<PAGE> 1
================================================================================
SCHEDULE 14A
(RULE 14a)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(a) OF THE SECURITIES
EXCHANGE ACT OF 1934
(AMENDMENT NO. )
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
<TABLE>
<S> <C>
[X] Preliminary Proxy Statement [ ] CONFIDENTIAL, FOR USE OF THE COMMISSION
ONLY (AS PERMITTED BY RULE 14a-6(e)(2))
[ ] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Section 240.14a-11(c) or Section 240.14a-12
</TABLE>
NEW WEST EYEWORKS, INC.
(NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
XXXXXXXXXXXXXXXX
(NAME OF PERSON(S) FILING PROXY STATEMENT, IF OTHER THAN THE REGISTRANT)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
(1) Title of each class of securities to which transaction applies: .......
(2) Aggregate number of securities to which transaction applies: ..........
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the
filing fee is calculated and state how it was determined): ............
(4) Proposed maximum aggregate value of transaction: ......................
(5) Total fee paid: .......................................................
[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid: ...............................................
(2) Form, Schedule or Registration Statement No.: .........................
(3) Filing Party: .........................................................
(4) Date Filed: ...........................................................
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<PAGE> 2
[NEW WEST EYEWORKS, INC. LOGO]
April , 1997
Dear Stockholder:
You are cordially invited to attend the 1997 Annual Meeting of Stockholders
of New West Eyeworks, Inc., on Friday, May 16, 1997, starting at 9:00 A.M. local
time at the offices of the Company.
As more fully described in the attached Notice of Annual Meeting and the
accompanying Proxy Statement, the principal business to be addressed at the
meeting is the election of a director, amendment of the Company's Restated
Certificate of Incorporation to increase the number of authorized shares of
common stock and ratification of the appointment of Price Waterhouse LLP as
independent accountants for the current year. In addition, the Company's
management team will report on the Company's results and will be available to
respond to stockholders' questions.
Your vote is important to the Company. Whether or not you plan to attend
the Annual Meeting, please return the enclosed Proxy as soon as possible to
ensure your representation at the meeting. You may choose to vote in person at
the Annual Meeting even if you have returned a Proxy.
On behalf of the Directors and management of New West Eyeworks, Inc., we
would like to thank you for your continued support and confidence in the Company
and look forward to seeing you at the meeting.
Sincerely,
/s/ Ronald E. Weinberg /s/ Barry J. Feld
Ronald E. Weinberg Barry J. Feld
Chairman of the Board President and Chief Executive Officer
<PAGE> 3
NEW WEST EYEWORKS, INC.
----------
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD MAY 16, 1997
TO THE STOCKHOLDERS OF NEW WEST EYEWORKS, INC.:
The Annual Meeting of the Stockholders of New West Eyeworks, Inc., a
Delaware corporation (the "Company"), will be held on May 16, 1997 at the
offices of the Company, 2104 West Southern Avenue, Tempe, Arizona 85282,
beginning at 9:00 A.M. local time for the following purposes:
1. To elect the Class I director to serve for a term of three years
(Proposal 1);
2. To amend the Company's Restated Certificate of Incorporation to
increase the number of shares of common stock authorized for issuance
to 25,000,000 shares from 5,000,000 shares (Proposal 2);
3. To ratify the appointment of Price Waterhouse LLP as independent
accountants for the Company for the fiscal year ending December 27,
1997 (Proposal 3); and
4. To transact such other business as may properly come before the
meeting or any adjournment thereof.
These items of business are more fully described in the Proxy Statement
accompanying this Notice.
Only stockholders of record at the close of business on March 24, 1997 are
entitled to vote at the Annual Meeting.
All stockholders are cordially invited to attend the meeting in person.
However, to insure your representation at the meeting, please sign and return
the enclosed Proxy as promptly as possible in the postage prepaid envelope
enclosed for your convenience. Any stockholder attending the meeting may vote in
person even if he or she has returned a Proxy.
By Order of the Board of Directors,
/s/ Byron S. Krantz
Byron S. Krantz
Secretary
<PAGE> 4
NEW WEST EYEWORKS, INC.
----------
PROXY STATEMENT
GENERAL INFORMATION
This Proxy Statement is furnished in connection with the solicitation of
proxies by the Board of Directors of New West Eyeworks, Inc. (the "Company") to
be used at the 1997 Annual Meeting of Stockholders of the Company to be held on
Friday, May 16, 1997, and any postponements or adjournments thereof (the "Annual
Meeting"). The Annual Meeting will be held at the offices of the Company, 2104
West Southern Avenue, Tempe, Arizona 85282, beginning at 9:00 A.M. local time.
As more fully described below, the principal business to be addressed at the
Annual Meeting is the election of a director, amendment of the Company's
Restated Certificate of Incorporation (the "Certificate of Incorporation") to
increase the number of authorized shares of the Company's common stock, $0.01
par value per share (the "Common Stock"), and the ratification of the
appointment of Price Waterhouse LLP as independent public accountants for the
Company's 1997 fiscal year.
The expense of soliciting proxies, including the cost of preparing,
printing and mailing the proxy materials, will be borne by the Company. In
addition to solicitation of proxies by mail, solicitation may be made personally
and by telephone, and the Company may pay persons holding shares for others
their expenses for sending proxy materials to their principals. No solicitation
will be made other than by directors, officers and employees of the Company.
Any person giving a proxy pursuant to this solicitation may revoke it at
any time before it is voted by delivering to the Secretary of the Company at its
principal office a written notice of revocation or a duly executed proxy bearing
a later date or by attending the Annual Meeting and voting in person. Attendance
at the Annual Meeting will not in and of itself revoke a proxy. Each validly
executed, unrevoked proxy received by the Board of Directors of the Company
pursuant to this solicitation will be voted at the Annual Meeting as specified
by the stockholder. If no choice is indicated, the proxy will be voted FOR the
election of the nominee and FOR the proposals set forth in the Notice.
This Proxy Statement and the accompanying Chairman and President's letter,
Notice and Proxy, together with the Company's annual report to stockholders for
the fiscal year ended December 28, 1996, are being sent to stockholders
beginning on or about April , 1997.
<PAGE> 5
VOTING AND QUORUM
Holders of record of shares of the Company's Common Stock at the close of
business on March 24, 1997 are entitled to vote at the Annual Meeting. On March
24, 1997, there were 4,868,436 shares of Common Stock outstanding. Each share is
entitled to one vote.
A majority of the issued and outstanding shares of Common Stock entitled to
vote constitutes a quorum at the Annual Meeting. Shares of Common Stock
represented in person or by proxy at the Annual Meeting, including abstentions
and "broker non-votes," will be tabulated by the inspectors of election
appointed for the Annual Meeting and will determine whether or not a quorum is
present. A broker non-vote occurs when a broker holding stock in "street name"
indicates on the proxy that it does not have discretionary authority to vote on
a particular matter.
The affirmative vote of the holders of a plurality of the shares of Common
Stock present in person or represented by proxy at the Annual Meeting is
required for the election of directors. Approval of the proposed amendment to
the Company's Certificate of Incorporation and the ratification of Price
Waterhouse LLP as the Company's independent accountants requires the affirmative
vote of the holders of a majority of the shares of Common Stock present in
person or represented by proxy at the Annual Meeting.
With respect to the election of directors, votes may be cast in favor or
withheld. Votes that are withheld will be excluded entirely from the vote and
will have no effect. Abstentions may be specified on all proposals (other than
the election of directors) and will be counted as shares that are present and
entitled to vote for a proposal, but will not be counted as votes in favor of
such proposal. Accordingly, an abstention from voting on a proposal by a
stockholder present in person or represented by proxy at the Annual Meeting will
have the same legal effect as a vote "against" the matter even though the
stockholder or interested parties analyzing the results of the voting may
interpret the abstention differently. Broker non-votes are not shares entitled
to vote, will not be counted in the total number of votes, and thus will have no
effect on the outcome of voting.
PROPOSAL NO. 1 -- ELECTION OF DIRECTORS
The directors elected by the holders of Common Stock are divided into three
classes serving staggered three year terms of office. The Company's Board of
Directors currently has seven members, one in Class I, two each in Classes II
and III, and two of whom are elected by the holders of the Company's convertible
6% cumulative preferred stock, par value $1,000 per share (the "Preferred
Stock"). The term of the Class I director expires at the 1997 Annual Meeting.
The term of the Class II and Class III directors will expire in 1998 and 1999,
respectively. The Board has nominated Bryon S. Krantz for re-election as a
director and recommends that the stockholders vote FOR Mr. Krantz.
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<PAGE> 6
The enclosed Proxy will be voted FOR Mr. Krantz unless the proxy holders
are otherwise instructed. If Mr. Krantz is unavailable or declines to serve as a
director for any reason, the proxy holders will vote the proxies for a
substitute nominee designated by the Board of Directors. The Board of Directors
does not expect that Mr. Krantz will be unavailable.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR MR. KRANTZ
Certain information about the nominee and the current directors with
unexpired terms is set forth below.
<TABLE>
<CAPTION>
Name Age Position Director Since
- ----------------------------------------------------------------------------------------------------------------
<S> <C> <C>
CLASS I -- TERM EXPIRING IN 2000
Byron S. Krantz 61 Secretary and Director 1988
CLASS II -- TERM EXPIRING IN 1998
Barry J. Feld 40 President, Chief Executive Officer and Director 1991
Norman C. Harbert 63 Director 1994
NOMINEES FOR CLASS III -- TERM EXPIRING IN 1999
Ronald E. Weinberg 55 Chairman of the Board, Treasurer and Director 1988
Larry I. Pollock 49 Director 1990
DIRECTORS ELECTED BY PREFERRED STOCKHOLDERS*
Donald M. Gleklen 60 Director 1988
William P. Sutter, Jr. 39 Director 1988
</TABLE>
- ------------------
* Under the terms of the Company's Preferred Stock, the holders of each of
Series A and Series B Preferred Stock have the right to elect one director
per Series as long as the applicable Series is outstanding. Donald M.
Gleklen and William P. Sutter, Jr. are the directors elected by the holders
of the Series A and Series B Preferred Stock, respectively. Messrs. Sutter
and Gleklen will hold office until their successors have been duly elected
by the holders of such Series of Preferred Stock and qualified.
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 Corporation, which publishes a chain of weekly
newspapers in the Cleveland and Milwaukee markets and operates a direct mail
business, and since then, Mr. Weinberg has served as the Chairman of the Board
of SunMedia Corporation. 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,
3
<PAGE> 7
Mr. Feld was President of Frame-n-Lens Optical, Inc., 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 ten 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.
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. Since 1988, Mr. Krantz has been a director of Hawk.
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 1988, 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 Home
Place, 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 a Managing Director
of Mesirow Private Equity Investments, Inc. and a Vice President of Mesirow
Financial Services, Inc.
4
<PAGE> 8
MEETINGS OF THE BOARD OF DIRECTORS AND COMMITTEES
The Board of Directors met three times in 1996. During 1996, all members of
the Board of Directors participated in at least 75% of all Board and applicable
Committee meetings.
The Audit Committee consists of Mr. Gleklen, Mr. Sutter and Mr. Weinberg.
The purpose of the Audit Committee is to review the accounting and reporting
principles, policies and practices followed by the Company and the adequacy of
the Company's internal, financial and operating controls. The Audit Committee
met once in 1996.
The Compensation Committee is composed of Mr. Krantz, Mr. Pollock, Mr.
Sutter and Mr. Weinberg, and its purpose is to review and make recommendations
regarding the compensation of executive officers of the Company and to
administer option grants under the Company's Amended and Restated Stock Option
Plan (the "Option Plan"). The Compensation Committee met once in 1996.
The Nominating Committee, which is composed of Mr. Krantz, Mr. Sutter and
Mr. Weinberg, is responsible for making recommendations to the Board of
Directors on candidates for election to the Board. The Nominating Committee
reviews nominees recommended to it by stockholders in writing and sent to the
Secretary of the Company. Such written recommendation must be delivered to the
Company in a timely fashion as described below in "Stockholder Proposals and
Director Nominations" and must set forth (1) as to each person whom the
stockholder proposes to nominate for election or re-election as a director, (a)
the name, age, business address and residence address of the person, (b) the
principal occupation or employment of the person, (c) the class and number of
shares of capital stock of the Company which are beneficially owned by the
person, and (d) any other information relating to the person that is required to
be disclosed in solicitations for proxies for election of directors pursuant to
Rule 14a under the Securities and Exchange Act of 1934, as amended (the
"Exchange Act"); and (2) as to the stockholder giving the notice, (a) the name
and record address of the stockholder, and (b) the class and number of shares of
capital stock of the Company which are beneficially owned by the stockholder.
The Company may require any proposed nominee to furnish such other information
as may reasonably be required by the Company to determine the eligibility of
such proposed nominee to serve as a director of the Company. The Nominating
Committee met once in 1996.
DIRECTOR COMPENSATION
The Company pays each director who is neither an employee of or legal
counsel to the Company nor affiliated with one of the Company's principal
stockholders a fee of $1,000 per board meeting attended by such director. The
Company also reimburses all directors for all expenses incurred in connection
with their services as directors. No additional consideration is paid to the
directors for committee participation. The Company's Option Plan also provides
for the automatic "formula" grant to each non-employee director of an option to
purchase 10,000 shares of Common Stock on the date of his or her initial
election to the Board of Directors.
5
<PAGE> 9
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Exchange Act requires the Company's directors and
executive officers, and persons who own more than ten percent of the Company's
Common Stock, to file with the Securities and Exchange Commission ("SEC"), the
Nasdaq System and The Pacific Stock Exchange initial reports of ownership and
reports of changes in ownership of the Common Stock. Officers, directors and
greater than ten percent stockholders are required by SEC regulation to furnish
the Company with copies of all Section 16(a) forms they file. Based solely on
its review of copies of these reports furnished to the Company or written
representation that no reports were required, the Company believes that all
Section 16(a) filing requirements were met in 1996.
PROPOSAL NO. 2 -- AMENDMENT OF
THE COMPANY'S CERTIFICATE OF INCORPORATION
On January 17, 1997, the Board of Directors authorized an amendment to the
Company's Certificate of Incorporation to increase the number of authorized
shares of Common Stock from 5,000,000 to 25,000,000. The stockholders are being
asked to approve this proposed amendment. As of March 24, 1997, 4,868,436 shares
of Common Stock were issued and outstanding and 938,863 shares were issuable
upon conversion of the Company's Preferred Stock and the exercise of the
presently exercisable portion of outstanding options and warrants.
The Board of Directors believes that the proposed increase is desirable to
accommodate the exercise of outstanding warrants and options. In addition, the
proposed amendment will provide the Company with more flexibility to issue
shares of Common Stock without the expense and delay of a special stockholders'
meeting in connection with possible future stock dividends or stock splits,
equity financings, future opportunities for expanding the business through
investments or acquisitions, management incentive and employee benefit plans and
for other general corporate purposes.
The increase in authorized Common Stock will not have any immediate effect
on the rights of existing stockholders. However, authorized but unissued shares
of the Company's Common Stock may be issued at such times, for such purposes and
for such consideration as the Board of Directors may determine to be appropriate
without further authority from the Company's stockholders, except as otherwise
required by applicable law or stock exchange regulations. To the extent that the
additional authorized shares are issued in the future, they will decrease the
existing stockholders' percentage equity ownership and, depending upon the price
at which they are issued, could be dilutive to the existing stockholders. The
holders of Common Stock have no preemptive rights.
The increase in the authorized number of shares of Common Stock and the
subsequent issuance of such shares could have the effect of delaying or
preventing a change in control of the Company. Shares of authorized and unissued
Common Stock could (within the limits imposed by applicable law) be issued in
one or more transactions which would make a change in control
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<PAGE> 10
of the Company more difficult, and therefore less likely. Any issuance of
additional stock would have the effect of diluting the earnings per share and
book value per share of outstanding shares of Common Stock, and such additional
shares could be used to dilute the stock ownership or voting rights of a person
seeking to obtain control of the Company. The Company has previously adopted
certain measures that may have the effect of helping the Board of Directors
resist an unsolicited takeover attempt.
VOTE REQUIRED
Approval of the amendment of the Certificate of Incorporation requires the
affirmative vote of the holders of a majority of the shares of Common Stock
present in person or represented by proxy at the Annual Meeting. The enclosed
Proxy will be noted FOR the amendment of the Certificate of Incorporation unless
the proxy holders are otherwise instructed.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE
FOR THE AMENDMENT TO THE CERTIFICATE OF INCORPORATION
PROPOSAL NO. 3 -- APPROVAL OF INDEPENDENT ACCOUNTANTS
The Board of Directors of the Company has selected Price Waterhouse LLP as
independent accountants to examine the consolidated financial statements of the
Company for the fiscal year ending December 27, 1997. Although the Bylaws of the
Company do not require the selection of independent accountants to be submitted
to stockholders for approval, this selection is being presented to stockholders
for ratification or rejection at the Annual Meeting. The Board of Directors
recommends that the stockholders vote FOR the ratification of such selection.
Price Waterhouse LLP has been the independent accountant of the Company since
1987, and is considered by the Board of Directors to be well qualified. A
representative of Price Waterhouse LLP is expected to be present at the Annual
Meeting, and will have an opportunity to make a statement if he so desires and
will be available to respond to appropriate questions.
For ratification, this proposal will require the affirmative vote of the
holders of a majority of the shares of Common Stock represented at the meeting
in person or by proxy. If the resolution is rejected, or if Price Waterhouse LLP
declines to act or becomes incapable of action, or if its employment is
discontinued, the Board will appoint other independent accountants whose
continued employment after the following Annual Meeting of Stockholders will be
subject to ratification by stockholders.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE APPOINTMENT OF PRICE WATERHOUSE
LLP
7
<PAGE> 11
EXECUTIVE COMPENSATION AND OTHER INFORMATION
SUMMARY COMPENSATION TABLE
The following table summarizes the compensation paid by the Company to the
Company's President and Chief Executive Officer and the Company's Chairman of
the Board in the last three years, the only executive officers who earned more
than $100,000 annually in total compensation during that period.
<TABLE>
<CAPTION>
Annual Compensation
------------------------------------------------
Fiscal All Other
Name and Principal Position Year Salary Bonus Compensation
- -------------------------------------- -------------- ---------------- ---------- -------------------
<S> <C> <C> <C> <C>
Ronald E. Weinberg 1996 $124,687 -- $2,256 (1)
Chairman of the Board 1995 124,687 -- 2,316 (1)
1994 129,704 -- 2,523 (1)
Barry J. Feld 1996 $175,000 -- $3,147 (2)
President and 1995 175,000 -- 3,219 (2)
Chief Executive Officer 1994 175,000 -- 3,356 (2)
</TABLE>
- ------------------
(1) Of the amounts listed, $1,918, $1,922 and $2,097 were contributed by
the Company in 1996, 1995, and 1994, respectively, to the Company's
profit sharing and 401(k) savings plan, as a matching contribution
relating to before-tax contributions made by Mr. Weinberg under such
plan, and $338, $394, and $426 were paid by the Company as premium
payments on a term life insurance policy in 1996, 1995, and 1994,
respectively, the proceeds of which are payable to Mr. Weinberg's named
beneficiary. For a description of additional amounts paid to Mr.
Weinberg and his affiliates in connection with certain transactions,
see "Certain Relationships and Related Transactions."
(2) Of the amounts listed, $2,787, $2,811, and $2,924 were contributed by
the Company in 1996, 1995, and 1994, respectively, to the Company's
profit sharing and 401(k) savings plan, as a matching contribution
relating to before-tax contributions made by Mr. Feld under such plan,
and $360, $408 and $432 were paid by the Company as premium payments on
a term life insurance policy in 1996, 1995, and 1994, respectively, the
proceeds of which are payable to Mr. Feld's named beneficiary.
LONG-TERM INCENTIVE AND PENSION PLANS
The Company does not have any long-term incentive, pension or similar
plans, other than the Company's profit sharing and 401(k) savings plan.
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 Board of Directors of the Company.
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<PAGE> 12
For 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 February 16, 1996, the members of the
Compensation Committee of the Board of Directors adopted the 1996 incentive
bonus plan, which plan provided that a bonus would only be payable to Messrs.
Feld and Weinberg if the Company's pre-tax income exceeded $1.0 million. The
bonus would then increase along with an increase in the Company's pre-tax income
according to a formula adopted by the Compensation Committee. Because the
Company did not reach the pre-tax income target in 1996, no bonus was paid to
either Mr. Feld or Mr. Weinberg.
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.
COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
The Compensation Committee of the Board of Directors (the "Committee") is
responsible for reviewing and recommending changes to the Company's compensation
policies and programs applicable to the Company's executive officers. The
Committee also administers option grants under the Option Plan. The Committee is
composed of three non-employee directors and the Company's Chairman of the
Board.
COMPENSATION PHILOSOPHY AND OBJECTIVES
The Company's compensation philosophy is to provide a total compensation
program that will attract, retain and motivate the high caliber executives
required for the success of the business. The Company achieves these objectives
by compensating its executive officers primarily through a combination of three
components: a base salary, an annual bonus plan, and long-term incentive
opportunities in the form of stock options.
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<PAGE> 13
COMPENSATION COMPONENTS
The Company's executive compensation packages for fiscal 1996, which the
Committee reviewed, were designed to attract and retain the management team
responsible for the Company's success, with ties to business objectives and
outstanding performance. The Committee assesses the past performance and the
anticipated future contribution, and considers the total compensation (actually
earned and potentially available), of each executive officer in establishing
each element of compensation.
Salary
The Company annually reviews each officer's salary, taking into account job
performance for the prior year as viewed subjectively by the person to whom the
individual reports, internal pay equity considerations and level of
responsibilities. Increases in base salaries are also influenced by the
performance of the Company and the individual in achieving goals and objectives
established by the Company.
Bonus
The Company uses annual bonuses to motivate its executive officers and
reward individuals for their initiative and outstanding performance. Bonuses are
contingent upon the Company's performance measured against pre-established
financial and other business goals and upon individual performance measured
against established revenue, profitability and other objectives, all of which
are based upon the individual's area of responsibility.
Stock Options
Stock option awards are designed to provide management with a direct
financial incentive to enhance stockholder values, thereby aligning the
interests of the Company's executives with the long-term interest of its
stockholders. The Committee approves option grants subject to vesting periods to
retain executives and encourage sustained contributions.
CHIEF EXECUTIVE OFFICERS' COMPENSATION
The compensation for Mr. Weinberg, Chairman of the Board, and Mr. Feld,
Chief Executive Officer and President, is determined by the members of the
Committee, other than Mr. Weinberg, through a process similar to the policies
and procedures discussed above for executive officers in general.
The Committee's approach in setting Mr. Feld's compensation is to provide
compensation stability in the form of the base salary element of his
compensation package. Mr. Weinberg's compensation takes into account his overall
level of experience and contribution to the Company, as well as his devotion of
less than 100% of his time to the management of the Company. Both executives
participate in a bonus plan providing them with an incentive to lead the Company
toward clearly defined performance goals.
10
<PAGE> 14
The base salary levels established by the Committee reflect the continued
year-to-year growth of revenues and operating cash flow, the attainment of same
store year-to-year sales gains above industry averages, the continuation of the
Company's new store opening program and the achievement of other specified
strategic objectives of the business.
The bonus plans for Messrs. Weinberg and Feld are keyed to specifically
budgeted operating results for the year. For 1996, the bonuses were based on
attained levels of pre-tax income. No bonuses were paid in 1996 to either Mr.
Weinberg or Mr. Feld because the Company did not reach the pre-tax income target
in 1996. See "Executive Compensation and Other Information -- Employment
Agreements."
COMPENSATION COMMITTEE
BYRON S. KRANTZ
LARRY I. POLLOCK
WILLIAM P. SUTTER, JR.
RONALD E. WEINBERG
COMPENSATION COMMITTEE INTERLOCKS AND
INSIDER PARTICIPATION IN COMPENSATION DECISIONS
Byron S. Krantz serves as Secretary of the Company without compensation and
is a partner in the law firm of Kohrman Jackson & Krantz P.L.L., which provides
legal services to the Company. William P. Sutter, Jr. is a Managing Director of
Mesirow Private Equity Investments, Inc. and a Vice President of Mesirow
Financial Services, Inc., both of which are corporate general partners of
partnerships that are stockholders of the Company. Ronald E. Weinberg serves as
Chairman of the Board of the Company and is President and sole shareholder of
Weinberg Capital Corporation, which provides certain management services to the
Company.
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<PAGE> 15
PERFORMANCE GRAPH
The following graph compares the cumulative total return on the Company's
Common Stock with the cumulative total return of the companies in the Russell
2000 Index and the S&P Specialty Retail Index. Cumulative total return for each
of the periods shown in the Performance Graph is calculated from the last sale
price of the Company's Common Stock at the end of the period and assumes an
initial investment of $100 on December 25, 1993, the last day of the Company's
1993 fiscal year, and the reinvestment of any dividends.
[GRAPHIC]
<TABLE>
<CAPTION>
12/25/93 06/24/94 12/30/94 07/01/95 12/30/95 06/29/96 12/28/96
- -------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
NEWI 100 71 76 74 62 81 96
S&P Retail 100 93 97 94 94 115 113
Russell 2000 100 96 101 116 130 143 150
- -------------------------------------------------------------------------------------------------------------------
</TABLE>
12
<PAGE> 16
PRINCIPAL STOCKHOLDERS
The following table sets forth, as of March 24, 1997, information regarding
the beneficial ownership of the Company's capital stock, by (1) 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 Option Plan under options that are
outstanding, but not presently exercisable. The information set forth in the
table below includes (1) 132,300 shares of Common Stock issuable under presently
exercisable options granted by the Company pursuant to the Option Plan, (2)
156,563 shares of Common Stock issuable upon the exercise of warrants that are
presently exercisable, and (3) 650,000 shares of Common Stock issuable upon
conversion of the Preferred Stock.
<TABLE>
<CAPTION>
Beneficial Ownership (2)
--------------------------------------------------
Names and Address (1) Shares Percentage
- ------------------------------------------------- --------------------- -------------------
<S> <C> <C>
Ronald E. Weinberg (3) 884,923 15.2%
Mesirow Group
350 North Clark Street
Chicago, Illinois 60610 (4) 1,236,688 21.3%
Barry J. Feld (5) 236,837 4.1%
Donald M. Gleklen (6) 32,260 *
Norman C. Harbert (7) 30,819 *
Byron S. Krantz (8) 52,895 *
Larry I. Pollock (9) 11,700 *
William P. Sutter, Jr. (10) 27,690 *
All directors and executive officers 1,330,124 *
as a group (12 individuals) (11)
</TABLE>
- ------------------
* Less than 1%
(1) Unless otherwise indicated, the address of each of the beneficial owners
identified is c/o New West Eyeworks, Inc., 2104 West Southern Avenue,
Tempe, Arizona 85282.
(2) Unless otherwise indicated, the Company believes that all persons named in
the table have sole investment and voting power over the shares of capital
stock owned.
(3) Includes (i) a warrant to purchase 22,500 shares of Common Stock; (ii)
6,805 shares of Common Stock and 15,714 shares of Common Stock issuable
upon the conversion of shares of Series A 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
13
<PAGE> 17
directors of the Company. Flag holds of record 30,623 shares of Common
Stock and 594 shares of Series A Preferred Stock presently convertible into
70,714 shares of Common Stock.
(4) Each of Mesirow Capital Partners II ("Mesirow II"), Mesirow Capital
Partners III ("Mesirow III"), Mesirow Capital Partners IV ("Mesirow IV"),
Mesirow Capital Partners V ("Mesirow V") and Mesirow Capital Partners VI
("Mesirow VI") (collectively, the "Mesirow Group") is a limited
partnership, the corporate general partners of which are affiliates of
Mesirow Financial Holdings, Inc. William P. Sutter, Jr. is an officer of
each of the corporate general partners of the Mesirow Group and a director
of the Company. 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 Preferred Stock held of record by
Mesirow VI; (iii) 178,572 shares of Common Stock issuable upon the
conversion of Series B Preferred Stock of which (a) 59,524 shares are held
of record by Mesirow II, (b) 41,667 shares are held 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, and (iv) 642,759 shares of Common Stock, of
which (a) 64,519 shares are held of record by Mesirow II, (b) 74,719 shares
are held of record by Mesirow III, (c) 333,386 shares are held of record by
Mesirow V, and (d) 170,135 shares are held by Mesirow VI. Mr. Sutter
disclaims beneficial ownership of such shares. Does not include shares
beneficially owned by Mr. Sutter.
(5) 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 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.
(6) 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 Preferred Stock; and
(iii) 1,000 shares held by Mr. Gleklen's wife as to which shares Mr.
Gleklen disclaims beneficial ownership.
(7) 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 shares of Series A Preferred Stock held of record by
Flag.
(8) 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 Preferred Stock held of record by Flag.
(9) Includes an option to purchase 10,000 shares of Common Stock granted to Mr.
Pollock pursuant to the Option Plan.
(10) 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 Preferred Stock held of record by Flag; and (iii) 800 shares held
by Mr. Sutter as a custodian for his children.
(11) 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
Preferred Stock held by Mr. Gleklen, and (iv) 30,623 shares of Common Stock
14
<PAGE> 18
and 70,714 shares of Common Stock issuable upon the conversion of shares of
Series A Preferred Stock held of record by Flag. Does not include shares
beneficially owned by the Mesirow Group. See footnote 4.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
In early 1997, the Company completed a secondary public offering of
1,505,400 shares of its Common Stock at an offering price of $6.00 per share
(the "Offering"). Mesirow II, Mesirow III and Mesirow IV sold 106,642, 123,501
and 169,857 shares of Common Stock in the Offering, respectively. Mesirow
Financial, Inc. participated in and served as co-manager of the Offering and is
affiliated with the members of the Mesirow Group. William P. Sutter, Jr. is a
director of the Company and an officer of each of the corporate general partners
of the Mesirow Group, which corporate general partners are affiliates of Mesirow
Financial, Inc.
In December 1996, the Company entered into a bridge loan for $350,000 with
The Second National Bank of Warren (Ohio). Ronald E. Weinberg, Chairman of the
Board of the Company, guaranteed the loan and received $7,500 in return for his
guaranty. Barry J. Feld, President and Chief Executive Officer of the Company,
agreed with Mr. Weinberg to share his guaranty obligations. Norman C. Harbert is
a director of the Company and Second Bancorp, Inc., the parent holding company
of The Second National Bank of Warren (Ohio). In February 1997 the Company
repaid the bridge loan with a portion of proceeds from the Offering.
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. The bridge loans were retired with the proceeds of a
$2.0 million 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. In
February 1997 the Company reduced the amount outstanding on the revolving line
of credit by approximately $1.9 million with a portion of the proceeds from the
Offering. There is presently no outstanding balance on the revolving line of
credit. 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.
15
<PAGE> 19
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) 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 $109,000 in 1996, $136,000 in 1995 and $140,000 in 1994.
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 the members of the Mesirow Group.
The original insurance agreement was for a period of one year and has since been
renewed. Under the terms of the insurance agreement, the annual aggregate
premiums paid by the Company are approximately $200,000.
Byron S. Krantz, a director of the Company, is a partner of the law firm of
Kohrman Jackson & Krantz P.L.L., which provides legal services to the Company.
The Company believes that the terms of the transactions and the agreements
described above are on terms at least as favorable as those which it could
otherwise have obtained from unrelated parties. On-going and future transactions
with related parties will be (1) on terms at least as favorable as those that
the Company would be able to obtain from unrelated parties, (2) for bona fide
business purposes, and (3) approved by a majority of the disinterested and
non-employee directors.
STOCKHOLDER PROPOSALS AND DIRECTOR NOMINATIONS
A stockholder intending to present a proposal to be included in the
Company's Proxy Statement for the Company's 1998 Annual Meeting of Stockholders
must deliver a proposal, in accordance with the requirements of the Company's
Bylaws, to the Secretary of the Company at the Company's principal executive
office no earlier than February 14, 1998 and no later than March 16, 1998.
Stockholders desiring to nominate a director for election at the Company's 1998
Annual Meeting of Stockholders must deliver a notice, in accordance with the
requirements of the Company's Bylaws, to the Secretary of the Company at the
Company's principal executive office no earlier than February 14, 1998 and no
later than March 6, 1998.
OTHER MATTERS
The Board of Directors of the Company is not aware of any other matters to
be submitted to the Annual Meeting. If any other matters properly come before
the Annual Meeting, it is the
16
<PAGE> 20
intention of the persons named in the accompanying Proxy to vote the shares they
represent as the Board of Directors may recommend.
You are urged to sign and return your Proxy promptly to make certain your
shares will be voted at the Annual Meeting. For your convenience, a return
envelope is enclosed requiring no additional postage if mailed in the United
States.
By Order of the Board of Directors,
/s/ Byron S. Krantz
BYRON S. KRANTZ
Secretary
April , 1997
17
<PAGE> 21
PROXY NEW WEST EYEWORKS, INC. PROXY
ANNUAL MEETING OF STOCKHOLDERS, MAY 16, 1997
2104 WEST SOUTHERN AVENUE, TEMPE, ARIZONA 85282
9:00 A.M. LOCAL TIME
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned hereby appoints Ronald E. Weinberg and Byron S. Krantz, or
either one of them acting singly with full power of substitution, the proxy or
proxies of the undersigned to attend the Annual Meeting of the Stockholders of
New West Eyeworks, Inc. to be held on May 16, 1997, at its offices, 2104 West
Southern Avenue, Tempe, Arizona, 85282, beginning at 9:00 a.m. local time, and
any adjournments, and to vote all shares of stock that the undersigned would be
entitled to vote if personally present in the manner indicated below and on the
reverse side, and on any other matter properly brought before the Meeting or any
adjournments thereof, all as set forth in the April , 1997 Proxy Statement.
The undersigned hereby acknowledges receipt of the Notice of Annual Meeting,
Proxy Statement and Annual Report of New West Eyeworks, Inc.
PLEASE MARK YOUR CHOICE LIKE THIS [X] IN BLUE OR BLACK INK.
THE BOARD OF DIRECTORS RECOMMENDS THAT YOU VOTE FOR "FOR NOMINEE" and FOR
PROPOSALS 2 AND 3.
1. Election of Byron S. Krantz as a director.
FOR NOMINEE [ ] WITHHOLD FROM THE NOMINEE [ ]
THIS PROXY IS CONTINUED ON THE REVERSE SIDE. PLEASE DATE, SIGN AND RETURN
PROMPTLY.
2. Amendment of the Certificate of Incorporation.
FOR [ ] AGAINST [ ] ABSTAIN [ ]
3. Ratification of appointment of independent accountants.
FOR [ ] AGAINST [ ] ABSTAIN [ ]
(Signature should be exactly
as name or names appear on
this proxy. If stock is held
jointly each holder should
sign. If signature is by
attorney, executor,
administrator, trustee or
guardian, please give full
title.)
Dated: , 1997
------------------------------
------------------------------
Signature
------------------------------
Signature if held jointly
I plan to attend the meeting: Yes [ ] No [ ]
THIS PROXY WILL BE VOTED FOR THE NOMINEE AND THE ABOVE MATTERS UNLESS OTHERWISE
INDICATED AND IN THE DISCRETION OF THE PROXIES ON ALL OTHER MATTERS PROPERLY
BROUGHT BEFORE THE MEETING.
