COMPENSATION COMMITTEE REPORT 2006

Report of the Compensation Committee on Executive Compensation

This Compensation Committee report shall not be deemed incorporated by reference by any general statement incorporating by reference this Proxy Statement into any filing under the Securities Act or under the Exchange Act, except to the extent that we specifically incorporated this information by reference, and shall not otherwise be deemed filed under such Acts.

The Compensation Committee is currently comprised of Messrs. Butler, Knight and Key. The Compensation Committee operates under a written charter, a copy of which can be found on our website located at www.1800contacts.com. The Compensation Committee reviews the recommendations of the Chief Executive Officer on the compensation levels of all other officers, reviews and approves changes to the Company’s compensation policies and practices and administers the Amended and Restated 2004 Stock Incentive Plan (the “Plan”).

The Compensation Committee has the authority to engage the services of outside advisers, experts and others to assist the Compensation Committee in fulfilling its duties and responsibilities. In connection with the Compensation Committee’s deliberations for 2006 compensation, the Compensation Committee directly selected and retained an independent compensation consulting firm and independent outside legal counsel to advise the Compensation Committee. The Compensation Committee received from the independent compensation consulting firm a comprehensive benchmarking analysis regarding base salary and total compensation levels of the executives at selected peer companies of comparable size in the same or related industries or with similar business models. The Compensation Committee believes that the use

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of an independent consultant provides additional assurance that our programs are reasonable and consistent with the Company’s objectives.

Compensation Philosophy and Review

The Company’s general compensation philosophy serves three principal purposes:

1.                to attract and retain qualified executives who will add to the Company’s long-term success;

2.                to link executive compensation to the achievement of the Company’s operational and strategic objectives; and

3.                to link executive compensation with each executive’s performance, level of responsibility and overall contribution to the Company’s success.

In making recommendations to the full Board concerning adjustments to compensation levels, the Compensation Committee intends to consider the Company’s financial condition and operational performance during the prior year. The Compensation Committee expects the Company’s executive compensation program to consist of three principal components: (1) base salary, (2) annual bonus and (3) long-term equity incentives. Set forth below is a discussion as to how the compensation for each of the Company’s executive officers was determined.

Base Salary.   In March 2006, the Compensation Committee recommended to the Board, and the Board approved, new employment agreements, for Messrs. Coon, Bethers, McCallum and Zeidner. The new employment agreements did not include an increase in the base salaries for these executives. The previous base salaries for Messrs. Coon, Bethers, McCallum, Mullis and Zeidner were established by the Compensation Committee in 2004. See “Executive Compensation and Other Matters—Employment Agreements.” The total of base salary and bonus for each of these executives was  maintained in order to keep such compensation arrangements in line with market conditions and to incentivize such executives to achieve the Company’s corporate performance goals and strong overall financial performance. Overall, Messrs. Coon, Bethers and Mullis received a decrease in total cash compensation in 2005 as compared to 2004, while Messrs. McCallum and Zeidner received an increase in total cash compensation in 2005 of approximately 9% and 28%, respectively, as compared to 2004.

Annual Bonus.   Messrs. Coon, Bethers, McCallum, Mullis and Zeidner are entitled to receive an annual bonus based on the Company’s achievement of a combination of personal performance objectives and the Company’s overall financial performance, which have been approved by the full Board and the achievement of which must be certified by the Compensation Committee. The amount of bonus that such executive officer is eligible to earn is also established by the Board, which is subject to increase based on achievement beyond targeted levels. In general, the targeted operating results are determined based upon net sales and operating income. For the most part, executive officers substantially achieved their individual performance objectives and were awarded bonuses accordingly.

Long-Term Equity Incentives.   The long-term equity incentive currently utilized by the Compensation Committee is restricted stock grants. The Compensation Committee believes that restricted stock grants are an effective incentive for management to create value for our stockholders since the ultimate value of the restricted stock bears direct relationship to the market price of the common stock. Executive officers receive one-time grants of both time-vesting and performance-vesting shares of the Company’s common stock. The time-vesting stock will vest over approximately five years, and the performance-vesting stock will vest upon the Company’s achievement of certain performance goals. Both the time-vesting shares and the performance-vesting shares are subject to various change in control provisions involving the Company and its subsidiaries that may result in the accelerated vesting of some or all of the shares that are unvested at the time of the change in control.

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The overall level of grants made to the executives is based on an assessment of their impact on the Company’s results. In March 2006, the Compensation Committee recommended, and the full Board approved, the grant to Messrs. Bethers, McCallum, Mullis and Zeidner of an aggregate of 300,000 restricted shares of common stock, or 46% of the restricted shares granted in 2006 as part of the Plan. As of April 4, 2006, 689,115 shares of restricted stock and options to purchase an aggregate of 1,213,322 shares of common stock were outstanding under the Plan and options to purchase an aggregate of 130,611 shares of common stock were outstanding from options granted prior to the establishment of the Plan.

CEO Compensation.   The Committee establishes the Chief Executive Officer’s base salary based upon the same criteria and review process that it uses for the establishment of the base salaries of the other executives of the Company. In early 2006, the Compensation Committee reviewed Mr. Coon’s performance against his performance goals established in 2005. In addition to a review of the Company’s financial and operational performance during fiscal 2005, the Compensation Committee specifically considered the Company’s failure to achieve certain business goals and objectives. Based on these factors, Mr. Coon offered to waive his bonus for 2005 and any salary increase for 2006. After due consideration, the Compensation Committee accepted Mr. Coon’s offer and, consequently, did not increase Mr. Coon’s base salary for 2006 and did not award Mr. Coon any of his 2005 bonus potential.

The foregoing report has been approved by all members of the Compensation Committee.

Compensation Committee Interlocks and Insider Participation

The Compensation Committee is composed of three directors appointed by the Board, each of whom is independent under applicable NASD listing rules. No member of the Compensation Committee (i) was, during our last fiscal year, an officer or employee of us or any of our subsidiaries; (ii) was formerly an officer of us or any of our subsidiaries; or (iii) had any relationship requiring disclosure under Item 404 of Regulation S-K. The Compensation Committee operates under a written charter adopted by the Board in fiscal 2001, as amended and restated in 2003 and amended during 2006. None of our executive officers serves as a member of the board of directors or compensation committee of any entity that has one or more executives serving on our Compensation Committee.

-- Proxy Statement April 2006