1050122--3/16/2006--1_800_CONTACTS

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Risks Relating to Our Business Continued growth of doctors only lenses could compel contact lens manufacturers to adopt or expand a doctors only distribution strategy for all or some of the lenses they manufacture. The Company will continue to experience order cancellations due to the prescription verification requirements of the Fairness to Contact Lens Consumers Act. The Company may continue to incur significant legal and professional fees related to its legal matters and its efforts to proactively influence the industry on its behalf and on behalf of its consumers. The Company obtains a large percentage of its inventory from a limited number of suppliers. The Company may incur unforeseen costs or not realize all of the anticipated benefits from its relationships with Johnson Johnson Vision Care and CIBA Vision. The Company currently purchases a portion of its products from unauthorized distributors and is not an authorized distributor for some of the products that it sells. Because the Company does not manufacture most of the contact lenses that it sells, the Company cannot ensure that all of the contact lenses it sells meet all federal regulatory requirements. It is possible that the FDA could consider certain of the contact lenses the Company sells to be misbranded or adulterated. A portion of the Company s sales may be found not to comply with state laws and regulations concerning the delivery and sale of contact lenses. The Company s manufacturing facilities and products are subject to stringent regulation by various foreign jurisdictions in which its products are manufactured and/or sold. Consumer acceptance of the Company s manufactured products may not meet the Company s expectations. The Company may not be able to establish a sufficient network of eye care practitioners to provide contact lens eye exams to its customers who have expired contact lens prescriptions. The Company s quarterly results are likely to vary based upon the level of sales and marketing activity in any particular quarter. The retail sale of contact lenses is highly competitive and certain of the Company s competitors are large, national optical chains that have greater resources than the Company. The demand for contact lenses could be substantially reduced if alternative technologies to permanently correct vision gain in popularity. Increases in the cost of shipping, postage or credit card processing could harm the Company s business. The Company s business could be harmed if it is required to collect state sales tax on the sale of all products. The Company faces an inherent risk of exposure to product liability claims in the event that the use of the products it manufacturers or sell results in personal injury. The Company conducts its retail operations through a single distribution facility. The Company is subject to certain risks associated with its foreign operations that could harm its revenues and profitability. Currency exchange rate fluctuations could have an adverse effect on the Company s financial results. The Company may be required to reduce the carrying value of its intangible assets if events and circumstances indicate the remaining balance of intangible assets may not be recoverable. The Company s intellectual property rights may be challenged, and the Company does not have any property rights in the 1-800 CONTACTS telephone number or the Internet addresses. The Company may not be able to complete its milestones and obligations in a timely manner under the Japanese license agreement and may not receive the amount of license fees and royalties that it presently anticipates under the agreement. Risks Relating to the Internet The Company is dependent on its telephone, Internet and management information systems for the sale and distribution of contact lenses. The Company s success is dependent, in part, on continued use of the Internet. Online security breaches could harm the Company s business. Government regulation and legal uncertainties relating to the Internet and online commerce could negatively impact the Company s business operations. Changing technology could adversely affect the operation of the Company s website.

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1050122--3/16/2006--1_800_CONTACTS_INC