10-Q

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

FORM 10-Q

(Mark One)

þ Quarterly report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
For the quarterly period ended August 3, 2002,

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 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   þYES o NO

As of August 31, 2002, 16,167,337 shares of the registrant’s common stock were outstanding.

TABLE OF CONTENTS

PART I. — FINANCIAL INFORMATION
	Item 1. Financial Statements
		CONSOLIDATED BALANCE SHEETS
		CONSOLIDATED STATEMENTS OF OPERATIONS
		CONSOLIDATED STATEMENTS OF CASH FLOWS
		NOTES TO CONSOLIDATED 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. Controls and Procedures
PART II — OTHER INFORMATION
	Item 1. Legal Proceedings
	Item 4. Submission of Matters to a Vote of Security Holders
	Item 6. Exhibits and Reports on Form 8-K
SIGNATURES
CERTIFICATIONS
EXHIBIT INDEX
EX 10.1 Letter Agmt Dated 4/14/02
EX 10.2 Letter Agmt Dated 4/19/02
EX 10.3 Restricted Stock Agmt
EX 10.4 Nonqualified Stock Option Agreement
EX 10.5 1st Amend to the Amend/Rest Credit Agmt
EX 10.6 2nd Amendment to Credit Agreement
EX 10.7 Amend #1 to the Cng Retirement Plan
EX 10.8 Nonqualified Stock Option Agreement
EX 99.1 Certification

COLE NATIONAL CORPORATION AND SUBSIDIARIES
FORM 10-Q
QUARTER ENDED AUGUST 3, 2002
INDEX

			Page No.
PART I.	FINANCIAL INFORMATION
	Item 1.	Financial Statements
		Consolidated Balance Sheets as of August 3, 2002 and February 2, 2002	1
		Consolidated Statements of Operations for the 13 and 26 weeks ended August 3, 2002 and August 4, 2001	2
		Consolidated Statements of Cash Flows for the 26 weeks ended August 3, 2002 and August 4, 2001	3
		Notes to Consolidated Financial Statements	4
	Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	9
	Item 3.	Quantitative and Qualitative Disclosures about Market Risk	14
	Item 4.	Controls and Procedures	14
PART II.	OTHER INFORMATION
	Item 1.	Legal Proceedings	15
	Item 4.	Submission of Matters to a Vote of Security Holders	15
	Item 6.	Exhibits and Reports on Form 8-K	16

PART I. — FINANCIAL INFORMATION

Item 1. Financial Statements

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

					August 3,			February 2,
					2002			2002
Assets
Current assets:
	Cash and cash equivalents				$	48,931		$	63,656
	Accounts receivable, less allowances of $5,588 and $4,008, respectively					44,574			39,609
	Current portion of notes receivable					2,899			2,926
	Inventories					118,318			111,098
	Refundable income taxes					458			502
	Prepaid expenses and other					22,088			22,757
	Deferred income tax benefits					547			477
			Total current assets			237,815			241,025
Property and equipment, at cost						303,851			297,649
	Less — accumulated depreciation and amortization					(182,391	)		(174,300	)
			Total property and equipment, net			121,460			123,349
Notes receivable, excluding current portion, less allowances of $4,217 and $5,209, respectively						20,706			19,056
Deferred income taxes and other assets						80,509			74,220
Tradenames, net						42,992			42,992
Goodwill, net						103,551			103,552
			Total assets		$	607,033		$	604,194
Liabilities and Stockholders’ Equity
Current liabilities:
	Current portion of long-term debt				$	50		$	85
	Accounts payable					53,590			57,647
	Accrued interest					7,970			6,539
	Accrued liabilities					83,358			79,722
	Accrued income taxes					743			3,501
				Total current liabilities		145,711			147,494
Long-term debt, net of discount and current portion						285,000			284,318
Other long-term liabilities						17,073			16,775
Stockholders’ equity						159,249			155,607
		Total liabilities and stockholders’ equity			$	607,033		$	604,194

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

1

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

			Thirteen Weeks Ended						Twenty-Six Weeks Ended
			August 3,			August 4,			August 3,			August 4,
			2002			2001			2002			2001
Net revenue			$	288,857		$	273,348		$	578,966		$	543,639
Costs and expenses:
	Cost of goods sold			94,520			91,307			190,168			179,029
	Operating expenses			185,234			171,374			368,621			345,277
	Goodwill and tradename amortization			—			1,436			—			2,898
		Total costs and expenses		279,754			264,117			558,789			527,204
Operating income				9,103			9,231			20,177			16,435
Interest and other (income) expense, net:
	Interest expense			6,947			7,010			14,076			14,068
	Interest and other (income), net			(613	)		(787	)		(1,246	)		(2,126	)
		Total interest and other (income) expense, net		6,334			6,223			12,830			11,942
Income before income taxes				2,769			3,008			7,347			4,493
Income tax provision				1,108			1,786			2,939			2,574
Income after taxes				1,661			1,222			4,408			1,919
Equity in net income of Pearle Europe				1,030			237			1,826			185
Income before extraordinary loss				2,691			1,459			6,234			2,104
Extraordinary loss on early extinguishment of debt, net of $4.1 million tax benefit				(7,634	)		—			(7,634	)		—
Net income (loss)			$	(4,943	)	$	1,459		$	(1,400	)	$	2,104
Basic earnings per common share:
	Income before extraordinary loss		$	0.16		$	0.09		$	0.39		$	0.13
	Extraordinary loss			(0.47	)		—			(0.48	)		—
	Net income (loss)		$	(0.31	)	$	0.09		$	(0.09	)	$	0.13
Diluted earnings per common share:
	Income before extraordinary loss		$	0.16		$	0.09		$	0.38		$	0.13
	Extraordinary loss			(0.46	)		—			(0.46	)		—
	Net income (loss)		$	(0.30	)	$	0.09		$	(0.08	)	$	0.13

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

2

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

					Twenty-Six Weeks Ended
					August 3,			August 4,
					2002			2001
Cash flows from operating activities:
	Net income (loss)				$	(1,400	)	$	2,104
	Adjustments to reconcile net income (loss) to net cash provided by operating activities:
		Depreciation and amortization				18,370			19,952
		Extraordinary loss on early extinguishment of debt				7,634			—
		Equity in net income of Pearle Europe				(1,826	)		(185	)
		Noncash interest, net				(97	)		(49	)
		Gain on sale of fixed assets				—			(683	)
		Increases (decreases) in cash resulting from changes in assets and liabilities:
			Accounts and notes receivable, prepaid expenses and other assets			(4,157	)		1,333
			Inventories			(7,227	)		(8,108	)
			Accounts payable, accrued liabilities and other liabilities			347			7,175
			Accrued interest			1,182			(318	)
			Accrued, refundable and deferred income taxes			(350	)		2,648
				Net cash provided by operating activities		12,476			23,869
Cash flows from investing activities:
	Purchases of property and equipment, net					(11,969	)		(19,907	)
	Net proceeds from sale of fixed assets					—			4,712
	Systems development costs					(2,219	)		(4,578	)
	Investment in Pearle Europe, net					—			(6,446	)
	Other, net					(138	)		(176	)
				Net cash used for investing activities		(14,326	)		(26,395	)
Cash flows from financing activities:
	Repayment of long-term debt					(158,094	)		(312	)
	Proceeds from issuance of long-term debt					150,000			—
	Payment of deferred financing fees					(5,920	)		—
	Net proceeds from exercise of stock options					1,148			1,186
	Issuance of notes receivable — stock options and awards					—			(340	)
	Other, net					(9	)		(210	)
				Net cash (used for) provided by financing activities		(12,875	)		324
Cash and cash equivalents:
	Net decrease during the period					(14,725	)		(2,202	)
	Balance, beginning of period					63,656			36,725
	Balance, end of period				$	48,931		$	34,523

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

3

COLE NATIONAL CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)

(1) Summary of Significant Accounting Policies

Basis of Presentation

         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 accounting principles generally accepted in the United States 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 unaudited consolidated financial statements should be read in conjunction with the Company’s consolidated financial statements for the fiscal year ended February 2, 2002.

         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 August 3, 2002 and the results of operations and cash flows for the applicable periods ended August 3, 2002 and August 4, 2001.

Inventories

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

Property and Depreciation

         The Company’s policy is to provide depreciation using the straight-line method over a period, which is sufficient to amortize the cost of the asset over its useful life or lease term. Leasehold improvements of optical departments operated in a host store under licenses, which are terminable under relatively short notice, are amortized over their estimated useful life.

Cash Flows

         Net cash flows from operating activities reflect net cash payments for income taxes and payments for interest of $3,074,000 and $12,064,000 respectively, for the 26 weeks ended August 3, 2002, and $51,000 and $13,785,000, respectively, for the 26 weeks ended August 4, 2001.

Earnings Per Share

         Earnings per share for the 13 and 26 weeks ended August 3, 2002 and August 4, 2001 have been calculated based on the following weighted average number of common shares and equivalents outstanding:

	Thirteen Weeks				Twenty-Six Weeks
	2002		2001		2002		2001
Basic		16,099,743		15,802,850		16,038,906		15,748,537
Diluted		16,624,967		16,243,001		16,547,198		16,019,867

4

(1)   Summary of Significant Accounting Policies (continued)

Total Other Comprehensive Income (Loss)

         Total other comprehensive income (loss) for the 13 and 26 weeks ended August 3, 2002 and August 4, 2001 is as follows (000’s omitted):

	Thirteen Weeks						Twenty-Six Weeks
	2002			2001			2002			2001
Net income (loss)	$	(4,943	)	$	1,459		$	(1,400	)	$	2,104
Cumulative translation gain (loss), net		1,780			(82	)		2,895			(959	)
Total other comprehensive income (loss)	$	(3,163	)	$	1,377		$	1,495		$	1,145

Use of Estimates

         The preparation of financial statements, in conformity with accounting principles generally accepted in the United States, requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements, and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.

Reclassification

         Certain prior year amounts have been reclassified to conform with the current year presentation.

(2) Goodwill and Other Intangible Assets

         The Company adopted Financial Accounting Standards Board Statement of Financial Accounting Standards No. 142, “Goodwill and Other Intangible Assets” (SFAS 142) in the first quarter of fiscal 2002. This statement requires that goodwill and certain intangible assets deemed to have indefinite lives will no longer be amortized, but instead, will be subject to reviews for impairment annually, or more frequently if certain indicators arise. With the adoption of this statement, the Company ceased amortization of goodwill and tradenames as of February 3, 2002.

         The Company completed the transitional impairment testing of goodwill during the second quarter of fiscal 2002 as required by SFAS 142. Based on the findings of its outside valuation advisor, the Company has concluded that there was no impairment of its goodwill at the adoption date of the new accounting standard, effective February 3, 2002.

5

         The following table presents the results of the Company for the 13 and 26 weeks ended August 3, 2002 and August 4, 2001 on a comparable basis with fiscal 2001 adjusted for the pro forma impacts of SFAS 142 and fiscal 2002’s estimated annual effective tax rate of 40% (000’s omitted, except per share amounts):

		Thirteen Weeks				Twenty-Six Weeks
		2002		2001		2002		2001
Income before extraordinary loss:
	Reported income before extraordinary loss	$	2,691	$	1,459	$	6,234	$	2,104
	Goodwill amortization — Cole Vision		—		881		—		1,788
	Goodwill amortization — Things Remembered		—		246		—		492
	Tradename amortization — Cole Vision		—		309		—		618
	Related tax adjustment		—		8		—		(382	)
	Adjusted income before extraordinary loss	$	2,691	$	2,903	$	6,234	$	4,620
Basic earnings per share:
	Reported income before extraordinary loss	$	0.16	$	0.09	$	0.39	$	0.13
	Goodwill and tradename amortization, net of tax		—		0.09		—		0.16
	Adjusted income before extraordinary loss	$	0.16	$	0.18	$	0.39	$	0.29
Diluted earnings per share:
	Reported income before extraordinary loss	$	0.16	$	0.09	$	0.38	$	0.13
	Goodwill and tradename amortization, net of tax		—		0.09		—		0.16
	Adjusted income before extraordinary loss	$	0.16	$	0.18	$	0.38	$	0.29

         The net carrying amount of goodwill at August 3, 2002, by business segment, was $81,220,000 at Cole Vision and $22,331,000 at Things Remembered. The decrease in the net carrying amount of goodwill for the 26 weeks ended August 3, 2002, was $1,000 and was due to foreign currency translation of goodwill at Cole Vision. The net carrying amount of tradenames at August 3, 2002 was attributable to the Cole Vision segment.

(3) Long-Term Debt

         On May 22, 2002, Cole National Group issued $150.0 million of 8-7/8% senior subordinated notes due 2012. These notes are unsecured and mature on May 15, 2012. Interest on the notes is payable semi-annually on each May 15 and November 15, commencing November 15, 2002.

         The indenture pursuant to which the 8-7/8% notes were issued contains certain optional and mandatory redemption features and other financial covenants similar to those in the indentures for Cole National Group’s 8-5/8% and previously outstanding 9-7/8% notes.

         Net proceeds from the 8-7/8% note offering, together with cash on hand, were used to retire $150.0 million of 9-7/8% senior subordinated notes due 2006 and pay premiums and other costs associated with retiring those notes. The Company’s results for the 13 and 26 weeks ended August 3, 2002 included an extraordinary loss on early extinguishment of debt of approximately $7.6 million, net of an income tax benefit of approximately $4.1 million, representing the payment of premiums and other costs of retiring the notes and the write-offs of unamortized discount and deferred financing fees.

6

         Subsequent to August 3, 2002, the Company entered into interest rate swap agreements to take advantage of favorable market interest rates. These agreements require the Company to pay an average floating interest rate based on six-month LIBOR plus 4.5375% to a counter party while receiving a fixed interest rate on a portion of the Company’s $125.0 million 8-5/8% senior subordinated notes due 2007. The counter party is a major commercial bank. The agreements mature August 15, 2007 and qualify as fair value hedges. The aggregate notional amount of the interest rate swap agreements is $50.0 million.

(4) Credit Facility

         In connection with the 8-7/8% note offering, Cole National Group and its operating subsidiaries amended their existing credit facility to, among other things, extend its term to May 31, 2006, provide a working capital commitment of $75.0 million and reduce borrowing rates. Borrowings under the amended credit facility presently bear interest at a rate equal to, at the option of the principal operating subsidiaries of Cole National Group, either (a) the Eurodollar Rate plus 2.25% or (b) 1.25% plus the highest of (i) the prime rate, (ii) the three-week moving average of the secondary market rates for three-month certificates of deposit plus 1.0% or (iii) the federal funds rate plus 0.5%. Cole National Group pays a commitment fee of between 0.50% and 0.75% per annum on the unused portion of the facility based on the percentage of revolving credit commitments used.

         The amended credit facility, which is secured by liens against various assets of the operating subsidiaries and guaranteed by Cole National Corporation and Cole National Group, has customary operating and financial covenants similar to those in the Company’s previous credit agreement, as described in Cole National’s annual report on Form 10-K for the fiscal year ended February 2, 2002.

(5) Segment Information

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

				Thirteen Weeks						Twenty-Six Weeks
				2002			2001			2002			2001
Net revenue:
	Cole Vision			$	215,680		$	200,714		$	452,336		$	417,095
	Things Remembered				73,177			72,634			126,630			126,544
			Total net revenue	$	288,857		$	273,348		$	578,966		$	543,639
Operating income:
	Cole Vision			$	2,693		$	1,403		$	17,829		$	12,782
	Things Remembered				9,324			10,434			7,960			9,366
			Total segment operating income		12,017			11,837			25,789			22,148
		Unallocated amounts:
			Corporate expenses		(2,914	)		(2,606	)		(5,612	)		(5,713	)
	Total operating income				9,103			9,231			20,177			16,435
	Interest and other income, net				(6,334	)		(6,223	)		(12,830	)		(11,942	)
	Income before income taxes			$	2,769		$	3,008		$	7,347		$	4,493

7

(6) Commitments and Contingencies

         The Company leases a substantial portion of its equipment and facilities including laboratories, office and warehouse space, and retail store locations. These leases generally have initial terms of up to 10 years and often contain renewal options. Certain of the store locations have been sublet to franchisees. In most leases covering retail store locations, additional rents are payable based on store sales. In addition, Cole Vision operates departments in various host stores paying occupancy costs solely as a percentage of sales under agreements containing short-term cancellation clauses. Generally, the Company is required to pay taxes and normal expenses of operating the premises for laboratory, office, warehouse and retail store leases; the host stores pay these expenses for departments operated on a percentage-of-sales basis.

         The Company guarantees future minimum lease payments for certain store locations leased directly by franchisees. These guarantees totaled approximately $13.7 million and $14.0 million as of February 2, 2002 and August 3, 2002, respectively. Generally, these guarantees also extend to payments of taxes and other normal expenses payable under these leases, the amounts of which are not readily quantifiable. Many of the guarantees are limited to periods that are less than the full term of the leases involved.

         As described in Part II, Item 1. “Legal Proceedings”, the State of California has obtained a preliminary injunction in July 2002 in a case brought against the Company, Pearle Vision and other subsidiaries regarding Pearle Vision Centers and Pearle Vision Care, Inc. The terms of the injunction are not expected to have any material effect on the Company’s operations. Although we believe we are in compliance with California law and intend to continue to defend the case vigorously, we may be required to further modify our activities or might be required to pay damages and/or restitution in currently undeterminable amounts if we are not successful, the cost of which, as well as continuing defense costs, might have a material adverse effect on our operating results in one or more periods.

         As described in Part II, Item 1. “Legal Proceedings”, a class action complaint was filed in a case brought against the Company’s subsidiary, Things Remembered, Inc., alleging violation of California’s wage and hour laws. The case is in its early stages and the Company intends to vigorously defend the suit. We may be required to modify our activities and pay damages and/or restitution in currently undeterminable amounts if the plaintiffs prevail, the cost of which, as well as continuing defense costs, might have a material adverse impact on our operating results in one or more periods.

8

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

         The following is a discussion of certain factors affecting the Company’s results of operations for the 13 and 26 week periods ended August 3, 2002 and August 4, 2001 (the Company’s second quarter and first six months) 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 February 2, 2002 included in the Company’s 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 February 2, 2002 is referred to as “fiscal 2001.” The current fiscal year, which will end February 1, 2003, is referred to as “fiscal 2002.”

Results of Operations

         The following table sets forth certain operating information for the second quarter and first six months of fiscal 2002 and fiscal 2001 (dollars in millions):

			Second Quarter									First Six Months
			2002			2001			Change			2002			2001			Change
Net revenue
	Cole Vision		$	215.7		$	200.7			7.5	%	$	452.4		$	417.1			8.4	%
	Things Remembered			73.2			72.6			0.7			126.6			126.5			0.1
		Total net revenue	$	288.9		$	273.3			5.7		$	579.0		$	543.6			6.5
Gross margin			$	194.3		$	182.0			6.8	%	$	388.8		$	364.6			6.6	%
Operating expenses				185.2			171.4			8.1			368.6			345.3			6.8
Goodwill and tradename amortization				—			1.4			(100.0	)		—			2.9			(100.0	)
		Operating income	$	9.1		$	9.2			(1.4	)	$	20.2		$	16.4			22.8
Percentage of net revenue
	Gross margin			67.3	%		66.6	%		0.7			67.2	%		67.1	%		0.1
	Operating expenses			64.1			62.7			1.4			63.7			63.6			0.1
	Goodwill and tradename amortization			—			0.5			(0.5	)		—			0.5			(0.5	)
		Operating income		3.2	%		3.4	%		(0.2	)		3.5	%		3.0	%		0.5
Number of retail locations at the end of the period
	Cole Licensed Brands			1,296			1,224
	Pearle company-owned			420			435
	Pearle franchised			446			416
		Total Cole Vision		2,162			2,075
	Things Remembered			776			780
		Total Cole National		2,938			2,855

9

         Consolidated net revenue increased $15.5 million and $35.3 million for the second quarter and first six months, respectively, compared to the same periods in fiscal 2001. The revenue increases were primarily attributable to increases in comparable store sales at Cole Vision, growth in managed vision care revenue and an increase in the number of Target Optical stores open. Changes in comparable store sales by business for the second quarter and first six months of fiscal year 2002 were as follows:

		Second Quarter			First Six Months
Cole Licensed Brands (U.S.)			5.8	%		4.6	%
Pearle U.S. company-owned			1.5	%		6.2	%
	Total Cole Vision		3.6	%		4.8	%
Things Remembered			(1.6	%)		(2.2	%)
	Total Cole National		2.1	%		3.0	%
Pearle U.S. franchise stores			0.6	%		1.0	%
Pearle U.S. chain-wide			1.0	%		4.6	%

         At Cole Vision, comparable store sales for the second quarter and first six months of fiscal 2002 increased in all retail vision brands, despite the difficult retail environment and a slowdown in business in July. Comparable store sales reflected an increase in the average spectacle selling price and strong transaction increases at Target Optical. For the first six months of fiscal 2002, comparable store sales increases also reflected first quarter transaction increases at Pearle. The comparable store sales at Target Optical increased 41.1% for the second quarter and 35.0% for the first six months. At Things Remembered, comparable store sales declined as fewer transactions offset the increase in average selling price resulting from sales of new merchandise at higher average unit prices, higher revenue from merchandise personalization, and less merchandise sold at clearance prices.

         Gross margin increased $12.3 million and $24.2 million in the second quarter and first six months of fiscal year 2002, respectively, compared to the same periods a year ago. The gross margin dollar increases were primarily attributable to improvements in net revenue at Cole Vision. The gross margin rate for the second quarter was 67.3%, compared to 66.6% for the second quarter 2001. Gross margins as a percentage of net revenue increased by 0.7 at Cole Vision and 1.0 at Things Remembered. The second quarter increase in gross margin rate was due to a number of factors including an increase in average dollar sale at Things Remembered and an increase in average spectacle selling price at Cole Vision, as well as growth in managed vision care claims and fee revenue. More competitive pricing on contact lenses and an increase in product sold to Pearle franchisees, which carry a lower margin, partially offset the increase. Product sales to franchisees offer benefits other than gross margin for the Company, including helping franchise comparable store sales and producing a more uniform merchandise assortment and consistent brand look across all stores. For the first six months, gross margin rate increased slightly to 67.2% in fiscal 2002 from 67.1% in fiscal 2001 due to 0.9 percentage point margin improvement at Things Remembered.

         Operating expenses increased $13.9 million and $23.3 million for the second quarter and first six months of fiscal 2002 respectively, compared to those periods in fiscal 2001. The increases in operating expenses were primarily due to costs incurred to support the increases in net revenue and the number of Target Optical stores opened in the past twelve months. As a percentage of net revenue, second quarter operating expenses were 64.1% compared to 62.7% for second quarter 2001. Increased advertising expenditures at both Cole Vision and Things Remembered were the primary factor contributing to the operating leverage loss of 1.4 percentage points. Second quarter advertising expenditures included a shift of spending from first quarter to support Pearle’s second quarter 40th Anniversary promotion. For the first six months, operating expenses as a percentage of net revenue were up only slightly to 63.7% from 63.6% in the first six months of fiscal 2001. Amortization of goodwill and tradenames was discontinued in fiscal 2002 as a result of adopting SFAS 142.

         Second quarter 2002 operating income was essentially flat compared to the second quarter 2001, primarily because of business slowdown in July and a loss in operating leverage from increased advertising

10

expenditures, offset by the elimination of goodwill and tradename amortization from adopting SFAS 142 as discussed above. The $3.7 million improvement in operating income for the first six months of fiscal 2002 compared to the same period in fiscal 2001 reflected the elimination of goodwill and tradename amortization from adopting SFAS 142 and improved operating earnings at Pearle. These were partially offset by lower operating earnings at Licensed Brands and Things Remembered.

         Second quarter interest and other (income) expense, net, increased slightly compared to the same period in fiscal 2001. For the first six months of fiscal 2002, the increase in interest and other (income) expense, net, reflects the fact that these expenses were offset by a $0.7 million gain from the sale of a Dallas office facility in the first quarter of fiscal 2001. In May 2002, Cole National Group Inc. issued $150.0 million of 8-7/8% senior subordinated notes due 2012. The net proceeds of the issuance and cash on hand were used to retire all of Cole National Group’s $150.0 million 9-7/8% Senior Subordinated Notes due 2006. The issuance and retirement will reduce cash interest expense by $1.5 million on an annual basis.

         The Company’s 21% equity interest in the net income of Pearle Europe increased to $1.0 million in the second quarter of fiscal 2002 from $0.2 million for the same period in fiscal 2001. Pearle Europe’s strong results reflect internal growth as well as acquisitions. For the first six months, equity in the net income of Pearle Europe increased to $1.8 million in fiscal 2002 from $0.2 million in fiscal 2001. In fiscal 2001, six month results of Pearle Europe included substantial costs associated with the termination of a developmental venture during the first quarter.

         An income tax provision was recorded in the first six months of fiscal 2002 and fiscal 2001 using the Company’s estimated annual effective tax rates of 40.0% and 57.3%, respectively. The reduction in the estimated effective tax rate compared to fiscal 2001 was primarily a result of adopting SFAS 142, which stopped amortization of nondeductible goodwill.

         Second quarter 2002 results included an extraordinary loss on early extinguishment of debt of $7.6 million, net of an income tax benefit of $4.1 million. The extraordinary charge represents payment of premiums and other costs of retiring Cole National Group’s 9-7/8% Senior Subordinated Notes due 2006 and the write-offs of unamortized discount and deferred financing fees.

Liquidity and Capital Resources

         The Company’s primary source of liquidity is funds provided from the operations of its operating subsidiaries. In addition, as of August 3, 2002, Cole National Group and its operating subsidiaries had a working capital commitment of $75.0 million. Availability under this credit facility totaled $60.3 million, after reduction for commitments under outstanding letters of credit. There were no working capital borrowings outstanding at any time during the first six months of fiscal 2002 or fiscal 2001. Cole National Group and its principal operating subsidiaries are in compliance with all credit facility covenants as of August 3, 2002.

         On May 22, 2002, Cole National Group issued $150.0 million of 8-7/8% senior subordinated notes due 2012. These notes are unsecured and mature on May 15, 2012. Interest on the notes is payable semi-annually on each May 15 and November 15, commencing November 15, 2002.

         The indenture pursuant to which the 8-7/8% notes were issued contains certain optional and mandatory redemption features and other financial covenants including restrictions on the ability of Cole National Group to pay dividends or make other restricted payments to Cole National Corporation. The indenture permits dividend payments to Cole National Corporation equal to 50% of Cole National Group’s consolidated net income, provided that no default or event of default has occurred under the indenture and that Cole National Group has met a specified fixed charge coverage ratio test. The indenture also permits payments to Cole National Corporation for certain tax obligations, for administrative expenses not to exceed 0.25% of net revenue and for other restricted payments not to exceed $25.0 million in the aggregate.

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         Net proceeds from the 8-7/8% note offering, together with cash on hand, were used to retire $150.0 million of 9-7/8% senior subordinated notes due 2006 and pay premiums and other costs associated with retiring the notes. As discussed above, the Company’s second quarter results include an extraordinary loss on early extinguishment of debt recorded in connection with the retirement of the 9-7/8% notes. In addition to extending the Company’s debt maturity schedule, the offering and retirement will reduce annual cash interest expense by $1.5 million.

         In connection with the 8-7/8% note offering, Cole National Group and its operating subsidiaries amended their existing credit facility to, among other things, extend its term to May 31, 2006, provide a working capital commitment of $75.0 million and reduce borrowing rates. The credit facility requires Cole National Group and its principal operating subsidiaries to comply with customary operating covenants that restrict corporate activities. These include covenants restricting the ability of the subsidiaries to incur additional indebtedness, pay dividends, prepay subordinated indebtedness, dispose of certain investments or make acquisitions. The credit facility also requires Cole National Group to comply with certain financial covenants, including covenants regarding minimum interest coverage and maximum leverage and is guaranteed by Cole National Corporation and Cole National Group.

         Operations for the first six months provided $12.5 million of cash in fiscal 2002 compared to $23.9 million in fiscal 2001. The primary reason for the $11.4 million decrease in cash provided by operations was the changes in certain operating assets and liabilities during the first six months of fiscal 2002 as compared to the same period in fiscal 2001. In fiscal 2002, the increase in accounts and notes receivable, prepaid expenses and other assets used $4.2 million of cash primarily due to increased receivables from revenue growth at Target Optical and managed vision care. In addition, the fiscal 2002 increase in accounts payable, accrued liabilities and other liabilities provided $6.8 million less cash than in fiscal 2001.

         Capital expenditures were $12.0 million and $19.9 million for the first six months of fiscal 2002 and fiscal 2001, respectively. The majority of capital expenditures in both years were for store fixtures, equipment and leasehold improvements for new stores, including the Target Optical expansion, and the remodeling of existing stores. The reduction in capital expenditures reflects the Company’s decision to limit fiscal 2002 Target Optical store openings to Super Target stores. Expenditures for systems development costs totaled $2.2 million and $4.6 million for the first six months of fiscal 2002 and fiscal 2001, respectively. In fiscal 2001, net proceeds of $4.7 million were received from the sale of a Dallas office facility no longer needed for Pearle’s operations. Also in fiscal 2001, the Company made a net investment in Pearle Europe of $6.4 million in connection with Pearle Europe’s acquisition of a leading optical retail chain in Portugal. The Company anticipates making additional investments in Pearle Europe during fiscal 2002 in connection with possible acquisitions by Pearle Europe.

         The Company believes that funds provided from operations including cash on hand 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, fund capital expenditures and systems development costs and investments in Pearle Europe.

Contractual Commitments

         In the second quarter, Cole National Group issued $150.0 million of Senior Subordinated Notes due 2012 and retired of all of its $150.0 million Senior Subordinated Notes due 2006 as discussed above and in Note 3 of the Notes to Consolidated Financial Statements. As a result, $150.0 million of the Company’s scheduled payments for contractual obligations as reported in its latest annual report on Form 10-K have been shifted from due in the period “4-5 years” to due in the period “after 5 years”.

         The Company’s primary source of liquidity, other than cash on hand, is the working capital line of credit discussed above and in Note 4 of the Notes to Consolidated Financial Statements. This facility has been extended until May 31, 2006 and supports $14.7 million of standby letters of credit that are renewable annually.

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Contingencies

         As described in Part II, Item 1. “Legal Proceedings”, the State of California has obtained a preliminary injunction in July 2002, in a case brought against the Company, Pearle Vision and other subsidiaries regarding Pearle Vision Centers and Pearle Vision Care, Inc. The terms of the injunction are not expected to have any material effect on the Company’s operations. Although we believe we are in compliance with California law and intend to continue to defend the case vigorously, we may be required to further modify our activities or might be required to pay damages and/or restitution in currently undeterminable amounts if we are not successful, the cost of which, as well as continuing defense costs might have a material adverse effect on our operating results in one or more periods.

         As described in Part II, Item 1. “Legal Proceedings”, a class action complaint was filed in a case brought against the Company’s subsidiary, Things Remembered, Inc., alleging violation of California’s wage and hour laws. The case is in its early stages and the Company intends to vigorously defend the suit. We may be required to modify our activities and pay damages and/or restitution in currently undeterminable amounts if the plaintiffs prevail, the cost of which, as well as continuing defense costs, might have a material adverse impact on our operating results in one or more periods.

New Accounting Pronouncements

         The Company adopted SFAS 142 in the first quarter of fiscal 2002. This statement requires that goodwill and certain intangible assets deemed to have indefinite lives will no longer be amortized, but instead, will be subject to reviews for impairment annually, or more frequently if certain indicators arise. With the adoption of this statement, the Company ceased amortization of goodwill and tradenames as of February 3, 2002. Amortization of goodwill and tradenames totaled $5.8 million in fiscal 2001.

         During the second quarter of fiscal 2002, the Company completed the transitional impairment testing of goodwill as required by SFAS 142. Based on the findings of its outside valuation advisor, the Company has concluded that there was no impairment of its goodwill at the adoption date of the new accounting standard, effective February 3, 2002.

         The Financial Accounting Standards Board (FASB) has issued Statement of Financial Accounting Standards No. 145, “Rescission of FASB Statements No. 4, 44, and 64, Amendment of FASB Statement No. 13, and Technical Corrections” (SFAS 145). SFAS 145 states that the rescission of FASB Statement No. 4 shall be applied in fiscal years beginning after May 15, 2002. Any gain or loss on extinguishment of debt that was classified as an extraordinary item in prior periods presented that does not meet the criteria in Opinion 30 for classification as an extraordinary item shall be reclassified.

         The Company will adopt SFAS 145 as of the beginning of fiscal 2003. As a result, the loss on early extinguishment of debt reported as an extraordinary item in the 13 weeks ended August 3, 2002 will be reclassified at that time. The pretax loss from the early extinguishment of debt will be presented as a separate line within total costs and expenses and the related income tax benefit will reduce the reported income tax provision.

         In June 2002, the FASB issued SFAS No. 146, “Accounting for Costs Associated with Exit or Disposal Activities.” This statement requires that a liability for a cost associated with an exit or disposal activity be recognized when the liability is incurred. The provisions of this statement are effective for exit or disposal activities that are initiated after December 31, 2002. Management has not determined the impact, if any, that this statement will have on the Company’s consolidated financial statements.

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Forward-Looking Information

         Management’s goal has been to increase earnings per share in fiscal 2002 from fiscal 2001 by approximately 15% to 20%. This comparison is based on earnings before the extraordinary loss on early extinguishment of debt and with fiscal 2001 adjusted for the pro forma impacts of SFAS 142 and fiscal 2002’s estimated annual effective tax rate of 40%. Management continues to believe this goal is achievable, although given the uncertain business environment, and subject to litigation costs in California, we now expect to be in the lower end of the estimated range.

         Certain sections of this Quarterly Report on 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 forecast due to a variety of factors that can adversely affect the operating results, liquidity and financial condition, such as risks associated with the timing and achievement of improvements in the operations of the optical business, the nature and extent of disruptions of the economy from terrorist activities and from governmental and consumer responses to such acts, the success of new store openings and the rate at which new stores achieve profitability, the Company’s relationships with host stores and franchisees, the Company’s ability to select, stock and price merchandise attractive to customers, success of systems development and integration, outcome and costs associated with litigation, the performance of Pearle Europe, competition and regulation in the optical industry, integration of acquired businesses, economic, political and weather factors affecting consumer spending, operating factors affecting customer satisfaction, including manufacturing quality of optical and engraved goods, the mix of goods sold, pricing and other competitive factors, the seasonality of the Company’s business and the actual effect of implementation of new accounting standards. 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.

Item 3. Quantitative and Qualitative Disclosures about Market Risk

         The Company’s major market risk exposure is to 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 to 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.

         In addition, the Company is exposed to changes in the fair value of our debt portfolio, primarily resulting from the effects of changes in interest rates. Subsequent to August 3, 2002, the Company entered into interest rate swap agreements to manage this exposure. Management believes that its use of this financial instrument is in the Company’s best interests. The Company does not enter into financial instruments for trading purposes.

Item 4. Controls and Procedures

(a)	Not applicable.
(b)	There were no significant changes in the Company’s internal controls or in other factors that could significantly affect these controls subsequent to management’s evaluation.

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PART II — OTHER INFORMATION

Item 1. Legal Proceedings

         From time to time during the ordinary course of business, the Company is threatened with, or may become a party to a variety of legal actions and other proceedings incidental to its business.

         A complaint was filed in the Superior Court of California, County of San Diego against Cole National Corporation, its affiliates and certain of its officers by the Attorney General of the State of California on February 14, 2002 and amended on February 22, 2002. The case, State of California v. Cole National Corporation, et al., Case No. GIC783135, alleges claims for various statutory violations related to the operation of 24 Pearle Vision Centers in California. The claims include alleged untrue or misleading advertising, illegal dilation fees, unlawful advertising of eye exams, maintaining an optometrist on or near the premises by a registered dispensing optician, unlawful advertising of an optometrist, unlicensed practice of optometry, and illegal relationships among dispensing opticians, optical retailers and optometrists. The action seeks unspecified damages, restitution and injunctive relief.

         The case is in its early stages and we cannot predict with certainty its outcome or costs. In May 2002, all of the individual officer defendants were dismissed and their dismissal has been appealed by the State. The State of California moved for a preliminary injunction to enjoin certain advertising practices and from charging dilation fees. Though the State obtained a preliminary injunction in July 2002, the terms of the injunction are not expected to have any material effect on the Company’s operations. In addition, both the State and the Company have appealed the preliminary injunction. We believe we are in compliance with California law and intend to continue to defend the issues raised in the case vigorously.

         On August 14, 2002, two former store managers employed in the San Francisco area by our subsidiary, Things Remembered, Inc., filed a class action complaint in San Francisco Superior Court. The complaint alleges that the plaintiffs and the other members of the putative class (alleged to include 250 members) were improperly denied overtime compensation for more than eight hours of work per day and/or more than 40 hours of work per week in violation of California law. The action seeks unspecified damages, interest, restitution, as well as, declaratory and injunctive relief and attorneys’ fees.

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

         On June 13, 2002 the Company held its annual meeting of stockholders. At that meeting, the stockholders elected eight directors to serve until the next annual meeting of stockholders.

         Of the total eligible votes 16,009,403, stockholders cast votes of 13,983,576 or 87.3% of the total eligible votes. The votes cast for the election of directors were as follows:

	For		Withheld		Non-votes
Jeffrey A. Cole		13,792,217		191,359		0
Larry Pollock		13,792,945		190,631		0
Timothy F. Finley		13,799,333		184,243		0
Irwin W. Gold		13,801,455		182,121		0
Melchert F. Groot		13,801,380		182,196		0
Peter V. Handal		13,799,380		184,196		0
Charles A. Ratner		13,792,680		190,896		0
Walter J. Salmon		13,794,408		189,168		0

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Item 6. Exhibits and Reports on Form 8-K

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

10.1	Letter dated April 14, 2002 from Cole National Corporation to Lawrence Hyatt.
10.2	Letter Agreement dated April 19, 2002 between Cole National Corporation and Lawrence Hyatt regarding termination of employment.
10.3	Restricted Stock Agreement between Cole National Corporation and Lawrence Hyatt dated as of July 15, 2002.
10.4	Nonqualified Stock Option Agreement between Cole National Corporation and Lawrence Hyatt dated as of July 15, 2002.
10.5	First Amendment to Credit Agreement, dated August 23, 2002, among Cole Vision Corporation, Things Remembered, Inc., and Pearle, Inc. and Canadian Imperial Bank of Commerce.
10.6	Second Amendment to Credit Agreement, dated September 13, 2002, among Cole Vision Corporation, Things Remembered, Inc., and Pearle, Inc. and Canadian Imperial Bank of Commerce.
10.7	Amendment No. 1 to the Cole National Group, Inc. Retirement Plan (Amended and Restated as of January 1, 2001), effective March 31, 2002.
10.8	Nonqualified Stock Option Agreement (1998 Plan/Time Vesting/Senior Executive) between Cole National Corporation and Jeffrey A. Cole dated as of January 25, 2002.
99.1	Certification of Chief Executive Officer and Chief Financial Officer Pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

(b) Reports on Form 8-K

         The Company filed a report on Form 8-K on June 18, 2002 disclosing the Company was replacing Arthur Andersen LLP as its independent public accountants and appointing Deloitte & Touche LLP to serve as its independent public accountants for the fiscal year 2002.

         The Company filed a report on Form 8-K on June 19, 2002 disclosing the Company was replacing Arthur Andersen LLP for the Cole National Corporation 401(K) Savings Plan for Employees at Pearle Vision Centers and appointing Grant Thornton LLP to serve as its independent public accountants for the Plan for the year ending December 31, 2001.

         The Company filed a report on Form 8-K on June 19, 2002 disclosing the Company was replacing Arthur Andersen LLP for the Cole National Corporation 401(K) Savings Plan and appointing Grant Thornton LLP to serve as its independent public accountants for the Plan for the year ending December 31, 2001.

         The Company filed a report on Form 8-K on June 19, 2002 disclosing the Company was replacing Arthur Andersen LLP for the Cole National Corporation 401(K) Savings Plan for Employees at Former NuVision Locations and appointing Grant Thornton LLP to serve as its independent public accountants for the Plan for the year ending December 31, 2001.

         The Company filed a report on Form 8-K on August 27, 2002, which attached a press release dated August 27, 2002.

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SIGNATURES

         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/ Lawrence E. Hyatt Lawrence E. Hyatt Executive Vice President and Chief Financial Officer (Duly Authorized Officer)
By:	/s/ Tracy L. Burmeister Tracy L. Burmeister Vice President Accounting and Reporting (Principal Accounting Officer)

Date: September 17, 2002

17

CERTIFICATION
PURSUANT TO 18 U.S.C. 1350, AS ADOPTED
PURSUANT TO SECTIONS 302 OF THE SARBANES-OXLEY ACT OF 2002

I, Jeffrey A. Cole, certify that:

1.     I have reviewed this quarterly report on Form 10-Q of Cole National Corporation;

2.     Based on my knowledge, this quarterly 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 quarterly report; and

3.     Based on my knowledge, the financial statements, and other financial information included in this quarterly 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 quarterly report.

Date: September 17, 2002

/s/ Jeffrey A. Cole Jeffrey A. Cole
Chairman and CEO

18

CERTIFICATION
PURSUANT TO 18 U.S.C. 1350, AS ADOPTED
PURSUANT TO SECTIONS 302 OF THE SARBANES-OXLEY ACT OF 2002

         I, Lawrence E. Hyatt, certify that:

1. I have reviewed this quarterly report on Form 10-Q of Cole National Corporation;

2. Based on my knowledge, this quarterly 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 quarterly report; and

3. Based on my knowledge, the financial statements, and other financial information included in this quarterly 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 quarterly report.

Date: September 17, 2002

/s/ Lawrence E. Hyatt Lawrence E. Hyatt
Executive Vice President and Chief Financial Officer

19

COLE NATIONAL
CORPORATION
FORM 10-Q
QUARTER ENDED August 3, 2002

EXHIBIT INDEX

Exhibit Number	Description
10.1†	Letter dated April 14, 2002 from Cole National Corporation to Lawrence Hyatt.
10.2†	Letter Agreement dated April 19, 2002 between Cole National Corporation to Lawrence Hyatt regarding termination of employment.
10.3†	Restricted Stock Agreement between Cole National Corporation and Lawrence Hyatt dated as of July 15, 2002.
10.4†	Nonqualified Stock Option Agreement between Cole National Corporation and Lawrence Hyatt dated as of July 15, 2002.
10.5†	First Amendment to Credit Agreement, dated as of August 23, 2002, among Cole Vision Corporation, Things Remembered, Inc., and Pearle, Inc. and Canadian Imperial Bank of Commerce.
10.6†	Second Amendment to Credit Agreement, dated as of September 13, 2002, among Cole Vision Corporation, Things Remembered, Inc., and Pearle, Inc. and Canadian Imperial Bank of Commerce.
10.7†	Amendment No. 1 to the Cole National Group, Inc. Retirement Plan (Amended and Restated as of January 1, 2001), effective March 31, 2002.
10.8†	Nonqualified Stock Option Agreement (1998 Plan/Time Vesting/Senior Executive) between Cole National Corporation and Jeffrey A. Cole dated as of January 25, 2002.
99.1†	Certification of Chief Executive Officer and Chief Financial Officer Pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

† Filed herewith.

20 EX-10.1 3 l96272aexv10w1.txt EX 10.1 LETTER AGMT DATED 4/14/02 Exhibit 10.1 [Cole National Letterhead] [COLE NATIONAL LOGO] April 14, 2002 Mr. Lawrence Hyatt 21 Beauvoir Court Rockville, Maryland 20855 Dear Larry: We are pleased to offer you the position of EXECUTIVE VICE-PRESIDENT & CHIEF FINANCIAL OFFICER for Cole National Corporation reporting directly to Jeffrey Cole, Chairman & CEO. This position will have responsibility all financial functions for Cole National Corporation. The following highlights the terms and conditions of our offer. Full details of the benefit programs are provided in the enclosed booklet. 1. EFFECTIVE DATE: No later than July 15, 2002. 2. SALARY: Your initial bi-weekly salary will be $15,385, payable on a bi-weekly payroll schedule and representing an annualized base salary of $400,000. 3. OPERATING BONUS: You will participate in a Management Incentive Plan for Fiscal Year 2002 that could pay a bonus of up to one hundred (100%) percent of your annualized salary. This bonus will be predicated upon the overall performance against an EBIT Plan for Fiscal Year 2002 performance. For FY 2002, you will be eligible for a full year's consideration (not prorated by the number of months actually worked). 4. RESTRICTED STOCK: We will request that Board of Directors of Cole National grant you 25,0000 shares of restricted stock effective on the first day of employment. These shares will vest: over a four-year (4) period; 12,500 at the end of year three (3); 12,500 at the end of year four (4). 5. STOCK OPTIONS: We will request that the Board of Directors of Cole National Corporation grant you an option to purchase 75,000 shares of Cole National Corporation stock, at a per share price equal to the closing stock price on the date of employment. These options will vest over a four-year (4) period in four equal installments subject to your continued employment. 6. AUTOMOBILE: You may choose a company automobile with a value of up to $45,850 or a cash allowance ($925.00 per month) in place of a company provided automobile. 7. MERIT INCREASE: Your salary will be reviewed annually, and adjustments, when they occur, will be effective in April, beginning with April 2003. 8. GROUP MEDICAL PLAN: If you elect, you and your eligible dependents will be eligible to participate in the Cole group coverage. Additionally, you will also be eligible to participate in our "MERP" -- MEDICAL EXPENSE REIMBURSEMENT PLAN. In the meantime, we will offer to pay your COBRA health insurance premiums during the 90-day waiting period. 9. SUPPLEMENTAL EXECUTIVE RETIREMENT PLANS (SERP): Effective January 1, 2003, you will be eligible to participate in the company's non-qualified defined contribution (SERP). This plan contributes 8% of your base salary annually with earnings on your account balance credited each year; vesting occurs over a 10-year period. 10. TERM LIFE INSURANCE/ACCIDENTAL DEATH AND DISMEMBERMENT INSURANCE (AD&D): You would be eligible to participate in Cole Vision's Life Insurance Program, which provides a coverage at no cost to you in an amount equal to two (2) times your annual base salary. You may elect to purchase additional amounts of Term Insurance equal to one (1) or (2) times your base salary for a nominal cost to you. 11. SHORT-TERM DISABILITY PLAN: After a six (6) month waiting period, you would be eligible for benefits up to a maximum of thirteen (13) weeks beginning with the first day of absence. 12. EXECUTIVE LONG-TERM DISABILITY PLAN: In accordance with the terms of this plan, you would be eligible for a monthly benefit of up to sixty (60%) percent of your monthly base salary, up to a maximum of fifteen thousand dollars ($15,000) per month. You will be eligible to participate in this plan following ninety (90) days of continuous employment. Benefits are payable after a waiting period of ninety (90) days after the onset of disability. 13. DENTAL: Cole Vision offers a Dental Plan to eligible full-time employees, after ninety (90) days of employment. 14. DEFERRED COMPENSATION PLAN: You will be eligible to participate in the Deferred Compensation Plan (DCP) after 90 days of continuous service. This is a non-qualified compensation deferral plan that allows you to defer up to 100% of your salary and/or bonus. The Company will match 10% of the first 10% of your compensation contributed to the Plan in Cole National Common Stock after the end of each Plan year. 2 \15. 401(k) SAVINGS PLAN: You would be eligible for participation after ninety (90) days of service. Pre-tax contributions to the plan are at the employee's expense; the employer has a match equal to (minimally) 10% of the employee's contributions. As you probably know, highly compensated individuals may be limited in their contribution amount based upon discrimination testing. This is why we have the Deferred Compensation Plan noted above and the match to it. 16. RELOCATION: You are eligible for the enclosed relocation plan. Sue Peplowski, 1-800-831-5367 in our HR Department will assist you in planning, conducting and executing the move. Key elements of our relocation plan include: REAL ESTATE FEES FOR THE SALE OF YOUR HOME CLOSING COSTS ASSOCIATED WITH THE PURCHASE OF YOUR NEW HOME IN OHIO TEMPORARY LIVING EXPENSES MOVEMENT OF HOUSEHOLD GOODS HOUSE HUNTING TRIPS (2) FOR SPOUSE AND CHILDREN "GROSS UP" OF TAXABLE EXPENSES THE ABOVE ARE DETAILED IN THE ATTACHED EXECUTIVE RELOCATION BENEFITS PROGRAM 17. VACATION: You will be eligible for four (4) weeks vacation in calendar year 2002 and four weeks per year thereafter. 18. SALARY CONTINUATION: A Salary Continuation agreement is enclosed with this letter. It contains non-compete provisions as well as a provision for salary continuation upon certain terminations of employment. 19. EMPLOYMENT AT WILL: NOTHING contained in this offer letter is intended to create a fixed or contractual employment term between you and the Company and you understand and acknowledge that if you accept this offer, you are and will continue to be an employee at will, that your employment with the Company can be terminated with or without cause and with or without notice, at any time at the option of either you or the Company. 3 Larry, we believe you have the talent, leadership and style to make a very significant contribution to Cole National. THIS OFFER SHALL REMAIN OPEN UNTIL APRIL 22, 2002. I look forward to hearing from you soon. If you accept this offer, please sign the enclosed copy of this letter, as well as, both signed copies of the Termination/Non-Compete Agreement, and return them to me. Sincerely, /s/ Jeffrey A. Cole - ---------------------- Jeffrey A. Cole Chairman and CEO Enclosures Agreed to and acknowledged the 19th day of April, 2002. /s/ Lawrence E. Hyatt - ---------------------- Signature 4 EX-10.2 4 l96272aexv10w2.txt EX 10.2 LETTER AGMT DATED 4/19/02 Exhibit 10.2 April 19, 2002 Cole National Corporation 5915 Landerbrook Drive Mayfield Heights, OH 44124 Gentlemen: In consideration of my employment as Executive Vice President and Chief Financial Officer for Cole National Corporation and the benefits I derive from Paragraph L hereof (but without thereby creating any fixed or contractual employment term, understanding that my employment can be terminated, with or without cause and with or without notice, at any time at the option of either the Company or me), I hereby agree with the Company (for purposes of this letter agreement, the "Company" shall mean Cole National Corporation or any of its present or future direct or indirect parents or subsidiaries or affiliated entities by which I am employed or on behalf of which I provide service(s) as follows: A. During the term of my employment I will not compete, directly or indirectly, with the Company. In accordance with this restriction, but without limiting its terms, I will not: (a) enter into or engage in any business which competes with the business of the Company; or (b) solicit customers, business, patronage, or orders for, or sell, any product or products in competition with, or for any business that competes with, the business of the Company; or (c) divert, entice, or take away any customers, business, patronage or orders of the Company or attempt to do so; or (d) promote or assist, financially or otherwise, any person, firm, association or corporation or any other entity engaged in any business which competes with the business of the Company. B. For a period of twelve (12) months following termination of my employment with the Company, I will not enter into or engage in any business that competes with the Company's business. C. For a period of twelve (12) months following termination of my employment with the Company, I will not solicit customers, business, patronage, or orders for, or sell any product(s) in competition with the Company's business. D. For a period of twelve (12) months following termination of my employment with the Company, I will not divert, entice, or otherwise take away any customers, business, patronage, or orders of the Company, or attempt to do so. E. For a period of twelve (12) months following termination of my employment with the Company, I will not promote or assist financially or otherwise, any person, firm, association, partnership, corporation, or any other entity engaged in any business which competes with the Company's business. F. For the purposes of Paragraphs A through E, inclusive, I understand that I will be competing if I engage in any or all of the activities set forth therein directly as an individual on my own account, or indirectly as a partner, joint venturer, employee, agent, salesman, consultant, officer and/or director of any firm, association, corporation, or other entity, or as a stockholder of any corporation in which I own, directly or indirectly, individually or in the aggregate, more than one percent (1%) of the outstanding stock; provided however, that at such time as I am no longer employed by the Company, my direct or indirect ownership as a stockholder of less than five percent (5%) of the outstanding stock of any publicly traded corporation shall not by itself constitute a violation of Paragraphs B through E. G. For the purposes of Paragraphs B through E, inclusive, the Company's business is defined as the manufacture, production, sale, marketing and/or distribution of any product(s) and/or the rendering of any service(s) that are the same as or similar to those manufactured, produced, sold, marketed, distributed and/or rendered, as of the date of my termination, by the Company. H. I understand that the activities set forth in Paragraphs B through E, inclusive, shall be prohibited only within the United States, Canada and Puerto Rico or such lesser geographic area as to which or for which I was assigned or had responsibility at the time of my termination or at any time during the twelve (12) month period immediately preceding my termination. I. If it shall be judicially determined that I have violated any of my obligations under Paragraphs B through E, inclusive, then the period applicable to the obligation which I shall have been determined to have violated shall automatically be extended by a period of time equal in length to the period during which said violation(s) occurred. J. I also agree that I will not directly or indirectly at any time solicit or induce or attempt to solicit or induce any employee(s) or any sales representative(s), agent(s) or consultant(s) of the Company or any of its parent, subsidiary or affiliate entities to terminate their employment, representation or other association with the Company or such entity. K. During the period of my employment and at any time thereafter, I will not disclose, furnish, disseminate, make available or, except in the ordinary course of performing my duties on behalf of the Company, use any trade secrets or confidential business and technical information of the Company, or its parent, subsidiaries or affiliated entities or its customers, without limitation as to when it was acquired by me or whether it was compiled or obtained by, or furnished to me while I was employed by the Company. Such trade secrets and confidential business and technical information are considered to include, without limitation, the vision care plans, vendor lists, vendor terms and programs, merchandise costs, financial statistics, research data, or any other statistics and plans contained in monthly and annual review books, profit plans, capital plans, critical issues plans, strategic plans, or merchandising, marketing, real estate, or store operations plans. I specifically acknowledge that all such information, whether reduced to writing or maintained in my mind or memory and whether compiled by the Company and/or me derives independent economic value from not being readily known to or ascertainable by proper means by others who can obtain economic value from its disclosure or use, that reasonable efforts have been put forth by the Company to maintain the secrecy of such information, that such information is and will remain the sole property of the Company and that any retention and use of such information during or after the termination of my relationship with the Company (except in the course of performing my duties) shall constitute a misappropriation of the Company's trade secrets; provided, however, that this restriction shall not apply to information which is in the public domain or otherwise made public by others through no fault of mine. The above restrictions on disclosure and use of confidential information shall not prevent me from: (i) using or disclosing information in the good faith performance of my duties on behalf of the Company; (ii) using or disclosing information to another employee to whom disclosure is required to perform in good faith the duties of either of us on behalf of the Company; (iii) using or disclosing information to another person or entity pursuant to a binding confidentiality agreement in a Company-approved form as part of the performance in good faith of my duties on behalf of the Company or as authorized in writing by the Company; (iv) at any time after the period of my employment using or disclosing information to the extent such information is, through no fault or disclosure of my own, generally known to the public; (v) using or disclosing information which was not disclosed to me by the Company or otherwise during the period of my employment which is then disclosed to me after termination of my employment with the Company by a third party who is under no duty or obligation not to disclose such information; or (vi) disclosing information as required by law. If I become legally compelled to disclose any of the confidential information, I shall (i) provide the Company with reasonable prior written notice of the need for such disclosure such that the Company may obtain a protective order; (ii) if disclosure is required, furnish only that portion of the confidential information which, in the written opinion of my counsel delivered to the Company, is legally required; and (iii) exercise reasonable efforts to obtain reliable assurances that confidential treatment will be accorded to the confidential information. L. It is further understood and agreed that if my employment with the Company should be terminated as a result of a Termination Without Cause (defined below) or a Termination With Good Reason (defined below), and if I am not then or thereafter in material breach of this agreement, and upon the execution and delivery to the Company by me of an agreement, in a form presented by the Company and accepted by me, which acceptance shall not be unreasonably withheld or delayed, releasing all claims which I may have against the Company, I will receive, in full and complete settlement of any claims for compensation which I may have, and in lieu of any severance pay under any policy of the Company or otherwise, the following: (i) continued monthly payments, in accordance with the Company's regular payroll practices, for a period of twelve (12) months after the date of termination equal to the sum of (1) one-twelfth (1/12) of my annual base salary at the highest rate in effect at any time during the twelve (12)-month period prior to my date of termination, and (2) one-twelfth (1/12) of my target annual bonus for the fiscal year in which the date of termination occurs; and (ii) any payments and benefits which I, my spouse, dependents, beneficiaries or estate would have been entitled to receive pursuant to any employee benefit plan or program of the Company during the twelve (12)-month period following my termination had I remained an employee during that period, with such benefits provided to me at no less than the same coverage level and at no more of a cost to me as in effect as of the date of my termination subject to such reduction in coverage or increases in cost as shall become in effect for senior executive employees of the Company generally, provided however, that such continued payments and benefits shall terminate on the date or dates I receive equivalent coverage and benefits, without waiting period or pre-existing condition limitations, under the plans and programs or a subsequent employer (such coverage and benefits to be determined on a coverage-by-coverage or benefit-by-benefit basis); (iii) the stock options and restricted stock which will be granted to me in connection with the commencement of my employment and dated that date ("Original Grants") shall become vested and nonforfeitable as follows: (a) If the Termination Without Cause or Termination With Good Reason shall occur before the first anniversary of the date of commencement of my employment, (x) twenty-five percent (25%) of the original grant of unvested stock options of the Company shall vest as of the date of the Termination Without Cause or Termination With Good Reason and (y) twenty-five percent (25%) of the Original Grant of restricted stock shall become nonforfeitable, as of the date of the Termination Without Cause or Termination With Good Reason. Such stock options shall remain exercisable for the lesser of one (1) year from the date of such termination or ten (10) years from the date of grant; (b) If the Termination Without Cause or Termination With Good Reason shall occur on or after the first anniversary of the date of commencement of my employment, fifty percent (50%) of the unvested portion of the Original Grant of stock options of the Company shall vest and fifty percent (50%) of any forfeitable shares of the Original Grant of restricted stock shall become nonforfeitable, as of the date of the Termination Without Cause or Termination With Good Reason. Such stock options shall remain exercisable for the lesser of one (1) year from the date of such termination or ten (10) years from the date of grant. (iv) I will become fully vested as of the date of Termination Without Cause or Termination With Good Reason in my account under the Company's Supplemental Retirement Benefit Plan dated March 29, 1994, (SERP), such account being calculated as if I had remained an employee of the Company during the twelve (12)-month period following my termination. In addition, upon the occurrence of a Change of Control, all of the stock options and restricted stock I then hold shall become fully vested. As used herein, "Termination Without Cause" means any termination of my employment by the Company other than a Termination With Cause (defined below). As used herein, "Termination With Cause" means termination by the Company of my employment at any time after the Company believes in good faith it has actual knowledge of the occurrence of any of the following events: gross neglect of duty, material breach of this Agreement, a material act of dishonesty or disloyalty, the inability to discharge my material duties due to alcohol or drug addiction, or gross misconduct inimical to the best interests of the Company; provided however, that termination of employment due to unsatisfactory job performance shall not be considered Termination for Cause; provided further, however, that "Cause" shall not be deemed existing unless and until the Company has delivered to me a copy of a resolution duly adopted by the Company's Board of Directors at a meeting of the Board duly called (after reasonable (but in no event less than seven (7) days) notice to me and an opportunity for me, together with my counsel, to be heard before the Board), finding that in the good faith opinion of the Board, I had engaged in the conduct set forth in above and specifying the particulars thereof in reasonable detail. As used herein, "Termination with Good Reason" means my termination of employment at any time after I have actual knowledge of the occurrence, without my written consent, of one of the following events: (i) a reduction in my base compensation or a reduction in the health and welfare insurance, retirement and car benefits available to me as of the commencement of employment, except for reductions in such benefits applicable generally to executives at my level and below: (ii) the reassignment of me to a position resulting in my not being the Company's Executive Vice-President & Chief Financial Officer or a comparable position, or a reporting relationship other than to the CEO or COO of the Company; (iii) there shall have occurred a Change of Control (defined below) and I shall elect to terminate my employment with the Company during the ninety (90) day period commencing six (6) months after such Change of Control; or (iv) the location of my principal office is relocated to a location more than fifty (50) miles from either Twinsburg or Mayfield Heights, Ohio prior to the third anniversary date of the commencement of my employment. As used herein, a "Change of Control" will be deemed to have taken place upon the occurrence of any of the following: (i) Cole National Corporation merges or consolidates with or into another corporation and as a result of such merger or consolidation less than 51% of the voting power of the then-outstanding voting securities of the surviving or resulting corporation immediately after such transaction are owned in the aggregate directly or indirectly by the former stockholders of Cole National Corporation immediately prior to such transaction; (ii) All or substantially all of the assets accounted for on the Consolidated Balance Sheet of Cole National Corporation are sold or transferred to one or more corporations or persons, and as a result of such sale or transfer less than 51% of the voting power of the then-outstanding voting securities of such corporation or person immediately after such sale or transfer is directly or indirectly beneficially held in the aggregate by the former stockholders of Cole National Corporation immediately prior to such transaction or series of transactions; (iii) A person, within the meaning of Section 3(a)(9) or 13(d)(3) of the Securities Exchange Act of 1934, become the beneficial owner (as defined in Rule 13d-3 of the Securities and Exchange Commission pursuant to the Securities Exchange Act of 1934) of (i) 15% or more, but less than 35%, of the voting power of the then outstanding voting securities of Cole National Corporation without the prior approval of the Board of Directors of Cole National Corporation or (ii) 35% or more of the voting power of the then-outstanding voting securities of Cole National Corporation; provided, however, that the foregoing does not apply to any such acquisition that is made by (w) any subsidiary of Cole National Corporation; (x) any employee benefit plan of Cole National Corporation or any subsidiary; or (y) any person or group of which employees of Cole National Corporation or of any subsidiary control a greater than 25% interest unless the Board of Directors of Cole National Corporation determines that such person or group is making a "hostile acquisition," or (z) any person or group of which I am an affiliate; or (iv) A majority of the members of the Board of Directors of Cole National Corporation are not Continuing Directors, where a "Continuing Director" is any member of the Board of Directors of Cole National Corporation who (x) was a member of the Board of Directors of Cole National Corporation on the date of this letter agreement or (y) was nominated for election or elected to the Board of Directors with the affirmative vote of a majority of the Continuing Directors who were members of the Board at the time of such nomination or election. The amounts payable to me under this Paragraph L are not eligible earnings under any pension, savings, deferred compensation, bonus, incentive, supplemental retirement benefit or other benefit plan of the Company. M. I expressly agree and understand that the remedy at law for any breach by me of this Agreement will be inadequate and that the damages flowing from such breach are not readily susceptible to being measured in monetary terms. Accordingly, it is acknowledged that upon may violation of any provision of this Agreement, the Company shall be entitled to immediate injunctive relief and may obtain a temporary order restraining any threatened or further breach without the necessity of proof of actual damage. Nothing in this Agreement shall be deemed to limit the Company's remedies at law or in equity for any breach by me of any of the provisions of this Agreement which may be pursued or availed of by the Company. N. This Agreement is not assignable by either party without the prior written consent of the other except that the Company may assign it without such consent to any parent, subsidiary or affiliated entity, and upon such entity's assumption of the Company's duties and obligations hereunder, such entity shall succeed to each of the Company's rights hereunder. Upon such assignment and assumption, I agree to and will become an employee of such entity, and all references to the Company in this Agreement shall, as the context requires, be deemed to be to the entity to which such assignment, assumption and employment relate. O. No modification, waiver, amendment or addition to any of the terms of this Agreement shall be effective, except as set forth in a writing signed by me and the Company. The failure of the Company to enforce any provision of this Agreement shall not be construed to be a waiver of such provision or of the right of the Company thereafter to enforce each and every provision. P. This Agreement and any amendments thereto shall become effective on the date of acceptance by the Company and shall be governed by, and construed in accordance with, the internal, substantive laws of the State of Ohio. I agree that the state and federal courts located in the State of Ohio shall have jurisdiction in any action, suit or proceeding against me arising out of this Agreement and I hereby: (a) submit to the personal jurisdiction of such courts; (b) consent to service of process in connection with any action, suit or proceeding against me; and (c) waive any other requirement (whether imposed by statute, rule of court or otherwise) with respect to personal jurisdiction, venue or service of process. Q. This Agreement supersedes the provisions of each and every other agreement or understanding, whether oral or written, between the undersigned and the Company relating to the subject matter contained herein, and any such agreement or understanding shall be of no further force and effect. The provisions of this Agreement are severable and if any one or more provisions may be determined to be illegal or otherwise unenforceable, in whole or in part, the remaining provisions and any partially unenforceable provision, to the extent enforceable in any jurisdiction, shall, nevertheless, be binding and enforceable. The parties hereto agree that when fully executed, the foregoing shall constitute a legally enforceable Agreement between us, which also shall inure to the benefit of the Company's successors and assigns. Finally, I represent that prior to signing this Agreement, I have read, fully understand and voluntarily agree to the terms and conditions as stated above, that I was not coerced to sign this Agreement, that I was not under duress at the time I signed this Agreement and that, prior to signing this Agreement, I had adequate time to consider entering into this Agreement, including without limitation, the opportunity to discuss the terms and conditions of this Agreement, as well as its legal consequences, with an attorney of my choice. This Agreement shall become effective as of the commencement date of my employment by the Company. Very truly yours, By: /s/ Lawrence E. Hyatt -------------------------- Lawrence E. Hyatt Acknowledged and agreed to as of this 14th day of April, 2002 COLE NATIONAL CORPORATION By: /s/ Jeffrey A. Cole ------------------------------------ Jeffrey A. Cole Chairman and Chief Executive Officer EX-10.3 5 l96272aexv10w3.txt EX 10.3 RESTRICTED STOCK AGMT Exhibit 10.3 COLE NATIONAL CORPORATION Restricted Stock Agreement THIS RESTRICTED STOCK AGREEMENT is made by and between Cole National Corporation, a Delaware corporation (the "COMPANY"), and Lawrence E. Hyatt, an individual (the "GRANTEE"). PRELIMINARY STATEMENTS: A. In connection with the Grantee accepting employment as Executive Vice President and Chief Financial Officer -- Cole National Corporation and as a condition thereof, the Company and Grantee have entered into this Agreement; and B. The execution of this Agreement in the form hereof has been authorized by a resolution of the Board of Directors of the Company (the "BOARD"); NOW, THEREFORE, in consideration of the Grantee's acceptance of the terms and conditions of this Agreement, and subject to the terms of this Agreement, the Company hereby grants to the Grantee 25,000 shares (together with all other shares of Common Stock that become subject to this Agreement, collectively, the "SHARES") of the Company's common stock, par value $.001 per share ("COMMON STOCK"), which are to be granted pursuant to resolution of the Board and issued out of the Company's treasury. AGREEMENT: 1. Issuance of Common Stock. The Shares will be issued as soon as practicable after the date of this Agreement as fully paid and nonassessable shares and will be represented by certificates registered in the name of the Grantee and bearing a legend referring to the restrictions set forth in this Agreement. 2. Restriction on Transfer of Common Stock. The Shares may not be transferred, sold, pledged, exchanged, assigned or otherwise encumbered or disposed of by the Grantee, except to the Company, until they have become nonforfeitable in accordance with Section 3 of this Agreement. Any purported transfer, encumbrance or other disposition of the Shares that is in violation of this Section 2 will be null and void, and the other party to any such purported transaction will not obtain any rights to or interest in the Shares. 3. Vesting of Common Stock. (a) The Shares will become nonforfeitable upon the occurrence of the following: 1

Amount Nonforfeitable Date Nonforfeitable --------------------- ------------------- 1/2 of the Shares On the date three years from the Grant Date. 1/2 of the Shares On the date four years from the Grant Date.

(b) Notwithstanding the provisions of Section 3(a), (i) all of the Shares will immediately become nonforfeitable if a Change of Control occurs. (ii) if Grantee's employment with the Company terminates as the result of a Termination Without Cause or Termination With Good Reason before the first anniversary of the Grant Date and the conditions of Paragraph L of that certain Letter Agreement between Grantee and the Company dated April 19, 2002 have been satisfied, than twenty-five percent (25%) of the Shares shall become nonforfeitable, as of the date of the Termination Without Cause or Termination With Good Reason; and (iii) if Grantee's employment with the Company terminates as the result of a Termination Without Cause or Termination With Good Reason before the first anniversary of the Grant Date and the conditions of Paragraph L of that certain Letter Agreement between Grantee and the Company dated April 19, 2002 have been satisfied, than 50% of any forfeitable Shares shall become nonforfeitable, as of the date of the Termination Without Cause or Termination With Good Reason. 4. Termination of Rights and Forfeiture of Common Stock. Except for Shares that have become nonforfeitable, all of the Shares will be forfeited if the Grantee ceases to be continuously employed by the Company or a Subsidiary, except as provided in Section 3(b), (i), (ii), (iii). In the event of a forfeiture, any certificate(s) representing the Shares will be canceled. For purposes of this Agreement, the continuous employment of the Grantee with the Company or a Subsidiary will not be deemed to have been interrupted, and the Grantee will not be deemed to have ceased to be an employee of the Company or a Subsidiary, by reason of the transfer of his employment among the Company and its subsidiaries or a leave of absence approved by the Committee. 5. Dividend, Voting and Other Rights. (a) Except as otherwise provided in this Agreement, the Grantee will have all of the rights of a stockholder with respect to the Shares, including the right to vote the Shares and receive any dividends that may be paid thereon; provided, however, that any additional shares of Common Stock or other securities that the Grantee may become entitled to receive pursuant to a stock dividend, stock split, combination of shares, recapitalization, merger, consolidation, separation or reorganization or any other change in the capital structure of the Company will be subject to the same restrictions as the Shares. 2 (b) Cash dividends, if any, and any other distributions paid on the Shares will be sequestered by the Company until such time as such Shares become nonforfeitable in accordance with Section 3 and will, to the extent practicable, be deemed to be reinvested (at the Stock Price on the dividend payment date) on an immediate basis in additional shares of Common Stock from the Company's treasury, which will be subject to the same restrictions as the underlying Shares granted under this Agreement. If Shares are forfeited pursuant to Section 4, all dividends and other distributions, together with the earnings thereon, with respect to such Shares will likewise be forfeited. 6. Retention of Stock Certificate(s) by Company. Any certificates representing Shares will be held in custody by the Company together with a stock power endorsed in blank by the Grantee with respect thereto, until those shares have become nonforfeitable in accordance with Section 3. 7. Compliance with Law. The Company shall make reasonable efforts to comply with all applicable federal, state and other applicable securities laws; provided, however, notwithstanding any other provision of this Agreement, the Company will not be obligated to issue any securities pursuant to this Agreement if the issuance thereof would result in a violation of any such law. Grantee acknowledges that he has been given the opportunity to ask questions and receive answers about the Company's financial and other information, is fully capable of making an investment decision concerning the Company's Common Stock without assistance of third parties, and has no intention to distribute any of the Shares to third parties. During each of the prior two calendar years Grantee has had individual income in excess of $200,000 and has a reasonable expectation of reaching at least that level of income in the current year. 8. Withholding Taxes. If the Company is required to withhold any federal, state, local or foreign tax in connection with any issuance of restricted or nonrestricted shares of Common Stock or other securities pursuant to this Agreement, the Grantee shall pay the tax or make provisions that are satisfactory to the Company for the payment thereof. 9. Right to Terminate Employment. No provision of this Agreement will limit in any way whatsoever any right that the Company or a Subsidiary may otherwise have to terminate the employment of the Grantee at any time. 10. Relation to Other Benefits. Any economic or other benefit to the Grantee under this Agreement shall not be taken into account in determining any benefits to which the Grantee may be entitled under any profit-sharing, retirement or other benefit or compensation plan maintained by the Company or a Subsidiary and shall not affect the amount of any insurance coverage available to any beneficiary under any insurance plan covering employees of the Company or a Subsidiary. 11. Severability. In the event that one or more of the provisions of this Agreement are invalidated for any reason by a court of competent jurisdiction, any provision so invalidated will be deemed to be separable from the other provisions hereof, and the remaining provisions hereof will continue to be valid and fully enforceable. 3 12. Governing Law. This Agreement is made under, and will be construed in accordance with, the laws of the State of Ohio without regard to conflict of law principles of such state. 13. Taxes. Grantee may make a proper election under Section 83(b) of the Internal Revenue Code of 1986, as amended, no later than 30 days after the date of this Agreement with respect to all of the Shares. 14. Definitions. As used in this Agreement, the following terms have the following meanings: "CHANGE OF CONTROL" means if at any time any of the following events has occurred: (i) the Company merges or consolidates with or into another corporation and as a result of such merger or consolidation less than 51% of the voting power of the then-outstanding voting securities of the surviving corporation immediately after such transaction are directly or indirectly beneficially owned in the aggregate by the former stockholders of the Company immediately prior to such transaction; (ii) all or substantially all the assets accounted for on the Consolidated Balance Sheet of the Company are sold or transferred to one or more corporations or persons, and as a result of such sale or transfer less than 51% of the voting power of the then-outstanding voting securities of such corporation or person immediately after such sale or transfer is directly or indirectly beneficially held in the aggregate by the former stockholders of the Company immediately prior to such transaction or series of transactions; (iii) a person, within the meaning of Section 3(a)(9) or 13(d)(13) (as in effect on the date of the award) of the Securities Exchange Act of 1934, as amended (the "EXCHANGE ACT"), becomes the beneficial owner (as defined in Rule 13d-3 of the Securities and Exchange Commission pursuant to the Exchange Act) of (i) 15% or more but less than 35% of the voting power of the then-outstanding voting securities of the Company without prior approval of the Company's Board, or (ii) 35% or more of the voting power of the then-outstanding voting securities of the Company; provided, however, that the foregoing does not apply to any such acquisition that is made by (w) any Subsidiary of the Company (x) any employee benefit plan of the Company or any Subsidiary or (y) any person or group of which employees of the Company or of any Subsidiary control a greater than 25% interest unless the Board determines that such person or group is making a "hostile acquisition;" (iv) a majority of the members of the Board or of any Subsidiary are not Continuing Directors, where a "CONTINUING DIRECTOR" is any member of the Board or, with respect to a Subsidiary, of such Subsidiary who (x) was 4 a member of the Board or, with respect to a Subsidiary, of such Subsidiary on the date of the award or (y) was nominated for election or elected to such Board with the affirmative vote of a majority of the Continuing Directors who were members of such Board at the time of such nomination or election. "GRANT DATE" means July 15, 2002. "SUBSIDIARY" means any corporation (other than the Company) in an unbroken chain of corporations beginning with the Company if each of such corporations (or a group of corporations that themselves are Subsidiaries) other than the last corporation in the unbroken chain owns stock possessing fifty percent or more of the total combined voting power of all classes of stock in one of the other corporations in such chain. "TERMINATION WITHOUT CAUSE" shall have the same meaning as set forth in that certain Letter Agreement between Grantee and Company dated April 19, 2002. "TERMINATION WITH GOOD REASON" shall have the same meaning as set forth in that certain Letter Agreement between Grantee and Company dated April 19, 2002. This Restricted Stock Agreement has been executed by the parties at Cleveland, Ohio as of July 15, 2002. COLE NATIONAL CORPORATION By: /s/ Leslie D. Dunn ----------------------------------- Leslie D. Dunn Sr. Vice President-Business Development /s/ Lawrence E. Hyatt --------------------------------------- Lawrence E. Hyatt 5 EX-10.4 6 l96272aexv10w4.txt EX 10.4 NONQUALIFIED STOCK OPTION AGREEMENT Type 2-'99 Plan Exhibit 10.4 COLE NATIONAL CORPORATION Nonqualified Stock Option Agreement This Nonqualified Stock Option Agreement (this "Agreement") is entered into between the individual optionee named on the signature page hereof (the "Optionee") and Cole National Corporation, a Delaware corporation (the "Company"), as of the Grant Date. Certain capitalized terms used herein are defined in Paragraph 8. WHEREAS, the Board of Directors of the Company has authorized a grant of stock options on the terms hereof to the Optionee in connection with his commencement of employment in the capacity shown on the signature page; and NOW, THEREFORE, the Company hereby grants to the Optionee options (the "Options") pursuant to the Company's 1999 Broad Based Employee Stock Option Plan (the "Plan") to purchase the number of shares of Common Stock, par value $.001 per share, of the Company ("Common Stock") shown as the Original Award on the signature page hereof; and agrees to cause certificates for any shares purchased hereunder to be delivered to the Optionee upon payment of the purchase price in full, all subject, however, to the terms and conditions of the Plan and as hereinafter set forth. 1. Exercise. (a) Except as otherwise provided herein, the Options (until terminated as hereinafter provided) will become vested and exercisable as follows: Type 2-'99 Plan --------------- 2 1/4 of the Original Award The first anniversary of the Grant Date; and 1/4 of the Original Award The second anniversary of the Grant Date; and 1/4 of the Original Award The third anniversary of the Grant Date; and All Unvested Shares The fourth anniversary of the Grant Date To the extent exercisable, the Options may be exercised in whole or in part from time to time. (b) Upon the occurrence of a Change of Control prior to the fourth anniversary of the date of this Agreement, the Options, in addition to any vesting pursuant to the provisions of Paragraph 1(a) above, will become exercisable in full as to any then Unvested Shares immediately prior to the consummation of such Change in Control. (c) (i) If Grantee's employment with the Company terminates as the result of a Termination Without Cause or Termination With Good Reason before the first anniversary of the Grant Date and the conditions of Paragraph L of that certain Letter Agreement between Grantee and the Company dated April 19, 2002 have been satisfied, than twenty-five percent (25%) of the Unvested Shares shall vest as of the date of the Termination Without Cause or Termination With Good Reason. Type 2 -- '99 Plan 3 (ii) If Grantee's employment with the Company terminates as the result of a Termination Without Cause or Termination With Good Reason on or after the first anniversary of the Grant Date and the conditions of Paragraph L of that certain Letter Agreement between Grantee and the Company dated April 19, 2002 have been satisfied, than 50% of the Unvested Shares shall vest as of the date of the Termination Without Cause or Termination With Good Reason. (d) If a Sale Event occurs prior to the fourth anniversary of the Grant Date and the Optionee is not a Full-Time Employee of the Company or a continuing Subsidiary immediately after the Sale Event, the Options will, in addition to any prior vesting pursuant to Paragraph 1(a) above, immediately become exercisable with respect to those Unvested Shares that would have vested on the next succeeding anniversary of the Grant Date (if the Sale Event occurs on an anniversary of the Grant Date, no additional Options will become exercisable besides those that became exercisable as of that anniversary). Thereupon, all remaining Unvested Options will be forfeited and cancelled. (e) If the Optionee dies or becomes permanently disabled while in the employ of the Company or any Subsidiary, or the Optionee retires under a retirement plan of the Company or any Subsidiary, the Options will, in addition to any vesting pursuant to Paragraph 1(a) above, immediately become exercisable with respect to those Unvested Shares that would have vested on the next succeeding anniversary of the Grant Date (if the event occurs on an anniversary of the Grant Date, no additional Options will become exercisable besides those that Type 2 -- '99 Plan 4 became exercisable as of that anniversary). Thereupon, all remaining Unvested Options will be forfeited and cancelled. (f) Any exercise of the Options must be made in writing by the Optionee delivered to the Secretary of the Company. 2. Exercise Price and Payment; Reload Options. (a) The Options will be exercisable for Vested Shares (whether such vesting occurs pursuant to Paragraph 1(a), 1(b), 1(c), 1(d) or 1(e)) at the Exercise Price shown on the signature page hereof. (b) The Exercise Price for any shares may be paid (i) in cash or by check, (ii) by actual or constructive transfer to the Company of Mature Shares, or (iii) by a combination of such methods of payment. (c) If, at a time at which the Optionee is a Full-time Employee, the Optionee pays the Exercise Price of shares by delivery of Mature Shares, additional option rights ("Reload Option Rights") shall, subject to the provisions hereinafter set forth, be automatically granted to the Optionee equal to the sum of the number of Mature Shares transferred to the Company with respect to such Exercise Price. In no event, however, shall Reload Option Rights be granted unless the remainder of the original ten (10) year term of the option being exercised is greater than six (6) months at the time of such exercise. Such Reload Option Rights shall not be exercisable during the six (6) month period immediately following the date of grant of such Reload Option Rights. The Exercise Price of such Reload Option Rights shall be one hundred (100) percent of the Stock Price per share on the day of the exercise of the Options to which such Reload Option Rights relate. Such Reload Option Rights shall terminate at such time as the Options being exercised would have terminated had they not been exercised. Such Reload Type 2 - '99 Plan ----------------- 5 Option Rights will be evidenced by an agreement in form substantially the same as this Agreement, with appropriate changes. Reload Option Rights will not be granted with respect to any Options that have been transferred by the original Optionee. 3. Termination. The Options will terminate and all Unvested and Vested Options then outstanding will be forfeited on the earliest of the following dates: (a) On the date on which the Optionee voluntarily resigns (unless otherwise provided in a written agreement relating to employment or such resignation constitutes a Termination With Good Reason) or ceases to be an employee of the Company or a Subsidiary by reason of termination of employment for Cause; (b) Subject to possible extension pursuant to Paragraph 3(c) below, five years after either (i) the date on which the Optionee ceases to be an employee of the Company or a Subsidiary by reason of retirement under a retirement plan of the Company or a Subsidiary at or after the earliest voluntary retirement age provided for in such retirement plan or retirement at an earlier age with the consent of the Company's Board of Directors or the Compensation Committee or (ii) the date of permanent disability of the Optionee if the Optionee becomes permanently disabled while an employee of the Company or a Subsidiary; (c) Five years after the date of the death of the Optionee if the Optionee dies while an employee of the Company or a Subsidiary or one year after the date of death of the Optionee if the Optionee dies during the fifth year of the five year period referred to in Paragraph 3(b) above; (d) One year after the date Grantee's employment with the Company terminates as the result of a Termination Without Cause or Termination For Good Reason; Type 2 -- '99 Plan ------------------ 6 (e) On the first anniversary of the date of a Sale Event if the Optionee is not a Full-Time Employee of the Company or a continuing Subsidiary immediately after the Sale Event; (f) Immediately (x) upon the Optionee accepting employment with a Competitor without the prior written approval of the Company's Chief Executive Officer or (y) upon a material breach by the Optionee of any applicable agreement with the Company or a Subsidiary relating to non-competition, non-solicitation or maintaining of Company confidences; or (g) Ten years from the Grant Date. 4. Transferability. Unless otherwise approved by the Compensation Committee following a request from the Optionee or the Optionee's guardian or legal representative, the Options are not transferable by the Optionee otherwise than by will or the laws of descent and distribution. If another type of transfer is approved by the Compensation Committee, a transfer will only be effective when the transferee of the Options enters into an agreement with the Company (in form and substance acceptable to the Company) agreeing to be bound by the provisions of this Agreement as if such transferee were the Optionee. If exercised during the lifetime of the Optionee, the Options are exercisable only by the Optionee or by the Optionee's guardian or legal representative, or by an transferee authorized as provided in this Paragraph. 5. Securities Laws. The Options are not exercisable if such exercise would involve a violation of any applicable federal, state or other securities law, and the Company hereby agrees to make reasonable efforts to comply with such securities laws. The Options are Type 2 -- '99 Plan ------------------ 7 not exercisable unless under said laws at the time of exercise the shares of Common Stock or other securities purchasable hereunder are exempt, are the subject matter of an exempt transaction, or are registered in accordance with such laws. 6. Adjustments. (a) The Board of Directors or the Compensation Committee shall make such adjustment in the option price and in the number or kind of shares of Common Stock or other securities covered by the Options as such Board or Committee may in good faith determine is equitably required to prevent dilution or enlargement of the rights of the Optionee that otherwise would result from (i) any stock dividend, stock split, combination of shares, recapitalization or other change in the capital structure of the Company, or (ii) any merger, consolidation, spin-off, split-off, spin-out, split up, reorganization, partial or complete liquidation or other distribution of assets, issuance of rights to purchase securities, or (iii) any distribution to the holders of the Common Stock of rights or warrant to purchase equity interests of the Company, or (iv) any other corporate transaction or event having an effect similar to any of the foregoing. Moreover, in the event of any such transaction or event, the Board of Directors or the Compensation Committee, in its discretion, may provide in substitution for any or all outstanding awards under the Options such alternative consideration as it, in good faith, may determine to be equitable in the circumstances and may require in connection therewith the surrender of all awards so replaced. (b) In the event that any provision of this Agreement would result in a calculation of a number of shares in amounts other than a whole number, the number of shares so calculated will be reduced or increased to the nearest whole number (rounding 0.50 up), with the Type 2 -- '99 Plan ------------------ 8 effect of any such rounding deemed to attach to the last group of shares to be so calculated (with calculations to be conducted in alphabetical or numerical order, as applicable). 7. Withholding. If the Company is required to withhold any federal, state, local or foreign tax in connection with the exercise of the Options, it will be a condition to such exercise that the Optionee make provision satisfactory to the Company for payment of all such taxes. 8. Definitions. The following capitalized terms have meanings as set forth below. "Change of Control" means if at any time any of the following events shall have occurred: (a) the Company merges or is consolidated with or into another corporation and as a result of such merger or consolidation less than 51% of the voting power of the then-outstanding voting securities of the surviving or resulting corporation immediately after such transaction are directly or indirectly beneficially owned in the aggregate by the former stockholders of the Company immediately prior to such transaction; (b) all or substantially all the assets accounted for on the consolidated balance sheet of the Company are sold or transferred to one or more corporations or persons, and as a result of such sale or transfer less than 51% of the voting power of the then-outstanding voting securities of such corporation or person immediately after such sale or transfer is directly or indirectly beneficially held in the aggregate by the former stockholders of the Company immediately prior to such transaction or series of transactions; Type 2 -- '99 Plan 9 (c) A person, within the meaning of Section 3(a)(9) or 13(d)(3) (as in effect on the date hereof) of the Securities Exchange Act of 1934, becomes the beneficial owner (as defined in Rule 13d-3 of the Securities and Exchange Commission pursuant to the Securities Exchange Act of 1934) of (i) 15% or more but less than 35% of the voting power of the then-outstanding voting securities of the Company without the prior approval by the Board, or (ii) 35% or more of the voting power of the then-outstanding voting securities of the Company; provided, however, that the foregoing does not apply to any such acquisition that is made by (w) any subsidiary of the Company; (x) any employee benefit plan of the Company or of any Subsidiary or (y) any person or group of which employees of the Company or of any Subsidiary control a greater than 25% interest unless the Board of Directors of the Company determines that such person or group is making a "hostile acquisition;" (d) A majority of the members of the Board of Directors of the Company or of any Subsidiary are not Continuing Directors, where a "Continuing Director" is any member of the Board of Directors of the Company or, with respect to a Subsidiary, of such Subsidiary who (x) was a member of the Board of Directors of the Company or, with respect to a Subsidiary, of such Subsidiary on the date hereof or (y) was nominated for election or elected to such Board of Directors with the affirmative vote of a majority of the Continuing Directors who were members of such Board at the time of such nomination or election. "Competitor" means any Person that competes with any then-existing business of the Company or any Subsidiary. "Exercise Price" means the exercise price per share indicated as the Exercise Price per share on the signature page hereof. Type 2 - '99 Plan 10 "Full-time Employee" means a person having the status of a full-time employee of the Company or a Subsidiary working at least 20 hours a week, including a person who is on a short-term disability, parental or other leave under an applicable benefit plan or other approved leave. "Grant Date" means July 15, 2002. "Mature Shares" means (x) nonforfeitable, unrestricted shares of Common Stock that have been owned by the Optionee for more than six (6) months prior to the date of exercise, or (y) shares of restricted stock or other shares of Common Stock that are forfeitable or subject to restrictions on transfer, including, without limitation, shares of Common Stock issued pursuant to the earn out of performance shares or performance units, which shares have been owned by the Optionee for more than six (6) months and that the Company agrees to accept as consideration, or (z) such other Company securities as the Company's chief accounting officer, upon consultation with the Company's independent accountants, determines will not adversely affect the Company's tax or accounting position by accepting. "Original Award" means the number of shares of Common Stock indicated as the Original Award on the signature page hereof. "Person" means any corporation, partnership, limited liability company, association, firm, other entity or individual(s). "Sale Event" means the consummation of a sale or other event by which the Subsidiary by which the Optionee is primarily employed ceases to be a Subsidiary of the Company. Type 2 - '99 Plan 11 "Stock Price" means the closing price of the Common Stock on the principal exchange on which the Common Stock is traded. "Subsidiary" means any corporation (other than the Company) in an unbroken chain of corporations beginning with the Company if each of the corporations (or a group of corporations that themselves are Subsidiaries) other than the last corporation in the unbroken chain owns stock possessing fifty percent or more of the total combined voting power of all classes of stock in one of the other corporations in such chain. For purposes of this Agreement, the continuous employment of the Optionee with the Company or a Subsidiary will not be deemed interrupted, and the Optionee will not be deemed to have ceased to be an employee of the Company or any Subsidiary, by reason of the transfer of his employment among the Company and its Subsidiaries. "Termination Without Cause" shall have the same meaning as set forth in that certain Letter Agreement between Grantee and Company dated April 19, 2002. "Termination Without Good Reason" shall have the same meaning as set forth in that certain Letter Agreement between Grantee and Company dated April 19, 2002. "Trading Days" means days on which the principal exchange on which the Common Stock is traded is open for trading, regardless whether actual trading in the Common Stock occurs. "Unvested Shares" means, as of any given time, those shares of Common Stock relating to the Options that are not, at the time in question, otherwise permitted, under the terms of this Agreement, to be acquired pursuant to the exercise of the Options. Type 2 - '99 Plan ----------------- 12 "Vested Shares" means, as of any given time, those shares of Common Stock relating to the Options that are, at the time in question, otherwise permitted, under the terms of this Agreement, to be acquired pursuant to the exercise of the Options. 9. Acknowledgement. The undersigned Optionee hereby acknowledges receipt of an executed original of this Agreement and accepts the Options granted hereunder. Type 2 - '99 Plan ----------------- 13 Nonqualified Stock Option Agreement ----------------------------------- EXECUTED at Cleveland, Ohio as of the date first set forth above. COLE NATIONAL CORPORATION By: /s/ Leslie D. Dunn ------------------------------------- Leslie D. Dunn, Senior Vice President Title: Senior Vice President ---------------------------------- /s/ Lawrence E. Hyatt ----------------------------------------- OPTIONEE -- Lawrence E. Hyatt Name of Optionee: Lawrence E. Hyatt Name of Employer: Cole National Corporation Position: Executive Vice President & Chief Financial Officer Number of Shares in the Original Award: 75,000 Grant Date: July 15, 2002 Exercise Price per Share: $17.55 EX-10.5 7 l96272aexv10w5.txt EX 10.5 1ST AMEND TO THE AMEND/REST CREDIT AGMT Exhibit 10.5 EXECUTION COPY FIRST AMENDMENT FIRST AMENDMENT, dated as of August 23,2002 (this "Amendment"), to the Amended and Restated Credit Agreement, dated as of May 23,2002 (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"), LEHMAN COMMERCIAL PAPER INC., as syndication agent, WACHOVIA BANK, NATIONAL ASSOCIATION, as documentation agent, 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"). W I T N E S S E T H : WHEREAS, the Borrowers, the Lenders and the Administrative Agent are parties to the Credit Agreement; WHEREAS, the Borrowers and the other Loan Parties have requested that the Administrative Agent and the Lenders amend 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 other Loan Parties, 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 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: "Make any expenditure in respect of the purchase or other acquisition of fixed or capital assets and/or 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 in an aggregate amount for the Borrowers and their Subsidiaries not to exceed in any fiscal year $60,000,000." 3. Amendment to Section 9. Section 9(l) of the Credit Agreement is hereby amended by deleting such Section in its entirety and substituting in lieu thereof the following: "(1) CNG shall engage in any business other than the owning of the capital stock of the Borrowers and all actions incidental thereto or in connection therewith, including, without limitation, entering into the CNG Guarantee and Cash Collateral Agreement and the maintenance of cash management arrangements for the Borrowers and their Subsidiaries or CNG shall incur any material liabilities (other than the Senior Subordinated Notes, the Senior Subordinated 1997 Notes or the Senior Subordinated 2002 Notes); provided, however, that, notwithstanding the foregoing, CNG may enter into (i) leases (other than Financing Leases) of real and personal property that will be used by its Subsidiaries and Affiliates, the payments under which constitute Rental Expense and (ii) one or more Interest Rate Protection Agreements having an aggregate notional amount of not more than $75,000,000 pursuant to which the fixed rate of interest payable in respect of such amount of the Senior Subordinated Notes, Senior Subordinated 1997 Notes and Senior Subordinated 2002 Notes will be effectively converted into a floating rate of interest; or" 4. 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. 5. Effectiveness. This Amendment shall be effective upon execution and delivery by each of the Borrowers, the other Loan Parties, the Administrative Agent and the Majority Lenders. 6. 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. 7. 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. 8. 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. 9. GOVERNING LAW. THIS AMENDMENT 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. IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be duly executed and delivered by their proper and duly authorized officers as of the day and year first above written. COLE VISION CORPORATION By: /s/ J. Gaglioti --------------------------------- Title: Treasurer THINGS REMEMBERED, INC. By: /s/ J. Gaglioti --------------------------------- Title: Treasurer PEARLE, INC. By: /s/ J. Gaglioti --------------------------------- Title: Vice President & Treasurer CANADIAN IMPERIAL BANK OF COMMERCE, NEW YORK AGENCY, as Administrative Agent By: /s/ Katherine Bass --------------------------------- Title: Authorized Signatory CIBC INC. By: /s/ Katherine Bass --------------------------------- Name: Katherine Bass Title: Executive Director CIBC World Markets Corp. As Agent FIFTH THIRD BANK By: /s/ James P. Byrnes ------------------------- Name: James P. Byrnes Title: Vice President LEHMAN COMMERCIAL PAPER INC. By: /s/ Francis Chang ------------------------- Name: Francis Chang Title: Authorized Signatory KEYBANK NATIONAL ASSOCIATION By: /s/ Thomas J. Purcell ------------------------- Name: Thomas J. Purcell Title: Senior Vice President WACHOVIA BANK, NATIONAL ASSOCIATION By: /s/ Mark S. Supple ------------------------- Name: Mark S. Supple Title: Vice President The undersigned Guarantors do hereby consent and agree to the foregoing First Amendment: COLE NATIONAL CORPORATION By: /s/ J. Gaglioti --------------------------------- Title: Vice President & Treasurer COLE NATIONAL GROUP, INC. By: /s/ J. Gaglioti --------------------------------- Title: Vice President & Treasurer BAY CITIES OPTICAL COMPANY By: /s/ J. Gaglioti --------------------------------- Title: Treasurer WESTERN STATES OPTICAL, INC. By: /s/ J. Gaglioti --------------------------------- Title: Treasurer COLE VISION SERVICES, INC. By: /s/ J. Gaglioti --------------------------------- Title: Treasurer COLE LENS SUPPLY, INC. By: /s/ J. Gaglioti --------------------------------- Title: Treasurer THINGS REMEMBERED PERSONALIZED GIFTS, INC. By: /s/ J. Gaglioti --------------------------------- Title: Treasurer PEARLE VISION, INC. By: /s/ J. Gaglioti --------------------------------- Title: Vice President, Treasurer AMERICAN VISION CENTERS, INC. By: /s/ J. Gaglioti --------------------------------- Title: Vice President, Treasurer NUVISION, INC. By: /s/ J. Gaglioti --------------------------------- Title: Vice President, Treasurer EX-10.6 8 l96272aexv10w6.txt EX 10.6 2ND AMENDMENT TO CREDIT AGREEMENT Exhibit 10.6 SECOND AMENDMENT SECOND AMENDMENT, dated as of September 13, 2002 (this "AMENDMENT"), to the Amended and Restated Credit Agreement, dated as of May 23, 2002 (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"), LEHMAN COMMERCIAL PAPER INC., as syndication agent, WACHOVIA BANK,, NATIONAL ASSOCIATION, as documentation agent, 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"). W I T N E S S E T H: - - - - - - - - - - WHEREAS, the Borrowers, the Lenders and the Administrative Agent are parties to the Credit Agreement; WHEREAS, the Borrowers and the other Loan Parties have requested that the Administrative Agent and the Lenders amend 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 other Loan Parties, 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. AMENDMENTS TO SUBSECTION 1.1. (a) The definition of "Leverage Ratio" is hereby amended by deleting it in its entirety and replacing it with the following: "LEVERAGE RATIO": as of the end of each fiscal quarter of CNG, with respect to CNG and its Subsidiaries on a Consolidated basis, the ratio of (a) Total Indebtedness on such date to (b) EBITDA for the twelve month period ending on such date; PROVIDED HOWEVER that, for purposes of computing the Leverage Ratio, Total Indebtedness shall be computed without giving effect to any fair value adjustments for derivative hedge instruments." (b) The definition of "Rental Expense" is hereby amended by deleting it in its entirety and replacing it with the following: "RENTAL EXPENSE": for any period, the excess, if any, of (i) the aggregate amount of fixed rentals payable by CNG, the Borrowers and their Subsidiaries for such period, determined on a consolidated basis in accordance with GAAP, with respect to leases (other than Financing Leases) of real and personal property over (ii) the aggregate amount of fixed rental sublease income received by CNG, the Borrowers and their Subsidiaries from subleases during such period with respect to such real and personal property. Notwithstanding the foregoing, any payment pursuant to a Guarantee Obligation permitted pursuant to subsection 8.4(g) shall constitute Rental Expense. 3. AMENDMENTS TO SUBSECTION 8.4. (a) Subsection 8.4(f) of the Credit Agreement is hereby amended by deleting the period at the end of such subsection and replacing it with a semicolon followed by the word "and". (b) Subsection 8.4 of the Credit Agreement is hereby further amended by inserting a new subsection 8.4(g) to read as follows: "(g) Guarantee Obligations of Pearle Vision, Inc. or Pearle of obligations of franchisees of Pearle Vision, Inc. under operating leases of real property; PROVIDED that any amounts paid pursuant to such Guarantee Obligations shall constitute Rental Expense." 4. AMENDMENTS TO SUBSECTION 8.9. (a) Subsection 8.9(g) of the Credit Agreement is hereby amended by deleting the word "and" at the end of such subsection; (b) Subsection 8.9 of the Credit Agreement is hereby further amended by relabelling the current subsection 8.9(h) as subsection 8.9(i). (c) Subsection 8.9 of the Credit Agreement is hereby further amended by inserting a new subsection 8.9(h) to read as follows: "(h) Guarantee Obligations permitted pursuant to subsection 8.4(a), 8.4(e) or 8.4(g); and" 5. 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. 6. EFFECTIVENESS. This Amendment shall be effective upon execution and delivery by each of the Borrowers, the other Loan Parties, the Administrative Agent and the Majority Lenders. 7. 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. 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. 9. 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. 10. GOVERNING LAW. THIS AMENDMENT 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. IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be duly executed and delivered by their proper and duly authorized officers as of the day and year first above written. COLE VISION CORPORATION By: /s/ J. Gaglioti ----------------------------- Title: Treasurer THINGS REMEMBERED, INC. By: /s/ J. Gaglioti ----------------------------- Title: Treasurer PEARL, INC. By: /s/ J. Gaglioti ----------------------------- Title: Vice President & Treasurer CANADIAN IMPERIAL BANK OF COMMERCE, NEW YORK AGENCY, as Administrative Agent By: ------------------------------- Title: IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be duly executed and delivered by their proper and duly authorized officers as of the day and year first above written. COLE VISION CORPORATION By: ----------------------------------- Title: THINGS REMEMBERED, INC. By: ----------------------------------- Title: PEARLE, INC. By: ----------------------------------- Title: CANADIAN IMPERIAL BANK OF COMMERCE, NEW YORK AGENCY, as Administrative Agent By: /s/ Katherine Bass ----------------------------------- Title: Authorized Signatory CIBC INC. By: /s/ Katherine Bass ----------------------------------- Name: Katherine Bass Title: Executive Director CIBC World Markets Corp. As Agent LEHMAN COMMERCIAL PAPER INC. By: /s/ Francis Chang ----------------------------------- Name: Francis Chang Title: Authorized Signatory WACHOVIA BANK, NATIONAL ASSOCIATION By: /s/ Mark S. Supple ----------------------- Name: Mark S. Supple Title: Vice President KEYBANK NATIONAL ASSOCIATION By: /s/ Lawrence A. Mack ----------------------- Name: Lawrence A. Mack Title: Senior Vice President FIFTH THIRD BANK By: James P. Byrnes ----------------------- Name: James P. Byrnes Title: Vice President The undersigned Guarantors do hereby consent and agree to the foregoing Amendment: COLE NATIONAL CORPORATION By: /s/ J. Gaglioti --------------------------------- Title: Vice President & Treasurer COLE NATIONAL GROUP, INC. By: /s/ J. Gaglioti --------------------------------- Title: Vice President & Treasurer BAY CITIES OPTICAL COMPANY By: /s/ J. Gaglioti --------------------------------- Title: Treasurer WESTERN STATES OPTICAL, INC. By: /s/ J. Gaglioti --------------------------------- Title: Treasurer COLE VISION SERVICES, INC. By: /s/ J. Gaglioti --------------------------------- Title: Treasurer COLE LENS SUPPLY, INC. By: /s/ J. Gaglioti --------------------------------- Title: Treasurer THINGS REMEMBERED PERSONALIZED GIFTS, INC. By: /s/ J. Gaglioti --------------------------------- Title: Treasurer PEARLE VISION, INC. By: /s/ J. Gaglioti --------------------------------- Title: Vice President, Treasurer AMERICAN VISION CENTERS, INC. By: /s/ J. Gaglioti --------------------------------- Title: Vice President, Treasurer NUVISION, INC. By: /s/ J. Gaglioti --------------------------------- Title: Vice President, Treasurer EX-10.7 9 l96272aexv10w7.txt EX 10.7 AMEND #1 TO THE CNG RETIREMENT PLAN Exhibit 10.7 AMENDMENT NO. 1 TO THE COLE NATIONAL GROUP, INC. RETIREMENT PLAN (As Amended and Restated as of January 1, 2001) Cole National Group, Inc., a Delaware corporation, hereby amends the Cole National Group, Inc. Retirement Plan (As Amended and Restated as of January 1, 2001) (the "Plan") as hereinafter set forth. Except as otherwise provided herein, the provisions of this Amendment shall be effective March 31, 2002. Words and phrases used herein with initial capital letters that are defined in the Plan are used herein as so defined. SECTION 1 Section 1.2 of the Plan is hereby amended by the addition of the following new sentence at the end thereof: "Effective March 31, 2002, the Accrued Benefit under the Plan of each Participant, other than a Grandfathered Participant, is frozen." SECTION 2 Effective as of January 1, 2002, the first sentence of Section 1.8(b) of the Plan is hereby amended to read as follows:: "Notwithstanding the foregoing provisions of this Section, effective for the 1997, 1998, 1999, 2000 and 2001 Plan Years, Annual Compensation taken into account for any purpose for any such Plan Year shall not exceed $150,000 (as such amount shall be adjusted pursuant to section 401(a)(17) of the Code) and for Plan Years beginning on or after January 1, 2002, Annual Compensation taken into account for any purpose for any such Plan Year shall not exceed $200,000." SECTION 3 Section 1.11 of the Plan is hereby amended by the addition of the following new sentence at the end thereof: "Notwithstanding the foregoing, for purposes of each Participant in the Plan on March 31, 2002, Average Monthly Compensation shall be frozen on March 31, 2002." SECTION 4 Section 1.20 of the Plan is hereby amended by the addition of the following new sentence at the end thereof: "Notwithstanding the foregoing, for purposes of each Participant in the Plan on or after January 1, 2002, Covered Compensation shall be frozen on December 31, 2001." SECTION 5 Section 1.30A of the Plan is hereby added to the Plan immediately following Section 1.30 of the Plan: "1.30A Grandfathered Participant: A Participant who had attained age 50 and completed at least 10 Years of Benefit Service under the Plan on December 31, 2001." SECTION 6 Section 1.56 of the Plan is hereby amended by the addition of the following new subsection at the end thereof: "(g) For purposes of any Participant who is not a Grandfathered Participant, in no event shall such Participant's Years of Benefit Service take into account Hours of Service performed after March 31, 2002." SECTION 7 Section 3.1 of the Plan is hereby amended by the addition of the following new sentence at the end thereof: "Notwithstanding the foregoing provisions of this Section or the provisions of Section 3.3, no person shall become a Participant on or after April 1, 2002." SECTION 8 Sections 4.3(a), 4.4(b), 4.5 and 4.6 of the Plan are hereby amended by the addition of the following new sentence at the end of each such section: "Notwithstanding the foregoing, (i) for purposes of any Participant other than a Grandfathered Participant, the benefit determined under this Section shall reflect the freeze of (A) Covered Compensation as of December 31, 2001 and (B) Average Monthly Compensation and Years of Benefit Service as of March 31, 2002 and (ii) for purposes of any Grandfathered Participant, the benefit determined under this Section shall reflect the freeze of (A) Covered Compensation earned as of December 31, 2001 and (B) Average Monthly Compensation as of March 31, 2002." EXECUTED this day of , 2002. ---- -------------- COLE NATIONAL GROUP, INC. By: --------------------------- Title: ------------------------ And: -------------------------- Title: -------------------------- EX-10.8 10 l96272aexv10w8.txt EX 10.8 NONQUALIFIED STOCK OPTION AGREEMENT Exhibit 10.8 COLE NATIONAL CORPORATION Nonqualified Stock Option Agreement (1998 Plan/Time Vesting/Senior Executive) This Nonqualified Stock Option Agreement (this "AGREEMENT") is entered into between Jeffrey A. Cole (the "OPTIONEE") and Cole National Corporation, a Delaware corporation (the "COMPANY"), as of the Grant Date. Certain capitalized terms used herein are defined in Paragraph 8. WHEREAS, the Board of Directors of the Company has authorized a grant of stock options on the terms hereof to the Optionee, who is employed in the capacity shown on the signature page; and NOW, THEREFORE, the Company hereby grants to the Optionee options (the "OPTIONS") pursuant to the Company's 1998 Equity Performance and Incentive Plan, amended and restated effective June 10, 1999 (the "PLAN") to purchase the number of shares of Common Stock, par value $.001 per share, of the Company ("COMMON STOCK") shown as the Original Award on the signature page hereof; and agrees to cause certificates for any shares purchased hereunder to be delivered to the Optionee upon payment of the purchase price in full, all subject, however, to the terms and conditions of the Plan and the terms and conditions hereinafter set forth. 1. Exercise. (a) Except as otherwise provided herein, the Options (until terminated as hereinafter provided) will become vested and exercisable as follows: Amount Vested Date Exercisable ------------------------- --------------------------------------------- 1/5 of the Original Award The first anniversary of the Grand Date; and 1/5 of the Original Award The second anniversary of the Grand Date; and 1/5 of the Original Award The third anniversary of the Grand Date; and 1/5 of the Original Award The fourth anniversary of the Grand Date; and All Unvested Shares The fifth anniversary of the Grand Date; and for so long as the Optionee remains in the continued employment of the Company, except as provided below. To the extent exercisable, the Options may be exercised in whole or in part from time to time. (b) If, prior to the fifth anniversary of the Grant Date, any of the following occurs: (i) a Change in Control, (ii) a Termination Event, (iii) a Constructive Termination, (iv) the Optionee voluntarily ceases to be an employee of the Company or a Subsidiary or retires under a retirement plan of the Company or any Subsidiary, in either case with the consent of the Compensation Committee, or (v) the Optionee dies or becomes permanently disabled while in the employ of the Company or any Subsidiary, the Options will, in addition to any vesting pursuant to Paragraph 1(a) above, immediately become exercisable in full. (c) If, prior to the fifth anniversary of the Grant Date, the Optionee voluntarily ceases to be an employee of the Company or a Subsidiary or retires under a retirement plan of the Company or any Subsidiary, in either case without the consent of the Compensation Committee, the Options will, in addition to any vesting pursuant to Paragraph 1(a) above, immediately become exercisable in full with respect to those Unvested Shares that would have vested on the next succeeding anniversary of the Grant Date (if the event occurs on an anniversary of the Grant Date, no additional Options will become exercisable besides those that became exercisable as of that anniversary). Thereupon, all remaining Unvested Options will be forfeited and cancelled. (d) Any exercise of the Options must be made in writing by the Optionee delivered to the Secretary of the Company. 2. Exercise Price and Payment; Reload Options. (a) The Options will be exercisable for Vested Shares (whether such vesting occurs pursuant to Paragraph 1(a), 1(b), or 1(c)) at the Exercise Price shown on the signature page hereof. (b) The Exercise Price for any shares may be paid (i) in cash or by check, (ii) if approved by the Compensation Committee prior to such exercise, by delivery to the Company of a promissory note or notes of the Optionee; PROVIDED, HOWEVER, that the principal amount of such notes for all optionees outstanding at any one time pursuant to the Plan, the Company's 1996 Management Stock Option Plan, the Company's 1993 Management Stock Option Plan and the Company's 1992 Management Stock Option Plan shall not in the aggregate exceed $3,000,000, (iii) by actual or constructive transfer to the Company of Mature Shares, or (iv) by a combination of such methods of payment. (c) If, at the date of exercise the Optionee is an employee of the Company, and the Optionee pays the Exercise Price of shares by delivery of Mature Shares, additional option rights ("Reload Option Rights") shall, subject to the provisions hereinafter set forth, be automatically granted to the Optionee equal to the sum of (i) the number of Mature Shares transferred to the Company with respect to such Exercise Price and (ii) the number of shares of Common Stock surrendered to the Company in payment of the Withholding Amount associated with the Options exercised through the delivery of Mature Shares. Reload Option 2 Rights shall be granted as set forth in this Paragraph 2(c) with respect to Optionee's exercise of Options prior to their termination pursuant to Paragraph 3. In no event, however, shall Reload Option Rights be granted unless the remainder of the original ten (10) year term of the option being exercised is greater than six (6) months at the time of such exercise. Reload Option Rights will not be granted with respect to any Options that have been transferred by the original Optionee. Reload Option Rights shall not be exercisable during the six (6) month period immediately following the date of grant of such Reload Option Rights. The Exercise Price of such Reload Option Rights shall be one hundred percent (100%) of the Stock Price per share on the day of the exercise of the Options to which such Reload Option Rights relate. Such Reload Option Rights shall terminate at such time as the Options being exercised would have terminated had they not been exercised. Such Reload Option Rights will be evidenced by an agreement in form substantially the same as this Agreement, with appropriate changes. 3. Termination. The Options will terminate and all Unvested and Vested Options then outstanding will be forfeited on the earliest of the following dates: (a) On the date on which the Optionee ceases to be an employee of the Company or a Subsidiary by reason of termination of employment for Cause; (b) Subject to possible extension pursuant to Paragraph 3(c) below, five (5) years after either (i) the date on which the Optionee ceases to be an employee of the Company or a Subsidiary with eligibility for retirement under a retirement plan of the Company or a Subsidiary or (ii) the date of permanent disability of the Optionee if the Optionee becomes permanently disabled while an employee of the Company or a Subsidiary; (c) Five (5) years after the date of the death of the Optionee if the Optionee dies while an employee of the Company or a Subsidiary or one (1) year after the date of death of the Optionee if the Optionee dies during the fifth year of the five (5) year period referred to in Paragraph 3(b) above; (d) Five (5) years after the date of a Termination Event or Constructive Termination; (e) Immediately (x) upon the Optionee accepting employment with a Competitor without the prior written approval of the Company's Board or (y) upon a material breach by the Optionee of any applicable agreement with the Company or a Subsidiary relating to non-competition, non-solicitation or maintaining of Company confidences; or (f) Ten (10) years from the Grant Date. 4. Transferability. Unless otherwise approved by the Compensation Committee following a request from the Optionee or the Optionee's guardian or legal representative, the Options are not transferable by the Optionee otherwise than by will or the laws of descent and distribution. If another type of transfer is approved by the Compensation Committee, a transfer will only be effective when the transferee of the Options enters into an agreement with the Company (in form and substance acceptable to the Company) agreeing to be bound by the provisions of this Agreement as if such transferee were the Optionee. If exercised during the lifetime of the Optionee, the Options are exercisable only by the Optionee or by the 3 Optionee's guardian or legal representative, or by a transferee authorized as provided in this Paragraph. 5. Securities Laws. The Options are not exercisable if such exercise would involve a violation of any applicable federal, state or other securities law, and the Company hereby agrees to make reasonable efforts to comply with such securities laws. The Options are not exercisable unless under said laws at the time of exercise the shares of Common Stock or other securities purchasable hereunder are exempt, are the subject matter of an exempt transaction, or are registered in accordance with such laws. 6. Adjustments. (a) The Board of Directors or the Compensation Committee shall make such adjustment in the option price and in the number or kind of shares of Common Stock or other securities covered by the Options as such Board or Committee may in good faith determine is equitably required to prevent dilution or enlargement of the rights of the Optionee that otherwise would result from (i) any stock dividend, stock split, combination of shares, recapitalization or other change in the capital structure of the Company, or (ii) any merger, consolidation, spin-off, split-off, spin-out, split up, reorganization, partial or complete liquidation or other distribution of assets, issuance of rights to purchase securities, or (iii) any distribution to the holders of the Common Stock of rights or warrant to purchase equity interests of the Company, or (iv) any other corporate transaction or event having an effect similar to any of the foregoing. Moreover, in the event of any such transaction or event, the Board of Directors or the Compensation Committee, in its discretion, may provide in substitution for any or all outstanding awards under the Options such alternative consideration as it, in good faith, may determine to be equitable in the circumstances and may require in connection therewith the surrender of all awards so replaced. (b) In the event that any provision of this Agreement would result in a calculation of a number of shares in amounts other than a whole number, the number of shares so calculated will be reduced or increased to the nearest whole number (rounding 0.50 up), with the effect of any such rounding deemed to attach to the last group of shares to be so calculated (with calculations to be conducted in alphabetical or numerical order, as applicable). 7. Withholding. If the Company is required to withhold any federal, state, local or foreign tax in connection with the exercise of the Options, it will be a condition to such exercise that the Optionee make provision satisfactory to the Company for payment of all such taxes. Upon exercise of any Options, Optionee shall surrender to the Company, by the Company withholding from the shares of Common Stock to be issued upon such exercise to the Optionee, in satisfaction of the Withholding Amount, shares of Common Stock that have value in the aggregate that is equal to such Withholding Amount. In the event that the Optionee desires to have an amount greater than the Withholding Amount withheld, the excess over the Withholding Amount must be paid to the Company in cash. 8. Definitions. The following capitalized terms have meanings as set forth below. 4 "CHANGE IN CONTROL" means if at any time any of the following events shall have occurred: (a) the Company merges into itself, or is merged or consolidated with, another corporation and as a result of such merger or consolidation less than 51% of the voting power of the then-outstanding voting securities of the surviving or resulting corporation immediately after such transaction are directly or indirectly beneficially owned in the aggregate by the former stockholders of the Company immediately prior to such transaction; (b) all or substantially all the assets accounted for on the consolidated balance sheet of the Company are sold or transferred to one or more corporations or persons, and as a result of such sale or transfer less than 51% of the voting power of the then-outstanding voting securities of such corporation or person immediately after such sale or transfer is directly or indirectly beneficially held in the aggregate by the former stockholders of the Company immediately prior to such transaction or series of transactions; (c) A person, within the meaning of Section 3(a)(9) or 13(d)(3) (as in effect on the date hereof) of the Securities Exchange Act of 1934, becomes the beneficial owner (as defined in Rule 13d-3 of the Securities and Exchange Commission pursuant to the Securities Exchange Act of 1934) of (i) 15% or more but less than 35% of the voting power of the then-outstanding voting securities of the Company without the prior approval by the Board, or (ii) 35% or more of the voting power of the then-outstanding voting securities of the Company; PROVIDED, HOWEVER, that the foregoing does not apply to any such acquisition that is made by (w) any subsidiary of the Company; (x) any employee benefit plan of the Company or of any Subsidiary or (y) any person or group of which employees of the Company or of any Subsidiary control a greater than 25% interest unless the Board of Directors of the Company determines that such person or group is making a "hostile acquisition;" (d) A majority of the members of the Board of Directors of the Company or of any Subsidiary are not Continuing Directors, where a "Continuing Director" is any member of the Board of Directors of the Company or, with respect to a Subsidiary, of such Subsidiary who (x) was a member of the Board of Directors of the Company or, with respect to a Subsidiary, of such Subsidiary on the date hereof or (y) was nominated for election or elected to such Board of Directors with the affirmative vote of a majority of the Continuing Directors who were members of such Board at the time of such nomination or election. "COMPETITOR" means any Person that competes with any then-existing business of the Company or any Subsidiary. "CONSTRUCTIVE TERMINATION" means either (i) a substantial, nonconsensual adverse change in the Optionee's employment duties (which will, however, not include the relinquishment of the Optionee's status as Chief Executive Officer if he remains the Chairman of 5 the Board of the Company), or (ii) the moving of the Company's executive headquarters more than 50 miles from its present location without the Optionee's consent. "EXERCISE PRICE" means the exercise price per share indicated as the Exercise Price per share on the signature page hereof. "FOR CAUSE" means that there is a final, non-appealable order in a proceeding before a court of competent jurisdiction or a final order in an administrative proceeding before the Securities and Exchange Commission finding that the Optionee (i) committed any willful misconduct, fraud or criminal activity (excluding traffic violations or other minor offenses) which commission is materially inimical to the interests of any of the Subsidiaries or the Company, whether for his personal benefit or in connection with his duties for the Company or the Subsidiaries or (ii) intentionally or knowingly violated any antifraud provision of the federal or state securities laws. "GRANT DATE" means the date of the Board or Compensation Committee action awarding the Options to the Optionee as indicated on the signature page hereof. "MATURE SHARES" means (x) nonforfeitable, unrestricted shares of Common Stock that have been owned by the Optionee for more than six (6) months prior to the date of exercise, or (y) shares of restricted stock or other shares of Common Stock that are forfeitable or subject to restrictions on transfer, including, without limitation, shares of Common Stock issued pursuant to the earn out of performance shares or performance units, which shares have been owned by the Optionee for more than six (6) months and that the Company agrees to accept as consideration, or (z) such other Company securities as the Company's chief accounting officer, upon consultation with the Company's independent accountants, determines will not adversely affect the Company's tax or accounting position by accepting. "ORIGINAL AWARD" means the number of shares of Common Stock indicated as the Original Award on the signature page hereof. "PERSON" means any corporation, partnership, limited liability company, association, firm, other entity or individual(s). "STOCK PRICE" means the closing price of the Common Stock on the principal exchange on which the Common Stock is traded. "SUBSIDIARY" means Cole National Group, Inc., Cole Vision Corporation, Pearle, Inc., and Things Remembered, Inc. "TERMINATION EVENT" means the Optionee's ceasing to be an employee of the Company or its Subsidiaries by reason of termination by the employer of the Optionee's employment without Cause. "UNVESTED SHARES" means, as of any given time, those shares of Common Stock relating to the Options that are not, at the time in question, otherwise permitted, under the terms of this Agreement, to be acquired pursuant to the exercise of the Options. 6 "VESTED SHARES" means, as of any given time, those shares of Common Stock relating to the Options that are, at the time in question, otherwise permitted, under the terms of this Agreement, to be acquired pursuant to the exercise of the Options. "WITHHOLDING AMOUNT" means the minimum amount of withholding taxes including Federal, state and local income taxes and social security and Medicare taxes required to be withheld by the Company by the applicable taxing authorities, as the result of the exercise of an Option. 9. Acknowledgment. The undersigned Optionee hereby acknowledges receipt of an executed original of this Agreement and accepts the Options granted hereunder. EXECUTED at Cleveland, Ohio as of the date first set forth above. COLE NATIONAL CORPORATION By: /s/ Leslie D. Dunn ------------------------------------ Title: Senior Vice President --------------------------------- /s/ Jeffrey A. Cole ---------------------------------------- OPTIONEE Name of Optionee: Jeffrey A. Cole Name of Employer: Cole National Corporation Position: Chairman and Chief Executive Officer of the Company and Chairman of the Board of the Company and each of the Subsidiaries Number of Shares in the Original Award: 250,000 Date of Board Resolution authorizing this Option (Grant Date): January 25, 2002 Exercise Price per Share: $15.15 7 EX-99.1 11 l96272aexv99w1.txt EX 99.1 CERTIFICATION Exhibit 99.1 ------------ CERTIFICATION 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 quarterly report of Cole National Corporation (the "Company") on Form 10-Q for the period ended August 3, 2002, as filed with the Securities and Exchange Commission on the date hereof (the "Report"), each of the undersigned officers of the Company certifies, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that, to such officer's knowledge: (1) The Report fully complies with the requirements of Section 13(a) or 15(d) 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 results of operations of the Company as of the dates and for the periods expressed in the Report. Date: September 17, 2002 /s/ Jeffrey A. Cole ------------------------------- Name: Jeffrey A. Cole Title: Chief Executive Officer /s/ Lawrence E. Hyatt -------------------------------- Name: Lawrence E. Hyatt Title: Chief Financial Officer The foregoing certification is being furnished solely pursuant to 18 U.S.C. Section 1350 and is not being filed as part of the Report or as a separate disclosure document. 10-Q 12 l96272ae10vqxpdfy.pdf COURTESY COPY begin 644 l96272ae10vqxpdfy.pdf M)5!$1BTQ+C(-)>+CS],-"C@W(#`@;V)J#3P\(`TO3&EN96%R:7IE9"`Q(`TO M3R`X.2`-+T@@6R`Y-S4@-#F4@,3$U M#2]);F9O(#@V(#`@4B`-+U)O;W0@.#@@,"!2(`TO4')E=B`R-SDS,#4@#2]) M1%L\,&8Y-C,W-#$Q83DT-SDQ-65F9C9F931A,6-F939D,V0^/#!F.38S-S0Q M,6$Y-#V.QY?=I.[L:T;7/UD)7\$.2R.;=E;V?3M9*=!H$@ M6:<'D0@#CGE$W2K9Q^+X9//:]3X/FN9F5J>S`*V\;:&P/"KNYD%6JTO?Q(R< MKEU>>H"!05!0,#0TM*.C@8&CHX.!P0)$,(&XC'`"1`)%00H:&-+`(B""&"!; M("TQ-C@@+3(Q."`Q,#`P(#DS-2!=(`TO1F]N=$YA;64@+TE)341&3RM4:6UE MF5R;R]J+TTO M>B]N+V]N92]!+VLO3R]T=V\O;2]Q=6]T97)I9VAT+U$O>"]T:')E92]O+W!A M2]Z97)O+VHO32]D86=G97(O>B]N+V]N92]!+VLO3R]A;7!E M7!E("]4>7!E,2`-+T9I2!R97!O2!C:&5C:R!M87)K('=H971H97(@=&AE(')E9VES M=')A;G0@7"@Q7"D@:&%S(&9I;&5D(&%L;"!R97!O2`-/CX@#65N9&]B:@TQ,#D@,"!O8FH-/#P@+T9U;F-T:6]N5'EP92`P("]$ M;VUA:6X@6R`P(#$@72`O4F%N9V4@6R`M,2`Q(%T@+T)I='-097)386UP;&4@ M,38@#2]3:7IE(%L@,C4V(%T@+TQE;F=T:"`U,C<@+T9I;'1E'B`B(B(D)B8F*"HJ*BPN+BXP,C(R-#8V-C@Z.CH\/CX^0 M$)"0D1&1D9(2DI*3$Y.3E!24E)45E966%I:6EQ>7EY@8F)B9&9F9FAJ:FIL; MFYN<')RGIZ?'Y^?H""@H*$AH:&B(J*BHR.CHZ0DI*2E):6EIB:F MIJH**BHJ2FIJ:HJJJJK*ZNKK"RLK*TMK:VN+JZNKR^OK[`PL+"Q,;&Q MLC*RLK,SL[.T-+2TM36UM;8VMK:W-[>WN#BXN+DYN;FZ.KJZNSN[N[P\O+R] M/;V]OCZ^OK\_O[_`0,#`P4'!P<)"PL+#0\/#Q$3$Q,5%Q<7&1L;&QT?'Q\A( MR,C)29FYN;G9^?GZ&CHZ.EIZ>GJ M:NKJZVOKZ^QL[.SM;>WM[F[N[N]O[^_P?GY^GKZ^OM[^_O\?/S\_7W]_?Y^_O[_?___`@P` MYZP_$`IE;F1S=')E86T-96YD;V)J#3$Q,"`P(&]B:@T\/"`O1FEL=&5R("]& M;&%T941E8V]D92`O3&5N9W1H(#E&-A<4$%!9!!%M'!'1MD5PHQD6>^QV:6!&QAE'F:_2 M#X\3[/G1O^:\<[[SON]]]YY[[\,QH1F&XSCEZ;ENI?NZF;YJC4H_>Z-6HXP8 M'2_D91@_`>$;NTNDBM3AFE"IHCERO"P^4;1QGT\HTJO4H7;9I^ MEBI7Z^5*>91.&:32*'5APKTQQ80*, M,$T^XM?,]IG=,'LOL!<$"_8)B@0-@D_"!<)4X1!A3V00;TB&/"W"10K1*3$I MSA,/?^'_1:>YPOSFF!EC=HPIM>`L0BUZ+)TMCUJ.2/22MV/]QYX?)QJW==S@ M^#BI4!HL;:*649E4GU45/94^2+^TCK"NLO&VN65+VB;9?K#SL>MAIC`9S(`L M5H8FZ"?43K2?>(JU8J?+)7()A-\&YC9^C#\HX,.@A)Y.G@&&^'#;GJR$'80W MJ4$["&1'7OC@G`"&-/[:'-AM,%)Q((W M'3.ZQY#%)DZ)H9P?/B]M+$SI>E\%9-^V0NKO_%+^"`T"TWJ;U$ M5!^BDOT5*YD9+_WZ_5E4+:*&9OLV_VLOEX"LR7WG[ZG?RN97O11]*'AU#40, M8&NK$=W%PE$3\F9J5W0Q,A,CSSGT5_4!%V\Q9X\_'"IBJ]$030VU!=T,6\E, M79(0FLI*^$A#)>15%5V$D-*22ND/W:`K;>^&/6548Z)Q)B^BD=F7R&J21^6J M0;#L`WL0_'MY3C"7'T;75P9O6>B.N/EK#:UG&EK`9XA3PJ]T$*D)"U0MDOG% M%>3'<]2GQ(+X_?G;9#PGC/Q%Q_)/5S`IA;F':Z3M907 MYI_C,M/1NX]F1!-IPFV&UW10U.G;SWMA5L?I`_'Q;=SQV*S$?0P2NB!S%Y-T MYP/-?D_AG\40<5':,/"H#YQN43>ABF^A[]>67KE:H]Z\V&E;Y'XVYDI,O7.4>H6/_[.SJ#.\4/*OL;_\%T>S4NG^:W<,76_-"S MZUG57L)3Y>CQ)8-LWN_Y`<:TM5;7LYJ*>^M_D@TW`IZ=P5$'$DX0&GU,E)], ML::W((EK^\5@J&TONVY;_N?*[)IC8NKF2!?:2[_Z\?JU"K;!I7GN77>QM\>6 ME"C92N\'/9Q$S[O#880!)NT#+JB.VD`5#_/NM`56F?O7CJ?,<^_\*%UH0L"N MFD-E.<B&`)N-B&CDX."![Y,8@ M]M**&RO8RSX=[G?#\XILT3+`#:!]QT#.F]ZN[]G?8;#UA>`R!81P4\1Y-H MJOC_"Z4"_B@5OF[#Z^"HH`YR:2\XVB:2R!-!@#\!@0#&)YI<%U>?K+VPITRC MT>G"5%7QQ9S$-2?:Z!&#)\$-`=2;'*XF4=Q'#^(1*=E?9I26X25O(/^-`+*, M+`U6F2A[E6LZ2D%6R"H=DGYZE`G98,65"9&7$L4@G>Z:S$T,V?Z\*A_X6`U\)$^L`QPBLH]LAN&4HFP156$HW?_=P_S(#0 MZ9'CO-E;T4P-6YQ&M)RM[.Z7@7FI@[];@-/\.1SR0-[$09X12?;7\/WWI/"T M3]5)/8;9\)Q^G%F:5A,K?A":I]`Q;H&N<]@-JM;MLOBH%*W?R[02<`*+5S`9 M;!=6*T]QU"\=5\]?;6&N1/X-T:OGAB.;76SA8:*\L*&W7]95\[6_@]M6QPB3 M68A?^X#WCI'FU4-*+Q7+AT,\/97WWDFBAR/>Q%JH$E'7D$N/B(H%EWBU_IP\'_HD`//EG-/B3)[XU?)O%77Z=E$,D)"8E[I$A%8EP M=(A(.9*5>EP&V&%PWX;F,TBB\%G#;HJ\OU:VRQ!Q*/@[?1_,!;-AL'N=6!'0 MS&WHG'W2I4`LV5_."Z]#2A%>-0C9OPKXC48W&J4EHV5H#=K)H-WO9H$Y>-3` MO!^!6=H]R2?Z8*@O>QHD;T$&'N5B%(CJZ.'*Z5,0L=W/RVUU%[C>RRW)S>5* M2FN^J9))\J/YP2[\#*\0\)N,]O0(2<;O#)AR,IEHOG2JHET&&A)M&1DDVDD( M,4XF3&J,DG)I:[=[%V@?^W93@Q`"[33U&D3.#1H%X[Y-Z;5D>WL/2PWV-]5= M+&.1(UI"+^UPAG&L:6G))1`V/XR^BY@W'-734O&L88#I7M>!B`73-DU;4J_^ M66$"SET5&#Z?H7J>\5/IIHNW_M)3O M.0`I0X+O]]*04P338".$,.`R$P@T%EF[(`S9_9?M:H]JXLSBQC@S>+JUU=GP MF/3,6/'151=?M8`L^*+UJ'5%JOC`'NMCK:`("R%,@!`!"20AO%0@(0R/X(.G M08+QA=K#ZKI@UY5J?=1'=7NV=G5=(ZYWTB_=W6^(N[:GGOEOSGSWWM]W?[_? 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EX-10.1

                                                                    Exhibit 10.1
                           [Cole National Letterhead]
                              [COLE NATIONAL LOGO]

April 14, 2002

Mr. Lawrence Hyatt
21 Beauvoir Court
Rockville, Maryland 20855

Dear Larry:

We are pleased to offer you the position of EXECUTIVE VICE-PRESIDENT & CHIEF
FINANCIAL OFFICER for Cole National Corporation reporting directly to
Jeffrey Cole, Chairman & CEO. This position will have responsibility all
financial functions for Cole National Corporation. The following highlights the
terms and conditions of our offer. Full details of the benefit programs are
provided in the enclosed booklet.

1.   EFFECTIVE DATE: No later than July 15, 2002.

2.   SALARY: Your initial bi-weekly salary will be $15,385, payable on a
     bi-weekly payroll schedule and representing an annualized base salary of
     $400,000.

3.   OPERATING BONUS: You will participate in a Management Incentive Plan for
     Fiscal Year 2002 that could pay a bonus of up to one hundred (100%) percent
     of your annualized salary. This bonus will be predicated upon the overall
     performance against an EBIT Plan for Fiscal Year 2002 performance. For FY
     2002, you will be eligible for a full year's consideration (not prorated by
     the number of months actually worked).

4.   RESTRICTED STOCK: We will request that Board of Directors of Cole National
     grant you 25,0000 shares of restricted stock effective on the first day of
     employment. These shares will vest: over a four-year (4) period; 12,500 at
     the end of year three (3); 12,500 at the end of year four (4).

5.   STOCK OPTIONS: We will request that the Board of Directors of Cole National
     Corporation grant you an option to purchase 75,000 shares of Cole National
     Corporation stock, at a per share price equal to the closing stock price on
     the date of employment. These options will vest over a four-year (4) period
     in four equal installments subject to your continued employment.

6.   AUTOMOBILE: You may choose a company automobile with a value of up to
     $45,850 or a cash allowance ($925.00 per month) in place of a company
     provided automobile.


7.  MERIT INCREASE: Your salary will be reviewed annually, and adjustments, when
    they occur, will be effective in April, beginning with April 2003.

8.  GROUP MEDICAL PLAN: If you elect, you and your eligible dependents will be
    eligible to participate in the Cole group coverage. Additionally, you will
    also be eligible to participate in our "MERP" -- MEDICAL EXPENSE
    REIMBURSEMENT PLAN. In the meantime, we will offer to pay your COBRA health
    insurance premiums during the 90-day waiting period.

9.  SUPPLEMENTAL EXECUTIVE RETIREMENT PLANS (SERP): Effective January 1, 2003,
    you will be eligible to participate in the company's non-qualified defined
    contribution (SERP). This plan contributes 8% of your base salary annually
    with earnings on your account balance credited each year; vesting occurs
    over a 10-year period.

10. TERM LIFE INSURANCE/ACCIDENTAL DEATH AND DISMEMBERMENT INSURANCE (AD&D): You
    would be eligible to participate in Cole Vision's Life Insurance Program,
    which provides a coverage at no cost to you in an amount equal to two (2)
    times your annual base salary. You may elect to purchase additional amounts
    of Term Insurance equal to one (1) or (2) times your base salary for a
    nominal cost to you.

11. SHORT-TERM DISABILITY PLAN: After a six (6) month waiting period, you would
    be eligible for benefits up to a maximum of thirteen (13) weeks beginning
    with the first day of absence.

12. EXECUTIVE LONG-TERM DISABILITY PLAN: In accordance with the terms of this
    plan, you would be eligible for a monthly benefit of up to sixty (60%)
    percent of your monthly base salary, up to a maximum of fifteen thousand
    dollars ($15,000) per month. You will be eligible to participate in this
    plan following ninety (90) days of continuous employment. Benefits are
    payable after a waiting period of ninety (90) days after the onset of
    disability.

13. DENTAL: Cole Vision offers a Dental Plan to eligible full-time employees,
    after ninety (90) days of employment.

14. DEFERRED COMPENSATION PLAN: You will be eligible to participate in the
    Deferred Compensation Plan (DCP) after 90 days of continuous service. This
    is a non-qualified compensation deferral plan that allows you to defer up to
    100% of your salary and/or bonus. The Company will match 10% of the first
    10% of your compensation contributed to the Plan in Cole National Common
    Stock after the end of each Plan year.

                                       2

\15. 401(k) SAVINGS PLAN: You would be eligible for participation after ninety
    (90) days of service. Pre-tax contributions to the plan are at the
    employee's expense; the employer has a match equal to (minimally) 10% of the
    employee's contributions. As you probably know, highly compensated
    individuals may be limited in their contribution amount based upon
    discrimination testing. This is why we have the Deferred Compensation Plan
    noted above and the match to it.

16. RELOCATION: You are eligible for the enclosed relocation plan. Sue
    Peplowski, 1-800-831-5367 in our HR Department will assist you in planning,
    conducting and executing the move. Key elements of our relocation plan
    include:

       REAL ESTATE FEES FOR THE SALE OF YOUR HOME
       CLOSING COSTS ASSOCIATED WITH THE PURCHASE OF YOUR NEW HOME IN OHIO
       TEMPORARY LIVING EXPENSES
       MOVEMENT OF HOUSEHOLD GOODS
       HOUSE HUNTING TRIPS (2) FOR SPOUSE AND CHILDREN
       "GROSS UP" OF TAXABLE EXPENSES

THE ABOVE ARE DETAILED IN THE ATTACHED EXECUTIVE RELOCATION BENEFITS PROGRAM

17. VACATION: You will be eligible for four (4) weeks vacation in calendar year
    2002 and four weeks per year thereafter.

18. SALARY CONTINUATION: A Salary Continuation agreement is enclosed with this
    letter. It contains non-compete provisions as well as a provision for salary
    continuation upon certain terminations of employment.

19. EMPLOYMENT AT WILL: NOTHING contained in this offer letter is intended to
    create a fixed or contractual employment term between you and the Company
    and you understand and acknowledge that if you accept this offer, you are
    and will continue to be an employee at will, that your employment with the
    Company can be terminated with or without cause and with or without notice,
    at any time at the option of either you or the Company.

                                       3


Larry, we believe you have the talent, leadership and style to make a very
significant contribution to Cole National. THIS OFFER SHALL REMAIN OPEN UNTIL
APRIL 22, 2002. I look forward to hearing from you soon. If you accept this
offer, please sign the enclosed copy of this letter, as well as, both signed
copies of the Termination/Non-Compete Agreement, and return them to me.

Sincerely,

/s/ Jeffrey A. Cole
- ----------------------
Jeffrey A. Cole
Chairman and CEO

Enclosures
Agreed to and acknowledged the 19th day of April, 2002.

/s/ Lawrence E. Hyatt
- ----------------------
Signature


                                       4

EX-10.2

                                                                    Exhibit 10.2

                                 April 19, 2002

Cole National Corporation
5915 Landerbrook Drive
Mayfield Heights, OH 44124

Gentlemen:

     In consideration of my employment as Executive Vice President and Chief
Financial Officer for Cole National Corporation and the benefits I derive from
Paragraph L hereof (but without thereby creating any fixed or contractual
employment term, understanding that my employment can be terminated, with or
without cause and with or without notice, at any time at the option of either
the Company or me), I hereby agree with the Company (for purposes of this
letter agreement, the "Company" shall mean Cole National Corporation or any of
its present or future direct or indirect parents or subsidiaries or affiliated
entities by which I am employed or on behalf of which I provide service(s) as
follows:

     A.   During the term of my employment I will not compete, directly or
indirectly, with the Company. In accordance with this restriction, but without
limiting its terms, I will not:

     (a)  enter into or engage in any business which competes with the business
          of the Company; or

     (b)  solicit customers, business, patronage, or orders for, or sell, any
          product or products in competition with, or for any business that
          competes with, the business of the Company; or

     (c)  divert, entice, or take away any customers, business, patronage or
          orders of the Company or attempt to do so; or

     (d)  promote or assist, financially or otherwise, any person, firm,
          association or corporation or any other entity engaged in any business
          which competes with the business of the Company.

     B.   For a period of twelve (12) months following termination of my
employment with the Company, I will not enter into or engage in any business
that competes with the Company's business.

     C.   For a period of twelve (12) months following termination of my
employment with the Company, I will not solicit customers, business, patronage,
or orders for, or sell any product(s) in competition with the Company's
business.

     D.   For a period of twelve (12) months following termination of my
employment with the Company, I will not divert, entice, or otherwise take away
any customers, business, patronage, or orders of the Company, or attempt to do
so.

     E.   For a period of twelve (12) months following termination of my
employment with the Company, I will not promote or assist financially or
otherwise, any person, firm, association, partnership, corporation, or any
other entity engaged in any business which competes with the Company's business.

     F.   For the purposes of Paragraphs A through E, inclusive, I understand
that I will be competing if I engage in any or all of the activities set forth
therein directly as an individual on my own account, or indirectly as a
partner, joint venturer, employee, agent, salesman, consultant, officer and/or
director of any firm, association, corporation, or other entity, or as a
stockholder of any corporation in which I own, directly or indirectly,
individually or in the aggregate, more than one percent (1%) of the outstanding
stock;


provided however, that at such time as I am no longer employed by the Company,
my direct or indirect ownership as a stockholder of less than five percent (5%)
of the outstanding stock of any publicly traded corporation shall not by itself
constitute a violation of Paragraphs B through E.

     G.   For the purposes of Paragraphs B through E, inclusive, the Company's
business is defined as the manufacture, production, sale, marketing and/or
distribution of any product(s) and/or the rendering of any service(s) that are
the same as or similar to those manufactured, produced, sold, marketed,
distributed and/or rendered, as of the date of my termination, by the Company.

     H.   I understand that the activities set forth in Paragraphs B through E,
inclusive, shall be prohibited only within the United States, Canada and Puerto
Rico or such lesser geographic area as to which or for which I was assigned or
had responsibility at the time of my termination or at any time during the
twelve (12) month period immediately preceding my termination.

     I.   If it shall be judicially determined that I have violated any of my
obligations under Paragraphs B through E, inclusive, then the period applicable
to the obligation which I shall have been determined to have violated shall
automatically be extended by a period of time equal in length to the period
during which said violation(s) occurred.

     J.   I also agree that I will not directly or indirectly at any time
solicit or induce or attempt to solicit or induce any employee(s) or any sales
representative(s), agent(s) or consultant(s) of the Company or any of its
parent, subsidiary or affiliate entities to terminate their employment,
representation or other association with the Company or such entity.

     K.   During the period of my employment and at any time thereafter, I will
not disclose, furnish, disseminate, make available or, except in the ordinary
course of performing my duties on behalf of the Company, use any trade secrets
or confidential business and technical information of the Company, or its
parent, subsidiaries or affiliated entities or its customers, without limitation
as to when it was acquired by me or whether it was compiled or obtained by, or
furnished to me while I was employed by the Company. Such trade secrets and
confidential business and technical information are considered to include,
without limitation, the vision care plans, vendor lists, vendor terms and
programs, merchandise costs, financial statistics, research data, or any other
statistics and plans contained in monthly and annual review books, profit plans,
capital plans, critical issues plans, strategic plans, or merchandising,
marketing, real estate, or store operations plans. I specifically acknowledge
that all such information, whether reduced to writing or maintained in my mind
or memory and whether compiled by the Company and/or me derives independent
economic value from not being readily known to or ascertainable by proper means
by others who can obtain economic value from its disclosure or use, that
reasonable efforts have been put forth by the Company to maintain the secrecy of
such information, that such information is and will remain the sole property of
the Company and that any retention and use of such information during or after
the termination of my relationship with the Company (except in the course of
performing my duties) shall constitute a misappropriation of the Company's trade
secrets; provided, however, that this restriction shall not apply to information
which is in the public domain or otherwise made public by others through no
fault of mine.

     The above restrictions on disclosure and use of confidential information
shall not prevent me from: (i) using or disclosing information in the good faith
performance of my duties on behalf of the Company; (ii) using or disclosing
information to another employee to whom disclosure is required to perform in
good faith the duties of either of us on behalf of the Company; (iii) using or
disclosing information to another person or entity pursuant to a binding
confidentiality agreement in a Company-approved form as part of the performance
in good faith of my duties on behalf of the Company or as authorized in writing
by the Company; (iv) at any time after the period of my employment using or
disclosing information to the extent such information is, through no fault or
disclosure of my own, generally known to the public; (v) using or disclosing
information which was not disclosed to me by the Company or otherwise during the
period of my employment which is then disclosed to me after termination of my
employment with the Company by a third party who is under no duty or obligation
not to disclose such information; or (vi) disclosing information as required by
law. If I become legally compelled to disclose any of the confidential
information, I shall (i) provide the Company with reasonable prior written
notice of the need for such disclosure such that the





Company may obtain a protective order; (ii) if disclosure is required, furnish
only that portion of the confidential information which, in the written opinion
of my counsel delivered to the Company, is legally required; and (iii) exercise
reasonable efforts to obtain reliable assurances that confidential treatment
will be accorded to the confidential information.

     L. It is further understood and agreed that if my employment with the
Company should be terminated as a result of a Termination Without Cause
(defined below) or a Termination With Good Reason (defined below), and if I am
not then or thereafter in material breach of this agreement, and upon the
execution and delivery to the Company by me of an agreement, in a form
presented by the Company and accepted by me, which acceptance shall not be
unreasonably withheld or delayed, releasing all claims which I may have against
the Company, I will receive, in full and complete settlement of any claims for
compensation which I may have, and in lieu of any severance pay under any
policy of the Company or otherwise, the following:

          (i) continued monthly payments, in accordance with the Company's
     regular payroll practices, for a period of twelve (12) months after the
     date of termination equal to the sum of (1) one-twelfth (1/12) of my annual
     base salary at the highest rate in effect at any time during the twelve
     (12)-month period prior to my date of termination, and (2) one-twelfth
     (1/12) of my target annual bonus for the fiscal year in which the date of
     termination occurs; and

          (ii) any payments and benefits which I, my spouse, dependents,
     beneficiaries or estate would have been entitled to receive pursuant to any
     employee benefit plan or program of the Company during the twelve
     (12)-month period following my termination had I remained an employee
     during that period, with such benefits provided to me at no less than the
     same coverage level and at no more of a cost to me as in effect as of the
     date of my termination subject to such reduction in coverage or increases
     in cost as shall become in effect for senior executive employees of the
     Company generally, provided however, that such continued payments and
     benefits shall terminate on the date or dates I receive equivalent coverage
     and benefits, without waiting period or pre-existing condition limitations,
     under the plans and programs or a subsequent employer (such coverage and
     benefits to be determined on a coverage-by-coverage or benefit-by-benefit
     basis);

          (iii) the stock options and restricted stock which will be granted to
     me in connection with the commencement of my employment and dated that date
     ("Original Grants") shall become vested and nonforfeitable as follows:

               (a) If the Termination Without Cause or Termination With Good
          Reason shall occur before the first anniversary of the date of
          commencement of my employment, (x) twenty-five percent (25%) of the
          original grant of unvested stock options of the Company shall vest as
          of the date of the Termination Without Cause or Termination With Good
          Reason and (y) twenty-five percent (25%) of the Original Grant of
          restricted stock shall become nonforfeitable, as of the date of the
          Termination Without Cause or Termination With Good Reason. Such stock
          options shall remain exercisable for the lesser of one (1) year from
          the date of such termination or ten (10) years from the date of grant;

               (b) If the Termination Without Cause or Termination With Good
          Reason shall occur on or after the first anniversary of the date of
          commencement of my employment, fifty percent (50%) of the unvested
          portion of the Original Grant of stock options of the Company shall
          vest and fifty percent (50%) of any forfeitable shares of the Original
          Grant of restricted stock shall become nonforfeitable, as of the date
          of the Termination Without Cause or Termination With Good Reason. Such
          stock options shall remain exercisable for the lesser of one (1) year
          from the date of such termination or ten (10) years from the date of
          grant.




          (iv) I will become fully vested as of the date of Termination Without
     Cause or Termination With Good Reason in my account under the Company's
     Supplemental Retirement Benefit Plan dated March 29, 1994, (SERP), such
     account being calculated as if I had remained an employee of the Company
     during the twelve (12)-month period following my termination.

     In addition, upon the occurrence of a Change of Control, all of the stock
options and restricted stock I then hold shall become fully vested.

     As used herein, "Termination Without Cause" means any termination of my
employment by the Company other than a Termination With Cause (defined below).

     As used herein, "Termination With Cause" means termination by the Company
of my employment at any time after the Company believes in good faith it has
actual knowledge of the occurrence of any of the following events: gross neglect
of duty, material breach of this Agreement, a material act of dishonesty or
disloyalty, the inability to discharge my material duties due to alcohol or drug
addiction, or gross misconduct inimical to the best interests of the Company;
provided however, that termination of employment due to unsatisfactory job
performance shall not be considered Termination for Cause; provided further,
however, that "Cause" shall not be deemed existing unless and until the Company
has delivered to me a copy of a resolution duly adopted by the Company's Board
of Directors at a meeting of the Board duly called (after reasonable (but in no
event less than seven (7) days) notice to me and an opportunity for me, together
with my counsel, to be heard before the Board), finding that in the good faith
opinion of the Board, I had engaged in the conduct set forth in above and
specifying the particulars thereof in reasonable detail.

     As used herein, "Termination with Good Reason" means my termination of
employment at any time after I have actual knowledge of the occurrence, without
my written consent, of one of the following events: (i) a reduction in my base
compensation or a reduction in the health and welfare insurance, retirement and
car benefits available to me as of the commencement of employment, except for
reductions in such benefits applicable generally to executives at my level and
below: (ii) the reassignment of me to a position resulting in my not being the
Company's Executive Vice-President & Chief Financial Officer or a comparable
position, or a reporting relationship other than to the CEO or COO of the
Company; (iii) there shall have occurred a Change of Control (defined below)
and I shall elect to terminate my employment with the Company during the ninety
(90) day period commencing six (6) months after such Change of Control; or (iv)
the location of my principal office is relocated to a location more than fifty
(50) miles from either Twinsburg or Mayfield Heights, Ohio prior to the third
anniversary date of the commencement of my employment.

     As used herein, a "Change of Control" will be deemed to have taken place
upon the occurrence of any of the following:

     (i)  Cole National Corporation merges or consolidates with or into another
          corporation and as a result of such merger or consolidation less than
          51% of the voting power of the then-outstanding voting securities of
          the surviving or resulting corporation immediately after such
          transaction are owned in the aggregate directly or indirectly by the
          former stockholders of Cole National Corporation immediately prior to
          such transaction;

     (ii) All or substantially all of the assets accounted for on the
          Consolidated Balance Sheet of Cole National Corporation are sold or
          transferred to one or more corporations or persons, and as a result of
          such sale or transfer less than 51% of the voting power of the
          then-outstanding voting securities of such corporation or person
          immediately after such sale or transfer is directly or indirectly
          beneficially held in the aggregate by the former stockholders of Cole
          National Corporation immediately prior to such transaction or series
          of transactions;

          (iii) A person, within the meaning of Section 3(a)(9) or 13(d)(3) of
                the Securities Exchange Act of 1934, become the beneficial
                owner (as defined in Rule 13d-3 of the Securities and Exchange
                Commission pursuant to the Securities Exchange Act of 1934) of
                (i) 15% or more, but less than 35%, of the voting power of the
                then outstanding voting securities of Cole National Corporation
                without the prior approval of the Board of Directors of Cole
                National Corporation or (ii) 35% or more of the voting power of
                the then-outstanding voting securities of Cole National
                Corporation; provided, however, that the foregoing does not
                apply to any such acquisition that is made by (w) any subsidiary
                of Cole National Corporation; (x) any employee benefit plan of
                Cole National Corporation or any subsidiary; or (y) any person
                or group of which employees of Cole National Corporation or of
                any subsidiary control a greater than 25% interest unless the
                Board of Directors of Cole National Corporation determines that
                such person or group is making a "hostile acquisition," or (z)
                any person or group of which I am an affiliate; or

          (iv)  A majority of the members of the Board of Directors of Cole
                National Corporation are not Continuing Directors, where a
                "Continuing Director" is any member of the Board of Directors of
                Cole National Corporation who (x) was a member of the Board of
                Directors of Cole National Corporation on the date of this
                letter agreement or (y) was nominated for election or elected to
                the Board of Directors with the affirmative vote of a majority
                of the Continuing Directors who were members of the Board at the
                time of such nomination or election.

     The amounts payable to me under this Paragraph L are not eligible earnings
under any pension, savings, deferred compensation, bonus, incentive,
supplemental retirement benefit or other benefit plan of the Company.

     M.   I expressly agree and understand that the remedy at law for any
breach by me of this Agreement will be inadequate and that the damages flowing
from such breach are not readily susceptible to being measured in monetary
terms. Accordingly, it is acknowledged that upon may violation of any provision
of this Agreement, the Company shall be entitled to immediate injunctive relief
and may obtain a temporary order restraining any threatened or further breach
without the necessity of proof of actual damage. Nothing in this Agreement
shall be deemed to limit the Company's remedies at law or in equity for any
breach by me of any of the provisions of this Agreement which may be pursued or
availed of by the Company.

     N.   This Agreement is not assignable by either party without the prior
written consent of the other except that the Company may assign it without such
consent to any parent, subsidiary or affiliated entity, and upon such entity's
assumption of the Company's duties and obligations hereunder, such entity shall
succeed to each of the Company's rights hereunder. Upon such assignment and
assumption, I agree to and will become an employee of such entity, and all
references to the Company in this Agreement shall, as the context requires, be
deemed to be to the entity to which such assignment, assumption and employment
relate.

     O.   No modification, waiver, amendment or addition to any of the terms
of this Agreement shall be effective, except as set forth in a writing signed
by me and the Company. The failure of the Company to enforce any provision of
this Agreement shall not be construed to be a waiver of such provision or of
the right of the Company thereafter to enforce each and every provision.

     P.   This Agreement and any amendments thereto shall become effective on
the date of acceptance by the Company and shall be governed by, and construed
in accordance with, the internal, substantive laws of the State of Ohio. I
agree that the state and federal courts located in the State of Ohio shall have
jurisdiction in any action, suit or proceeding against me arising out of this
Agreement and I hereby: (a) submit to the personal jurisdiction of such courts;
(b) consent to service of process in connection with any action, suit or
proceeding against me; and (c) waive any other requirement (whether imposed by
statute, rule of court or otherwise) with respect to personal jurisdiction,
venue or service of process.

     Q.   This Agreement supersedes the provisions of each and every other
agreement or understanding, whether oral or written, between the undersigned and
the Company relating to the subject matter contained herein, and any such
agreement or understanding shall be of no further force and effect. The
provisions of this Agreement are severable and if any one or more provisions may
be determined to be illegal or otherwise unenforceable, in whole or in part, the
remaining provisions and any partially unenforceable provision, to the extent
enforceable in any jurisdiction, shall, nevertheless, be binding and
enforceable. The parties hereto agree that when fully executed, the foregoing
shall constitute a legally enforceable Agreement between us, which also shall
inure to the benefit of the Company's successors and assigns.

     Finally, I represent that prior to signing this Agreement, I have read,
fully understand and voluntarily agree to the terms and conditions as stated
above, that I was not coerced to sign this Agreement, that I was not under
duress at the time I signed this Agreement and that, prior to signing this
Agreement, I had adequate time to consider entering into this Agreement,
including without limitation, the opportunity to discuss the terms and
conditions of this Agreement, as well as its legal consequences, with an
attorney of my choice.

     This Agreement shall become effective as of the commencement date of my
employment by the Company.


                                        Very truly yours,



                                        By: /s/ Lawrence E. Hyatt
                                            --------------------------
                                            Lawrence E. Hyatt






Acknowledged and agreed to
as of this 14th day of April, 2002

COLE NATIONAL CORPORATION

By: /s/ Jeffrey A. Cole
    ------------------------------------
   Jeffrey A. Cole
   Chairman and Chief Executive Officer

EX-10.3

                                                                    Exhibit 10.3



                           COLE NATIONAL CORPORATION
                           Restricted Stock Agreement


     THIS RESTRICTED STOCK AGREEMENT is made by and between Cole National
Corporation, a Delaware corporation (the "COMPANY"), and Lawrence E. Hyatt, an
individual (the "GRANTEE").


PRELIMINARY STATEMENTS:

     A.   In connection with the Grantee accepting employment as Executive Vice
President and Chief Financial Officer -- Cole National Corporation and as a
condition thereof, the Company and Grantee have entered into this Agreement; and

     B.   The execution of this Agreement in the form hereof has been authorized
by a resolution of the Board of Directors of the Company (the "BOARD");

     NOW, THEREFORE, in consideration of the Grantee's acceptance of the terms
and conditions of this Agreement, and subject to the terms of this Agreement,
the Company hereby grants to the Grantee 25,000 shares (together with all other
shares of Common Stock that become subject to this Agreement, collectively, the
"SHARES") of the Company's common stock, par value $.001 per share ("COMMON
STOCK"), which are to be granted pursuant to resolution of the Board and issued
out of the Company's treasury.


AGREEMENT:

     1.   Issuance of Common Stock.  The Shares will be issued as soon as
practicable after the date of this Agreement as fully paid and nonassessable
shares and will be represented by certificates registered in the name of the
Grantee and bearing a legend referring to the restrictions set forth in this
Agreement.

     2.   Restriction on Transfer of Common Stock.  The Shares may not be
transferred, sold, pledged, exchanged, assigned or otherwise encumbered or
disposed of by the Grantee, except to the Company, until they have become
nonforfeitable in accordance with Section 3 of this Agreement. Any purported
transfer, encumbrance or other disposition of the Shares that is in violation of
this Section 2 will be null and void, and the other party to any such purported
transaction will not obtain any rights to or interest in the Shares.

     3.   Vesting of Common Stock.  (a) The Shares will become nonforfeitable
upon the occurrence of the following:




                                       1



     Amount Nonforfeitable         Date Nonforfeitable
     ---------------------         -------------------
                                
     1/2 of the Shares             On the date three years from the Grant Date.

     1/2 of the Shares             On the date four years from the Grant Date.


     (b)  Notwithstanding the provisions of Section 3(a),

          (i)   all of the Shares will immediately become nonforfeitable if a
                Change of Control occurs.

          (ii)  if Grantee's employment with the Company terminates as the
                result of a Termination Without Cause or Termination With Good
                Reason before the first anniversary of the Grant Date and the
                conditions of Paragraph L of that certain Letter Agreement
                between Grantee and the Company dated April 19, 2002 have been
                satisfied, than twenty-five percent (25%) of the Shares shall
                become nonforfeitable, as of the date of the Termination Without
                Cause or Termination With Good Reason; and

          (iii) if Grantee's employment with the Company terminates as the
                result of a Termination Without Cause or Termination With Good
                Reason before the first anniversary of the Grant Date and the
                conditions of Paragraph L of that certain Letter Agreement
                between Grantee and the Company dated April 19, 2002 have been
                satisfied, than 50% of any forfeitable Shares shall become
                nonforfeitable, as of the date of the Termination Without Cause
                or Termination With Good Reason.

     4.   Termination of Rights and Forfeiture of Common Stock. Except for
Shares that have become nonforfeitable, all of the Shares will be forfeited if
the Grantee ceases to be continuously employed by the Company or a Subsidiary,
except as provided in Section 3(b), (i), (ii), (iii). In the event of a
forfeiture, any certificate(s) representing the Shares will be canceled. For
purposes of this Agreement, the continuous employment of the Grantee with the
Company or a Subsidiary will not be deemed to have been interrupted, and the
Grantee will not be deemed to have ceased to be an employee of the Company or a
Subsidiary, by reason of the transfer of his employment among the Company and
its subsidiaries or a leave of absence approved by the Committee.

     5.   Dividend, Voting and Other Rights. (a) Except as otherwise provided in
this Agreement, the Grantee will have all of the rights of a stockholder with
respect to the Shares, including the right to vote the Shares and receive any
dividends that may be paid thereon; provided, however, that any additional
shares of Common Stock or other securities that the Grantee may become entitled
to receive pursuant to a stock dividend, stock split, combination of shares,
recapitalization, merger, consolidation, separation or reorganization or any
other change in the capital structure of the Company will be subject to the same
restrictions as the Shares.

                                       2

         (b) Cash dividends, if any, and any other distributions paid on the
Shares will be sequestered by the Company until such time as such Shares become
nonforfeitable in accordance with Section 3 and will, to the extent
practicable, be deemed to be reinvested (at the Stock Price on the dividend
payment date) on an immediate basis in additional shares of Common Stock from
the Company's treasury, which will be subject to the same restrictions as the
underlying Shares granted under this Agreement. If Shares are forfeited
pursuant to Section 4, all dividends and other distributions, together with the
earnings thereon, with respect to such Shares will likewise be forfeited.

         6. Retention of Stock Certificate(s) by Company. Any certificates
representing Shares will be held in custody by the Company together with a
stock power endorsed in blank by the Grantee with respect thereto, until those
shares have become nonforfeitable in accordance with Section 3.

         7. Compliance with Law. The Company shall make reasonable efforts to
comply with all applicable federal, state and other applicable securities laws;
provided, however, notwithstanding any other provision of this Agreement, the
Company will not be obligated to issue any securities pursuant to this
Agreement if the issuance thereof would result in a violation of any such law.
Grantee acknowledges that he has been given the opportunity to ask questions
and receive answers about the Company's financial and other information, is
fully capable of making an investment decision concerning the Company's Common
Stock without assistance of third parties, and has no intention to distribute
any of the Shares to third parties. During each of the prior two calendar years
Grantee has had individual income in excess of $200,000 and has a reasonable
expectation of reaching at least that level of income in the current year.

         8. Withholding Taxes. If the Company is required to withhold any
federal, state, local or foreign tax in connection with any issuance of
restricted or nonrestricted shares of Common Stock or other securities pursuant
to this Agreement, the Grantee shall pay the tax or make provisions that are
satisfactory to the Company for the payment thereof.

         9. Right to Terminate Employment. No provision of this Agreement will
limit in any way whatsoever any right that the Company or a Subsidiary may
otherwise have to terminate the employment of the Grantee at any time.

         10. Relation to Other Benefits. Any economic or other benefit to the
Grantee under this Agreement shall not be taken into account in determining any
benefits to which the Grantee may be entitled under any profit-sharing,
retirement or other benefit or compensation plan maintained by the Company or a
Subsidiary and shall not affect the amount of any insurance coverage available
to any beneficiary under any insurance plan covering employees of the Company
or a Subsidiary.

         11. Severability. In the event that one or more of the provisions of
this Agreement are invalidated for any reason by a court of competent
jurisdiction, any provision so invalidated will be deemed to be separable from
the other provisions hereof, and the remaining provisions hereof will continue
to be valid and fully enforceable.


                                       3


     12. Governing Law. This Agreement is made under, and will be construed in
accordance with, the laws of the State of Ohio without regard to conflict of law
principles of such state.

     13. Taxes. Grantee may make a proper election under Section 83(b) of the
Internal Revenue Code of 1986, as amended, no later than 30 days after the date
of this Agreement with respect to all of the Shares.

     14. Definitions. As used in this Agreement, the following terms have the
following meanings:

     "CHANGE OF CONTROL" means if at any time any of the following events has
occurred:

     (i)    the Company merges or consolidates with or into another corporation
            and as a result of such merger or consolidation less than 51% of the
            voting power of the then-outstanding voting securities of the
            surviving corporation immediately after such transaction are
            directly or indirectly beneficially owned in the aggregate by the
            former stockholders of the Company immediately prior to such
            transaction;

     (ii)   all or substantially all the assets accounted for on the
            Consolidated Balance Sheet of the Company are sold or transferred to
            one or more corporations or persons, and as a result of such sale or
            transfer less than 51% of the voting power of the then-outstanding
            voting securities of such corporation or person immediately after
            such sale or transfer is directly or indirectly beneficially held in
            the aggregate by the former stockholders of the Company immediately
            prior to such transaction or series of transactions;

     (iii)  a person, within the meaning of Section 3(a)(9) or 13(d)(13) (as in
            effect on the date of the award) of the Securities Exchange Act of
            1934, as amended (the "EXCHANGE ACT"), becomes the beneficial owner
            (as defined in Rule 13d-3 of the Securities and Exchange Commission
            pursuant to the Exchange Act) of (i) 15% or more but less than 35%
            of the voting power of the then-outstanding voting securities of the
            Company without prior approval of the Company's Board, or (ii) 35%
            or more of the voting power of the then-outstanding voting
            securities of the Company; provided, however, that the foregoing
            does not apply to any such acquisition that is made by (w) any
            Subsidiary of the Company (x) any employee benefit plan of the
            Company or any Subsidiary or (y) any person or group of which
            employees of the Company or of any Subsidiary control a greater than
            25% interest unless the Board determines that such person or group
            is making a "hostile acquisition;"

     (iv)   a majority of the members of the Board or of any Subsidiary are not
            Continuing Directors, where a "CONTINUING DIRECTOR" is any member of
            the Board or, with respect to a Subsidiary, of such Subsidiary who
            (x) was


                                       4

            a member of the Board or, with respect to a Subsidiary, of such
            Subsidiary on the date of the award or (y) was nominated for
            election or elected to such Board with the affirmative vote of a
            majority of the Continuing Directors who were members of such Board
            at the time of such nomination or election.

     "GRANT DATE" means July 15, 2002.

     "SUBSIDIARY" means any corporation (other than the Company) in an unbroken
chain of corporations beginning with the Company if each of such corporations
(or a group of corporations that themselves are Subsidiaries) other than the
last corporation in the unbroken chain owns stock possessing fifty percent or
more of the total combined voting power of all classes of stock in one of the
other corporations in such chain.

     "TERMINATION WITHOUT CAUSE" shall have the same meaning as set forth in
that certain Letter Agreement between Grantee and Company dated April 19, 2002.

     "TERMINATION WITH GOOD REASON" shall have the same meaning as set forth in
that certain Letter Agreement between Grantee and Company dated April 19, 2002.

     This Restricted Stock Agreement has been executed by the parties at
Cleveland, Ohio as of July 15, 2002.


                                     COLE NATIONAL CORPORATION






                                     By: /s/ Leslie D. Dunn
                                         -----------------------------------
                                         Leslie D. Dunn
                                         Sr. Vice President-Business Development


                                     /s/ Lawrence E. Hyatt
                                     ---------------------------------------
                                     Lawrence E. Hyatt




                                       5

EX-10.4

                                                                 Type 2-'99 Plan

                                                                    Exhibit 10.4

                           COLE NATIONAL CORPORATION

                      Nonqualified Stock Option Agreement

     This Nonqualified Stock Option Agreement (this "Agreement") is entered into
between the individual optionee named on the signature page hereof (the
"Optionee") and Cole National Corporation, a Delaware corporation (the
"Company"), as of the Grant Date. Certain capitalized terms used herein are
defined in Paragraph 8.

     WHEREAS, the Board of Directors of the Company has authorized a grant of
stock options on the terms hereof to the Optionee in connection with his
commencement of employment in the capacity shown on the signature page; and

     NOW, THEREFORE, the Company hereby grants to the Optionee options (the
"Options") pursuant to the Company's 1999 Broad Based Employee Stock Option Plan
(the "Plan") to purchase the number of shares of Common Stock, par value $.001
per share, of the Company ("Common Stock") shown as the Original Award on the
signature page hereof; and agrees to cause certificates for any shares purchased
hereunder to be delivered to the Optionee upon payment of the purchase price in
full, all subject, however, to the terms and conditions of the Plan and as
hereinafter set forth.

     1.   Exercise. (a) Except as otherwise provided herein, the Options (until
terminated as hereinafter provided) will become vested and exercisable as
follows:

                                                                 Type 2-'99 Plan
                                                                 ---------------
                                                                               2


                           
1/4 of the Original Award     The first anniversary of the Grant Date; and
1/4 of the Original Award     The second anniversary of the Grant Date; and
1/4 of the Original Award     The third anniversary of the Grant Date; and
All Unvested Shares           The fourth anniversary of the Grant Date



To the extent exercisable, the Options may be exercised in whole or in part from
time to time.

          (b)  Upon the occurrence of a Change of Control prior to the fourth
anniversary of the date of this Agreement, the Options, in addition to any
vesting pursuant to the provisions of Paragraph 1(a) above, will become
exercisable in full as to any then Unvested Shares immediately prior to the
consummation of such Change in Control.

          (c)  (i) If Grantee's employment with the Company terminates as the
result of a Termination Without Cause or Termination With Good Reason before the
first anniversary of the Grant Date and the conditions of Paragraph L of that
certain Letter Agreement between Grantee and the Company dated April 19, 2002
have been satisfied, than twenty-five percent (25%) of the Unvested Shares shall
vest as of the date of the Termination Without Cause or Termination With Good
Reason.


                                                              Type 2 -- '99 Plan
                                                                               3


          (ii) If Grantee's employment with the Company terminates as the
result of a Termination Without Cause or Termination With Good Reason on or
after the first anniversary of the Grant Date and the conditions of Paragraph L
of that certain Letter Agreement between Grantee and the Company dated April
19, 2002 have been satisfied, than 50% of the Unvested Shares shall vest as of
the date of the Termination Without Cause or Termination With Good Reason.

          (d)  If a Sale Event occurs prior to the fourth anniversary of the
Grant Date and the Optionee is not a Full-Time Employee of the Company or a
continuing Subsidiary immediately after the Sale Event, the Options will, in
addition to any prior vesting pursuant to Paragraph 1(a) above, immediately
become exercisable with respect to those Unvested Shares that would have vested
on the next succeeding anniversary of the Grant Date (if the Sale Event occurs
on an anniversary of the Grant Date, no additional Options will become
exercisable besides those that became exercisable as of that anniversary).
Thereupon, all remaining Unvested Options will be forfeited and cancelled.

          (e)  If the Optionee dies or becomes permanently disabled while in
the employ of the Company or any Subsidiary, or the Optionee retires under a
retirement plan of the Company or any Subsidiary, the Options will, in addition
to any vesting pursuant to Paragraph 1(a) above, immediately become exercisable
with respect to those Unvested Shares that would have vested on the next
succeeding anniversary of the Grant Date (if the event occurs on an anniversary
of the Grant Date, no additional Options will become exercisable besides those
that


                                                              Type 2 -- '99 Plan

                                                                               4


became exercisable as of that anniversary). Thereupon, all remaining Unvested
Options will be forfeited and cancelled.

                  (f)      Any exercise of the Options must be made in writing
by the Optionee delivered to the Secretary of the Company.

         2.       Exercise Price and Payment; Reload Options. (a) The Options
will be exercisable for Vested Shares (whether such vesting occurs pursuant to
Paragraph 1(a), 1(b), 1(c), 1(d) or 1(e)) at the Exercise Price shown on the
signature page hereof.

                  (b)      The Exercise Price for any shares may be paid (i) in
cash or by check, (ii) by actual or constructive transfer to the Company of
Mature Shares, or (iii) by a combination of such methods of payment.

                  (c)      If, at a time at which the Optionee is a Full-time
Employee, the Optionee pays the Exercise Price of shares by delivery of Mature
Shares, additional option rights ("Reload Option Rights") shall, subject to the
provisions hereinafter set forth, be automatically granted to the Optionee
equal to the sum of the number of Mature Shares transferred to the Company with
respect to such Exercise Price. In no event, however, shall Reload Option
Rights be granted unless the remainder of the original ten (10) year term of
the option being exercised is greater than six (6) months at the time of such
exercise. Such Reload Option Rights shall not be exercisable during the six (6)
month period immediately following the date of grant of such Reload Option
Rights. The Exercise Price of such Reload Option Rights shall be one hundred
(100) percent of the Stock Price per share on the day of the exercise of the
Options to which such Reload Option Rights relate. Such Reload Option Rights
shall terminate at such time as the Options being exercised would have
terminated had they not been exercised. Such Reload



                                                               Type 2 - '99 Plan
                                                               -----------------
                                                                               5


Option Rights will be evidenced by an agreement in form substantially the same
as this Agreement, with appropriate changes. Reload Option Rights will not be
granted with respect to any Options that have been transferred by the original
Optionee.

     3. Termination. The Options will terminate and all Unvested and Vested
Options then outstanding will be forfeited on the earliest of the following
dates:

          (a) On the date on which the Optionee voluntarily resigns (unless
otherwise provided in a written agreement relating to employment or such
resignation constitutes a Termination With Good Reason) or ceases to be an
employee of the Company or a Subsidiary by reason of termination of employment
for Cause;

          (b) Subject to possible extension pursuant to Paragraph 3(c) below,
five years after either (i) the date on which the Optionee ceases to be an
employee of the Company or a Subsidiary by reason of retirement under a
retirement plan of the Company or a Subsidiary at or after the earliest
voluntary retirement age provided for in such retirement plan or retirement at
an earlier age with the consent of the Company's Board of Directors or the
Compensation Committee or (ii) the date of permanent disability of the Optionee
if the Optionee becomes permanently disabled while an employee of the Company
or a Subsidiary;

          (c) Five years after the date of the death of the Optionee if the
Optionee dies while an employee of the Company or a Subsidiary or one year
after the date of death of the Optionee if the Optionee dies during the fifth
year of the five year period referred to in Paragraph 3(b) above;

          (d) One year after the date Grantee's employment with the Company
terminates as the result of a Termination Without Cause or Termination For Good
Reason;





                                                              Type 2 -- '99 Plan
                                                              ------------------
                                                                               6

          (e)  On the first anniversary of the date of a Sale Event if the
Optionee is not a Full-Time Employee of the Company or a continuing Subsidiary
immediately after the Sale Event;


          (f)  Immediately (x) upon the Optionee accepting employment with a
Competitor without the prior written approval of the Company's Chief Executive
Officer or (y) upon a material breach by the Optionee of any applicable
agreement with the Company or a Subsidiary relating to non-competition,
non-solicitation or maintaining of Company confidences; or

          (g)  Ten years from the Grant Date.

     4.   Transferability. Unless otherwise approved by the Compensation
Committee following a request from the Optionee or the Optionee's guardian or
legal representative, the Options are not transferable by the Optionee
otherwise than by will or the laws of descent and distribution. If another type
of transfer is approved by the Compensation Committee, a transfer will only be
effective when the transferee of the Options enters into an agreement with the
Company (in form and substance acceptable to the Company) agreeing to be bound
by the provisions of this Agreement as if such transferee were the Optionee. If
exercised during the lifetime of the Optionee, the Options are exercisable only
by the Optionee or by the Optionee's guardian or legal representative, or by an
transferee authorized as provided in this Paragraph.

     5.   Securities Laws. The Options are not exercisable if such exercise
would involve a violation of any applicable federal, state or other securities
law, and the Company hereby agrees to make reasonable efforts to comply with
such securities laws. The Options are



                                                              Type 2 -- '99 Plan
                                                              ------------------
                                                                               7

not exercisable unless under said laws at the time of exercise the shares of
Common Stock or other securities purchasable hereunder are exempt, are the
subject matter of an exempt transaction, or are registered in accordance with
such laws.

     6.   Adjustments. (a)    The Board of Directors or the Compensation
Committee shall make such adjustment in the option price and in the number or
kind of shares of Common Stock or other securities covered by the Options as
such Board or Committee may in good faith determine is equitably required to
prevent dilution or enlargement of the rights of the Optionee that otherwise
would result from (i) any stock dividend, stock split, combination of shares,
recapitalization or other change in the capital structure of the Company, or
(ii) any merger, consolidation, spin-off, split-off, spin-out, split up,
reorganization, partial or complete liquidation or other distribution of assets,
issuance of rights to purchase securities, or (iii) any distribution to the
holders of the Common Stock of rights or warrant to purchase equity interests of
the Company, or (iv) any other corporate transaction or event having an effect
similar to any of the foregoing. Moreover, in the event of any such transaction
or event, the Board of Directors or the Compensation Committee, in its
discretion, may provide in substitution for any or all outstanding awards under
the Options such alternative consideration as it, in good faith, may determine
to be equitable in the circumstances and may require in connection therewith the
surrender of all awards so replaced.

          (b) In the event that any provision of this Agreement would result in
a calculation of a number of shares in amounts other than a whole number, the
number of shares so calculated will be reduced or increased to the nearest whole
number (rounding 0.50 up), with the

                                                              Type 2 -- '99 Plan
                                                              ------------------
                                                                               8


effect of any such rounding deemed to attach to the last group of shares to be
so calculated (with calculations to be conducted in alphabetical or numerical
order, as applicable).

         7.       Withholding. If the Company is required to withhold any
federal, state, local or foreign tax in connection with the exercise of the
Options, it will be a condition to such exercise that the Optionee make
provision satisfactory to the Company for payment of all such taxes.

         8.       Definitions. The following capitalized terms have meanings as
set forth below.

         "Change of Control" means if at any time any of the following events
shall have occurred:

                  (a)      the Company merges or is consolidated with or into
another corporation and as a result of such merger or consolidation less than
51% of the voting power of the then-outstanding voting securities of the
surviving or resulting corporation immediately after such transaction are
directly or indirectly beneficially owned in the aggregate by the former
stockholders of the Company immediately prior to such transaction;

                  (b)      all or substantially all the assets accounted for on
the consolidated balance sheet of the Company are sold or transferred to one or
more corporations or persons, and as a result of such sale or transfer less
than 51% of the voting power of the then-outstanding voting securities of such
corporation or person immediately after such sale or transfer is directly or
indirectly beneficially held in the aggregate by the former stockholders of the
Company immediately prior to such transaction or series of transactions;

                                                              Type 2 -- '99 Plan
                                                                               9

          (c) A person, within the meaning of Section 3(a)(9) or 13(d)(3) (as
in effect on the date hereof) of the Securities Exchange Act of 1934, becomes
the beneficial owner (as defined in Rule 13d-3 of the Securities and Exchange
Commission pursuant to the Securities Exchange Act of 1934) of (i) 15% or more
but less than 35% of the voting power of the then-outstanding voting securities
of the Company without the prior approval by the Board, or (ii) 35% or more of
the voting power of the then-outstanding voting securities of the Company;
provided, however, that the foregoing does not apply to any such acquisition
that is made by (w) any subsidiary of the Company; (x) any employee benefit
plan of the Company or of any Subsidiary or (y) any person or group of which
employees of the Company or of any Subsidiary control a greater than 25%
interest unless the Board of Directors of the Company determines that such
person or group is making a "hostile acquisition;"

          (d) A majority of the members of the Board of Directors of the
Company or of any Subsidiary are not Continuing Directors, where a "Continuing
Director" is any member of the Board of Directors of the Company or, with
respect to a Subsidiary, of such Subsidiary who (x) was a member of the Board
of Directors of the Company or, with respect to a Subsidiary, of such
Subsidiary on the date hereof or (y) was nominated for election or elected to
such Board of Directors with the affirmative vote of a majority of the
Continuing Directors who were members of such Board at the time of such
nomination or election.

     "Competitor" means any Person that competes with any then-existing
business of the Company or any Subsidiary.

     "Exercise Price" means the exercise price per share indicated as the
Exercise Price per share on the signature page hereof.


                                                               Type 2 - '99 Plan
                                                                              10


     "Full-time Employee" means a person having the status of a full-time
employee of the Company or a Subsidiary working at least 20 hours a week,
including a person who is on a short-term disability, parental or other leave
under an applicable benefit plan or other approved leave.

     "Grant Date" means July 15, 2002.

     "Mature Shares" means (x) nonforfeitable, unrestricted shares of Common
Stock that have been owned by the Optionee for more than six (6) months prior to
the date of exercise, or (y) shares of restricted stock or other shares of
Common Stock that are forfeitable or subject to restrictions on transfer,
including, without limitation, shares of Common Stock issued pursuant to the
earn out of performance shares or performance units, which shares have been
owned by the Optionee for more than six (6) months and that the Company agrees
to accept as consideration, or (z) such other Company securities as the
Company's chief accounting officer, upon consultation with the Company's
independent accountants, determines will not adversely affect the Company's tax
or accounting position by accepting.

     "Original Award" means the number of shares of Common Stock indicated as
the Original Award on the signature page hereof.

     "Person" means any corporation, partnership, limited liability company,
     association, firm, other entity or individual(s).

     "Sale Event" means the consummation of a sale or other event by which the
Subsidiary by which the Optionee is primarily employed ceases to be a Subsidiary
of the Company.



                                                               Type 2 - '99 Plan
                                                                              11

     "Stock Price" means the closing price of the Common Stock on the principal
exchange on which the Common Stock is traded.

     "Subsidiary" means any corporation (other than the Company) in an unbroken
chain of corporations beginning with the Company if each of the corporations (or
a group of corporations that themselves are Subsidiaries) other than the last
corporation in the unbroken chain owns stock possessing fifty percent or more of
the total combined voting power of all classes of stock in one of the other
corporations in such chain. For purposes of this Agreement, the continuous
employment of the Optionee with the Company or a Subsidiary will not be deemed
interrupted, and the Optionee will not be deemed to have ceased to be an
employee of the Company or any Subsidiary, by reason of the transfer of his
employment among the Company and its Subsidiaries.

     "Termination Without Cause" shall have the same meaning as set forth in
that certain Letter Agreement between Grantee and Company dated April 19, 2002.

     "Termination Without Good Reason" shall have the same meaning as set forth
in that certain Letter Agreement between Grantee and Company dated April 19,
2002.

     "Trading Days" means days on which the principal exchange on which the
Common Stock is traded is open for trading, regardless whether actual trading
in the Common Stock occurs.

     "Unvested Shares" means, as of any given time, those shares of Common
Stock relating to the Options that are not, at the time in question, otherwise
permitted, under the terms of this Agreement, to be acquired pursuant to the
exercise of the Options.


                                                               Type 2 - '99 Plan
                                                               -----------------
                                                                              12

     "Vested Shares" means, as of any given time, those shares of Common Stock
relating to the Options that are, at the time in question, otherwise permitted,
under the terms of this Agreement, to be acquired pursuant to the exercise of
the Options.

     9. Acknowledgement. The undersigned Optionee hereby acknowledges receipt
of an executed original of this Agreement and accepts the Options granted
hereunder.

                                                               Type 2 - '99 Plan
                                                               -----------------
                                                                              13

                                             Nonqualified Stock Option Agreement
                                             -----------------------------------

       EXECUTED at Cleveland, Ohio as of the date first set forth above.

                                       COLE NATIONAL CORPORATION


                                       By: /s/ Leslie D. Dunn
                                           -------------------------------------
                                           Leslie D. Dunn, Senior Vice President


                                       Title: Senior Vice President
                                              ----------------------------------

                                       /s/ Lawrence E. Hyatt
                                       -----------------------------------------
                                       OPTIONEE -- Lawrence E. Hyatt


Name of Optionee:                      Lawrence E. Hyatt

Name of Employer:                      Cole National Corporation

Position:                              Executive Vice President & Chief
                                       Financial Officer

Number of Shares
in the Original Award:                 75,000

Grant Date:                            July 15, 2002

Exercise Price per Share:              $17.55

EX-10.5

                                                                    Exhibit 10.5
                                                                  EXECUTION COPY


                                 FIRST AMENDMENT

            FIRST AMENDMENT, dated as of August 23,2002 (this "Amendment"), to
the Amended and Restated Credit Agreement, dated as of May 23,2002 (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"), LEHMAN COMMERCIAL PAPER
INC., as syndication agent, WACHOVIA BANK, NATIONAL ASSOCIATION, as
documentation agent, 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").

                              W I T N E S S E T H :

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

            WHEREAS, the Borrowers and the other Loan Parties have requested
that the Administrative Agent and the Lenders amend 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 other Loan
Parties, 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 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:

            "Make any expenditure in respect of the purchase or other
      acquisition of fixed or capital assets and/or 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 in an aggregate amount for the Borrowers and their Subsidiaries
      not to exceed in any fiscal year $60,000,000."

      3. Amendment to Section 9. Section 9(l) of the Credit Agreement is hereby
amended by deleting such Section in its entirety and substituting in lieu
thereof the following:

            "(1) CNG shall engage in any business other than the owning of the
      capital stock of the Borrowers and all actions incidental thereto or in
      connection therewith, including, without limitation, entering into the CNG
      Guarantee and Cash Collateral Agreement and the maintenance of cash
      management arrangements for the Borrowers and their Subsidiaries or CNG
      shall incur any material liabilities (other than the Senior

      Subordinated Notes, the Senior Subordinated 1997 Notes or the Senior
      Subordinated 2002 Notes); provided, however, that, notwithstanding the
      foregoing, CNG may enter into (i) leases (other than Financing Leases) of
      real and personal property that will be used by its Subsidiaries and
      Affiliates, the payments under which constitute Rental Expense and (ii)
      one or more Interest Rate Protection Agreements having an aggregate
      notional amount of not more than $75,000,000 pursuant to which the fixed
      rate of interest payable in respect of such amount of the Senior
      Subordinated Notes, Senior Subordinated 1997 Notes and Senior Subordinated
      2002 Notes will be effectively converted into a floating rate of interest;
      or"

      4. 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.

      5. Effectiveness. This Amendment shall be effective upon execution and
delivery by each of the Borrowers, the other Loan Parties, the Administrative
Agent and the Majority Lenders.

      6. 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.

      7. 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.

      8. 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.

      9. GOVERNING LAW. THIS AMENDMENT 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.

            IN WITNESS WHEREOF, the parties hereto have caused this Amendment to
be duly executed and delivered by their proper and duly authorized officers as
of the day and year first above written.

                                       COLE VISION CORPORATION

                                       By: /s/ J. Gaglioti
                                           ---------------------------------
                                           Title: Treasurer


                                       THINGS REMEMBERED, INC.

                                       By: /s/ J. Gaglioti
                                           ---------------------------------
                                           Title: Treasurer


                                       PEARLE, INC.

                                       By: /s/ J. Gaglioti
                                           ---------------------------------
                                           Title: Vice President & Treasurer


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

                                       By: /s/ Katherine Bass
                                           ---------------------------------
                                           Title: Authorized Signatory

CIBC INC.


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

FIFTH THIRD BANK


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

LEHMAN COMMERCIAL PAPER INC.


By: /s/ Francis Chang
    -------------------------
    Name:  Francis Chang
    Title: Authorized Signatory

KEYBANK NATIONAL ASSOCIATION


By: /s/ Thomas J. Purcell
    -------------------------
    Name:  Thomas J. Purcell
    Title: Senior Vice President

WACHOVIA BANK, NATIONAL ASSOCIATION


By: /s/ Mark S. Supple
    -------------------------
    Name:  Mark S. Supple
    Title: Vice President


                                       The undersigned Guarantors do hereby
                                       consent and agree to the foregoing
                                       First Amendment:


                                       COLE NATIONAL CORPORATION

                                       By: /s/ J. Gaglioti
                                           ---------------------------------
                                           Title: Vice President & Treasurer


                                       COLE NATIONAL GROUP, INC.

                                       By: /s/ J. Gaglioti
                                           ---------------------------------
                                           Title: Vice President & Treasurer


                                       BAY CITIES OPTICAL COMPANY

                                       By: /s/ J. Gaglioti
                                           ---------------------------------
                                           Title: Treasurer


                                       WESTERN STATES OPTICAL, INC.

                                       By: /s/ J. Gaglioti
                                           ---------------------------------
                                           Title: Treasurer


                                       COLE VISION SERVICES, INC.

                                       By: /s/ J. Gaglioti
                                           ---------------------------------
                                           Title: Treasurer


                                       COLE LENS SUPPLY, INC.

                                       By: /s/ J. Gaglioti
                                           ---------------------------------
                                           Title: Treasurer


                                       THINGS REMEMBERED PERSONALIZED
                                       GIFTS, INC.

                                       By: /s/ J. Gaglioti
                                           ---------------------------------
                                           Title: Treasurer


                                       PEARLE VISION, INC.

                                       By: /s/ J. Gaglioti
                                           ---------------------------------
                                           Title: Vice President, Treasurer


                                       AMERICAN VISION CENTERS, INC.

                                       By: /s/ J. Gaglioti
                                           ---------------------------------
                                           Title: Vice President, Treasurer


                                       NUVISION, INC.

                                       By: /s/ J. Gaglioti
                                           ---------------------------------
                                           Title: Vice President, Treasurer

EX-10.6

                                                                    Exhibit 10.6

                                SECOND AMENDMENT

        SECOND AMENDMENT, dated as of September 13, 2002 (this "AMENDMENT"), to
the Amended and Restated Credit Agreement, dated as of May 23, 2002 (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"), LEHMAN COMMERCIAL PAPER
INC., as syndication agent, WACHOVIA BANK,, NATIONAL ASSOCIATION, as
documentation agent, 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").

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

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

        WHEREAS, the Borrowers and the other Loan Parties have requested that
the Administrative Agent and the Lenders amend 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 other Loan Parties, 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. AMENDMENTS TO SUBSECTION 1.1.

        (a) The definition of "Leverage Ratio" is hereby amended by deleting it
in its entirety and replacing it with the following:

          "LEVERAGE RATIO": as of the end of each fiscal quarter of CNG, with
     respect to CNG and its Subsidiaries on a Consolidated basis, the ratio
     of (a) Total Indebtedness on such date to (b) EBITDA for the twelve month
     period ending on such date; PROVIDED HOWEVER that, for purposes of
     computing the Leverage Ratio, Total Indebtedness shall be computed without
     giving effect to any fair value adjustments for derivative hedge
     instruments."

          (b) The definition of "Rental Expense" is hereby amended by deleting
it in its entirety and replacing it with the following:

          "RENTAL EXPENSE": for any period, the excess, if any, of (i) the
     aggregate amount of fixed rentals payable by CNG, the Borrowers and their
     Subsidiaries for such period,




     determined on a consolidated basis in accordance with GAAP, with respect to
     leases (other than Financing Leases) of real and personal property over
     (ii) the aggregate amount of fixed rental sublease income received by CNG,
     the Borrowers and their Subsidiaries from subleases during such period with
     respect to such real and personal property. Notwithstanding the foregoing,
     any payment pursuant to a Guarantee Obligation permitted pursuant to
     subsection 8.4(g) shall constitute Rental Expense.

     3. AMENDMENTS TO SUBSECTION 8.4.

        (a) Subsection 8.4(f) of the Credit Agreement is hereby amended by
deleting the period at the end of such subsection and replacing it with a
semicolon followed by the word "and".

        (b) Subsection 8.4 of the Credit Agreement is hereby further amended by
inserting a new subsection 8.4(g) to read as follows:

          "(g) Guarantee Obligations of Pearle Vision, Inc. or Pearle of
     obligations of franchisees of Pearle Vision, Inc. under operating leases of
     real property; PROVIDED that any amounts paid pursuant to such Guarantee
     Obligations shall constitute Rental Expense."

     4. AMENDMENTS TO SUBSECTION 8.9.

        (a) Subsection 8.9(g) of the Credit Agreement is hereby amended by
deleting the word "and" at the end of such subsection;

        (b) Subsection 8.9 of the Credit Agreement is hereby further amended by
relabelling the current subsection 8.9(h) as subsection 8.9(i).

        (c) Subsection 8.9 of the Credit Agreement is hereby further amended by
inserting a new subsection 8.9(h) to read as follows:

          "(h) Guarantee Obligations permitted pursuant to subsection 8.4(a),
     8.4(e) or 8.4(g); and"

     5. 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.

     6. EFFECTIVENESS. This Amendment shall be effective upon execution and
delivery by each of the Borrowers, the other Loan Parties, the Administrative
Agent and the Majority Lenders.

     7. 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. 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.

     9. 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.

     10. GOVERNING LAW. THIS AMENDMENT 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.


         IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be
duly executed and delivered by their proper and duly authorized officers as of
the day and year first above written.


                                   COLE VISION CORPORATION

                                   By: /s/ J. Gaglioti
                                       -----------------------------
                                       Title: Treasurer


                                   THINGS REMEMBERED, INC.

                                   By: /s/ J. Gaglioti
                                       -----------------------------
                                       Title: Treasurer

                                   PEARL, INC.

                                   By: /s/ J. Gaglioti
                                       -----------------------------
                                       Title: Vice President & Treasurer


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

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

         IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be
duly executed and delivered by their proper and duly authorized officers as of
the day and year first above written.

                                        COLE VISION CORPORATION

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


                                        THINGS REMEMBERED, INC.

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


                                        PEARLE, INC.

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


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


                                        By:  /s/ Katherine Bass
                                            -----------------------------------
                                            Title: Authorized Signatory




CIBC INC.


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


LEHMAN COMMERCIAL PAPER INC.


By:  /s/ Francis Chang
    -----------------------------------
    Name:  Francis Chang
    Title: Authorized Signatory


WACHOVIA BANK, NATIONAL ASSOCIATION


By: /s/ Mark S. Supple
    -----------------------
    Name: Mark S. Supple
    Title: Vice President


KEYBANK NATIONAL ASSOCIATION


By: /s/ Lawrence A. Mack
    -----------------------
    Name: Lawrence A. Mack
    Title: Senior Vice President


FIFTH THIRD BANK


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



                             The undersigned Guarantors do hereby consent and
                             agree to the foregoing Amendment:


                             COLE NATIONAL CORPORATION

                             By: /s/ J. Gaglioti
                             ---------------------------------
                             Title: Vice President & Treasurer


                             COLE NATIONAL GROUP, INC.

                             By: /s/ J. Gaglioti
                             ---------------------------------
                             Title: Vice President & Treasurer


                             BAY CITIES OPTICAL COMPANY

                             By: /s/ J. Gaglioti
                             ---------------------------------
                             Title: Treasurer


                             WESTERN STATES OPTICAL, INC.

                             By: /s/ J. Gaglioti
                             ---------------------------------
                             Title: Treasurer


                             COLE VISION SERVICES, INC.

                             By: /s/ J. Gaglioti
                             ---------------------------------
                             Title: Treasurer


                             COLE LENS SUPPLY, INC.

                             By: /s/ J. Gaglioti
                             ---------------------------------
                             Title: Treasurer


                             THINGS REMEMBERED PERSONALIZED
                             GIFTS, INC.

                             By: /s/ J. Gaglioti
                             ---------------------------------
                             Title: Treasurer


                             PEARLE VISION, INC.

                             By: /s/ J. Gaglioti
                             ---------------------------------
                             Title: Vice President, Treasurer


                             AMERICAN VISION CENTERS, INC.

                             By: /s/ J. Gaglioti
                             ---------------------------------
                             Title: Vice President, Treasurer


                             NUVISION, INC.

                             By: /s/ J. Gaglioti
                             ---------------------------------
                             Title: Vice President, Treasurer

EX-10.7

                                                                    Exhibit 10.7


                                 AMENDMENT NO. 1
                                     TO THE
                            COLE NATIONAL GROUP, INC.
                                 RETIREMENT PLAN

                 (As Amended and Restated as of January 1, 2001)

         Cole National Group, Inc., a Delaware corporation, hereby amends the

Cole National Group, Inc. Retirement Plan (As Amended and Restated as of January

1, 2001) (the "Plan") as hereinafter set forth. Except as otherwise provided

herein, the provisions of this Amendment shall be effective March 31, 2002.

Words and phrases used herein with initial capital letters that are defined in

the Plan are used herein as so defined.


                                    SECTION 1

         Section 1.2 of the Plan is hereby amended by the addition of the

following new sentence at the end thereof:

      "Effective March 31, 2002, the Accrued Benefit under the Plan of each
      Participant, other than a Grandfathered Participant, is frozen."

                                    SECTION 2

         Effective as of January 1, 2002, the first sentence of Section 1.8(b)

of the Plan is hereby amended to read as follows::

      "Notwithstanding the foregoing provisions of this Section, effective for
      the 1997, 1998, 1999, 2000 and 2001 Plan Years, Annual Compensation taken
      into account for any purpose for any such Plan Year shall not exceed
      $150,000 (as such amount shall be adjusted pursuant to section 401(a)(17)
      of the Code) and for Plan Years beginning on or after January 1, 2002,
      Annual Compensation taken into account for any purpose for any such Plan
      Year shall not exceed $200,000."

                                    SECTION 3

         Section 1.11 of the Plan is hereby amended by the addition of the
following new sentence at the end thereof:




      "Notwithstanding the foregoing, for purposes of each Participant in the
      Plan on March 31, 2002, Average Monthly Compensation shall be frozen on
      March 31, 2002."

                                    SECTION 4

         Section 1.20 of the Plan is hereby amended by the addition of the

following new sentence at the end thereof:

      "Notwithstanding the foregoing, for purposes of each Participant in the
      Plan on or after January 1, 2002, Covered Compensation shall be frozen on
      December 31, 2001."

                                    SECTION 5

         Section 1.30A of the Plan is hereby added to the Plan immediately

following Section 1.30 of the Plan:

         "1.30A Grandfathered Participant: A Participant who had attained age 50
and completed at least 10 Years of Benefit Service under the Plan on December
31, 2001."

                                    SECTION 6

         Section 1.56 of the Plan is hereby amended by the addition of the

following new subsection at the end thereof:

            "(g) For purposes of any Participant who is not a Grandfathered
      Participant, in no event shall such Participant's Years of Benefit Service
      take into account Hours of Service performed after March 31, 2002."

                                    SECTION 7

         Section 3.1 of the Plan is hereby amended by the addition of the

following new sentence at the end thereof:

      "Notwithstanding the foregoing provisions of this Section or the
      provisions of Section 3.3, no person shall become a Participant on or
      after April 1, 2002."



                                    SECTION 8

         Sections 4.3(a), 4.4(b), 4.5 and 4.6 of the Plan are hereby amended by

the addition of the following new sentence at the end of each such section:

      "Notwithstanding the foregoing, (i) for purposes of any Participant other
      than a Grandfathered Participant, the benefit determined under this
      Section shall reflect the freeze of (A) Covered Compensation as of
      December 31, 2001 and (B) Average Monthly Compensation and Years of
      Benefit Service as of March 31, 2002 and (ii) for purposes of any
      Grandfathered Participant, the benefit determined under this Section shall
      reflect the freeze of (A) Covered Compensation earned as of December 31,
      2001 and (B) Average Monthly Compensation as of March 31, 2002."

            EXECUTED this     day of               , 2002.
                         ----       --------------

                                                  COLE NATIONAL GROUP, INC.


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


                                                  And:
                                                      --------------------------
                                                  Title:
                                                      --------------------------

EX-10.8

                                                                    Exhibit 10.8

                           COLE NATIONAL CORPORATION

                      Nonqualified Stock Option Agreement

                   (1998 Plan/Time Vesting/Senior Executive)

     This Nonqualified Stock Option Agreement (this "AGREEMENT") is entered
into between Jeffrey A. Cole (the "OPTIONEE") and Cole National Corporation, a
Delaware corporation (the "COMPANY"), as of the Grant Date. Certain capitalized
terms used herein are defined in Paragraph 8.

     WHEREAS, the Board of Directors of the Company has authorized a grant of
stock options on the terms hereof to the Optionee, who is employed in the
capacity shown on the signature page; and

     NOW, THEREFORE, the Company hereby grants to the Optionee options (the
"OPTIONS") pursuant to the Company's 1998 Equity Performance and Incentive
Plan, amended and restated effective June 10, 1999 (the "PLAN") to purchase the
number of shares of Common Stock, par value $.001 per share, of the Company
("COMMON STOCK") shown as the Original Award on the signature page hereof; and
agrees to cause certificates for any shares purchased hereunder to be delivered
to the Optionee upon payment of the purchase price in full, all subject,
however, to the terms and conditions of the Plan and the terms and conditions
hereinafter set forth.

     1.   Exercise.

          (a)  Except as otherwise provided herein, the Options (until
terminated as hereinafter provided) will become vested and exercisable as
follows:

          Amount Vested                           Date Exercisable
     -------------------------     ---------------------------------------------
     1/5 of the Original Award     The first anniversary of the Grand Date; and

     1/5 of the Original Award     The second anniversary of the Grand Date; and

     1/5 of the Original Award     The third anniversary of the Grand Date; and

     1/5 of the Original Award     The fourth anniversary of the Grand Date; and

     All Unvested Shares           The fifth anniversary of the Grand Date; and

for so long as the Optionee remains in the continued employment of the Company,
except as provided below.


     To the extent exercisable, the Options may be exercised in whole or in
part from time to time.

               (b)  If, prior to the fifth anniversary of the Grant Date, any
of the following occurs: (i) a Change in Control, (ii) a Termination Event,
(iii) a Constructive Termination, (iv) the Optionee voluntarily ceases to be an
employee of the Company or a Subsidiary or retires under a retirement plan of
the Company or any Subsidiary, in either case with the consent of the
Compensation Committee, or (v) the Optionee dies or becomes permanently
disabled while in the employ of the Company or any Subsidiary, the Options
will, in addition to any vesting pursuant to Paragraph 1(a) above, immediately
become exercisable in full.

               (c)  If, prior to the fifth anniversary of the Grant Date, the
Optionee voluntarily ceases to be an employee of the Company or a Subsidiary or
retires under a retirement plan of the Company or any Subsidiary, in either
case without the consent of the Compensation Committee, the Options will,
in addition to any vesting pursuant to Paragraph 1(a) above, immediately become
exercisable in full with respect to those Unvested Shares that would have
vested on the next succeeding anniversary of the Grant Date (if the event
occurs on an anniversary of the Grant Date, no additional Options will become
exercisable besides those that became exercisable as of that anniversary).
Thereupon, all remaining Unvested Options will be forfeited and cancelled.

               (d)  Any exercise of the Options must be made in writing by the
Optionee delivered to the Secretary of the Company.

          2.   Exercise Price and Payment; Reload Options.

               (a)  The Options will be exercisable for Vested Shares (whether
such vesting occurs pursuant to Paragraph 1(a), 1(b), or 1(c)) at the Exercise
Price shown on the signature page hereof.

               (b)  The Exercise Price for any shares may be paid (i) in cash
or by check, (ii) if approved by the Compensation Committee prior to such
exercise, by delivery to the Company of a promissory note or notes of the
Optionee; PROVIDED, HOWEVER, that the principal amount of such notes for all
optionees outstanding at any one time pursuant to the Plan, the Company's 1996
Management Stock Option Plan, the Company's 1993 Management Stock Option Plan
and the Company's 1992 Management Stock Option Plan shall not in the aggregate
exceed $3,000,000, (iii) by actual or constructive transfer to the Company of
Mature Shares, or (iv) by a combination of such methods of payment.

               (c)  If, at the date of exercise the Optionee is an employee of
the Company, and the Optionee pays the Exercise Price of shares by delivery of
Mature Shares, additional option rights ("Reload Option Rights") shall, subject
to the provisions hereinafter set forth, be automatically granted to the
Optionee equal to the sum of (i) the number of Mature Shares transferred to the
Company with respect to such Exercise Price and (ii) the number of shares of
Common Stock surrendered to the Company in payment of the Withholding Amount
associated with the Options exercised through the delivery of Mature Shares.
Reload Option

                                       2


Rights shall be granted as set forth in this Paragraph 2(c) with respect to
Optionee's exercise of Options prior to their termination pursuant to Paragraph
3. In no event, however, shall Reload Option Rights be granted unless the
remainder of the original ten (10) year term of the option being exercised is
greater than six (6) months at the time of such exercise. Reload Option Rights
will not be granted with respect to any Options that have been transferred by
the original Optionee. Reload Option Rights shall not be exercisable during the
six (6) month period immediately following the date of grant of such Reload
Option Rights. The Exercise Price of such Reload Option Rights shall be one
hundred percent (100%) of the Stock Price per share on the day of the exercise
of the Options to which such Reload Option Rights relate. Such Reload Option
Rights shall terminate at such time as the Options being exercised would have
terminated had they not been exercised. Such Reload Option Rights will be
evidenced by an agreement in form substantially the same as this Agreement,
with appropriate changes.

     3.   Termination. The Options will terminate and all Unvested and Vested
Options then outstanding will be forfeited on the earliest of the following
dates:

          (a)  On the date on which the Optionee ceases to be an employee of
the Company or a Subsidiary by reason of termination of employment for Cause;

          (b)  Subject to possible extension pursuant to Paragraph 3(c) below,
five (5) years after either (i) the date on which the Optionee ceases to be an
employee of the Company or a Subsidiary with eligibility for retirement under a
retirement plan of the Company or a Subsidiary or (ii) the date of permanent
disability of the Optionee if the Optionee becomes permanently disabled while
an employee of the Company or a Subsidiary;

          (c)  Five (5) years after the date of the death of the Optionee if
the Optionee dies while an employee of the Company or a Subsidiary or one (1)
year after the date of death of the Optionee if the Optionee dies during the
fifth year of the five (5) year period referred to in Paragraph 3(b) above;

          (d)  Five (5) years after the date of a Termination Event or
Constructive Termination;

          (e)  Immediately (x) upon the Optionee accepting employment with a
Competitor without the prior written approval of the Company's Board or (y)
upon a material breach by the Optionee of any applicable agreement with the
Company or a Subsidiary relating to non-competition, non-solicitation or
maintaining of Company confidences; or

          (f)  Ten (10) years from the Grant Date.

     4.   Transferability. Unless otherwise approved by the Compensation
Committee following a request from the Optionee or the Optionee's guardian or
legal representative, the Options are not transferable by the Optionee
otherwise than by will or the laws of descent and distribution. If another type
of transfer is approved by the Compensation Committee, a transfer will only be
effective when the transferee of the Options enters into an agreement with the
Company (in form and substance acceptable to the Company) agreeing to be bound
by the provisions of this Agreement as if such transferee were the Optionee. If
exercised during the lifetime of the Optionee, the Options are exercisable only
by the Optionee or by the


                                       3


Optionee's guardian or legal representative, or by a transferee authorized as
provided in this Paragraph.

     5. Securities Laws. The Options are not exercisable if such exercise would
involve a violation of any applicable federal, state or other securities law,
and the Company hereby agrees to make reasonable efforts to comply with such
securities laws.  The Options are not exercisable unless under said laws at the
time of exercise the shares of Common Stock or other securities purchasable
hereunder are exempt, are the subject matter of an exempt transaction, or are
registered in accordance with such laws.

     6. Adjustments.

        (a) The Board of Directors or the Compensation Committee shall make
such adjustment in the option price and in the number or kind of shares of
Common Stock or other securities covered by the Options as such Board or
Committee may in good faith determine is equitably required to prevent dilution
or enlargement of the rights of the Optionee that otherwise would result from
(i) any stock dividend, stock split, combination of shares, recapitalization or
other change in the capital structure of the Company, or (ii) any merger,
consolidation, spin-off, split-off, spin-out, split up, reorganization, partial
or complete liquidation or other distribution of assets, issuance of rights to
purchase securities, or (iii) any distribution to the holders of the Common
Stock of rights or warrant to purchase equity interests of the Company, or (iv)
any other corporate transaction or event having an effect similar to any of the
foregoing.  Moreover, in the event of any such transaction or event, the Board
of Directors or the Compensation Committee, in its discretion, may provide in
substitution for any or all outstanding awards under the Options such
alternative consideration as it, in good faith, may determine to be equitable
in the circumstances and may require in connection therewith the surrender of
all awards so replaced.

        (b) In the event that any provision of this Agreement would result in a
calculation of a number of shares in amounts other than a whole number, the
number of shares so calculated will be reduced or increased to the nearest
whole number (rounding 0.50 up), with the effect of any such rounding deemed to
attach to the last group of shares to be so calculated (with calculations to be
conducted in alphabetical or numerical order, as applicable).

     7. Withholding. If the Company is required to withhold any federal, state,
local or foreign tax in connection with the exercise of the Options, it will be
a condition to such exercise that the Optionee make provision satisfactory to
the Company for payment of all such taxes. Upon exercise of any Options,
Optionee shall surrender to the Company, by the Company withholding from the
shares of Common Stock to be issued upon such exercise to the Optionee, in
satisfaction of the Withholding Amount, shares of Common Stock that have value
in the aggregate that is equal to such Withholding Amount. In the event that
the Optionee desires to have an amount greater than the Withholding Amount
withheld, the excess over the Withholding Amount must be paid to the Company in
cash.

     8. Definitions. The following capitalized terms have meanings as set forth
below.

                                       4

     "CHANGE IN CONTROL" means if at any time any of the following events shall
have occurred:

          (a)  the Company merges into itself, or is merged or consolidated
with, another corporation and as a result of such merger or consolidation less
than 51% of the voting power of the then-outstanding voting securities of the
surviving or resulting corporation immediately after such transaction are
directly or indirectly beneficially owned in the aggregate by the former
stockholders of the Company immediately prior to such transaction;

          (b)  all or substantially all the assets accounted for on the
consolidated balance sheet of the Company are sold or transferred to one or more
corporations or persons, and as a result of such sale or transfer less than 51%
of the voting power of the then-outstanding voting securities of such
corporation or person immediately after such sale or transfer is directly or
indirectly beneficially held in the aggregate by the former stockholders of the
Company immediately prior to such transaction or series of transactions;

          (c)  A person, within the meaning of Section 3(a)(9) or 13(d)(3) (as
in effect on the date hereof) of the Securities Exchange Act of 1934, becomes
the beneficial owner (as defined in Rule 13d-3 of the Securities and Exchange
Commission pursuant to the Securities Exchange Act of 1934) of (i) 15% or more
but less than 35% of the voting power of the then-outstanding voting securities
of the Company without the prior approval by the Board, or (ii) 35% or more of
the voting power of the then-outstanding voting securities of the Company;
PROVIDED, HOWEVER, that the foregoing does not apply to any such acquisition
that is made by (w) any subsidiary of the Company; (x) any employee benefit plan
of the Company or of any Subsidiary or (y) any person or group of which
employees of the Company or of any Subsidiary control a greater than 25%
interest unless the Board of Directors of the Company determines that such
person or group is making a "hostile acquisition;"

          (d)  A majority of the members of the Board of Directors of the
Company or of any Subsidiary are not Continuing Directors, where a "Continuing
Director" is any member of the Board of Directors of the Company or, with
respect to a Subsidiary, of such Subsidiary who (x) was a member of the Board of
Directors of the Company or, with respect to a Subsidiary, of such Subsidiary on
the date hereof or (y) was nominated for election or elected to such Board of
Directors with the affirmative vote of a majority of the Continuing Directors
who were members of such Board at the time of such nomination or election.

     "COMPETITOR" means any Person that competes with any then-existing business
of the Company or any Subsidiary.

     "CONSTRUCTIVE TERMINATION" means either (i) a substantial, nonconsensual
adverse change in the Optionee's employment duties (which will, however, not
include the relinquishment of the Optionee's status as Chief Executive Officer
if he remains the Chairman of



                                       5

the Board of the Company), or (ii) the moving of the Company's executive
headquarters more than 50 miles from its present location without the Optionee's
consent.

     "EXERCISE PRICE" means the exercise price per share indicated as the
Exercise Price per share on the signature page hereof.

     "FOR CAUSE" means that there is a final, non-appealable order in a
proceeding before a court of competent jurisdiction or a final order in an
administrative proceeding before the Securities and Exchange Commission finding
that the Optionee (i) committed any willful misconduct, fraud or criminal
activity (excluding traffic violations or other minor offenses) which commission
is materially inimical to the interests of any of the Subsidiaries or the
Company, whether for his personal benefit or in connection with his duties for
the Company or the Subsidiaries or (ii) intentionally or knowingly violated any
antifraud provision of the federal or state securities laws.

     "GRANT DATE" means the date of the Board or Compensation Committee action
awarding the Options to the Optionee as indicated on the signature page hereof.

     "MATURE SHARES" means (x) nonforfeitable, unrestricted shares of Common
Stock that have been owned by the Optionee for more than six (6) months prior to
the date of exercise, or (y) shares of restricted stock or other shares of
Common Stock that are forfeitable or subject to restrictions on transfer,
including, without limitation, shares of Common Stock issued pursuant to the
earn out of performance shares or performance units, which shares have been
owned by the Optionee for more than six (6) months and that the Company agrees
to accept as consideration, or (z) such other Company securities as the
Company's chief accounting officer, upon consultation with the Company's
independent accountants, determines will not adversely affect the Company's tax
or accounting position by accepting.

     "ORIGINAL AWARD" means the number of shares of Common Stock indicated as
the Original Award on the signature page hereof.

     "PERSON" means any corporation, partnership, limited liability company,
association, firm, other entity or individual(s).

     "STOCK PRICE" means the closing price of the Common Stock on the principal
exchange on which the Common Stock is traded.

     "SUBSIDIARY" means Cole National Group, Inc., Cole Vision Corporation,
Pearle, Inc., and Things Remembered, Inc.

     "TERMINATION EVENT" means the Optionee's ceasing to be an employee of the
Company or its Subsidiaries by reason of termination by the employer of the
Optionee's employment without Cause.

     "UNVESTED SHARES" means, as of any given time, those shares of Common Stock
relating to the Options that are not, at the time in question, otherwise
permitted, under the terms of this Agreement, to be acquired pursuant to the
exercise of the Options.


                                       6

     "VESTED SHARES" means, as of any given time, those shares of Common Stock
relating to the Options that are, at the time in question, otherwise permitted,
under the terms of this Agreement, to be acquired pursuant to the exercise of
the Options.

     "WITHHOLDING AMOUNT" means the minimum amount of withholding taxes
including Federal, state and local income taxes and social security and
Medicare taxes required to be withheld by the Company by the applicable taxing
authorities, as the result of the exercise of an Option.

     9. Acknowledgment. The undersigned Optionee hereby acknowledges receipt of
an executed original of this Agreement and accepts the Options granted
hereunder.

     EXECUTED at Cleveland, Ohio as of the date first set forth above.

                                        COLE NATIONAL CORPORATION

                                        By: /s/ Leslie D. Dunn
                                            ------------------------------------
                                        Title: Senior Vice President
                                               ---------------------------------


                                        /s/ Jeffrey A. Cole
                                        ----------------------------------------
                                        OPTIONEE


Name of Optionee:                       Jeffrey A. Cole

Name of Employer:                       Cole National Corporation

Position:                               Chairman and Chief Executive Officer of
                                        the Company and Chairman of the Board of
                                        the Company and each of the Subsidiaries

Number of Shares
  in the Original Award:                250,000

Date of Board Resolution
  authorizing this Option
  (Grant Date):                         January 25, 2002

Exercise Price per Share:               $15.15


                                       7

EX-99.1

                                                                    Exhibit 99.1
                                                                    ------------


                            CERTIFICATION 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 quarterly report of Cole National Corporation
(the "Company") on Form 10-Q for the period ended August 3, 2002, as filed with
the Securities and Exchange Commission on the date hereof (the "Report"), each
of the undersigned officers of the Company certifies, pursuant to 18 U.S.C.
Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of
2002, that, to such officer's knowledge:

         (1) The Report fully complies with the requirements of Section 13(a) or
             15(d) 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 results of
             operations of the Company as of the dates and for the periods
             expressed in the Report.


Date: September 17, 2002


                                               /s/ Jeffrey A. Cole
                                               -------------------------------
                                               Name: Jeffrey A. Cole
                                               Title: Chief Executive Officer


                                               /s/ Lawrence E. Hyatt
                                               --------------------------------
                                               Name: Lawrence E. Hyatt
                                               Title: Chief Financial Officer


         The foregoing certification is being furnished solely pursuant to 18
U.S.C. Section 1350 and is not being filed as part of the Report or as a
separate disclosure document.