10-Q

TABLE OF CONTENTS

	Item 1. Financial Statements
	Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations
	Item 3. Quantitative and Qualitative Disclosures about Market Risk
	Item 4. Submission of Matters to a Vote of Security Holders
	Item 6. Exhibits and Reports on Form 8-K
Exhibit 10.1
Exhibit 27

SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549

FORM 10-Q

(Mark One)

X	Quarterly report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 For the quarterly period ended July 29, 2000, or
__	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 1-12814

COLE NATIONAL CORPORATION
(Exact name of registrant as specified in its charter)

Delaware
(State or other jurisdiction of
incorporation or organization) 34-1453189
(I.R.S. employer
identification no.)

5915 Landerbrook Drive
Mayfield Heights, Ohio
(Address of principal executive offices) 44124
(Zip code)

(440) 449-4100
(Registrant’s telephone number, including area code)

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.
  X   YES        NO

As of August 24, 2000, 15,621,426 shares of the registrant’s common stock were outstanding.

COLE NATIONAL CORPORATION AND SUBSIDIARIES
FORM 10-Q
QUARTER ENDED JULY 29, 2000
INDEX

		Page No.
PART I. FINANCIAL INFORMATION
Item 1.	Financial Statements
	Consolidated Balance Sheets as of July 29, 2000 and January 29, 2000		1
	Consolidated Statements of Operations for the 13 and 26 weeks ended July 29, 2000 and July 31, 1999		2
	Consolidated Statements of Cash Flows for the 26 weeks ended July 29, 2000 and July 31, 1999		3
	Notes to Consolidated Financial Statements		4
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations		7
Item 3.	Quantitative and Qualitative Disclosures about Market Risk		11
PART II. OTHER INFORMATION
Item 4.	Submission of Matters to a Vote of Security Holders		12
Item 6.	Exhibits and Reports on Form 8-K		13

PART I — FINANCIAL INFORMATION

Item 1. Financial Statements

COLE NATIONAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(Unaudited)
(Dollars in Thousands)

			July 29,			January 29,
			2000			2000
Assets
Current assets:
	Cash and temporary cash investments		$	18,295		$	28,953
	Accounts receivable, less allowance for doubtful accounts of $8,378 and $7,557, respectively			41,520			41,682
	Current portion of notes receivable			4,965			4,917
	Inventories			132,868			116,514
	Refundable income taxes			1,546			1,546
	Prepaid expenses and other			7,059			6,947
	Deferred income tax benefits			4,272			3,901
		Total current assets		210,525			204,460
Property and equipment, at cost				280,049			267,633
	Less — accumulated depreciation and amortization			(151,657	)		(144,249	)
		Total property and equipment, net		128,392			123,384
Notes receivable, excluding current portion and less reserves for uncollectible amounts of $4,863 and $4,196, respectively				23,927			25,948
Deferred income taxes and other assets				75,881			77,080
Intangible assets, net				154,566			157,399
		Total assets	$	593,291		$	588,271
Liabilities and Stockholders’ Equity
Current liabilities:
	Current portion of long-term debt		$	1,074		$	1,515
	Accounts payable			62,485			60,388
	Accrued interest			6,113			6,482
	Accrued liabilities			78,984			71,998
	Accrued income taxes			—			178
		Total current liabilities		148,656			140,561
Long-term debt, net of discount and current portion				284,299			284,584
Other long-term liabilities				15,310			16,610
Stockholders’ equity				145,026			146,516
		Total liabilities and stockholders’ equity	$	593,291		$	588,271

      The accompanying notes to consolidated financial statements are an integral part of these consolidated balance sheets.

1

COLE NATIONAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
(Dollars in thousands, except per share amounts)

			Thirteen Weeks Ended						Twenty-Six Weeks Ended
			July 29,			July 31,			July 29,			July 31,
			2000			1999			2000			1999
Net revenue			$	264,663		$	260,918		$	522,434		$	521,401
Costs and expenses:
	Cost of goods sold			87,981			90,882			174,309			179,000
	Operating expenses			159,624			148,428			317,967			300,287
	Depreciation and amortization			9,960			8,936			19,962			18,202
		Total costs and expenses		257,565			248,246			512,238			497,489
Operating income				7,098			12,672			10,196			23,912
Interest and other (income) expense:
	Interest expense			7,028			6,975			14,088			13,803
	Interest and other income			(934	)		(1,080	)		(1,884	)		(1,819	)
		Total interest and other expense, net		6,094			5,895			12,204			11,984
Income (loss) before income taxes				1,004			6,777			(2,008	)		11,928
Income tax provision (benefit)				552			2,779			(1,104	)		4,891
Net income (loss)			$	452		$	3,998		$	(904	)	$	7,037
Earnings (loss) per common share:
	Basic		$	.03		$	.27		$	(.06	)	$	.47
	Diluted		$	.03		$	.27		$	(.06	)	$	.47

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

2

COLE NATIONAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
(Dollars in thousands)

				Twenty-six Weeks Ended
				July 29,			July 31,
				2000			1999
Cash flows from operating activities:
	Net income (loss)			$	(904	)	$	7,037
	Adjustments to reconcile net income (loss) to net cash provided (used) by operating activities:
		Depreciation and amortization			19,962			18,202
		Non-cash interest, net			(711	)		(854	)
		Increases (decreases) in cash resulting from changes in assets and liabilities:
			Accounts and notes receivable, prepaid expenses and other assets		2,981			173
			Inventories		(16,354	)		(6,971	)
			Accounts payable, accrued liabilities and other liabilities		9,274			(24,951	)
			Accrued interest		(369	)		64
			Accrued, refundable and deferred income taxes		(549	)		4,354
			Net cash provided (used) by operating activities		13,330			(2,946	)
Cash flows from investing activities:
	Purchases of property and equipment, net				(17,598	)		(13,501	)
	Systems development costs				(3,851	)		(6,500	)
	Investment in Pearle Europe, net				(553	)		(1,360	)
	Other, net				(10	)		(582	)
			Net cash used by investing activities		(22,012	)		(21,943	)
Cash flows from financing activities:
	Repayment of long-term debt				(770	)		(710	)
	Proceeds from exercise of stock options				472			153
	Common stock repurchased				—			(564	)
	Issuance of stock option notes receivable				(1,128	)		—
	Payment of deferred financing fees				(375	)		—
	Other, net				(175	)		207
			Net cash used by financing activities		(1,976	)		(914	)
Cash and temporary cash investments:
	Net decrease during the period				(10,658	)		(25,803	)
	Balance, beginning of the period				28,953			51,057
	Balance, end of the period			$	18,295		$	25,254

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

3

COLE NATIONAL CORPORATION AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(Unaudited)

(1) Basis of Presentation and Accounting Policies

      The consolidated financial statements include the accounts of Cole National Corporation and its wholly owned subsidiaries, including Cole National Group, Inc. and its wholly owned subsidiaries (collectively, the “Company”). All significant intercompany transactions have been eliminated in consolidation.

      The accompanying consolidated financial statements have been prepared without audit and certain information and footnote disclosures normally included in financial statements prepared in accordance with generally accepted accounting principles have been condensed or omitted, although management believes that the disclosures herein are adequate to make the information not misleading. Results for interim periods are not necessarily indicative of the results to be expected for the full year. These statements should be read in conjunction with Cole National Corporation’s consolidated financial statements for the fiscal year ended January 29, 2000.

      In the opinion of management, the accompanying financial statements contain all adjustments (consisting only of normal recurring accruals) necessary to present fairly its financial position as of July 29, 2000 and the results of operations and cash flows for the 26 weeks ended July 29, 2000 and July 31, 1999.

   Inventories

      The accompanying interim consolidated financial statements have been prepared without physical inventories.

   Cash Flows

      Net cash flows from operating activities reflect cash payments for income taxes and interest of $176,000 and $13,915,000 respectively, for the 26 weeks ended July 29, 2000, and $283,000 and $13,331,000, respectively, for the 26 weeks ended July 31, 1999.

   Earnings Per Share

      Earnings per share for the 13 and 26 weeks ended July 29, 2000 and July 31, 1999 have been calculated based on the following weighted average number of common shares and equivalents outstanding:

	Thirteen Weeks				Twenty-six Weeks
	2000		1999		2000		1999
Basic		15,552,558		14,855,657		15,535,685		14,862,827
Diluted		15,594,889		14,874,604		15,556,856		14,971,526

4

COLE NATIONAL CORPORATION AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(Unaudited)

(1) Basis of Presentation and Accounting Policies (continued)

      Total Other Comprehensive Income (Loss)

      Total other comprehensive income (loss) for the 13 and 26 weeks ended July 29, 2000 and July 31, 1999 is as follows (000’s omitted):

	Thirteen Weeks					Twenty-six Weeks
	2000		1999			2000			1999
Net income (loss)	$	452	$	3,998		$	(904	)	$	7,037
Cumulative translation income (loss)		1,141		(32	)		(672	)		(886	)
Total comprehensive income (loss)	$	1,593	$	3,966		$	(1,576	)	$	6,151

(2) Credit Facility

      In June 2000, the credit facility was amended providing availability under the working capital commitment of from $50.0 million to 75.0 million based on Cole National Group’s current debt leverage ratio described in the credit facility. As of July 29, 2000 total availability under the credit facility was $50.0 million (less commitments under outstanding letters of credit). The amendment also modified certain covenants, as well as the permitted levels on indebtedness, dividends, investments, and capital expenditures.

5

COLE NATIONAL CORPORATION AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(Unaudited)

(3) Segment Information

      Information on the Company’s reportable segments is as follows (000’s omitted):

			Thirteen Weeks					Twenty-six Weeks
			2000			1999		2000			1999
Net revenue:
	Cole Vision		$	190,548		$	192,050	$	397,663		$	404,132
	Things Remembered			74,115			68,868		124,771			117,269
		Consolidated net revenue	$	264,663		$	260,918	$	522,434		$	521,401
Income or (loss):
	Cole Vision		$	(969	)	$	4,077	$	8,474		$	18,404
	Things Remembered			11,887			10,479		9,509			9,138
		Total segment profit		10,918			14,556		17,983			27,542
Unallocated amounts:
	Corporate expenses			3,820			1,884		7,787			3,630
		Consolidated operating income		7,098			12,672		10,196			23,912
		Interest and other expense, net		6,094			5,895		12,204			11,984
		Income before income taxes	$	1,004		$	6,777	$	(2,008	)	$	11,928

(4) Reclassifications

      Certain fiscal 1999 amounts have been reclassified to conform with the fiscal 2000 presentation.

6

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

      The following is a discussion of certain factors affecting Cole National Corporation’s results of operations for the 13 and 26 week periods ended July 29, 2000 and July 31, 1999 (the Company’s second quarter and first six months, respectively) and its liquidity and capital resources. This discussion should be read in conjunction with the consolidated financial statements and notes thereto included elsewhere in this filing and the audited financial statements for the fiscal year ended January 29, 2000 included in the annual report on Form 10-K.

      Fiscal years end on the Saturday closest to January 31 and are identified according to the calendar year in which they begin. For example, the fiscal year ended January 29, 2000 is referred to as “fiscal 1999.” The current fiscal year, which will end February 3, 2001, is referred to as “fiscal 2000.”

Results of Operations

      The following table sets forth certain operating information for the second quarter and first six months of fiscal 2000 and fiscal 1999 (dollars in millions):

			Second Quarter									First Six Months
			2000			1999			Change			2000			1999			Change
Net Revenue:
	Cole Vision		$	190.6		$	192.0			(0.8	)%	$	397.6		$	404.1			(1.6	)%
	Things Remembered			74.1			68.9			7.6			124.8			117.3			6.4
		Total net revenue	$	264.7		$	260.9			1.4	%	$	522.4		$	521.4			0.2	%
Gross margin			$	176.7		$	170.0			3.9	%	$	348.1		$	342.4			1.7	%
Operating expenses				159.6			148.4			7.5			317.9			300.3			5.9
Depreciation and amortization				10.0			8.9			11.5			20.0			18.2			9.7
		Operating income	$	7.1		$	12.7			(44.0	)%	$	10.2		$	23.9			(57.4	)%
Percentage of Net Revenue:
	Gross margin			66.8	%		65.2	%		1.6			66.6	%		65.7	%		0.9
	Operating expenses			60.3	%		56.9	%		3.4			60.8	%		57.6	%		3.2
	Depreciation and amortization			3.8	%		3.4	%		0.4			3.8	%		3.5	%		0.3
		Operating income		2.7	%		4.9	%		(2.2	)		2.0	%		4.6	%		(2.6	)
Number of Retail Locations at the End of the Period:
	Cole Licensed Brands			1,106			1,176			(6.0	)%
	Pearle company-owned			446			462			(3.5	)%
	Pearle franchised			425			418			1.7	%
		Total Cole Vision		1,977			2,056			(3.8	)%
	Things Remembered			788			810			(2.7	)%
		Total Cole National		2,765			2,866			(3.5	)%

7

      The increase in net revenue for the second quarter and first six months of fiscal 2000 was primarily attributable to increases in consolidated comparable store sales and revenue associated with the MetLife vision care business acquired in October 1999, offset by a reduction in the number of locations, including the closing of all optical departments at Montgomery Ward in December 1999. Changes in comparable store sales by business were:

		Second Quarter			First Six Months
Cole Licensed Brands			5.5	%		5.2	%
Pearle U.S. company-owned			(2.8	%)		(2.0	%)
	Total Cole Vision		2.5	%		2.4	%
Things Remembered			8.5	%		7.4	%
	Total Cole National		4.2	%		3.7	%
Pearle U.S. franchise stores			0.9	%		2.3	%
Pearle U.S. chain-wide			(0.8	)%		0.3	%

      Sales at Cole Licensed Brands increased despite the closing of the Montgomery Ward departments. The average selling price at Cole Licensed Brands for the second quarter and first six months was slightly above last year, while the number of transactions was also up slightly even though there were fewer locations. Sales results for the second quarter and first six months at Pearle company-owned stores reflected a decrease in the number of transactions due, in part, to fewer locations. The average transaction increased slightly in the second quarter and first six months. At Things Remembered, the comparable store sales increases for the second quarter and first six months reflected an increase in sales of new merchandise at higher average unit retails and an increase in the number of transactions compared to a year ago.

      The gross margin increase was primarily attributable to the revenue increase at Things Remembered. Gross margin as a percentage of net revenue at Cole Vision improved 1.9 and 1.4 percentage points in fiscal 2000 compared to the second quarter and first six months of last year, respectively. The primary cause for the improvement was the additional revenue associated with the MetLife vision care business. Gross margin as a percentage of net revenue at Things Remembered was flat to last year in the second quarter and decreased 0.9 percentage points compared to the first six months in fiscal 1999 reflecting the impact of an aggressive merchandise clearance promotion in the first quarter of this year.

      The unfavorable leverage in operating expenses for the second quarter was primarily attributable to a 1.8 percentage point increase in payroll costs, and a 1.0 percentage point increase in managed vision care costs. The unfavorable leverage for the first six months was primarily attributable to a 2.0 percentage point increase in payroll costs, including a 0.3 percentage point increase from first quarter severance costs, and a 0.5 percentage point increase in managed vision care costs primarily associated with the MetLife vision care business. The leverage loss resulted primarily from the decline in comparable store sales at Pearle company-owned stores, a $1.8 million first quarter charge for severance costs recorded in connection with a personnel reduction at Cole Vision, and increased expenses associated with the Target Optical expansion. The increase in depreciation and amortization was primarily attributable to amortization of systems development costs related to the Pearle manufacturing and merchandise/inventory management system implemented in the third quarter last year and amortization of restricted stock awarded in January 2000.

      The decreases in operating income for the second quarter and first six months compared to the same periods a year earlier were primarily the result of the increases in operating expenses and depreciation and amortization as noted above.

8

      Net interest and other expense increased slightly for the second quarter and first six months compared to the same periods a year ago. Income tax provisions were recorded in the first six months of fiscal 2000 and fiscal 1999 using the Company’s estimated annual effective tax rates of 55% and 41%, respectively. The higher rate for fiscal 2000 approximates the full year effective rate realized in fiscal 1999.

      Net income for the second quarter decreased to $0.5 million from $4.0 million for the same period last year. For the first six months of fiscal 2000, net income decreased to a loss of $0.9 million from a profit of $7.0 million for the first six months of fiscal 1999. The decrease was primarily due to the decrease in income from operations, offset in part by the higher effective tax rate on the fiscal 2000 loss.

Liquidity and Capital Resources

      The Company’s primary source of liquidity is funds provided from operations of its operating subsidiaries. In addition, its wholly-owned subsidiary, Cole National Group, Inc., and its operating subsidiaries have a working capital line of credit of $75.0 million. By amendment, availability under the working capital commitment ranges from $50.0 million to $75.0 million based on Cole National Group’s current debt leverage ratio described in the credit facility. As of July 29, 2000, total availability under the credit facility was $50.0 million and availability after reduction for commitment under outstanding letters of credit totaled $40.4 million. There were no working capital borrowings outstanding at any time during the first six months of fiscal 2000 and fiscal 1999. However, the Company expects to supplement its seasonal cash needs with working capital borrowings in the third and fourth quarters this year.

      Operations for the first six months provided $13.3 million of cash in fiscal 2000 compared to a use of $2.9 million for the same period in fiscal 1999. The primary reason for the additional $16.3 million in cash provided by operations was an increase in accounts payable and accrued liabilities in the first six months of fiscal 2000 due, in large part, to accounts payable in connection with the remerchandising of the Pearle stores and the opening of the Target departments compared to a significant decrease in accounts payable and accrued liabilities for the same period in fiscal 1999. This favorable comparison was partially offset by a larger increase in inventories this year than last year and a decrease in net income compared to last year.

      Cash used by investing activities included capital additions of $17.6 million and $13.5 million for the first six months of fiscal 2000 and fiscal 1999, respectively. The majority of capital expenditures were for store fixtures, equipment and leasehold improvements for new stores and the remodeling of existing stores. Investments in systems development costs totaled $3.9 million and $6.5 million in the first six months of fiscal 2000 and fiscal 1999, respectively. The Company’s net investment in Pearle Europe was increased by $0.6 million and $1.4 million in the first six months of fiscal 2000 and fiscal 1999, respectively.

      The Company believes that funds provided from operations, along with funds available under the credit facility, will provide adequate sources of liquidity to allow its operating subsidiaries to continue to expand the number of stores and to fund capital expenditures and systems development costs.

Recent Developments and Forward-Looking Information

      Primarily as a result of the costs associated with the rapid expansion of Target Optical, the Company expects that third quarter operating results will be below last year’s level (before the severance charges of $4.7 million in the third quarter of fiscal 1999).

      Certain sections of this Form 10-Q, including this Management’s Discussion and Analysis, contain forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Actual results may differ materially from those forecasted due to a variety of factors that can adversely affect the Company’s operating results, liquidity and financial condition such as risks associated with the timing and achievement of the continuing restructuring and improvements in the operations of the optical business, the

9

Company’s ability to select, stock and price merchandise attractive to customers, success of systems integration, competition in the optical industry, integration of acquired businesses, economic and weather factors affecting consumer spending, operating factors affecting customer satisfaction, including manufacturing quality of optical and engraved goods, the Company’s relationships with host stores and franchisees, the mix of goods sold, pricing and other competitive factors, and the seasonality of the Company’s business. Forward-looking statements are made based upon management’s expectations and beliefs concerning future events impacting the Company. All forward-looking statements involve risk and uncertainty.

10

Item 3. Quantitative and Qualitative Disclosures about Market Risk

      The Company is exposed to market risk from changes in foreign currency exchange rates, which could impact its results of operations and financial condition. Foreign exchange risk arises from the Company’s exposure in fluctuations in foreign currency exchange rates because the Company’s reporting currency is the United States dollar. Management seeks to minimize the exposure to foreign currency fluctuations through natural internal offsets to the fullest extent possible.

11

PART II — OTHER INFORMATION

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

      On June 15, 2000 the Company held its annual meeting of stockholders. At that meeting, the stockholders elected seven directors to serve until the next annual meeting of stockholders and confirmed the appointment of Arthur Andersen LLP as independent auditors of the Company for the fiscal year ending February 3, 2001.

      Of the total eligible votes of 15,518,812, stockholders cast votes of 14,345,290 or 92.44% of the total eligible votes. The votes cast for the aforementioned matters were as follows:

      1) Election of Directors

					Abstentions
					And/or Broker
	For		Withheld		Non-votes
Jeffrey A. Cole		13,272,831		1,072,459		0
Timothy F. Finley		13,272,110		1,073,180		0
Irwin W. Gold		13,272,110		1,073,180		0
Peter V. Handal		13,272,010		1,073,280		0
Larry Pollock		13,274,930		1,070,360		0
Charles A. Ratner		13,271,075		1,074,215		0
Walter J. Salmon		13,274,885		1,070,405		0

      2) Confirmation of Independent Auditors

					Abstentions
					And/or Broker
	For		Withheld		Non-votes
Arthur Andersen LLP		14,292,762		34,698		17,830

12

Item 6. Exhibits and Reports on Form 8-K

      (a)     Exhibits. The following Exhibits are filed herewith and made a part hereof:

10.1	Eighth Amendment to the Credit Agreement, dated as of June 9, 2000, among Cole Vision Corporation, Things Remembered, Inc., and Pearle Inc. and Canadian Imperial Bank of Commerce.
27	Financial Data Schedule

      (b)    Reports on Form 8-K

None

13

SIGNATURE

      Pursuant to the requirements 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.

COLE NATIONAL CORPORATION

By: /s/ William P. Lahiff, Jr.

William P. Lahiff, Jr.
Vice President and Controller
(Duly Authorized Officer and Principal
Accounting Officer)

Date: September 11, 2000

14

COLE NATIONAL CORPORATION
FORM 10-Q
QUARTER ENDED JULY 29, 2000

EXHIBIT INDEX

Exhibit
Number	Description
10.1	Eighth Amendment to the Credit Agreement, dated as of June 9, 2000, among Cole Vision Corporation, Things Remembered, Inc., and Pearle Inc. and Canadian Imperial Bank of Commerce.
27	Financial Data Schedule

15 EX-10.1 2 l83708aex10-1.txt EXHIBIT 10.1 1 Exhibit 10.1 EIGHTH AMENDMENT EIGHTH AMENDMENT, dated as of June 9, 2000 (this "AMENDMENT") to the Credit Agreement, dated as of November 15, 1996 (as amended, supplemented or otherwise modified from time to time, the "CREDIT AGREEMENT"), among COLE VISION CORPORATION, a Delaware corporation ("COLE VISION"), THINGS REMEMBERED, INC., a Delaware corporation ("THINGS REMEMBERED") and PEARLE, INC., a Delaware corporation ("PEARLE"; Cole Vision, Things Remembered and Pearle each being referred to as a "BORROWER" and collectively as the "BORROWERS"), the several banks and other financial institutions from time to time parties thereto (collectively, the "LENDERS") and CANADIAN IMPERIAL BANK OF COMMERCE, a Canadian-chartered bank acting through its New York Agency, as administrative agent for the Lenders thereunder (in such capacity, the "ADMINISTRATIVE AGENT"). WITNESSETH ---------- WHEREAS, the Borrowers, the Lenders and the Administrative Agent are parties to the Credit Agreement; WHEREAS, the Borrowers have requested that the Administrative Agent and the Lenders amend certain provisions of the Credit Agreement as set forth herein; and WHEREAS, the Administrative Agent and the Lenders are willing to effect such amendment, but only upon the terms and subject to the conditions set forth herein; NOW, THEREFORE, in consideration of the premises and mutual agreements contained herein, and for other good and valuable consideration, the sufficiency of which is hereby acknowledged, the Borrowers, the Lenders and the Administrative Agent hereby agree as follows: 1. DEFINED TERMS. Unless otherwise defined herein, terms defined in the Credit Agreement shall have such meanings when used herein. 2. AMENDMENT TO SUBSECTION 1.1. Subsection 1.1 of the Credit Agreement is hereby amended by: (a) inserting the following new definitions in their proper alphabetical order; "EIGHTH AMENDMENT EFFECTIVE DATE": June 9, 2000. "LEVERAGE THRESHOLD": shall be deemed to have been satisfied on the date upon which the Borrowers shall have delivered financial statements to the Lenders pursuant to subsection 7.1(a) or 7.1(b) confirming that, as at the end of the fiscal period covered by such financial statements, the Leverage Ratio was less than 3.70 to 1.00. "TWINSBURG SALE/LEASEBACK": the sale and leaseback transaction involving the real property located in Twinsburg, Ohio, currently owned by CNC. 2 2 (b) changing the definition of "Available Revolving Credit Commitment" to read in its entirety as follows: "AVAILABLE REVOLVING CREDIT COMMITMENT": as to any Lender at any time, an amount equal to the excess, if any, of (a) the amount of such Lender's Revolving Credit Commitment at such time OVER (b) the sum of (i) the aggregate unpaid principal amount at such time of all Revolving Credit Loans made by such Lender and (ii) an amount equal to such Lender's Revolving Credit Commitment Percentage of the outstanding L/C Obligations at such time; collectively, as to all the Lenders, the "AVAILABLE REVOLVING CREDIT COMMITMENTS", PROVIDED that, for purposes of subsection 2.1 only, "Available Revolving Credit Commitments" shall be reduced by an amount equal to $25,000,000 in the event that the Leverage Ratio as of the end of any fiscal quarter of CNG is greater than 3.70 to 1.00 until such time as the Leverage Ratio as of the end of any fiscal quarter of CNG subsequent to such fiscal quarter is less than or equal to 3.70 to 1.00. 3. AMENDMENT TO SUBSECTION 2.4(a) and 2.4(b). Subsection 2.4 of the Credit Agreement is hereby amended by changing such subsection to read in its entirety as follows: "2.4 COMMITMENT FEES: OTHER FEES. (a) The Borrowers agree, jointly and severally, to pay to the Administrative Agent for the account of each Lender, a commitment fee for the period from and including the first day of the Revolving Credit Commitment Period to the Revolving Credit Commitment Termination Date, computed at the rate per annum set forth under the heading "Commitment Fees" on Schedule II opposite the percentage which is the average daily amount of the Aggregate Outstanding Revolving Credit of all Lenders during the period for which payment is made constitutes of the average daily amount of the Available Revolving Credit Commitment of such Lender during such payment period, payable quarterly in arrears on the last day of each fiscal quarter of CNG and on the Revolving Credit Commitment Termination Date, commencing on the first of such days to occur after the Closing Date. Notwithstanding the foregoing, the commitment fee for the period from and including the first day of the Eighth Amendment Effective Date until the date on which the Leverage Theshold has been satisfied shall be 0.75% per annum of the average daily amount of the Available Revolving Credit Commitment of such Lender (without any reduction thereof pursuant to the definition of "Available Revolving Credit Commitment") during such period, payable as set forth above. (b) The Borrowers agree, jointly and severally, to pay to the Administrative Agent for the account of each Lender, a utilization fee for the period from and including the Eighth Amendment Effective Date to the date on which the Leverage Threshold has been satisfied, (i) if the average daily amount of the aggregate principal amount of all Revolving Credit Loans outstanding during such period is greater than 66-2/3% of the average aggregate Revolving Credit Commitments during such period, computed at 0.50% per annum on the average daily principal amount of such Lender's outstanding Revolving Credit Loans during such period and (ii) if the average daily amount of the aggregate principal amount of all Revolving Credit Loans outstanding during such period 3 3 is less than or equal to 66-2/3% but greater than 33-1/3% of the average aggregate Revolving Credit Commitments during such period, computed at 0.25% per annum on the average daily principal amount of such Lender's outstanding Revolving Credit Loans." 4. AMENDMENT TO SUBSECTION 7.2(c). Subsection 7.2(c) of the Credit Agreement is hereby amended by deleting "(90 days in the case of the fiscal year ending January 29, 2000)" after the word "Borrowers" therein. 5. AMENDMENT TO SUBSECTIONS 8.1(a) 8.1(b) and 8.1(c). Subsections 8.1(a), 8.1(b) and 8.1(c) of the Credit Agreement are hereby amended by deleting such subsections in their entireties and substituting in lieu thereof the following: "(a) LEVERAGE RATIO. Permit the Leverage Ratio as of the end of each fiscal quarter of CNG ending on any of the dates set forth below to be greater than the ratio set forth opposite such date set forth below: Fiscal Quarter Ending Leverage Ratio --------------------- -------------- July 29, 2000 5.05 to 1.00 October 28, 2000 5.30 to 1.00 February 3, 2001 4.40 to 1.00 May 5, 2001 4.50 to 1.00 August 4, 2001 4.25 to 1.00 November 3, 2001 4.25 to 1.00 February 2, 2002 3.75 to 1.00 May 5, 2002 3.85 to 1.00 August 4, 2002 3.65 to 1.00 November 3, 2002 3.60 to 1.00 February 2, 2003 3.10 to 1.00 (b) ADJUSTED INTEREST COVERAGE RATIO. Permit the Adjusted Interest Coverage Ratio as of the end of each fiscal quarter of CNG ending on any of the dates set forth below to be less than the ratio set forth opposite such date below: Adjusted Fiscal Quarter Ending Interest Coverage Ratio --------------------- ----------------------- July 29, 2000 1.20 to 1.00 October 28, 2000 1.20 to 1.00 February 3, 2001 1.25 to 1.00 4 4 May 5, 2001 1.25 to 1.00 August 4, 2001 1.25 to 1.00 November 3, 2001 1.30 to 1.00 February 2, 2002 1.30 to 1.00 May 5, 2002 1.35 to 1.00 August 4, 2002 1.40 to 1.00 November 3, 2002 1.40 to 1.00 February 2, 2003 1.45 to 1.00 (c) MINIMUM CONSOLIDATED NET WORTH: Permit the Consolidated Net Worth of CNG as of the end of each fiscal quarter of CNG ending on any of the dates set forth below to be less than the amount set forth opposite such date below: Fiscal Quarter Ending Consolidated Net Worth --------------------- ---------------------- July 29, 2000 $95,000,000 October 28, 2000 $95,000,000 February 3, 2001 $95,000,000 May 5, 2001 $100,000,000 August 4, 2001 $100,000,000 November 3, 2001 $100,000,000 February 2, 2002 $105,000,000 May 5, 2002 $105,000,000 August 4, 2002 $105,000,000 November 3, 2002 $110,000,000 February 2, 2003 $115,000,000" 6. ADDITIONAL AMENDMENT TO SUBSECTION 8.1. Subsection 8.1 of the Credit Agreement is hereby amended by deleting paragraph (d) thereof in its entirety. 7. AMENDMENT TO SUBSECTION 8.2(i). Subsection 8.2(i) of the Credit Agreement is hereby amended by deleting such subsection in its entirety and substituting in lieu thereof the following: "(i) Indebtedness of the Borrowers and their Subsidiaries in an aggregate principal amount not exceeding as to the Borrowers and their Subsidiaries $10,000,000 at any time outstanding; PROVIDED that no Indebtedness shall be created, incurred or assumed pursuant to this subsection 8.2(i) until the Leverage Threshold has been satisfied." 5 5 8. AMENDMENT TO SUBSECTION 8.7(c). Subsection 8.7(c) of the Credit Agreement is hereby amended by deleting such subsection in its entirety and substituting in lieu thereof the following: "(c) so long as no Default or Event of Default shall have occurred and be continuing or would occur after giving effect to such dividend, dividends to CNG in an aggregate amount not to exceed $30,000,000 solely to allow CNG to repurchase CNG Notes and/or Senior Subordinated Notes without violating Section 9(m); PROVIDED that no dividends shall be declared or paid pursuant to this subsection 8.7(c) until the Leverage Threshold has been satisfied;" 9. AMENDMENT TO SUBSECTION 8.7(d). Subsection 8.7(d) of the Credit Agreement is hereby amended by deleting such subsection in its entirety and substituting in lieu thereof the following: "(d) so long as no Default or Event of Default shall have occurred and be continuing or would occur after giving effect to such dividend, dividends to CNG in an aggregate amount not to exceed $4,000,000 solely to allow CNG or CNC to repurchase, redeem, or otherwise acquire or retire for value, any Capital Stock of CNG or CNC or any current or former Subsidiary of CNG held by any of CNG's (or any of its Subsidiaries') current or former employees; PROVIDED that no dividends shall be declared or paid pursuant to this subsection 8.7(d) until the Leverage Threshold has been satisfied;" 10. AMENDMENT TO SUBSECTION 8.8. Subsection 8.8 of the Credit Agreement is hereby amended by deleting such subsection in its entirety and substituting in lieu thereof the following: "8.8 Limitation on Capital and Other Expenditures. -------------------------------------------- (a) Make any expenditure in respect of the purchase or other acquisition of fixed or capital assets (a "CAPITAL EXPENDITURE") except for expenditures in the ordinary course of business not exceeding, in the aggregate for the Borrowers and their Subsidiaries during any of the test periods set forth below, the amount set forth opposite such test period set forth below: Test Period Amount ----------- ------ January 30, 2000 - February 3, 2001 $43,000,000 February 4, 2001 - February 2, 2002 $47,000,000 February 3, 2002 - Revolving Credit Termination Date $52,000,000 (b) Make any expenditure in respect of the development of computer systems owned or operated by the Borrowers and their Subsidiaries except for expenditures in the ordinary course of business not exceeding, in the aggregate for the Borrowers and their Subsidiaries during any of the test periods set forth below, the amount set forth opposite such test period set forth below: 6 6 Test Period Amount ----------- ------ January 30, 2000 - February 3, 2001 $9,000,000 February 4, 2001 - February 2, 2002 $9,000,000 February 3, 2002 - Revolving Credit Termination Date $9,000,000" 11. AMENDMENT TO SUBSECTION 8.9(e). Subsection 8.9(e) of the Credit Agreement is hereby amended by deleting such subsection in its entirety and substituting in lieu thereof the following: "(e) so long as no Default or Event of Default has occurred and is continuing or would occur after giving effect to such Investment, Investments in franchises in a business related to the optical business of Pearle and Cole Vision as conducted on the Closing Date in an aggregate amount not to exceed $15,000,000 during any fiscal year; PROVIDED that, until the Leverage Threshold has been satisfied, the aggregate amount of Investments made pursuant to this subsection 8.9(e) during any fiscal year shall not exceed $5,000,000; and". 12. AMENDMENT TO SUBSECTION 8.9(f). Subsection 8.9(f) of the Credit Agreement is hereby amended by deleting such subsection in its entirety and substituting in lieu thereof the following: "(f) Investments, other than the purchase of CNG Notes or the Senior Subordinated Notes, in an aggregate amount not to exceed $10,000,000; PROVIDED that the aggregate amount of Investments made pursuant to this subsection 8.9(f) until the Leverage Threshold has been satisfied shall not exceed $l,000,000.". 13. AMENDMENT TO SUBSECTION 9(m). Subsection 9(m)(i)(x) of the Credit Agreement is hereby amended by deleting such subsection in its entirety and substituting in lieu thereof the following: "(x) (so long as no Default or Event of Default has occurred and is continuing or would occur as a result of such repurchase and so long as no such repurchase occurs until the Leverage Threshold has been satisfied), repurchases by CNG of such of the CNG Notes and/or Senior Subordinated Notes that it is able to repurchase for an aggregate purchase price (including fees and expenses incurred in connection with such repurchase) not to exceed $30,000,000 and". 14. AMENDMENT TO SUBSECTION 9(o). Subsection 9(o) is hereby amended by deleting such subsection in its entirety and substituting in lieu thereof the following: "(o) CNC shall (i) create, incur, assume or suffer to exist any Indebtedness, except (A) Indebtedness outstanding on the Sixth Amendment Effective Date, (B) Indebtedness in connection with the Twinsburg Sale/Leaseback and (C) other Indebtedness in an aggregate principal amount not to exceed $5,000,000; (ii) make any Investments, except (A) Investments in connection with the Twinsburg Sale/Leaseback not to exceed in an aggregate amount equal to 20% of the purchase price payable thereunder, (B) Investments 7 7 in Pearle Europe B.V., PROVIDED that, until the Leverage Threshold has been satisfied, the aggregate amount of Investments in Pearle Europe B.V. shall not exceed $10,000,000 during fiscal year 2000, $6,000,000 in fiscal year 2001 and $5,000,000 in fiscal year 2002; and (C) other Investments in an aggregate amount not to exceed $3,000,000; or (iii) create, incur, assume or suffer to exist any Lien upon any of its property, assets or revenues, whether now owned or hereafter acquired." 15. AMENDMENT TO SCHEDULE II TO CREDIT AGREEMENT. Schedule II to the Credit Agreement is hereby amended by deleting such Schedule in its entirety and inserting in lieu thereof the revised Schedule II attached hereto as Exhibit A. 16. AMENDMENT FEE. In consideration of the agreement of the Lenders to consent to the amendments contained herein, the Borrowers agree to pay to the Administrative Agent for the benefit of each Lender which so consents on or prior to June 23, 2000 (by executing and delivering to the Administrative Agent or its counsel this Amendment on or prior to such date), an amendment fee in an amount equal to .25% of the amount of such Lender's Revolving Credit Commitment, payable on the effective date of this Amendment in immediately available funds to the Administrative Agent on behalf of such Lender. 17. REPRESENTATIONS AND WARRANTIES. Each Borrower hereby confirms, reaffirms and restates the representations and warranties made by it in Section 5 of the Credit Agreement, PROVIDED that each reference to the Credit Agreement therein shall be deemed to be a reference to the Credit Agreement after giving effect to this Amendment. Each Borrower represents and warrants that, after giving effect to this Amendment, no Default or Event of Default has occurred and is continuing. 18. CONDITIONS TO EFFECTIVENESS. This Amendment shall become effective on the date (the "AMENDMENT EFFECTIVE DATE") on which all of the following conditions precedent have been satisfied or waived: (a) the Borrowers, the Majority Lenders, and the Administrative Agent shall have executed and delivered to the Administrative Agent this Amendment, and the Guarantors shall have executed and delivered to the Administrative Agent the Acknowledgment and Consent attached hereto; and (b) the Borrowers shall have paid the fees referred to in Section 16 above. 19. CONTINUING EFFECT OF CREDIT AGREEMENT. This Amendment shall not constitute a waiver, amendment or modification of any other provision of the Credit Agreement not expressly referred to herein and shall not be construed as a waiver or consent to any further or future action on the part of the Borrowers that would require a waiver or consent of the Lenders or the Administrative Agent. Except as expressly amended or modified herein, the provisions of the Credit Agreement are and shall remain in full force and effect. 8 8 20. COUNTERPARTS. This Amendment may be executed by one or more of the parties to this Amendment on any number of separate counterparts (including by facsimile transmission), and all of said counterparts taken together shall be deemed to constitute one and the same instrument. A set of the copies of this Amendment signed by all the parties shall be lodged with the Borrowers and the Administrative Agent. 21. PAYMENT OF EXPENSES. The Borrowers agree, jointly and severally, to pay or reimburse the Administrative Agent for all of its out-of-pocket costs and expenses incurred in connection with the development, preparation and execution of this Amendment and any other documents prepared in connection herewith, and the consummation and administration of the transactions contemplated hereby, including, without limitation, the reasonable fees and disbursements of counsel to the Administrative Agent. 22. GOVERNING LAW. THIS AMENDMENT AND WAIVER AND THE RIGHTS AND OBLIGATIONS OF THE PARTIES HEREUNDER SHALL BE GOVERNED BY, AND CONSTRUED AND INTERPRETED IN ACCORDANCE WITH, THE LAW OF THE STATE OF NEW YORK. 9 CANADIAN IMPERIAL BANK OF COMMERCE, NEW YORK AGENCY, as Administrative Agent /s/ Katherine Bass By: ------------------------------------- Name: Katherine Bass Title: Executive Director CIBC World Markets Corp. As Agent CIBC INC. /s/ Katherine Bass By: ------------------------------------- Name: Katherine Bass Title: Executive Director CIBC World Markets Corp. As Agent CREDIT SUISSE FIRST BOSTON By: ------------------------------------- Name: Title: By: ------------------------------------- Name: Title: 10 CANADIAN IMPERIAL BANK OF COMMERCE, NEW YORK AGENCY, as Administrative Agent By: ------------------------------------- Name: Title: CIBC INC. By: ------------------------------------- Name: Title: CREDIT SUISSE FIRST BOSTON /s/ Robert Hetu By: ------------------------------------- Name: Robert Hetu Title: Vice President /s/ Thomas G. Muoio By: ------------------------------------- Name: Thomas G. Muoio Title: Vice President 11 FIRST UNION NATIONAL BANK /s/ Randall R. Meck By: ------------------------------------- Name: Randall R. Meck Title: Vice President NATIONAL CITY BANK By: ------------------------------------- Name: Title: KEYBANK NATIONAL ASSOCIATION By: ------------------------------------- Name: Title: FIFTH THIRD BANK, NORTHEASTERN OHIO By: ------------------------------------- Name: Title: 12 FIRST UNION NATIONAL BANK By: ------------------------------------- Name: Title: NATIONAL CITY BANK /s/ Chris D. Thornton By: ------------------------------------- Name: Chris D. Thornton Title: Vice President KEYBANK NATIONAL ASSOCIATION By: ------------------------------------- Name: Title: FIFTH THIRD BANK, NORTHEASTERN OHIO By: ------------------------------------- Name: Title: 13 FIRST UNION NATIONAL BANK By: ------------------------------------- Name: Title: NATIONAL CITY BANK By: ------------------------------------- Name: Title: KEYBANK NATIONAL ASSOCIATION /s/ Mark A. LoSchiavo By: ------------------------------------- Name: Mark A. LoSchiavo Title: Assistant Vice President FIFTH THIRD BANK, NORTHEASTERN OHIO By: ------------------------------------- Name: Title: 14 FIRST UNION NATIONAL BANK By: ------------------------------------- Name: Title: NATIONAL CITY BANK By: ------------------------------------- Name: Title: KEYBANK NATIONAL ASSOCIATION By: ------------------------------------- Name: Title: FIFTH THIRD BANK, NORTHEASTERN OHIO /s/ James P. Byrnes By: ------------------------------------- Name: James P. Byrnes Title: Vice President 15 EXHIBIT A TO EIGHTH AMENDMENT Schedule II ----------- to Credit Agreement ------------------- Applicable Margin Calculation for Revolving Credit Loans -------------------------------------------------------- ABR Loans Eurodollar Loans Leverage Ratio Applicable Margin Applicable Margin - -------------- ----------------- ----------------- Greater than 4.25 to 1.00 2.00% 3.00% Greater than 3.75 to 1.00, but less than or equal to 4.25 to 1.00 1.50% 2.50% Greater than 3.25 to 1.00, but less than or equal to 3.75 to 1.00 1.25% 2.25% Greater than 2.75 to 1.00, but less than or equal to 3.25 to 1.00 1.00% 2.00% Less than or equal to 2.75 to 1.00 .75% 1.75% Notwithstanding the foregoing table, (a) during the period from and including the Eighth Amendment Effective Date until June 30, 2000, the Applicable Margin in respect of Revolving Credit Loans shall equal (i) with respect to ABR Loans, 1.5% per annum and (ii) with respect to Eurodollar Loans, 2.5% per annum, and (b) the Applicable Margin will be adjusted on each Adjustment Date after such period to the applicable rate per annum set forth above under the heading "ABR Loans Applicable Margin" or "Eurodollar Loans Applicable Margin" MINUS .25% per annum in the event that, immediately preceding such Adjustment Date, (i) the senior unsecured long-term debt of CNG shall be rated at least "BBB-" by Standard & Poor's, a division of McGraw-Hill, Inc., and (ii) the Administrative Agent shall have received written notice of such rating from a Borrower. 16 2 Commitment Fees --------------- Percentage of Revolving Credit Commitments Used Commitment Fees - ---------------- --------------- Greater than 66.6% 0.375% Greater than 33.3%, but less 0.50% than or equal to 66.6% Less than or equal to 33.3% 0.75% 17 ACKNOWLEDGMENT AND CONSENT (i) Cole National Corporation ("CNC"), as Guarantor under the Guarantee, dated as of March 7, 2000 (as amended, supplemented or otherwise modified from time to time, the "CNC GUARANTEE"), made by CNC in favor of the Administrative Agent, for the benefit of the Lenders, and (ii) each of the other undersigned corporations, as Guarantors under the Guarantee and Collateral Agreement, dated as of November 15, 1996 (as amended, supplemented or otherwise modified from time to time, the "GUARANTEE AND COLLATERAL AGREEMENT"), made by the undersigned corporations in favor of the Administrative Agent, for the benefit of the Lenders, hereby (a) consents to the transactions contemplated by this Amendment, and (b) acknowledges and agrees that the guarantees (and grants of collateral security therefor) contained in such CNC Guarantee and Guarantee and Collateral Agreement, as applicable, are, and shall remain, in full force and effect after giving effect to this Amendment, and all prior modifications to the Credit Agreement. COLE NATIONAL CORPORATION /s/ Joseph Gaglioti By: ------------------------------------- Name: Joseph Gaglioti Title: Vice President & Treasurer BAY CITIES OPTICAL COMPANY /s/ Joseph Gaglioti By: ------------------------------------- Name: Joseph Gaglioti Title: Treasurer WESTERN STATES OPTICAL, INC. /s/ Joseph Gaglioti By: ------------------------------------- Name: Joseph Gaglioti Title: Treasurer 18 COLE VISION SERVICES, INC. /s/ Joseph Gaglioti By: ------------------------------------- Name: Joseph Gaglioti Title: Treasurer COLE MANAGEMENT SERVICES, INC. /s/ Joseph Gaglioti By: ------------------------------------- Name: Joseph Gaglioti Title: Treasurer PEARLE VISIONCARE, INC. /s/ Joseph Gaglioti By: ------------------------------------- Name: Joseph Gaglioti Title: Vice President & Treasurer PEARLE VISION MANAGED CARE -- HMO OF TEXAS, INC. /s/ Joseph Gaglioti By: ------------------------------------- Name: Joseph Gaglioti Title: Vice President & Treasurer EX-27 3 l83708aex27.txt EXHIBIT 27

<ARTICLE> 5

<LEGEND> THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE CONSOLIDATED BALANCE SHEET AND THE CONSOLIDATED STATEMENT OF OPERATIONS FILED AS PART OF THE ANNUAL REPORT ON FORM 10-K AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH ANNUAL REPORT ON FORM 10-K.

<MULTIPLIER> 1,000 <PERIOD-TYPE> 6-MOS <FISCAL-YEAR-END> FEB-03-2001 <PERIOD-START> JAN-30-2000 <PERIOD-END> JUL-29-2000 <CASH> 18,295 <SECURITIES> 0 <RECEIVABLES> 54,863 <ALLOWANCES> 8,378 <INVENTORY> 132,868 <CURRENT-ASSETS> 210,525 <PP&E> 280,049 <DEPRECIATION> 151,657 <TOTAL-ASSETS> 593,291 <CURRENT-LIABILITIES> 148,656 <BONDS> 284,299 <PREFERRED-MANDATORY> 0 <PREFERRED> 0 <COMMON> 16 <OTHER-SE> 145,010 <TOTAL-LIABILITY-AND-EQUITY> 593,291 <SALES> 522,434 <TOTAL-REVENUES> 522,434 <CGS> 174,309 <TOTAL-COSTS> 512,238 <OTHER-EXPENSES> 0 <LOSS-PROVISION> 0 <INTEREST-EXPENSE> 12,204 <INCOME-PRETAX> (2,008) <INCOME-TAX> (1,104) <INCOME-CONTINUING> (904) <DISCONTINUED> 0 <EXTRAORDINARY> 0 <CHANGES> 0 <NET-INCOME> (904) <EPS-BASIC> (0.06) <EPS-DILUTED> (0.06)

-----END PRIVACY-ENHANCED MESSAGE-----

EX-10.1

   1
                                                                    Exhibit 10.1

                                EIGHTH AMENDMENT

        EIGHTH AMENDMENT, dated as of June 9, 2000 (this "AMENDMENT") to the
Credit Agreement, dated as of November 15, 1996 (as amended, supplemented or
otherwise modified from time to time, the "CREDIT AGREEMENT"), among COLE VISION
CORPORATION, a Delaware corporation ("COLE VISION"), THINGS REMEMBERED, INC., a
Delaware corporation ("THINGS REMEMBERED") and PEARLE, INC., a Delaware
corporation ("PEARLE"; Cole Vision, Things Remembered and Pearle each being
referred to as a "BORROWER" and collectively as the "BORROWERS"), the several
banks and other financial institutions from time to time parties thereto
(collectively, the "LENDERS") and CANADIAN IMPERIAL BANK OF COMMERCE, a
Canadian-chartered bank acting through its New York Agency, as administrative
agent for the Lenders thereunder (in such capacity, the "ADMINISTRATIVE AGENT").


                                   WITNESSETH
                                   ----------

         WHEREAS, the Borrowers, the Lenders and the Administrative Agent are
parties to the Credit Agreement;

         WHEREAS, the Borrowers have requested that the Administrative Agent and
the Lenders amend certain provisions of the Credit Agreement as set forth
herein; and

         WHEREAS, the Administrative Agent and the Lenders are willing to effect
such amendment, but only upon the terms and subject to the conditions set forth
herein;

        NOW, THEREFORE, in consideration of the premises and mutual agreements
contained herein, and for other good and valuable consideration, the sufficiency
of which is hereby acknowledged, the Borrowers, the Lenders and the
Administrative Agent hereby agree as follows:


         1. DEFINED TERMS. Unless otherwise defined herein, terms defined in the
Credit Agreement shall have such meanings when used herein.

         2. AMENDMENT TO SUBSECTION 1.1. Subsection 1.1 of the Credit Agreement
is hereby amended by:

         (a) inserting the following new definitions in their proper
alphabetical order;

        "EIGHTH AMENDMENT EFFECTIVE DATE": June 9, 2000.

        "LEVERAGE THRESHOLD": shall be deemed to have been satisfied on the date
upon which the Borrowers shall have delivered financial statements to the
Lenders pursuant to subsection 7.1(a) or 7.1(b) confirming that, as at the end
of the fiscal period covered by such financial statements, the Leverage Ratio
was less than 3.70 to 1.00.

         "TWINSBURG SALE/LEASEBACK": the sale and leaseback transaction
involving the real property located in Twinsburg, Ohio, currently owned by CNC.

   2
                                                                               2


         (b) changing the definition of "Available Revolving Credit Commitment"
to read in its entirety as follows:

                  "AVAILABLE REVOLVING CREDIT COMMITMENT": as to any Lender at
         any time, an amount equal to the excess, if any, of (a) the amount of
         such Lender's Revolving Credit Commitment at such time OVER (b) the sum
         of (i) the aggregate unpaid principal amount at such time of all
         Revolving Credit Loans made by such Lender and (ii) an amount equal to
         such Lender's Revolving Credit Commitment Percentage of the outstanding
         L/C Obligations at such time; collectively, as to all the Lenders, the
         "AVAILABLE REVOLVING CREDIT COMMITMENTS", PROVIDED that, for purposes
         of subsection 2.1 only, "Available Revolving Credit Commitments" shall
         be reduced by an amount equal to $25,000,000 in the event that the
         Leverage Ratio as of the end of any fiscal quarter of CNG is greater
         than 3.70 to 1.00 until such time as the Leverage Ratio as of the end
         of any fiscal quarter of CNG subsequent to such fiscal quarter is less
         than or equal to 3.70 to 1.00.

         3. AMENDMENT TO SUBSECTION 2.4(a) and 2.4(b). Subsection 2.4 of the
Credit Agreement is hereby amended by changing such subsection to read in its
entirety as follows:

         "2.4 COMMITMENT FEES: OTHER FEES. (a) The Borrowers agree, jointly and
      severally, to pay to the Administrative Agent for the account of each
      Lender, a commitment fee for the period from and including the first day
      of the Revolving Credit Commitment Period to the Revolving Credit
      Commitment Termination Date, computed at the rate per annum set forth
      under the heading "Commitment Fees" on Schedule II opposite the percentage
      which is the average daily amount of the Aggregate Outstanding Revolving
      Credit of all Lenders during the period for which payment is made
      constitutes of the average daily amount of the Available Revolving Credit
      Commitment of such Lender during such payment period, payable quarterly in
      arrears on the last day of each fiscal quarter of CNG and on the
      Revolving Credit Commitment Termination Date, commencing on the first of
      such days to occur after the Closing Date. Notwithstanding the foregoing,
      the commitment fee for the period from and including the first day of the
      Eighth Amendment Effective Date until the date on which the Leverage
      Theshold has been satisfied shall be 0.75% per annum of the average daily
      amount of the Available Revolving Credit Commitment of such Lender
      (without any reduction thereof pursuant to the definition of "Available
      Revolving Credit Commitment") during such period, payable as set forth
      above.

         (b) The Borrowers agree, jointly and severally, to pay to the
      Administrative Agent for the account of each Lender, a utilization fee for
      the period from and including the Eighth Amendment Effective Date to the
      date on which the Leverage Threshold has been satisfied, (i) if the
      average daily amount of the aggregate principal amount of all Revolving
      Credit Loans outstanding during such period is greater than 66-2/3% of the
      average aggregate Revolving Credit Commitments during such period,
      computed at 0.50% per annum on the average daily principal amount of such
      Lender's outstanding Revolving Credit Loans during such period and (ii) if
      the average daily amount of the aggregate principal amount of all
      Revolving Credit Loans outstanding during such period

   3
                                                                             3


      is less than or equal to 66-2/3% but greater than 33-1/3% of the
      average aggregate Revolving Credit Commitments during such period,
      computed at 0.25% per annum on the average daily principal amount of such
      Lender's outstanding Revolving Credit Loans."

         4. AMENDMENT TO SUBSECTION 7.2(c). Subsection 7.2(c) of the Credit
Agreement is hereby amended by deleting "(90 days in the case of the fiscal year
ending January 29, 2000)" after the word "Borrowers" therein.

         5. AMENDMENT TO SUBSECTIONS 8.1(a) 8.1(b) and 8.1(c). Subsections
8.1(a), 8.1(b) and 8.1(c) of the Credit Agreement are hereby amended by
deleting such subsections in their entireties and substituting in lieu thereof
the following:

         "(a) LEVERAGE RATIO. Permit the Leverage Ratio as of the end of each
      fiscal quarter of CNG ending on any of the dates set forth below to be
      greater than the ratio set forth opposite such date set forth below:

              Fiscal Quarter Ending                     Leverage Ratio
              ---------------------                     --------------

              July 29, 2000                             5.05 to 1.00
              October 28, 2000                          5.30 to 1.00
              February 3, 2001                          4.40 to 1.00

              May 5, 2001                               4.50 to 1.00
              August 4, 2001                            4.25 to 1.00
              November 3, 2001                          4.25 to 1.00
              February 2, 2002                          3.75 to 1.00

              May 5, 2002                               3.85 to 1.00
              August 4, 2002                            3.65 to 1.00
              November 3, 2002                          3.60 to 1.00
              February 2, 2003                          3.10 to 1.00

         (b) ADJUSTED INTEREST COVERAGE RATIO. Permit the Adjusted Interest
      Coverage Ratio as of the end of each fiscal quarter of CNG ending on any
      of the dates set forth below to be less than the ratio set forth opposite
      such date below:

                                                             Adjusted
              Fiscal Quarter Ending                  Interest Coverage Ratio
              ---------------------                  -----------------------

               July 29, 2000                                1.20 to 1.00
               October 28, 2000                             1.20 to 1.00
               February 3, 2001                             1.25 to 1.00

   4
                                                                               4

               May 5, 2001                                  1.25 to 1.00
               August 4, 2001                               1.25 to 1.00
               November 3, 2001                             1.30 to 1.00
               February 2, 2002                             1.30 to 1.00


               May 5, 2002                                  1.35 to 1.00
               August 4, 2002                               1.40 to 1.00
               November 3, 2002                             1.40 to 1.00
               February 2, 2003                             1.45 to 1.00



         (c) MINIMUM CONSOLIDATED NET WORTH: Permit the Consolidated Net Worth
      of CNG as of the end of each fiscal quarter of CNG ending on any of the
      dates set forth below to be less than the amount set forth opposite such
      date below:

              Fiscal Quarter Ending                  Consolidated Net Worth
              ---------------------                  ----------------------

               July 29, 2000                                $95,000,000
               October 28, 2000                             $95,000,000
               February 3, 2001                             $95,000,000

               May 5, 2001                                  $100,000,000
               August 4, 2001                               $100,000,000
               November 3, 2001                             $100,000,000
               February 2, 2002                             $105,000,000

               May 5, 2002                                  $105,000,000
               August 4, 2002                               $105,000,000
               November 3, 2002                             $110,000,000
               February 2, 2003                             $115,000,000"

         6. ADDITIONAL AMENDMENT TO SUBSECTION 8.1. Subsection 8.1 of the Credit
Agreement is hereby amended by deleting paragraph (d) thereof in its entirety.

         7. AMENDMENT TO SUBSECTION 8.2(i). Subsection 8.2(i) of the Credit
Agreement is hereby amended by deleting such subsection in its entirety and
substituting in lieu thereof the following:

         "(i) Indebtedness of the Borrowers and their Subsidiaries in an
      aggregate principal amount not exceeding as to the Borrowers and their
      Subsidiaries $10,000,000 at any time outstanding; PROVIDED that no
      Indebtedness shall be created, incurred or assumed pursuant to this
      subsection 8.2(i) until the Leverage Threshold has been satisfied."


   5

                                                                               5

         8. AMENDMENT TO SUBSECTION 8.7(c). Subsection 8.7(c) of the Credit
Agreement is hereby amended by deleting such subsection in its entirety and
substituting in lieu thereof the following:

         "(c) so long as no Default or Event of Default shall have occurred and
      be continuing or would occur after giving effect to such dividend,
      dividends to CNG in an aggregate amount not to exceed $30,000,000 solely
      to allow CNG to repurchase CNG Notes and/or Senior Subordinated Notes
      without violating Section 9(m); PROVIDED that no dividends shall be
      declared or paid pursuant to this subsection 8.7(c) until the Leverage
      Threshold has been satisfied;"

         9. AMENDMENT TO SUBSECTION 8.7(d). Subsection 8.7(d) of the Credit
Agreement is hereby amended by deleting such subsection in its entirety and
substituting in lieu thereof the following:

         "(d) so long as no Default or Event of Default shall have occurred and
      be continuing or would occur after giving effect to such dividend,
      dividends to CNG in an aggregate amount not to exceed $4,000,000 solely to
      allow CNG or CNC to repurchase, redeem, or otherwise acquire or retire for
      value, any Capital Stock of CNG or CNC or any current or former Subsidiary
      of CNG held by any of CNG's (or any of its Subsidiaries') current or
      former employees; PROVIDED that no dividends shall be declared or paid
      pursuant to this subsection 8.7(d) until the Leverage Threshold has been
      satisfied;"

        10. AMENDMENT TO SUBSECTION 8.8. Subsection 8.8 of the Credit Agreement
is hereby amended by deleting such subsection in its entirety and substituting
in lieu thereof the following:

        "8.8 Limitation on Capital and Other Expenditures.
             --------------------------------------------

         (a) Make any expenditure in respect of the purchase or other
      acquisition of fixed or capital assets (a "CAPITAL EXPENDITURE") except
      for expenditures in the ordinary course of business not exceeding, in the
      aggregate for the Borrowers and their Subsidiaries during any of the test
      periods set forth below, the amount set forth opposite such test period
      set forth below:


                       Test Period                                      Amount
                       -----------                                      ------

               January 30, 2000 - February 3, 2001                   $43,000,000
               February 4, 2001 - February 2, 2002                   $47,000,000
               February 3, 2002 - Revolving Credit Termination Date  $52,000,000

         (b) Make any expenditure in respect of the development of computer
      systems owned or operated by the Borrowers and their Subsidiaries except
      for expenditures in the ordinary course of business not exceeding, in the
      aggregate for the Borrowers and their Subsidiaries during any of the test
      periods set forth below, the amount set forth opposite such test period
      set forth below:


   6

                                                                               6

                       Test Period                                    Amount
                       -----------                                    ------

               January 30, 2000 - February 3, 2001                   $9,000,000
               February 4, 2001 - February 2, 2002                   $9,000,000
               February 3, 2002 - Revolving Credit Termination Date  $9,000,000"

        11. AMENDMENT TO SUBSECTION 8.9(e). Subsection 8.9(e) of the Credit
Agreement is hereby amended by deleting such subsection in its entirety and
substituting in lieu thereof the following:

         "(e) so long as no Default or Event of Default has occurred and is
      continuing or would occur after giving effect to such Investment,
      Investments in franchises in a business related to the optical business of
      Pearle and Cole Vision as conducted on the Closing Date in an aggregate
      amount not to exceed $15,000,000 during any fiscal year; PROVIDED that,
      until the Leverage Threshold has been satisfied, the aggregate amount of
      Investments made pursuant to this subsection 8.9(e) during any fiscal year
      shall not exceed $5,000,000; and".

         12. AMENDMENT TO SUBSECTION 8.9(f). Subsection 8.9(f) of the Credit
Agreement is hereby amended by deleting such subsection in its entirety and
substituting in lieu thereof the following:

         "(f) Investments, other than the purchase of CNG Notes or the Senior
      Subordinated Notes, in an aggregate amount not to exceed $10,000,000;
      PROVIDED that the aggregate amount of Investments made pursuant to this
      subsection 8.9(f) until the Leverage Threshold has been satisfied shall
      not exceed $l,000,000.".

        13. AMENDMENT TO SUBSECTION 9(m). Subsection 9(m)(i)(x) of the Credit
Agreement is hereby amended by deleting such subsection in its entirety and
substituting in lieu thereof the following:

      "(x) (so long as no Default or Event of Default has occurred and is
      continuing or would occur as a result of such repurchase and so long as no
      such repurchase occurs until the Leverage Threshold has been satisfied),
      repurchases by CNG of such of the CNG Notes and/or Senior Subordinated
      Notes that it is able to repurchase for an aggregate purchase price
      (including fees and expenses incurred in connection with such repurchase)
      not to exceed $30,000,000 and".

         14. AMENDMENT TO SUBSECTION 9(o). Subsection 9(o) is hereby amended by
deleting such subsection in its entirety and substituting in lieu thereof the
following:

      "(o) CNC shall (i) create, incur, assume or suffer to exist any
      Indebtedness, except (A) Indebtedness outstanding on the Sixth Amendment
      Effective Date, (B) Indebtedness in connection with the Twinsburg
      Sale/Leaseback and (C) other Indebtedness in an aggregate principal amount
      not to exceed $5,000,000; (ii) make any Investments, except (A)
      Investments in connection with the Twinsburg Sale/Leaseback not to exceed
      in an aggregate amount equal to 20% of the purchase price payable
      thereunder, (B) Investments

   7

                                                                               7

      in Pearle Europe B.V., PROVIDED that, until the Leverage Threshold has
      been satisfied, the aggregate amount of Investments in Pearle Europe B.V.
      shall not exceed $10,000,000 during fiscal year 2000, $6,000,000 in fiscal
      year 2001 and $5,000,000 in fiscal year 2002; and (C) other Investments in
      an aggregate amount not to exceed $3,000,000; or (iii) create, incur,
      assume or suffer to exist any Lien upon any of its property, assets or
      revenues, whether now owned or hereafter acquired."

         15. AMENDMENT TO SCHEDULE II TO CREDIT AGREEMENT. Schedule II to the
Credit Agreement is hereby amended by deleting such Schedule in its entirety and
inserting in lieu thereof the revised Schedule II attached hereto as Exhibit A.

         16. AMENDMENT FEE. In consideration of the agreement of the Lenders to
consent to the amendments contained herein, the Borrowers agree to pay to the
Administrative Agent for the benefit of each Lender which so consents on or
prior to June 23, 2000 (by executing and delivering to the Administrative Agent
or its counsel this Amendment on or prior to such date), an amendment fee in an
amount equal to .25% of the amount of such Lender's Revolving Credit Commitment,
payable on the effective date of this Amendment in immediately available funds
to the Administrative Agent on behalf of such Lender.

         17. REPRESENTATIONS AND WARRANTIES. Each Borrower hereby confirms,
reaffirms and restates the representations and warranties made by it in Section
5 of the Credit Agreement, PROVIDED that each reference to the Credit Agreement
therein shall be deemed to be a reference to the Credit Agreement after giving
effect to this Amendment. Each Borrower represents and warrants that, after
giving effect to this Amendment, no Default or Event of Default has occurred and
is continuing.

         18. CONDITIONS TO EFFECTIVENESS. This Amendment shall become effective
on the date (the "AMENDMENT EFFECTIVE DATE") on which all of the following
conditions precedent have been satisfied or waived:

         (a) the Borrowers, the Majority Lenders, and the Administrative Agent
      shall have executed and delivered to the Administrative Agent this
      Amendment, and the Guarantors shall have executed and delivered to the
      Administrative Agent the Acknowledgment and Consent attached hereto; and

         (b) the Borrowers shall have paid the fees referred to in Section 16
      above.

         19. CONTINUING EFFECT OF CREDIT AGREEMENT. This Amendment shall not
constitute a waiver, amendment or modification of any other provision of the
Credit Agreement not expressly referred to herein and shall not be construed as
a waiver or consent to any further or future action on the part of the Borrowers
that would require a waiver or consent of the Lenders or the Administrative
Agent. Except as expressly amended or modified herein, the provisions of the
Credit Agreement are and shall remain in full force and effect.


   8

                                                                               8

         20. COUNTERPARTS. This Amendment may be executed by one or more of the
parties to this Amendment on any number of separate counterparts (including by
facsimile transmission), and all of said counterparts taken together shall be
deemed to constitute one and the same instrument. A set of the copies of this
Amendment signed by all the parties shall be lodged with the Borrowers and the
Administrative Agent.

         21. PAYMENT OF EXPENSES. The Borrowers agree, jointly and severally, to
pay or reimburse the Administrative Agent for all of its out-of-pocket costs
and expenses incurred in connection with the development, preparation and
execution of this Amendment and any other documents prepared in connection
herewith, and the consummation and administration of the transactions
contemplated hereby, including, without limitation, the reasonable fees and
disbursements of counsel to the Administrative Agent.

         22. GOVERNING LAW. THIS AMENDMENT AND WAIVER AND THE RIGHTS AND
OBLIGATIONS OF THE PARTIES HEREUNDER SHALL BE GOVERNED BY, AND CONSTRUED AND
INTERPRETED IN ACCORDANCE WITH, THE LAW OF THE STATE OF NEW YORK.


   9
                           CANADIAN IMPERIAL BANK OF
                           COMMERCE, NEW YORK AGENCY,
                           as Administrative Agent


                               /s/ Katherine Bass
                           By: -------------------------------------
                               Name:   Katherine Bass
                               Title:  Executive Director
                                       CIBC World Markets Corp. As Agent


                           CIBC INC.

                               /s/ Katherine Bass
                           By: -------------------------------------
                               Name:   Katherine Bass
                               Title:  Executive Director
                                       CIBC World Markets Corp. As Agent


                           CREDIT SUISSE FIRST BOSTON


                           By: -------------------------------------
                               Name:
                               Title:


                           By: -------------------------------------
                               Name:
                               Title:
   10
                           CANADIAN IMPERIAL BANK OF
                           COMMERCE, NEW YORK AGENCY,
                           as Administrative Agent



                           By: -------------------------------------
                               Name:
                               Title:


                           CIBC INC.

                           By: -------------------------------------
                               Name:
                               Title:


                           CREDIT SUISSE FIRST BOSTON

                               /s/ Robert Hetu
                           By: -------------------------------------
                               Name:  Robert Hetu
                               Title: Vice President


                               /s/ Thomas G. Muoio
                           By: -------------------------------------
                               Name:  Thomas G. Muoio
                               Title: Vice President

   11
                           FIRST UNION NATIONAL BANK


                               /s/ Randall R. Meck
                           By: -------------------------------------
                               Name:   Randall R. Meck
                               Title:  Vice President


                           NATIONAL CITY BANK


                           By: -------------------------------------
                               Name:
                               Title:


                           KEYBANK NATIONAL ASSOCIATION


                           By: -------------------------------------
                               Name:
                               Title:


                           FIFTH THIRD BANK, NORTHEASTERN OHIO


                           By: -------------------------------------
                               Name:
                               Title:
   12
                           FIRST UNION NATIONAL BANK


                           By: -------------------------------------
                               Name:
                               Title:


                           NATIONAL CITY BANK

                               /s/ Chris D. Thornton
                           By: -------------------------------------
                               Name:  Chris D. Thornton
                               Title: Vice President


                           KEYBANK NATIONAL ASSOCIATION


                           By: -------------------------------------
                               Name:
                               Title:


                           FIFTH THIRD BANK, NORTHEASTERN OHIO


                           By: -------------------------------------
                               Name:
                               Title:
   13
                           FIRST UNION NATIONAL BANK


                           By: -------------------------------------
                               Name:
                               Title:


                           NATIONAL CITY BANK


                           By: -------------------------------------
                               Name:
                               Title:


                           KEYBANK NATIONAL ASSOCIATION

                               /s/ Mark A. LoSchiavo
                           By: -------------------------------------
                               Name:  Mark A. LoSchiavo
                               Title: Assistant Vice President


                           FIFTH THIRD BANK, NORTHEASTERN OHIO


                           By: -------------------------------------
                               Name:
                               Title:
   14
                           FIRST UNION NATIONAL BANK


                           By: -------------------------------------
                               Name:
                               Title:


                           NATIONAL CITY BANK


                           By: -------------------------------------
                               Name:
                               Title:


                           KEYBANK NATIONAL ASSOCIATION


                           By: -------------------------------------
                               Name:
                               Title:


                           FIFTH THIRD BANK, NORTHEASTERN OHIO

                               /s/ James P. Byrnes
                           By: -------------------------------------
                               Name:  James P. Byrnes
                               Title: Vice President

   15
                                                                    EXHIBIT A TO
                                                                EIGHTH AMENDMENT

                                                                     Schedule II
                                                                     -----------
                                                             to Credit Agreement
                                                             -------------------



            Applicable Margin Calculation for Revolving Credit Loans
            --------------------------------------------------------

                              ABR Loans                Eurodollar Loans
Leverage Ratio                Applicable Margin        Applicable Margin
- --------------                -----------------        -----------------

Greater than 4.25 to 1.00          2.00%                    3.00%

Greater than 3.75 to 1.00,
but less than or equal to
4.25 to 1.00                       1.50%                    2.50%

Greater than 3.25 to 1.00,
but less than or equal to
3.75 to 1.00                       1.25%                    2.25%

Greater than 2.75 to 1.00,
but less than or equal to
3.25 to 1.00                       1.00%                    2.00%


Less than or equal to 2.75
to 1.00                             .75%                    1.75%




Notwithstanding the foregoing table, (a) during the period from and including
the Eighth Amendment Effective Date until June 30, 2000, the Applicable Margin
in respect of Revolving Credit Loans shall equal (i) with respect to ABR Loans,
1.5% per annum and (ii) with respect to Eurodollar Loans, 2.5% per annum, and
(b) the Applicable Margin will be adjusted on each Adjustment Date after such
period to the applicable rate per annum set forth above under the heading "ABR
Loans Applicable Margin" or "Eurodollar Loans Applicable Margin" MINUS .25% per
annum in the event that, immediately preceding such Adjustment Date, (i) the
senior unsecured long-term debt of CNG shall be rated at least "BBB-" by
Standard & Poor's, a division of McGraw-Hill, Inc., and (ii) the Administrative
Agent shall have received written notice of such rating from a Borrower.

   16

                                                                               2

                                Commitment Fees
                                ---------------

Percentage of Revolving Credit
Commitments Used                                  Commitment Fees
- ----------------                                  ---------------

Greater than 66.6%                                    0.375%

Greater than 33.3%, but less                           0.50%
than or equal to 66.6%

Less than or equal to 33.3%                            0.75%



















   17
                       ACKNOWLEDGMENT AND CONSENT

         (i) Cole National Corporation ("CNC"), as Guarantor under the
Guarantee, dated as of March 7, 2000 (as amended, supplemented or otherwise
modified from time to time, the "CNC GUARANTEE"), made by CNC in favor of the
Administrative Agent, for the benefit of the Lenders, and (ii) each of the other
undersigned corporations, as Guarantors under the Guarantee and Collateral
Agreement, dated as of November 15, 1996 (as amended, supplemented or otherwise
modified from time to time, the "GUARANTEE AND COLLATERAL AGREEMENT"), made by
the undersigned corporations in favor of the Administrative Agent, for the
benefit of the Lenders, hereby (a) consents to the transactions contemplated by
this Amendment, and (b) acknowledges and agrees that the guarantees (and grants
of collateral security therefor) contained in such CNC Guarantee and Guarantee
and Collateral Agreement, as applicable, are, and shall remain, in full force
and effect after giving effect to this Amendment, and all prior modifications to
the Credit Agreement.


                           COLE NATIONAL CORPORATION

                               /s/ Joseph Gaglioti
                           By: -------------------------------------
                               Name:  Joseph Gaglioti
                               Title: Vice President & Treasurer


                           BAY CITIES OPTICAL COMPANY

                               /s/ Joseph Gaglioti
                           By: -------------------------------------
                               Name:  Joseph Gaglioti
                               Title: Treasurer


                           WESTERN STATES OPTICAL, INC.

                               /s/ Joseph Gaglioti
                           By: -------------------------------------
                               Name:  Joseph Gaglioti
                               Title: Treasurer
   18
                           COLE VISION SERVICES, INC.

                               /s/ Joseph Gaglioti
                           By: -------------------------------------
                               Name:   Joseph Gaglioti
                               Title:  Treasurer


                           COLE MANAGEMENT SERVICES, INC.

                               /s/ Joseph Gaglioti
                           By: -------------------------------------
                               Name:  Joseph Gaglioti
                               Title: Treasurer


                           PEARLE VISIONCARE, INC.

                               /s/ Joseph Gaglioti
                           By: -------------------------------------
                               Name:  Joseph Gaglioti
                               Title: Vice President & Treasurer


                           PEARLE VISION MANAGED CARE -- HMO OF
                             TEXAS, INC.

                               /s/ Joseph Gaglioti
                           By: -------------------------------------
                               Name:  Joseph Gaglioti
                               Title: Vice President & Treasurer

EX-27

 

<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONSOLIDATED BALANCE SHEET AND THE CONSOLIDATED STATEMENT OF OPERATIONS FILED AS
PART OF THE ANNUAL REPORT ON FORM 10-K AND IS QUALIFIED IN ITS ENTIRETY BY
REFERENCE TO SUCH ANNUAL REPORT ON FORM 10-K.

<MULTIPLIER> 1,000

                             
<PERIOD-TYPE>                   6-MOS
<FISCAL-YEAR-END>                          FEB-03-2001
<PERIOD-START>                             JAN-30-2000
<PERIOD-END>                               JUL-29-2000
<CASH>                                          18,295
<SECURITIES>                                         0
<RECEIVABLES>                                   54,863
<ALLOWANCES>                                     8,378
<INVENTORY>                                    132,868
<CURRENT-ASSETS>                               210,525
<PP&E>                                         280,049
<DEPRECIATION>                                 151,657
<TOTAL-ASSETS>                                 593,291
<CURRENT-LIABILITIES>                          148,656
<BONDS>                                        284,299
<PREFERRED-MANDATORY>                                0
<PREFERRED>                                          0
<COMMON>                                            16
<OTHER-SE>                                     145,010
<TOTAL-LIABILITY-AND-EQUITY>                   593,291
<SALES>                                        522,434
<TOTAL-REVENUES>                               522,434
<CGS>                                          174,309
<TOTAL-COSTS>                                  512,238
<OTHER-EXPENSES>                                     0
<LOSS-PROVISION>                                     0
<INTEREST-EXPENSE>                              12,204
<INCOME-PRETAX>                                (2,008)
<INCOME-TAX>                                   (1,104)
<INCOME-CONTINUING>                              (904)
<DISCONTINUED>                                       0
<EXTRAORDINARY>                                      0
<CHANGES>                                            0
<NET-INCOME>                                     (904)
<EPS-BASIC>                                     (0.06)
<EPS-DILUTED>                                   (0.06)