are hereby incorporated herein and made a part hereof as if
set forth herein in full, and all references therein to the Loan Agreement shall
be deemed to include the Loan Agreement, as amended by the First Amendment, the
Second Amendment, the Third Amendment, the Fourth Amendment and further amended
by this Fifth Amendment. This Fifth Amendment may be executed in counterpart and
delivered by facsimile, each of which shall constitute and original and
collectively one and the same agreement.

                   [BALANCE OF PAGE INTENTIONALLY LEFT BLANK]


                                        4



     IN WITNESS WHEREOF, intending to be legally bound hereby, Obligors and
Lender have executed this Agreement under seal, intending to be legally bound
hereby, the day and year first above written.

BORROWERS / OBLIGORS:                   GUARANTORS / OBLIGORS:

U.S. VISION, INC.                       9072-8411 QUEBEC, INC.
                                        d/b/a "Optik Pro Baie 2000"


By: /s/ Carmen J. Nepa III              By: /s/ Carmen J. Nepa III
    ---------------------------------       ------------------------------------
    Carmen J. Nepa III,                     Carmen J. Nepa III,
    Executive Vice President                Executive Vice President
    and Chief Financial Officer             and Chief Financial Officer


STYL-RITE OPTICAL MFG. CO., INC.


By: /s/ William A. Schwartz, Jr.
    ---------------------------------
    William A. Schwartz, Jr.,
    President


USV OPTICAL, INC.                       LENDER: COMMERCE BANK, N.A.


By: /s/ Carmen J. Nepa III              By: /s/ Gerard L. Grady
    ---------------------------------       ------------------------------------
    Carmen J. Nepa III,                     Gerard L. Grady,
    Executive Vice President                Vice President
    and Chief Financial Officer


U.S. VISION HOLDINGS, INC.


By: /s/ Carmen J. Nepa III
    ---------------------------------
    Carmen J. Nepa III,
    Chief Financial Officer


                                        5

EX-10.35

                                                                   Exhibit 10.35

                                AMENDMENT NO. 2

                        TO LICENSED DEPARTMENT AGREEMENT


        This Amendment No. 2 dated effective as of April 13, 1998 amends the
terms and conditions of the Licensed Department Agreement between J.C. Penney
Company, Inc. ("Penney") and U. S. Vision, ("Operator") dated as of February 1,
1995, as amended December 18, 1996 (the "Agreement").

        WHEREAS, incident to its operation of the Licensed Department, Operator
seeks to establish a website utilizing the tradename "JCPenney Optical" (the
Website"); and

        WHEREAS, the parties have agreed to amend the Agreement to provide for
the terms and conditions applicable to the Website;

        NOW THEREFORE, in consideration of the mutual covenants contained
herein, and other good and valuable consideration, the receipt and sufficiency
of which are hereby acknowledged, the parties agree as follows:

        1.      The Operator shall be responsible for the domain name
registration, construction, maintenance, site hosting, content and operation of
the Website. The domain name for the Website shall be "www.jcpenneyoptical.com".
                                                       -----------------------

        2.      Operator shall comply with all applicable laws, and shall not
breach, infringe or encroach upon the rites of third parties in connection with
its registration, construction, maintenance, site hosting, content and operation
of the Website.

        3.      Penney shall continue to maintain at least one JCPenney Optical
page on its website at "www.jcpenney.com" and shall provide a link between such
optical page(s) and the Website.

        4.      Upon the expiration, termination and/or cancellation of the
Agreement, Operator shall cease operation of the Website and shall transfer and
assign to Penney the domain name registration www.jcpenneyoptical.com.
                                              -----------------------

        5.      All content of the Website shall be consistent with Penney's
advertising practices and procedures. In the event that Penney notifies Operator
that certain content is not consistent with Penney's advertising practices and
procedures, Operator shall have 48 hours within which to either remove the
offending content or modify the content to comply with Penney's advertising
practices and procedures.

        6.      Except as specifically modified herein, the terms and conditions
of the Agreement, including, without limitation, Section 8, Trademarks;
Advertising, and Section 19, Indemnity, shall continue in full force and effect.

        IN WITNESS WHEREOF, Operator and Penney have caused this Agreement to be
executed as of the day and year first written above.



J. C. PENNEY COMPANY, INC.                      U. S. VISION, INC.



By:  /s/ James A. Fike                          By: /s/ William A. Schwartz
     -------------------------------                -------------------------
     James A. Fike                                  William A. Schwartz
     Vice President                                 Chairman of the Board and
     Director of Operation, Services                Chief Executive Officer
     & Systems, JCPenny Stores

EX-10.36

                                                                   Exhibit 10.36

                                                       MATERIAL IN THIS DOCUMENT
                                                       HAS BEEN OMITTED PURSUANT
                                             TO A CONFIDENTIAL TREATMENT REQUEST

                                 THIRD AMENDMENT
                                       TO
                          LICENSED DEPARTMENT AGREEMENT

     This Third Amendment To Licensed Department Agreement (the "Amendment"), is
entered into by and between J. C. Penney Corporation, Inc., a Delaware
corporation having its principal place of business at 6501 Legacy Drive, Plano,
Texas 75024-3698 (hereinafter "Penney"), and U. S. Vision, Inc., a Delaware
corporation, having its principal place of business at Glen Oaks Industrial
Park, P. O. Box 124, Glendora, New Jersey (hereinafter "Operator').

     WHEREAS, Penney and Operator have entered into a Licensed Department
Agreement dated February 1, 1995 (the "Agreement");

     WHEREAS, Penney and Operator amended the Agreement by an Amendment
("Amendment Number 1") to Licensed Department Agreement dated December 18, 1996
and by an Amendment No. 2 ("Amendment Number 2") to License Department Agreement
dated April 13, 1998;

     WHEREAS, Penney and Operator temporarily supplemented the Agreement by a
letter dated in December 1997 and that supplemental letter is no longer in
effect; and

     WHEREAS, in accordance with the terms of the Agreement, the parties desire
to amend the following terms and provisions of the Agreement to reflect the
current agreement of the parties;

     WHEREAS, capitalized terms not otherwise defined in this Amendment are used
as defined in the Agreement; and

     NOW THEREFORE, in consideration of the premises, and for other good and
valuable consideration, the receipt and sufficiency of which is hereby
acknowledged, Penney and Operator hereby agree as follows:

                                    ARTICLE I

     Section 5 of the Agreement shall be deleted in its entirety and the
following Section 5 shall be substituted in its place:

          5. Hours of Operation; Relocation; Opening Costs. (a) The Operator
     agrees to sell the Merchandise in each Licensed Department and shall be
     entitled to sell the Merchandise in the Selling Space. Except as approved
     by the management of Operator and Penney, the hours of operation of the
     Licensed Departments shall be as follows (the "Standard Operating Hours"):


                                       1



          Sunday:             12:00 p.m. to 5:00 p.m., except as mutually agreed
                              by Penney and Operator or as limited by applicable
                              law requiring licensed staff coverage (provided
                              that Operator will provide Penney with written
                              notice of such limitation)

          Monday & Tuesday:   10:00 a.m. to 7:00 p.m.

          Wednesday - Friday: 10:00 a.m. to 8:00 p.m.

          Saturday:           10:00 a.m. to 6:00 p.m.

     Operator agrees to conspicuously post the Standard Operating Hours at the
     Licensed Department locations, subject to Penney's approval in writing
     (including by email) of the signage wording, design and location. Seasonal
     and permanent increases to the Standard Operating Hours will not require
     the approval of Penney, provided that such increases are consistent in all
     Licensed Departments, but the parties must agree in writing to a reduction
     in the Standard Operating Hours.

          (b) In each of Penney's fiscal years during the term of this
     Agreement, Operator agrees to spend at least $[CONFIDENTIAL] (or a pro rata
     portion of such amount in the event the term of this Agreement includes
     only a portion of such fiscal years) on opening new Licensed Departments or
     in relocating or refurbishing existing Licensed Departments,. Operator
     agrees that its expenditure of such funds is not conditioned on the
     expenditure by Penney of funds for construction or other costs related to
     the opening, relocating or refurbishing of Licensed Departments. For the
     avoidance of doubt, it is understood that, notwithstanding past practice or
     anything in this Agreement to the contrary, there may be instances where
     Operator is responsible for all costs associated with the opening,
     relocation or refurbishment of individual Licensed Departments, including,
     without limitation, construction costs, paint, wallcoverings, carpet,
     partitions, light fixtures, electrical wiring, plumbing work and fixtures,
     and heating, ventilation and air conditioning. Operator and Penney agree to
     establish an annual spending plan for new openings, relocations and
     refurbishments prior to the beginning of each of Penney's fiscal years,
     subject to such modifications as the parties agree upon, in writing, from
     time to time during each such fiscal year.

          (c) Penney may, upon not less than 60 days prior written notice to the
     Operator, relocate a Licensed Department to a different space in a Store;
     provided, however, that the Operator may terminate this Agreement as to an
     individual Licensed Department effective as of the date specified for its
     relocation by giving to Penney written notice of its election to terminate
     as to that individual Licensed Department, which notice shall be


                                       2



     given within 14 days from Operator's receipt of Penney's notice of
     relocation.

                                   ARTICLE II

     Section 6 of the Agreement shall be amended by the addition of the
following provision at the end of the current section 6:

     If Operator enters into a licensed department agreement or an arrangement
     similar to this Agreement with another Chain Retailer (as defined below)
     for the operation of optical departments and such arrangement provides for
     more favorable terms and conditions relating to the amount and payment of
     license fees, then Operator agrees to notify Penney of such terms and
     conditions and agrees to promptly amend this Agreement, if Penney so
     requests, to include the more favorable terms and conditions relating to
     the amount and payment of license fees. For the purposes of this paragraph,
     a "Chain Retailer" means a national chain of department stores or large
     chain of discount stores such as Kmart, Target or Sam's Club.

                                   ARTICLE III

          Section 8 of the Agreement is hereby amended to provide that the
amount that Operator shall expend on advertising shall increase from an amount
not less than [CONFIDENTIAL] to an amount not less than [CONFIDENTIAL] of Net
Sales.

                                   ARTICLE IV

          Section 20 of the Agreement is amended to provide that the term of the
license shall expire on December 1, 2007. Section 20 also may grant Penney the
right to approve or disapprove of the consummation of the Kayak Transaction
(defined below) and in connection with any such right, Penney hereby consents to
the Kayak Transaction. The consent provided in this paragraph is subject to (a)
Penney not having delivered the Refusal Notice (defined below), (b) the Kayak
Transaction not changing substantially from the transaction described in the
preliminary proxy statement filed with the U. S. Securities & Exchange
Commission, and (c) consummation of the Kayak Transaction on or before October
31, 2002.

                                    ARTICLE V

     Schedule A to the Agreement is hereby amended as follows:

     (a) Paragraph 2 of Schedule A to the Agreement shall be deleted in its
     entirety and the following Paragraph 2 shall be substituted in its place:

          2.   Merchandise: (list products and/or services sold in Licensed
               Department)


                                       3



               Optical products and services, including the sale of contact
          lenses, prescription sunglasses, optical goods and supplies and the
          taking of orders for and repair of the same, and such other
          merchandise as may be mutually agreed upon. The Merchandise will be
          similar to merchandise carried by competitors of Operator (where
          permitted by the applicable vendor and designer) and will be
          competitively priced. Operator will update Merchandise product lines
          each year and will provide additional Merchandise offerings as they
          become available.

     (b) Paragraph 5 of Schedule A to the Agreement shall be deleted in its
     entirety and the following Paragraph 5 shall be substituted in its place:

          5.   License fees:

               Percentage of cash Net Sales, excluding doctors' fees received in
               cash by doctors within a Licensed Department: [CONFIDENTIAL]

               Percentage of credit Net Sales, excluding doctors' fees received
               by doctors within a Licensed Department: [CONFIDENTIAL]

               Percentage of doctors' fees received through credit card sales by
               doctors within a Licensed Department: [CONFIDENTIAL]

               Percentage of Net Sales, excluding shipping, from orders for
               products placed through the Optical Website shall be at a
               percentage to be agreed to by the parties before any product
               offerings are placed on the Optical Website for sale.

                                   ARTICLE VI

     The parties agree to the following clarification of Amendment Number 1 to
the Agreement

          a.   The last sentence of subsection 20(b) of the Agreement, as
               amended by section 3 of Amendment Number 1, is hereby deleted in
               its entirety and the following sentence is substituted in its
               place:

                    Penney agrees to pay Operator for the costs of the fixtures
                    and equipment for each Licensed Department terminated by
                    Penney


                                       4



                    pursuant to this subsection 20(b), using the lesser amount
                    of either the actual costs of such fixtures and equipment or
                    a cost basis of twenty thousand dollars ($20,000) less
                    accumulated depreciation which shall be calculated on a
                    straight line ten (10) year basis.

          b.   A line was inadvertently dropped at the end of page 2. Therefore
               the last sentence of subsection 20(c) of the Agreement, as
               amended by section 3 of Amendment Number 1, is deleted in its
               entirety and the following sentence is substituted in its place:

                    At Penney's option, this Agreement will terminate
                    automatically thirty (30) days after a transfer or sale of a
                    majority of the stock or assets of Operator unless (i) such
                    sale of stock is by the Operator for cash in connection with
                    a public stock offering registered with the U. S. Securities
                    & Exchange Commission, or (ii) Operator obtains the advance
                    written consent of Penney for such sale of stock or assets,
                    which consent may be withheld or granted in Penney's sole
                    discretion.

          c.   Notwithstanding the provisions of subsection 20(b) of the
               Agreement, as amended by section 3 of Amendment Number 1,
               Operator shall not be entitled to terminate the Agreement with
               respect to more than 20 individual Licensed Departments without
               cause during any Penney fiscal year and provided further that
               (unless otherwise agreed in writing by Penney) the actual closing
               of such 20 Licensed Departments may only occur during the last 10
               days of January of each then current Penney fiscal year.

                                   ARTICLE VII

     Section 17 of the Agreement is hereby amended, effective at the closing of
the Kayak Transaction (as defined below), by deleting that section in its
entirety and substituting the following in its place:

               17. Insurance. Operator warrants and represents that, at all
     times, it shall maintain, at its sole expense, insurance of the following
     kinds and amounts, or in the amounts required by law, whichever is greater:


                                       5



     Workers Compensation Insurance:

     Worker's Compensation and Employer's Liability Insurance affording
     protection under the Worker's Compensation Law of the state in which work
     is to be performed, or containing an all-states endorsement, and Employer's
     Liability protection subject to a limit of not less than $500,000.

     General Liability Insurance:

     Commercial general liability insurance written on an occurrence basis in
     amounts not less than



BODILY INJURY                 PROPERTY DAMAGE
- -------------                 ---------------
                           
$2 million per person         $2 million per occurrence
$2 million annual aggregate   $2 million annual aggregate


     This insurance shall include (a) products and completed operations
     liability coverage, (b) contractual liability coverage for the liabilities
     assumed by Operator under this Agreement, including but not limited to
     section 19 of this Agreement, and (c) coverage for property in the care,
     custody or control of Operator.

     This insurance shall (i) name Penney as an additional insured, including
     without limitation, as an insured with respect to third party claims or
     actions brought directly against Penney or against Penney and Operator as
     co-defendants and arising out of this Agreement, (ii) be such that,
     although Penney is named an insured, Penney shall nonetheless be entitled
     to recovery for any loss suffered by Penney as a result of Operator's
     negligence, (iii) be written as a primary policy not contributing with any
     other coverage which Penney may carry, and (iv) be renewed annually, while
     doing business with Penney, and for the period of five (5) years after
     cessation of business with Penney.

     Professional Liability Insurance:

     Professional Liability Insurance covering the professional services
     provided by Operator, its employees and agents, in an amount not less that
     $5,000,000 per occurrence. This insurance shall be renewed annually, while
     doing business with Penney, and for the period of five (5) years after
     cessation of business with Penney. Independent doctors of optometry located
     in or adjacent to Licensed Departments shall be required to have
     professional liability insurance with limits of not less than $1,000,000 in
     the aggregate.

     Automobile Liability Insurance:
     Liability insurance in amounts not less than:



BODILY INJURY               PROPERTY DAMAGE
- -------------               ---------------
                         
$1 million per person       $1 million per occurrence
$2 million per occurrence


     CRIME INSURANCE:

     Crime insurance in an amount not less than $3 million per occurrence.


                                       6



     OTHER:

     All insurance policies required to be maintained under this Agreement shall
     be procured from insurance companies rated at least A-VIII or better by the
     then current edition of Best's Insurance Reports published by A.M. Best Co.
     Operator shall provide Penney with certificates of insurance evidencing the
     required coverage concurrently with the execution of this Agreement and
     upon each renewal of such policies thereafter, including a clause that
     obligates the insurer to give Penney at least thirty (30) days prior
     written notice of any material change or cancellation of such policies.

     This section shall in no way affect the indemnification, remedy or warranty
     provisions set forth in this Agreement. Further, if any work provided for
     or to be performed under this Agreement is subcontracted by Operator, the
     subcontractor(s) shall maintain and furnish satisfactory evidence of
     Worker's Compensation, Employer's Liability and such other forms and
     amounts of insurance which Operator deems reasonably adequate.

                                  ARTICLE VIII

     In addition to the provisions of Amendment Number 2, the parties agree as
follows with respect to the Penney optical website located at
www.jcpenneyoptical.com, www.jcpeyes.com or any other domain name containing
Trademarks of Penney or Trademark used by Operator in connection with the
advertising and sale of Merchandise under the Agreement ("Optical Website"):

     a.   The Merchandise listed on the Optical Website and such Optical Website
          itself shall be updated by Operator at least annually.

     b.   All information gathered from the Optical Website shall be subject to
          the provisions of section 15 of the Agreement relating to ownership,
          confidentiality and use of customer names and other information
          related to the operation of the Licensed Departments.

     c.   Prior to November 30, 2002, Operator shall adopt and abide by a
          privacy policy regarding the use of information gathered from the
          Optical Website and such policy shall be substantially the same as
          Penney's website privacy policy or contain such other terms as are
          approved by Penney.

                                   ARTICLE IX

     Except as expressly modified by this Amendment, all terms and conditions of
the Agreement, as previously amended by Amendment Number 1 and Amendment Number
2, shall remain in full force and effect.


                                       7



                                    ARTICLE X

     This Amendment shall become effective if, and only if, all of the following
conditions are satisfied on or before October 31, 2002:

          a.   In connection with the proposed merger of Operator with Kayak
               Acquisition Corp., a corporation formed and owned by George E.
               Norcross III, Philip A. Norcross, Joseph J. Roberts, Jr. and
               William A. Schwartz, which has previously been publicly announced
               and as to which a preliminary proxy statement has been filed with
               the US Securities & Exchange Commission ("Kayak Transaction"),
               the pro forma balance sheet of Operator assuming that the
               proposed transaction is completed has been delivered to Penney
               including the identity of the proposed senior lender to the
               Operator following the Kayak Transaction ("Pro Forma Balance
               Sheet");

          b.   Penney has not advised Operator in writing within 10 days of
               Penney's receipt of the Pro Forma Balance Sheet that the
               structure is not acceptable to Penney on the grounds it is too
               highly leveraged ("Refusal Notice").

          c.   The Kayak Transaction has been consummated.

     IN WITNESS WHEREOF, the parties have caused this Third Amendment to
Licensed Department Agreement to be executed as of the 30 day of September 2002.

U. S. VISION, INC.                      J. C. PENNEY CORPORATION, INC.


By: /s/ William A. Schwartz, Jr.        By: /s/ Frank V. Cassara
    ---------------------------------       ------------------------------------
    William A. Schwartz, Chief          Name: Frank V. Cassara, Vice President
    Executive Officer and Chairman of   Its: Director of Store Operations
    the Board


                                       8

EX-10.37

                                                                   Exhibit 10.37

                                                       MATERIAL IN THIS DOCUMENT
                                                       HAS BEEN OMITTED PURSUANT
                                             TO A CONFIDENTIAL TREATMENT REQUEST

                                FOURTH AMENDMENT
                                       TO
                          LICENSED DEPARTMENT AGREEMENT

     This Fourth Amendment To Licensed Department Agreement (the "Amendment"),
is entered into by and between J. C. Penney Corporation, Inc., a Delaware
corporation having its principal place of business at 6501 Legacy Drive, Plano,
Texas 75024-3698 (hereinafter "Penney"), and U. S. Vision, Inc., a Delaware
corporation, having its principal place of business at Glen Oaks Industrial
Park, P. O. Box 124, Glendora, New Jersey (hereinafter "Operator").

     WHEREAS, Penney and Operator have entered into a Licensed Department
Agreement, dated February 1, 1995 (the "Agreement");

     WHEREAS, Penney and Operator amended the Agreement by an Amendment
("Amendment Number 1") to Licensed Department Agreement, dated December 18,
1996, by an Amendment No. 2 ("Amendment Number 2") to License Department
Agreement, dated April 13, 1998, and by a Third Amendment to License Agreement
("Amendment Number 3"), dated as of September 30, 2002;

     WHEREAS, Penney and Operator temporarily supplemented the Agreement by a
letter, dated December 18, 1997, and that supplemental letter is no longer in
effect; and

     WHEREAS, in accordance with the terms of the Agreement, the parties desire
to amend the following terms and provisions of the Agreement to reflect the
current agreement of the parties;

     WHEREAS, capitalized terms not otherwise defined in this Amendment are used
as defined in the Agreement; and

     NOW THEREFORE, in consideration of the premises, and for other good and
valuable consideration, the receipt and sufficiency of which is hereby
acknowledged, Penney and Operator hereby agree as follows:

                                    ARTICLE I

          Section 6 of the Agreement, as amended, shall be amended by deleting
the text of Section 6 in its entirety and replacing it with the following:

          The Operator shall pay to Penney a license fee for each Licensed
          Department to be determined by applying to Net Sales on a cash and
          credit basis, respectively, the percentages for cash Net Sales and for
          credit Net Sales set forth in the attached Schedule A. If Operator
          enters into a licensed department agreement or an arrangement similar
          to this Agreement with another Chain Retailer (as defined below) for
          the operation of optical departments and such arrangement provides for
          more favorable terms and conditions


                                       1


          relating to the amount and payment of license fees, then Operator
          agrees to notify Penney of such terms and conditions and agrees to
          promptly amend this Agreement, if Penney so requests, to include the
          more favorable terms and conditions relating to the amount and payment
          of license fees. For the purposes of this paragraph, a "Chain
          Retailer" means a national chain of department stores or large chain
          of discount stores such as Kmart, Target or Sam's Club.
          Notwithstanding the foregoing, in the event that Operator or any
          Affiliate of Operator acquires (by stock or asset purchase) a then
          existing chain of retail optical stores or then existing licensed
          optical departments with more than 50 locations, then (a) for the
          fiscal year of Operator during which such acquisitions occurs, the
          total aggregate license fees payable by Operator under this Agreement
          for such fiscal year shall in no event be less than the sum of (i) the
          actual license fees paid for the period prior to the acquisition; and
          (ii) a prorated portion of the Adjusted Minimum License Fee based upon
          the period remaining in such fiscal year after the acquisition; and
          (b) for each full fiscal year of Operator ending on January 31st
          thereafter the total aggregate license fee payable by Operator under
          this Agreement for each such fiscal year shall in no event be less
          than the Adjusted Minimum License Fee. For the purpose of this
          Agreement, "Adjusted Minimum License Fee" shall mean [CONFIDENTIAL],
          provided that such amount shall be reduced by the amount of any
          license fees allocable to a Closed Licensed Department for the period
          of 12 months immediately prior to the closure of such department. A
          "Closed Licensed Department" is an optical department, which Penney
          elects to close after the date of this Amendment. "Affiliate" of
          Operator means Palisade Concentrated Equity Partnership L.P. or
          Operator, and each corporation, partnership, joint venture, limited
          liability company, fund or other person or entity that is controlled
          by Operator or Palisade Concentrated Equity Partnership L.P.,
          including without limitation Opticare Health Systems, Inc.

                                   ARTICLE II

          Section 20(a) of the Agreement, as amended, shall be amended by
deleting the text of Section 20(a) in its entirety and replacing it with the
following:

          This Agreement shall become effective as of the date first above
          written, and as subsequently amended as of the dates of any
          amendments, including the Fourth Amendment to License Department
          Agreement, and shall expire on December 1, 2007, unless sooner
          terminated as provided in this Agreement; provided, however, that
          Penney and Operator (if such party is not then in default under this
          Agreement) shall each have an option to extend the term of this
          Agreement beyond the December 1, 2007 expiration date for a single
          additional renewal term commencing on December 1, 2007 and expiring on
          December 1, 2010; provided, further, that this Agreement, unless
          otherwise amended in accordance with the terms of this Agreement,
          shall contain the same terms and conditions as are in effect prior to
          such renewal. Either party may exercise its renewal option right as
          provided herein by


                                       2



          giving the other party written notice of its election to exercise such
          renewal option at any time prior to September 1, 2007. For the
          avoidance of doubt, nothing in the foregoing provision affects any
          right either party may possess under this Agreement to terminate the
          Agreement as to all or any Licensed Departments.

                                   ARTICLE III

          The last sentence of Section 20(c) of the Agreement, as amended, is
modified and amended only by the addition of the following underlined language,
such that the last sentence of Section 20(c) of the Agreement, as amended, now
reads as follows:

          At Penney's option, this Agreement will terminate automatically thirty
          (30) days after a transfer or sale of a majority of the stock or
          assets of Operator unless (i) such [transfer or sale of stock or
          assets is to Palisade Concentrated Equity Partnership, L.P., or any of
          its affiliated funds, provided that transfer or sale of stock or
          assets is consummated not later than 60 days from the effective date
          of this Amendment,]* or such sale of stock is by the Operator for cash
          in connection with a public stock offering registered with the U. S.
          Securities & Exchange Commission, or (ii) Operator obtains the advance
          written consent of Penney for such sale of stock or assets, which
          consent may be withheld or granted in Penney's sole discretion.

                                   ARTICLE IV

     Except as expressly modified by this Amendment, all terms and conditions of
the Agreement, as previously amended by Amendment Number 1, Amendment Number 2,
and Amendment Number 3, shall remain in full force and effect.

     IN WITNESS WHEREOF, the parties have caused this Fourth Amendment to
Licensed Department Agreement to be executed as of the 22nd day of May 2003.

U. S. VISION, INC.                      J. C. PENNEY CORPORATION, INC.


By: /s/ William A. Schwartz             By: /s/ Frank V. Cassara
    ---------------------------------       ------------------------------------
Name: William A. Schwartz               Name: Frank V. Cassara
Title: Chief Executive Officer          Title: Vice President, Director of Store
       and Chairman of the Board               Operations


* Brackets denote text which is underlined in the original agreement.



                                       3

EX-10.38

                                                                   Exhibit 10.38

                                                       MATERIAL IN THIS DOCUMENT
                                                       HAS BEEN OMITTED PURSUANT
                                             TO A CONFIDENTIAL TREATMENT REQUEST

                                 FIFTH AMENDMENT
                                       TO
                          LICENSED DEPARTMENT AGREEMENT

     This Fifth Amendment To Licensed Department Agreement (the "Amendment"), is
entered into by and between J. C. Penney Corporation, Inc., a Delaware
corporation having its principal place of business at 6501 Legacy Drive, Piano,
Texas 75024-3698 (hereinafter "Penney"), and U. S. Vision, Inc., a Delaware
corporation, having its principal place of business at Glen Oaks Industrial
Park, P. 0. Box 124, Glendora, New Jersey (hereinafter "Operator").

     WHEREAS, Penney and Operator have entered into a Licensed Department
Agreement, dated February 1, 1995 (the "Agreement");

     WHEREAS, Penney and Operator amended the Agreement by an Amendment
("Amendment Number 1") to Licensed Department Agreement, dated December 18,
1996, by an Amendment No. 2 ("Amendment Number 2") to License Department
Agreement, dated April 13,1998, by a Third Amendment to License Agreement
("Amendment Number 3"), dated as of September 30, 2002, and by a Fourth
Amendment to License Agreement ("Amendment Number 4"), dated as of May 22, 2003;

     WHEREAS, Penney and Operator temporarily supplemented the Agreement by a
letter, dated December 1997, and that supplemental letter is no longer in
effect; and

     WHEREAS, in accordance with the terms of the Agreement, the parties desire
to amend certain terms and provisions of the Agreement relating to the operation
of a "JCPenney Optical" website to reflect the current agreement of the parties;

     WHEREAS, capitalized terms not otherwise defined in this Amendment are used
as defined in the Agreement; and

     NOW THEREFORE, in consideration of the premises, and for other good and
valuable consideration. the receipt and sufficiency of which is hereby
acknowledged, Penney and Operator hereby agree as follows:

                                    Article I

     The provisions of Amendment Number 2 and Article VIII of Amendment Number 3
are hereby amended and restated to provide as follows:

     1. Optical Website. Operator shall be responsible, at its sole expense, for
the maintenance (during the term of the Agreement) of valid domain name
registrations for, and the



construction, maintenance, site hosting, content and operation of a website
utilizing the tradename "JCPenney Optical" (the "Optical Website"). The domain
names for the Optical Website shall be www.jcpenneyoptical.com, www.jcpeyes.com
or, subject to Penney's prior approval, any other domain name containing
Trademarks of Penney or a Trademark used by Operator in connection with the
advertising and sale of Merchandise under the Agreement. The Optical Website
shall be considered a "Licensed Department" under the Agreement, except where
the context in which the defined term "Licensed Department" is used clearly
relates only to a physical in-store location.

     2. Compliance with Laws. Operator shall comply with all applicable laws and
regulations, including without limitation all applicable laws and regulations
pertaining to data protection, and shall not breach, infringe or encroach upon
the rights of third parties in connection with its registration, construction,
maintenance, site hosting, content and operation of the Optical Website. For the
avoidance of doubt, Operator's obligations under this provision shall be in
addition to those imposed by section 4 of the Agreement and not in lieu thereof.

     3. Penney Website Link. Penney shall provide a link between its website at
www.jcpenney.com or any successor website and the Optical Website. For the
avoidance of doubt, it is agreed that this provision shall not require Penney to
maintain the www.icpenney.com website or any successor website. It is further
agreed that Penney may disable the link to the Optical Website in the event
system issues reasonably believed to be associated with the link arise, provided
that Penney promptly reports the disabling to Operator. Upon request, Operator
shall furnish a report(s) to Penney regarding the number of customers and
potential customers that visit the Optical Website.

     4. Termination. Upon the expiration or termination of the Agreement,
Operator shall cease operation of the Optical Website and shall transfer and
assign to Penney the domain name registration www.jcpenneyoptical.com,
www.jcpeyes.com and any other domain name containing Trademarks of Penney.

     5. Content. All content of the Optical Website shall be consistent with
Penney's advertising practices and procedures. Operator shall furnish Penney an
opportunity to review and comment on all Optical Website content. In the event
that Penney notifies Operator that certain content is not consistent with
Penney's advertising practices and procedures, Operator shall have 48 hours
within which to either remove the offending content or modify the content to
comply with Penney's advertising practices and procedures.

     6. Updates. The Merchandise listed on the Optical Website and the Optical
Website itself shall be updated by Operator at least annually.

     7. Confidentiality. All information, including without limitation, names,
addresses, email addresses, and credit and debit card account numbers, gathered
from the Optical Website shall be subject to the provisions of section 15 of the
Agreement relating to the ownership, confidentiality and use of customer names
and other information related to the operation of the Licensed Departments. Upon
Penney's request or the expiration or termination of the Agreement, Operator
will furnish copies of that information to Penney. Additionally, Operation shall
use all such



information solely in accordance with Penney's and Operator's published website
privacy policies.

     8. Privacy Policy. Operator shall adopt, publish on the Optical Website and
abide by a privacy policy regarding the use or information gathered from the
Optical Website and such policy shall be substantially the same as Penney's
website privacy policy or contain such other terms as are approved by Penney.

     9. Information Security. Operator shall implement and maintain appropriate
administrative, technical, and physical safeguards to (i) protect the security,
confidentiality, and integrity of all information about customers or potential
customers, including without limitation names, addresses, email addresses, and
credit and debit card account numbers; (ii) protect against any anticipated
threats or hazards to the security or integrity of that information; and (iii)
protect against unauthorized access to or use of that information or associated
records which could result in substantial harm or inconvenience to any customer.
Operator shall also require that any third party to which information about
customers or potential customers is transferred by or on behalf of Operator
implements and maintains safeguards meeting the above standards. Without
limitation, Operator shall (i) establish and maintain a web site security policy
and shall host the Optical Website on a server(s) that maintains the security of
the data, identifies and prevents intruder activity, maintains the security of
data, identifies and prevents intruder activity, maintains expected
functionality and controls proprietary software and (ii) encrypt all credit card
transactions. If Operator connects to Penney's network via dial-up, leased line,
or the Internet, Operator shall complete Penney's security questionnaire and
satisfy Penney's connectivity requirements. If Operator personnel access
Penney's network, Operator shall cause such personnel to comply with Penney's
access requirements. Operator shall immediately give notice to Penney if it
reasonably believes or has a reasonable suspicion that unauthorized use or
unauthorized disclosure of confidential customer information has occurred and
agrees to promptly take action to stop and or remedy any such unauthorized use
or unauthorized disclosure. Operator agrees that Penney, at any reasonable time
and place, and upon reasonable notice, may examine Operator's books, records and
procedures relevant to the Optical Website to verify compliance with the terms
of this section.

     10. Performance Standards. Operator will cause the Optical Website to meet
the minimum performance standards set forth in Schedule 1 to this Fifth
Amendment and will report to Penney monthly regarding its performance.

     11. Order Fulfillment. Operator will maintain a sufficient inventory of
Merchandise to reasonably satisfy all orders received from Optical Website
customers in a timely fashion.

     12. Shipping. Operator will ship Merchandise directly to each customer
ordering Merchandise through the Optical Website. Operator may not insert any
product offers or written materials of Operator (other than those pertaining
solely to JCPenney Optical Centers) or a third party without the prior approval
of Penney.

     13. Credit and Off-line Debit Card Transactions.



          (a) Operator shall accept the JCPenney credit card, and American
          Express, Discover, MasterCard and Visa credit and debit cards in
          payment for Merchandise ordered from the Optical Website.

          (b) Operator shall submit all credit and debit card transactions in
          connection with orders of Merchandise from the Optical Website to
          Penney for authorization, processing and settlement. Operator shall
          follow all authorization, processing and settlement procedures
          furnished to it by Penney from time to time.

          (c) Operator shall be liable, and reimburse Penney, for any and all
          amounts "charged back" to Penney by credit or debit card issuers in
          connection with purchases of Merchandise from the Optical Website.
          Penney is permitted to deduct such amounts from any payments due
          Operator. Penney shall cooperate with Operator to challenge
          chargebacks. Operator shall follow all chargeback-handling procedures
          furnished to it by Penney from time to time.

          (d) Operator shall reimburse up to and including $100,000 of Penney's
          costs in developing and modifying its information systems in order to
          implement the authorization, processing and settlement of credit and
          debit card sales of Merchandise on the Optical Website. For the
          avoidance of doubt, Operator acknowledges that such payment is over
          and above any amounts that Operator has agreed to pay pursuant to
          section 5(b) of the Agreement.

     14. Returns. Defective or Damaged Merchandise. The Optical Website shall
contain Operator's policy regarding returns, and defective or damaged
Merchandise. That policy shall provide that all returns of Merchandise purchased
from the Optical Website, whether or not damaged or defective, are to be made to
an address specified by Operator and not to Operator's in-store Licensed
Departments or to Penney's stores. Operator shall promptly issue any credits due
to customers in connection with such returns.

     15. Customer Service Communications. Operator will maintain a toll free
telephone number and an e-mail address for customer service communications
relating to Merchandise purchases from the Optical Website and will promptly
respond to all such communications. Penney will promptly forward to Operator any
such customer service communications received by Penney.

                                   ARTICLE II

     Schedule A to the Agreement is hereby amended by deleting paragraph 5 of
such Schedule in its entirety and substituting the following Paragraph 5 in its
place:

     "5. License fees:

          Percentage of cash Net Sales, excluding doctor's fees received in cash
          by doctors within a Licensed Department: [CONFIDENTIAL]


          Percentage of credit and debit card Net Sales, excluding doctors' fees
          received by doctors within a Licensed Department: [CONFIDENTIAL]

          Percentage of doctors' fees received through credit and debit card
          sales by doctors within a Licensed Department: [CONFIDENTIAL]

          Percentage of Net Sales, excluding shipping, from orders placed
          through the Optical Website: [CONFIDENTIAL]

                                   ARTICLE III

     The parties agree that all references to "credit sales" or "credit card
sales" contained in the Agreement shall be deemed to include sales charged to
debit cards as well as credit cards.

                                   ARTICLE IV

     Section 13, Taxes and Fees, of the Agreement is hereby amended as follows:

     (a)  deleting the following provision from the first sentence: "provided,
          however, that state and local retail sales taxes assessed upon
          Licensed Department sales shall be collected by Penney and remitted
          directly to the appropriate taxing authorities; and

     (b)  adding the following provision to such section 13:

          "State and local retail sales taxes assessed upon Licensed Department
          sales shall be collected by Operator and remitted directly to the
          appropriate taxing authorities."

                                    ARTICLE V

     Except as expressly modified by this Amendment, all terms and conditions of
the Agreement, as previously amended by Amendment Number 1, Amendment Number 2,
Amendment Number 3, and Amendment Number 4 shall remain in full force and
effect. All terms and provisions of the Agreement, as so amended, not
specifically amended by this Fifth Amendment shall apply to the Optical Website.

     IN WITNESS WHEREOF, the parties have caused this Fifth Amendment to
Licensed Department Agreement to be executed as of the   day of September 2003.

U. S. VISION, INC.                      J.C. PENNEY CORPORATION, INC.
                                        By: JCP Procurement & LP as agent

                                        J.C. Penney Corporation, Inc.


By: /s/ William A. Schwartz             By: /s/ C. Haggatt
    ---------------------------------   ----------------------------------------
Name: William A. Schwartz               Name: C. Haggatt
Title: Chief Executive Officer          Title: Procurement Group Mgr.
       and Chairman of the Board



                                       Recommended by /s/ Daphne Johnson
                                                      --------------------------
                                                      Daphie Johnson
                                                      Senior Procurement Agent

EX-10.40

                                                                   Exhibit 10.40

October 30, 2002

U.S. Vision, Inc.
One Harmon Drive
Glendora, New Jersey 08029
Attn: William A. Schwartz

               Re: Amendment to Participating Provider Agreement

Dear Mr. Schwartz:

     Reference is hereby made to that certain Participating Provider Agreement,
dated as of June 1, 1997, as amended (the "Vision Care Agreement"), by and
between U.S. Vision, Inc., a Delaware corporation ("USV"), and Cole Vision
Corporation, a Delaware corporation ("Cole"). As you are aware USV and Cole are
entering into a certain Agreement, of even date herewith (the "Agreement"), to
facilitate USV's merger with Kayak Acquisition Corp. The delivery of this letter
agreement is required pursuant to the Agreement. Capitalized terms used but not
defined herein shall have the meanings ascribed to such terms in the Agreement
or the Subordinated Note.

     Contingent upon the execution and delivery of the Agreement, USV and Cole
hereby agree to amend the Vision Care Agreement as follows:

1.   In the event of the exercise of the Option and effective upon the
     consummation of such Option, Section 1.10 is hereby deleted and replaced in
     its entirety with the following:

     "'Locations' shall mean the optical outlets owned or operated by USV as of
     the effective date of this provision where optical products and services
     are provided to Members; provided, however, that USV must obtain the prior
     consent of CVC to add any new Locations, except that no consent is required
     from CVC for Sears and JC Penny Locations, or additional optical
     departments within departments stores where USV had optical departments at
     the effective date of this provision."

2.   Section 4.1 of the Vision Care Agreement is hereby deleted and replaced in
     its entirety with the following:

     "The Term of this Agreement shall commence on June 1, 1997, and shall,
     unless terminated earlier pursuant to the terms of this Agreement, expire
     on the earlier to occur of (a) 7 years after the date on which the Option
     is consummated or (b) the 30th day following the Option Termination Date.
     As used herein, the term "Option Termination Date" shall mean the earlier


                                      -1-



     to occur of (i) March 1, 2004, (ii) the date on which all outstanding
     amounts under the terms of the Subordinated Note are paid in full prior to
     the consummation of the Option or (iii) the date on which Cole elects to
     terminate the Vision Care Agreement following an uncured default by USV of
     any of its obligations under the Agreement or the Subordinated Note."

3.   Clause (e) of Section 4.2 of the Vision Care Agreement is hereby deleted
     and replaced in its entirety with the following:

     "(e) if more than ten (10) Location audits conducted by CVC during any six
     (6) month period (after the date hereof) during the term hereof reveal that
     the Transaction Fees paid by USV to CVC at each such Location have been
     understated by more than five percent (5%) and upon such determination, CVC
     shall notify USV of the results of such audit;"

4.   The last sentence of Section 7.1 of the Vision Care Agreement is hereby
     deleted and replaced in its entirety with the following:

     "In the event such audit reveals that USV has paid CVC an amount equal to
     less than 98% of the total Transaction Fees due CVC at any Location, USV
     shall reimburse CVC for the reasonable cost of such audit (including travel
     expenses) applicable to such Location."

5.   The last sentence of Section 7.2 of the Vision Care Agreement is hereby
     deleted and replaced in its entirety with the following:

     "In the event such audit reveals that CVC has paid USV an amount equal to
     less than 98% of the total sums due USV from Purchasers, CVC shall
     reimburse USV for the reasonable cost of such audit (including travel
     expenses)."

6.   USV shall not be a participating provider in any managed vision network
     operated or sponsored by EyeMed Vision Care LLC, Eyecare Plan of America
     (aka ECPA) or any of their affiliates after January 1, 2003.

7.   The reference to "ECPA" in Section 7.8 is hereby deleted. The first and
     second sentences of Section 7.8 are hereby deleted and replaced in their
     entirety with the following:

     "Except as provided for in this Agreement, USV shall not be a participating
     provider in any managed vision network after January 1, 2003, without the
     prior written consent of CVC, other than networks that USV is in as of
     October 30, 2002 as to which no further consent is required."

8.   USV and Cole hereby agree to the HIPAA Rider attached hereto, and such
     rider shall be deemed part of the Vision Care Agreement.


                                      -2-



9.   CVC may amend the Vision Care Agreement upon 30 days prior written notice
     to USV to effectuate any change required pursuant to any law or regulation
     imposed by any governmental or regulatory authority.

10.  USV shall indemnify and hold harmless Cole and its Affiliates from and
     against any and all losses, liabilities, claims, damages, penalties, fines,
     judgments, awards, settlements, costs, fees, expenses (including attorneys'
     fees) and disbursements incurred by such Persons relating to the use of the
     JC Penney Optical name and logo by Cole and its Affiliates in its
     advertising and other materials.

11.  In the event that the Vision Care Agreement is terminated for any reason,
     USV shall, and cause all of its Affiliates to, cease using immediately all
     materials and copies thereof containing any Cole (including its Affiliates)
     trade name, trademark, service mark or other intellectual property or
     confidential information, and USV and its Affiliates shall return all such
     materials to Cole unless it provides reasonably satisfactory assurance to
     Cole that such materials and copies thereof have been destroyed. Cole has
     the right to supervise the return or destruction of all such materials.

12.  The first sentence of Section 7.7 of the Vision Care Agreement is hereby
     deleted and replaced in its entirety with the following:

     "CVC agrees that it will not enter into an agreement with any multi-unit
     retail optical chain (i.e., a retail optical chain with more than one
     hundred (100) retail locations) which owns its own manufacturing facility
     to participate as a provider in CVC's Preferred Network under terms and
     conditions more favorable than the terms and conditions under which USV
     serves as a provider pursuant to the terms of this Agreement."

13.  The second sentence of Section 7.8 of the Vision Care Agreement is hereby
     deleted and replaced in its entirety with the following:

     "In the event of any sale or transfer (by purchase, merger, consolidation
     or otherwise (including operation of law)), of more than forty percent
     (40%) of USV's issued and outstanding stock or sale of substantially all of
     the assets of USV to any entity who is, directly or indirectly, engaged in
     (i) the retail optical business through the ownership of 100 or more
     domestic retail optical outlets, or (ii) the ownership and operation of an
     optical managed care network, USV shall promptly notify CVC and CVC shall
     have the right, within thirty (30) days of receipt of such notice, to
     terminate this Agreement."

14.  Notwithstanding anything in the Agreement, the Subordinated Note or the
     Vision Care Agreement, as amended hereby, to the contrary, if USV breaches
     any of its obligations under the Agreement or the Subordinated Note and any
     such breach shall remain uncured by USV as of the end of any applicable
     cure period, Cole may immediately terminate the Vision Care Agreement, as
     amended hereby, only if Cole elects not to exercise the Option; provided,
     however, that such termination shall not relieve USV of any of its
     obligations under the Vision Care Agreement, as amended


                                      -3-



     hereby, arising prior to or as a result of any event occurring prior to the
     effective date of such termination. For the avoidance of doubt, USV's
     obligations under the Agreement and the Subordinated Note shall continue
     notwithstanding the termination of the Vision Care Agreement, as amended
     hereby.

15.  Except as modified by this letter agreement, the provisions of the Vision
     Care Agreement shall remain in full force and effect.

16.  This letter agreement shall be governed by, and construed and interpreted
     in accordance with, the laws of the state of Ohio, exclusive of its choice
     of law provisions.

17.  This letter agreement may be executed in two or more counterparts, each of
     which shall be deemed an original, but all of which together shall
     constitute one and the same agreement.

     If this letter agreement is acceptable to you, please execute both copies
of this letter in the space provided below and return one fully executed copy to
the undersigned.

                                        Very truly yours,

                                        COLE VISION CORPORATION


                                        By: /s/ Lawrence E. Hyatt
                                            ------------------------------------
                                        Name: Lawrence E. Hyatt
                                        Title: Executive VP

Acknowledged and agreed to
this 30th day of October, 2002

U.S. VISION, INC.


By: /s/ William A. Schwartz
    ---------------------------------
Name: William A. Schwartz
Title: President


                                      -4-

EX-10.41

                                                                  Exhibit 10.41



                                  COLE VISION



                                              December 19, 2003

Mr. William A. Schwartz
Chief Executive Officer
U.S. Vision, Inc.
One Harmon Drive
Glendora, New Jersey 08029

Re: Third Amendment to Participating Provider Agreement

Dear Mr. Schwartz.

The parties entered into the Participating Provider Agreement dated as of June
1, 1997, as amended on April 9,1998 and October 30,2002 by and between U.S.
Vision, Inc., a Delaware corporation ("USV"), and Cole Vision Corporation, a
Delaware corporation ("CVC"), referred hereafter as the "Vision Care Agreement".
Capitalized terms used but not defined herein shall have the meanings ascribed
in the Vision Care Agreement. USV and CVC hereby agree to amend the Vision Care
Agreement as follows.


1.  Section 4.1 of the Vision Care Agreement is hereby deleted and replaced in
    its entirety with the following:

      "The Term of this Agreement shall commence on June 1, 1997 and shall
      terminate on January 31, 2004, unless terminated earlier pursuant to the
      terms of this Agreement."

2.  Section 3.12 of the Vision Care Agreement is hereby amended to include a new
    paragraph as follows.

    Notwithstanding the foregoing, in addition to the payment of the Transaction
    Fees, U.S. Vision shall contribute to CVC's marketing costs as follows:

    a. a monthly fee of Thirty-five Thousand Dollars ($35,000) for the promotion
       of Sears Optical locations;

    b. an annual amount not to exceed One Hundred Five Thousand Two Hundred
       Thirty-six Dollars ($105,236) for marketing of the AARP Vision Program





       equal to twenty percent (20%) of CVC's incurred costs USV agrees to make
       periodic payments that shall be due and payable upon USV's receipt of a
       CVC's invoice;

    c. an annual amount not to exceed Forty Thousand Dollars ($40,000) for the
       marketing of the American Legion Vision Plan equal to apportioned amount
       of CVC's incurred costs. USV agrees to make periodic payments that shall
       be due and payable upon USV's receipt of CVC's invoice.

3.  Except as modified by this letter amendment, the provisions of the Vision
    Care Agreement shall remain in full force and effect.

4.  This letter amendment may be executed in two (2) counterparts, each of which
    shall be deemed the original, but all of which together shall constitute one
    and the same agreement.

If this letter amendment is acceptable to you, please execute both copies of
this letter in the space provided below and return one fully executed copy to
the undersigned.

Very truly yours,

COLE VISION CORPORATION

/s/ Lawrence E. Hyatt
- -----------------------
Lawrence E. Hyatt
Executive Vice President, Finance


Acknowledged and agreed to this __ day of December, 2003

U S. VISION, INC
By: /s/ William A. Schwartz
    ---------------------------
Name:  William A. Schwartz, Jr.
Title: President

EX-10.42

                                                                   Exhibit 10.42

                              COLE MANAGED VISION

                                February 6, 2004

Mr. William A. Schwartz
Chief Executive Officer
U.S. Vision, Inc.
One Harmon Drive
Glendora, New Jersey 08029

     Re: Fourth Amendment to Vision Care Agreement

Dear Bill:

     The parties entered into the Participating Provider Agreement dated as of
June 1, 1997 as amended on April 9, 1998, October 30, 2002 and December 19, 2003
by and between U.S. Vision, Inc., a Delaware corporation ("USV"), and Cole
Vision Corporation, a Delaware corporation ("CVC"), referred hereafter as the
"Vision Care Agreement". Capitalized terms used but not defined herein shall
have the meanings ascribed in the Vision Care Agreement. USV and CVC hereby
agree to amend the Vision Care Agreement as follows:

1.   Section 4.1 of the Vision Care Agreement is hereby deleted and replaced in
     its entirety with the following:

     "The Term of this Agreement shall commence on June 1, 1997 and shall
     terminate on December 31, 2008, unless terminated earlier pursuant to the
     terms of this Agreement A contract year shall be twelve months of the term
     of the Agreement commencing on January 1 and terminating December 31 of any
     year."

2.   Section 2.6 of the Vision Care Agreement is hereby deleted and replaced in
     its entirety with the following:

     "CVC shall provide electronic means for USV to submit compliant ANSI X-1 2
     837 health care claim- professional for the submission of claims for
     Billable Plans and a format to report each Covered Vision Services
     transaction of a Non-Billable Plan to CVC or its Affiliates (collectively
     referred to as "Claim Forms"). Until such time as the electronic format is
     operational, the parties shall continue to use paper forms and web
     transactions.

3.   Section 3.12 of the Vision Care Agreement is hereby deleted and replaced in
     its entirety with the following:

     Billable Transactions

     "USV agrees that it shall submit a Claim Form consistent with Section 2.6
     of this Agreement to CVC or its Affiliates, reflecting all Covered Vision
     Services provided to a Member or such Member's eligible dependents within
     sixty (60) days of the Member's date of the service. For


                                       -1-



     purposes of this Agreement, a Billable Transaction shall mean each separate
     optical product (i.e., eyeglasses, frames, lenses, etc.) provided to a
     Member or such Member's eligible dependent pursuant to a Billable Plan;
     provided, however, the purchase of a complete pair of eyeglasses or more
     than one (1) box of contact lenses shall be recorded as one (1) Billable
     Transaction. For each Billable Transaction reflected on the Claim Form, USV
     agrees that CVC shall have the right to deduct the sum of Eleven Dollars
     and fifty cents ($11.50) for Covered Vision Services provided as of
     February 1, 2004 and thereafter (the "Transaction Fee") from any sums due
     and owing USV for reimbursement under Billable Plans. In the event a Member
     purchases more than one (1) optical product at one date of service, USV
     will be subject to the payment of a single Transaction Fee. Notwithstanding
     the above, for each Transaction for the sale of contact lenses, USV agrees
     that CVC may deduct this Transaction Fee of Four Dollars ($4.00) provided
     as of February 1, 2004 and thereafter. CVC will increase the amount of each
     Transaction Fee described above by three percent (3%) per year. Such
     increase shall be effective on January 1 of each subsequent year of the
     term of this Agreement.

     Non-Billable Plan Transactions

          For purposes of this Agreement, a "Non-Billable Plan Transaction"
     shall mean any Covered Vision Services provided to a Member or such
     Member's eligible dependents pursuant to a Non-Billable Plan. USV agrees
     that it shall report any Covered Vision Services provided to a Member or
     such Member's eligible dependents of a Non-Billable Plan monthly and in
     such format as reasonably required by CVC.

     Commencing with the calendar month of February 2004, in full consideration
     for the right to participate in the Network of providers to such
     Non-Billable Plans, USV shall pay CVC a monthly amount equal to the sum of

          (x) The number of Locations that USV is operating multiplied by

          (y) Three Hundred Sixty Six Dollars and 67 Cents ($366.67)

     Such monthly payments are hereinafter referred to as the "Non-Billable
     Transaction Fee" and shall be due on the before the tenth business day of
     the each calendar month during the term hereof commencing with the month of
     February 2004. Provided, however, that the Non-Billable Transaction Fee
     shall be reduced by fifty percent (50%) for the first twelve (12) months of
     operation as to any USV location which has been opened for business for
     twelve (12) months or less; for the purposes of this provision, a new
     location that is located within one (1) mile of a location closed within
     thirty (30) days of the opening of the new location, shall not be
     considered to have been opened for less than twelve (12) months. CVC will
     increase the annual amount of the Non-Billable Transaction Fee three
     percent (3%) per year. Such increase shall be effective on January 1 of
     each subsequent year of the term of this Agreement. In addition, the
     Non-Billable Transaction Fee shall be reduced pro rata in the event that
     CVC adds more than five hundred (500) non-rural retail locations to CVC's
     Preferred or Retail Only Networks to service Non-Billable Plans in any one
     contract year, If CVC increases its Preferred or Retail Only Network by at
     least five hundred (500) non-rural retail providers in any one contract
     year, the pro rata reduction shall be effective January 1 of the subsequent
     contract year and shall be determined by multiplying the Non-Billable
     Transaction Fee by the result of the increased number of non-rural retail
     locations in the prior contract year divided by the total number of
     participating locations as of December31 of the then current contract year.

     For purposes of this Agreement, non-rural retail location" shall mean an
     individual store location of a national vision retail brand or a chain of
     five hundred (500) or more locations operated under


                                       -2-



     the same name that is not located in a rural designated zip code.

     If the number of aggregate lives contracted under the total number of
     Non-Billable Plans increase or decrease by more than twenty percent (20%)
     in any one contract year, the parties shall on a prorated basis adjust the
     Non-Billable Transaction Fee. If USV's payment of any monthly Non-Billable
     Transaction Fee remains outstanding for thirty (30) days or more, CVG shall
     have the option to offset such outstanding payments against any
     reimbursement for Covered Vision Services performed under Billable Plans.

4.   Subsection 4.2(e) and Section 7.7 of the Vision Care Agreement shall be
     deleted in their entirety.

5.   Section 7.1 of the Vision Care Agreement shall be deleted in its entirety
     and replaced with the following:

     CVC, its Affiliates, Plans, or any regulatory agency shall have access upon
     reasonable notice and during reasonable business hours at Locations or at
     USV's corporate headquarters to inspect, audit, and request of copies
     records relating to the Covered Vision Services performed pursuant to the
     terms of this Agreement during the term of this Agreement and for a period
     of 6 years from the termination of this Agreement or as required by federal
     and state law. CVC shall not have the right to audit any other records
     except those relating to the Covered Vision Services provided by USV
     pursuant to the terms of this Agreement.

6    Section 7.2 of the Vision Care Agreement shall be deleted in its entirety
     and replaced with the following:

     Marketing Charges. In addition to the payment of the Transaction Fees:

          a.   In the event USV continues to operate between fifty-two (52) and
               ninety-eight (98) Sears Optical locations on the first day of
               each month during the term of this Agreement, USV shall pay, or
               cause to be paid, by bank wire transfer of immediately available
               funds to an account designated in writing by Cole, an amount in
               cash equal to Thirty-Five Thousand Dollars ($35000). In the event
               that USV is operating less than 52 Sears Optical location or more
               than 98 Sears Optical locations, USV and Cole shall agree upon a
               prorated adjusted monthly payment for such national advertising
               efforts. Such amount shall be used by Cole Vision as it considers
               appropriate for national advertising efforts for Sears Optical.

          b.   U.S. Vision shall contribute to CVC's marketing costs associated
               with certain Billable and Non-Billable Plans as follows:

               i.   twenty percent (20%) of CVC's incurred costs for marketing
                    of the AARP Vision Program~

               ii.  twenty percent (20%) of CVC's incurred costs for the
                    marketing of the American Legion Vision Plan;

               iii. contribute up to Thirty-Five Thousand Dollars for transition
                    costs incurred by CareFirst: and,

               iv.  any amounts as mutually agreed upon by the parties.

          USV agrees to make such payments that shall be due and payable upon
          USV's receipt of CVC's invoice. Any amounts not paid when due pursuant
          to this Section shall accrue interest at the per annum rate of 11.75%.
          Such marketing costs may be reduced pro rata in accordance with the
          terms of Section 3.12 of this Agreement."


                                      -3-



7.   Section 7.8 of the Vision Care Agreement is modified to include the
     following:

     Notwithstanding the foregoing, USV may be a participating provider in i)
     any vision network with respect to any new host stores in which USV
     operates and as to which CVC does not consent to the inclusion of such
     locations in any CVC Network; or ii) any managed vision network to provide
     vision services and/or materials only to groups and/or plans of two
     thousand five hundred (2500) or less covered lives or members who contract
     with such networks for the provision of vision services and/or optical
     materials; and (iii) Opticare to provide vision services and/or materials
     to a plan that has contracted with Opticare and CVC chooses not to
     participate in such plan; however, CVC must be offered the right to
     participate in any plan contracted with or offered by OptiCare and refused
     to participate prior to USV having the ability to become a participating
     provider in such plan During the term of this Agreement, in all other
     circumstances, USV may seek to CVC's approval to participate in other
     vision network opportunities.

8.   Section 2.2 of the Vision Care Agreement is modified to include:

     USV locations will be included in any CVC Network, including Preferred and
     Retail Only Networks, except in the following circumstances: i) a Plan
     elects not to have USV locations as a participating providers of its Plan;
     or, ii) USV does not accept any additional terms or conditions requested by
     an individual Plan.

     CVC's call centers shall direct callers to retail locations on a random
     basis consistent with the parameters sought by the caller and without
     preference to CVC's affiliated locations.

9.   Except as modified by this letter amendment, the provisions of the Vision
     Care Agreement shall remain in full force and effect.

10.  This letter amendment may be executed in two (2) counterparts, each of
     which shall be deemed the original, but all of which together shall
     constitute one and the same agreement.

     If this letter amendment is acceptable to you, please execute both copies
of this letter in the space provided below and return one fully executed copy to
the undersigned.

Very truly yours,

COLE VISION CORPORATION


/s/ Stephen L. Holden
- -------------------------------------
Stephen L. Holden
Executive Vice President

Acknowledged and agreed to this 6th
day of February, 2004


U.S. VISION, INC.


/s/ Carmen Nepa
- -------------------------------------
Carmen Nepa
Executive Vice President

cc: Eric Bertrand
    Mike McPhillips


                                      -4-

EX-10.77

                                                                   Exhibit 10.77

                               SURRENDER OF LEASE

         AGREEMENT, made as of October 21st, 2005 between MACK-CALI SO. WEST
REALTY ASSOCIATES L.L.C., a New York limited liability company, having its
principal place of business at 100 Clearbrook Road, Elmsford, New York 10523
("Owner"), and OPTICARE ACQUISITION CORP., a corporation, having an office at 4
Executive Plaza, Yonkers, New York ("Tenant").

                              W I T N E S S E T H
                              - - - - - - - - - -

         WHEREAS, Owner and Tenant's predecessor-in interest, Wise Optical
Vision Group, Inc. f/k/a Wise/Contact US Optical Corporation, entered into a
written Lease Agreement dated August 11, 2000, as amended by commencement date
letter dated February 26, 2002, First Amendment dated August 1, 2001, and
commencement date letter dated January 21, 2002 (collectively the "Lease"),
whereby Owner currently leases to Tenant approximately 27,725 square feet in the
building known as 4 Executive Plaza, Yonkers, New York, for a term which
currently expires on September 30, 2011; and

         WHEREAS, Tenant has represented and warranted to Owner that all its
business operations have been discontinued or disposed of and that Tenant is not
in a position to continue with the Lease, and

         WHEREAS, based upon said representation and in order to avoid
protracted litigation, the parties desire to terminate the Lease and to release
each other from their respective obligations, upon the terms and conditions set
forth herein,

         NOW, THEREFORE, in consideration of the mutual covenants herein
contained and other good and valuable consideration, each to the other in hand
paid, IT IS AGREED as follows:

1. The Lease is hereby terminated, and the term demised brought to an end as of
December 31, 2005 ("Cancellation Date") with the same effect as if the term of
the Lease were, in and by the provisions of it, fixed to expire on the
Cancellation Date, and not on September 30, 2011. Notwithstanding anything
herein to the contrary, at Owner's election, in the event Owner enters into a
lease with a third party for the demised premises, Owner may, upon fifteen (15)
days notice to Tenant, recapture the demised premises at any time prior to the
Cancellation Date and in such event the Cancellation Date shall be such earlier
date on which Owner elects to recapture the demised premises.

2. Tenant shall surrender the demised premises to Owner in vacant, broom clean
condition, with all of Tenant's furniture, fixtures and personal property
removed from the demised premises on or before the Cancellation Date or such
earlier time, as may be required pursuant to Paragraph 1 hereinabove. Provided
Tenant delivers the demised premises (including the loading dock area) in
vacant, broom clean condition, with its property removed, as aforesaid, Owner
shall accept the demised premises in its current "as-is" condition and
notwithstanding anything in the Lease to the contrary, Tenant shall have no
obligation to repair or restore the demised premises, provided Tenant does not
cause any further damage thereto during the period from the date hereof to the
date the demised premises are legally surrendered to Owner. Until the demised
premises are legally surrendered to Owner, Tenant shall maintain and keep in
full force and effect insurance as required under the Lease and shall maintain
utilities service to the demised premises. The parties agree that the demised
premises shall be deemed to be legally surrendered on the cancellation date or
such earlier time as may be required pursuant to Paragraph 1 hereof. In
consideration of Owner's agreement to accept the demised premises in vacant,
broom clean condition, with its property removed, and otherwise in its current
as-is condition, Tenant shall pay Owner the sum of $2,727.01 simultaneously with
the execution and delivery of this


Surrender of Lease by Tenant and Owner, said sum shall be paid by official bank
check or wire transfer of federal funds.

3. In consideration of Owner's agreement to terminate the Lease as of the
Cancellation Date or on such earlier date as Owner may elect: (i) simultaneously
with the execution and delivery of this Surrender of Lease by Tenant and Owner,
Tenant shall prepay to Owner, Fixed Annual Rent and additional rent due under
the Lease through and including the Cancellation Date in the stipulated and
agreed upon aggregate sum of $122,272.99 (which sum shall not be adjusted if the
Cancellation Date is earlier than December 31, 2005), said sum shall be paid by
official bank check or wire transfer of federal funds, and (ii) Tenant hereby
relinquishes all right, title and interest in and to the security deposit under
the Lease in the amount of $85,485.42, and any interest earned thereon. Upon
such payment and relinquishment, and the legal surrender of vacant, broom clean
possession the demised premises, with Tenant's property removed as aforesaid, on
the Cancellation Date or such earlier time as may be required pursuant to
Paragraph 1 hereof, it is agreed that Tenant shall have no further obligation to
Owner under of by reason of the Lease accruing from and after the Cancellation
Date, or such earlier time as may be required pursuant to Paragraph 1 hereof.

4. This Surrender of Lease is submitted to the Tenant for signature with the
understanding that it shall not bind the Owner unless and until it has been
executed by the Owner and delivered to the Tenant or Tenant's attorney and Owner
has received the payments provided for in Paragraphs 2 and 3 hereof.

5. This Surrender of Lease shall be binding upon the parties hereto, their
successors and assigns.

6. Tenant agrees not to disclose the terms, covenants, conditions or other facts
with respect to this Surrender of Lease, to any person, corporation,
partnership, association, newspaper, periodical or other entity except pursuant
to a valid business purpose or as required by law. This non-disclosure and
confidentiality agreement shall be binding upon Tenant without limitation as to
time.

7. Tenant represents that it has dealt with no broker in connection with this
Surrender of Lease and agrees to indemnify, defend and hold Owner harmless from
any and all claims of any broker arising out of or in connection with
negotiations of, or entering into of, this Surrender of Lease.

IN WITNESS WHEREOF, the parties hereto have caused this Surrender of Lease to be
duly executed by their respective officers the day and year first above
mentioned.

MACK-CALI SO. WEST REALTY ASSOCIATES L.L.C.

By:  Mack-Cali Realty L.P., member
By:  Mack-Cali Realty Corporation, general partner


By:  /s/ Michael Grossman
     -------------------------------------
         Executive Vice President


OPTICARE ACQUISITION CORP.

By:  /s/  Christopher J. Walls
     -------------------------------------
         Name:  Christopher J. Walls
         Title: President

EX-21.1

                                                                               .
                                                                               .
                                                                               .
                                  EXHIBIT 21.1

                         SUBSIDIARIES OF THE REGISTRANT

      The following corporations were subsidiaries of the Company as of December
31, 2005:



                                           JURISDICTION
                                                OF
                  NAME                     INCORPORATION
                  ----                     -------------
                                        
OptiCare Merger Sub, Inc.(1)                 Delaware
USV Merger Sub, Inc.(1)                      Delaware


(1)   Formed solely for the purpose of completing a merger. Merged out of
      existence on March 6, 2006.

EX-23.1

                                                                    EXHIBIT 23.1

            CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

Board of Directors and Stockholders of
    REFAC OPTICAL GROUP

We have issued our report dated March 17, 2006, accompanying the financial
statements included in the Annual Report of Refac Optical Group (formerly Refac)
on Form 10-K for the year ended December 31, 2005. We hereby consent to the
incorporation by reference of said report in the Registration Statements on Form
S-4 (File No. 333-130328, effective February 14, 2006) and Forms S-8 (File Nos.
333-76085, effective April 16, 1999, and 333-107146, effective September 5,
2003).

/s/ GRANT THORNTON LLP

New York, New York
March 17, 2006

EX-31.1

                                                                    EXHIBIT 31.1

                                 CERTIFICATIONS

     I, J. David Pierson, Chief Executive Officer of Refac Optical Group,
certify that:

1.    I have reviewed this annual report on Form 10-K of Refac Optical Group
      (the "Registrant");

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 annual 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 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 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 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.

Date: March 31, 2006                        /s/ J. David Pierson
                                            --------------------
                                            J. David Pierson
                                            Chief Executive Officer

EX-31.2

                                                                    EXHIBIT 31.2

     I, Raymond A. Cardonne, Jr., Chief Financial Officer of Refac Optical
Group, certify that:

1.    I have reviewed this annual report on Form 10-K of Refac Optical Group
      (the "Registrant");

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 annual 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 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 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 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.

Date:  March 31, 2006                       /s/ Raymond A. Cardonne
                                            -----------------------
                                            Raymond A. Cardonne, Jr.
                                            Chief Financial Officer

EX-32.1

                                                                   EXHIBIT 32.1


                    CERTIFICATION OF CEO AND CFO PURSUANT TO
                             18 U.S.C. SECTION 1350,
                             AS ADOPTED PURSUANT TO
                  SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

      In connection with the Annual Report on Form 10-K of Refac Optical Group,
a Delaware corporation (the "Company"), for the fiscal year ended December 31,
2005 as filed with the Securities and Exchange Commission on the date hereof
(the "Report"), each of J. David Pierson, as Chief Executive Officer of the
Company, and Raymond A. Cardonne, as Chief Financial Officer of the Company,
hereby certifies, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to
Section 906 of the Sarbanes-Oxley Act of 2002, that, to the best of his
knowledge:

      (1) The Report fully complies with the requirements of Section 13(a) of
the Securities Exchange Act of 1934; and

      (2) The information contained in the Report fairly presents, in all
material respects, the financial condition and result of operations of the
Company.


/s/ J. David Pierson
- ----------------------
J. David Pierson
Chief Executive Officer
March 31, 2006


/s/Raymond A. Cardonne
- ----------------------
Raymond A. Cardonne, Jr.
Senior Vice President and CFO
March 31, 2006


      This certification accompanies the Report pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002 and shall not, except to the extent required by the
Sarbanes-Oxley Act of 2002, be deemed filed by the Company for purposes of
Section 18 of the Securities Exchange Act of 1934, as amended.