NEW WEST EYEWORKS INC, S-2, 1996-12-24

NEW WEST EYEWORKS INC
S-2, 1996-12-24
RETAIL STORES, NEC

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<PAGE> 1

AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON DECEMBER 24, 1996
REGISTRATION NO. 333-
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------

SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------------------

FORM S-2
REGISTRATION STATEMENT
UNDER THE SECURITIES ACT OF 1933
------------------------------------

NEW WEST EYEWORKS, INC.
(Exact name of registrant as specified in its charter)

<TABLE>
<S> <C>
DELAWARE 34-1589514
(State of incorporation) (I.R.S. Employer Identification No.)
</TABLE>

2104 WEST SOUTHERN AVENUE, TEMPE, ARIZONA 85282, (602) 438-1330
(Address, including zip code, and telephone number, including area code,
of Registrant's principal executive offices)

BARRY J. FELD
PRESIDENT AND CHIEF EXECUTIVE OFFICER
NEW WEST EYEWORKS, INC.
2104 WEST SOUTHERN AVENUE
TEMPE, ARIZONA 85282
(602) 438-1330
(Name, address, including zip code, and telephone number, including area code,
of agent for service)
------------------------------------

WITH COPIES TO:

<TABLE>
<S> <C>
MARC C. KRANTZ PAUL I. RACHLIN
KOHRMAN JACKSON & KRANTZ P.L.L. ARNOLD & PORTER
20TH FLOOR, ONE CLEVELAND CENTER 399 PARK AVENUE
CLEVELAND, OHIO 44114 NEW YORK, NY 10022-4690
(216) 696-8700 (212) 715-1172
</TABLE>

------------------------------------

Approximate date of commencement of proposed sale to the public:
As soon as practicable after this registration statement becomes effective.

If any of the securities being registered on this Form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, check the following box. [ ]

If the registrant elects to deliver its latest annual report to security
holders, or a complete and legible facsimile thereof, pursuant to Item 11(a)(1)
of this Form, check the following box. [ ]

If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. [ ]

If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [ ]

If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. [ ]
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CALCULATION OF REGISTRATION FEE
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<TABLE>
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<S> <C> <C> <C> <C>
TITLE OF SECURITIES AMOUNT TO MAXIMUM OFFERING MAXIMUM AGGREGATE AMOUNT OF
TO BE REGISTERED BE REGISTERED(1) PRICE PER SHARE(2) OFFERING PRICE(2) REGISTRATION FEE
- -------------------------------------------------------------------------------------------------
Common Stock,
$0.01 par value.... 1,840,000 Shares(1) $7.13 $13,119,200 $3,975.52
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</TABLE>

(1) Includes up to 240,000 shares of Common Stock issuable pursuant to the
Underwriters' over-allotment option. See "Underwriting."
(2) Estimated solely for the purpose of calculating the registration fee
pursuant to Rule 457(c).

THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF
THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(A),
MAY DETERMINE.
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<PAGE> 2

NEW WEST EYEWORKS, INC.

CROSS REFERENCE SHEET

PURSUANT TO
ITEM 501(b) OF REGULATION S-K

<TABLE>
<CAPTION>
ITEM
NO. FORM S-2 CAPTION CAPTION OR LOCATION IN PROSPECTUS
- ----- ---------------------------------------------- ----------------------------------------
<C> <S> <C>
1. Forepart of Registration Statement and Outside
Front Cover Page of Prospectus................ Forepart of Registration Statement and
Outside Front Cover Page of Prospectus
2. Inside Front and Outside Back Cover Pages of
Prospectus.................................... Inside Front and Outside Back Cover
Pages of Prospectus
3. Summary Information, Risk Factors and Ratio of
Earnings to Fixed Charges..................... Summary; Risk Factors; Not Applicable
4. Use of Proceeds............................... Use of Proceeds
5. Determination of Offering Price............... Not Applicable
6. Dilution...................................... Dilution
7. Selling Security Holders...................... Principal and Selling Stockholders
8. Plan of Distribution.......................... Underwriting
9. Description of Securities to Be Registered.... Outside Front Cover Page; Price Range of
Common Stock and Dividends; Description
of Capital Stock
10. Interests of Named Experts and Counsel........ Legal Matters
11. Information With Respect to the Registrant.... The Company; Consolidated Financial
Statements; Price Range of Common Stock
and Dividends; Selected Financial And
Operating Data; Management's Discussion
and Analysis of Financial Condition and
Results of Operations
12. Incorporation of Certain Information by
Reference..................................... Information Incorporated by Reference
13. Disclosure of Commission Position on
Indemnification for Securities Act
Liabilities................................... Not Applicable
</TABLE>
<PAGE> 3

INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR
MAY OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT
BECOMES EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR
THE SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE
SECURITIES IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE
UNLAWFUL PRIOR TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS
OF ANY SUCH STATE.

SUBJECT TO COMPLETION, DATED DECEMBER 24, 1996

LOGO

1,600,000 SHARES
COMMON STOCK

Of the 1,600,000 shares of Common Stock, par value $0.01 per share (the
"Common Stock"), of New West Eyeworks, Inc. (the "Company") offered hereby,
1,000,000 shares are being issued and sold by the Company and 600,000 are being
sold by the selling stockholders (the "Selling Stockholders"). The Company will
not receive any proceeds from the sale of shares by the Selling Stockholders.
See "Principal and Selling Stockholders."

The Company's Common Stock is quoted on the National Association of
Securities Dealers Automated Quotation System ("NASDAQ") under the symbol "NEWI"
and is listed on the Pacific Stock Exchange under the symbol "NWE." The last
reported sales price for the Common Stock on NASDAQ on December 23, 1996 was
$7.50 per share. See "Price Range of Common Stock and Dividends."

------------------------

THE COMMON STOCK INVOLVES A HIGH DEGREE OF RISK.
SEE "RISK FACTORS" BEGINNING ON PAGE 5 HEREIN.

------------------------

THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION
PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
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<TABLE>
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<CAPTION>
PROCEEDS TO
PRICE TO UNDERWRITING PROCEEDS TO SELLING
PUBLIC DISCOUNT(1) COMPANY(2) STOCKHOLDERS
<S> <C> <C> <C> <C>
- ------------------------------
Per Share..................... $ $ $ $
- ------------------------------
Total (3)..................... $ $ $ $
- ------------------------------
</TABLE>

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(1) Does not include additional compensation paid or payable to the
Underwriters. See "Underwriting" for information concerning compensation
paid and payable to Fahnestock & Co. Inc. (the "Representative"),
indemnification of the Underwriters and other matters.

(2) Before deducting expenses payable by the Company estimated at
$ , including the Representative's non-accountable expense
allowance of $75,000.

(3) The Company and one of the Selling Stockholders have each granted to the
Underwriters a 30-day option to purchase up to 120,000 additional shares of
Common Stock, solely to cover over-allotments, if any. If the Underwriters
exercise this option in full, the total Price to Public, Underwriting
Discount, Proceeds to Company, and Proceeds to Selling Stockholders will be
$ , $ , $ and $ ,
respectively. The Company will not receive any proceeds from the sale of
shares by the Selling Stockholders. See "Principal and Selling Stockholders"
and "Underwriting."

------------------------

The shares of Common Stock are offered by the several Underwriters named
herein, subject to prior sale, when, as and if delivered to and accepted by the
Underwriters and subject to certain other conditions. The Underwriters reserve
the right to withdraw, cancel or modify the offering and to reject any orders in
whole or in part. It is expected that delivery of certificates representing the
shares of Common Stock will be made against payment therefor on or about
, 1997 in New York, New York.

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FAHNESTOCK & CO. INC.

------------------------

The date of this Prospectus is , 1997.
<PAGE> 4

[VARIOUS PHOTOGRAPHS OF GLASSES, PEOPLE WEARING GLASSES, PEOPLE MAKING GLASSES
AND STORES.]

[MAP OF THE UNITED STATES WITH DOTS SHOWING STORE LOCATIONS.]

[NEW WEST EYEWORKS LOGO WITH THE FOLLOWING TEXT UNDERNEATH: "SELLING QUALITY,
FASHIONABLE EYEWEAR AT EVERYDAY VALUE PRICES."]

[NEW WEST EYEWORKS, ALEXIS VISION, VISTA OPTICAL AND LEE OPTICAL LOGOS.]

IN CONNECTION WITH THIS OFFERING, THE UNDERWRITERS MAY OVER-ALLOT OR EFFECT
TRANSACTIONS WHICH STABILIZE OR MAINTAIN THE MARKET PRICE OF THE COMMON STOCK AT
A LEVEL ABOVE THAT WHICH MIGHT OTHERWISE PREVAIL IN THE OPEN MARKET. SUCH
TRANSACTIONS MAY BE EFFECTED ON NASDAQ AND THE PACIFIC STOCK EXCHANGE. SUCH
STABILIZING, IF COMMENCED, MAY BE DISCONTINUED AT ANY TIME.

IN CONNECTION WITH THIS OFFERING, CERTAIN UNDERWRITERS MAY ENGAGE IN
PASSIVE MARKET MAKING TRANSACTIONS IN THE COMMON STOCK OF THE COMPANY ON NASDAQ
AND THE PACIFIC STOCK EXCHANGE IN ACCORDANCE WITH RULE 10B-6A UNDER THE
SECURITIES EXCHANGE ACT OF 1934. SEE "UNDERWRITING."
<PAGE> 5

AVAILABLE INFORMATION

The Company is subject to the informational requirements of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), and, in accordance
therewith, files reports and other information with the Securities and Exchange
Commission (the "Commission"). Reports, proxy statements and other information
filed by the Company may be inspected and copied at the public reference
facilities maintained by the Commission at 450 Fifth Street, N.W., Judiciary
Plaza, Washington, D.C. 20549, and at its regional offices located at Seven
World Trade Center, 13th Floor, New York, New York 10048 and at Citicorp Center,
500 West Madison Street, Suite 1400, Chicago, Illinois 60661. Copies of all or
any part of such material may be obtained from the Public Reference Section of
the Commission, 450 Fifth Street, N.W., Washington, D.C. 20549, at prescribed
rates. The Commission also maintains a web site (http://www.sec.gov) that
contains reports, proxy, and information statements and other information
regarding registrants, such as the Company, that file electronically with the
Commission. The Company's Common Stock is listed on the Pacific Stock Exchange
under the symbol "NWE" and investors may contact the Pacific Stock Exchange at
(415) 393-4252 to arrange to examine similar information at its offices at 301
Pine Street, San Francisco, California 44101.

The Company has filed with the Commission a registration statement on Form
S-2 (together with all amendments, exhibits, schedules and supplements thereto,
the "Registration Statement") with respect to the shares of Common Stock offered
hereby. This Prospectus, which constitutes part of the Registration Statement,
does not contain all of the information contained in the Registration Statement.
For further information with respect to the Company and the Common Stock offered
hereby, reference is made to the Registration Statement. Statements contained
herein concerning the provisions of any contract or other document filed as an
exhibit to the Registration Statement or otherwise filed with the Commission are
not necessarily complete, and in each instance, reference is made to the copy of
such contract or other document as so filed. Each such statement is qualified in
its entirety by such reference.

No dealer, salesperson or other person has been authorized to give any
information or to make any representations other than those contained or
incorporated by reference in this Prospectus and, if given or made, such
information or representations must not be relied upon as having been authorized
by the Company, any Selling Stockholders or any Underwriter. This Prospectus
does not constitute an offer to sell or solicitation of an offer to buy any of
the securities offered hereby in any jurisdiction to any person to whom it is
unlawful to make such offer in such jurisdiction. Neither the delivery of this
Prospectus nor any offer, solicitation or sale made hereunder shall, under any
circumstances, create an implication that there has been no change in the
affairs of the Company since the dates as of which information is furnished or
the date hereof.

INFORMATION INCORPORATED BY REFERENCE

The following documents have been filed by the Company with the Commission
and are hereby incorporated by reference into this Prospectus: (1) Annual Report
on Form 10-K for the fiscal year ended December 30, 1995; (2) Quarterly Report
on Form 10-Q for the quarter ended March 30, 1996; (3) Quarterly Report on Form
10-Q for the quarter ended June 29, 1996; (4) Quarterly Report on Form 10-Q for
the quarter ended September 28, 1996; and (5) Current Report on Form 8-K dated
June 10, 1996. All other documents and reports filed pursuant to Sections 13(a)
or 15(d) of the Exchange Act subsequent to the date of this Prospectus and prior
to the termination of this offering shall be deemed to be incorporated by
reference in this Prospectus and to be made a part hereof from the date of the
filing of such reports and documents.

Any statement contained in a document incorporated or deemed to be
incorporated by reference herein shall be deemed to be modified or superseded
for purposes of this Prospectus to the extent that a statement contained herein
or in any subsequently filed document which also is or is deemed to be
incorporated by reference herein modifies or supersedes such statement. Any such
statement so modified or superseded shall not be deemed, except as so modified
or superseded, to constitute a part of this Prospectus.

iii
<PAGE> 6

The Company will provide without charge to each person, including any
beneficial owner of Common Stock, to whom this Prospectus is delivered, upon the
written or oral request of such person, a copy of any or all documents
incorporated herein by reference (not including the exhibits to such documents,
unless such exhibits are specifically incorporated by reference in the document
which this Prospectus incorporates). Requests for such documents should be
directed to New West Eyeworks, Inc., 2104 West Southern Avenue, Tempe, Arizona
85282, Attention: Vice President -- Finance and Administration. The Company's
executive office telephone number is (602) 438-1330.

iv
<PAGE> 7

PROSPECTUS SUMMARY

The following summary is qualified in its entirety by the more detailed
information and consolidated financial statements, including the notes thereto,
appearing elsewhere in this Prospectus. This Prospectus contains forward-looking
statements that involve risks and uncertainties. Statements that are not
historical facts, including statements about the Company's confidence in its
prospects and strategies and its expectations about expansion into new markets,
growth in existing markets, enhanced operating margins or growth in the managed
optical care business, are forward-looking statements that involve risks and
uncertainties. Actual results and events may differ significantly from those
discussed in the forward-looking statements. Factors that might cause a
difference include, but are not limited to, those discussed in "Risk Factors."
Unless otherwise indicated, the information contained in this Prospectus does
not give effect to the exercise of the Underwriters' over-allotment option.

THE COMPANY

New West Eyeworks, Inc. (the "Company") is a leading specialty retailer of
eyewear, operating under the tradenames "Lee Optical" and "Vista Optical." In
the western and midwestern United States, the Company operates 146 value-priced
optical stores located in malls, strip-shopping centers and Fred Meyer, Inc.
("Fred Meyer") host stores. The Company's everyday value-pricing strategy
features its "signature" $59 price point for a wide selection of quality, brand
name eyeglasses offered at attractive, convenient locations with professional
service. The Company's stores also sell brand name contact lenses and
non-prescription sunglasses and offer customers on-site eye examinations by
independent optometrists. The Company operates optical laboratory and
distribution facilities in Tempe, Arizona and near Portland, Oregon.

The Company's value-pricing strategy differentiates it from competitors.
The Company believes that the economies of scale achieved by operating
centralized laboratory and distribution facilities enable it to produce eyewear
at a lower per unit cost and to maintain lower capital and inventory investment
per sales dollar than optical superstores which operate individual in-store
laboratories to offer "one-hour" service to customers. Therefore, the Company
believes that chains with in-store laboratories are unable to implement an
everyday value-pricing strategy. While certain discount chains have positioned
themselves as low-priced eyewear retailers, the Company believes that such
chains cannot match the combination of product quality, selection, professional
service and mall and strip-shopping center locations offered by the Company. In
addition, the Company believes independent retail outlets, which lack economies
of scale, cannot match the Company's everyday value-pricing, wide selection and
number of locations. The Company also believes that its value-pricing strategy
has appeal to today's price-conscious consumer, especially given the trends
toward cost containment in the health care industry.

At $59 for both the frame and lenses, the Company carries recognizable
brand name eyewear, enabling consumers to comparison price shop. The Company
also sells brand name contact lenses at similar everyday value prices, featuring
daily soft wear lenses for $22 a pair. The Company believes that the success of
its value-pricing strategy is demonstrated by (1) its 19 consecutive quarters of
positive comparable store sales growth, including a 9.2% increase in the first
nine months of 1996 over the comparable 1995 period and an 11.7% increase in its
mall and strip-shopping center locations in the same periods, and (2) the
Company's increasing number of repeat customers.

The Company's growth strategy has four major components:

Emphasize Mall and Strip-Shopping Centers. The Company's expansion
plan is to open new mall and strip-shopping center stores where it can
market its value-pricing strategy under the "Lee Optical" and "Vista
Optical" tradenames. Since successfully completing its initial public
offering in December 1993, the Company has embarked on its growth program
under which it has opened 40 new stores, 31 of which are located in malls
and strip-shopping centers. In addition, during this period, the Company
has relocated and remodeled 18 of its stores, eight of which are located in
malls and strip-shopping centers. To further improve the Company's
operating performance and place increased emphasis on its mall and

1
<PAGE> 8

strip-shopping center locations, the Company has closed 28 underperforming
stores in the same period, 19 of which were located in Fred Meyer and
Smitty's Super Valu, Inc. ("Smitty's") host stores.

Accelerate Store Opening Program. Upon completion of this offering,
the Company plans to accelerate its store opening program with the addition
of 20 to 25 stores in 1997, substantially all of which will be in malls and
strip-shopping centers. In addition, the Company plans to remodel five of
its mall and strip-shopping center stores. The Company will use its modular
store design in all of its new, relocated or remodeled stores. The Company
believes that its store design optimizes customer appeal, while the use of
modular construction reduces store opening and operating costs and
substantially shortens new store construction time. The Company's strategy
is to improve its market share in existing markets and to expand into new
markets by clustering stores in a particular metropolitan area or in
smaller adjacent markets. For example, since 1993, the Company has entered
new markets in Colorado and Iowa where it has established itself as a
leading eyewear retailer.

Increase Managed Care Sales. Managed care is a substantial and
rapidly growing segment of the retail optical business. Under the trade
name "Alexis Vision Plan," the Company uses its stores as a managed care
network. Alexis Vision Plan provides eyecare benefits through negotiated
pricing to members of health maintenance organizations ("HMO"),
beneficiaries of health insurance plans and employees of local and state
governments and mid-sized to large companies. In the first nine months of
1996, sales generated under the Alexis Vision Plan were $8.7 million (or
25.5% of net sales), a 23.6% increase over the comparable 1995 period. The
Company believes that its value-pricing strategy and convenient store
locations are key factors in attracting managed care business. As the
Company increases its presence within existing markets and expands into new
markets, it believes it will be more attractive to managed care
administrators because of its additional store locations.

Established Infrastructure for Growth. To support its planned
expansion, the Company (1) operates two manufacturing facilities that
provide operational flexibility and additional capacity necessary for
expansion and facilitate the delivery of efficient and timely customer
service, (2) has invested substantially in information systems, including a
manufacturing and distribution system and a fully integrated inventory
control, merchandising, and general ledger software system, providing
management with detailed retail sales, manufacturing and administrative
data on a timely basis, and (3) uses centralized purchasing to achieve
greater leverage with vendors.

In late 1994, certain Fred Meyer employees went on a strike that lasted for
a 12-week period. None of the Company's employees were involved in the Fred
Meyer labor dispute and none participated in the Fred Meyer strike. However,
reduced customer traffic in all Fred Meyer stores resulted in a material
reduction in Company sales at the Fred Meyer host stores. In 1995, it became
clear that certain of the Company's stores located in Fred Meyer host stores
were permanently damaged by the impact of the 1994 strike. Management, through
successful negotiations with Fred Meyer, was able to close eight underperforming
stores without lease penalties.

For the first nine months of 1996, operating income was $1.2 million
compared to an operating loss of $438,000 in the comparable 1995 period. The
Company may, however, experience a slight operating loss in the fourth quarter
of 1996, as a result of seasonal factors. The Company believes that it is well
positioned to continue its recent improvement in operating results and
anticipates that as incremental sales occur the operating leverage provided by
its optical laboratory fixed cost structure will enhance operating margins.
Finally, the demographic trends of an aging U.S. population are expected to
increase demand for prescription eyewear from the current $13.8 billion annual
U.S. retail optical market.
------------------------

The Company's principal executive offices are located at 2104 West Southern
Avenue, Tempe, Arizona 85282, and its telephone number is (602) 438-1330.

2
<PAGE> 9

THE OFFERING
<TABLE>
<S> <C>
Common Stock offered by the
Company........................... 1,000,000 shares

Common Stock offered by the Selling
Stockholders...................... 600,000 shares

Common Stock to be outstanding after
this offering(1).................. 4,763,036 shares

Use of Proceeds..................... To reduce the amount outstanding on the
revolving line of credit, open new
stores, remodel existing stores, and
for general corporate purposes,
including working capital. See "Use of
Proceeds."

Risk Factors........................ This offering involves a high degree of
risk. Prospective investors should
review and consider the information set
forth under "Risk Factors."

NASDAQ Symbol....................... NEWI

Pacific Stock Exchange Symbol....... NWE
- ---------------
</TABLE>

(1) Does not include (i) options to purchase 400,000 shares of Common Stock
under the Company's Amended and Restated Stock Option Plan (of which 183,500
are outstanding); (ii) 156,563 shares of Common Stock issuable upon the
exercise of outstanding warrants; and (iii) 650,000 shares of Common Stock
issuable upon conversion of the Company's outstanding preferred stock at
$8.40 per share. See "Description of Capital Stock."

3
<PAGE> 10

SUMMARY FINANCIAL AND OPERATING DATA

<TABLE>
<CAPTION>
FISCAL YEAR ENDED(1) NINE-MONTHS ENDED
------------------------------------------ -----------------------------
DECEMBER 25, DECEMBER 31, DECEMBER 30, SEPTEMBER 30, SEPTEMBER 28,
1993(2) 1994 1995 1995 1996
------------ ------------ ------------ ------------- -------------
(IN THOUSANDS, EXCEPT PER SHARE AND STATISTICAL DATA)
<S> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Net sales.................................... $ 32,964 $ 37,367 $ 40,033 $31,030 $34,043
Gross profit................................. 15,708 17,692 19,681 15,537 17,196
Operating income (loss)...................... (569) (1,286) (1,986) (438) 1,219
Extraordinary gain........................... 1,674 -- -- -- --
Cumulative effect of change in accounting
principle.................................. 374 -- -- -- --
Net income (loss)............................ 1,238 (1,288) (2,025) (451) 902
Net income (loss) applicable to holders of
common stock............................... $ 842 $ (1,616) $ (2,354) $ (696) $ 657
======= ======= ======= ======= =======
Income (loss) per common and common
equivalent share:
Income (loss) before extraordinary gain and
cumulative effect of change in accounting
principle................................ $ (0.57) $ (0.43) $ (0.63) $ (0.18) $ 0.18
Extraordinary gain........................... 0.79 -- -- -- --
Cumulative effect of change in accounting
principle.................................. 0.18 -- -- -- --
------- ------- ------- ------- -------
Net income (loss) per share.................. $ 0.40 $ (0.43) $ (0.63) $ (0.18) $ 0.18
======= ======= ======= ======= =======
Weighted average number of common and common
equivalent shares outstanding.............. 2,125 3,736 3,763 3,763 3,763
STATISTICAL DATA:
Net sales growth (3)....................... 16.1% 13.4% 7.1% 9.3% 9.7%
Increase in comparable store sales (4)..... 15.0% 6.7% 5.9% 5.6% 9.2%
Stores open at period beginning............ 129 134 150 150 139
Stores opened during period................ 8 21 9 8 10
Stores closed during period................ (3) (5) (20) (13) (3)
------- ------- ------- ------- -------
Stores open at period end.................. 134 150 139 145 146
======= ======= ======= ======= =======
Type of store at period end:
Host stores.............................. 61 65 51 58 51
Mall and strip-shopping centers.......... 73 85 88 87 95
</TABLE>

<TABLE>
<CAPTION>
SEPTEMBER 28, 1996
------------------------
ACTUAL AS ADJUSTED(5)
------- --------------
<S> <C> <C>
BALANCE SHEET DATA:
Cash and cash equivalents.................................................................. $ 126 $ 4,317
Working capital (deficit).................................................................. (4,924) 1,182
Total assets............................................................................... 12,920 17,111
Notes payable and capital lease obligations................................................ 2,368 453
Total stockholders' equity................................................................. 2,609 8,715
</TABLE>

- ---------------

(1) The Company's fiscal year consists of 52 or 53 weeks ending on the last
Saturday of the calendar year. The year ended December 31, 1994 consists of
53 weeks, all other years presented consist of 52 weeks.

(2) Net income for the year ended December 25, 1993 includes an extraordinary
gain of $1,674,000 or $0.79 per share, that was realized by the Company as a
result of the retirement in full of its senior bank debt. See Note 1 of
Notes to Consolidated Financial Statements appearing elsewhere in this
Prospectus. During the same period, the Company changed its method of
accounting for income taxes, resulting in a cumulative effect adjustment of
$374,000, or $0.18 per share. See "Change in Accounting Principle" in Note 2
of Notes to Consolidated Financial Statements appearing elsewhere in this
Prospectus.

(3) Net sales growth in the first nine months of 1996 would have been 13.3% if
prior-year sales from closed retail outlets were excluded from 1995
revenues.

(4) A store becomes comparable after it has been open 52 weeks. Stores that are
relocated are not included in the comparable store base.

(5) As adjusted to reflect the sale by the Company of 1,000,000 shares of Common
Stock offered hereby at an assumed public offering price of $7.13 per share
of Common Stock, and the application of the estimated net proceeds of this
offering to reduce the amount outstanding on the Company's revolving line of
credit, as of September 28, 1996, as set forth in "Use of Proceeds."

4
<PAGE> 11

RISK FACTORS

The Common Stock offered hereby involves a high degree risk. In addition to
the other information contained in this Prospectus, the following factors should
be considered carefully in evaluating the Company and its business before
purchasing any shares of Common Stock. This Prospectus contains forward-looking
statements that involve risks and uncertainties. Actual results and events may
differ significantly from those discussed in the forward-looking statements as a
result of certain of the risk factors set forth below and elsewhere in this
Prospectus, and other factors.

ACCUMULATED DEFICIT AND HISTORICAL OPERATING LOSSES

Total accumulated deficit was $11.3 million, $13.6 million and $13.0
million at December 31, 1994, December 30, 1995 and September 28, 1996,
respectively. The Company reported operating losses of $1.3 million and $2.0
million for 1994 and 1995. The Company had operating income of $1.2 million for
the first nine months of 1996, although the Company may incur a slight operating
loss in the fourth quarter of 1996, as a result of seasonal factors. See
"Management's Discussion and Analysis of Financial Condition and Results of
Operations -- Seasonality and Quarterly Results." There can be no assurance that
the Company will remain profitable, or will achieve profits similar to or
greater than those achieved in 1996.

EXPANSION PLANS

The Company's net sales have grown from $33.0 million in 1993 to $
million in 1996, and the Company intends to pursue an aggressive growth
strategy. The growth of the Company is dependent, in large part, upon its
ability to open and operate new stores on a timely and profitable basis. Upon
completion of this offering, the Company plans to open a total of 20 to 25 new
stores in 1997, substantially all of which will be in malls and strip-shopping
centers. The Company expects that in the short-term its operating margins may be
adversely affected by increased operating costs associated with such new store
openings. In addition, no assurance can be given that opening new stores in
markets already served by the Company will not adversely impact existing store
profitability or reduce comparable store sales. Furthermore, the rate of new
store openings is subject to various contingencies, many of which are beyond the
Company's control. These contingencies include the Company's ability to secure
suitable store sites on a timely basis and on satisfactory terms, the
availability of independent optometrists, the ability to attract licensed
opticians and other qualified personnel, the Company's ability to successfully
integrate new geographic markets into its existing eyewear laboratory,
manufacturing and distribution system, and the availability of adequate capital
resources. The Company would consider opportunistic acquisitions of small retail
optical chains or independent retail optical outlets if such acquisitions
enabled the Company to improve its market share in existing markets or expand
into new markets. There is no assurance that any definitive acquisition
agreements will be reached or, if entered into, that any acquisitions will be
successful. Insufficient capital resources may require the Company to delay,
scale back or eliminate its expansion activities. Although there can be no
assurance, the Company believes that the net proceeds from this offering,
together with cash flow from operations and existing capital lease financing,
will be adequate to fund the Company's currently proposed expansion plans. There
can be no assurance that the continued expansion of the Company's business will
be profitable. See "Business -- Expansion Strategy."

COMPETITION

The retail eyecare industry is fragmented and highly competitive and
historically has been subject to severe price competition. The Company's
competitors include large optical store chains and numerous independent retail
outlets, opticians, optometrists and ophthalmologists. In addition, the increase
in the number of optical units in department store chains and warehouse clubs
and the emergence of mail order contact lens replacement services have further
increased the Company's competition. Many of the Company's competitors are
larger than the Company and have financial and other resources substantially
greater than

5
<PAGE> 12

those of the Company. There can be no assurance that competition will not
adversely affect the Company's operations in the future. In addition, medical
innovations such as surgical laser technology and new drug development may
change the nature of the eyecare industry. Although the Company believes that
foreseeable advances will not eliminate the need for corrective eyewear, there
can be no assurance that technological innovations will not have a material
adverse effect on the Company's operations. See "Business -- Competition."

DEPENDENCE ON FRED MEYER

Historically, the Company has been dependent upon its relationship with
Fred Meyer, in which the Company had 51 stores as of December 23, 1996. The Fred
Meyer host stores are generally smaller than the Company's mall and
strip-shopping center locations and historically have lower net revenues per
store than the Company's other stores. The Company has a master lease agreement
with Fred Meyer, due to expire in April 1998, that grants the Company the right
of first refusal to open an optical store in any new Fred Meyer store in which
Fred Meyer decides to place an eyewear department. However, Fred Meyer is not
required under the master lease agreement to open any future stores or, when new
stores are opened, to place an eyewear department in the store. A strike by
certain Fred Meyer employees in the third and fourth quarters of 1994 had an
adverse impact on the Company. None of the Company's employees were involved in
the Fred Meyer labor dispute and none participated in the strike. However,
reduced customer traffic in all Fred Meyer stores resulted in a material
reduction in Company sales at the Fred Meyer host stores. Although Fred Meyer
entered into agreements with the unions representing the striking employees,
there can be no assurance that a similar strike in the future will not adversely
impact the Company. In 1995 and 1996, the Company closed nine Fred Meyer host
stores. The Company anticipates that as it implements its expansion plans,
revenues from Fred Meyer host stores will become a smaller percentage of the
Company's revenues. See "Business -- Expansion Strategy" and "-- Relationship
with Host Stores."

RISKS ASSOCIATED WITH MANAGED CARE CONTRACTS

As an increasing percentage of optometric and ophthalmologic patients are
coming under the control of managed care entities, the Company believes that its
success will, in part, be dependent upon its ability to negotiate contracts with
HMOs, health insurance companies and employer groups. When the Company provides
benefits to a managed care customer it does so generally at a small discount
from the Company's everyday value prices. There can be no assurance that the
Company will be able to negotiate satisfactory agreements with managed care
providers or maintain its current agreements with managed care providers. Any
such failure to obtain satisfactory new agreements or maintain existing
relationships may have a material adverse effect on the Company.

RELATIONSHIPS WITH OPTOMETRISTS

An important element in the Company's expansion plans is the establishment
of relationships with optometrists for the Company's new stores. Although the
Company believes that its stores offer excellent practice opportunities for
independent optometrists and that relations with its optometrists are good,
there can be no assurance that the Company will be successful in developing new
relationships or maintaining its existing relationships. Any difficulties or
delays in securing or maintaining the services of optometrists could have a
material adverse effect on the Company. See "Business -- Optical Professionals."

SEASONALITY AND QUARTERLY RESULTS

The retail eyewear industry is seasonal in nature. The Company has
historically incurred and anticipates that it may incur lower net sales and net
losses during the fourth quarter of each year because of reduced demand for
eyewear during the holiday season. The Company's quarterly results may also
fluctuate significantly as a result of a variety of factors, including the
timing of new store openings, the net sales contributed by new stores and bad
weather. See "Management's Discussion and Analysis of Financial Condition and
Results of Operations -- Seasonality and Quarterly Results."

6
<PAGE> 13

DEPENDENCE ON KEY PERSONNEL

The Company's success depends to a significant extent upon the performance
of its senior management team, including Ronald E. Weinberg, Chairman of the
Board, and Barry J. Feld, the Company's Chief Executive Officer and President.
Although the Company believes that its senior management team has significant
depth, the loss of services of any of the Company's executive officers could
have an adverse impact on the Company. The Company maintains key man life
insurance in the amount of $2.0 million on the life of Mr. Feld. The future
success of the Company will depend in large part on its continued ability to
attract and retain qualified personnel. See "Management."

REGULATION

The retail optical industry is subject to a variety of federal, state and
local laws, regulations and ordinances, including those regarding advertising,
location and design of stores, products sold, qualifications and practices of
opticians (such as those employed by the Company), and relations between
independent optometrists and optical retailers (such as the Company). The state
and local legal requirements vary widely among jurisdictions and are subject to
frequent change. In addition, the Federal Trade Commission has issued
regulations affecting certain aspects of the optical industry, including a
requirement that optometrists deliver a copy of optical prescriptions for
eyeglasses to patients so that they may select optical dispensers of their
choice. Certain products sold by the Company, specifically ophthalmic lenses,
contact lenses and contact lens solutions, must comply with quality control
standards set by the United States Food and Drug Administration.

The Company believes that it is in substantial compliance with all material
laws and regulations applicable to its operations. There can be no assurance,
however, that a review of the Company's past, present or future business
activities by courts or regulatory authorities will not result in determinations
that could adversely affect the operations of the Company or that the health
care regulatory environment will not change so as to restrict the Company's
existing operations or limit the expansion of the Company's business. See
"Business -- Government Regulation."

In addition, numerous health care related legislative proposals have been
made in recent years in the United States Congress and various state
legislatures. The potential impact of these proposals with respect to the
Company's managed optical care business is uncertain, and there is no assurance
that the proposals, if adopted, would not have a material adverse impact on the
Company.

NET OPERATING LOSS CARRYFORWARDS

As of December 30, 1995, for federal income tax purposes, the Company had
regular net operating loss ("NOL") carryforwards of $7.7 million and alternative
minimum tax ("AMT") NOL carryforwards of $6.9 million which begin to expire in
2006. Under Section 382 of the Internal Revenue Code of 1986, as amended (the
"Code"), utilization of NOL carryforwards is subject to significant limitations
after an "ownership change" as defined in Section 382(g) of the Code, which may
result in Federal income taxes being paid earlier than if no such change in
ownership had occurred. The Company's initial public offering in 1993 caused the
Company to experience an ownership change as defined by Section 382(g) of the
Code. As a result, there is an annual limitation of approximately $1.0 million
on the amount of NOL carryforwards generated prior to the ownership change which
can be utilized to offset the Company's future taxable income. The Company does
not currently believe that this offering will result in an ownership change.
However, future transactions involving the Company's stock (or rights to acquire
such stock) could also cause a further ownership change resulting in additional
restrictions on the Company's ability to utilize its net operating loss
carryforwards after the date of such ownership change. See "Management's
Discussion and Analysis of Financial Condition and Results of Operations -- Net
Operating Loss Carryforwards."

ANTI-TAKEOVER PROVISIONS

Certain provisions of the Company's Amended and Restated Certificate of
Incorporation and Amended and Restated Bylaws may be deemed to have
anti-takeover effects and may discourage, defer or prevent a change of control
of the Company. These provisions (1) classify the Company's Board of Directors
into three

7
<PAGE> 14

classes, each of which will serve for different three-year periods, (2) provide
that only the Board of Directors, the Chairman of the Board or at least 25% of
the stockholders of the Company entitled to vote may call special meetings of
the stockholders, (3) establish certain advance notice procedures for nomination
of candidates for election as directors and for stockholder proposals to be
considered at stockholders' meetings and (4) authorize preferred stock, the
terms of which may be determined by the Board of Directors and which may be
issued without stockholder approval.

CONTROL BY PRINCIPAL STOCKHOLDERS

Assuming conversion of the Company's convertible 6% cumulative preferred
stock, Series A and Series B, par value $1,000 per share (together, the
"Convertible Preferred Stock"), and the exercise of all warrants and options
that are presently exercisable, officers and directors of the Company and the
Selling Stockholders collectively will own approximately 41.4% of the
outstanding Common Stock upon the closing of this offering (38.5% if the
Underwriters' over-allotment option is exercised in full). Accordingly, if such
persons vote their shares of Common Stock in the same manner, they will
influence significantly all matters submitted to the holders of Common Stock for
approval, including the election of directors and fundamental corporate
transactions. In addition, each of the two series of the Convertible Preferred
Stock has elected and will be entitled to elect one director to the Company's
Board of Directors, and if the Company fails to pay in full six consecutive
quarterly dividends, then the holders of the Convertible Preferred Stock will be
entitled to vote on all matters submitted to the holders of Common Stock, as if
the Convertible Preferred Stock had been converted into Common Stock at a price
equal to $8.40 per share (subject to adjustment). There is no assurance that the
Company will make the required dividend payments on the Convertible Preferred
Stock. If the Company fails to pay in full six consecutive quarterly dividends
on the Convertible Preferred Stock, the provisions of the Convertible Preferred
Stock granting voting rights to the holders thereof will dilute significantly
the voting power of the holders of the outstanding Common Stock. See "Principal
and Selling Stockholders" and "Description of Capital Stock -- Convertible
Preferred Stock."

SHARES ELIGIBLE FOR FUTURE SALE

Upon the closing of this offering, the Company will have 4,763,036 shares
of Common Stock outstanding. All the directors, officers and beneficial owners
of 5% or more of the outstanding Common Stock of the Company have agreed not to
offer, sell or otherwise dispose of such shares or any other shares of Common
Stock purchased by them directly from the Company after the effective date of
this offering, until 180 days after the effective date, without the prior
written consent of the Representative. After such date, all such shares may be
sold subject to the limitations of Rule 144 of the Securities Act of 1933, as
amended (the "Securities Act"). The holders of the Convertible Preferred Stock
may convert their shares into 650,000 shares of Common Stock, subject to
customary anti-dilution adjustments. In addition, the Company has warrants and
options outstanding to purchase up to an aggregate of 340,063 shares of Common
Stock, subject to customary anti-dilution adjustments. Certain of the Company's
existing stockholders are entitled to certain rights with respect to the
registration of 594,940 shares of Common Stock under the Securities Act, and an
additional 650,000 and 106,563 shares of Common Stock (subject to adjustment)
issuable upon conversion of the Convertible Preferred Stock and the exercise of
outstanding warrants, respectively (the "Registrable Securities"). In the event
that the Company proposes to register any of its securities under the Securities
Act, either for its own account or the account of other security holders, the
holders of Registrable Securities are entitled to have their shares included in
such registration, subject to certain marketing and other limitations. In
addition, the Mesirow Group (as defined below) and Mr. Weinberg, with respect to
35,655 of his shares, each generally have the right under certain circumstances
to require the Company to file one registration statement under the Securities
Act to register all or any part of their Registrable Securities, provided that
the aggregate offering value of the Registrable Securities is at least $8.0
million. The Company may in certain circumstances defer such registrations and
the underwriters have the right, subject to certain limitations, to limit the
number of shares included in such registration. Future sales of substantial
amounts of Common Stock, or the potential for such sales, could adversely affect
prevailing market prices.

8
<PAGE> 15

LIMITED PUBLIC FLOAT; TRADING; VOLATILITY OF STOCK PRICE

The Company's Common Stock is quoted on the National Association of
Securities Dealers Automated Quotation System ("NASDAQ") and the Pacific Stock
Exchange. While a public market currently exists for the Company's Common Stock,
the number of shares in the public market at the completion of this offering
will be approximately 3.2 million. Trading volume in the four weeks ended
December 20, 1996 averaged 8,863 shares traded per day. Thus, trading of
relatively small blocks of stock can have a significant impact on the price at
which the stock is traded. In addition, NASDAQ has experienced, and is likely to
experience in the future, significant price and volume fluctuations that could
adversely affect the market price of the Common Stock without regard to the
operating performance of the Company. The Company believes factors such as
quarterly fluctuations in financial results, announcements by competitors or
changes in securities analysts' recommendations may cause the market price to
fluctuate, perhaps substantially. These fluctuations, as well as general
economic conditions, such as recessions or high interest rates, may adversely
affect the market price of the Common Stock. See "Price Range of Common Stock
and Dividends."

NO DIVIDENDS

The Company has never paid cash dividends on its Common Stock and
anticipates that all earnings, if any, in the foreseeable future will be
retained to finance the growth and development of its business. Any future
dividends will depend on the earnings, capital requirements and financial
condition of the Company, and on such other factors as the Company's Board of
Directors may consider relevant. In addition, the Company's current revolving
line of credit prohibits, and any new financing agreements entered into by the
Company may limit or prohibit, the payment of cash dividends on its Common
Stock. See "Price Range of Common Stock and Dividends."

DILUTION

The purchasers of the shares of Common Stock offered hereby will experience
immediate and substantial dilution in the amount of $5.62 per share. See
"Dilution."

USE OF PROCEEDS

The net proceeds to the Company from the sale of 1,000,000 shares of Common
Stock offered by the Company hereby are estimated to be $6.1 million (or
approximately $6.9 million if the Underwriters' over-allotment options are
exercised in full) assuming a public offering price of $7.13 per share, after
deducting underwriting discounts and commissions and estimated offering expenses
payable by the Company. The Company will not receive any proceeds from the sale
of shares of Common Stock by the Selling Stockholders. The Company expects to
use the net proceeds of this offering to reduce the outstanding balance on its
revolving line of credit ($2.0 million, including accrued unpaid interest as of
December 13, 1996). The Company also expects to use approximately $3.6 million
to open new stores and remodel existing stores. See "Business -- Expansion
Strategy." The remainder of the net proceeds will be used for general corporate
purposes, including working capital. Pending such uses, the Company will invest
the net proceeds of this offering in short term, investment-grade,
interest-bearing securities.

9
<PAGE> 16

PRICE RANGE OF COMMON STOCK AND DIVIDENDS

The Company's Common Stock is quoted on NASDAQ under the symbol "NEWI" and
is listed on the Pacific Stock Exchange under the symbol "NWE." The following
table sets forth for the high and low bid information of the Company's Common
Stock on NASDAQ for each full quarter in fiscal 1996, 1995 and 1994:

<TABLE>
<CAPTION>
1996 1995 1994
------------ ------------ ------------
QUARTER ENDED HIGH LOW HIGH LOW HIGH LOW
------------------------------------------- ---- --- ---- --- ---- ---
<S> <C> <C> <C> <C> <C> <C>
First Quarter.............................. 6 4 5 1/2 3 1/8 8 3/8 5 3/4
Second Quarter............................. 6 5 5 3/4 4 1/8 7 5/8 4 1/2
Third Quarter.............................. 6 3/4 5 1/4 5 1/4 3 1/4 4 3/4 2 3/4
Fourth Quarter............................. 5 1/4 3 7/8 4 3/8 3
</TABLE>

The last sale price of the Company's Common Stock on December 23, 1996 as
reported on NASDAQ was $7.50 per share. As of December 13, 1996, there were
approximately 30 stockholders of record representing approximately 650
beneficial holders of the Common Stock.

DILUTION

At September 28, 1996, the Company had net tangible book value of $2.1
million, or $0.47 per share of Common Stock. Net tangible book value per share
represents the Company's tangible assets less total liabilities divided by the
number of shares of Common Stock outstanding, assuming conversion of the
Convertible Preferred Stock. After giving effect to the sale by the Company of
1,000,000 shares of Common Stock offered hereby at an assumed offering price of
$7.13 per share and after deduction of underwriting discounts and commissions
and estimated offering expenses (estimated at $1.0 million), the as adjusted net
tangible book value of the Company at September 28, 1996 would have been $8.2
million, or $1.51 per share. This represents an immediate increase in net
tangible book value of $1.04 per share to existing stockholders and an immediate
dilution of $5.62 per share to new investors. The following table illustrates
this dilution per share:

<TABLE>
<S> <C> <C>
Assumed public offering price per share........ $7.13
Net tangible book value per share as of
September 28, 1996........................... $ 0.47
Increase in net tangible book value per share
attributable to new investors................ 1.04
------
As adjusted net tangible book value per share
after the offering........................... 1.51
-----
Dilution per share to new investors............ $5.62
=====
</TABLE>

10
<PAGE> 17

CAPITALIZATION

The following table presents as of September 28, 1996, (1) the actual
capitalization of the Company; (2) the adjusted capitalization of the Company
after giving effect to the sale by the Company of 1,000,000 shares of Common
Stock offered hereby at an assumed offering price of $7.13 per share and the
application of the estimated net proceeds therefrom as described under "Use of
Proceeds." This table should be read in conjunction with the more detailed
financial data and notes thereto included elsewhere in this Prospectus.

<TABLE>
<CAPTION>
SEPTEMBER 28, 1996
-----------------------
AS ADJUSTED
FOR
ACTUAL OFFERING
------- -----------
(IN THOUSANDS)
<S> <C> <C>
SHORT-TERM DEBT AND CURRENT PORTION OF LONG-TERM DEBT AND CAPITAL
LEASE OBLIGATIONS.................................................. $ 2,133 $ 218
-------- ---------
LONG-TERM DEBT AND CAPITAL LEASE OBLIGATION (LESS CURRENT PORTION)... 235 235
-------- ---------

STOCKHOLDERS' EQUITY:
Series A 6% Cumulative Convertible Preferred Stock, $1,000 par
value, 3,960 shares authorized, issued and outstanding.......... 3,960 3,960
Series B 6% Cumulative Convertible Preferred Stock, $1,000 par
value, 1,500 shares authorized, issued and outstanding.......... 1,500 1,500
Common stock, $0.01 par value, 5,000,000 shares authorized,
3,763,036 shares issued and outstanding, 4,763,036 shares issued
and outstanding on an as adjusted basis......................... 38 48
Paid-in capital.................................................... 10,100 16,196
Accumulated deficit................................................ (12,989) (12,989)
-------- ---------

Total stockholders' equity................................. 2,609 8,715
-------- ---------

TOTAL CAPITALIZATION................................................. $ 4,977 $ 9,168
========= =========
</TABLE>

11
<PAGE> 18

SELECTED FINANCIAL AND OPERATING DATA

The selected financial data presented below under the captions "Statement
of Operations Data" and "Balance Sheet Data" for the years ended 1991, 1992,
1993, 1994, and 1995, are derived from the Company's annual Consolidated
Financial Statements. The selected financial data for the nine months ended
September 30, 1995 and September 28, 1996 are derived from the Company's
unaudited Consolidated Financial Statements. The unaudited financial statements
include all adjustments (consisting only of normal recurring adjustments) which
the Company considers necessary for a fair presentation of its financial
position and results of operations for the interim period. The operating results
for the nine months ended September 28, 1996 are not necessarily indicative of
the results that may be expected for the full year. The following data should be
read in conjunction with, and are qualified in their entirety by, such
Consolidated Financial Statements and related notes, "Management's Discussion
and Analysis of Financial Condition and Results of Operations" and the other
financial information included elsewhere herein.

<TABLE>
<CAPTION>
FISCAL YEAR ENDED (1) NINE-MONTHS ENDED
------------------------------------------------------------ -----------------------
DEC. 28, DEC. 26, DEC. 25, DEC. 31, DEC. 30, SEPT. 30, SEPT. 28,
1991 1992 1993 (2) 1994 1995 1995 1996
-------- -------- -------- -------- -------- --------- ---------
(IN THOUSANDS, EXCEPT PER SHARE AND STATISTICAL DATA)
<S> <C> <C> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Net sales............................. $24,568 $28,383 $32,964 $37,367 $40,033 $31,030 $34,043
Gross profit.......................... 10,630 13,642 15,708 17,692 19,681 15,537 17,196
Restructuring expenses (3)............ 1,279 -- -- -- -- -- --
Operating income (loss)............... (4,786) (1,312) (569) (1,286) (1,986) (438) 1,219
Income (loss) before income taxes,
extraordinary gain and cumulative
effect of change in accounting
principle........................... (5,417) (1,846) (1,279) (1,288) (2,025) (451) 1,074
Income tax expense (benefit).......... -- -- (469) -- -- -- 172
Extraordinary gain.................... -- -- 1,674 -- -- -- --
Cumulative effect of change in
accounting principle................ -- -- 374 -- -- -- --
-------- -------- -------- -------- -------- -------- --------
Net income (loss)..................... (5,417) (1,846) 1,238 (1,288) (2,025) (451) 902
Accretion of redeemable preferred
stock............................... (100) -- -- -- -- -- --
Dividends paid or accrued on
redeemable preferred stock and
cumulative convertible preferred
stock............................... (291) (431) (396) (328) (329) (245) (245)
-------- -------- -------- -------- -------- -------- --------
Net income (loss) applicable to
holders of common stock............. $(5,808) $(2,277) $ 842 $(1,616) $(2,354) $ (696) $ 657
======== ======== ======== ======== ======== ======== ========
INCOME (LOSS) PER COMMON AND COMMON
EQUIVALENT SHARE:
Loss before extraordinary gain and
cumulative effect of accounting
change.............................. $ (4.27) $ (1.67) $ (0.57) $ (0.43) $ (0.63) $ (0.18) $ 0.18
Extraordinary gain.................... -- -- 0.79 -- -- -- --
Cumulative effect of change in
accounting principle................ -- -- 0.18 -- -- -- --
-------- -------- -------- -------- -------- -------- --------
Net income (loss)..................... $ (4.27) $ (1.67) $ 0.40 $ (0.43) $ (0.63) $ (0.18) $ 0.18
======== ======== ======== ======== ======== ======== ========
BALANCE SHEET DATA:
Cash and cash equivalents............. $ 395 $ 281 $ 163 $ 1,000 $ 241 $ 127 $ 126
Working capital (deficit)............. (7,406) (8,260) (6,917) (2,354) (4,984) (3,433) (4,924)
Total assets.......................... 9,274 8,372 9,846 11,721 11,734 12,225 12,920
Notes payable and capital lease
obligations......................... -- -- 406 259 556 636 2,368
Total common stock and other
stockholders' equity (deficit)...... (8,077) (10,347) (2,692) 4,276 1,922 3,578 2,609
STATISTICAL DATA:
Net sales growth (4).................. (12.3% ) 15.5 % 16.1 % 13.4 % 7.1 % 9.3% 9.7%
Increase (decrease) in comparable
store sales (5)..................... (12.3% ) 19.5 % 15.0 % 6.7 % 5.9 % 5.6% 9.2%
Stores open at period beginning....... 143 128 129 134 150 150 139
Stores opened during period........... 1 3 8 21 9 8 10
Stores closed during period........... (16) (2) (3) (5) (20) (13) (3)
-------- -------- -------- -------- -------- -------- --------
Stores open at period end............. 128 129 134 150 139 145 146
======== ======== ======== ======== ======== ======== ========
Type of store at period end:
Host stores......................... 58 58 61 65 51 58 51
Malls and strip-shopping centers.... 70 71 73 85 88 87 95
</TABLE>

- ---------------
(1) The Company's fiscal year consists of 52 or 53 weeks ending the last
Saturday of the calendar year. The year ended December 31, 1994 consists of
53 weeks, all other years presented consist of 52 weeks.

(2) Net income for the period ended December 25, 1993 includes an extraordinary
gain of $1,674,000 or $0.79 per share, that was realized by the Company as a
result of the retirement in full of its senior bank debt. See Note 1 of
Notes to Consolidated Financial Statements appearing elsewhere in this
Prospectus. During the same period, the Company changed its method of
accounting for income taxes, resulting in a cumulative effect adjustment of
$374,000, or $0.18 per share. See "Change in Accounting Principle" in Note 2
of Notes to Consolidated Financial Statements appearing elsewhere in this
Prospectus.

(3) During 1991, the Company incurred nonrecurring expenses of $1,279,000
relating to the restructuring of its business, including the write-off of
property and equipment and accrual of lease payments at stores and optical
laboratories either closed or scheduled for closure.

(4) Net sales growth in the first nine months of 1996 would have been 13.3% if
prior-year sales from closed retail outlets were excluded from 1995
revenues.

(5) A store becomes comparable after it has been open 52 weeks. Stores that are
relocated are not included in the comparable store base.

12
<PAGE> 19

MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Unless otherwise stated, references in this Prospectus to the years 1995,
1994, and 1993 relate to the fiscal years ended December 30, 1995, December 31,
1994, and December 25, 1993, and references to 1996 and 1995 nine month periods
relate to the periods ended September 28, 1996 and September 30, 1995. Fiscal
years 1995 and 1993 each had 52 weeks, while 1994 had 53 weeks.

OVERVIEW

Concurrent with the hiring of new management in 1991, the Company
implemented its everyday value-pricing strategy, featuring its "signature" $59
price point for a wide selection of quality, brand name eyeglasses offered at
attractive, convenient locations with professional service. Since that time, the
Company has focused on opening new stores, primarily in malls and strip-shopping
centers, entering new geographic markets, improving its operating efficiency,
expanding its managed optical care business and establishing the informational
and operational infrastructure necessary for further expansion. Simultaneously,
the Company closed its underperforming stores which were located primarily in
host stores, including eight stores located in Fred Meyer host stores that were
negatively impacted by the 1994 strike by Fred Meyer employees.

The Company believes that the success of its value-pricing strategy is
demonstrated by (1) its 19 consecutive quarters of positive comparable store
sales growth, including a 9.2% increase in the first nine months of 1996
compared to the first nine months of 1995 and an 11.7% increase in its mall and
strip-shopping center locations in the same periods, and (2) the increasing
number of repeat customers. Currently, the Company operates 146 stores in 12
western and midwestern states.

In the first nine months of 1996, the Company opened 10 stores, nine of
which are located in malls or strip-shopping centers and one of which is located
in a Fred Meyer host store. Evidencing the Company's strategy to expand into new
geographic markets, seven of the 10 new stores opened in 1996 were located in
the Iowa market, representing the Company's first entry into the midwestern
United States. In addition, the Company remodeled or relocated eight stores and
closed three stores during this period. With additional capital from this
offering, the Company plans to accelerate its store opening program with the
addition of 20 to 25 stores in 1997, substantially all of which will be in malls
and strip-shopping centers. Opening new stores in markets already served by the
Company may adversely impact existing store profitability and reduce comparable
store sales, although the Company believes that such new stores will increase
its total sales and profitability in such markets.

The Company's managed optical care business, Alexis Vision Plan, is an
increasingly important component of its overall business. In the first nine
months of 1996, sales generated by the Alexis Vision Plan, were $8.7 million (or
approximately 25.5% of net sales), a 23.6% increase over the comparable 1995
period. There is no assurance that sales generated under the Alexis Vision Plan
will continue to increase at all or at the rate of increase of 1995 and 1996.

The Company believes that it is well positioned to continue its recent
improvement of operating results and in 1996, expects to report its first full
year of operating income since implementing its value-pricing strategy. The
Company has established the infrastructure necessary for future growth. To
support its planned expansion, the Company (1) operates two manufacturing
facilities, (2) has invested substantially in information systems and (3) uses
centralized purchasing. Therefore, the Company believes that as incremental
sales occur, from both existing stores and new stores, the operating leverage
provided by its optical laboratory fixed cost structure will enhance operating
margins. However, because it is the Company's accounting policy to expense
pre-opening advertising costs and other store pre-opening expenses as they are
incurred, the Company expects that in the short-term its operating margins may
be adversely affected by increased operating costs associated with new store
openings.

13
<PAGE> 20

RESULTS OF OPERATIONS

The following table sets forth for each of the years 1995, 1994, and 1993,
and the first nine months of 1996 and 1995 certain selected statement of
operations data expressed as a percentage of net sales:

FIRST NINE MONTHS OF 1996 COMPARED TO FIRST NINE MONTHS 1995

Net sales increased $3.0 million or 9.7% to $34.0 million during the first
nine months of 1996 from $31.0 million during the first nine months of 1995.
Revenues during the first nine months of 1995 included $989,000 in sales from
unprofitable or underperforming host stores which were closed during 1995. If
prior-year sales from these closed retail outlets were excluded from 1995
revenues, the Company would have posted a 13.3% year-to-date improvement in net
sales ($34.0 million compared to $30.0 million). The net sales increase in the
first nine months of 1996 was primarily attributable to an increase of 9.2% in
comparable store sales. The comparable store sales increase was primarily due to
increases in eyeglass and contact lens units sold and sales generated under the
Alexis Vision Plan, the Company's managed optical care division. The comparable
store sales increase in the first nine months of 1996 at the Company's stores in
malls and strip-shopping centers was partially offset by a lower rate of
comparable store sales growth in the Company's host stores.

Gross profit increased $1.7 million to $17.2 million during the first nine
months of 1996, a 10.7% increase compared to gross profit of $15.5 million
during the first nine months of 1995. The gross profit margin improved slightly
to 50.5% in the first nine months of 1996 from 50.1% in the first nine months of
1995. This increase was primarily due to increased sales volume which covered
more of the fixed cost components of cost of goods sold and was partially offset
by increased sales under the Alexis Vision Plan. Consistent with the

14
<PAGE> 21

Company's practice, the Alexis Vision Plan sales are generally at a small
discount from the Company's everyday value prices.

Selling, general and administrative expenses remained steady at $16.0
million during the first nine months of 1996 and the first nine months of 1995.
As a percentage of sales, these expenses decreased to 46.9% during the first
nine months of 1996, from 51.5% during the first nine months of 1995 as a result
of an increase in the Company's sales while the selling, general, and
administrative expenses remained steady, and to a lesser extent, reduced
advertising expenditures resulting from the Company's changing to a different
advertising agency in the fourth quarter of 1995.

Interest expense increased by $120,000 to $145,000 in the first nine months
of 1996 from $25,000 in the first nine months of 1995 as a result of increased
capital lease obligations, interest payments on two bridge loans from Mesirow
Capital Partners VI, a common and preferred stockholder, and Ronald E. Weinberg,
Chairman of the Board, and interest on the line of credit executed in June 1996.

Income tax expense increased to $172,000 in the first nine months of 1996
compared to no income tax expense in the first nine months of 1995, as a result
of increased pre-tax income. The income tax expense for the Company is lower
than what the Company would have to pay if it did not have significant NOL
carryforwards.

As a result of the foregoing, net income increased by $1.4 million to
$902,000 in the first nine months of 1996 compared to a net loss of $451,000 in
the first nine months of 1995.

Dividends were accrued and paid on the Company's Convertible Preferred
Stock in the aggregate amount of $245,000 in the first nine months of 1996 and
1995.

1995 COMPARED TO 1994

Net sales increased $2.6 million or 7.1% to $40.0 million in 1995 from
$37.4 million in 1994. The net sales increase was primarily attributable to an
increase of 5.9% in comparable store sales, which increase was primarily due to
increases in units sold and sales generated under the Alexis Vision Plan. The
comparable store increase at malls and strip-shopping centers was partially
offset by a lower rate of comparable store sales growth in the Company's host
stores. This lower host store growth rate is consistent with the Company's
historical experience, but in 1995, the Company experienced even lower host
store growth because of the lingering effects from the 12 week long strike
involving Fred Meyer in 1994 that negatively impacted the Company's stores in
Fred Meyer locations in Oregon and Washington. See "Business -- Relationship
with Host Stores."

Gross profit increased $2.0 million to $19.7 million in 1995, an 11.2%
increase over gross profit of $17.7 million in 1994. The gross profit margin as
a percentage of sales increased to 49.2% in 1995 compared to 47.3% in 1994 as a
result of improved lab efficiencies due to increased volume and decreased
depreciation expense in 1995. The depreciation expense decreased as a result of
the original asset base from the 1988 acquisition being fully depreciated in
1994.

Selling, general and administrative expenses increased $2.7 million to
$21.7 million in 1995 from $19.0 million in 1994. As a percentage of sales,
these expenses increased to 54.2% in 1995, from 50.8% in 1994. This increase is
primarily due to increased advertising expenses during off-peak seasons and
increased administrative and advertising expenses in the effort to revive the
strike-impacted Fred Meyer stores, and to a lesser extent, the cost of closing
eight of these unprofitable locations.

A provision for income taxes was not required in 1995 or in 1994 due to the
net loss experienced for the year.

The Company had a net loss of $2.0 million for 1995 compared to a net loss
of $1.3 million in 1994, a $700,000 increase. The increased net loss is
primarily due to the poor performance of the Fred Meyer host stores in 1995.
Despite additional administrative, training and advertising resources, the
Company was unable to achieve pre-strike sales levels at these locations. As a
result, the Company redirected this portion of the business in late 1995 to
include administrative reductions, advertising reductions, and the closing of
eight

15
<PAGE> 22

unprofitable Fred Meyer locations. To a lesser extent, the increased net loss in
1995 was the result of the incomplete and ineffective advertising campaign
delivered by the Company's new advertising agency during the second selling
season of 1995.

Dividends were accrued and paid on the Company's Convertible Preferred
Stock, in the aggregate amount of $329,000 in 1995 compared to $328,000 in 1994.

1994 COMPARED TO 1993

Net sales increased $4.4 million or 13.4% to $37.4 million in 1994 from
$33.0 million in 1993. The net sales increase was attributable to an increase of
6.7% in comparable store sales, as well as a net of 16 new stores opened during
1994. The comparable store sales increase was primarily due to increases in
units sold and sales generated under the Alexis Vision Plan. The comparable
store increase at malls and strip-shopping centers was partially offset by a
lower rate of comparable store sales growth in the Company's host stores. This
lower host store growth rate is consistent with the Company's historical
experience, but in 1994, the Company experienced a lower host store growth
because of the 12 week long strike involving Fred Meyer that negatively impacted
the Company's stores in Fred Meyer locations in Oregon and Washington. See
"Business -- Relationship with Host Stores."

Gross profit increased $2.0 million to $17.7 million in 1994, a 12.6%
increase over gross profit of $15.7 million in 1993. The gross profit margin as
a percentage of sales decreased slightly to 47.3% in 1994 compared to 47.7% in
1993 as a result of increased sales under the Alexis Vision Plan, which sales
are generally made at a small discount from the Company's everyday value
pricing.

Selling, general and administrative expenses increased $2.7 million to
$19.0 million in 1994 from $16.3 million in 1993. As a percentage of sales,
these expenses increased to 50.8% in 1994, from 49.4% in 1993. This increase is
primarily due to increased advertising expenses during off-peak seasons,
expensing store pre-opening costs associated with opening 21 new stores, and to
a lesser extent, additional costs incurred as a result of being a public
company.

Interest income increased to $53,000 in 1994 from $2,000 in 1993 primarily
due to the increased cash balances from the proceeds of the Company's initial
public offering.

Interest expense decreased by $657,000 to $55,000 in 1994 from $712,000 in
1993. The decrease was due to the repayment of the principal and interest on the
Company's senior and junior bridge loans. The loans were retired from the
proceeds of the initial public offering in December 1993.

A provision for income taxes was not required in 1994 due to the net loss
experienced for the year. An income tax benefit of $469,000 was recorded in 1993
primarily as a result of the extraordinary gain relating to the retirement of
debt.

The Company had net loss of $1.3 million for 1994 compared to net income of
$1.2 million in 1993, a $2.5 million decrease. The decrease was primarily due to
a $1.7 million extraordinary gain in 1993, net of incremental costs incurred to
effect the debt restructuring and income taxes, as a result of the retirement in
full of its senior bank debt and, to a lesser extent, a cumulative effect
adjustment resulting from a change in the Company's method of accounting for
income taxes in 1993. The Fred Meyer strike, and approximately $300,000 in costs
related to closing all 10 of the Company's retail outlets located in the
Smitty's host stores, contributed significantly to the decrease of net income in
1994. See Note 1 and Note 2 of Notes to Consolidated Financial Statements
appearing elsewhere in this Prospectus.

Dividends were accrued and paid on the Company's Convertible Preferred
Stock, in the aggregate amount of $328,000 in 1994 compared to $396,000 in 1993.

LIQUIDITY AND CAPITAL RESOURCES

The Company requires liquidity and working capital primarily for operations
and the opening of new stores, and, to a lesser extent, management information
systems and optical laboratory equipment to support

16
<PAGE> 23

store growth and improve operating efficiencies. The Company's primary sources
of funds are cash flow from operations, lease financing of equipment, vendor
trade credit, shareholder loans and bank loans.

In early 1996, to fund the Company's expansion and advertising needs, the
Company entered into two bridge loans with Mesirow Capital Partners VI and Mr.
Weinberg, totaling $700,000. The loans bore interest at an annual rate of 15%
and were secured by a deed of trust on the Company's executive office building
and optical laboratory facility in Tempe, Arizona. William P. Sutter, Jr. is an
officer of the corporate general partner of Mesirow Capital Partners VI and a
director of the Company. The bridge loans were retired with the proceeds of a
$2.0 million bank revolving line of credit in June 1996. The revolving line of
credit matures on May 31, 1997, and is secured by substantially all of the
Company's assets, including the Company's executive office building and optical
laboratory in Tempe, Arizona, but excluding furniture, fixtures and equipment.
The revolving line of credit bears interest on the principal balance outstanding
from time to time at a rate equal to the lending bank's prime rate plus 2.0% per
annum, and is due and payable monthly. The interest rate may be reduced to the
lending bank's prime rate plus 1.0% per annum if certain financial covenants are
met at year end 1996 and at the end of February 1997. The revolving line of
credit is also secured by guarantees from Mesirow Capital Partners V, Mesirow
Capital Partners VI, and Mr. Weinberg. Barry J. Feld, President and Chief
Executive Officer of the Company, agreed to share in the obligations of the
guarantors.

In exchange for the guarantee of the Company's obligations under its
revolving line of credit by such officers and shareholders, the Company issued
warrants to them to purchase, in the aggregate, 50,000 shares of the Common
Stock at a price per share of $6.11, subject to customary anti-dilution
adjustments. The value of the warrants, which was determined by independent
valuation to be $0.57 per share, is reflected on the September 28, 1996 balance
sheet in other assets and paid-in capital and will be amortized over the life of
the revolving line of credit.

The Company was not in compliance with one financial covenant contained in
the revolving line of credit agreement at June 29, 1996 and September 28, 1996.
The credit agreement was amended effective October 24, 1996, and the Company is
now in compliance with the covenant. There can be no assurance that the Company
will not require additional waivers in the future or, if required, that the
lender will grant them.

Short-term trade credit represents a significant source of financing for
inventory. Trade credit arises from the willingness of the Company's vendors to
grant payment terms for inventory purchases. Inventory levels increased $356,000
from December 30, 1995 to September 28, 1996, primarily as a result of the
opening of a net of seven new stores in the first nine months of 1996, expanded
merchandise programs in certain other stores and seasonal buying patterns.
Although the Company has negotiated what it believes to be favorable payment
terms from its primary vendors, there is no assurance that the Company will
obtain such terms in the future. In addition, although the Company has not
customarily been able to take advantage of available vendor trade discounts
because it has not had sufficient funds, the Company anticipates that after
completion of this offering it may take advantage of such discounts. See
"Business -- Operations -- Inventory and Suppliers."

The Company leases all of its retail space and the optical laboratory and
distribution facility near Portland, Oregon. The Company owns its executive
offices and optical laboratory and distribution facility in Tempe, Arizona,
subject to a deed of trust under the Company's revolving line of credit.

Although operating income was $1.2 million in the first nine months of 1996
compared to a $438,000 operating loss in 1995, the Company had net cash used in
operating activities of $372,000 in the first nine months of 1996 compared to
net cash from operating activities of $294,000 in the first nine months of 1995.
The change was primarily attributable to a $505,000 decrease in accounts payable
in the first nine months of 1996 compared to a $1.3 million increase in accounts
payable during the same period in 1995, and an $819,000 decrease in accrued
expenses in the first nine months of 1996 compared to a $295,000 decrease in
accrued expenses during the same period in 1995. Net cash from operating
activities was $722,000 in 1995 compared to $733,000 in 1994. This slight
decrease was primarily attributable to the increase in the net operating loss
exclusive of non-cash charges offset by an increase in accounts payable and
accrued expenses.

17
<PAGE> 24

Cash flows used in investing activities, primarily for store expansion,
renovation and relocation, were $1.3 million in the first nine months of 1996
and $1.4 million in the first nine months of 1995. Cash flows used in investing
activities were $1.5 million in 1995 compared to $3.2 million in 1994. This
decrease reflects a decrease in the number of new stores opening in 1995.

Cash flows from financing activities were $1.6 million in the first nine
months of 1996 compared to $213,000 in the comparable 1995 period. Cash flows
from financing activities in the first nine months of 1996 reflect the
establishment of the revolving line of credit. Cash flows from financing
activities were $51,000 in 1995 compared to $3.3 million in 1994. The 1994 cash
flow reflects the $8.6 million in net proceeds of the Company's initial public
offering, partially offset by the Company's repayment of $3.2 million to retire,
and pay accrued interest on, the senior and junior bridge loans, and the
Company's payment of $1.8 million to redeem its remaining old senior redeemable
6% cumulative preferred stock, par value $1,000 per share, and pay accrued
dividends and interest on the Company's old Series A junior redeemable 6%
cumulative preferred stock, par value $1,000 per share. The debt repayments on
the senior and junior bridge loans were made to Mesirow Capital Partners II,
Mesirow Capital Partners III, Mesirow Capital Partners IV, and Mesirow Capital
Partners V and Mr. Weinberg, all of whom are shareholders of the Company.

On August 17, 1995, the Company sold certain equipment for an aggregate
sales price of $505,000 and simultaneously leased the equipment back over a term
of three years with monthly payments of $16,000. The sale was recorded as a
financing transaction with no associated gain or loss recognized. The equipment
includes modular fixtures, optical equipment and manufacturing equipment
purchased by the Company in late 1994 and early 1995.

The Company anticipates opening 20 to 25 new stores in 1997. Assuming the
Company opens 25 new stores in 1997, including 24 new stores in malls and
strip-shopping centers and one new store within a Fred Meyer host store, the
Company expects that the costs of these new stores, including furniture,
fixtures, leasehold improvements, inventory and optometric equipment, will be
approximately $3.1 million. Actual costs will vary based upon, among other
matters, geographic location, the size of the store and the extent of the
build-out required at the selected site. The Company also plans to spend
approximately $500,000 to remodel certain of its existing mall and
strip-shopping center stores.

The Company anticipates renegotiating the revolving line of credit prior to
its expiration on May 31, 1997, or obtaining other comparable financing. There
can be no assurance that the Company will be able to renegotiate the revolving
line of credit on terms acceptable to the Company, or that the Company will be
able to obtain other financing. However, the Company does not believe that
extending the revolving line of credit or obtaining other financing is necessary
for its current expansion plans and immediate working capital needs. The Company
believes that the net proceeds from this offering, cash flow from operations and
existing capital lease financing will be sufficient to fund its working capital
needs and store expansion and renovation program for at least the next 12
months.

NET OPERATING LOSS CARRYFORWARDS

As of December 30, 1995, for federal income tax purposes, the Company had
regular NOL carryforwards of $7.7 million and AMT NOL carryforwards of $6.9
million that begin to expire in 2006. Under Section 382 of the Code, utilization
of NOL carryforwards is subject to significant limitations after an "ownership
change" as defined in Section 382(g) of the Code, which may result in Federal
income taxes being paid earlier than if no such change in ownership had
occurred. The Company's initial public offering in 1993 caused the Company to
experience an ownership change as defined by Section 382(g) of the Code. As a
result, there is an annual limitation of approximately $1.0 million on the
amount of NOL carryforwards generated prior to the ownership change which can be
utilized to offset the Company's future taxable income. The Company does not
currently believe that this offering will result in an ownership change.
However, future transactions involving the Company's stock (or rights to acquire
such stock) could cause a further ownership change resulting in additional
restrictions on the Company's ability to utilize its net operating loss
carryforwards after the date of such ownership change.

18
<PAGE> 25

At December 30, 1995, the Company had deferred tax assets of approximately
$3.5 million relating to the future tax benefits attributable to its NOL
carryforwards and other deductible items. As a result of historical operating
losses, the Company had fully reserved its deferred tax assets as of December
30, 1995. The Company will consider reducing this reserve once profitable
operations have been sustained.

SEASONALITY AND QUARTERLY RESULTS

Historically, the Company's operations have been seasonal, with the highest
sales in a given year occurring first in February, March and April and then in
August, September and, to a lesser extent, in October. The Company has
historically incurred and anticipates that it may continue to incur lower net
sales and net losses during the Company's fourth quarter because of reduced
demand for eyewear during the holiday season.

The Company's results of operations may also fluctuate from quarter to
quarter as a result of the amount and timing of sales contributed by new stores,
the integration of new stores into the operations of the Company, as well as
other factors, including bad weather. The addition of a large number of new
stores can therefore significantly affect quarterly results of operations.

The following table presents certain unaudited financial data for the first
three quarters of 1996 and all of 1995 and 1994. The quarterly results set forth
below are not necessarily indicative of results for any future period. The
Company believes that the amounts stated below including all adjustments
(consisting only of normal reoccurring adjustments) necessary to present fairly
and in accordance with generally accepted accounting principles the following
selected quarterly information when read in conjunction with the Company's
Consolidated Financial Statements included elsewhere in this Prospectus.

<TABLE>
<CAPTION>
1994 1995 1996
------------------------------------- ------------------------------------- ---------------------------
FIRST SECOND THIRD FOURTH FIRST SECOND THIRD FOURTH FIRST SECOND THIRD
QUARTER QUARTER QUARTER QUARTER QUARTER QUARTER QUARTER QUARTER QUARTER QUARTER QUARTER
------- ------- ------- ------- ------- ------- ------- ------- ------- ------- -------
(IN THOUSANDS, EXCEPT STORE DATA)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Net sales........... $9,621 $9,242 $9,520 $ 8,984 $10,815 $10,127 $10,088 $ 9,003 $11,504 $10,865 $11,674
Gross profit........ 4,686 4,489 4,555 3,962 5,551 5,153 4,834 4,143 5,704 5,436 6,056
Operating income
(loss)............ 320 (238) (259) (1,109) 466 (114) (790) (1,548) 583 220 416
Net income (loss)... 219 (170) (249) (1,088) 329 (65) (715) (1,574) 443 152 307
Net income (loss)
applicable to
holders of common
stock............. $ 137 $ (251) $ (330) $(1,172) $ 248 $ (148) $ (796) $(1,658) $ 362 $ 71 $ 224
====== ====== ====== ======= ======= ======= ======= ======= ======= ======= =======
Net income (loss)
per common and
common equivalent
shares............ $ 0.04 $(0.07) $(0.09) $ (0.31) $ 0.07 $ (0.04) $ (0.21) $ (0.45) $ 0.10 $ 0.02 $ 0.06
====== ====== ====== ======= ======= ======= ======= ======= ======= ======= =======
Stores open at
period end........ 141 147 149 150 151 144 145 139 141 145 146
</TABLE>

- ---------------

(1) All quarters presented are 13 week quarters with the exception of the fourth
quarter of 1994 which contained 14 weeks.

INFLATION

The Company believes that the relatively moderate rate of inflation over
the past few years has not had a significant effect on its results of
operations.

19
<PAGE> 26

BUSINESS

GENERAL

The Company is a leading specialty retailer of eyewear, operating under the
tradenames "Lee Optical" and "Vista Optical." In the western and midwestern
United States, the Company operates 146 value-priced optical stores located in
malls, strip-shopping centers and Fred Meyer host stores. The Company's everyday
value-pricing strategy features its "signature" $59 price point for a wide
selection of quality, brand name eyeglasses offered at attractive, convenient
locations with professional service. The Company's stores also sell brand name
contact lenses and non-prescription sunglasses and offer customers on-site eye
examinations by independent optometrists. The Company operates optical
laboratory and distribution facilities in Tempe, Arizona and near Portland,
Oregon.

The Company's value-pricing strategy differentiates it from competitors.
The Company believes that the economies of scale achieved by operating
centralized laboratory and distribution facilities enable it to produce eyewear
at a lower per unit cost and to maintain lower capital and inventory investment
per sales dollar than optical superstores which operate individual in-store
laboratories to offer "one-hour" service to customers. Therefore, the Company
believes that chains with in-store laboratories are unable to implement an
everyday value-pricing strategy. While certain discount chains have positioned
themselves as low-priced eyewear retailers, the Company believes that such
chains cannot match the combination of product quality, selection, professional
service and mall and strip-shopping center locations offered by the Company. In
addition, the Company believes independent retail outlets, which lack economies
of scale, cannot match the Company's everyday value pricing, wide selection and
number of locations. The Company also believes that its value-pricing strategy
has appeal to today's price-conscious consumer, especially given the current
trends toward cost containment in the health care industry.

EXPANSION STRATEGY

The Company's expansion plan is to open new mall and strip-shopping center
stores where it can market its value-pricing strategy under the "Lee Optical"
and "Vista Optical" tradenames. Since successfully completing its initial public
offering in December 1993, the Company has embarked on its growth program under
which it has opened 40 new stores, 31 of which are located in malls and
strip-shopping centers. In addition, during this period, the Company has
relocated and remodeled 18 of its stores, eight of which are located in malls
and strip-shopping centers. To further improve the Company's operating
performance and place increased emphasis on its mall and strip-shopping center
locations, the Company has closed 28 underperforming stores in the same period,
19 of which were located in Fred Meyer and Smitty's host stores.

Upon completion of this offering, the Company plans to accelerate its store
opening program with the addition of 20 to 25 new stores in 1997, substantially
all of which will be located in malls and strip-shopping centers. Assuming the
Company opens 25 new stores in 1997, including 24 new stores in malls and strip-
shopping centers and one new store within a Fred Meyer host store, the Company
expects that the costs of these new stores, including furniture, fixtures,
leasehold improvements, inventory and optometric equipment, will be
approximately $3.1 million. Actual costs will vary based upon, among other
matters, geographic location, the size of the store and the extent of the
build-out required at the selected site. In addition to opening new stores, the
Company may relocate stores within a mall or strip-shopping center if sites
become available with better traffic patterns and better merchandising
opportunities. In 1997, the Company plans to remodel five of its mall and
strip-shopping center stores at an estimated cost of approximately $500,000.

The Company will use its modular store construction design in all of its
new, relocated or remodeled stores. The Company believes that its use of modular
store construction reduces store opening and operating costs and substantially
shortens the time required to construct new stores or remodel existing ones.

The Company's strategy is to improve its market share in existing markets
and to expand into new markets by clustering stores in a particular metropolitan
area or in smaller adjacent markets. For example, since 1993, the Company has
entered new markets in Colorado and Iowa where it has established itself as a
leading eyewear retailer. The Company believes that by clustering stores it can
obtain economies of scale with

20
<PAGE> 27

respect to advertising, distribution and management costs as well as attract
additional managed care business. As incremental sales occur, the Company
anticipates that these economies, as well as its optical laboratory fixed cost
structure, will enable it to enhance its operating margins. In its new markets,
the Company expects that all of its stores will be operated under the trade name
"Vista Optical."

The Company will consider opportunistic acquisitions of small retail
optical chains or independent retail optical outlets if such acquisitions enable
the Company to improve its market share in existing markets or expand into new
markets. The Company has no outstanding commitments or agreements regarding any
acquisitions.

To evaluate the suitability of potential markets, the Company performs a
demographic and competitive analysis. Potential store site selection criteria
include market demographics, traffic count, the retail mix of a mall or
strip-shopping center, location within the mall or center, overall retail
activity of the area and proposed lease terms.

The Company intends to lease all new store locations under multi-year
leases. The time required to open a store after signing a lease depends
primarily upon the landlord's ability to deliver the premises to the Company.
Upon acceptance of the premises from the landlord, the Company expects, with the
use of its modular construction store design, to be able to open a store
generally within three to five weeks. See "Operations -- Store Locations and
Layout."

MERCHANDISING AND MARKETING

The Company's merchandising and marketing strategy focuses on the following
key concepts: (1) selling quality, brand name eyewear at everyday value prices;
(2) offering a wide selection of eyewear products in each of its stores; (3)
using a variety of media, such as television, direct mail, newspaper and yellow
page advertising, to differentiate it from competitors and to create general
consumer awareness and traffic in its retail stores; and (4) providing
knowledgeable and personalized customer service.

Value-Pricing. The Company's merchandising focuses on offering quality,
brand name eyewear at everyday value prices. Beginning in September 1991, the
Company set a $59 price point for single vision, plastic lens eyeglasses
(including both the frame and lenses), enabling consumers to comparison price
shop. "Single vision" eyewear refers to a non-bifocal prescription. Additional
pairs of single vision, plastic lens eyeglasses purchased on the same store
visit with the same prescription are sold for $49. The Company also features
similar value pricing for contact lenses with daily wear, soft lenses at $22 a
pair. The Company expects to maintain its $59 eyeglass price point for the
foreseeable future.

Wide Selection of Eyewear Products. Each store carries a selection of 650
to 1,200 frames, depending on the size and type of store. The Company
continually analyzes sales of its frames to keep its stores stocked with a wide
selection of the latest in eyewear fashion and a proper assortment of styles,
colors, and sizes. Approximately 65% of each store's inventory consists of
frames that are sold at the $59 price point, and in the first nine months of
1996, approximately 80% of the Company's eyeglass unit sales were at the $59
price point. The balance of each store's inventory is distributed among
higher-priced frames, including recognized designer brand names that are sold at
price points ranging from $79 to $149 complete with single vision, plastic
lenses. The result is that the Company's customers are offered a broad selection
at the $59 price point with the opportunity to purchase higher-priced designer
frames, many of which the Company believes are sold at lower prices than at
chains offering "one-hour" service to customers. The Company also believes that
its value pricing is conducive to multiple sales.

At its $59 price point, the Company carries recognizable brand name
eyewear, such as REM, St. Moritz, Zimco and Limited Editions. Designer frames
carried by the Company include Anne Klein, Liz Claiborne, Stetson, Logo of
Paris, Perry Ellis and Sophia Loren. The Company sells gas permeable and soft
contact lenses, including daily wear, flexible wear and disposable lenses
manufactured by such nationally-recognized eyewear companies as Bausch & Lomb,
Inc., Ciba-Vision Corporation, Johnson & Johnson and Wesley-Jessen. The Company
does not buy close-out or discontinued inventory.

21
<PAGE> 28

The Company also offers several different types of eyeglass lenses, such
as, progressive, transition, bi-focal, polycarbonate and hi-index lenses, as
well as other eyeglass options, including fashion tints, ultraviolet protection,
anti-reflective coatings and scratch resistance. In keeping with its
value-pricing strategy, the Company offers these options at prices ranging from
$15 for options such as tints or scratch resistance, to $80 for transition
lenses. For multiple pair purchases, the customer is offered a package of three
options on all additional pairs for free.

Advertising. The Company uses a variety of media, such as television,
direct mail, newspaper and yellow page advertising, to differentiate it from
competitors and to create general consumer awareness and traffic in its retail
stores. The primary emphasis of the Company's advertising is to inform consumers
that they can spend less and still receive quality, brand name eyewear.

The Company has developed management information systems to quickly
evaluate the effectiveness of advertising and target its advertising expenses
accordingly. Historically, the Company has concentrated its advertising
expenditures in its peak selling seasons of March and April, and again in August
and September. However, the Company has increased its advertising expenditures
during its off-peak seasons and in its existing and new markets where sufficient
stores are clustered to support additional advertising. There is no assurance
that the Company's advertising will be effective.

The Company was not satisfied with the results of the incomplete and
ineffective advertising campaign delivered by the Company's advertising agency
during the second selling season of 1995. The Company has replaced the agency
responsible for this campaign and has refocused its advertising campaign on the
Company's core message of informing consumers that they can spend less and still
receive quality, brand name eyewear.

Customer Service. The Company believes that providing knowledgeable and
personalized customer service is essential to its success. The Company has
employee training programs designed to continually upgrade the technical optical
skills and retail selling techniques of its sales associates. See "Operations--
Personnel and Training." Stores are open during hours that are convenient for
customers, generally from 10 a.m. to 9 p.m. All stores are open on Saturdays and
most are open on Sundays.

The Company's return policy and its service agreement program are also
designed to ensure customer satisfaction. Within 30 days, if a customer is
dissatisfied with a choice of eyeglasses, the Company will exchange them for a
new pair of comparable value, at no additional charge. As an additional option
to its customers, the Company offers an eyeglass service agreement that can be
purchased for $20. Under the service agreement, all frames or eyeglass lenses
that break within one year are replaced free of charge. In addition, the
customer is entitled to a $10 discount on any pair of eyeglasses purchased
during the service agreement year. For customers who need eyewear quickly, the
Company offers for $10 a guaranteed express service that delivers eyewear within
48 hours.

MANAGED CARE

Managed care is a substantial and rapidly growing segment of the retail
optical business. Under the tradename "Alexis Vision Plan," formerly American
Vision Plan, the Company uses its stores as a managed care network. The Company
markets Alexis Vision Plan to managed care administrators at HMO's and health
insurance plans and to local and state governments and mid-sized to large
companies that offer eyecare benefits to their employees. When the Company
provides benefits to members of an HMO, beneficiaries of a health care insurer
or employees of a government or company, the covered participants may use their
eyecare benefits at the Company's stores, generally at a small discount from the
Company's everyday value prices. Because of the Company's value pricing,
participants will typically be eligible for greater eyecare benefits at the
Company's stores than at other eyecare providers participating in managed care
programs. The Company believes that the additional customer traffic generated
under the Alexis Vision Plan, including family members of the covered
participants, and purchases by covered participants beyond their eyecare
benefits, more than offsets the reduced gross margins generated under the Alexis
Vision Plan.

22
<PAGE> 29

In the first nine months of 1996, sales generated under the Alexis Vision
Plan were $8.7 million (or 25.5% of net sales), a 23.6% increase over the
comparable 1995 period. In 1996, the Company continues to enter into new
agreements in its existing and new markets.

The Company believes that its value-pricing strategy and convenient store
locations are key factors in attracting managed care business. As the Company
increases its presence within existing markets and expands into new markets, it
believes it will be more attractive to managed care administrators because of
its additional store locations. The Company also believes that Alexis Vision
Plan will further benefit from the trend in the health care industry toward
managed care as a means to better manage health care costs.

OPERATIONS

Store Locations and Layout. The Company's stores are located in regional
malls, strip-shopping centers and leased departments within Fred Meyer host
stores. In Arizona and Utah, the Company's stores are operated under the
tradename "Lee Optical" and in other states as "Vista Optical." In its new
markets, the Company expects that all of its stores will be operated under the
tradename "Vista Optical."

The following table sets forth the Company's stores by location and type as
of December 23, 1996:

<TABLE>
<CAPTION>
LOCATION NUMBER TYPE NUMBER
--------------------------------- ------ --------------------------------- ------
<S> <C> <C> <C>
Washington....................... 39 Regional Malls................... 76
Oregon........................... 31 Fred Meyer Host Stores........... 51
Arizona.......................... 28 Strip Shopping Centers........... 19
------
Colorado......................... 13
Idaho............................ 11
Alaska........................... 9
Iowa............................. 6
Montana.......................... 3
New Mexico....................... 2
Wyoming.......................... 2
Illinois......................... 1
Utah............................. 1
------
Total.......................... 146 Total............................ 146
====== ======
</TABLE>

The Company's typical mall location ranges from 700 to 1,500 square feet,
and the typical Company store in a strip-shopping center ranges from 700 to
1,200 square feet. The ideal size for the Company's modular design store is
approximately 1,000 square feet. The Fred Meyer host store locations range from
400 to 800 square feet, with the ideal size for the host store modular design
being 700 square feet. The Company believes that its use of modular store
construction reduces store opening and operating costs and substantially
shortens the time required to construct new stores or remodel existing ones. The
Company will use its modular store design in all of its new, relocated or
remodeled stores.

Each of the Company's stores has separate areas for merchandise display,
customer service and an independent optometrist to perform eye examinations. The
Company continuously enhances its store design to optimize customer appeal. In
1997, the Company plans to introduce a new store design in its new and remodeled
stores, including new store colors, improved lighting, enhanced eyeglass frame
displays and wood floors, as well as other improvements in store fixtures and
furniture.

Manufacturing and Distribution. To produce prescription eyeglasses and to
distribute eyeglasses, contact lenses and other products to the Company's
stores, the Company operates two optical laboratory and distribution facilities
located in Tempe, Arizona and Clackamas, Oregon, which is near Portland. The
laboratories provide grinding, polishing, cutting, edging, tempering, tinting
and coating for prescription lenses that are custom fitted to eyeglass frames in
the size and style selected by the customer. The two facilities produce
approximately the same number of eyeglasses. In 1995, the Company expanded its
distribution facility in Clackamas, Oregon, to include the distribution of
contact lenses to better service its customers in

23
<PAGE> 30

the Northwest. Previously, all contact lenses were distributed out of the Tempe
location. The Company believes that having two facilities provides it with the
operational flexibility and additional capacity for expansion and facilitates
the delivery of efficient and timely customer service.

The Company has invested substantially in information systems, including a
manufacturing and distribution system and a fully integrated inventory control,
merchandising, and general ledger software system, providing management with
detailed retail sales, manufacturing and administrative data on a timely basis.
The Company believes that these systems should help maintain stable margins and
sound fiscal controls as the Company expands its network of retail stores and
Alexis Vision Plan business.

The Company continually seeks to shorten the turnaround time necessary to
deliver completed eyeglasses and contact lenses to its customers. The Company's
stores submit orders daily to the laboratories, which stock many frames in the
Company's stay-in-stock program, thereby minimizing turnaround time. For frames
not in stock at the laboratories, independent couriers make daily deliveries
from the stores. These couriers also make outbound deliveries from the
laboratories to the stores to replenish store inventories and deliver completed
prescription eyeglasses and contact lenses. Generally, delivery of prescription
eyeglasses takes four to six business days. For customers who need eyewear
quickly, the Company offers its guaranteed express service that delivers eyewear
within 48 hours.

Inventory and Suppliers. Inventory control is a major focus for the
Company. The Company has established systems to increase inventory turns and
eliminate overages and shortages. As a result, the Company turned its inventory
in approximately 54 days in the first nine months of 1996.

The Company has not experienced any difficulty in obtaining satisfactory
sources of supply in the past and believes that it has excellent relations with
each of its principal vendors. In addition, the Company believes that it will be
able to obtain greater purchasing leverage as it expands. The Company is not
dependent on any single supplier and has purchase agreements with several of its
suppliers which the Company believes enable it to purchase ophthalmic lenses and
various other supplies at favorable pricing terms. A material change in the
Company's current purchase terms could have a material adverse effect on the
Company's financial condition or results of operations.

Personnel and Training. Each of the Company's stores is staffed by a
manager and one to six sales associates. In certain states, in conformity with
applicable regulations, each store is staffed with a licensed optician. See
"Government Regulation." Each store employee receives a basic wage, plus
incentive compensation based on sales performance. Each store is supported by a
district administrative staff. Each of 12 District Managers has general
supervisory authority over nine to 21 stores. The District Managers report
directly to either the Senior Vice President or the Division Manager of the
Company.

The Company emphasizes employee training. The Company operates a
comprehensive training program led by the Senior Vice President and the National
Sales Training Manager, who supervise two support trainers, each of whom trains
personnel on a regional basis. Training programs have been developed for
employees from entry level to senior management. These programs teach the
Company's sales associates technical information about skills particular to the
optical business, Company policies and procedures and retail sales techniques,
including skills that enable the sales associates to educate consumers about
eyewear options offered by the Company.

The Company developed and operates Vision In Excellence Workshops ("VIEW"
Training) to provide advanced skills to both store managers and store employees
in the critical areas of communication and customer service. In addition, the
Company uses vendor product training seminars that provide the Company's sales
associates with specific product knowledge enabling them to match customer needs
with the eyewear. The Company believes its training programs have assisted in
increasing revenue, as well as reducing employee turnover.

24
<PAGE> 31

RELATIONSHIP WITH HOST STORES

Fred Meyer. The Company operates 51 stores in Fred Meyer host stores in
the states of Oregon, Washington, Idaho and Alaska. Fred Meyer has approximately
110 stores located primarily in the Pacific Northwest. Generally, the Fred Meyer
stores are "one-stop" department stores of approximately 140,000 square feet
that offer groceries, soft goods, home improvement items and various other
merchandise. Not all of the Fred Meyer stores have eyewear departments.

The Company's optical store is generally located near the main checkout
counter in the front of the Fred Meyer host store, offering excellent exposure
to customer traffic. In 1996, the Company opened one new store and closed one
store in Fred Meyer locations. The Company expects to open one new store within
Fred Meyer in 1997. From time to time, Fred Meyer remodels a store and the
Company may remodel its store at that location. In addition, when Fred Meyer
closes a store, the Company's store closes.

The Company has a master lease agreement with Fred Meyer due to expire in
April 1998, that grants the Company the right of first refusal to open an
optical store in any new Fred Meyer store in which Fred Meyer decides to place
an eyewear department. However, Fred Meyer is not required under the master
lease agreement to open any future stores, or when new stores are opened, to
place an eyewear department in the store. Each optical store is covered by its
own separate lease, subject to the guideline provisions of the master lease.
Generally, the term of each store lease is for a period of five years, with an
option to extend the lease term for one renewal term of five years.

The Company is generally prohibited under the terms of each individual
store lease from operating an optical store within a one mile radius of the Fred
Meyer store in which the Company has a store, unless otherwise approved by Fred
Meyer. Additionally, the Company is required under each lease to pay rent that
is generally the greater of the minimum base rent, which varies according to the
Company's store size, or 13% of all merchandise sales. During the renewal
period, the minimum base rent generally increases annually at a rate of 5% per
year.

On August 18, 1994, certain Fred Meyer employees went on strike. The strike
involved retail in-store employees, as well as Fred Meyer office workers,
warehouse workers, and truck drivers. None of the Company's employees were
involved in the Fred Meyer labor dispute and none participated in the Fred Meyer
strike. The affected Fred Meyer stores continued to operate, and Company outlets
in the Fred Meyer stores remained open for business during the strike. However,
reduced customer traffic in all Fred Meyer stores resulted in a material
reduction in Company sales at the Fred Meyer host stores during the 12 weeks of
the strike. The strike was settled on November 12, 1994.

In 1995, it became clear that certain of the Company's stores located in
Fred Meyer host stores were permanently damaged by the impact of the 1994
strike. Despite increased advertising, these stores did not return to pre-strike
sales levels. Management, through successful negotiations with Fred Meyer, was
able to close eight under performing stores without lease penalties.

Smitty's. Immediately following the end of the first quarter of 1995, the
Company closed all 10 of its stores located in Smitty's host stores in Arizona.
These stores were not profitable.

OPTICAL PROFESSIONALS

Optometrists. Each Company store offers customers on-site eye examinations
performed by independent licensed optometrists. These optometrists are not
employed by, and receive no compensation from, the Company. The Company does not
share in the fees which are set and received by the independent optometrists.

Generally, the Company subleases at nominal rates approximately 125 square
feet in each store to an independent optometrist who is, in certain instances,
permitted to re-sublet space to an additional optometrist to handle increased
patient loads. Customers of on-site optometrists are not required to have
prescriptions filled in the Company's stores, and the Company may fill any
eyewear prescription whether or not it was written by the on-site optometrist.
The leased space, which is usually developed and equipped by the

25
<PAGE> 32

Company, includes optometric examination and diagnostic equipment. The cost to
fully equip a store with such optical equipment is approximately $25,000.

The Company operates a formal program of continuing professional education
that provides optometrists with a convenient method of meeting state continuing
education requirements and helps ensure that the Company's customers receive
high quality optical care. The Company offers this continuing education to all
optometrists in certain states, regardless of whether or not they occupy one of
the Company's stores. This program has been useful in recruiting new doctors.
The Company has formed an internal peer review committee to periodically review
the performance of its independent optometrists who provide services to Alexis
Vision Plan customers. In addition, the Company has initiated a series of
regional optometrist meetings to facilitate communication among the independent
optometrists. The Company believes that its stores offer excellent practice
opportunities for independent optometrists and that relations with its
optometrists are good.

Opticians. Certain states require that the Company staff its stores with
one or more opticians licensed by state authorities to fit and dispense
eyeglasses and contact lenses prescribed by optometrists or ophthalmologists.
See "Government Regulation." To assist its opticians in maintaining their
licenses, the Company has implemented a formal training and education program.
The Company has not experienced any difficulty in recruiting and employing
opticians.

COMPETITION

The retail eyecare industry is fragmented and highly competitive and
historically has been subject to severe price competition. According to 20/20, a
leading optical industry trade journal, total sales in the U.S. retail optical
market were $11.4 billion in 1990, and grew to $13.8 billion in 1995. The
Company's competitors include large optical store chains, such as LensCrafters
and Pearle Vision Centers, many of which offer "one-hour" service to customers,
and numerous independent retail outlets, opticians, optometrists and
ophthalmologists. In addition, the increase in the number of optical units in
department store chains (including Sears, Roebuck & Co. and Wal-Mart Stores,
Inc.) and warehouse clubs (including Wholesale Club Inc. and Price/Costco Inc.)
and the emergence of mail order contact lens replacement services have further
increased the Company's competition. The Company believes it is able to compete
in the retail marketplace based on its value-pricing strategy, the wide
selection of frames offered at the Company's $59 price point, the quality of its
products and services, its attractive stores and its convenient store locations.
However, many of the Company's competitors are larger than the Company and have
financial and other resources substantially greater than those of the Company.

The Company's value-pricing strategy differentiates it from competitors.
The Company believes that the economies of scale achieved by operating
centralized laboratory and distribution facilities enable it to produce eyewear
at a lower per unit cost and to maintain lower capital and inventory investment
per sales dollar than optical superstores which operate individual in-store
laboratories to offer "one-hour" service to customers. Therefore, the Company
believes chains with in-store laboratories are unable to implement an everyday
value-pricing strategy. These chains may offer special price promotions or
limited value-priced sections, but the Company believes that these chains do not
compete with the Company's everyday value prices. While certain discount chains
have positioned themselves as low-priced eyewear retailers, the Company believes
that such chains cannot match the combination of product quality, selection,
professional service and mall and strip-shopping center locations offered by the
Company. In addition, the Company believes independent retail outlets, which
lack economies of scale, cannot match the Company's everyday value pricing, wide
selection and number of locations. The Company also believes that its
value-pricing strategy has appeal to today's price-conscious consumer,
especially given the current trends toward cost containment in the health care
industry.

Although the retail eyewear industry is highly competitive, demographic
trends are expected to increase demand for prescription eyewear. According to
20/20, the percentage of the U.S. population wearing prescription eyewear
increases from over 45% between ages 25 and 44 to almost 90% by age 45. The
number of Americans aged 45 and over is expected to increase 19.0% from 80.6
million in 1992 to 95.9 million in 2000.

26
<PAGE> 33

GOVERNMENT REGULATION

The retail optical industry is subject to a variety of federal, state and
local laws, regulations and ordinances, including those regarding advertising,
location and design of stores, products sold, qualifications and practices of
opticians, such as those employed by the Company, and relations between
independent optometrists and optical retailers, such as the Company. The state
and local legal requirements vary widely among jurisdictions and are subject to
frequent change. In addition, the Federal Trade Commission has issued
regulations affecting certain aspects of the optical industry, including a
requirement that optometrists deliver a copy of optical prescriptions for
eyeglasses to patients so that they may select optical dispensers of their
choice. Certain products sold by the Company, specifically ophthalmic lenses,
contact lenses and contact lens solutions, must comply with quality control
standards set by the United States Food and Drug Administration.

In certain states, the Company is required to staff retail optical stores
with one or more licensed opticians, who fit and dispense eyeglasses or contact
lenses. The extent of these requirements varies from state to state.

State and local regulations also govern the relations between independent
optometrists and optical retail stores. For example, some states and
municipalities restrict the location of optometric offices in relation to
optical stores, such as the Company's stores, and other commercial or mercantile
establishments, such as Fred Meyer host stores. The Company configures its
stores and adjusts the terms and conditions of its arrangements with independent
optometrists to comply with these varying state and local requirements. The
Company believes it is in substantial compliance with all material laws and
regulations applicable to its operations.

EMPLOYEES

As of September 28, 1996, the Company employed 629 persons, 510 on a
full-time basis and 119 on a part-time basis. Approximately 452 of the Company's
employees work in retail sales or retail sales supervision, 94 in the Company's
optical laboratory and distribution facilities, eight in managed care and 75 in
management and administration. None of the Company's employees are covered under
any collective bargaining agreement. The Company has experienced no strikes and
believes its relations with its employees to be good.

TRADEMARKS

Vista Optical and Lee Optical are federally registered trademarks of the
Company. In addition, the Company has a pending application with the United
States Patent and Trademarks Office to register "Alexis Vision Plan" as a
trademark of the Company. The Company also relies on common law, including the
law of unfair competition to protect its trademarks and services. The Company is
not aware of any pending claims of infringement or other challenges to the
Company's right to use its trademarks.

PROPERTIES

The Company's stores are located in regional malls, strip-shopping centers
and host stores. Each of the stores located in a mall or strip center operates
under a retail lease agreement which provides for certain base rents plus, in
many circumstances, additional rent based on sales. The host store sites are
leased under a master lease agreement with Fred Meyer and each individual site
has a separate lease under the master agreement. See "Operations -- Store
Locations and Layout" and "-- Relationship with Host Stores."

The Company's Clackamas, Oregon, laboratory and distribution facility which
is near Portland is located in approximately 6,430 square feet of leased space.
The lease provides for average annual payments of approximately $40,000 through
August 31, 2001. The Company's executive offices and laboratory and distribution
facility in Tempe, Arizona, are located in a 24,000 square foot building that is
owned by Alexis Holdings, Inc. ("Alexis"), a wholly-owned subsidiary of the
Company. Alexis' sole purpose is ownership of the Tempe building. This building
secures the Company's revolving line of credit. See "Management's Discussion and
Analysis of Financial Condition and Results of Operations -- Liquidity and
Capital Resources."

LEGAL PROCEEDINGS

From time to time, the Company is involved in legal matters which are
incidental to its operations. In the opinion of management, the ultimate
resolution of these matters is not anticipated to have a material adverse effect
on the Company's financial condition or results of operations.

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<PAGE> 34

MANAGEMENT

The directors, executive officers and significant employees of the Company
and their respective ages and positions held with the Company, are as follows:

<TABLE>
<CAPTION>
NAME AGE POSITION
- ------------------------------------------ --- -----------------------------------------------
<S> <C> <C>
Ronald E. Weinberg(1)(2).................. 55 Chairman of the Board and Treasurer
Barry J. Feld............................. 40 Chief Executive Officer, President and Director
James W. Swanson.......................... 49 Senior Vice President
Darius J. DiTallo......................... 39 Vice President -- Finance and Administration
Annette C. Feld........................... 34 Vice President -- Marketing and Merchandising
Glenn K. Ozawa............................ 39 Vice President -- Manufacturing
Roger W. Deason........................... 53 Vice President -- Managed Care
Byron S. Krantz(2)........................ 61 Secretary and Director
Donald M. Gleklen(1)...................... 60 Director
Norman C. Harbert......................... 63 Director
Larry I. Pollock(2)....................... 49 Director
William P. Sutter, Jr.(1)(2).............. 39 Director
</TABLE>

- ---------------

(1) Member of the Audit Committee

(2) Member of the Compensation Committee

Ronald E. Weinberg has served as Chairman of the Board and Treasurer since
the acquisition of the Company in August 1988. Mr. Weinberg served as acting
President of the Company from January 1991 until May 1991 as the Company
recruited a new management team. In 1986, Mr. Weinberg led an investor group in
the acquisition of SunMedia Corp., which publishes a chain of weekly newspapers
in the Cleveland and Milwaukee markets and operates a direct mail business, and
Mr. Weinberg has served as Chairman of the Board of that company since that
date. Since 1989, Mr. Weinberg has been Vice-Chairman of the Board of Hawk
Corporation ("Hawk"), a privately-held corporation that manufactures friction
products and powdered metal components primarily for aerospace, industrial and
specialty applications.

Barry J. Feld has served as President and a member of the Board of
Directors since joining the Company in May 1991, and as Chief Executive Officer
since February 1994. Previously, Mr. Feld was President of Frame-n-Lens Optical,
Inc., which is the largest chain of retail optical stores in California. Mr.
Feld joined Frame-n-Lens Optical, Inc. in 1987 and served as Executive Vice
President and Chief Operating Officer until January 1990 when he became
President. Prior to that, Mr. Feld spent 10 years with Pearle Health Services,
Inc., one of the largest retail optical chains in the United States, serving in
various senior management capacities during his tenure, including Retail
Operations Director of Texas State Optical, Inc., then one of the largest retail
optical subsidiaries of Pearls Health Services, Inc., from 1985 until 1987.

James W. Swanson has served as Senior Vice President since May 1996, and
Vice President -- Human Resources and Optometric Relations since April 1992. Mr.
Swanson joined the Company in July 1991 as Vice President -- Training and
Optometric Relations. Prior to that, Mr. Swanson was Director of Training and
Third-Party Sales at Frame-n-Lens Optical, Inc. from September 1989 to July
1991, and Director of Operations of Dr. Leventhal's Vision Care Centers, Inc., a
San Diego-based chain of retail optical stores, from March 1984 until September
1989.

Darius J. DiTallo joined the Company in December 1996 and serves as Vice
President -- Finance and Administration. Previously, Mr. DiTallo held senior
financial management positions, including serving as Chief Financial Officer, at
Image Choice, Inc., a Phoenix-based document imaging solution provider, from
December 1993 to December 1996. During this period, Mr. DiTallo also served as
Chief Financial Officer of TransEquatorial Holdings, Inc., which sells
electronic components and held a substantial investment in Image

28
<PAGE> 35

Choice, Inc. Prior to that, he served as a financial consultant to various
entities from January 1993 to December 1993, and he held senior financial
management positions at the Arizona facility of Courtaulds Performance Films,
Inc., from October 1990 to January 1993. Mr. DiTallo is a certified public
accountant.

Annette C. Feld has served as Vice President -- Marketing and Merchandising
since December 1992. Ms. Feld joined the Company in May 1991 as Director of
Marketing and Merchandising. Previously, she was the Director of Materials and
Marketing for Frame-n-Lens Optical, Inc. from March 1988 to April 1991. Prior to
that, Ms. Feld was an associate buyer for Bullock's, a chain of department
stores, from 1985 to 1987 and an associate buyer for R. H. Macy & Co., Inc.,
from 1983 to 1985. Ms. Feld is the wife of Barry Feld.

Glenn K. Ozawa has served as Vice President -- Manufacturing since March
1995. Mr. Ozawa joined the Company in January 1992 as Director of Manufacturing.
Prior to that, he served as Manufacturing Manager for Frame-n-Lens Optical, Inc.
from November 1990 to December 1991 and as Director of Manufacturing of
NuVision, Inc., a chain of optical stores based in California and Michigan, from
August 1988 until November 1990 after previously serving in a senior capacity at
that company for three years.

Roger W. Deason has served as Vice President -- Managed Care since October
1995. Previously, Mr. Deason was Vice President -- National Marketing & Sales of
The Eye Health Network, Inc., a large Denver based managed eye care
organization, from February 1994 to October 1995. Prior to joining The Eye
Health Network, Inc., Mr. Deason was in senior management positions with Sierra
Health Services, Inc., a Nevada based multi-state health maintenance
organization, from September 1991 to January 1994, and Vision Service Plan, a
national vision care organization, from September 1984 to August 1991.

Byron S. Krantz has been the Secretary and a director since August 1988.
Mr. Krantz has been a partner in the law firm of Kohrman Jackson & Krantz P.L.L.
since its formation in 1984.

Donald M. Gleklen has been a director since August 1988. Since February
1995, Mr. Gleklen has been President of Jocard Financial Services, Inc. From
March 1994 to February 1995, Mr. Gleklen was a private investor and special
counsel to Robert J.F. Brobyn & Associates, attorneys at law. From September
1984 to March 1994, Mr. Gleklen was Senior Vice President of MEDIQ Incorporated
("MEDIQ"), a provider of health care services to hospitals, extended care
facilities and other health-care professionals, and President of MEDIQ
Investment Services, Inc., with oversight responsibilities for six of MEDIQ's
nine operating subsidiaries and corporate development responsibilities. Mr.
Gleklen is also a director of Nutramax Products, Inc. and Gandalf Technologies,
Inc., and Chairman of the Board of Trustees of the Pennsylvania College of
Optometry.

Norman C. Harbert has been a director since April 1994. Since 1989, Mr.
Harbert has served as the Chairman of the Board, President and Chief Executive
Officer of Hawk. Mr. Harbert is a director of Second Bancorp Inc., a bank
holding company, and Caliber System, Inc., a transportation company (formerly
known as Roadway Services, Inc.).

Larry I. Pollock has been a director since April 1990. From January 1994 to
January 1996, Mr. Pollock was President and Chief Operating Officer of Zale
Corporation, a retail jewelry store chain. From January 1990 to December 1993,
Mr. Pollock served as President and Chief Executive Officer of Karten's
Jewelers, Inc., a New England jewelry chain. Mr. Pollock is a partner of
Independent Group, L.P., a privately-held radio broadcasting company based in
Cleveland, Ohio and a director of Borders Group, Inc.

William P. Sutter, Jr. has been a director since August 1988. Since 1984,
Mr. Sutter has been associated with affiliates of Mesirow Financial Holdings,
Inc. ("Mesirow Financial"), a Chicago-based financial services firm. Mr. Sutter
is an Executive Vice President of Mesirow Private Equity Investments, Inc. and a
Vice President of Mesirow Financial Services, Inc.

EMPLOYMENT AGREEMENTS

Effective August 1, 1993, the Company entered into employment agreements
with each of Mr. Weinberg and Mr. Feld. Both agreements have been extended until
December 31, 1998. Mr. Weinberg's agreement provided for his employment as
Chairman of the Board at a base salary of $131,250 per year through

29
<PAGE> 36

December 31, 1994, and Mr. Feld's agreement provided for his employment as
President at a base salary of $175,000 per year through December 31, 1994.
Thereafter, the base annual salaries may be adjusted by the Board of Directors
of the Company. For the 1995 and 1996 fiscal years, the Board of Directors did
not increase the salary of either Mr. Feld or Mr. Weinberg. Mr. Weinberg agreed
to forgo a portion of his salary in 1994, 1995 and 1996.

The employment agreements also required the adoption of a bonus plan for
the years 1994 and thereafter. On January 31, 1995, the members of the
Compensation Committee of the Board of Directors adopted the 1995 incentive
bonus plan, which plan provides that a bonus is payable to Messrs. Feld and
Weinberg if the Company's pre-tax income exceeds $1 million. The bonus increases
along with an increase in the Company's pre-tax income according to a formula
adopted by the Compensation Committee. Because the Company experienced a pre-tax
loss in 1995, no bonus was paid to either Mr. Feld or Mr. Weinberg. The 1996
incentive bonus plan is substantially the same as the 1995 plan.

Mr. Weinberg devotes a substantial amount of his time and effort to the
business of the Company, but under the terms of Mr. Weinberg's employment
agreement, he is not required to devote all of his time and efforts to such
business so long as he performs the duties of his office to the best of his
ability in a manner that promotes the best interests of the Company. If either
Mr. Weinberg or Mr. Feld dies during the term of their respective employment
agreements, the Company will pay his base annual salary for 12 months and any
bonus earned but not paid, and if either becomes mentally or physically disabled
during the term, the Company will pay his base annual salary for 12 months. Each
employment agreement also provides for a two year non-competition provision;
however, Mr. Feld's non-competition provision is conditioned upon the Company
paying him 75% of his base salary then in effect.

The Company has no other employment agreements with any of its executive
officers or other employees.

30
<PAGE> 37

PRINCIPAL AND SELLING STOCKHOLDERS

The following table sets forth, as of December 15, 1996, and as adjusted to
reflect the sale of the Common Stock offered hereby, information regarding the
beneficial ownership of the Company's capital stock, by (1) the Selling
Stockholders and each stockholder known by the Company to be the beneficial
owner of more than five percent of the Company's outstanding shares of capital
stock, (2) each director and the Company's President, and (3) all directors and
executive officers of the Company as a group. The information set forth in the
table below does not include 91,200 shares of Common Stock issuable under the
Amended and Restated New West Eyeworks, Inc. Stock Option Plan (the "Option
Plan") under options that are not presently exercisable. The information set
forth in the table below includes (a) 92,300 shares of Common Stock issuable
under presently exercisable options granted to directors and officers of the
Company pursuant to the Option Plan, (b) 156,563 shares of Common Stock issuable
upon the exercise of certain warrants, including 106,563 shares of Common Stock
issuable upon the exercise of warrants granted in connection with the Company's
initial public offering in December 1993 (the "IPO Warrants"), and (c) 650,000
shares of Common Stock issuable upon conversion of the Convertible Preferred
Stock. See "Underwriting." Mesirow Capital Partners II ("Mesirow II"), Mesirow
Capital Partners III ("Mesirow III"), Mesirow Capital Partners IV ("Mesirow IV")
and Mesirow Capital Partners V ("Mesirow V") will sell 171,161, 198,220, 169,857
and 60,762 shares of Common Stock in this offering, respectively. Each of
Mesirow II, III, IV, V and Mesirow Capital Partners VI ("Mesirow VI")
(collectively, the "Mesirow Group") are limited partnerships, the corporate
general partners of which are indirect subsidiaries of Mesirow Financial.
William P. Sutter, Jr. is an Executive Vice President or Vice President of each
of the corporate general partners of the Mesirow Group and a director of the
Company. See "Certain Transactions."

<TABLE>
<CAPTION>
BENEFICIAL OWNERSHIP NUMBER OF BENEFICIAL OWNERSHIP AFTER
PRIOR TO THE OFFERING (2) SHARES THE OFFERING
---------------------------- TO BE SOLD IN ----------------------------
NAME AND ADDRESS (1) SHARES PERCENTAGE THE OFFERING SHARES PERCENTAGE
- --------------------------- --------- ---------- ------------- --------- ----------
<S> <C> <C> <C> <C> <C>
Ronald E. Weinberg(3) 883,923 19.0% -- 883,923 15.6%

Mesirow Group
c/o William P. Sutter, Jr.
350 North Clark Street
Chicago, Illinois 60610(4) 1,636,688(5) 35.1% 600,000 1,036,688 18.3%

Barry J. Feld(6) 220,637 4.7% -- 220,637 3.9%

Donald M. Gleklen(7) 31,260 * -- 31,260 *

Norman C. Harbert(8) 30,819 * -- 30,819 *

Byron S. Krantz(9) 52,895 1.1% -- 52,895 *

Larry I. Pollock(10) 11,700 * -- 11,700 *

William P. Sutter, Jr.(11) 26,890 * -- 26,890 *

All directors and executive
officers as a group (11
individuals)(12) 1,310,724 28.1% -- 1,310,724 23.1%
</TABLE>

- ---------------

* Less than 1%.

(1) Unless otherwise indicated, the address of each of the beneficial owners
identified is c/o New West Eyeworks, Inc., 2104 West Southern Avenue,
Tempe, Arizona 85282.

(2) Unless otherwise indicated, the Company believes that all persons named in
the table have sole investment and voting power over the shares of capital
stock owned.

(3) Includes (i) a warrant to purchase 22,500 shares of Common Stock; and (ii)
6,805 shares of Common Stock and 15,714 shares of Common Stock issuable
upon the conversion of shares of Convertible Preferred Stock, Series A
("Series A Convertible Preferred Stock") held of record by Flag Partners,
an Ohio partnership ("Flag"). The partners of Flag are all directors of the
Company. Flag holds of record 30,623 shares of Common Stock and 594 shares
of Series A Preferred Stock. Does not include 1,000 shares beneficially
owned by Mr. Weinberg's wife as to which shares Mr. Weinberg disclaims
beneficial ownership.

31
<PAGE> 38

(4) Includes (i) a warrant to purchase 9,000 shares of Common Stock held by
Mesirow V and a warrant to purchase 13,500 shares of Common Stock held by
Mesirow VI; (ii) 392,857 shares of Common Stock issuable upon the
conversion of shares of Series A Convertible Preferred Stock held of record
by Mesirow Capital Partners VI; and (iii) 178,571 shares of Common Stock
issuable upon the conversion of Convertible Preferred Stock, Series B
("Series B Convertible Preferred Stock") of which (a) 59,524 shares are
held of record by Mesirow II, (b) 41,667 shares are held of record by
Mesirow III, (c) 35,714 shares are held of record by Mesirow IV, and (d)
41,667 shares are held of record by Mesirow V. Mr. Sutter disclaims
beneficial ownership of such shares. Does not include shares beneficially
owned by Mr. Sutter.

(5) Includes 1,042,759 shares of Common Stock, of which (i) 171,161 shares held
of record by Mesirow II, (ii) 198,220 shares held of record by Mesirow III,
(iii) 169,857 shares held of record by Mesirow IV, (iv) 333,386 shares held
of record by Mesirow V, and (v) 170,135 held of record by Mesirow VI. Mr.
Sutter disclaims beneficial ownership of such Common Stock. Does not
include shares of Common Stock beneficially owned by Mr. Sutter.

(6) Includes (i) a warrant to purchase 5,000 shares of Common Stock; and (ii)
5,104 shares of Common Stock and 11,786 shares of Common Stock issuable
upon the conversion of shares of Series A Convertible Preferred Stock held
of record by Flag. Annette C. Feld, Vice President -- Marketing and
Merchandise of the Company, is the wife of Barry J. Feld. Does not include
options to purchase 23,000 shares of Common Stock granted to Ms. Feld
pursuant to the Option Plan, which options are presently exercisable for
12,000 shares, or 200 shares of Common Stock held by Mr. Feld as custodian
for his children. Mr. Feld disclaims beneficial ownership of such shares.

(7) Includes (i) an option to purchase 10,000 shares of Common Stock granted to
Mr. Gleklen pursuant to the Option Plan; and (ii) 7,857 shares of Common
Stock issuable upon the conversion of shares of Series A Convertible
Preferred Stock. Does not include 1,000 shares held by Mr. Gleklen's wife
as to which shares Mr. Gleklen disclaims beneficial ownership.

(8) Includes (i) the presently exercisable portion of an option granted to Mr.
Harbert pursuant to the Option Plan to purchase 10,000 shares of Common
Stock, which option is presently exercisable for 3,300 shares; and (ii)
6,805 shares of Common Stock and 15,714 shares of Common Stock issuable
upon the conversion of Series A Convertible Preferred Stock held of record
by Flag.

(9) Includes (i) an option to purchase 10,000 shares of Common Stock granted to
Mr. Krantz pursuant to the Option Plan; and (ii) 6,805 shares of Common
Stock and 15,714 shares of Common Stock issuable upon the conversion of
shares of Series A Convertible Preferred Stock held of record by Flag.

(10) Includes an option to purchase 10,000 shares of Common Stock granted to Mr.
Pollock pursuant to the Option Plan.

(11) Includes (i) an option to purchase 10,000 shares of Common Stock granted to
Mr. Sutter pursuant to the Option Plan; and (ii) 5,104 shares of Common
Stock and 11,786 shares of Common Stock issuable upon the conversion of
shares of Series A Convertible Preferred Stock held of record by Flag. Does
not include 800 shares held by Mr. Sutter as a custodian for his children,
as to which shares Mr. Sutter disclaims beneficial ownership.

(12) Includes (i) options to purchase shares of Common Stock granted to
directors and executive officers pursuant to the Option Plan, which are
presently exercisable for 92,300 shares in the aggregate; (ii) warrants to
purchase 27,500 shares of Common Stock in the aggregate; (iii) 7,857 shares
of Common Stock issuable upon the conversion of shares of Series A
Convertible Preferred Stock held by Mr. Gleklen, and (iv) 30,623 shares of
Common Stock and 70,714 shares of Common Stock issuable upon the conversion
of Series A Convertible Preferred Stock held of record by Flag. Does not
include shares beneficially owned by the Mesirow Group. See footnotes 4 and
5.

32
<PAGE> 39

CERTAIN TRANSACTIONS

In early 1996, to fund the Company's expansion and advertising needs, the
Company entered into two bridge loans with Mesirow VI and Mr. Weinberg, totaling
$700,000. The loans bore interest at an annual rate of 15% and were secured by a
deed of trust on the Company's executive office building and optical laboratory
facility in Tempe, Arizona. William P. Sutter, Jr. is an officer of the
corporate general partner of Mesirow Capital Partners VI and a director of the
Company. The bridge loans were retired with the proceeds of a $2.0 million
revolving line of credit in June 1996. The revolving line of credit matures on
May 31, 1997, and is secured by substantially all of the Company's assets,
including the Company's executive office building and optical laboratory in
Tempe, Arizona, but excluding furniture, fixtures, and equipment. The revolving
line of credit bears interest on the principal balance outstanding from time to
time at a rate equal to the lending bank's prime rate plus 2.0% per annum, and
is due and payable monthly. The interest rate may be reduced to the lending
bank's prime rate plus 1.0% per annum if certain financial covenants are met at
year end 1996 and at the end of February 1997. The revolving line of credit is
also secured by guarantees from Mesirow V, Mesirow VI, and Mr. Weinberg. Mr.
Feld agreed to share in the obligations of the guarantors.

In exchange for the guarantee of the Company's obligations under its
revolving line of credit by such officers and shareholders, the Company issued
warrants to them to purchase, in the aggregate, 50,000 shares of the Company's
common stock at a price per share of $6.11, subject to customary anti-dilution
adjustments. The value of the warrants, which was determined by independent
valuation to be $0.57 per share, is reflected on the September 28, 1996 balance
sheet in other assets and paid-in capital and will be amortized over the life of
the revolving line of credit.

The Company is a party to an expense sharing arrangement under which the
Company shares the expenses of its Cleveland, Ohio headquarters with Weinberg
Capital Corporation, of which Mr. Weinberg is President and sole shareholder.
The Company pays (1) up to approximately $12,000 per month in the aggregate for
its allocated portion of the overhead costs of the headquarters and the salary
of a financial staff assistant to the Chairman of the Board, and (2) all
clearly-identifiable and reasonable out-of-pocket expenses incurred by personnel
in the headquarters office directly on behalf of the Company. The aggregate
amount of the payments by the Company for the shared headquarters were
approximately $74,000 in the first nine months of 1996, $136,000 in 1995,
$140,000 in 1994 and $117,000 in 1993.

In August 1993, the Company chose Mesirow Insurance Services, Inc., as its
primary insurance broker to arrange its insurance coverage, including real and
personal property, workers' compensation and general liability. Mesirow
Insurance Services, Inc. is an affiliate of Mesirow Financial. The original
insurance agreement was for a period of one year and has since been renewed.
Under the terms of the insurance agreement, the annual aggregate premiums paid
by the Company are approximately $200,000.

Byron S. Krantz, a director of the Company, is a partner of the law firm of
Kohrman Jackson & Krantz P.L.L., which provides legal services to the Company.

The Company believes that the terms of the transactions and the agreements
described above are on terms at least as favorable as those which it could
otherwise have obtained from unrelated parties. On-going and future transactions
with related parties will be (1) on terms at least as favorable as those that
the Company would be able to obtain from unrelated parties, (2) for bona fide
business purposes, and (3) approved by a majority of the disinterested and
non-employee directors.

33
<PAGE> 40

DESCRIPTION OF CAPITAL STOCK

The authorized capital stock of the Company consists of (1) 5,000,000
authorized shares of Common Stock, $0.01 par value per share, 3,763,036 shares
of which were outstanding as of December 23, 1996, (2) 3,960 authorized shares
of Series A Convertible Preferred Stock, $1,000 par value per share and 1,500
authorized shares of Series B Convertible Preferred Stock, $1,000 par value per
share, all of which are outstanding, and (3) 500,000 authorized shares of
Preferred Stock, $0.01 par value per share (the "Preferred Stock"), none of
which are outstanding. The Company intends to propose that the number of
authorized shares of Common Stock be increased to allow for the issuance of
Common Stock upon conversion of the Convertible Preferred Stock and exercise of
warrants and options under the Option Plan. The holders of outstanding warrants
of the Company and the Convertible Preferred Stock have agreed to waive the
reservation of shares of Common Stock reserved for issuance under the warrants
and Convertible Preferred Stock until the proposed increase is effected.

COMMON STOCK

Subject to the rights of the holders of any outstanding preferred stock,
each holder of Common Stock on the applicable record date is entitled to receive
such dividends as may be declared by the Board of Directors out of funds legally
available therefor. Upon liquidation or dissolution of the Company, each holder
of Common Stock will be entitled to share pro rata in any distribution of the
Company's assets after the payment of all debts and other liabilities, subject
to the rights of the holders of any outstanding preferred stock. Each holder of
Common Stock is entitled to one vote per share owned of record on the applicable
record date on all matters presented to a vote of the holders of Common Stock,
including the election of directors. Holders of Common Stock have no cumulative
voting rights and, therefore, the holders of more than half of the shares voting
for the election of a class of directors can elect all the directors of such
class and in such event the holders of the remaining shares will not be able to
elect any of such directors. The holders of Common Stock have no preemptive
rights to purchase or subscribe for any stock or other securities and there are
no conversion rights or redemption or sinking fund provisions with respect to
such stock. All outstanding shares of Common Stock are, and the shares of Common
Stock offered hereby will be when issued, fully paid and nonassessable.

CONVERTIBLE PREFERRED STOCK

Holders of the Convertible Preferred Stock are entitled on a pari passu
basis by Series to receive 6% cumulative, quarterly cash dividends. If the
Company fails to pay in full six consecutive dividends, then, until the Company
pays in full all such past due dividends, the holders of the Convertible
Preferred Stock will be entitled to vote on all matters submitted to the holders
of Common Stock, as if the Convertible Preferred Stock had been converted into
Common Stock based on its par value of $1,000 per share at a price equal to
$8.40, subject to adjustment as described below. The Company may redeem the
Series A Convertible Preferred Stock, in whole or in part, at any time, with not
less than 30 days notice, at its par value of $1,000 per share plus accrued
dividends. The Company may not redeem the Series B Convertible Preferred Stock,
in whole or in part, while any shares of the Series A Convertible Preferred
Stock are outstanding. Holders of both Series A and Series B may convert their
shares based on their par value of $1,000 per share into shares of Common Stock
at $8.40 per share. The Convertible Preferred Stock contains provisions
providing for adjustment of the conversion price and the number and type of
securities issuable upon conversion of such Preferred Stock upon the occurrence
of certain events. The holders of each Series of the Convertible Preferred Stock
have the right to elect one director per Series as long as the applicable Series
is outstanding. The holders of each Series of the Convertible Preferred Stock
are entitled to vote as a class on various actions that may adversely affect
each such Series. Upon the liquidation or dissolution of the Company, after the
payment of all debts and other liabilities of the Company, each holder of
Convertible Preferred Stock will be entitled on a pari passu basis by Series to
receive out of the assets of the Company available for distribution to
stockholders, before any payments or distribution is made on the Common Stock
(or any other capital stock subordinate to the Convertible Preferred Stock), the
amount of $1,000 per share plus an amount equal to the accumulated

34
<PAGE> 41

dividends to the date of such liquidation or dissolution. The Convertible
Preferred Stock is not listed or quoted on any stock exchange or market.

PREFERRED STOCK

The Company's Board of Directors has the authority (without action by the
stockholders) to issue the authorized and unissued Preferred Stock in one or
more series, to designate the number of shares constituting any series, and to
fix, by resolution, the preferences, rights, privileges, restrictions and other
rights thereof, including voting rights, liquidation preferences, dividend
rights and conversion and redemption rights of such series subject to the prior
rights of the Convertible Preferred Stock. Under certain circumstances, the
Company could issue this Preferred Stock as a method of discouraging, delaying
or preventing a change of control of the Company. The Company does not currently
intend to issue any shares of this Preferred Stock.

TRANSFER AGENT AND REGISTRAR

The Transfer Agent and Registrar for the Common Stock is Continental Stock
Transfer & Trust Company, New York, New York.

35
<PAGE> 42

UNDERWRITING

The Underwriters named below, for whom Fahnestock & Co. Inc. is acting as
representative (the "Representative"), have severally agreed, subject to the
terms and conditions contained in the Underwriting Agreement, to purchase from
the Company and the Selling Stockholders the number of shares of Common Stock
indicated below opposite their respective names at the public offering price
less the underwriting discount set forth on the cover page of this Prospectus.

<TABLE>
<CAPTION>
NUMBER OF
SHARES OF
COMMON
STOCK TO BE
NAME OF UNDERWRITER PURCHASED
---------------------------------------------------------------------- -----------
<S> <C>
Fahnestock & Co. Inc. ................................................
---------
Total....................................................... 1,600,000
=========
</TABLE>

The Underwriting Agreement provides that the obligations of the
Underwriters are subject to certain conditions and that the Underwriters are
committed to purchase all of the shares (other than those covered by the
over-allotment option) if any are purchased.

The Representative has advised the Company and the Selling Stockholders
that the Underwriters propose to offer the Common Stock to the public at the
public offering price set forth on the cover page of this Prospectus and to
certain dealers at such price less a concession not to exceed $ per share.
The Underwriters may allow, and such dealers may reallow, a concession of not
more than $ to certain other dealers. After the public offering, the
offering price, the concession to certain dealers and other selling terms may be
changed by the Representative. The Underwriters do not anticipate that sales to
discretionary accounts will exceed five percent of the total number of shares of
Common Stock offered hereby.

The Company and one of the Selling Stockholders have granted to the
Underwriters an option, exercisable not later than 30 days after the date of
this Prospectus, to purchase up to a maximum of 240,000 additional shares of
Common Stock in the aggregate on an equal basis solely to cover over-allotments,
if any, at the public offering price less the underwriting discount set forth on
the cover page of this Prospectus. To the extent that the Underwriters exercise
this option, each Underwriter will be committed, subject to certain conditions,
to purchase approximately the same proportion of such additional shares as the
number of shares to be purchased by it shown in the foregoing table bears to the
total number of shares of Common Stock initially offered hereby.

The Underwriting Agreement provides that the Company and the Selling
Stockholders will indemnify the Underwriters against certain liabilities,
including liabilities under the Securities Act or will contribute to payments
the Underwriters may be required to make in respect thereof. The Company has
also agreed to pay the Representative a non-accountable expense allowance of
$75,000, $25,000 of which has been paid to date.

The Company's directors, officers and beneficial owners of 5% or more of
the Company's outstanding Common Stock have agreed not to offer, issue, sell,
contract to sell, grant any option for the sale of, or otherwise dispose of,
directly or indirectly, any securities of the Company, other than the
over-allotment shares, if any, for a period of 180 days from the date of this
Prospectus, without the prior written request of the Representative.

The Representative and its affiliates are beneficial owners of IPO Warrants
to purchase up to 66,563 shares of Common Stock. The IPO Warrants are
non-transferable during their term, except to affiliates of the Representative.
The IPO Warrants grant to the holder thereof certain registration rights for the
securities issuable upon the exercise thereof. In consideration of the
participation of the Representative in this offering and the agreement of the
Representative and each of the other holders of the IPO Warrants to eliminate
certain anti-dilution provisions relating to the issuance by the Company of
securities at a price below market

36
<PAGE> 43

or the IPO Warrant exercise price, the Company has agreed to amend the IPO
Warrants concurrently with the closing of this offering, as follows: (1) the
exercise price will be reduced from the original exercise price of $8.75 per
share to $8.00 per share, and (2) the exercise period and associated
registration rights will be extended from the original expiration date of
December 23, 1997 to December 23, 1999.

In connection with this offering, the Underwriters and selling group
members, if any, may engage in passive market making transactions in the Common
Stock on NASDAQ in accordance with rule 10b-6A under the Securities and Exchange
Act of 1934, as amended. Passive market making consists of displaying bids on
NASDAQ limited by the prices of independent market makers and effecting
purchases limited by such prices and in response to order flow. Net purchases by
a passive maker on each day are limited in amount to a specified percentage of
the passive market maker's average daily trading volume in the Common Stock
during a specified prior period and must be discontinued when such limit is
reached. Passive market making may stabilize the market price of the Common
Stock at a level above that which might otherwise prevail and, if commenced, may
be discontinued at any time.

LEGAL MATTERS

Certain legal matters with respect to the Common Stock offered hereby will
be passed upon for the Company by Kohrman Jackson & Krantz P.L.L., Cleveland,
Ohio. Certain legal matters will be passed upon for the Underwriters by Arnold &
Porter, New York, New York. Byron S. Krantz, a partner in Kohrman Jackson &
Krantz P.L.L., is the beneficial owner of 27,181 shares of Common Stock, 132
shares of Series A Convertible Preferred Stock, an option to purchase 10,000
shares of Common Stock granted under the Option Plan, and is the Secretary and a
director of the Company.

EXPERTS

The consolidated financial statements as of December 30, 1995 and December
31, 1994 and for each of the three years in the period ended December 30, 1995
included in this Prospectus have been so included in reliance on the report of
Price Waterhouse LLP, independent accountants, given on the authority of said
firm as experts in auditing and accounting.

37
<PAGE> 44

NEW WEST EYEWORKS, INC.

INDEX TO CONSOLIDATED FINANCIAL STATEMENTS

<TABLE>
<CAPTION>
PAGE
-----
<S> <C>
Report of Independent Accountants..................................................... F-2
Financial Statements:
Consolidated Balance Sheet at December 31, 1994, December 30, 1995 and September 28,
1996 (unaudited)................................................................. F-3
Consolidated Statements of Operations for each year in the three year period ended
December 30, 1995, and the unaudited nine-month periods ended September 30, 1995
and September 28, 1996........................................................... F-4
Consolidated Statement of Stockholders' Equity for each year in the three year
period ended December 30, 1995, and the unaudited nine-month period ended
September 28, 1996............................................................... F-5
Consolidated Statement of Cash Flow for each year in the three year period ended
December 30, 1995, and the unaudited nine-month period ended September 30, 1995
and September 28, 1996........................................................... F-6
Notes to Consolidated Financial Statements.......................................... F-7
</TABLE>

F-1
<PAGE> 45

REPORT OF INDEPENDENT ACCOUNTANTS

To the Board of Directors and
Stockholders of New West Eyeworks, Inc.

In our opinion, the accompanying consolidated balance sheet and the related
consolidated statements of operations, of stockholders' equity and of cash flows
present fairly, in all material respects, the financial position of New West
Eyeworks, Inc. and its subsidiary at December 30, 1995 and December 31, 1994,
and the results of their operations and their cash flows for each of the three
years in the period ended December 30, 1995, in conformity with generally
accepted accounting principles. These financial statements are the
responsibility of the Company's management; our responsibility is to express an
opinion on these financial statements based on our audits. We conducted our
audits of these statements in accordance with generally accepted auditing
standards which require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements, assessing the
accounting principles used and significant estimates made by management, and
evaluating the overall financial statement presentation. We believe that our
audits provide a reasonable basis for the opinion expressed above.

As described in Note 2 to the consolidated financial statements, the Company
changed its method of accounting for income taxes effective December 27, 1992.

PRICE WATERHOUSE LLP
Phoenix, Arizona
March 8, 1996

F-2
<PAGE> 46

NEW WEST EYEWORKS, INC.

CONSOLIDATED BALANCE SHEET

(IN THOUSANDS, EXCEPT SHARE AMOUNTS)

<TABLE>
<CAPTION>
SEPTEMBER
DECEMBER 31, DECEMBER 30, 28,
1994 1995 1996
------------ ------------ ------------
(UNAUDITED)
<S> <C> <C> <C>
ASSETS
Current Assets:
Cash and cash equivalents............................... $ 1,000 $ 241 $ 126
Accounts receivable, net................................ 875 999 1,324
Inventory............................................... 2,851 3,132 3,488
Other current assets.................................... 130 78 189
-------- -------- --------
Total current assets................................. 4,856 4,450 5,127
Property and equipment, net............................... 6,131 6,656 7,214
Goodwill.................................................. 686 596 528
Other assets.............................................. 48 32 51
-------- -------- --------
Total assets......................................... $ 11,721 $ 11,734 $ 12,920
======== ======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Accounts payable........................................ $ 4,059 $ 5,755 $ 5,250
Accrued expenses........................................ 2,410 3,096 2,358
Deferred warranty revenues.............................. 588 348 310
Notes payable and capital lease obligations, current
portion.............................................. 153 235 2,133
-------- -------- --------
Total current liabilities............................ 7,210 9,434 10,051
Liability for closed store leases......................... 129 57 25
Notes payable and capital lease obligations............... 106 321 235
-------- -------- --------
Total liabilities.................................... 7,445 9,812 10,311
-------- -------- --------
Stockholders' Equity:
Series A 6% Cumulative Convertible Preferred Stock,
$1,000 par value, 3,960 shares authorized, issued and
outstanding.......................................... 3,960 3,960 3,960
Series B 6% Cumulative Convertible Preferred Stock,
$1,000 par value, 1,500 shares authorized, issued and
outstanding.......................................... 1,500 1,500 1,500
Common stock, $0.01 par value, 5,000,000 shares
authorized, 3,763,036 shares issued and
outstanding.......................................... 38 38 38
Paid-in capital......................................... 10,070 10,070 10,100
Accumulated deficit..................................... (11,292) (13,646) (12,989)
-------- -------- --------
Total stockholders' equity........................... 4,276 1,922 2,609
-------- -------- --------
Total liabilities and stockholders' equity........... $ 11,721 $ 11,734 $ 12,920
======== ======== ========
</TABLE>

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

F-3
<PAGE> 47

NEW WEST EYEWORKS, INC.

CONSOLIDATED STATEMENT OF OPERATIONS

(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)

<TABLE>
<CAPTION>
FISCAL YEAR ENDED NINE-MONTHS ENDED
------------------------------------------ -----------------------------
DECEMBER 25, DECEMBER 31, DECEMBER 30, SEPTEMBER 30, SEPTEMBER 28,
1993 1994 1995 1995 1996
------------ ------------ ------------ ------------- -------------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Net sales.......................... $ 32,964 $ 37,367 $ 40,033 $31,030 $34,043
Cost of Sales...................... 17,256 19,675 20,352 15,493 16,847
------- ------- ------- ------- -------
Gross Profit..................... 15,708 17,692 19,681 15,537 17,196
Selling, general and administrative
expenses......................... 16,277 18,978 21,667 15,975 15,977
------- ------- ------- ------- -------
Operating income (loss)............ (569) (1,286) (1,986) (438) 1,219
Interest income.................... 2 53 12 12 --
Interest expense................... 712 55 51 25 145
------- ------- ------- ------- -------
Income (loss) before income tax
expense (benefit) extraordinary
gain and cumulative effect of
change in accounting principle... (1,279) (1,288) (2,025) (451) 1,074
Income tax expense (benefit)....... (469) -- -- -- 172
------- ------- ------- ------- -------
Income (loss) before extraordinary
gain and cumulative effect of
change in accounting principle... (810) (1,288) (2,025) (451) 902
Extraordinary gain from retirement
of debt, net of tax.............. 1,674 -- -- -- --
Cumulative effect of change in
accounting principle............. 374 -- -- -- --
------- ------- ------- ------- -------
Net income (loss).................. 1,238 (1,288) (2,025) (451) 902
Preferred stock dividends.......... (396) (328) (329) (245) (245)
------- ------- ------- ------- -------
Net income (loss) applicable to
holder of common stock........... $ 842 $ (1,616) $ (2,354) $ (696) $ 657
======= ======= ======= ======= =======
Income (loss) per common and common
equivalent share:
Income (loss) before
extraordinary gain and
cumulative effect of change
in accounting principle..... $ (0.57) $ (0.43) $ (0.63) $ (0.18) $ 0.18
Extraordinary gain............ 0.79 -- -- -- --
Cumulative effect of change in
accounting principle........ 0.18 -- -- -- --
------- ------- ------- ------- -------
Net income (loss)............. $ 0.40 $ (0.43) $ (0.63) $ (0.18) $ 0.18
======= ======= ======= ======= =======
Weighted average number of common
and common equivalent shares
outstanding...................... 2,125 3,736 3,763 3,763 3,763
</TABLE>

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

F-4
<PAGE> 48

NEW WEST EYEWORKS, INC.

CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY

(IN THOUSAND, EXCEPT SHARE AMOUNTS)

<TABLE>
<CAPTION>
AMOUNTS
SHARES -----------------------------------------------------
--------------------- PAID-IN ACCUMULATED
PREFERRED COMMON PREFERRED COMMON CAPITAL DEFICIT TOTAL
--------- --------- --------- ------ ------- ----------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
BALANCES AT DECEMBER 26, 1992......... 921,007 $ 9 $ 162 $ (10,518) $(10,347)
Issuance of warrants.................. 95 95
Dividends accrued on redeemable
preferred stock..................... (396) (396)
Dividends forgiven on redeemable
preferred stock..................... 252 252
Collection of stock subscription
receivable.......................... 29 29
Preferred stock issued upon conversion
of redeemable preferred stock....... 5,460 $ 5,460 5,460
Common stock issued in exchange for
reduction in debt and accrued
dividends........................... 139,286 1 974 975
Common stock issued upon exercise of
warrants............................ 1,203,993 12 (10) 2
Net income............................ 1,238 1,238
----- --------- ------ --- ------- -------- -------
BALANCES AT DECEMBER 25, 1993......... 5,460 2,264,286 5,460 22 1,502 (9,676) (2,692)
Common stock issued................... 1,498,750 16 8,568 8,584
Preferred stock dividends............. (328) (328)
Net loss.............................. (1,288) (1,288)
----- --------- ------ --- ------- -------- -------
BALANCES AT DECEMBER 31, 1994......... 5,460 3,763,036 5,460 38 10,070 (11,292) 4,276
Preferred stock dividends............. (329) (329)
Net loss.............................. (2,025) (2,025)
----- --------- ------ --- ------- -------- -------
BALANCES AT DECEMBER 30, 1995......... 5,460 3,763,036 5,460 38 10,070 (13,646) 1,922
Preferred stock dividends
(unaudited)......................... (245) (245)
Issuance of warrants (unaudited)...... 30 30
Net income (unaudited)................ 902 902
----- --------- ------ --- ------- -------- -------
BALANCES AT SEPTEMBER 28, 1996
(unaudited)......................... 5,460 3,763,036 $ 5,460 $ 38 $10,100 $ (12,989) $ 2,609
===== ========= ====== === ======= ======== =======
</TABLE>

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

F-5
<PAGE> 49

NEW WEST EYEWORKS, INC.

CONSOLIDATED STATEMENT OF CASH FLOWS

(IN THOUSANDS)

<TABLE>
<CAPTION>
FISCAL YEAR ENDED NINE-MONTHS ENDED
------------------------------------------ -----------------------------
DECEMBER 25, DECEMBER 31, DECEMBER 30, SEPTEMBER 30, SEPTEMBER 28,
1993 1994 1995 1995 1996
------------ ------------ ------------ ------------- -------------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
CASH FLOWS FROM (USED IN) OPERATING ACTIVITIES:
Net income (loss).................................. $1,238 $ (1,288) $ (2,025) $ (451) $ 902
Adjustments to reconcile net income (loss) to net
cash from (used in) operating activities:
Depreciation and amortization.................... 1,845 1,614 1,048 763 910
Provision for closed stores...................... -- -- -- 40 --
Loss on disposal of fixed assets................. 54 133 65 -- --
Extraordinary gain............................... (2,500) -- -- -- --
Cumulative effect of change in accounting
principle...................................... (374) -- -- -- --
Reduction in goodwill resulting from tax benefit
of acquisition NOL............................. 88 -- -- -- --
Interest expenses accrued on unpaid preferred
stock dividends................................ 65 -- -- -- --
Amortization of debt discount.................... 95 -- -- -- --
Change in assets and liabilities:
Accounts receivable, net......................... (310) (48) (124) (95) (325)
Inventory........................................ (418) (515) (281) (686) (356)
Other current assets............................. (15) (34) 52 (21) (111)
Deferred offering costs.......................... (929) 929 -- -- --
Accounts payable................................. 1,217 (680) 1,696 1,290 (505)
Accrued expenses................................. 108 522 603 (295) (819)
Deferred warranty revenues....................... 90 94 (240) (179) (38)
Other assets and liabilities..................... (104) 6 (72) (72) (30)
------- ------- ------- ------- ------
Net cash from (used in) operating activities..... 150 733 722 294 (372)
------- ------- ------- ------- ------
CASH FLOWS USED IN INVESTING ACTIVITIES:
Purchase of property and equipment................. (1,018) (3,178) (1,532) (1,380) (1,300)
------- ------- ------- ------- ------
CASH FLOWS FROM (USED IN) FINANCING ACTIVITIES:
Proceeds from issuance of debt..................... 3,750 -- 505 505 2,615
Payment of debt.................................... (3,031) (3,222) (208) (128) (895)
Payment of preferred stock dividends............... -- (328) (246) (164) (163)
Net proceeds from issuance of common stock......... -- 8,584 -- -- --
Redemption of redeemable preferred stock........... -- (1,752) -- -- --
Other.............................................. 31 -- -- -- --
------- ------- ------- ------- ------
Net cash from financing activities................... 750 3,282 51 213 1,557
------- ------- ------- ------- ------
NET INCREASE (DECREASE) IN CASH and CASH
EQUIVALENTS:....................................... (118) 837 (759) (873) (115)
CASH and CASH EQUIVALENTS, beginning of period....... 281 163 1,000 1,000 241
------- ------- ------- ------- ------
CASH and CASH EQUIVALENTS, end of period............. $ 163 $ 1,000 $ 241 $ 127 $ 126
======= ======= ======= ======= ======
SUPPLEMENTAL CASH FLOW INFORMATION:
Interest paid...................................... $ 311 $ 66 $ 51 $ 25 $ 138
Income taxes paid.................................. $ 50 $ 65 $ -- $ -- $ --
</TABLE>

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

F-6
<PAGE> 50

NEW WEST EYEWORKS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 1 -- THE COMPANY AND ITS RECAPITALIZATION:

New West Eyeworks, Inc. (the Company) operates retail optical stores as
well as two optical laboratories and distribution facilities in the Western
United States. During 1993 and early 1994, the Company consummated the following
transactions in connection with its recapitalization.

JUNIOR BRIDGE LOAN

On March 26, 1993, the Company entered into a new investment agreement with
an officer of the Company as well as certain holders of its then outstanding
Series A Redeemable Junior Preferred Stock. Under terms of this agreement, the
Company issued $750,000 ($75,000 to an officer of the Company) of its 8% notes
(the Junior Bridge Loan) which required quarterly interest payments. The Company
also issued warrants to those creditors to purchase 248,917 shares of its common
stock (24,941 to an officer of the Company) at an exercise price of $0.002 per
share. The fair value of the warrants at the date of issuance was determined by
independent valuation to be $0.095 per share. The aggregate warrant value of
$23,000 was recorded as a discount against the Junior Bridge Loan to be accreted
over the five year term of the loan as incremental interest expense.

Proceeds from the Junior Bridge Loan were used to repay $250,000 of
principal under the Company's then outstanding bank term note and revolving line
of credit agreements; to make payments of approximately $122,000 in connection
with the settlement of a dispute involving two former employees under which the
Company acquired its executive office building and optical laboratory facilities
subject to a mortgage with the then principal amount of $228,000; to repay a
$100,000 short-term loan extended by an officer of the Company; and for working
capital and general corporate purposes.

Under terms of the new investment agreement, the Company also issued
warrants to the holder of its then outstanding Redeemable Cumulative Preferred
Stock to purchase 33,906 shares of common stock at an exercise price of $0.002
per share in exchange for the stockholder's consent to the Junior Bridge Loan, a
waiver of certain defaults under the original Redeemable Cumulative Preferred
Stock purchase agreement and the stockholder's agreement to forego accrued
dividends and interest of approximately $252,000 (such forgiven dividends and
interest have been recorded by the Company as a capital contribution). The fair
value of such warrants at the date of issuance was determined by independent
valuation to be $0.095 per share. In connection with obtaining the stockholder's
consent to the Junior Bridge Loan, the Company also decreased the exercise price
of previously existing warrants held by the stockholder to purchase 195,612
shares of common stock from $0.613 to $0.002. The fair value of such warrants at
the date of the reduction in exercise price was determined by independent
valuation to be $0.095 per share. The aggregate value of the new warrants as
well as the reduction in the exercise price of existing warrants of $20,000 was
also recorded as a discount against the Junior Bridge Loan to be accreted over
the five year term of the loan as incremental interest expense.

SENIOR BRIDGE LOAN

On September 16, 1993, the Company consummated a series of transactions
under which it borrowed $2,900,000 from one of the holders of its then
outstanding Series A Redeemable Junior Preferred Stock (the Senior Bridge Loan).
Under the terms of the related agreement, the Senior Bridge Loan was due on
September 16, 1994, and had an annual effective interest rate of 25%. The
Company also issued warrants to the stockholder to purchase 63,737 shares of
common stock at an exercise price of $0.003 per share. The fair value of
warrants at the date of issuance was determined by independent valuation to be
$0.816 per share. The aggregate warrant value of $52,000 was recorded as a
discount against the Senior Bridge Loan to be accreted over the one year term of
the loan as incremental interest expense. The proceeds of the Senior Bridge Loan
were used primarily to retire in full for $2,000,000 the Company's then
outstanding aggregate balance of

F-7
<PAGE> 51

NEW WEST EYEWORKS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

NOTE 1 -- THE COMPANY AND ITS RECAPITALIZATION: (CONTINUED)

SENIOR BRIDGE LOAN (CONTINUED)
$4,500,000 under the bank term note and revolving line of credit agreements. The
resulting gain of $1,674,000 (which is net of incremental costs incurred to
effect the debt restructuring of $209,000 and income taxes of $617,000) has been
reflected in the accompanying consolidated statement of operations as an
extraordinary gain.

STOCK SPLIT

On October 7, 1993, the Company's Board of Directors approved a
163.0101-for-1 stock split, which stock split became effective prior to the
Company's initial public offering of its common stock described below. The stock
split has been reflected in the accompanying consolidated financial statements
as if it had occurred at the beginning of fiscal 1993.

CHANGES IN CAPITAL STRUCTURE

On December 20, 1993, the Company amended its Certificate of Incorporation
to increase the number of authorized shares of common stock from 13,500 to
5,000,000 and to authorize the issuance of 3,960 shares of Series A and 1,500
shares of Series B $1,000 par value Cumulative Convertible Preferred Stock. The
Cumulative Convertible Preferred Stock is redeemable by the Company at par value
plus accrued but unpaid dividends; however, Series B shares cannot be redeemed
while any Series A shares are outstanding. Additionally, prior to August 1,
1996, Series B shares could not be redeemed without the consent of the holders
of such shares. Holders of Cumulative Convertible Preferred Stock may convert
their shares into shares of the Company's common stock beginning August 1, 1996.
The number of common shares issuable upon conversion is determined by dividing
the par value of outstanding Cumulative Convertible Preferred Stock by 120% of
the initial public offering price of $7.00 per share, subject to adjustment.

CONVERSION OF REDEEMABLE PREFERRED STOCK

As of December 20, 1993, 3,960 shares of the then outstanding Redeemable
Cumulative Preferred Stock were converted on a one-for-one basis into the
newly-authorized shares of Series A Cumulative Convertible Preferred Stock and
1,500 shares of the then outstanding Series A Redeemable Junior Preferred Stock
were converted on a one-for-one basis into the newly authorized shares of Series
B Cumulative Convertible Preferred Stock.

EXCHANGE OF INDEBTEDNESS AND ACCRUED DIVIDENDS

As of December 20, 1993, the Company issued 71,429 shares of its common
stock in exchange for a $500,000 reduction in the principal amount of the Senior
Bridge Loan; 57,143 shares of common stock to holders of the then outstanding
Redeemable Cumulative Preferred Stock in exchange for a $400,000 reduction in
accrued dividends; and 10,714 shares of common stock to an officer of the
Company in exchange for the retirement of $75,000 in the principal amount of the
Junior Bridge Loan.

EXERCISE OF WARRANTS

During the last month of fiscal 1993, all existing warrants for the
Company's common stock were exercised at prices ranging from $0.002 to $0.003
per share. As a result of these exercises, the Company issued 1,203,993 shares
of its common stock generating proceeds of $2,000.

F-8
<PAGE> 52

NEW WEST EYEWORKS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

NOTE 1 -- THE COMPANY AND ITS RECAPITALIZATION: (CONTINUED)

INITIAL PUBLIC OFFERING

On December 23, 1993, the Company's initial Registration Statement on Form
S-1 was declared effective by the Securities and Exchange Commission for the
purpose of offering 1,375,000 shares of its common stock at a price of $7.00 per
share. An additional 123,750 shares were sold on January 20, 1994, when the
underwriters of the initial public offering exercised their over-allotment
option. Aggregate net offering proceeds to the Company were approximately
$8,584,000.

Proceeds from the offering were used by the Company to repay outstanding
principal and interest on the Junior Bridge Loan and the Senior Bridge Loan of
$691,000 and $2,611,000, respectively; to redeem the outstanding shares of the
then outstanding Redeemable Cumulative Preferred Stock together with accrued
dividends and related interest aggregating $1,408,000; and to pay accrued
dividends and interest on the then outstanding Series A Redeemable Junior
Preferred Stock aggregating $344,000. Remaining proceeds were used for the
Company's store expansion program, optical laboratory equipment, and other
general corporate purposes.

NOTE 2 SIGNIFICANT ACCOUNTING POLICIES:

USE OF ESTIMATES

The preparation of financial statements in conformity with generally
accepted accounting principles 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 amount of revenues and expenses during the reporting
period. Actual results could differ from those estimates.

PRINCIPLES OF CONSOLIDATION

The accompanying financial statements include the accounts of the Company
and its wholly-owned subsidiary, Alexis Holdings, Inc. All significant
intercompany accounts and transactions have been eliminated.

CHANGE IN ACCOUNTING PRINCIPLE

Effective December 27, 1992, the Company adopted, on a prospective basis,
Statement of Financial Accounting Standards No. 109, Accounting for Incomes
Taxes (SFAS 109). The adoption of SFAS 109 changes the Company's method of
accounting for income taxes from the deferred method to an asset and liability
approach. Previously, the Company deferred the past tax effects of timing
differences between financial reporting and taxable income. The asset and
liability approach requires the recognition of deferred tax assets and
liabilities for the expected future tax consequences of temporary differences
between the carrying amounts and tax bases of assets and liabilities.

Under SFAS 109, assets and liabilities acquired in purchase business
combinations are assigned their fair values assuming equal tax bases, and
deferred taxes are provided for lower or higher tax bases. Under the Company's
previous accounting method, values were assigned net-of-tax. In adopting SFAS
109, the Company adjusted the carrying amount of property and equipment obtained
in its 1988 acquisition of Western States Optical (WSO). The adjustments to the
December 27, 1992, balance sheet to adopt SFAS 109 totalled $374,000 and relate
to the increase in the carrying amount of property and equipment acquired from
WSO in 1988. This adjustment was recorded in the first quarter of 1993 and is
reflected in net income for the year as the cumulative effect of a change in
accounting principle. The loss before income tax benefit, extraordinary gain and
cumulative effect adjustment for the years ended December 31, 1994, and December
25, 1993, was

F-9
<PAGE> 53

NEW WEST EYEWORKS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

NOTE 2 -- SIGNIFICANT ACCOUNTING POLICIES: (CONTINUED)

CHANGE IN ACCOUNTING PRINCIPLE (CONTINUED)
increased by $138,000 and $236,000, respectively, to reflect depreciation
expense during the year related to the previously mentioned increase in carrying
value.

FISCAL YEAR

The Company's fiscal year ends on the last Saturday of the calendar year.
Fiscal years 1995 and 1993 reflect periods of 52 weeks while fiscal year 1994
reflects a period of 53 weeks.

REVENUE RECOGNITION

Revenues are recognized at the time of customer order. Revenues from
separately priced warranty contracts are deferred and recognized on a pro rata
basis over the contract period.

STORE OPENING COSTS

The Company expenses store opening costs as incurred.

ADVERTISING COSTS

Effective January 1, 1995, the Company adopted American Institute of
Certified Public Accountants Statement of Position No. 93-7, Reporting on
Advertising Costs (the "Statement"). In accordance with the Statement, the
Company recognizes advertising production costs in the period in which the
related advertisement first takes place. Advertising communication costs such as
television air time and newspaper advertising space are recognized as the
related services are received. All other costs are expensed as incurred. The
adoption of the Statement during 1995 did not have a material impact on the
Company's financial condition or results of operations. Advertising expenses
totaling $4,136,000, $3,392,000, and $2,552,000 for the years 1995, 1994, and
1993, respectively.

CASH AND CASH EQUIVALENTS

The Company considers liquid investments with an original maturity of three
months or less to be cash equivalents.

ACCOUNTS RECEIVABLE

Accounts receivable are primarily comprised of amounts due from insurance
carriers on sales where the Company has accepted an assignment of insurance
benefits from the customer. The reported balances are net of an allowance for
doubtful accounts of $160,000 and $186,000 at December 30, 1995, and December
31, 1994, respectively.

INVENTORY AND COST OF SALES

Inventory primarily consists of the direct material cost of eyeglass
frames, contact lenses, ophthalmic lenses and optical laboratory supplies and is
stated at the lower of cost or market. Cost is determined using the first-in,
first-out method.

Cost of sales includes the cost of merchandise sold during the period,
optical laboratory costs directly related to manufacturing eyeglasses, store
occupancy expenses, and depreciation expense relating to store and optical
laboratory fixtures and equipment.

F-10
<PAGE> 54

NEW WEST EYEWORKS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

NOTE 2 -- SIGNIFICANT ACCOUNTING POLICIES: (CONTINUED)

PROPERTY AND EQUIPMENT

Property and equipment are stated at cost less accumulated depreciation.
Depreciation is provided using the straight-line method over the estimated
useful lives of the related assets which range from five to ten years. Major
improvements are capitalized while repairs which do not extend the useful life
of the asset are expensed.

GOODWILL

Goodwill relating to the 1988 acquisition of Western States Optical is
being amortized for financial statement purposes on a straight-line basis over a
period of fifteen years. The reported balance is net of accumulated amortization
of $669,000 and $579,000 at December 30, 1995, and December 31, 1994,
respectively. The Company evaluates the possibility of goodwill impairment when
events or changes in economic circumstances indicate that the related carrying
amount may not be recoverable.

INCOME (LOSS) PER COMMON AND COMMON EQUIVALENT SHARE

Income (loss) per common and common equivalent share is computed using the
weighted average number of common and common equivalent shares outstanding
during the period. Common equivalent shares consist of warrants and options
using the treasury stock method. Common equivalent shares are excluded from the
computation if their effect is anti-dilutive except that, pursuant to the
requirements of the Securities and Exchange Commission, common equivalent shares
relating to warrants issued during the twelve month period prior to the initial
public offering (See Note 1) are included in the computations for all periods
presented.

UNAUDITED INTERIM FINANCIAL STATEMENTS

The interim consolidated financial statements as of September 28, 1996 and
for the nine-month periods ended September 30, 1995 and September 28, 1996 are
unaudited. In the opinion of management, such interim consolidated financial
statements include all adjustments, consisting only of normal recurring
adjustments, necessary to present fairly the Company's consolidated financial
position as of September 28, 1996 and the consolidated results of operations and
cash flows for the periods ended September 30, 1995 and September 28, 1996. The
interim results of operations are not necessarily indicative of results which
may occur for the full year.

NOTE 3 -- STORE CLOSURES:

The Company closed ten of its retail outlets operated in a chain of
department stores in Arizona at the end of the first quarter of 1995. Costs of
closing these retail outlets, including remaining lease payments for periods
subsequent to April 1, 1995, equipment write-downs and other related costs,
approximated $300,000 and are included in cost of sales, and selling, general
and administrative expenses for the year ending December 31, 1994.

The Company closed three of its retail outlets during of the first quarter
of 1996. Estimated costs of closing these retail outlets, including remaining
lease payments, equipment write-downs and other related costs, approximated
$50,000 and are included in cost of sales, and selling, general and
administrative expenses for the year ending December 30, 1995.

F-11
<PAGE> 55

NEW WEST EYEWORKS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

NOTE 4 -- PROPERTY, EQUIPMENT AND LEASES:

Property and equipment consists of the following, in thousands:

<TABLE>
<CAPTION>
DECEMBER 30, DECEMBER 31,
1995 1994
------------ ------------
<S> <C> <C>
Store fixtures and equipment............................... $ 10,385 $ 9,888
Laboratory fixtures and equipment.......................... 1,843 1,632
Other fixtures and equipment............................... 1,971 1,793
Building and improvements.................................. 638 517
Construction in progress................................... 28
------------ ------------
14,865 13,830
Less: accumulated depreciation............................. (8,209) (7,699)
------------ ------------
$ 6,656 $ 6,131
========== ==========
</TABLE>

The Company leases substantially all of its store facilities under
operating leases which expire at various dates through 2002. Certain leases
require payment of property taxes, utilities, common area maintenance and
insurance as well as additional rent if sales exceed specified amounts. Total
rent expense incurred during 1995, 1994 and 1993 approximated $5,000,000,
$5,000,000 and $4,300,000, respectively, including additional rent expense of
$889,000, $930,000 and $843,000, respectively. At December 30, 1995, future
minimum annual rental commitments under noncancelable operating leases were as
follows, in thousands:

<TABLE>
<S> <C>
1996....................................................... $ 3,085
1997....................................................... 2,706
1998....................................................... 2,376
1999....................................................... 1,724
2000....................................................... 1,017
Thereafter................................................. 1,447
-------
$12,355
=======
</TABLE>

NOTE 5 -- NOTES PAYABLE:

Notes payable consist of the following, in thousands:

<TABLE>
<CAPTION>
DECEMBER 30, DECEMBER 31,
1995 1994
------------ ------------
<S> <C> <C>
Capital lease obligations.................................. $505 $134
Mortgage note payable, interest at 10.75%, interest and
principal payments of $7,000 due monthly until maturity
on August 1, 1996, secured by executive office building
and optical
laboratory facilities.................................... 51 125
------ ------
Total debt................................................. 556 259
Less: current portion...................................... 235 153
------ ------
Total long-term debt....................................... $321 $106
========== ==========
</TABLE>

In August 1995, the Company sold certain equipment for an aggregate sales
price of $505,000 and simultaneously leased the equipment back over a term of
three years with monthly payments of $16,000. The sale was recorded as a
financing transaction with no associated gain or loss recognized. The equipment

F-12
<PAGE> 56

NEW WEST EYEWORKS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

NOTE 5 -- NOTES PAYABLE: (CONTINUED)

includes modular fixtures, optical equipment and manufacturing equipment
purchased by the Company in late 1994 and early 1995.

To fund the Company's expansion and advertising needs in early 1996, two
bridge loans were executed with Mesirow Partners VI, a common and preferred
stockholder, and Ronald Weinberg, Chairman of the Board, totaling $700,000. The
loans mature on April 30, 1996, bear interest at an annual rate of 15% and are
secured by a deed of trust on the Company's executive office building and
optical laboratory facilities in Tempe, Arizona.

The Company believes that cash flow from operations, lease financing and
shareholder loans will be sufficient to fund its working capital needs and store
expansion program in 1996. However, there can be no assurances that the Company
will meet its sales targets or obtain additional financing, in which case the
Company will not have sufficient funds to satisfy its working capital needs and
fund its store expansion program.

NOTE 6 -- COMMON STOCK AND WARRANTS:

In connection with the initial public offering, the Company sold warrants
to its primary underwriter and two individuals at a nominal price. The warrants,
which are exercisable for a four-year period commencing December 23, 1994,
entitle the holders to purchase a total of 106,563 shares of the Company's
common stock at an exercise price of 125% of the initial public offering price
of $7.00 per share ($8.75 per share).

In October 1993, the Company established the New West Eyeworks 1993 Stock
Option Plan (the 1993 Plan) which provides for grants to eligible employees and
directors of options to purchase an aggregate of 200,000 shares of the Company's
common stock. Option awards vest evenly over a three-year period and are
exercisable for up to ten years. Changes during 1994 and 1995 in options
outstanding were as follows:

<TABLE>
<CAPTION>
AVERAGE OPTION
SHARES PRICE PER SHARE
------- ---------------
<S> <C> <C>
Outstanding December 25, 1993: --
Granted in fiscal 1994.................................... 108,500 $7.00
-------
Outstanding December 31, 1994:.............................. 108,500
Granted in fiscal 1995.................................... 99,500 $4.10
Cancelled in fiscal 1995.................................. (76,500) $4.99
-------
Outstanding December 30, 1995:.............................. 131,500
=======
Options exercisable at December 30, 1995.................... 58,000
=======
</TABLE>

In October 1995, the Financial Accounting Standards Board issued Statement
of Financial Accounting Standard No. 123, Accounting for Stock-Based
Compensation (SFAS123). The Company will adopt only the disclosure provision of
SFAS123 in 1996.

NOTE 7 -- INCOME TAXES:

As of December 30, 1995, the Company had net operating loss carryforwards
of $7.7 million and $6.9 million for regular tax and alternative minimum tax
purposes, respectively, which begin to expire in 2006. The initial public
offering described in Note 1 caused the Company to experience an ownership
change as defined by Section 382(g) of the Internal Revenue Code. As a result,
there will be an annual limitation of approximately $1.0 million on the amount
of net operating loss carryforwards generated prior to the ownership change
which can be utilized to offset the Company's future taxable income.
Additionally, capital share

F-13
<PAGE> 57

NEW WEST EYEWORKS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

NOTE 7 -- INCOME TAXES: (CONTINUED)
transactions among existing shareholders during 1995 may further limit the
Company's ability to utilize its operating loss carryforwards. Future
transactions involving the Company's stock (or rights to acquire such stock)
could also cause an ownership change resulting in additional restrictions on the
Company's ability to utilize its net operating loss carryforwards after the date
of such ownership change.

The Company's deferred tax assets consist of the following, in thousands:

<TABLE>
<CAPTION>
DECEMBER 30, DECEMBER 31,
1995 1994
------------ ------------
<S> <C> <C>
Net operating loss carryforwards........................... $ 2,611 $ 1,724
Property and equipment..................................... 363 354
Deferred warranty revenues................................. 118 200
Other...................................................... 360 426
------- -------
Deferred tax assets........................................ 3,452 2,704
Less: valuation allowance.................................. (3,452) (2,704)
------- -------
Net deferred tax assets.................................... $ -- $ --
======= =======
</TABLE>

As a result of historical operating losses, the Company has reserved its
net deferred tax assets as of December 30, 1995, and December 31, 1994.

For the year ended December 25, 1993, the Company's results included a
pre-tax operating loss of $1,279,000 and a pre-tax extraordinary gain of
$2,291,000 relating to the retirement of debt. The pre-tax loss generated a
$469,000 income tax benefit. The extraordinary gain is shown net of income taxes
of $617,000 which represent a $469,000 charge relating to the tax benefit
generated by the 1993 operating loss, an $88,000 charge relating to the tax
benefits attributable to the utilization of a net operating loss carryforward
generated by a subsidiary prior to its acquisition by the Company which was
recorded as a reduction in goodwill and $60,000 of actual federal and state
income taxes. Remaining taxes applicable to the extraordinary gain were
eliminated by the application of net operating loss carryforwards.

NOTE 8 -- EMPLOYEE BENEFIT PLAN:

The Company established the New West Eyeworks, Inc. Profit Sharing and
401(k) Savings Plan (the Plan) for the benefit of employees (participants) who
meet certain age and eligibility requirements. The Plan provides for
discretionary profit sharing contributions as well as employer matching
contributions on participants' pre-tax savings deferrals. A profit sharing
contribution was not made in 1995, 1994, or 1993; however, employer matching
contributions approximated $97,000, $71,000, and $38,000 in 1995, 1994 and 1993,
respectively.

NOTE 9 -- RELATED PARTY TRANSACTIONS:

The Company is a party to an expense sharing arrangement whereby it pays an
entity owned by an officer of the Company for certain services provided by such
entity for the Company and as reimbursement for certain expenses incurred
directly on behalf of the Company. The aggregate amount of the payments by the

F-14
<PAGE> 58

NEW WEST EYEWORKS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

NOTE 9 -- RELATED PARTY TRANSACTIONS: (CONTINUED)

Company to such entity, including expenses incurred directly on behalf of the
Company, were approximately $136,000, $140,000 and $117,000 in 1995, 1994 and
1993, respectively.

A director of the Company is a partner in a law firm which provides legal
services to the Company.

NOTE 10 -- COMMITMENTS AND CONTINGENCIES:

As a result of the settlement agreement entered into between the Company
and Saatchi & Saatchi North America, Inc. the Company agreed to pay Saatchi &
Saatchi $1.0 million. $250,000 was paid in late February 1996. The balance of
$750,000 is to be paid in seven installments of $107,142.85 by April 30, May 31,
June 28, July 31, August 30, September 30, and October 31, 1996. These costs are
reflected in accounts payable and accrued expensed in the accompanying
consolidated balance sheet as of December 30, 1995.

NOTE 11 -- SUBSEQUENT EVENTS (UNAUDITED):

In June 1996, the Company secured a $2.0 million bank revolving line of
credit. The two bridge loans totaling $700,000 referred to in Note 5 were
retired with the proceeds from the line of credit. The line of credit matures on
May 31, 1997, and is secured by substantially all of the Company's assets,
including the Company's executive office building and optical laboratory in
Tempe, Arizona, but excluding furniture, fixtures, and equipment. The loan bears
interest on the principal balance outstanding from time to time at a rate equal
to the lending bank's prime rate plus 2.0% per annum, and is due and payable
monthly. The loan is also secured by guarantees from Mesirow Capital Partners V
and Mesirow Capital Partners VI, each a preferred stockholder, and Ronald E.
Weinberg, Chairman of the Board. Barry J. Feld, President and Chief Executive
Officer, agreed to share in the obligations of the guarantors. William P.
Sutter, Jr. is an officer of the corporate general partner of Mesirow Capital
Partners V and VI and a director of the Company.

The Company was not in compliance with one of the financial covenants
contained in the line of credit agreement at June 29, 1996 and September 28,
1996 and accordingly, received waivers and amendments with respect to such
covenant from the bank for periods up to and including September 30, 1996. The
credit agreement was amended effective October 24, 1996, and the Company is now
in compliance with all covenants contained in the agreement. There can be no
assurance that the Company will not require additional waivers in the future or,
if required, that the lenders will grant them.

In exchange for the guarantee of the Company's obligations under its line
of credit by such officers and shareholders, the Company issued warrants to them
to purchase, in the aggregate, 50,000 shares of the Company's common stock at a
price per share of $6.11, subject to customary anti-dilution adjustments. The
value of the warrants, which was determined by independent valuation to be $0.57
per share, is reflected on the September 28, 1996 balance sheet in other assets
and paid-in capital and will be amortized over the life of the loan.

F-15
<PAGE> 59

[VARIOUS PHOTOGRAPHS OF GLASSES AND STORE INTERIORS.]

[NEW WEST EYEWORKS LOGO.]
<PAGE> 60

- ------------------------------------------------------
- ------------------------------------------------------

NO DEALER, SALESPERSON OR OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATIONS OTHER THAN THOSE CONTAINED OR
INCORPORATED BY REFERENCE IN THIS PROSPECTUS AND, IF GIVEN OR MADE, SUCH
INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED
BY THE COMPANY, ANY SELLING STOCKHOLDERS OR ANY UNDERWRITER. THIS PROSPECTUS
DOES NOT CONSTITUTE AN OFFER TO SELL OR SOLICITATION OF AN OFFER TO BUY ANY OF
THE SECURITIES OFFERED HEREBY IN ANY JURISDICTION TO ANY PERSON TO WHOM IT IS
UNLAWFUL TO MAKE SUCH OFFER IN SUCH JURISDICTION. NEITHER THE DELIVERY OF THIS
PROSPECTUS NOR ANY OFFER, SOLICITATION OR SALE MADE HEREUNDER SHALL, UNDER ANY
CIRCUMSTANCES, CREATE AN IMPLICATION THAT THERE HAS BEEN NO CHANGE IN THE
AFFAIRS OF THE COMPANY SINCE THE DATES AS OF WHICH INFORMATION IS FURNISHED OR
THE DATE HEREOF.

------------------------

TABLE OF CONTENTS

<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Available Information................... iii
Information Incorporated by Reference... iii
Prospectus Summary...................... 1
Risk Factors............................ 5
Use of Proceeds......................... 9
Price Range of Common Stock and
Dividends............................. 10
Dilution................................ 10
Capitalization.......................... 11
Selected Financial and Operating Data... 12
Management's Discussion and Analysis of
Financial Condition and Results of
Operations............................ 13
Business................................ 20
Management.............................. 28
Principal and Selling Stockholders...... 31
Certain Transactions.................... 33
Description of Capital Stock............ 34
Underwriting............................ 36
Legal Matters........................... 37
Experts................................. 37
Index to Consolidated Financial
Statements............................ F-1
</TABLE>

- ------------------------------------------------------
- ------------------------------------------------------

LOGO

1,600,000 SHARES
COMMON STOCK
---------------------------

PROSPECTUS
---------------------------

FAHNESTOCK & CO. INC.
, 1997

- ------------------------------------------------------
- ------------------------------------------------------
<PAGE> 61

PART II

INFORMATION NOT REQUIRED IN PROSPECTUS

ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION

The Registrant estimates that expenses payable by the Registrant in
connection with the offering described in this registration statement (other
than underwriting discounts and commissions) will be as follows:

<TABLE>
<S> <C>
Securities and Exchange Commission registration fee..................... $3,636.36
NASD filing fee......................................................... $1,640.80
NASDAQ filing fee....................................................... $7,500.00
Pacific Stock Exchange Listing Fee...................................... $4,000.00
Registrar and Transfer Agent's fees and expenses........................ *
Printing and engraving expenses......................................... *
Accounting fees and expenses............................................ *
Legal fees and expenses................................................. *
Fees and expenses (including legal fees) for qualification under state
securities laws
Miscellaneous........................................................... $ *
---------
Total................................................................... $ *
=========
</TABLE>

- ---------------

* To be provided by amendment.

ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS

Reference is made to Section 102(b)(7) of the Delaware General Corporation
Law, as amended (the "DGCL"), which enables a corporation in its original
certificate of incorporation or an amendment thereto to eliminate or limit the
personal liability of a director for violations of the director's fiduciary
duty, except (1) for any breach of the director's duty of loyalty to the
corporation or its stockholders, (2) for acts or omissions not in good faith or
which involve intentional misconduct or a knowing violation of law, (3) pursuant
to Section 174 of the DGCL (providing for liability of directors for unlawful
payment of dividends or unlawful stock purchases or redemptions) or (4) for any
transaction from which a director derived an improper personal benefit. The
Registrant's Amended and Restated Certificate of Incorporation, a copy of which
is filed as Exhibit 3.1 to the Registrant's S-1 Registration Statement filed
with the Securities and Exchange Commission (File No. 33-71330), contains
provisions permitted by Section 102(b)(7) of the DGCL.

Reference also is made to Section 145 of the DGCL, which permits a
corporation to indemnify any persons, including officers and directors, who are,
or are threatened to be made, parties to any threatened, pending or completed
legal action, suit or proceeding, whether civil, criminal, administrative or
investigative (other than an action by or in the right of such corporation), by
reason of the fact that such person was an officer, director, employee or agent
of such corporation, or is or was serving at the request of such corporation as
a director, officer, employee or agent of another corporation or enterprise. The
indemnity may include expenses (including attorneys' fees), judgments, fines and
amounts paid in settlement actually and reasonably incurred by such person in
connection with such action, suit or proceeding, provided such officer,
director, employee or agent acted in good faith and in a manner he reasonably
believed to be in or not opposed to the corporation's best interests and, for
criminal proceedings, had no reasonable cause to believe that his conduct was
unlawful. A Delaware corporation may indemnify officers and directors in an
action by or in the right of the corporation under the same conditions, except
that no indemnification is permitted without judicial approval if the officer or
director is adjudged to be liable to the corporation. Where an officer or
director is successful on the merits or otherwise in the defense of any action
referred to above, the corporation must indemnify him against the expenses which
such officer or director actually and reasonably incurred.

The Certificate of Incorporation of the Registrant provides for the
indemnification of directors and officers of the Registrant to the fullest
extent permitted by the DGCL. At present, there is no pending

II-1
<PAGE> 62

litigation or proceeding involving a director or officer of the Registrant as to
which indemnification is being sought, nor is any Registrant aware of any
threatened litigation that may result in claims for indemnification by any
officer or director.

Pursuant to the Underwriting Agreement to be filed by amendment as Exhibit
1.1, to this Registration Statement, the underwriters have agreed to indemnify
the directors, officers and controlling persons of the Registrant against
certain civil liabilities that may be incurred in connection with this offering,
including certain liabilities under the Securities Act of 1933, as amended (the
"Securities Act").

ITEM 16. EXHIBITS

See the Exhibit Index following the signature page to this Registration
Statement.

ITEM 17. UNDERTAKINGS

(a) The undersigned Registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act, each filing of the
Registrant's annual report pursuant to section 13(a) or section 15(d) of the
Securities Exchange Act of 1934 (and, where applicable, each filing of an
employee benefit plan's annual report pursuant to section 15(d) of the
Securities Exchange Act of 1934) that is incorporated by reference in the
Registration Statement shall be deemed to be a new Registration Statement
relating to the securities offered therein, and the offering of such securities
at that time shall be deemed to be the initial bona fide offering thereof.

(b) The undersigned Registrant hereby undertakes that:

(1) For purposes of determining any liability under the Securities
Act, the information omitted from the form of prospectus filed as part of
this Registration Statement in reliance upon Rule 430A and contained in a
form of prospectus filed by the Registrant pursuant to Rule 424(b)(1) or
(4) or 497(h) under the Securities Act shall be deemed to be part of this
Registration Statement as of the time it was declared effective.

(2) For the purpose of determining any liability under the Securities
Act, each post-effective amendment that contains a form of prospectus shall
be deemed to be a new Registration Statement relating to the securities
offered therein, and the offering of such securities at that time shall be
deemed to be the initial bona fide offering thereof.

(c) Insofar as indemnification for liabilities arising under the Securities
Act may be permitted to directors, officers and controlling persons of the
Registrant pursuant to the foregoing provisions, or otherwise, the Registrant
has been advised that in the opinion of the Securities and Exchange Commission
such indemnification is against public policy as expressed in the Act and is,
therefore, unenforceable. In the event that a claim for indemnification against
such liabilities (other than the payment by the Registrant of expenses incurred
or paid by a director, officer or controlling person of the Registrant in the
successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the Registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Act and will be governed by the final adjudication of
such issue.

II-2
<PAGE> 63

SIGNATURES

Pursuant to the requirements of the Securities Act of 1933, the Company
certifies that it has reasonable grounds to believe that it meets all of the
requirements for filing on Form S-2 and has duly caused this registration
statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in the City of Cleveland, State of Ohio, on December 23, 1996.

NEW WEST EYEWORKS, INC.

By: /s/ RONALD E. WEINBERG

--------------------------------------
Ronald E. Weinberg, Chairman of the
Board

POWER OF ATTORNEY

KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears
below hereby constitutes and appoints Ronald E. Weinberg and Byron S. Krantz his
true and lawful attorneys-in-fact, each acting alone, with full powers of
substitution and resubstitution, for him and in his name, place and stead, in
any and all capacities, to sign any or all amendments, including any
post-effective amendments, to this registration statement, and to file the same,
with exhibits thereto, and other documents in connection therewith, with the
Securities and Exchange Commission, hereby ratifying and confirming all that
said attorneys-in-fact or their substitutes, each acting alone, may lawfully do
or cause to be done by virtue hereof.

Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities and on the dates indicated.

<TABLE>
<CAPTION>
NAME TITLE DATE
- ------------------------------- ------------------------------------------------ ------------------
<S> <C> <C>
/s/ RONALD E. WEINBERG Chairman of the Board, and Treasurer (Principal December 23, 1996
- ------------------------------- Financial Officer)
Ronald E. Weinberg
/s/ BARRY J. FELD Chief Executive Officer, President and Director December 23, 1996
- -------------------------------
Barry J. Feld
/s/ BYRON S. KRANTZ Secretary and Director December 23, 1996
- -------------------------------
Byron S. Krantz
/s/ NANCY S. FORNESS Controller (Principal Accounting Officer) December 23, 1996
- -------------------------------
Nancy S. Forness
/s/ DONALD M. GLEKLEN Director December 19, 1996
- -------------------------------
Donald M. Gleklen
/s/ NORMAN C. HARBERT Director December 23, 1996
- -------------------------------
Norman C. Harbert
/s/ LARRY I. POLLOCK Director December 19, 1996
- -------------------------------
Larry I. Pollock
/s/ WILLIAM P. SUTTER, JR. Director December 23, 1996
- -------------------------------
William P. Sutter, Jr.
</TABLE>

II-3
<PAGE> 64

EXHIBIT INDEX

<TABLE>
<S> <C>
1.1* Underwriting Agreement

4.1 Specimen Common Stock Certificate (Incorporated by reference to the Company's S-1
Registration Statement as filed with the Securities and Exchange Commission (File No.
33-71330))

4.2 Representative's Warrants and Warrant Agreement (Incorporated by reference to the
Company's S-1 Registration Statement as filed with the Securities and Exchange
Commission (File No. 33-71330))

4.3 Registration Rights Agreement between Registrant and MEDIQ ISI and amendments thereto
(Incorporated by reference to the Company's S-1 Registration Statement as filed with
the Securities and Exchange Commission (File No. 33-71330))

4.4 Registration Rights Agreement among Registrant, the Mesirow Group and certain other
stockholders and amendments thereto (Incorporated by reference to the Company's S-1
Registration Statement as filed with the Securities and Exchange Commission (File No.
33-71330))

4.5 MEDIQ Registration Rights Letter Agreement and amendments thereto (Incorporated by
reference to the Company's S-1 Registration Statement as filed with the Securities
and Exchange Commission (File No. 33-71330))

4.6 Amendment No. 2 dated November 2, 1993 to the Registration Rights Agreement dated
August 5, 1988 by and between the Registrant and MEDIQ ISI (Incorporated by reference
to the Company's 10-K for the fiscal year ended 1993)

4.7 Amended and Restated Registration Rights Agreement by and between the Company and
MEDIQ ISI dated April 21, 1995 (Incorporated by reference to the Company's 10-Q for
the quarterly period ended September 30, 1995)

4.8 Warrant to Purchase Common Stock of the Registrant issued on June 10, 1996
(Incorporated by reference to the Form 8-K filed by the Company on June 17, 1996)

4.9* Letter containing First Amendment to Warrant to Purchase Common Stock of the
Registrant, dated December 19, 1996

4.10* Letter containing First Amendment to Representative's Warrant, dated December 19,
1996

5.1* Opinion of Kohrman Jackson & Krantz P.L.L.

10.1 Employment Agreement, effective as of August 1, 1993, between the Registrant and
Barry Feld (Incorporated by reference to the Company's S-1 Registration Statement as
filed with the Securities and Exchange Commission (File No. 33-71330))

10.2 Employment Agreement, effective as of August 1, 1993, between the Registrant and
Ronald E. Weinberg (Incorporated by reference to the Company's S-1 Registration
Statement as filed with the Securities and Exchange Commission (File No. 33-71330))

10.3 Master Lease Agreement dated April 26, 1983 between Fred Meyer, Inc. and Western
States Optical, Inc. (predecessor in interest of Registrant) and amendments thereto
(Incorporated by reference to the Company's S-1 Registration Statement as filed with
the Securities and Exchange Commission (File No. 33-71330))
</TABLE>

II-4
<PAGE> 65

<TABLE>
<S> <C>
10.4 Agreement dated August 4, 1988 among Fred Meyer, Inc., MEDIQ Incorporated and
Registrant (Incorporated by reference to the Company's S-1 Registration Statement as
filed with the Securities and Exchange Commission (File No. 33-71330))

10.5 Guarantee dated August 4, 1988 by MEDIQ Incorporated to Fred Meyer, Inc.
(Incorporated by reference to the Company's S-1 Registration Statement as filed with
the Securities and Exchange Commission (File No. 33-71330))

10.6 $250,000 Letter of Credit dated November 1, 1990, of Bank One, Columbus, NA, as
extended (Incorporated by reference to the Company's S-1 Registration Statement as
filed with the Securities and Exchange Commission (File No. 33-71330))

10.7 Industrial Lease dated July 22, 1991, between O.W.N. Properties, Inc. and Western
States Optical, Inc. (predecessor in interest of Registrant) and amendments thereto
(Incorporated by reference to the Company's S-1 Registration Statement as filed with
the Securities and Exchange Commission (File No. 33-71330))

10.8 Form Optometrists' Sublease (Incorporated by reference to the Company's S-1
Registration Statement as filed with the Securities and Exchange Commission (File No.
33-71330))

10.9 Notice of Registration Letter to MEDIQ and MEDIQ ISI dated November 2, 1993, as
amended (including Exhibit B only, other exhibits included elsewhere) (Incorporated
by reference to the Company's S-1 Registration Statement as filed with the Securities
and Exchange Commission (File No. 33-71330))

10.10 Notice of Registration Letter to the Mesirow Group dated November 2, 1993, as amended
(including Exhibit B only, other exhibits included elsewhere) (Incorporated by
reference to the Company's S-1 Registration Statement as filed with the Securities
and Exchange Commission (File No. 33-71330))

10.11 Business Loan Agreement dated as of December 16, 1994 between Bank of America,
Arizona, and the Registrant (Incorporated by reference to the Company's Form 10-K for
the fiscal year ended 1996)

10.12 Master Lease (Incorporated by reference to the Company's 10-Q for the quarterly
period ended September 30, 1995)

10.13 Open-End Promissory Note, dated January 16, 1996, from Mesirow Capital Partners VI
(Incorporated by reference to the Company's Form 10-Q for the quarterly period ended
March 30, 1996)

10.14 Open-End Promissory Note, dated January 16, 1996, from Ronald E. Weinberg
(Incorporated by reference to the Company's Form 10-Q for the quarterly period ended
March 30, 1996)

10.15 Note, dated June 10, 1996, executed by the Registrant in favor of U.S. Bank of
Washington, National Association
</TABLE>

II-5
<PAGE> 66

<TABLE>
<S> <C>
10.16 Deed of Trust, dated May 31, 1996, executed by Alexis Holding Company, Inc., in favor
of U.S. Bank of Washington, National Association

10.17 Guaranty, Contribution and Indemnification Agreement, dated June 10, 1996 among the
Registrant, Ronald E. Weinberg, Barry Feld, Mesirow Capital Partners V and Mesirow
Capital Partners VI (Incorporated by reference to the Form 8-K filed by the Company
on June 17, 1996)

10.18 Credit Agreement between U.S. Bank of Washington, National Association, dated June
10, 1996 (Incorporated by reference to the Form 8-K filed by the Company on June 17,
1996)

10.19 First Amendment to Credit Agreement between U.S. Bank of Washington, National
Association and the Registrant, dated September 16, 1996

10.20 Second Amendment to Credit Agreement between U.S. Bank of Washington, National
Association and the Registrant, dated October 24, 1996

10.21 New West Eyeworks, Inc. Amended & Restated Stock Option Plan, dated February 16, 1996
(Incorporated by reference to the Company's S-8 filed on June 26, 1996)

10.22* Letter to FLAG Partners from the Registrant, dated December 19, 1996

10.23* Letter to Barry Feld from the Registrant, dated December 19, 1996

10.24* Letter to Donald M. Gleklen from the Registrant, dated December 19, 1996

10.25* Letter to Mesirow Capital Partners II, III, IV, V, and VI from the Registrant, dated
December 19, 1996

10.26 Security Agreement executed by the Registrant for the benefit of U.S. Bank of
Washington, National Association, dated June 10, 1996

21.1 Subsidiaries of the Registrant (Incorporated by reference to the Company's S-1
Registration Statement as filed with the Securities and Exchange Commission (File No.
33-71330))

23.1 Consent of Price Waterhouse LLP

23.2* Consent of Kohrman Jackson & Krantz P.L.L. is located in its legal opinion, which can
be found in Exhibit 5.1

24.1 Reference is made to the Signatures section of this Report for the Power of Attorney
contained therein.
</TABLE>

- ---------------

* To be filed by amendment.

II-6

<PAGE> 1
EXHIBIT 10.15

NOTE

$2,000,000 June __, 1996

For value received, the undersigned, NEW WEST EYEWORKS, INC., a
Delaware corporation ("Borrower"), promises to pay to the order of U. S. BANK OF
WASHINGTON, NATIONAL ASSOCIATION ("U. S. Bank"), at its principal place of
business, 1420 Fifth Avenue, Seattle, Washington 98101, or such other place or
places as the holder hereof may designate in writing, the principal sum of Two
Million and No/100 Dollars ($2,000,000) or so much thereof as advanced by U. S.
Bank in lawful, immediately available money of the United States of America, in
accordance with the terms and conditions of that certain credit agreement of
even date herewith by and between Borrower and U. S. Bank (together with all
supplements, exhibits, amendments and modifications thereto, the "Credit
Agreement"). Borrower also promises to pay interest on the unpaid principal
balance hereof, commencing as of the first date of an advance hereunder, in like
money in accordance with the terms and conditions, and at the rate or rates
provided for in the Credit Agreement. All principal, interest, and other charges
are due and payable in full on May 31, 1997.

Borrower and all endorsers, sureties, and guarantors hereof jointly and
severally waive presentment for payment, demand, notice of nonpayment, notice of
protest, and protest of this Note, and all other notices in connection with the
delivery, acceptance, performance, default, dishonor, or enforcement of the
payment of this Note except such notices as are specifically required by this
Note or by the Credit Agreement, and they agree that the liability of each of
them shall be unconditional without regard to the liability of any other party
and shall not be in any manner affected by any indulgence, extension of time,
renewal, waiver, or modification granted or consented to by U. S. Bank. Borrower
and all endorsers, sureties, and guarantors hereof (1) consent to any and all
extensions of time, renewals, waivers, or modifications that may be granted by
U. S. Bank with respect to the payment or other provisions of this Note and the
Credit Agreement; (2) consent to the release of any property now or hereafter
securing this Note with or without substitution; and (3) agree that additional
makers, endorsers, guarantors, or sureties may become parties hereto without
notice to them and without affecting their liability hereunder.

This Note is the Note referred to in the Credit Agreement and as such
is entitled to all of the benefits and obligations specified in the Credit
Agreement, including but not limited to any Collateral and any conditions to
making advances hereunder. Terms defined in the Credit Agreement are used herein
with the same meanings. Reference is made to the

- 1 -

<PAGE> 2

Credit Agreement for provisions for the repayment of this Note and the
acceleration of the maturity hereof.

NEW WEST EYEWORKS, INC.

By /s/ Barry J. Feld
--------------------------------

Title President & CEO
-----------------------------

- 2 -

<PAGE> 1
EXHIBIT 10.16

RECORDATION REQUESTED BY:

U.S. BANK OF WASHINGTON, NATIONAL
ASSOCIATION
C/O 1420 5TH AVE
WWH 470
SEATTLE, WA 98101

WHEN RECORDED MAIL TO:

U.S. BANK OF WASHINGTON, NATIONAL
ASSOCIATION
C/O 1420 5TH AVENUE
WWH 470
SEATTLE, WA 98101

FOR RECORDER'S USE ONLY

DEED OF TRUST

THIS DEED OF TRUST IS DATED MAY 31, 1996, among ALEXIS HOLDING COMPANY, INC., AN
ARIZONA CORPORATION, whose address is 2104 W. SOUTHERN AVE., TEMPE, AZ 85282
(referred to below as "Trustor"); U.S. BANK OF WASHINGTON, NATIONAL ASSOCIATION,
whose address is C/O 1420 5TH AVE, WWH 470, SEATTLE, WA 98101 (referred to below
sometimes as "Lender" and sometimes as "Beneficiary"); and FIRST AMERICAN TITLE
INSURANCE CO., whose address is 111 WEST MONROE, SUITE 204, PHOENIX, ARIZONA
85003 (referred to below as "Trustee").

CONVEYANCE AND GRANT. For valuable consideration, Trustor conveys to Trustee in
trust, with power of sale, for the benefit of Lender as Beneficiary, all of
Trustor's right, title, and interest in and to the following described real
property, together with all existing or subsequently erected or affixed
buildings, improvements and fixtures; all easements, rights of way, and
appurtenances; all water and water rights flowing through, belonging or in
anyway appertaining to the Real Property, and all of Trustor's water rights that
are personal property under Arizona law, including without limitation all type 2
nonirrigation grandfathered rights (if applicable), all irrigation rights, all
ditch rights, rights to limitation district stock, all contracts for effluent,
all contracts for Central Arizona Project water, and all other contractual
rights to water, and together with all rights (but none of the duties) of
Trustor as declarant under any presently recorded declaration of covenants,
conditions and restrictions affecting real property; and all other rights,
royalties, and profits relating to the real property, including without
limitation all minerals, oil, gas, geothermal and similar matters, located in
MARICOPA County, State of Arizona (the "Real Property"):

SEE EXHIBIT A ATTACHED HERETO AND BY THIS REFERENCE INCORPORATED HEREIN.

<PAGE> 2

The Real Property or its address is commonly known as 2104 WEST SOUTHERN AVE.,
TEMPE, AZ 85282.

Trustor presently assigns to Lender (also known as Beneficiary in this Deed of
Trust) all of Trustor's right, title, and interest in and to all present and
future leases of the Property and all Rents from the Property. In addition,
Trustor grants Lender a Uniform Commercial Code security interest in the Rents
and the Personal Property defined below.

DEFINITIONS. The following words shall have the following meanings when used in
this Deed of Trust. Terms not otherwise defined in this Deed of Trust shall have
the meanings attributed to such terms in the Uniform Commercial Code. All
references to dollar amounts shall mean amounts in lawful money of the United
States of America.

Beneficiary. The word "Beneficiary" means U.S. BANK OF WASHINGTON,
NATIONAL ASSOCIATION, its successors and assigns. U.S. BANK OF WASHINGTON,
NATIONAL ASSOCIATION also is referred to as "Lender" in this Deed of Trust.

Borrower. The word "Borrower" means each and every person or entity
signing the Note, including without limitation NEW WEST EYEWORKS, INC.

Deed of Trust. The words "Deed of Trust" mean this Deed of Trust among
Trustor, Lender, and Trustee, and includes without limitation all assignment and
security interest provisions relating to the Personal Property and Rents.

Guarantor. The word "Guarantor" means and includes without limitation
any and all guarantors, sureties, and accommodation parties in connection with
the indebtedness.

Improvements. The word "Improvements" means and includes without
limitation all existing and future improvements, buildings, structures, mobile
homes affixed on the Real Property, facilities, additions, replacements and
other construction on the Real Property.

Indebtedness. The word "Indebtedness" means all principal and interest
payable under the Note and any amounts expended or advanced by Lender to
discharge obligations of Trustor or expenses incurred by Trustee or Lender to
enforce obligations of Trustor under this Deed of Trust, together with interest
on such amounts as provided in this Deed of Trust. Specifically, without
limitation, this Deed of Trust secures a revolving line of credit, which
obligates Lender to make advances to Borrower so long as Borrower complies with
all the terms of the Note.

Lender. The word "Lender" means U.S. BANK OF WASHINGTON, NATIONAL
ASSOCIATION, its successors and assigns.

Note. The word "Note" means the Note dated May 31, 1996, in the
original principal amount of $2,000,000.00 from Borrower to Lender, together
with all renewals, extensions, modifications,

<PAGE> 3

refinancings, and substitutions for the Note. NOTICE TO TRUSTOR: THE NOTE
CONTAINS A VARIABLE INTEREST RATE.

Personal Property. The words "Personal Property" mean all equipment,
fixtures, and other articles of personal property now or hereafter owned by
Trustor, and now or hereafter attached or affixed to the Real Property; together
with all accessions, parts, and additions to, all replacements of, and all
substitutions for, any of such property; and together with all proceeds
(including without limitation all insurance proceeds and refunds of premiums)
from any sale or other disposition of the Property.

Property. The word "Property" means collectively the Real Property and
the Personal Property.

Real Property. The words "Real Property" mean the property, interests
and rights described above in the "Conveyance and Grant" section.

Related Documents. The words "Related Documents" mean and include
without limitation all promissory notes, credit agreements, loan agreements,
environmental agreements, guaranties, security agreements, mortgages, deeds of
trust, and all other instruments, agreements and documents, whether now or
hereafter existing, executed in connection with the Indebtedness.

Rents. The word "Rents" means all present and future rents, revenues,
income, issues, royalties, profits, and other benefits derived from the
Property.

Trustee. The word "Trustee" means FIRST AMERICAN TITLE INSURANCE CO.
and any substitute or successor trustees.

Trustor. The word "Trustor" means any and all persons and entities
executing this Deed of Trust, including without limitation all Trustors named
above. Any Trustor who signs this Deed of Trust, but does not sign the Note, is
signing this Deed of Trust only to grant and convey that Trustor's interest in
the Real Property and to grant a security interest in Trustor's interest in the
Rents and Personal Property to Lender and is not personally liable under the
Note except as otherwise provided by contract or law.

THIS DEED OF TRUST, INCLUDING THE ASSIGNMENT OF RENTS AND THE SECURITY INTEREST
IN THE RENTS AND PERSONAL PROPERTY, IS GIVEN TO SECURE (1) PAYMENT OF THE
INDEBTEDNESS AND (2) PERFORMANCE OF ANY AND ALL OBLIGATIONS OF BORROWER UNDER
THE NOTE, THE RELATED DOCUMENTS, AND THIS DEED OF TRUST. THIS DEED OF TRUST IS
GIVEN AND ACCEPTED ON THE FOLLOWING TERMS:

TRUSTOR'S REPRESENTATIONS AND WARRANTIES. Trustor warrants that: (a) this Deed
of Trust is executed at Borrower's request and not at the request of Lender, (b)
Trustor has the full power, right, and authority to enter into this Deed of
Trust and to hypothecate the Property; (c) the provisions of this Deed of Trust
do not conflict with, or result in a default under any agreement or other
instrument binding upon Trustor and do not result in a violation of any law,
regulation, court
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<PAGE> 4

decree or order applicable to Trustor, (d) Trustor has established adequate
means of obtaining from Borrower on a continuing basis information about
Borrower's financial condition; and (e) Lender has made no representation to
Trustor about Borrower (including without limitation the creditworthiness of
Borrower).

TRUSTOR'S WAIVERS. Trustor waives all rights or defenses arising by reason of
any "one action" or "anti-deficiency" law, or any other law which may prevent
Lender from bringing any action against Trustor, including a claim for
deficiency to the extent Lender is otherwise entitled to a claim or deficiency,
before or after Lender's commencement or completion of any foreclosure action,
either judicially or by exercise of a power of sale.

PAYMENT AND PERFORMANCE. Except as otherwise provided in this Deed of Trust,
Borrower shall pay to Lender all indebtedness secured by this Deed of Trust as
it becomes due, and Borrower and Trustor shall strictly perform all their
respective obligations under the Note, this Deed of Trust, and the Related
Documents.

POSSESSION AND MAINTENANCE OF THE PROPERTY. Trustor and Borrower agree that
Trustor's possession and use of the Property shall be governed by the following
provisions:

Possession and Use. Until the occurrence of an Event of Default,
Trustor may (a) remain in possession and control of the Property, (b) use,
operate or manage the Property, and (c) collect any Rents from the Property.

Duty to Maintain. Trustor shall maintain the Property in tenantable
condition and promptly perform all repairs, replacements, and maintenance
necessary to preserve its value.

Hazardous Substances. The terms "hazardous waste," "hazardous
substance," "disposal," "release," and "threatened release," as used in this
Deed of Trust, shall have the same meanings as set forth in the Comprehensive
Environmental Response, Compensation, and Liability Act of 1980, as amended, 42
U.S.C. Section 9601, et seq. ("CERCLA"), the Superfund Amendments and
Reauthorization Act of 1986, Pub. L. No. 99-499 ("SARA"), the Hazardous
Materials Transportation Act, 49 U.S.C. Section 1801, et seq., the Resource
Conservation and Recovery Act, 42 U.S.C. Section 6901, et seq., or other
applicable state or Federal laws, rules, or regulations adopted pursuant to any
of the foregoing. The terms "hazardous waste" and "hazardous substance" shall
also include, without limitation, petroleum and petroleum by-products or any
fraction thereof and asbestos. Trustor represents and warrants to Lender that:
(a) During the period of Trustor's ownership of the Property, there has been no
use, generation, manufacture, storage, treatment, disposal, release or
threatened release of any hazardous waste or substance by any Person on, under,
about or from the property; (b) Trustor has no knowledge of, or reason to
believe that there has been, except as previously disclosed to and acknowledged
by Lender in writing, any use, generation, manufacture, storage, treatment,
disposal, release, or threatened release of any hazardous waste or substance on,
under, about or from the Property by any prior owners or occupants of the
Property or any actual or threatened litigation or claims of any kind by any
person relating to such matters; and (c) Except as previously disclosed to and
acknowledged by Lender in writing, (i) neither Trustor nor any tenant,
contractor, agent or other authorized user of the Property shall use, generate,
manufacture, store,

<PAGE> 5

treat, dispose of, or release any hazardous waste or substance on, under, about
or from the Property and (ii) any such activity shall be conducted in
compliance with all applicable federal, state, and local laws, regulations and
ordinances, including without limitation those laws, regulations, and
ordinances as described above. Trustor authorizes Lender and its agents to
enter upon the Property to make such inspections and tests, at Trustor's
expense, as Lender may deem appropriate to determine compliance of the Property
with this section of the Deed of Trust. Beneficiary, at its option, but without
obligation to do so, may correct any condition violating any applicable
environmental law affecting the Property, and in doing so shall conclusively be
deemed to be acting reasonably and for the purpose of protecting the value of
its collateral, and all costs of correcting a condition or violation shall be
payable to Beneficiary by Trustor as provided in the Expenditures by Lender
section of this Deed of Trust. Any inspections or tests made by Lender shall be
for Lender's purposes only and shall not be construed to create any
responsibility or liability on the part of Lender to Trustor or to any other
person. The representations and warranties contained herein are based on
Trustor's due diligence in investigating the Property for hazardous waste and
hazardous substances. Trustor hereby (a) releases and waives any future claims
against Lender for indemnity or contribution in the event Trustor becomes
liable for cleanup or other costs under any such laws, and (b) agrees to
indemnify and hold harmless Lender against any and all claims, losses,
liabilities, damages, penalties, and expenses which Lender may directly or
indirectly sustain or suffer resulting from a breach of this section of the
Deed of Trust or as a consequence of any use, generation, manufacture, storage,
disposal, release or threatened release occurring prior to Trustor's ownership
or interest in the Property, whether or not the same was or should have been
known to Trustor. The provisions of this section of the Deed of Trust,
including the obligation to indemnify, shall survive the payment of the
Indebtedness and the satisfaction and reconveyance of the lien of this Deed of
Trust and shall not be affected by Lender's acquisition of any interest in the
Property, whether by foreclosure or otherwise.

Nuisance, Waste. Trustor shall not cause, conduct or permit any
nuisance nor commit, permit, or suffer any stripping of or waste on or to the
Property or any portion of the Property. Without limiting the generality of the
foregoing, Trustor will not remove, or grant to any other party the right to
remove, any timber, minerals (including oil and gas), soil, gravel or rock
products without the prior written consent of Lender.

Removal of Improvements. Trustor shall not demolish or remove any
Improvements from the Real Property without the prior written consent of Lender.
As a condition to the removal of any improvements, Lender may require Trustor to
make arrangements satisfactory to Lender to replace such Improvements with
Improvements of at least equal value.

Lender's Right to Enter. Lender and its agents and representatives may
enter upon the Real Property at all reasonable times to attend to Lender's
interests and to inspect the Property for purposes of Trustor's compliance with
the terms and conditions of this Deed of Trust.

Compliance with Governmental Requirements. Trustor shall promptly
comply with all laws, ordinances, and regulations, now or hereafter in effect,
of all governmental authorities applicable to the use or occupancy of the
Property, including without limitation, the Americans With Disabilities Act.
Trustor may contest in good faith any such law, ordinance, or regulation and
withhold compliance during any proceeding, including appropriate appeals, so
long as Trustor has notified

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<PAGE> 6

Lender in writing prior to doing so and so long as, in Lender's sole opinion,
Lender's interests in the Property are not jeopardized. Lender may require
Trustor to post adequate security or a surety bond, reasonably satisfactory to
Lender, to protect Lender's interest.

Duty to Protect. Trustor agrees neither to abandon nor leave unattended
the Property. Trustor shall do all other acts, in addition to those acts set
forth above in this section, which from the character and use of the Property
are reasonably necessary to protect and preserve the Property.

DUE ON SALE - CONSENT BY LENDER. Lender may, at its option, declare immediately
due and payable all sums secured by this Deed of Trust upon the sale or
transfer, without the Lender's prior written consent, of all or any part of the
Real Property, or any interest in the Real Property. A "sale or transfer" means
the conveyance of Real Property or any right, title or interest therein; whether
legal, beneficial or equitable; whether voluntary or involuntary; whether by
outright sale, deed, installment sale contract, land contract, contract for
deed, leasehold interest with a term greater than three (3) years, lease-option
contract, or by sale, assignment, or transfer of any beneficial interest in or
to any land trust holding title to the Real Property, or by any other method of
conveyance of Real Property interest. If any Trustor is a corporation,
partnership or limited liability company, transfer also includes any change in
ownership of more than twenty-five percent (25%) of the voting stock,
partnership interests or limited liability company interests, as the case may
be, of Trustor. However, this option shall not be exercised by Lender if such
exercise is prohibited by federal law or by Arizona law.

TAXES AND LIENS. The following provisions relating to the taxes and liens on the
Property are a part of this Deed of Trust.

Payment. Trustor shall pay when due (and in all events prior to
delinquency) all taxes and assessments, including without limitation sales or
use taxes in any state, local privilege or excise taxes based on gross revenues,
special taxes, charges (including water and sewer), fines and impositions levied
against Trustor or on account of the Property, and shall pay when due all claims
for work done on or for services rendered or material furnished to the Property.
Trustor shall maintain the Property free of all liens having priority over or
equal to the interest of Lender under this Deed of Trust, except for the lien of
taxes and easements not due and except as otherwise provided in this Deed of
Trust. Beneficiary shall have the right, but not the duty or obligation, to
charge Trustor for any such taxes or assessments in advance of payment. In no
event does exercise or non-exercise by Beneficiary of this right relieve Trustor
from Trustor's obligation under this Deed of Trust or impose any liability
whatsoever on Beneficiary.

Right To Contest. Trustor may withhold payment of any tax, assessment,
or claim in connection with a good faith dispute over the obligation to pay, so
long as Lender's interest in the Property is not jeopardized. If a lien arises
or is filed as a result of nonpayment, Trustor shall within fifteen (15) days
after the lien arises or, if a lien is filed, within fifteen (15) days after
Trustor has notice of the filing, secure the discharge of the lien, or if
requested by Lender, deposit with Lender cash or a sufficient corporate surety
bond or other security satisfactory to Lender in an amount sufficient to
discharge the lien plus any costs and attorneys' fees or other charges that
could accrue as a result of a foreclosure or sale under the lien. In any
contest, Trustor shall defend itself and Lender and shall satisfy any adverse
judgment before enforcement against the Property. Trustor shall

6
<PAGE> 7

name Lender as an additional obligee under any surety bond furnished in the
contest proceedings.

Evidence of Payment. Trustor shall upon demand furnish to Lender
satisfactory evidence of payment of the taxes or assessments and shall authorize
the appropriate governmental official to deliver to Lender at any time a written
statement of the taxes and assessments against the Property.

Notice of Construction. Trustor shall notify Lender at least fifteen
(15) days before any work is commenced, any services are furnished, or any
materials are supplied to the Property, if any mechanic's lien, materialmen's
lien, or other lien could be asserted on account of the work, services, or
materials. Trustor will upon request of Lender furnish to Lender advance
assurances satisfactory to Lender that Trustor can and will pay the cost of such
improvements.

PROPERTY DAMAGE INSURANCE. The following provisions relating to insuring the
Property are a part of this Deed of Trust.

Maintenance of Insurance. Trustor shall procure and maintain policies
of fire insurance with standard extended coverage endorsements on a replacement
basis for the full liability insurable value covering all Improvements on the
Real Property in an amount sufficient to avoid application of any coinsurance
clause, and with a standard mortgage clause in favor of Lender. Trustor shall
also procure and maintain comprehensive general liability insurance in such
coverage amounts as Lender may request with trustee and Lender being named as
additional insureds in such liability insurance policies. Additionally, Trustor
shall maintain such other insurance, including but not limited to hazard,
business interruption, and boiler insurance, as Lender may reasonably require.
Policies shall be written in form, amounts, coverages and basis reasonably
acceptable to Lender and issued by a company or companies reasonably acceptable
to Lender. Trustor, upon request of Lender, will deliver to Lender from time to
time the policies or certificates of insurance in form satisfactory to Lender,
including stipulations that coverages will not be cancelled or diminished
without at least ten (10) days prior written notice to Lender. Each insurance
policy also shall include an endorsement providing that coverage in favor of
Lender will not be impaired in any way by any act, omission or default of
Trustor or any other person. Should the Real Property at any time become located
in an area designated by the Director of the Federal Emergency Management Agency
as a special flood hazard area, Trustor agrees to obtain and maintain Federal
Flood Insurance to the extent such insurance is required by Lender and is or
becomes available, for the term of the loan and for the full unpaid principal
balance of the loan, or the maximum limit of coverage that is available,
whichever is less.

Application of Proceeds. Trustor shall promptly notify Lender of any
loss or damage to the Property if the estimated cost of repair or replacement
exceeds $5,000. Lender may make proof of loss if Trustor fails to do so within
fiffeen (15) days of the casualty. Whether or not Lender's security is impaired,
Lender may, at its election, receive and retain the proceeds of any insurance
and apply the proceeds to the reduction of the Indebtedness, payment of any lien
affecting the Property, or the restoration and repair of the Property. If Lender
elects to apply the proceeds to restoration and repair, Trustor shall repair or
replace the damaged or destroyed Improvements in a manner satisfactory to
Lender. Lender shall, upon satisfactory proof of such expenditure, pay or
reimburse Trustor from the proceeds for the reasonable cost of repair or
restoration if Trustor is not in default under this Deed of Trust. Any proceeds
which have not been disbursed within 180 days after their receipt and

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<PAGE> 8

which Lender has not committed to the repair or restoration of the Property
shall be used first to pay any amount owing to Lender under this Deed of Trust,
then to pay accrued interest, and the remainder, if any, shall be applied to the
principal balance of the Indebtedness. If Lender holds any proceeds after
payment in full of the Indebtedness, such proceeds shall be paid to Trustor as
Trustor's interests may appear.

Unexpired Insurance at Sale. Any unexpired insurance shall inure to the
benefit of, and pass to, the purchaser of the Property covered by this Deed of
Trust at any trustee's sale or other sale held under the provisions of this Deed
of Trust, or at any foreclosure sale of such Property.

Trustor's Report on Insurance. Upon request of Lender, however not more
than once a year, Trustor shall furnish to Lender a report on each existing
policy of insurance showing: (a) the name of the insurer; (b) the risks insured;
(c) the amount of the policy; (d) the property Insured, the then current
replacement value of such property, and the manner of determining that value;
and (e) the expiration date of the policy. Trustor shall, upon request of
Lender, have an independent appraiser satisfactory to Lender determine the cash
value replacement cost of the Property.

EXPENDITURES BY LENDER. If Trustor fails to comply with any provision of this
Deed of Trust, or if any action or proceeding is commenced that would materially
affect Lender's interests in the Property, Lender on Trustor's behalf may, but
shall not be required to, take any action that Lender deems appropriate. Any
amount that Lender expends in so doing will bear interest at the rate provided
for in the Note from the date incurred or paid by Lender to the date of
repayment by Trustor. All such expenses, at Lender's option, will (a) be payable
on demand, (b) be added to the balance of the Note and be apportioned among and
be payable with any installment payments to become due during either (i) the
term of any applicable insurance policy or (ii) the remaining term of the Note,
or (c) be treated as a balloon payment which will be due and payable at the
Note's maturity. This Deed of Trust also will secure payment of these amounts.
The rights provided for in this paragraph shall be in addition to any other
rights or any remedies to which Lender may be entitled on account of the
default. Any such action by Lender shall not be construed as curing the default
so as to bar Lender from any remedy that it otherwise would have had.

WARRANTY, DEFENSE OF TITLE. The following provisions relating to ownership of
the Property are a part of this Deed of Trust.

Title. Trustor warrants that: (a) Trustor holds good and marketable
title of record to the Property in fee simple, free and clear of all liens and
encumbrances other than those set forth in the Real Property description or in
any title insurance policy, title report, or final title opinion issued in favor
of, and accepted by, Lender, or have otherwise been previously disclosed to and
accepted by Lender in writing in connection with this Deed of Trust, and (b)
Trustor has the full right, power, and authority to execute and deliver this
Deed of Trust to Lender.

Defense of Title. Subject to the exception in the paragraph above,
Trustor warrants and will forever defend the title to the Property against the
lawful claims of all persons. In the event any action or proceeding is commenced
that questions Trustor's title or the interest of Trustee or Lender under this
Deed of Trust, Trustor shall defend the action at Trustor's expense. Trustor may
be the

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<PAGE> 9

nominal party in such proceeding, but Lender shall be entitled to participate in
the proceeding and to be represented in the proceeding by counsel of Lender's
own choice, and Trustor will deliver, or cause to be delivered, to Lender such
instruments as Lender may request from time to time to permit such
participation.

Compliance With Laws. Trustor warrants that the Property and Trustor's
use of the Property complies with all existing applicable laws, ordinances and
regulations of governmental authorities.

CONDEMNATION. The following provisions relating to condemnation proceedings are
a part of this Deed of Trust.

Application of Net Proceeds. If all or any part of the Property is
condemned by eminent domain proceedings or by any proceeding or purchase in lieu
of condemnation, Lender may at its election require that all or any portion of
the net proceeds of the award be applied to the Indebtedness or the repair or
restoration of the Property. The net proceeds of the award shall mean the award
after Payment of all reasonable costs, expenses, and attorneys' fees incurred by
Trustee or Lender in connection with the condemnation.

Proceedings. If any proceeding in condemnation is filed, Trustor shall
promptly notify Lender in writing, and Trustor shall promptly take such steps as
may be necessary to defend the action and obtain the award. Trustor may be the
nominal party in such proceeding, but Lender shall be entitled to participate in
the proceeding and to be represented in the proceeding by counsel of its own
choice, and Trustor will deliver or cause to be delivered to Lender such
instruments as may be requested by it from time to time to permit such
participation.

IMPOSITION OF TAXES, FEES AND CHARGES BY GOVERNMENTAL AUTHORITIES. The
following provisions relating to governmental taxes, fees and charges are a part
of this Deed of Trust:

Current Taxes, Fees and Charges. Upon request by Lender, Trustor shall
execute such documents in addition to this Deed of Trust and take whatever other
action is requested by Lender to perfect and continue Lender's lien on the Real
Property. Trustor shall reimburse Lender for all taxes, as described below,
together with all expenses incurred in recording, perfecting or continuing this
Deed of Trust, including without limitation all taxes, fees, documentary stamps,
and other charges for recording or registering this Deed of Trust.

Taxes. The following shall constitute taxes to which this section
applies: (a) a specific tax upon this type of Deed of Trust or upon all or any
part of the Indebtedness secured by this Deed of Trust; (b) a specific tax on
Borrower which Borrower is authorized or required to deduct from payments on the
Indebtedness secured by this type of Deed of Trust; (c) a tax on this type of
Deed of Trust chargeable against the Lender or the holder of the Note; and (d) a
specific tax on all or any portion of the Indebtedness or on payments of
principal and interest made by Borrower.

Subsequent Taxes. If any tax to which this section applies is enacted
subsequent to the date of this Deed of Trust, this event shall have the same
effect as an Event of Default (as defined below), and Lender may exercise any or
all of its available remedies for an Event of Default as

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<PAGE> 10

provided below unless Trustor either (a) pays the tax before it becomes
delinquent, or (b) contests the tax as provided above in the Taxes and Liens
section and deposits with Lender cash or a sufficient corporate surety bond or
other security satisfactory to Lender.

SECURITY AGREEMENT; FINANCING STATEMENTS. The following provisions relating to
this Deed of Trust as a security agreement are a part of this Deed of Trust.

Security Agreement. This instrument shall constitute a security
agreement to the extent any of the Property constitutes fixtures or other
personal property, and Lender shall have all of the rights of a secured party
under the Uniform Commercial Code as amended from time to time.

Security Interest. Upon request by Lender, Trustor shall execute
financing statements and take whatever other action is requested by Lender to
perfect and continue Lender's security interest in the Rents and Personal
Property. In addition to recording this Deed of Trust in the real property
records, Lender may, at any time and without further authorization from Trustor,
file executed counterparts, copies or reproductions of this Deed of Trust as a
financing statement. Trustor shall reimburse Lender for all expenses incurred in
perfecting or continuing this security interest. Upon default, Trustor shall
assemble the Personal Property in a manner and at a place reasonably convenient
to Trustor and Lender and make it available to Lender within three (3) days
after receipt of written demand from Lender.

Addresses. The mailing addresses of Trustor (debtor) and Lender
(secured party) from which information concerning the security interest granted
by this Deed of Trust may be obtained (each as required by the Uniform
Commercial Code), are as stated on the first page of this Deed of Trust.

FURTHER ASSURANCES; ATTORNEY-IN-FACT. The following provisions relating to
further assurances and attorney-in-fact are a part of this Deed of Trust.

Further Assurances. At any time, and from time to time, upon request of
Lender, Trustor will make, execute and deliver, or will cause to be made
executed or delivered, to Lender or to Lender's designee, and when requested by
Lender, cause to be filed, recorded, refiled, or rerecorded, as the case may be,
at such times and in such offices and places as Lender may deem appropriate, any
and all such mortgages, deeds of trust, security deeds, security agreements,
financing statements, continuation statements, instruments of further assurance,
certificates, and other documents as may, in the sole opinion of Lender, be
necessary or desirable in order to effectuate, complete, perfect, continue, or
preserve (a) the obligations of Trustor and Borrower under the Note, this Deed
of Trust, and the Related Documents, and (b) the liens and security interests
created by this Deed of Trust as first and prior liens on the Property, whether
now owned or hereafter acquired by Trustor. Unless prohibited by law or agreed
to the contrary by Lender in writing, Trustor shall reimburse Lender for all
costs and expenses incurred in connection with the matters referred to in this
paragraph.

Attorney-in-Fact. If Trustor fails to do any of the things referred to
in the preceding paragraph, Lender may do so for and in the name of Trustor and
at Trustor's expense. For such purposes, Trustor hereby irrevocably appoints
Lender as Trustor's attorney-in-fact for the purpose of making, executing,
delivering, filing, rescinding, and doing all other things as may be necessary
or desirable, in Lender's sole opinion, to accomplish the matters referred to in
the preceding

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paragraph.

FULL PERFORMANCE. If Borrower pays all the Indebtedness when due, terminates the
line of credit, and otherwise performs all the obligations imposed upon Trustor
under this Deed of Trust, Lender shall execute and deliver to Trustee a request
for full reconveyance without warranty and shall execute and deliver to Trustor
suitable statements of termination of any financing statement on file evidencing
Lender's security interest in the Rents and the Personal Property. Any
reconveyance fee required by law shall be paid by Trustor, if permitted by
applicable law.

DEFAULT. Event of Default shall have the meaning as set forth in the Credit
Agreement dated June 7, 1996.

RIGHTS AND REMEDIES ON DEFAULT. Upon the occurrence of any Event of Default and
at any time thereafter, Trustee or Lender at its option, may exercise any one or
more of the following rights and remedies, in addition to any other rights or
remedies provided by law:

Accelerate Indebtedness. Lender shall have the right at its option to
declare the entire Indebtedness immediately due and payable, including any
prepayment penalty which Borrower would be required to pay.

Foreclosure. With respect to all or any part of the Real Property, the
Trustee shall have the right to foreclose by notice and sale and Lender shall
have the right to foreclose by judicial foreclosure, in either case in
accordance with and to the full extent provided by applicable law. To the extent
permitted by law, Trustor shall be and remain liable for any deficiency
remaining after sale, either pursuant to the power of sale or judicial
proceedings.

UCC Remedies. With respect to all or any part of the Personal Property,
Lender shall have all the rights and remedies of a secured party under the
Uniform Commercial Code.

Collect Rents. Lender shall have the right without notice to Trustor or
Borrower, to take possession of and manage the Property and collect the rents,
including amounts past due and unpaid, and apply the net proceeds, over and
above Lender's costs, against the Indebtedness. In furtherance of this right,
Lender may require any tenant or other user of the Property to make payments of
rent or use fees directly to Lender. If the Rents are collected by Lender, then
Trustor irrevocably designates Lender as Trustor's attorney-in-fact to endorse
instruments received in payment thereof in the name of Trustor and to negotiate
the same and collect the proceeds. Payments by tenants or other users to Lender
in response to Lender's demand shall satisfy the obligations for which the
payments are made, whether or not any proper grounds for the demand existed.
Lender may exercise its rights under this subparagraph either in person, by
agent, or through a receiver.

Appoint Receiver. Lender shall have the right to have a receiver
appointed to take possession of all or any part of the Property, with the power
to protect and preserve the Property, to operate the Property preceding
foreclosure or sale, and to collect the Rents from the Property and apply the
proceeds, over and above the cost of the receivership, against the Indebtedness.
The receiver may serve without bond if permitted by law. Lender's right to the
appointment of a

11
<PAGE> 12

receiver shall exist whether or not the apparent value of the Property exceeds
the indebtedness by a substantial amount. Employment by Lender shall not
disqualify a person from serving as a receiver.

Tenancy at Sufferance. If Trustor remains in possession of the Property
after the Property is sold as provided above or Lender otherwise becomes
entitled to possession of the Property upon default of Trustor, Trustor shall
become a tenant at sufferance of Lender or the purchaser of the Property and
shall, at Lender's option, either (a) pay a reasonable rental for the use of the
Property, or (b) vacate the Property immediately upon the demand of Lender.

Other Remedies. Trustee or Lender shall have any other right or remedy
provided in this Deed of Trust or the Note or by law or equity or by other
rights and remedies afforded by Arizona law.

Notice of Sale. Lender shall give Trustor reasonable notice of the time
and place of any public sale of the Personal Property or of the time after which
any private sale or other intended disposition of the Personal Property is to be
made. Reasonable notice shall mean notice given at least ten (10) days before
the time of the sale or disposition. Any sale of Personal Property may be made
in conjunction with any sale of the Real Property.

Sale of the Property. To the extent permitted by applicable law,
Trustor and Borrower hereby waive any and all rights to have the Property
marshaled. In exercising its rights and remedies, the Trustee or Lender shall be
free to sell all or any part of the Property together or separately, in one sale
or by separate sales. Lender shall be entitled to bid at any public sale on all
or any portion of the Property.

Insurance Policies. Beneficiary shall have the right upon an Event of
Default, but not the obligation, to assign all of Trustor's right, title and
interest in and to all policies of insurance on the Property and any unearned
premiums paid on such insurance to any receiver or any purchaser of the Property
at a foreclosure sale, and Trustor hereby appoints Beneficiary as attorney in
fact to assign and transfer such policies.

Waiver; Election of Remedies. A waiver by any party of a breach of a
provision of this Deed of Trust shall not constitute a waiver of or prejudice
the party's rights otherwise to demand strict compliance with that provision or
any other provision. Election by Lender to pursue any remedy provided in this
Deed of Trust, the Note, in any Related Document, or provided by law shall not
exclude pursuit of any other remedy, and an election to make expenditures or to
take action to perform an obligation of Trustor or Borrower under this Deed of
Trust after failure of Trustor or Borrower to perform shall not affect Lender's
right to declare a default and to exercise any of its remedies.

12
<PAGE> 13

Attorneys' Fees; Expenses. If Lender institutes any suit or action to
enforce any of the terms of this Deed of Trust, Lender shall be entitled to
recover such sum as the court may adjudge reasonable as attorneys' fees at trial
and on any appeal. Whether or not any court action is involved, all reasonable
expenses incurred by Lender which in Lender's opinion are necessary at any time
for the protection of its interest or the enforcement of its rights shall become
a part of the Indebtedness payable on demand and shall bear interest at the Note
rate from the date of expenditure until repaid. Expenses covered by this
paragraph include, without limitation, however subject to any limits under
applicable law, Lender's attorneys fees whether or not there is a lawsuit,
including attorneys' fees for bankruptcy proceedings (including efforts to
modify or vacate any automatic stay or injunction), appeals and any anticipated
post-judgment collection services, the cost of searching records, obtaining
title reports (including foreclosure reports), surveyors' reports, appraisal
fees, title insurance, and fees for the Trustee, to the extent permitted by
applicable law. Trustor also will pay any court costs, in addition to all other
sums provided by law.

Rights of Trustee. Trustee shall have all of the rights and duties of
Lender as set forth in this section.

POWERS AND OBLIGATIONS OF TRUSTEE. The following provisions relating to the
powers and obligations of Trustee are part of this Deed of Trust.

Powers of Trustee. In addition to all powers of Trustee arising as a
matter of law, Trustee shall have the power to take the following actions with
respect to the Property upon the written request of Lender and Trustor: (a)
joining in preparing and filing a map or plat of the Real Property, including
the dedication of streets or other rights to the public; (b) join in granting
any easement or creating any restriction on the Real Property; and (c) join in
any subordination or other agreement affecting this Deed of Trust or the
interest of Lender under this Deed of Trust.

Obligations to Notify. Trustee shall not be obligated to notify any
other party of a pending sale under any other trust deed or lien, or of any
action or proceeding in which Trustor, Lender, or Trustee shall be a party,
unless the action or proceeding is brought by Trustee.

Trustee. Trustee shall meet all qualifications required for Trustee
under applicable law. In addition to the rights and remedies set forth above,
with respect to all or any part of the Property, the Trustee shall have the
right to foreclose by notice and sale, and Lender shall have the right to
foreclose by judicial foreclosure, in either case in accordance with and to the
full extent provided by applicable law.

Successor Trustee. Lender, at Lender's option, may from time to time
appoint a successor Trustee to any Trustee appointed hereunder by an instrument
executed and acknowledged by Lender and recorded in the office of the recorder
of MARICOPA County, Arizona. The Instrument shall contain, in addition to all
other matters required by state law, the names of the original Lender, Trustee,
and Trustor, the book and page where this Deed of Trust is recorded, and the
name and address of the successor trustee, and the instrument shall be executed
and acknowledged by Lender or its successors in interest. The successor trustee,
without conveyance of the Property shall succeed to all the title, power, and
duties conferred upon the Trustee in this Deed of Trust and by applicable

13
<PAGE> 14

law. This procedure for substitution of trustee shall govern to the exclusion of
all other provisions for substitution.

NOTICES TO TRUSTOR AND OTHER PARTIES. Any notice under this Deed of Trust shall
be in writing, may be sent by telefacsimile, and shall be effective when
actually delivered, or when deposited with a nationally recognized overnight
courier, or, if mailed, shall be deemed effective when deposited in the United
States mail first class certified or registered mail, postage prepaid, directed
to the addresses shown near the beginning of this Deed of Trust. Any party may
change its address for notices under this Deed of Trust by giving formal written
notice to the other parties, specifying that the purpose of the notice is to
change the party's address. All copies of notices of foreclosure from the holder
of any lien which has priority over this Deed of Trust shall be sent to Lender's
address, as shown near the beginning of this Deed of Trust. For notice purposes,
Trustor agrees to keep Lender and Trustee informed at all times of Trustor's
current address.

STATUTE OF FRAUDS DISCLOSURE. ORAL AGREEMENTS OR ORAL COMMITMENTS TO LOAN MONEY,
EXTEND CREDIT, OR TO FORBEAR FROM ENFORCING REPAYMENT OF A DEBT ARE NOT
ENFORCEABLE UNDER WASHINGTON LAW.

ACCESS LAWS. An exhibit, titled "ACCESS LAWS," is attached to this Deed of Trust
and by this reference is made a part of this Deed of Trust just as if all the
provisions, terms and conditions of the Exhibit had been fully set forth in this
Deed of Trust.

MISCELLANEOUS PROVISIONS. The following miscellaneous provisions are a part of
this Deed of Trust:

Amendments. This Deed of Trust, together with any Related Documents,
constitutes the entire understanding and agreement of the parties as to the
matters set forth in this Deed of Trust. No alteration of or amendment to this
Deed of Trust shall be effective unless given in writing and signed by the party
or parties sought to be charged or bound by the alteration or amendment.

Annual Reports. If the Property is used for purposes other than
Trustor's residence, Trustor shall furnish to Lender, upon request, a certified
statement of net operating income received from the Property during Trustor's
previous fiscal year in such form and detail as Lender shall require. "Net
operating income" shall mean all cash receipts from the Property less all cash
expenditures made in connection with the operation of the Property.

Arbitration. Lender and Trustor and Borrower agree that all disputes,
claims and controversies between them, whether individual, liens, or class in
nature, arising from this Deed of Trust or otherwise, including without
limitation contract and tort disputes, shall be arbitrated pursuant to the Rules
of the American Arbitration Association, upon request of either party. No act to
take or dispose of any Collateral shall constitute a waiver of this arbitration
agreement or be prohibited by this arbitration agreement. This includes, without
limitation, obtaining injunctive relief or a temporary restraining order;
invoking a power of sale under any deed of trust or mortgage; obtaining a writ
of attachment or imposition of a receiver; or exercising any rights relating to
personal property, including taking or disposing of such property with or
without judicial process pursuant to Article 9 of the Uniform Commercial Code.
Any disputes, claims, or controversies

14
<PAGE> 15

concerning the lawfulness or reasonableness of any act, or exercise of any
right, concerning any Collateral, including any claim to rescind, reform, or
otherwise modify any agreement relating to the Collateral, shall also be
arbitrated, provided however that no arbitrator shall have the right or the
power to enjoin or restrain any act of any party. Judgment upon any award
rendered by any arbitrator may be entered in any court having jurisdiction.
Nothing in this Deed of Trust shall preclude any party from seeking equitable
relief from a court of competent jurisdiction. The statute of limitations,
estoppel, waiver, laches, and similar doctrines which would otherwise be
applicable in an action brought by a party shall be applicable in any
arbitration proceeding, and the commencement of an arbitration proceeding shall
be deemed the commencement of an action for these purposes. The Federal
Arbitration Act shall apply to the construction, interpretation, and enforcement
of this arbitration provision.

Applicable Law. This Deed of Trust has been delivered to Lender and
accepted by Lender in the State of Washington. Except as set forth hereinafter,
this Deed of Trust shall be governed by, construed and enforced in accordance
with the laws of the State of Washington, except and only to the extent of
procedural matters related to the perfection and enforcement by Lender of its
rights and remedies against the Property, which matters shall be governed by the
laws of the State of Arizona. However, in the event that the enforceability or
validity of any provision of this Deed of Trust is challenged or questioned,
such provision shall be governed by whichever applicable state or federal law
would uphold or would enforce such challenged or questioned provision. The loan
transaction which is evidenced by the Note and this Deed of Trust (which secures
the Note) has been applied for, considered, approved and made in the State of
Washington.

Caption Headings. Caption headings in this Deed of Trust are for
convenience purposes only and are not to be used to interpret or define the
provisions of this Deed of Trust.

Merger. There shall be no merger of the interest or estate created by
this Deed of Trust with any other Interest or estate in the Property at any time
held by or for the benefit of Lender in any capacity, without the written
consent of Lender.

Severability. If a court of competent jurisdiction finds an provision
of this Deed of Trust to be invalid or unenforceable as to any person or
circumstance, such finding shall not render that provision invalid or
unenforceable as to any other persons or circumstances. If feasible, any such
offending provision shall be deemed to be modified to be within the limits of
enforceability or validity; however, if the offending provision cannot be so
modified, it shall be stricken and all other provisions of this Deed of Trust in
all other respects shall remain valid and enforceable.

Successors and Assigns. Subject to the limitations stated in this Deed
of Trust on transfer of Trustor's interest, this Deed of Trust shall be binding
upon and inure to the benefit of the parties, their successors and assigns. If
ownership of the Property becomes vested in a person other than Trustor, Lender,
without notice to Trustor, may deal with Trustor's successors with reference to
this Deed of Trust and the Indebtedness by way of forbearance or extension
without releasing Trustor from the obligations of this Deed of Trust or
liability under the Indebtedness.

Time is of the Essence. Time is of the essence in the performance of
this Deed of Trust.

15
<PAGE> 16

Waivers and Consents. Lender shall not be deemed to have waived any
rights under this Deed of Trust (or under the Related Documents) unless such
waiver is in writing and signed by Lender. No delay or omission on the part of
Lender in exercising any right shall operate as a waiver of such right or any
other right. A waiver by any party of a provision of this Deed of Trust shall
not constitute a waiver of or prejudice the party's right otherwise to demand
strict compliance with that provision or any other provision. No prior waiver by
Lender, nor any course of dealing between Lender and Trustor or Borrower, shall
constitute a waiver of any of Lender's rights or any of Trustor or Borrower's
obligations as to any future transactions. Whenever consent by Lender is
required in this Deed of Trust, the granting of such consent by Lender in any
instance shall not constitute continuing consent to subsequent instances where
such consent is required.

Waiver of Homestead Exemption. Trustor hereby releases and waives all
rights and benefits of the homestead exemption laws of the State of Arizona as
to all Indebtedness secured by this Deed of Trust.

16
<PAGE> 17
EACH TRUSTOR ACKNOWLEDGES HAVING READ ALL THE PROVISIONS OF THIS DEED OF TRUST,
AND EACH TRUSTOR AGREES TO ITS TERMS.

TRUSTOR:

ALEXIS HOLDING COMPANY, INC.

By:
---------------------------
BARRY J. FELD, President

CORPORATE ACKNOWLEDGMENT

STATE OF ________________ )

) ss

COUNTY OF _______________ )

On this ______ day of _____________, 19____, before me, the
undersigned Notary Public, personally appeared BARRY J. FELD of ALEXIS HOLDING
COMPANY, INC., and known to me to be an authorized agent of the corporation that
executed the Deed of Trust and acknowledged the Deed of Trust to be the free and
voluntary act and deed of the corporation, by authority of its Bylaws or by
resolution of its board of directors, for the uses and purposes therein
mentioned, and on oath stated that he or she is authorized to execute this Deed
of Trust and in fact executed the Deed of Trust on behalf of the corporation.

By:__________________________ Residing at: ______________________________
______________________________

Notary Public in and for the State of ___________________

My commission expires ___________________________________

<PAGE> 18
REQUEST FOR FULL RECONVEYANCE
(To be used only when obligations have been paid in full)

To:______________________________________, Trustee

The undersigned is the legal owner and holder of all Indebtedness secured by
this Deed of Trust. All sums secured by this Deed of Trust have been fully paid
and satisfied. You are hereby directed, upon payment to you of any sums owing to
you under the terms of this Deed of Trust or pursuant to any applicable statute,
to cancel the Note secured by this Deed of Trust (which is delivered to you
together with this Deed of Trust), and to reconvey, without warranty, to the
parties designated by the terms of this Deed of Trust, the estate now held by
you under this Deed of Trust. Please mail the reconveyance and Related Documents
to:___________________________________________________________________________

______________________________________________________________________________

Date:__________________ Beneficiary:_______________________________

By:___________________________

Its:___________________________

<PAGE> 19
EXHIBIT A
---------

PARCEL NO. 1: No. DR-1017084
---

The West 215 feet of Lot 71, of EATON FREEWAY INDUSTRIAL PARK, according to the
plat of record in the office of the County Recorder of Maricopa County, Arizona,
recorded in Book 171 of Maps, Page 31.

EXCEPT that portion of the West 215 feet of Lot 71, of EATON FREEWAY INDUSTRIAL
PARK, according to the plat of record in the office of the County Recorder of
Maricopa County, Arizona, recorded in Book 171 of Maps, Page 31, which lies
within a strip of land 20.00 feet in width as measured perpendicularly to, and
Westerly of, the following described line:

COMMENCING at the center of Section 29, Township 1 North, Range 4 East of the
Gila and Salt River Base and Meridian, Maricopa County, Arizona;

thence along the East-West midsection line of said section, North 89 degrees 39
minutes 33 Seconds East 651.34 feet to the construction median centerline of
Interstate Highway 10 (Phoenix-Casa Grande Highway);

thence along said construction median centerline, South 1 degrees 15 minutes 40
seconds West 1921.84 feet;

thence North 88 degrees 44 minutes 20 Seconds West 220.00 feet to the POINT OF
BEGINNING;

thence South 13 degrees 29 minutes 10 seconds West 306.96 feet;

thence South 20 degrees 53 minutes 03 seconds West 339.45 feet to the point of
ending on the South line of said Lot 71.

The Westerly line of said strip of land shall be extended Southerly so as to end
on the South line of said Lot 71.

PARCEL NO. 2:

Easement for roadway, walkway and sidewalks as created in Reciprocal Easement
Agreement, recorded in Docket 14403, Page 157, records of Maricopa County,
Arizona.

TRACT NO. 1:
- ------------

Those portions of Lot 71, except the West 215 feet and of the South 30.00 feet
of Lot 70, of EATON FREEWAY INDUSTRIAL PARK, according to the plat of record in
the office of the County Recorder of Maricopa County, Arizona, recorded in Book
171 of Maps, Page 30, which lie Westerly of a line 20.00 feet Westerly of and
parallel with the line described as follows:

No: (DR-1017084)

COMMENCING at the center of Section 29, Township 1 North, Range 4 East of the
Gila and Salt River Base and Meridian, Maricopa County, Arizona;

thence along the East-West midsection line of said section, North 89 degrees 39
minutes 33 seconds East 651.34 feet to the construction median centerline of
Interstate Highway 10 (Phoenix-Casa Grande Highway);

thence along said construction median centerline, South 1 degrees 15 minutes 40
seconds West 1921.84 feet;

thence North 88 degrees 44 minutes 20 seconds West 220.00 feet to the POINT OF
BEGINNING;

<PAGE> 20

thence South 13 degrees 29 minutes 10 seconds West 3.06.96 feet;

thence South 20 degrees 53 minutes 03 seconds West 339.45 feet to the point of
ending on the South line of said Lot 71.

TRACT NO. 2:
- ------------

Those portions of Lot 71 and of the South 30.00 feet of Lot 70, of EATON FREEWAY
INDUSTRIAL PARK, according to the plat of record in the office of the County
Recorder of Maricopa County, Arizona, recorded in Book 171 of Maps, Page 31,
being a strip of land 20.00 feet in width as measured perpendicularly to, and
Westerly of, the following described line:

COMMENCING at the center of Section 29, Township 1 North, Range 4 East of the
Gila and Salt River Base and Meridian, Maricopa County, Arizona;

thence along said construction median centerline, South 1 degrees 15 minutes 40
seconds West 1921.84 feet;

thence North 88 degrees 44 minutes 20 seconds West 220.00 feet to the POINT OF
BEGINNING;

thence South 13 degrees 29 minutes 10 seconds West 306.96 feet;

thence South 20 degrees 53 minutes 03 seconds West 339.45 feet to the point of
ending on the South line of said Lot 71.

The Westerly line of said strip of land shall be extended Southerly so as to end
on the South line of said Lot 71.

EXCEPT any portion lying within the West 215 feet of Lot 71.

TRACT NO. 3:
- ------------

That portion of the West 215 feet of Lot 71, of EATON FREEWAY INDUSTRIAL PARK,
according to the plat of record in the office of the County Recorder of Maricopa
County, Arizona, recorded in Book 171 of Maps, Page 31, which lies within a
strip of land 20.00 feet in width as measured perpendicularly to, and

<PAGE> 21

Westerly of, the following described line:

COMMENCING at the center of Section 29, Township 1 North, Range 4 East of the
Gila and Salt River Base and Meridian, Maricopa County, Arizona;

thence along said construction median centerline, South 1 degrees 15 minutes 40
seconds West 1921.84 feet;

thence North 88 degrees 44 minutes 20 seconds West 220.00 feet to the POINT OF
BEGINNING;

thence South 13 degrees 29 minutes 10 seconds West 306.96 feet;

thence South 20 degrees 53 minutes 03 seconds West 339.45 feet to the point of
ending on the South line of said Lot 71.

The Westerly line of said strip of land shall be extended Southerly so as to end
on the South line of said lot 71.

<PAGE> 1
EXHIBIT 10.19

FIRST AMENDMENT TO CREDIT AGREEMENT

THIS FIRST AMENDMENT dated as of this 16th day of September, 1996, by
and between NEW WEST EYEWORKS, INC., a Delaware corporation ("Borrower"), and
U.S. BANK OF WASHINGTON, NATIONAL ASSOCIATION ("Bank") amends that certain
Credit Agreement dated June 10, 1996, by and between the parties ("Agreement").

WHEREAS, the parties wish to amend the Agreement as provided herein.

For mutual consideration, the parties agree as follows:

A. DEFINITION OF ELIGIBLE ACCOUNTS RECEIVABLE. Section 1.1 of the
Agreement is hereby amended by striking the definition of "Eligible Accounts
Receivable" on page 8 of the Agreement and replacing it with the following:

"Eligible Accounts Receivable" means the accounts receivable
of Borrower excluding the following: (a) accounts receivable that have
been outstanding in excess of 90 days from the date of invoice, (b)
until September 30, 1997, all accounts receivable from any single
customer of Borrower if 50 percent or more of such customer's accounts
owed to Borrower are ineligible for any reason, (c) after September 30,
1997, all accounts receivable from any single customer of Borrower if
25 percent or more of such customer's accounts owed to Borrower are
ineligible for any reason, (d) accounts receivable due from officers,
employees, or Affiliates of Borrower, (e) accounts receivable that are
partially or wholly subject to the right of setoff, (f) accounts
receivable resulting from COD sales, finance charges, and consignments,
(g) accounts receivable due from Persons not residents of the United
States, (h) accounts receivable due from the federal government, (i)
accounts receivable that constitute any retainage, (j) accounts
receivable that constitute dated billings and (k) accounts receivable
in which any Person other than U.S. Bank has a security interest.
Notwithstanding the foregoing, "Eligible Accounts Receivable" shall not
include any accounts receivable unless and until U.S. Bank holds a
first, valid, binding perfected security interest in any such accounts
receivable.

B. FEE. Concurrently with the execution of this First Amendment,
Borrower shall pay Bank a nonrefundable fee in the amount of One Thousand and
no/100 Dollars ($1,000.00)

C. OTHER TERMS. Except as specifically amended by this Amendment, all
other terms and conditions of the Agreement shall remain in full force and
effect, and are hereby ratified and affirmed. Defined terms in the Agreement
shall have the same meanings herein. ORAL AGREEMENTS OR ORAL COMMITMENTS TO LOAN
MONEY, TO EXTEND CREDIT,

<PAGE> 2

OR TO FORBEAR FROM ENFORCING REPAYMENT OF A DEBT ARE NOT ENFORCEABLE UNDER
WASHINGTON LAW.

IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed
by themselves or by their respective officers or agents thereunto duly
authorized.

Borrower: Bank:
NEW WEST EYEWORKS, INC. U.S. BANK OF WASHINGTON,
NATIONAL ASSOCIATION

Barry J. Feld /s/ Jason R. Gill
- ------------------------------------ -----------------------------
By: /s/ Barry J. Feld Jason R. Gill,
-------------------------------- Assistant Vice President
Its: CEO
--------------------------------

<PAGE> 1
EXHIBIT 10.20

SECOND AMENDMENT TO CREDIT AGREEMENT

THIS SECOND AMENDMENT dated as of this 24th day of October, 1996, by
and between NEW WEST EYEWORKS, INC., a Delaware corporation ("Borrower") and
U.S. Bank of WASHINGTON, NATIONAL ASSOCIATION ("Bank") amends that certain
Credit Agreement dated June 10, 1996, by and between the parties ("Agreement").

WHEREAS, the parties wish to amend the Agreement as provided herein.

For mutual consideration, the parties agree as follows:

A. REQUIRED LEVEL OF WORKING CAPITAL. Section 6.18 of the Agreement is
hereby amended by striking the required levels of working capital on page 28 of
the Agreement and replacing it with the following:

Permit Working Capital to be less than negative $2,400,000 as of the
last day of each fiscal quarter of Borrower.

B. FEE. Concurrently with the execution of this Second Amendment,
Borrower shall pay Bank a nonrefundable fee in the amount of One Thousand and
no/100 Dollars ($1,000.00).

C. OTHER TERMS. Except as specifically amended by this Amendment, all
other terms and conditions of the Agreement shall remain in full force and
effect, and are hereby ratified and affirmed. Defined terms in the Agreement
shall have the same meanings hereon. ORAL AGREEMENTS OR ORAL COMMITMENTS TO LOAN
MONEY, TO EXTEND CREDIT, OR TO FORBEAR FROM ENFORCING REPAYMENT OF A DEBT ARE
NOT ENFORCEABLE UNDER WASHINGTON LAW.

IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed
by themselves or by their respective officers or agents thereunto duly
authorized.

BORROWER: BANK:
NEW WEST EYEWORKS, INC. U.S. BANK OF WASHINGTON,
NATIONAL ASSOCIATION

/S/ Barry J. Feld /S/ Jason R. Gill
- ------------------------------------- ------------------------------
Barry J. Feld Jason R. Gill
President and Chief Executive Officer Assistant Vice President

<PAGE> 1
EXHIBIT 10.26

SECURITY AGREEMENT

This security agreement ("Agreement") is made and entered into as of
June __, 1996, by NEW WEST EYEWORKS, INC., a Delaware corporation ("Borrower"),
for the benefit of U. S. BANK OF WASHINGTON, NATIONAL ASSOCIATION, a national
banking association ("U. S. Bank").

R E C I T A L S :

A. Concurrently with the execution hereof, U. S. Bank and Borrower
entered into a credit agreement (together with all supplements, exhibits, and
amendments thereto, referred to as the "Credit Agreement"), pursuant to which U.
S. Bank agreed to extend to Borrower credit facilities as more fully described
therein (the "Loan").

B. Borrower wishes to grant to U. S. Bank a security interest in all
its assets (excluding equipment and leasehold improvements) as security for all
the Secured Obligations.

NOW, THEREFORE, in order for U. S. Bank to make the Loan, Borrower
agrees as follows:

ARTICLE I. DEFINITIONS

Unless otherwise defined herein, terms defined in the Credit Agreement
shall have the same meanings when used herein. For the purposes of this
Agreement, the following terms shall have the following meanings:

"Accounts" means any right to payment for goods sold or leased or for
services rendered that is not evidenced by an Instrument or Chattel Paper,
whether or not it has been earned by performance.

"Account Debtor" means the party who is obligated on or under any
Account, Chattel Paper, or General Intangible.

"Assignee Deposit Account" shall have the meaning set forth in SECTION
5.7 hereof.

"Chattel Paper" means all interest of Borrower in writings that
evidence both a monetary obligation and a security interest in or a lease of
specific goods, including any group of writings consisting of both a security
agreement or a lease and an Instrument or series of Instruments.

-1-
<PAGE> 2

"Collateral" means all property, real, personal, and mixed, tangible
and intangible, wherever located, now owned or hereafter acquired by Borrower,
or in which Borrower has or later obtains an interest, and all products,
profits, rents, and proceeds of such property, including but not limited to
Accounts, Chattel Paper, Deposit Accounts, Documents, Financial Assets, General
Intangibles, Goods, Instruments, Inventory, Investment Property, and Trademarks,
but excluding furniture, fixtures, and equipment.

"Deposit Account" means a demand, time, savings, passbook, or like
account maintained with a bank, savings and loan association, credit union, or
like organization, other than an account evidenced by a certificate of deposit.

"Documents" means all of Borrower's right, title, and interest in or to
any document of title as defined in RCW 62A.1-201 and any receipt of the kind
described in RCW 62A.7-201(2).

"Event of Default" means an occurrence of an Event of Default as
defined in the Credit Agreement.

"Financial Assets" means all of Borrower's right, title, and interest
in and to any financial asset as defined in RCW 62A.8-102.

"General Intangibles" means all personal property (including things in
action) other than Goods, Accounts, Chattel Paper, Documents, Financial Assets,
Instruments, Investment Property, and money, including but not limited to all
Trademarks, insurance proceeds, patents, copyrights, trade names, trade secrets,
goodwill, registration, license rights, licenses, permits, corporate and other
business records, rights to refunds or indemnification, and all other intangible
personal property of Borrower of every kind and nature.

"Goods" means all things that are movable or that are fixtures, not
including money, Documents, Financial Assets, Instruments, Accounts, Chattel
Paper, Investment Property, or General Intangibles.

"Instrument" means any negotiable instrument or other writing that
evidences a right to the payment of money and is not itself a security agreement
or lease and is of a type that is in the ordinary course of business transferred
by delivery with any necessary endorsement or assignment.

"Inventory" means all Goods held by Borrower for sale or lease,
furnished or to be furnished by Borrower under any contract of service, or held
by Borrower as raw materials, work in progress, or materials used or consumed in
Borrower's business.

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"Investment Property" means all of Borrower's right, title, and
interest in and to any investment property as defined in RCW 62A.9-115.

"Secured Obligations" means any past, present, or future Indebtedness
of Borrower to U. S. Bank, and includes but is not limited to (a) any
indebtedness, obligation, or liability of any kind arising in any way of
Borrower to U. S. Bank, now existing or hereafter created, under the Credit
Agreement, the Note, or the other Loan Documents, including any refinancing,
renewal, replacement, extension, amendment, or substitution of such
indebtedness, (b) any liability or obligation of Borrower hereunder, (c) the
obligations of Borrower under any guaranty executed by Borrower and delivered to
U. S. Bank, whereby Borrower guarantees the indebtedness of any Person other
than Borrower to U. S. Bank, and (d) any cost, expense, or liability, including
but not limited to reasonable attorney fees, that may be incurred and advances
that may be made by U. S. Bank in any way in connection with any of the
foregoing or any security therefor.

"Trademark" means (a) any trademark, trade name, corporate name,
company name, business name, fictitious business name, trade style, service
mark, logo or other source or business identifier, and the goodwill associated
therewith, now existing or hereafter adopted or acquired, any registration or
recording thereof, and any application in connection therewith, whether in the
United States Patent and Trademark Office or in any similar office or agency of
the United States or of any state thereof, or any other country or any political
subdivision thereof, or otherwise, including but not limited to any thereof
referred to in SCHEDULE I hereto, and (b) all renewals thereof.

ARTICLE II. GRANT OF SECURITY INTEREST

As security for the payment and satisfaction of the Secured
Obligations, Borrower hereby grants to U. S. Bank a continuing security interest
in and assigns to U. S. Bank all of Borrower's right, title, and interest in the
Collateral and all products, profits, rents, and proceeds thereof.

ARTICLE III. COVENANTS OF BORROWER

Borrower shall fully perform each of the covenants set forth below.

3.1 OBLIGATIONS TO PAY.

(a) Borrower shall pay to U. S. Bank, in timely fashion and in full,
all amounts payable by Borrower to U. S. Bank, pursuant to the Credit Agreement,
the Note, and the other Loan Documents; and

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<PAGE> 4

(b) Borrower shall pay and reimburse U. S. Bank for all expenditures
including reasonable attorney fees and legal expenses in connection with the
exercise by U. S. Bank of any of its rights or remedies under the Credit
Agreement or the other Loan Documents in accordance with the terms thereof.

3.2 PERFORMANCE. Borrower shall fully perform in a timely fashion every
covenant, agreement, and obligation set forth in the Credit Agreement and the
other Loan Documents.

3.3 FURTHER DOCUMENTATION. At its own expense, Borrower shall execute
and deliver any financing statement, any renewal, substitution, or correction
thereof, or any other document; shall procure any document; and shall take such
further action as U. S. Bank may reasonably require in obtaining the full
benefits of this Agreement.

3.4 FILING FEES. Borrower shall pay all costs of filing any financing,
continuation, or termination statement with respect to the security interests
granted herein.

3.5 PLEDGES. Borrower shall deliver and pledge to U. S. Bank, endorsed
or accompanied by instruments of assignment or transfer satisfactory to U. S.
Bank, any Instruments, Investment Property, Documents, General Intangibles, or
Chattel Paper that it owns and that U. S. Bank may specify from time to time.

3.6 MAINTENANCE OF RECORDS. Borrower shall keep and maintain at its own
cost and expense satisfactory and complete records of the Collateral including
but not limited to a record of all payments received and all credits granted
with respect to the Collateral and all other dealings with the Collateral.
Borrower shall mark its books and records pertaining to the Collateral to
evidence this Agreement and the security interests granted herein. Borrower
shall deliver and turn over to U. S. Bank all books and records pertaining to
the Collateral at any time after the occurrence and during the continuation of
an Event of Default, if so demanded by U. S. Bank.

3.7 DISPOSITION OF COLLATERAL. Except as allowed in the Credit
Agreement, Borrower shall not sell or transfer any of the Collateral or release,
compromise, or settle any obligation or receivable due to Borrower.

3.8 INDEMNIFICATION. Borrower agrees to pay, and to indemnify U. S.
Bank and hold U. S. Bank harmless from, all liabilities, costs, and expenses
incurred by U. S. Bank including but not limited to reasonable legal fees and
expenses with respect to or resulting from (a) any delay in paying any excise,
sales, or other taxes that may be payable or determined to be payable with
respect to any of the Collateral, (b) any delay by Borrower in complying with
any requirement of law applicable to any of the Collateral, or (c) any of the
transactions contemplated by this Agreement, notwithstanding that U. S. Bank
shall not be

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<PAGE> 5

indemnified pursuant to this SECTION 3.8 for expenses or loss to the extent such
expenses were caused by the gross negligence or willful misconduct of U. S.
Bank. In any suit, proceeding, or action brought by U. S. Bank under any Account
to enforce payment of any sum owing thereunder or to enforce any provisions of
any Account, Borrower will indemnify U. S. Bank and hold U. S. Bank harmless
from all expense, loss, or damage suffered by reason of any defense, setoff,
counterclaim, recoupment, reduction, or liability whatsoever of the Account
Debtor thereunder arising out of a breach by Borrower of any obligation
thereunder or arising out of any other agreement, indebtedness, or liability at
any time owing to or in favor of such Account Debtor or its successors from
Borrower, notwithstanding that U. S. Bank shall not be indemnified pursuant to
this SECTION 3.8 for expenses or loss to the extent such expenses were caused by
the gross negligence or willful misconduct of U. S. Bank.

3.9 LIMITATIONS ON AMENDMENTS, MODIFICATIONS, TERMINATIONS, WAIVERS,
AND EXTENSIONS OF CONTRACTS AND AGREEMENTS GIVING RISE TO ACCOUNTS. Borrower
will not (a) amend, modify, terminate, waive, or extend any provision of any
agreement giving rise to an Account in any manner that could reasonably be
expected to have a material adverse effect on the value of such Account as
Collateral or (b) fail to exercise promptly and diligently every material right,
when and if commercially reasonable to do so, that it may have under each
agreement giving rise to an Account, other than any right of termination.

3.10 LIMITATIONS ON DISCOUNTS, COMPROMISES, AND EXTENSIONS OF ACCOUNTS.
Unless commercially reasonable to do so, Borrower will not grant any extension
of the time of payment of any of the Accounts; compromise, compound, or settle
the same for less than the full amount thereof; release, wholly or partially,
any Person liable for the payment thereof; or allow any credit or discount
whatsoever thereon.

3.11 FURTHER IDENTIFICATION OF COLLATERAL. Borrower will furnish to U.
S. Bank from time to time statements and schedules further identifying and
describing the Collateral and such other reports in connection with the
Collateral as U. S. Bank may reasonably request, all in reasonable detail.

3.12 NOTICES. Borrower will advise U. S. Bank promptly in reasonable
detail at its address set forth in SECTION 7.9(a) of any lien (other than liens
created hereby or permitted under the Credit Agreement) on or claim asserted
against any of the Collateral and (b) of the occurrence of any other event that
could reasonably be expected to have a material adverse effect on the Collateral
or on the liens created hereunder.

3.13 CHANGES IN LOCATIONS, NAME, ETC. Borrower will not (a) change the
location of its chief executive office/chief place of business from that
specified in SECTION 4.10 or remove its books and records from the location
specified in SECTION 4.7, (b) permit any of the Inventory to be kept at
locations other than those listed on SCHEDULE II hereto, or (c) change its name,
identity, or structure to such an extent that any financing statement filed

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<PAGE> 6

by U. S. Bank in connection with this Agreement would become seriously
misleading, unless it shall have given U. S. Bank at least ten days' prior
written notice thereof.

3.14 TRADEMARKS.

(a) Borrower (either itself or through licensees) will (i) unless it
determines otherwise, continue to use each Trademark on each and every trademark
class of goods applicable to its current line as reflected in its current
catalogs, brochures, and price lists in order to maintain such Trademark in full
force free from any claim of abandonment for nonuse, (ii) maintain as in the
past the quality of products and services offered under such Trademark, (iii)
employ such Trademark with the appropriate notice of registration, (iv) not
adopt or use any mark that is confusingly similar to or a colorable imitation of
such Trademark unless U. S. Bank shall obtain a perfected security interest in
such mark pursuant to this Agreement, and (v) not (and not permit any licensee
or sublicensee thereof to) do any act or knowingly omit to do any act whereby
any Trademark may become invalidated.

(b) Borrower will notify U. S. Bank promptly if it knows, or has reason
to know, of (i) any application or registration relating to any Trademark
material to its business that may become abandoned or dedicated, or (ii) any
adverse determination or development (including but not limited to the
institution of, or any adverse determination or development in, any proceeding
in the United States Patent and Trademark Office or any court or tribunal in any
country) regarding Borrower's ownership of any material Trademark or its right
to register, keep, or maintain the same.

(c) Whenever Borrower, either by itself or through any agent, employee,
licensee, or designee, shall file an application for the registration of any
material Trademark with the United States Patent and Trademark Office or any
similar office or agency in any other country or any political subdivision
thereof, Borrower shall report such filing to U. S. Bank within five Business
Days after the last day of the calendar month in which such filing occurs.
Borrower shall execute and deliver to U. S. Bank all agreements, instruments,
powers of attorney, documents, and papers that U. S. Bank may request to
evidence U. S. Bank's security interest in any Trademark and in the goodwill and
general intangibles of Borrower relating to or represented by the Trademark.
Borrower hereby constitutes U. S. Bank its attorney-in-fact to execute and file
all such writings for the foregoing purposes, with all acts of such attorney
being hereby ratified and confirmed; and such power, being coupled with an
interest, is irrevocable until all Secured Obligations are paid in full.

(d) Borrower will take all reasonable and necessary steps, including
but not limited to all reasonable and necessary steps in any proceeding before
the United States Patent and Trademark Office or any similar office or agency in
any other country or any political subdivision thereof, to maintain and pursue
each application, to obtain the relevant

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<PAGE> 7

registration, and to maintain each registration of material Trademarks,
including but not limited to filing applications for renewal, affidavits of use,
and affidavits of incontestability.

(e) If any Trademark that is included in the Collateral is infringed,
misappropriated, or diluted by a third party, Borrower shall take such action as
Borrower reasonably deems appropriate under the circumstances to protect such
Trademark.

3.15 INSURANCE. Borrower agrees to insure the Collateral in accordance
with the provisions of the Credit Agreement. If Borrower fails to obtain such
insurance, U. S. Bank shall have the right, but not the obligation, to obtain
either insurance covering both Borrower's and U. S. Bank's interest in the
Collateral, or insurance covering only U. S. Bank's interest in the Collateral.
Borrower agrees to pay any premium charged for such insurance. This amount may
be added to the outstanding balance of the Loan, and interest thereon shall be
charged at the rate specified in any applicable loan document, or U. S. Bank may
demand immediate payment. Any unpaid insurance premium advanced by U. S. Bank
shall be secured under the terms of this Agreement. U. S. Bank will have no
liability whatsoever for any loss which may occur by reason of the omission or
lack of coverage of any such insurance. Borrower hereby assigns to U. S. Bank
the right to receive proceeds of such insurance to the full amount of the
Secured Obligations and hereby directs any insurer to pay all proceeds directly
to U. S. Bank, and authorizes U. S. Bank to endorse any draft. In U. S. Bank's
sole discretion, U. S. Bank may apply any insurance proceeds either toward
repair of the property or reduction of the balance of the Secured Obligations.

3.16 COPY OF FINANCING STATEMENT. Borrower agrees that a carbon,
photographic, or other reproduction of a financing statement or this Agreement
is sufficient as a financing statement.

ARTICLE IV. REPRESENTATIONS AND WARRANTIES

Borrower hereby makes the following representations and warranties:

4.1 TITLE TO COLLATERAL. Except as set forth in Exhibit J to the Credit
Agreement or otherwise disclosed therein or herein, Borrower has good and
marketable title to all the Collateral, free and clear of all liens.

4.2 NO IMPAIRMENT OF COLLATERAL. None of the Collateral shall be
impaired or jeopardized because of the security interest herein granted.

4.3 OTHER AGREEMENTS. The execution and delivery of this Agreement, the
consummation of the transactions provided for herein, and of the terms hereof
will not result in the breach of any of the terms, conditions, or provisions of,
or constitute a default under, or conflict with, or cause any acceleration of
any obligation under any (a) agreement or other

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<PAGE> 8

instrument to which Borrower is a party or by which Borrower is bound other than
the Borrower's obligations to Security Mutual or (b) Applicable Law.

4.4 NO APPROVALS. No Governmental Approvals of any nature are required
in connection with the security interests herein granted other than filings or
recordings that may be required under the Uniform Commercial Code or in
connection with the perfection of the security interests of U. S. Bank in the
Trademarks.

4.5 AUTHORITY. Borrower has full power and authority to assign to U. S.
Bank and to grant to U. S. Bank a security interest in the Collateral.

4.6 LOCATION OF RECORDS. The address of the office where the books and
records of Borrower are kept concerning the Collateral is set forth on SCHEDULE
II.

4.7 LOCATION OF COLLATERAL. The locations of all Inventory of Borrower
are described on SCHEDULE II.

4.8 ACCOUNTS. The amount represented by Borrower to U. S. Bank from
time to time as owing by each Account Debtor or by all Account Debtors in
respect of the Accounts will at such time be the correct amount actually owing
by such Account Debtor or Debtors thereunder. No material amount payable to
Borrower under or in connection with any Account is evidenced by any Instrument
(other than checks received in the ordinary course of business) or Chattel Paper
that has not been delivered to U. S. Bank.

4.9 CHIEF EXECUTIVE OFFICE. Borrower's chief executive office and chief
place of business is located at the address set forth on SCHEDULE II.

4.10 TRADEMARKS. SCHEDULE I hereto includes all Trademarks owned by
Borrower in its own name as of the date hereof. To the best of Borrower's
knowledge, each such Trademark is valid, subsisting, unexpired, and enforceable
and has not been abandoned. Except as set forth in SCHEDULE I, none of such
Trademarks is the subject of any licensing or franchise agreement. No holding,
decision, or judgment that would limit, cancel, or question the validity of any
such Trademark has been rendered by any Governmental Body. No action or
proceeding is pending that (a) seeks to limit, cancel, or question the validity
of any such Trademark or (b) would, if adversely determined, have a material
adverse effect on the value of any Trademark.

4.11 GOVERNMENTAL OBLIGORS. No Account Debtor is a Governmental Body.

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ARTICLE V. U. S. BANK'S RIGHTS WITH RESPECT
TO THE COLLATERAL

5.1 NO DUTY ON U. S. BANK'S PART. U. S. Bank shall not be required
(except at its option upon the occurrence and during the continuation of any
Event of Default) to realize upon any Accounts, Financial Assets, Instruments,
Investment Property, Chattel Paper, or General Intangibles; collect the
principal, interest, or payment due thereon, exercise any rights or options of
Borrower pertaining thereto; make presentment, demand, or protest; give notice
of protest, nonacceptance, or nonpayment; or do any other thing for the
protection, enforcement, or collection of such Collateral. The powers conferred
on U. S. Bank hereunder are solely to protect U. S. Bank's interests in the
Collateral and shall not impose any duty upon U. S. Bank to exercise any such
powers. U. S. Bank shall be accountable only for amounts that U. S. Bank
actually receives as a result of the exercise of such powers; and neither U. S.
Bank nor any of its officers, directors, employees, or agents shall be
responsible to Borrower for any act or failure to act hereunder.

5.2 NEGOTIATIONS WITH ACCOUNT DEBTORS. Upon the occurrence and during
the continuation of any Event of Default, U. S. Bank may, in its sole
discretion, extend or consent to the extension of the time of payment or
maturity of any Instruments, Accounts, Chattel Paper, or General Intangibles.

5.3 RIGHT TO ASSIGN. Except as otherwise provided in the Credit
Agreement, U. S. Bank may assign or transfer the whole or any part of the
Secured Obligations and may transfer therewith as collateral security the whole
or any part of the Collateral; and all obligations, rights, powers, and
privileges herein provided shall inure to the benefit of the assignee and shall
bind the successors and assigns of the parties hereto.

5.4 DUTIES REGARDING COLLATERAL. Beyond the safe custody thereof, U. S.
Bank shall not have any duty as to any Collateral in its possession or control,
or as to any preservation of any rights of or against other parties.

5.5 COLLECTION FROM ACCOUNT DEBTORS. Upon the occurrence and during the
continuation of any Event of Default, Borrower shall, upon demand by U. S. Bank
(and without any grace or cure period), notify all Account Debtors to make
payment to U. S. Bank of any amounts due or to become due. Borrower authorizes
U. S. Bank to contact the Account Debtors after an occurrence of any Event of
Default, for the purpose of having all or any of them pay their obligations
directly to U. S. Bank. Upon demand by U. S. Bank, Borrower shall enforce
collection of any indebtedness owed to it by Account Debtors.

5.6 INSPECTION. Upon at least 24 hours' advance written notice to
Borrower, U. S. Bank and its designees, from time to time at reasonable times
and intervals,

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may inspect the Inventory and inspect, audit, and make copies of and extracts
from all records and all other papers in the possession of Borrower.

5.7 ASSIGNEE DEPOSIT ACCOUNT. Upon demand by U. S. Bank, after an
occurrence of any Event of Default, Borrower will transmit and deliver to U. S.
Bank, in the form received, immediately after receipt, all cash, checks, drafts,
Chattel Paper, Instruments, or other writings for the payment of money including
Investment Property (properly endorsed, where required, so that the items may be
collected by U. S. Bank) that may be received by Borrower at any time to the
extent required by the Credit Agreement. All items or amounts that are delivered
by Borrower to U. S. Bank, or collected by U. S. Bank from the Account Debtors,
shall be deposited to the credit of a Deposit Account ("Assignee Deposit
Account") of Borrower with U. S. Bank, as security for the payment of the
Secured Obligations. Borrower shall have no right to withdraw any funds
deposited in the Assignee Deposit Account. U. S. Bank may, from time to time in
its discretion after an occurrence of any Event of Default, and shall, upon the
request of Borrower made not more than twice in any week, apply all or any of
the balance, representing collected funds, in the Assignee Deposit Account, to
payment of the Secured Obligations, whether or not then due, in such order of
application, not inconsistent with the terms of the Credit Agreement and this
Agreement, as U. S. Bank may determine; and U. S. Bank may, from time to time in
its discretion, release all or any of such balance to Borrower.

ARTICLE VI. U. S. BANK'S RIGHTS AND REMEDIES

6.1 GENERAL. Upon the occurrence of any Event of Default, U. S. Bank
may exercise its rights and remedies in the Credit Agreement and in any other
Loan Documents and any other rights and remedies at law and in equity,
simultaneously or consecutively, all of which rights and remedies shall be
cumulative. The choice of one or more rights or remedies shall not be construed
as a waiver or election barring other rights and remedies. Borrower hereby
acknowledges and agrees that U. S. Bank is not required to exercise all rights
and remedies available to it equally with respect to all the Collateral and that
U. S. Bank may select less than all the Collateral with respect to which the
rights and remedies as determined by U. S. Bank may be exercised.

6.2 NOTICE OF SALE; DUTY TO ASSEMBLE COLLATERAL. In addition to or in
conjunction with the rights and remedies referred to in SECTION 6.1 hereof:

(a) Written notice mailed to Borrower at the address designated herein
ten days or more prior to the date of public or private sale of any of the
Collateral shall constitute reasonable notice.

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(b) If U. S. Bank requests, Borrower will assemble the Collateral and
make it available to U. S. Bank at places that U. S. Bank shall reasonably
select, whether on Borrower's premises or elsewhere.

ARTICLE VII. GENERAL PROVISIONS

7.1 ENTIRE AGREEMENT. This Agreement, together with the Credit
Agreement and the other Loan Documents, sets forth all the promises, covenants,
agreements, conditions, and understandings between the parties hereto with
respect to the subject matter hereof, and supersedes all prior and
contemporaneous agreements and understandings, inducements, or conditions,
express or implied, oral or written, with respect thereto, except as contained
or referred to herein. This Agreement may not be amended, waived, discharged, or
terminated orally, but only by an instrument in writing signed by the party
against whom enforcement of such amendment, waiver, discharge, or termination is
sought.

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

7.3 NONWAIVER AND NONEXCLUSIVE RIGHTS AND REMEDIES.

(a) No right or remedy herein conferred upon or reserved to U. S. Bank
is intended to be to the exclusion of any other right or remedy, but each and
every such right or remedy shall be cumulative and shall be in addition to every
other right or remedy given hereunder and now or hereafter existing at law or in
equity.

(b) No delay or omission by U. S. Bank in exercising any right or
remedy accruing upon an Event of Default shall impair any such right or remedy,
or shall be construed to be a waiver of any such Event of Default, or an
acquiescence therein, nor shall it affect any subsequent Event of Default of the
same or of a different nature.

7.4 TERMINATION OF SECURITY INTEREST. When all the Secured Obligations
have been paid in full, the security interest provided herein shall terminate
and U. S. Bank shall return to Borrower all Collateral then held by U. S. Bank,
if any, and upon written request of Borrower, shall execute, in form for filing,
termination statements of the security interests herein granted. Thereafter, no
party hereto shall have any further rights or obligations hereunder.

7.5 SUCCESSORS AND ASSIGNS. All rights of U. S. Bank hereunder shall
inure to the benefit of its successors and assigns, and all obligations of
Borrower shall be binding upon its successors and assigns.

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7.6 U.S. BANK'S APPOINTMENT AS ATTORNEY-IN-FACT.

(a) Borrower hereby irrevocably constitutes and appoints U. S. Bank and
any officer or agent thereof, with full power of substitution, as its true and
lawful attorney-in-fact with full irrevocable power and authority in the place
and stead of Borrower and in the name of Borrower or in its own name, from time
to time in U. S. Bank's discretion, for the purpose of carrying out the terms of
this Agreement, to take any and all appropriate action, and to execute any and
all documents and instruments that may be necessary or desirable to accomplish
the purposes of this Agreement; and without limiting the generality of the
foregoing, Borrower hereby gives U. S. Bank the power and right, on behalf of
Borrower, without consent by or notice to Borrower, to do the following, in the
event of an occurrence of and during the continuance of an Event of Default:

(i) to transfer to U. S. Bank or to any other person all or
any of said Collateral, to endorse any Instruments pledged to U. S.
Bank, and to fill in blanks in any transfers of Collateral, powers of
attorney, or other documents delivered to U. S. Bank;

(ii) to pay or discharge taxes and liens levied or placed on
or threatened against the Collateral, to effect any repairs or any
insurance called for by the terms of this Agreement, and to pay all or
any part of the premiums therefor and the costs thereof;

(iii) (A) to take possession of, endorse, and collect any
checks, drafts, notes, acceptances, or other instruments for the
payment of moneys due under any Account, Instrument, or General
Intangible or with respect to any other Collateral and (B) to file any
claim or to take any other action or proceeding in any court of law or
equity or otherwise deemed appropriate by U. S. Bank for the purpose of
collecting all such moneys due under any Account, Financial Assets,
Instrument, Investment Property, or General Intangible or with respect
to any other Collateral whenever payable; and

(iv) (A) to direct any party liable for any payment under
any of the Collateral to make payment of all moneys due or to become
due thereunder directly to U. S. Bank or as U. S. Bank shall direct;
(B) to ask for, demand, collect, and receive payment of and receipt
for, any and all moneys, claims and other amounts due or to become due
at any time in respect of or arising out of any Collateral; (C) to sign
and endorse any invoices, freight or express bills, bills of lading,
storage or warehouse receipts, drafts against debtors, assignments,
verifications, notices, and other documents in connection with any of
the Collateral; (D) to commence and prosecute any suits, actions, or
proceedings at law or in equity in any court of competent jurisdiction
to collect

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the Collateral or any thereof and to enforce any other right in respect
of any Collateral; (E) to defend any suit, action, or proceeding
brought against Borrower with respect to any Collateral; (F) to settle,
compromise, or adjust any suit, action, or proceeding described in
clause (E) above and, in connection therewith, to give such discharge
or releases as U. S. Bank may deem appropriate; (G) to assign any
Trademark (along with the goodwill of the business to which any such
Trademark pertains) throughout the world for such terms or terms, on
such conditions, and in such manner as U. S. Bank shall in its sole
discretion determine; and (H) generally, to sell, transfer, pledge, and
make any agreement with respect to or otherwise deal with any of the
Collateral as fully and completely as though U. S. Bank were the
absolute owner thereof for all purposes; and to do, at U. S. Bank's
option and Borrower's expense, at any time or from time to time, all
acts and things that U. S. Bank deems necessary to protect, preserve or
realize upon the Collateral and U. S. Bank's liens thereon and to
effect the intent of this Agreement, all as fully and effectively as
Borrower might do.

(b) Borrower hereby ratifies all that said attorneys shall lawfully do
or cause to be done by virtue hereof. This power of attorney is a power coupled
with an interest and shall be irrevocable.

(c) Borrower also authorizes U. S. Bank, at any time and from time to
time, to execute, in connection with the sale provided for in ARTICLE VI hereof,
any endorsements, assignments, or other instruments of conveyance or transfer
with respect to the Collateral.

(d) The powers conferred on U. S. Bank hereunder are solely to protect
U. S. Bank's interests in the Collateral and shall not impose any duty upon U.
S. Bank to exercise any such powers. U. S. Bank shall be accountable only for
amounts that it actually receives as a result of the exercise of such powers,
and neither it nor any of its officers, directors, employees, or agents shall be
responsible to Borrower for any act or failure to act hereunder.

7.7 PERFORMANCE BY U. S. BANK OF BORROWER'S OBLIGATIONS. If Borrower
fails to perform or comply with any of its agreements contained herein and U. S.
Bank, as provided for by the terms of this Agreement, shall itself perform or
comply, or otherwise cause performance or compliance, with such agreement, the
expense of U. S. Bank incurred in connection with such performance or
compliance, together with interest thereon at the rate provided for in the
Credit Agreement upon the occurrence of an Event of Default, shall be payable by
Borrower to U. S. Bank on demand and shall constitute Secured Obligations.

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7.8 GOVERNING LAW. This Agreement and the rights and obligations of the
parties hereunder shall be construed and enforced in accordance with and shall
be governed by the laws of the state of Washington, without regard to the choice
of law rules thereof.

7.9 NOTICES. All notices, requests, consents, demands, approvals, and
other communications hereunder shall be deemed to have been duly given, made, or
served if in writing and when delivered personally, or sent via facsimile, or
mailed by first class mail, postage prepaid, to the respective parties to this
Agreement as follows:

(a) If to U. S. Bank:

U.S. Bank of Washington,
National Association
1420 Fifth Avenue, Tenth Floor
Seattle, Washington 98101
Attn: Jason Gill
Facsimile number: (206) 344-2331

(b) If to Borrower:

New West Eyeworks, Inc.
2104 West Southern Avenue
Tempe, Arizona 85282
Attn: Robert W. Regas
Facsimile number (602) 438-2650

The designation of the person to be so notified or the address of such person
for the purposes of such notice may be changed from time to time by similar
notice in writing, except that any communication with respect to a change of
address shall be deemed to be given or made when received by the party to whom
such communication was sent.

7.10 COUNTERPARTS. This Agreement may be executed in one or more
counterparts, each of which shall constitute an original Agreement, but all of
which together shall constitute one and the same instrument.

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<PAGE> 15

IN WITNESS WHEREOF, Borrower and U. S. Bank have caused these presents
to be duly executed by their respective duly authorized signatories as of the
day and year first above written.

NEW WEST EYEWORKS, INC., a
Delaware corporation

By /s/ Barry J. Feld
-----------------------------------------

Title President & CEO
--------------------------------------

ACCEPTED BY: U. S. BANK OF WASHINGTON,
NATIONAL ASSOCIATION

By
-----------------------------------------

Title
--------------------------------------

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<PAGE> 16

SCHEDULE I

TRADEMARKS

[To be supplied by Borrower]

-16-
<PAGE> 17

SCHEDULE II

[To be supplied by Borrower]

Address of
chief executive office:

Address of Office where
books and records are kept:

Addresses of locations of
collateral:

-17-

<PAGE> 1

EXHIBIT 23.1

CONSENT OF INDEPENDENT ACCOUNTANTS

We hereby consent to the use in the Prospectus constituting part of this
Registration Statement on Form S-2 of our report dated March 8, 1996 relating to
the financial statements of New West Eyeworks, Inc., which appears in such
Prospectus. We also consent to the application of such report to the Financial
Statement Schedules for the three years ended December 30, 1995 listed under
Item 14(a) of New West Eyeworks, Inc.'s Annual Report on Form 10-K for the year
ended December 30, 1995 when such schedules are read in conjunction with the
financial statements referred to in our report. The audits referred to in such
report also included these Financial Statement Schedules. We also consent to the
references to us under the headings "Experts" in such Prospectus.

PRICE WATERHOUSE LLP
Phoenix, Arizona
December 23, 1996