NEW WEST EYEWORKS INC, 424B1, 1997-02-12

NEW WEST EYEWORKS INC
424B1, 1997-02-12
RETAIL STORES, NEC

Previous: CONSO PRODUCTS CO, SC 13G/A, 1997-02-12

Next: CORPORATE INCOME FD INTERM TERM SER 51 DEFINED ASSET FDS, 485BPOS, 1997-02-12

<PAGE> 1
Filed Pursuant To Rule 424(b)(1)
Registration No. 333-18709

[New West Eyeworks Logo]
1,400,000 SHARES

COMMON STOCK

Of the 1,400,000 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 400,000 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 SmallCap Market ("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 February
10, 1997 was $6.25 per share. See "Price Range of Common Stock and Dividends."
Fahnestock & Co. Inc. (the "Representative") will act as the "independent
qualified underwriter" pursuant to Rule 2710(c)(8) of the Conduct Rules of the
National Association of Securities Dealers, Inc. See "Underwriting."

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

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.

<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------
PROCEEDS TO
PRICE TO UNDERWRITING PROCEEDS TO SELLING
PUBLIC DISCOUNT(1) COMPANY(2) STOCKHOLDERS
- ------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Per Share..................... $6.00 $0.42 $5.58 $5.58
- ------------------------------------------------------------------------------------------------------
Total (3)..................... $8,400,000 $588,000 $5,580,000 $2,232,000
- ------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------
<FN>
(1) Does not include additional compensation paid or payable to the
Underwriters. See "Underwriting" for information concerning compensation
paid and payable to the Representative, indemnification of the Underwriters
and other matters.

(2) Before deducting expenses payable by the Company estimated at $525,000,
including the Representative's non-accountable expense allowance of $75,000.

(3) The Company has granted to the Underwriters a 30-day option to purchase up
to 210,000 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 $9,660,000, $676,200, $6,751,800
and $2,232,000, respectively. The Company will not receive any proceeds from
the sale of shares by the Selling Stockholders. See "Principal and Selling
Stockholders" and "Underwriting."
</TABLE>

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

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
February 14, 1997.

FAHNESTOCK & CO. INC. MESIROW FINANCIAL, INC.

The date of this Prospectus is February 11, 1997.
<PAGE> 2

[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> 3

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> 4

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> 5

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 current
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 20 consecutive quarters of
positive comparable store sales growth, including an 8.8% increase in 1996
compared to 1995 and a 10.7% increase in its mall and strip-shopping center
locations over the same periods, and (2) the Company's increasing number of
repeat customers.

The Company's growth strategy has three 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 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 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

1
<PAGE> 6

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 1996, sales generated
under the Alexis Vision Plan were $11.4 million (or 26.1% of net sales), a
23.2% increase over 1995. 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.

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 efficient and timely
delivery of eyewear products and customer service, (2) has made substantial
investments in information systems, including a manufacturing and distribution
system and a fully integrated inventory control, merchandising, and general
ledger software system, which provide management with detailed retail sales,
manufacturing, financial 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.

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. 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 will, however, experience an operating loss in the
fourth quarter of 1996, as a result of seasonal factors, including severe winter
weather in the northwestern United States. 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.
------------------------

In 1988, New West, Inc., a Delaware corporation, was formed to acquire the
capital stock of Western States Optical, Inc., an Arizona corporation, from
MEDIQ Incorporated. In 1992, the name Western States Optical, Inc. was changed
to New West Eyeworks, Inc. In a parent-subsidiary merger in 1993, New West
Eyeworks, Inc. was merged with and into New West, Inc., and concurrently, New
West, Inc. changed its name to New West Eyeworks, Inc. 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> 7

THE OFFERING

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

Common Stock offered by the Selling
Stockholders...................... 400,000 shares

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

Use of Proceeds..................... To repay indebtedness, 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 SmallCap Market Symbol....... NEWI

Pacific Stock Exchange Symbol....... NWE
<FN>
- ---------------

(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 230,500
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."
</TABLE>

3
<PAGE> 8

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 $ 3,481
Working capital (deficit).................................................................. (4,924) 131
Total assets............................................................................... 12,920 16,275
Notes payable and capital lease obligations................................................ 2,368 668
Total stockholders' equity................................................................. 2,609 7,664
<FN>
- ---------------

(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 $6.00 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 February 10,
1997, as set forth in "Use of Proceeds."
</TABLE>

4
<PAGE> 9

RISK FACTORS

The Common Stock offered hereby involves a high degree of 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.

ACCUMULATED DEFICIT, NET WORKING CAPITAL 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. As of September 28, 1996, the Company had a net working capital
deficit of $4.9 million. 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 will incur an
operating loss in the fourth quarter of 1996, as a result of seasonal factors,
including severe winter weather in the northwestern United States. See
"Management's Discussion and Analysis of Financial Condition and Results of
Operations -- Recent Events" and "-- 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.

RISKS ASSOCIATED WITH EXPANSION

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. Insufficient capital resources may require the Company to delay,
scale back or eliminate its expansion activities. 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 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. 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 28, 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

5
<PAGE> 10

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. See "Business -- Expansion Strategy" and
"-- Relationship with Host Stores."

DEPENDENCE ON MANAGED CARE

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. The Company competes with some of its
largest and best financed competitors, including large optical store chains, for
managed care contracts. 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. See "Business -- Managed Care."

DEPENDENCE ON OPTOMETRISTS

An important element in the Company's expansion plans is the establishment
of relationships with optometrists for the Company's new stores. 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 -- Recent Events" and "-- Seasonality and Quarterly
Results."

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.
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."

EFFECT OF GOVERNMENT REGULATION

6
<PAGE> 11

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.

There can be no assurance 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.

LIMITATIONS ON UTILIZATION OF 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 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 classes, each of which serves 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 45.0% of the
outstanding Common Stock upon the closing of this offering (43.4% 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

7
<PAGE> 12

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; REGISTRATION RIGHTS; POTENTIAL ADVERSE IMPACT
ON MARKET PRICE

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 387,063 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 under the Securities Act of (1) 712,440 outstanding shares of
Common Stock, (2) 650,000 shares of Common Stock (subject to adjustment)
issuable upon conversion of the Convertible Preferred Stock, and (3) 106,563
shares of Common Stock (subject to adjustment) issuable upon the exercise of
outstanding warrants (collectively, 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.

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 SmallCap Market ("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 3.0 million. Trading volume in the four
weeks ended February 7, 1997 averaged 6,965 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."

8
<PAGE> 13

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 $4.68 per share or 78.0%.
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 $5.1 million (or
approximately $6.2 million if the Underwriters' over-allotment options are
exercised in full) at the public offering price of $6.00 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 ($1.7 million, including
accrued and unpaid interest) and to retire its bridge loan ($355,000, including
accrued and unpaid interest). The outstanding balance on the revolving line of
credit as of February 10, 1997, including accrued and unpaid interest, was $1.9
million. The bridge loan, the proceeds of which were used to fund the Company's
store expansion plans, matures on June 2, 1997 and bears interest at a rate
equal to the lending bank's prime rate plus 1.5% per annum, payable upon
maturity. The revolving line of credit is secured by guarantees from Mesirow
Capital Partners V and Mesirow Capital Partners VI, two of the Selling
Stockholders, and Ronald E. Weinberg, Chairman of the Board of the Company. The
bridge loan is secured by Mr. Weinberg's guarantee. Barry J. Feld, President and
Chief Executive Officer of the Company, agreed to share in the obligations of
the guarantors on both loans. See "Management's Discussion and Analysis of
Financial Condition and Results of Operations -- Recent Events" and "Certain
Transactions." The Company also expects to use approximately $3.0 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.

The following table sets forth the foregoing use of net proceeds:

<TABLE>
<CAPTION>
APPROXIMATE
APPROXIMATE PERCENTAGE OF
USE OF PROCEEDS AMOUNT NET PROCEEDS
--------------- ----------- -------------
<S> <C> <C>
New and remodeled stores................................... $ 3,000,000 59.4%
Repayment of revolving line of credit...................... 1,700,000 33.6
Repayment of bridge loan................................... 355,000 7.0
---------- ----
Total............................................ $ 5,055,000 100.0%
========== ====
</TABLE>

9
<PAGE> 14

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 the high and low closing price of the Company's Common Stock on
NASDAQ for each full fiscal quarter in 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.............................. 5 3/4 4 5 1/2 3 1/4 8 1/2 5 7/8
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 1/2 3 1/2 5 3
Fourth Quarter............................. 7 1/2 6 5 3 7/8 4 1/2 3 1/8
</TABLE>

The last sale price of the Company's Common Stock on February 10, 1997 as
reported on NASDAQ was $6.25 per share. As of January 15, 1997, there were
approximately 30 stockholders of record representing approximately 403
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 $6.00 per share and after
deduction of underwriting discounts and commissions and estimated offering
expenses (estimated at $945,000), the as adjusted net tangible book value of the
Company at September 28, 1996 would have been $7.1 million, or $1.32 per share.
This represents an immediate increase in net tangible book value of $0.85 per
share to existing stockholders and an immediate dilution of $4.68 per share to
new investors. The following table illustrates this dilution per share:

<TABLE>
<S> <C> <C>
Public offering price per share................ $6.00
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................ 0.85
------
As adjusted net tangible book value per share
after the offering........................... 1.32
-----
Dilution per share to new investors............ $4.68
=====
</TABLE>

10
<PAGE> 15

CAPITALIZATION

The following table presents as of September 28, 1996, (1) the actual
capitalization of the Company, and (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 $6.00 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 $ 433
------- -------
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 15,145

Accumulated deficit................................................ (12,989) (12,989)
------- -------
Total stockholders' equity................................. 2,609 7,664
------- -------
TOTAL CAPITALIZATION................................................. $ 4,977 $ 8,332
======= =======
</TABLE>

11
<PAGE> 16

SELECTED FINANCIAL AND OPERATING DATA

The selected financial data presented below under the captions "Statement
of Operations Data," "Income (Loss) Per Common and Common Equivalent Share" 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
<FN>
- ---------------
(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.
</TABLE>

12
<PAGE> 17

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

Unless otherwise stated, references in this Prospectus to the years 1996,
1995, 1994, and 1993 relate to the fiscal years ended December 28, 1996,
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 (including
frame and lenses) 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 20 consecutive quarters of positive comparable store
sales growth, including an 8.8% increase in 1996 compared to 1995 and a 10.7%
increase in its mall and strip-shopping center locations over the same periods,
and (2) the increasing number of repeat customers. Currently, the Company
operates 146 stores in 12 western and midwestern states.

In 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 1996, sales
generated by the Alexis Vision Plan were $11.4 million (or approximately 26.1%
of net sales), a 23.2% increase over 1995. 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 made substantial investments 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

13
<PAGE> 18

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.

RECENT EVENTS

In December 1996, to fund the Company's store expansion plans, the Company
entered into a bridge loan for $350,000 with The Second National Bank of Warren
(Ohio). The loan matures on June 2, 1997 and bears interest at a rate equal to
the lending bank's prime rate plus 1.5% per annum, payable upon maturity. The
loan is guaranteed by Ronald E. Weinberg, Chairman of the Board. The Company has
paid Mr. Weinberg $7,500 in exchange for his guaranty of the loan and has agreed
to consider further compensation if the Company fails to repay the loan upon its
maturity. Barry J. Feld, President and Chief Executive Officer of the Company,
agreed with Mr. Weinberg to share his guaranty obligations. The Company expects
to repay the loan in full with the proceeds of this offering. See "Use of
Proceeds." Norman C. Harbert, a director of the Company, is also a director of
Second Bancorp Inc., the parent holding company of The Second National Bank of
Warren (Ohio).

As of December 28, 1996, the Company was not in compliance with certain
financial covenants, including covenants with respect to the Company's tangible
net worth, capital ratio and working capital, contained in the revolving line of
credit agreement with U.S. Bank of Washington, National Association. The credit
agreement was amended effective January 14, 1997, and the Company believes that
it is now in compliance with all the 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 lender will grant them.

The Company's sales during December 1996 were significantly impacted by
severe winter weather in the northwestern United States. Approximately 81 of the
Company's 146 retail eyewear stores were either closed or severely impacted by
flooding and heavy snowfall in Washington, Oregon and Idaho. As a result of the
reduction in December revenues, the Company will incur a net loss in the fourth
quarter. The Company's comparable store sales increased 7.1% for the fourth
quarter of 1996, when compared with the corresponding prior-year period.

Based on preliminary unaudited results, net sales for 1996 increased 9.8%
to approximately $43.9 million, compared with $40.0 million for the previous
year. If sales from retail outlets closed during 1995 are excluded from these
results, the Company's revenues would have increased 12.6% (to $43.9 million
compared to $39.0 million). The Company's comparable store sales increased 8.8%
for 1996 when compared with the previous year, and 10.7% for its mall and
strip-shopping center locations over the same periods.

14
<PAGE> 19

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

15
<PAGE> 20

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 unprofitable Fred Meyer locations. To a lesser extent, the increased net
loss in 1995 was the result of the

16
<PAGE> 21

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 even 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 a 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 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.

17
<PAGE> 22

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 the working capital 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
to bring the Company in compliance with the covenant. See "-- Recent Events."

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. Certain retail store leases require
payment of base rent and property taxes, expenses for utilities, common area
maintenance, and insurance, plus, in many circumstances, additional rent based
on sales. Total rent expenses for the Company's retail space and its facility
near Portland, Oregon approximated $4.1 million, $5.0 million, and $5.0 million
for the periods ending September 28, 1996, December 30, 1995, and December 31,
1994, respectively, including $818,000, $889,000, and $930,000, respectively,
for additional rent based on sales. 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.

18
<PAGE> 23

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 then outstanding 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 $3.0 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.

19
<PAGE> 24

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 PER SHARE AND 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........ 141 147 148 150 151 144 145 139 141 145 146
<FN>
- ---------------

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

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.

20
<PAGE> 25

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 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 $3.0 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

21
<PAGE> 26

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. There can be no assurance that any definitive acquisition agreements
will be reached or, if entered into, that any acquisitions will be successful.
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 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.

22
<PAGE> 27

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. Historically, the
Company's merchandise return rate has not been significant. 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 area 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 HMOs 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.

23
<PAGE> 28

In 1996, sales generated under the Alexis Vision Plan were $11.4 million
(or 26.1% of net sales), a 23.2% increase over 1995. In 1996, the Company
continued to enter into new managed care 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 28, 1996:

<TABLE>
<CAPTION>
LOCATION NUMBER TYPE NUMBER
-------- ------ ---- ------
<S> <C> <C> <C>
Washington....................... 39 Regional Malls................... 74
Oregon........................... 31 Fred Meyer Host Stores........... 51
Arizona.......................... 28 Strip-Shopping Centers........... 21
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

24
<PAGE> 29

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 efficient and timely delivery of eyewear products and customer service.

The Company has made substantial investments in information systems,
including a manufacturing and distribution system and a fully integrated
inventory control, merchandising, and general ledger software system, which
provide management with detailed retail sales, manufacturing, financial 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
approximately every 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 on favorable payment terms. In addition, although the
Company has not customarily been able to take advantage of available 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. 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.

25
<PAGE> 30

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 underperforming 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 optometrists who are licensed to prescribe corrective
eyeglasses and contact lenses. 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 Company,
includes optometric examination and diagnostic equipment. The cost to fully
equip a store with such optical equipment is approximately $25,000.

26
<PAGE> 31

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." However, not all of the Company's sales associates
are opticians. 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. Opticians
are not licensed to prescribe corrective lenses.

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 62% between ages 25 and 44 to almost 95% at age 45 and
older. The number of Americans aged 45 and over is expected to increase from
85.8 million in 1995 to approximately 96.0 million in 2000. The aging population
is a major factor in the projected growth of U.S. retail optical sales from
$13.8 billion in 1995 to $18.0 billion in 2000.

27
<PAGE> 32

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 December 28, 1996, the Company employed 619 persons, 511 on a
full-time basis and 108 on a part-time basis. Approximately 438 of the Company's
employees work in retail sales or retail sales supervision, 95 in the Company's
optical laboratory and distribution facilities, eight in managed care and 78 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.

28
<PAGE> 33

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
<FN>
- ---------------

(1) Member of the Audit Committee

(2) Member of the Compensation Committee
</TABLE>

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"), which 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 Pearle 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 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.

29
<PAGE> 34

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 J. 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 eyecare organization,
from February 1994 to October 1995. Prior to that, 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., Gandalf Technologies,
Inc., Microleague Multimedia, Inc. and Lason 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. In January 1997, Mr.
Pollock became Executive Vice President and Chief Operating Officer of
HomePlace, Inc., a chain of home furnishings and housewares superstores. 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., 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, 1999. Mr. Weinberg's agreement provided for his employment as
Chairman of the Board at a base salary of $131,250 per year through 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

30
<PAGE> 35

Board of Directors of the Company. For 1995 and 1996, 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.

31
<PAGE> 36

PRINCIPAL AND SELLING STOCKHOLDERS

The following table sets forth, as of the date of this Prospectus, 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 outstanding, but not presently
exercisable. The information set forth in the table below includes (a) 132,300
shares of Common Stock issuable under presently exercisable options granted by
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, 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") and Mesirow Capital Partners IV ("Mesirow IV") will
sell 106,642, 123,501 and 169,857 shares of Common Stock in this offering,
respectively. Each of Mesirow II, III, IV and Mesirow Capital Partners V
("Mesirow V") and Mesirow Capital Partners VI ("Mesirow VI") (collectively, the
"Mesirow Group") are limited partnerships, the corporate general partners of
which are affiliates of Mesirow Financial. The corporate general partner of each
of Mesirow II, III, IV and VI is Mesirow Financial Services, Inc. and the
corporate general partner of Mesirow V is Mesirow Private Equity Investments,
Inc. 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. For additional information regarding the Mesirow Group and its
relationship with the Company, see "Risk Factors -- Shares Eligible for Future
Sale" and "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) 884,923 18.8% -- 884,923 15.5%

Mesirow Group
350 North Clark Street
Chicago, Illinois 60610(4) 1,636,687(5) 34.8% 400,000 1,236,687 21.7%

Barry J. Feld(6) 236,837 5.0% -- 236,837 4.2%

Donald M. Gleklen(7) 32,260 * -- 32,260 *

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) 27,690 * -- 27,690 *

All directors and executive
officers as a group
(12 individuals)(12) 1,330,124 28.3% -- 1,330,124 23.3%
<FN>
- ---------------

* 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; (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"), and (iii) 1,000 shares beneficially owned by
Mr. Weinberg's wife as to which shares Mr. Weinberg disclaims beneficial
ownership. 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
Convertible Preferred Stock.
</TABLE>

32
<PAGE> 37

(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) 59,523 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 are
held of record by Mesirow II, (ii) 198,220 shares are held of record by
Mesirow III, (iii) 169,857 shares are held of record by Mesirow IV, (iv)
333,386 shares are held of record by Mesirow V, and (v) 170,135 shares are
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; (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; and (iii) 200 shares of Common Stock held by Mr. Feld as custodian
for his children. Annette C. Feld, Vice President -- Marketing and
Merchandise of the Company, is the wife of Barry J. Feld. Also includes the
presently exercisable portion of options to purchase 27,000 shares of
Common Stock granted to Ms. Feld pursuant to the Option Plan, which options
are presently exercisable for 16,000 shares, as to which Mr. Feld disclaims
beneficial ownership.

(7) Includes (i) an option to purchase 10,000 shares of Common Stock granted to
Mr. Gleklen pursuant to the Option Plan; (ii) 7,857 shares of Common Stock
issuable upon the conversion of shares of Series A Convertible Preferred
Stock; and (iii)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; (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; and (iii) 800
shares held by Mr. Sutter as a custodian for his children.

(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 110,300 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, 5
and 6.

33
<PAGE> 38

CERTAIN TRANSACTIONS

In December 1996, the Company entered into a bridge loan for $350,000 with
the Second National Bank of Warren (Ohio). Mr. Weinberg guaranteed the loan and
received $7,500 in return for his guaranty. Mr. Harbert is a director of the
lender's parent corporation. See "Management's Discussion and Analysis of
Financial Condition and Results of Operations -- Recent Events."

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
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 Mesirow V, Mesirow VI, Mr. Weinberg and Mr. Feld to purchase 9,000,
13,500, 22,500 and 5,000 shares of the Company's common stock, respectively, 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 affiliated with each of the Selling Stockholders.
See "Underwriting." 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.

Mesirow Financial, Inc., which is participating in and serving as
co-manager of this offering, is affiliated with each of the Selling
Stockholders. See "Underwriting."

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. In addition, the Company will not grant options or
warrants to officers, directors, employees, 5% stockholders or affiliates of the
Company with an exercise price of less than 85% of the fair market value of the
Common Stock on the date of grant.

34
<PAGE> 39

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 the date of this Prospectus, (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. At its next annual meeting of
stockholders, 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

35
<PAGE> 40

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. If the Company issues
Preferred Stock with voting rights or Preferred Stock convertible into
securities with voting rights, the holders of Common Stock may experience
substantial dilution of their voting rights. 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.

36
<PAGE> 41

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. ................................................ 840,000
Mesirow Financial, Inc. .............................................. 560,000
---------
Total....................................................... 1,400,000
=========
</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 $0.25 per share.
The Underwriters may allow, and such dealers may reallow, a concession of not
more than $0.10 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 have agreed not to confirm sales
of Common Stock offered hereby to any account over which they exercise
discretionary authority without the prior written approval of the customer.

The Company has 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 210,000 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.

Under Rule 2710(c)(8) of the Conduct Rules of the National Association of
Securities Dealers, Inc. (the "NASD"), no NASD member may participate in a
public offering where more than 10% of the net offering proceeds, after
underwriting compensation, are intended to be paid to members participating in
the distribution of the offering or associated or affiliated persons of such
members, unless the public offering price is no higher than that recommended by
a "qualified independent underwriter," as defined in the NASD Conduct Rules.
Mesirow Financial, Inc., which is participating in and serving as a co-manager
of the offering, is an affiliate of the Company and each of the Selling
Stockholders under the NASD Conduct Rules, and the Selling Stockholders are
receiving more than 10% of the net proceeds of the offering. The offering will
be

37
<PAGE> 42

made in compliance with Rule 2720 of the NASD Conduct Rules and is being made
pursuant to Rule 2710(c)(8) and the Representative is assuming the
responsibilities of acting as a qualified independent underwriter in pricing the
offering and conducting due diligence. William P. Sutter, Jr., a director of the
Company, is an Executive Vice President or Vice President of the corporate
general partners of each of the members of the Mesirow Group, which corporate
general partners are affiliates of Mesirow Financial, Inc.

The Representative and certain of its affiliates currently hold warrants to
purchase up to 66,563 shares of Common Stock which were granted to Reich & Co.,
Inc. ("Reich") pursuant to a warrant agreement dated December 31, 1993 (the
"1993 Warrant Agreement") in connection with Reich's participation in the
Company's initial public offering in 1993. Reich is now a wholly-owned
subsidiary of the Representative. The Company and the Representative have
entered into an agreement to eliminate the antidilution provisions of the 1993
Warrant Agreement in consideration for a reduction in the exercise price of the
warrants from $8.75 to $8.00.

In connection with this offering, the Company has agreed to grant to the
Representative and certain of its affiliates warrants to purchase up to 66,563
shares of Common Stock concurrently with the closing of this offering (the
"Representative's Warrants"). The Representative's Warrants are exercisable
beginning on December 23, 1998, the termination date of the 1993 Warrant
Agreement, for a period of three years terminating on December 23, 2001,
provided, however, that the number of shares of Common Stock issuable upon the
exercise of the Representative's Warrants will equal the number of shares of
Common Stock that remain issuable and unexercised under the 1993 Warrant
Agreement upon its termination, and the initial exercise price under the
Representative's Warrants will equal the exercise price under the 1993 Warrant
Agreement upon its termination, which price is currently $8.00. The
Representative's Warrants are non-transferrable during the term, except to
affiliates of the Representative, and grant to the holder thereof certain
registration rights for the securities issuable upon the exercise thereof.

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.

38
<PAGE> 43

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> 44

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> 45

NEW WEST EYEWORKS, INC.

CONSOLIDATED BALANCE SHEET

(IN THOUSANDS, EXCEPT SHARE AMOUNTS)

<TABLE>
<CAPTION>
DECEMBER 31, DECEMBER 30, SEPTEMBER 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> 46

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> 47

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> 48

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> 49

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> 50

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> 51

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> 52

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> 53

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> 54

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> 55

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> 56

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> 57

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 certain financial covenants
contained in the line of credit agreement at June 29, 1996, September 28, 1996
and December 28, 1996. The credit agreement was amended effective October 24,
1996 and January 14, 1997, and the Company believes that it 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.

In December 1996, the Company entered into a bridge loan for $350,000 with
The Second National Bank of Warren (Ohio). The loan matures on June 2, 1997 and
bears interest at a rate equal to the lending bank's prime rate plus 1.5% per
annum, payable upon maturity. The loan is guaranteed by Ronald E. Weinberg,
Chairman of the Board. The Company has paid Mr. Weinberg $7,500 in exchange for
his guaranty of the loan and has agreed to consider further compensation if the
Company fails to repay the loan upon its maturity. Norman C. Harbert, a director
of the Company, is also a director of Second Bancorp Inc., the parent holding
company for The Second National Bank of Warren (Ohio).

F-15
<PAGE> 58

[VARIOUS PHOTOGRAPHS OF GLASSES AND STORE INTERIORS.]

[NEW WEST EYEWORKS LOGO.]
<PAGE> 59

===============================================================================

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................................ 21
Management.............................. 29
Principal and Selling Stockholders...... 32
Certain Transactions.................... 34
Description of Capital Stock............ 35
Underwriting............................ 37
Legal Matters........................... 38
Experts................................. 38
Index to Consolidated Financial
Statements............................ F-1
</TABLE>

===============================================================================

[New West Eyeworks Logo]

1,400,000 SHARES
COMMON STOCK

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

PROSPECTUS

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

FAHNESTOCK & CO. INC.

MESIROW FINANCIAL, INC.

FEBRUARY 11, 1997

===============================================================================