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NEW WEST EYEWORKS, INC.
2104 West Southern Avenue, Tempe, Arizona 85282
------------------
INFORMATION STATEMENT PURSUANT TO SECTION 14(f) OF THE
SECURITIES EXCHANGE ACT OF 1934 AND RULE 14f-1 THEREUNDER
This Information Statement (this "Information Statement") relates to the
Offer to Purchase for Cash all outstanding shares of common stock of the New
West Eyeworks, Inc. for $11.50 net per share by NW Acquisition Corp., a
wholly-owned subsidiary of National Vision Associates, Ltd., and the election of
certain persons to the Board of Directors of New West in connection with the
acquisition of New West through the Offer to Purchase. No action is required by
the stockholders of New West in connection with the election of the directors.
Nevertheless, we urge you to read this Information Statement carefully.
This Information Statement is being mailed on or about October 16, 1998 to
the holders of record at the close of business on October 15, 1998 pursuant to
the requirements of Section 14(f) of the Securities Exchange Act of 1934, as
amended (the "Exchange Act"), and Rule 14f-1 adopted thereunder. On October 15,
1998, there were 4,887,436 shares of New West's common stock, par value $0.01
per share (the "Common Stock"), outstanding. Each share is entitled to one vote.
NO VOTE OR OTHER ACTION OF NEW WEST'S STOCKHOLDERS IS REQUIRED IN
CONNECTION WITH THIS INFORMATION STATEMENT. WE ARE NOT ASKING FOR A PROXY AND
REQUEST THAT YOU NOT SEND US A PROXY.
THE OFFER
Pursuant to an Agreement and Plan of Merger, dated as of July 13, 1998, as
amended by the First Amendment to Agreement and Plan of Merger, dated as of
October 5, 1998 (the "Merger Agreement"), by and among National Vision
Associates, Ltd., a Georgia corporation ("National Vision"), NW Acquisition
Corp., a Delaware corporation (the "Purchaser") and wholly-owned subsidiary of
National Vision, and New West Eyeworks, Inc., a Delaware corporation ("New West"
or the "Company"), Purchaser has commenced a tender offer (the "Offer") to
purchase all outstanding shares of Common Stock for $11.50 net to the seller in
cash.
On July 14, 1998, New West and National Vision publicly announced signing
the Merger Agreement and the proposed tender offer. On July 20, 1998, National
Vision and the Purchaser filed a Tender Offer Statement on Schedule 14D-1 (as
amended, the "Tender Offer Statement") with the Securities and Exchange
Commission (the "SEC"). On the same day, New West filed a Tender Offer
Solicitation/Recommendation Statement on Schedule 14D-9 (as amended, the
"Recommendation Statement") with the SEC, which states, among other things, that
New West's Board of Directors unanimously recommended that stockholders tender
their shares pursuant to the
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Offer. On October 5, 1998, due to adverse developments in the financial markets,
the Merger Agreement was amended to reduce the offer price from $13.00 to $11.50
a share (the "Offer Price"). National Vision distributed to stockholders of New
West a Change of Offer Price and Third Extension of Expiration Date on October
15, 1998. Shortly thereafter New West distributed an amended Recommendation
Statement which states, among other things, that New West's Board of Directors
unanimously recommended that stockholders tender their shares pursuant to the
Offer at the reduced offer price.
The Purchaser's Offer is open to all holders of shares of Common Stock
through October 22, 1998. In connection with the execution of the Merger
Agreement, National Vision, the Purchaser, and certain New West stockholders
have entered into a stock tender agreement in which the stockholders have agreed
to tender their shares pursuant to the Offer. Shares held by these stockholders
constitute approximately 40.3% of the outstanding shares of Common Stock
assuming the conversion of all convertible preferred stock and the exercise of
all warrants.
The Purchaser's obligation to purchase the tendered shares is conditioned
upon there being validly tendered and not withdrawn prior to the expiration date
the number of shares that would represent at least 51% of the outstanding shares
of Common Stock as determined immediately prior to the consummation of the
Offer. The Offer is also subject to various customary conditions. The Merger
Agreement provides that the completion of the merger of the Purchaser into New
West (the "Merger") will take place no later than the second business day after
the satisfaction of conditions set forth in Article VII of the Merger Agreement.
Following the Merger, New West will continue as the surviving corporation and
will be a wholly-owned subsidiary of National Vision. If stockholder approval of
the Merger is required by law, a stockholders' meeting will be held before the
completion of the Merger.
This Information Statement does not include a full description of the
Offer, the Merger Agreement and related transactions. For additional
information, please see the Merger Agreement, filed by National Vision with the
SEC as an exhibit to the Tender Offer Statement, the Offer to Purchase
distributed to New West stockholders and filed as an exhibit to the Tender Offer
Statement, the Tender Offer Statement itself, including all amendments, and New
West's Recommendation Statement, including all amendments.
LEGAL PROCEEDINGS
No director, officer, affiliate or person known to the Company to be the
record or beneficial owner of in excess of 5% of the shares of Common Stock, or
any person known to the Company to be an associate of any of the foregoing, is a
party adverse to the Company or has a material interest adverse to the Company
in any material pending legal proceedings.
RIGHT TO DESIGNATE DIRECTORS
The Merger Agreement provides that, subject to compliance with Section
14(f) of the Exchange Act, at the effective time of the Merger, certain persons
who have been identified on a Schedule to the Merger Agreement will become the
directors and officers of New West until their successors are
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duly elected and qualified. The Merger Agreement also provides that, promptly
upon the acceptance for payment of and payment by the Purchaser for, any shares
of Common Stock pursuant to the Offer, the Purchaser will be entitled to
designate the number of directors to the Board of Directors of New West that
will give the Purchaser, subject to compliance with Section 14(f) of the
Exchange Act, representation on the Board of Directors equal to at least that
number of directors which is the product of (1) the total number of directors on
the Board of Directors who are elected by the holders of shares of Common Stock
pursuant to New West's Amended and Restated Certificate of Incorporation (giving
effect to the directors elected pursuant to this sentence) multiplied by (2) the
percentage that (a) the number of shares of Common Stock accepted for payment
and paid for by the Purchaser, plus the number of shares of Common Stock
otherwise owned by the Purchaser or any other subsidiary of National Vision,
bears to (b) the total number of shares of Common Stock outstanding, and New
West will, at that time, cause the Purchaser's designees to be appointed or
elected. However, the Merger Agreement also provides that, if the Purchaser's
designees are to be appointed or elected to New West's Board of Directors before
the effective time of the Merger, the Board of Directors of New West will have
at least three directors who were directors of New West on July 13, 1998 and who
are not officers of New West (the "Independent Directors"). In addition, if the
number of Independent Directors is reduced below three for any reason, any
remaining Independent Directors will be entitled to designate persons to fill
the vacancies, who will be deemed to be Independent Directors for purposes of
the Merger Agreement, or, if no Independent Directors remain, the other
directors will designate three persons who shall not be officers, stockholders
or affiliates of New West, National Vision or the Purchaser to fill the
vacancies, and such persons will be deemed to be Independent Directors for
purposes of the Merger Agreement. Subject to applicable law, New West has agreed
to take all action requested by National Vision necessary to effect this
appointment. In connection with the foregoing, the Merger Agreement provides
that New West will promptly, at the option of the Purchaser, either increase the
size of New West's Board of Directors or obtain the resignation of the number of
its current directors that is necessary to enable the Purchaser's designees to
be elected or appointed to New West's Board of Directors as provided above.
National Vision has informed New West that it will require New West to obtain
the necessary resignations.
National Vision has informed New West that, if stockholder approval of the
Merger is required by law, National Vision currently intends to exercise its
right to appoint designees to the Board of Directors of New West pursuant to the
Merger Agreement as described above as soon as possible after consummation of
the Offer. If stockholder approval of the Merger is not required by law because
Purchaser has acquired at least 90% of the outstanding shares of Common Stock or
for any other reason, National Vision intends to replace the entire Board of
Directors of New West with its designees upon completion of the Merger.
NATIONAL VISION'S BOARD DESIGNEES
The following table sets forth the name, present principal occupation or
employment, five-year employment history and certain other information
concerning the individuals whom National Vision
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has indicated that it currently intends to appoint as directors and executive
officers of New West. This information was provided to New West by National
Vision.
James W. Krause Age 53. To serve as Chairman of the Board
and Chief Executive Officer of New West.
President, Chief Executive Officer and
Director of National Vision since April 1994
and Chairman of the Board since June 1995.
President and General Manager of the
automotive and international divisions of
Sherwin-Williams Company, 1980 through April
1994.
Barry J. Feld Age 41. To serve as a Director and
President of New West. President and a
member of the Board of Directors of New West
since May 1991; Chief Executive Officer
since February 1994. President of
Frame-n-Lens Optical, Inc. from 1990 to
1991; Executive Vice President and Chief
Operating Officer from 1987 to 1990.
Angus C. Morrison Age 41. To serve as a Director and Vice
President, Chief Financial Officer and
Treasurer of New West. Vice President and
Corporate Controller of National Vision
since February 1995, and Senior Vice
President, Finance, and Treasurer of
National Vision since March 1998. Controller
and Senior Financial Officer of the Soap
Division of The Dial Corp., 1993 through
February 1995; Controller and Senior
Financial Officer of the Food Division of
The Dial Corp., 1989 through 1992.
Mitchell Goodman Age 44. To serve as a Director and Vice
President, General Counsel and Secretary of
New West. General Counsel and Secretary of
National Vision since September 1992; Vice
President since November 1993; became Senior
Vice President in 1998.
If, pursuant to its right to designate directors described above under
"Right to Designate Directors," National Vision elects to designate directors
after consummation of the Offer but before the Merger, the individuals listed
above will serve as directors of New West in addition to three Independent
Directors.
DIRECTORS AND EXECUTIVE OFFICERS OF THE COMPANY
The Company's current 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 directors will expire in 2000,
the Class II directors in 2001 and the Class III directors in 1999. The
Company's Bylaws provide that
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each executive officer will hold office until his or her successor is elected or
appointed and qualified, or until his or her death, resignation, or removal by
the Board of Directors. Certain information about the Company's current
directors and executive officers is set forth below.
<TABLE>
<CAPTION>
NAME AGE POSITION
- -------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Ronald E. Weinberg 57 Chairman of the Board, Treasurer and Director (Class III)
Barry J. Feld 41 President, Chief Executive Officer and Director (Class II)
James W. Swanson 51 Chief Operating Officer, Executive Vice President
Darius J. DiTallo 41 Chief Financial Officer and Vice President-- Finance and
Administration
Annette C. Feld 36 Vice President-- Marketing and Merchandising
Glenn K. Ozawa 40 Vice President-- Manufacturing
Tricia L. Wood 38 Vice President-- Real Estate and Construction
Byron S. Krantz 63 Secretary and Director (Class I)
Norman C. Harbert 65 Director (Class II)
Larry I. Pollock 51 Director (Class III)
Donald M. Gleklen 62 Director *
William P. Sutter, Jr. 41 Director *
</TABLE>
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* 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. In 1986, Mr. Weinberg led an
investor group in the acquisition of SunMedia Corporation, which publishes a
chain of weekly newspapers in the Cleveland market, and since then, Mr. Weinberg
has served as the Chairman of the Board of SunMedia Corporation. Since December
1997, Mr. Weinberg has been the Chairman of the Board and Chief Executive
Officer of Timestar Communications Corp., a direct mail business in Cleveland,
formerly owned by SunMedia Corporation. Since 1989, Mr. Weinberg has been
Treasurer and a Director of Hawk Corporation ("Hawk"), which manufactures
specialized components, principally made from powder metals, used in a wide
variety of aerospace, industrial and commercial applications. From 1989 to May
1998, Mr. Weinberg served as Vice Chairman of the Board of Hawk and in May 1998
became Chairman of the Executive Committee.
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., 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
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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.
James W. Swanson has served as Chief Operating Officer and Executive Vice
President since September 1997, and as Vice President -- Human Resources and
Optometric Relations since April 1992. He also served as Senior Vice President
between May 1996 and August 1997. 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 Chief
Financial Officer and Vice President -- Finance and Administration. Previously,
Mr. DiTallo held senior financial management positions including serving as
Chief Financial Officer with 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 held
senior financial management positions at the Arizona facility of Courtaulds
Performance Films, Inc., from 1990 to January 1993. Mr. DiTallo is a certified
public accountant.
Annette C. Feld has served as Vice President -- Marketing and Merchandising
since December 1992. Ms. Feld joined the Company in May 1991 as Director of
Marketing and Merchandising. Previously, she was the Director of Materials and
Marketing for Frame-n-lens Optical, Inc. from March 1988 to April 1991. Prior to
that, Ms. Feld was an associate buyer for Bullock's, a chain of department
stores, from 1985 to 1987 and an associate buyer for R.H. Macy & Co., from 1983
to 1985. Ms. Feld is the wife of Barry Feld.
Glenn K. Ozawa has served as Vice President -- Manufacturing since March
1995. Mr. Ozawa joined the Company in January 1992 as Director of Manufacturing.
Prior to that, he served as Manufacturing Manager for Frame-n-Lens, 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.
Tricia L. Wood has served as Vice President -- Real Estate and Construction
since September 1997. Ms. Wood served as the Director of Real Estate from
January 1996 to August 1997. Ms. Wood joined the Company in December 1989 as
Real Estate Manager.
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. Mr. Krantz has been a Director of Hawk since 1989.
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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.
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. In
October 1997, he became President, Chief Operating Officer and a Director, and
Chief Executive Officer in September 1998. HomePlace, Inc. and its affiliates
filed for reorganization under Chapter 11 in the United States Bankruptcy Court
in Wilmington, Delaware on January 5, 1998. 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.
Donald M. Gleklen has been a Director since August 1988. In September 1997,
Mr. Gleklen became President and Chief Executive Officer of The Maine Merchant
Bank. Since July 1996, Mr. Gleklen has been Chairman of the Board and Chief
Executive Officer of InteliHealth, a provider of health care information and
products to consumers. Since February 1995, Mr. Gleklen has been President of
Jocard Financial Services. 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.,
Lason Inc. and Home Health Corporation of America, and Chairman of the Board of
Trustees of the Pennsylvania College of Optometry.
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 Senior Managing
Director of Mesirow Private Equity Investments, Inc. and a Vice President of
Mesirow Financial Services, Inc.
MEETINGS AND COMMITTEES OF THE BOARD OF DIRECTORS
The Board of Directors met three times and acted by written consent twice
in 1997. During 1997, all members of the Board of Directors participated in at
least 80% of all Board and applicable Committee meetings.
The Audit Committee consists of Mr. Gleklen, Mr. Pollock and Mr. Weinberg.
The purpose of the Audit Committee is to review the Company's accounting and
reporting principles, policies and
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practices and the adequacy of the Company's internal, financial and operating
controls. The Audit Committee met once in 1997.
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 Board of Directors reviews and votes upon all
option grants recommended by the Compensation Committee. The Compensation
Committee met twice in 1997.
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. The Nominating Committee met once in 1997.
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 the director. The
Company also reimburses all directors for 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.
EXECUTIVE COMPENSATION AND RELATED INFORMATION
SUMMARY COMPENSATION TABLE
The following table summarizes the compensation paid by the Company to the
Company's President and Chief Executive Officer, the Chairman of the Board, and
the Executive Vice President and Chief Operating Officer, in the last three
years, the only executive officers who earned more than $100,000 annually in
total compensation at any time during that period (the "Named Executive
Officers").
<TABLE>
<CAPTION>
NUMBER OF
LONG-TERM
NAME AND COMPENSATION ALL OTHER
PRINCIPAL POSITION ANNUAL COMPENSATION OPTION AWARDS COMPENSATION*
- ----------------------------- --------------------------------------- --------------------- -----------------
FISCAL
YEAR SALARY BONUS
- ----------------------------- ---------- ------------- ---------- ---------------
<S> <C> <C> <C> <C> <C>
Ronald E. Weinberg 1997 $139,411 -- -- $ 2,010
Chairman of the Board 1996 124,687 -- -- 1,918
1995 124,687 -- -- 1,922
</TABLE>
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<TABLE>
<S> <C> <C> <C> <C> <C>
Barry J. Feld 1997 $189,423 $15,000 30,000 $ 2,822
President and 1996 175,000 -- -- 2,787
Chief Executive Officer 1995 175,000 -- -- 2,811
James W. Swanson 1997 $101,433 -- 25,000 $ 1,596
Executive Vice President 1996 90,154 $ 3,750 7,000 1,467
and Chief Operating Officer 1995 81,500 10,000 4,500 1,435
</TABLE>
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* These amounts were contributed by the Company to the Company's profit
sharing and 401(k) savings plan, as a matching contribution relating to
before-tax contributions made by each of the Named Executive Officers under
the plan. For a description of additional amounts paid to Mr. Weinberg and
his affiliates in connection with certain transactions, see "Certain
Relationships and Related Transactions."
OPTION GRANTS IN 1997 FISCAL YEAR
The following table summarizes information concerning options granted
during the Company's fiscal year ended December 27, 1997 to each of the Named
Executive Officers.
<TABLE>
<CAPTION>
POTENTIAL REALIZABLE
NUMBER OF VALUE AT ASSUMED
SHARES OF PERCENT OF ANNUAL RATES OF STOCK
COMMON TOTAL OPTIONS PRICE APPRECIATION
STOCK GRANTED TO EXERCISE FOR OPTION TERM
UNDERLYING EMPLOYEES IN PRICE PER -------------------------
NAME OPTIONS FISCAL 1997 SHARE EXPIRATION DATE 5% 10%
- --------------------- ----------- ------------- --------- ------------------- -- ------
<S> <C> <C> <C> <C> <C> <C>
Ronald E. Weinberg -- -- -- -- -- --
Barry J. Feld 30,000 19.1% $5.50 May 16, 2007 $ 103,950 $ 262,350
James W. Swanson 5,000 3.2% $6.00 February 11, 2007 $ 18,900 $ 47,700
20,000 12.7% $9.50 September 25, 2007 $ 119,700 $ 302,100
</TABLE>
OPTION VALUES AT 1997 FISCAL YEAR-END
The following table summarizes information with respect to the number of
unexercised options held by the Named Executive Officers as of December 27,
1997. Also reported are values of "in-the-money" options, that is, the amount by
which the exercise price of the option is exceeded by the last sale price of the
Common Stock on December 27, 1997. No Named Executive Officer exercised any
options in 1997.
<TABLE>
<CAPTION>
NUMBER OF SHARES VALUE OF UNEXERCISED
UNDERLYING UNEXERCISED IN-THE-MONEY OPTIONS
NAME OPTIONS AT DECEMBER 27, 1997 AT DECEMBER 27, 1997
- --------------------------------- ---------------------------------- ----------------------------------
EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- --------------------------------- ------------- ---------------- ------------- -----------------
<S> <C> <C> <C> <C>
Ronald E. Weinberg -- -- -- --
Barry J. Feld 30,000 -- $ 75,000 --
James W. Swanson 17,000 31,500 $ 22,000 $ 46,770
</TABLE>
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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. Under the agreements, the base salaries may be adjusted
annually by the Board of Directors of the Company. Mr. Weinberg agreed to forgo
a portion of his salary in 1995 and 1996.
The employment agreements also required the adoption of an annual bonus
plan. On May 6, 1997, the members of the Compensation Committee of the Board of
Directors adopted the 1997 incentive bonus plan, which provided that a bonus
would only be payable to Messrs. Feld and Weinberg if the Company's annual
pre-tax income exceeded $1.35 million. The bonus would then increase along with
an increase in the Company's annual pre-tax income according to a formula
adopted by the Compensation Committee. Because the Company did not reach the
pre-tax income target in 1997, no bonus was paid to either Mr. Feld or Mr.
Weinberg pursuant to the 1997 incentive bonus plan. Even though the annual
target was not met, the Board of Directors elected, on the recommendation of the
Compensation Committee, to pay Mr. Feld a bonus of $15,000 in 1997 for
outstanding performance in achieving certain short-term goals.
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 the
Company 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.
Effective June 1, 1998, the Company entered into a change of ownership
employment agreement with Mr. Swanson. The agreement provides for Mr. Swanson's
continued employment for a period of one year after there is a "change in
control" of the Company, as defined in the agreement. After a change in control
has occurred, if Mr. Swanson's employment is terminated by the Company without
cause, or Mr. Swanson resigns for cause, the Company will be obligated to
continue to pay Mr. Swanson's compensation for the remainder of his employment
period or six months, whichever is longer. The Company has entered into similar
agreements with Mr. DiTallo, Ms. Feld and Mr.
Ozawa.
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COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
The Compensation Committee of the Board of Directors is responsible for
reviewing and recommending changes to the Company's compensation policies and
programs applicable to the Company's executive officers. The Compensation
Committee also administers option grants under the Option Plan. The Compensation
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.
COMPENSATION COMPONENTS
The Company's executive compensation packages for fiscal 1997, which the
Compensation 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 Compensation 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 Compensation Committee approves option grants subject to
vesting periods to retain executives and encourage sustained contributions.
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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
Compensation Committee, other than Mr. Weinberg, through a process similar to
the policies and procedures discussed above for executive officers in general.
The Compensation 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.
The base salary levels established by the Compensation 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 1997, the bonuses were based on
attained levels of pre-tax income. No bonuses were paid in 1997 to either Mr.
Weinberg or Mr. Feld pursuant to the bonus plans because the Company did not
reach the pre-tax income target in 1997. Even though the annual target was not
met, the Compensation Committee recommended, and the Board of Directors
approved, a bonus of $15,000 for Mr. Feld in 1997 for outstanding performance in
achieving certain short term goals. 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 Senior 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.
12
<PAGE> 13
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 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.
<TABLE>
<CAPTION>
12/25/93 12/30/94 12/30/95 12/28/96 12/27/97
-------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
NEWI 100 48.95 62.45 97.89 109.71
S&P Retail 100 75.03 56.65 79.68 80.04
Russel 2000 100 101.04 129.79 149.74 178.33
</TABLE>
PRINCIPAL STOCKHOLDERS
The following table sets forth, as of September 1, 1998, 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 5% of
the Company's outstanding shares of capital stock, (2) each director, (3) the
Named Executive Officers, and (4) all directors and executive officers of the
Company as a group. The information contained in the table does not include
shares of Common Stock issuable under the Option Plan under options that are
outstanding, but not presently exercisable. The information contained in the
table does include (1) 163,000 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.
13
<PAGE> 14
<TABLE>
<CAPTION>
NAMES AND ADDRESS (1) BENEFICIAL OWNERSHIP (2)
- ------------------------------------------------- --------------------------------------------------
SHARES PERCENTAGE
--------------------- -------------------
<S> <C> <C>
Ronald E. Weinberg (3) 884,923 15.1%
Mesirow Group (4) 1,236,688 21.1%
Barry J. Feld (5) 266,937 4.6%
Donald M. Gleklen (6) 32,260 *
Norman C. Harbert (7) 37,519 *
Byron S. Krantz (8) 52,895 *
Larry I. Pollock (9) 11,700 *
William P. Sutter, Jr. (10) 27,690 *
James W. Swanson (11) 19,000 *
All directors and executive officers 1,365,224 23.3%
as a group (12 individuals) (12)
</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 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. The Mesirow Group's address is 350 North
Clark Street, Chicago, Illinois 60610. 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
a 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 shares held by the Mesirow Group.
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; (iii) 300 shares of Common Stock held by Mr. Feld as custodian
for his children; and (iv) an option to
14
<PAGE> 15
purchase 30,000 shares of Common Stock granted to Mr. Feld pursuant to the
Option Plan. Annette C. Feld, Vice President -- Marketing and Merchandise
of the Company, is Mr. Feld's wife. 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;
(iii) 1,000 shares held by Mr. Gleklen's wife as to which shares Mr.
Gleklen disclaims beneficial ownership; and (iv) 4,403 shares of Common
Stock held by an IRA.
(7) Includes (i)an option to purchase 10,000 shares of Common Stock granted to
Mr. Harbert pursuant to the Option Plan; (ii) 5,000 shares of Common Stock
held of record by Mr. Harbert's defined benefits plan; and (iii) 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 of Common Stock held by Mr.
Sutter as a custodian for his children.
(11) Includes options to purchase 17,000 shares of Common Stock granted to Mr.
Swanson pursuant to the Option Plan.
(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 145,000 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 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
above.
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 10% of the Common Stock, to
file with the 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 10% stockholders are required by SEC
regulation to furnish the Company with copies of all Section 16(a) forms they
file.
Tricia Wood, Vice President -- Real Estate and Construction of the
Company, inadvertently failed to file a required form on a timely basis upon her
appointment as an executive officer of the Company in October 1997. The required
form was subsequently filed. Based solely on its review of copies of reports
furnished to the Company or written representations that no reports were
required, the Company believes that all other Section 16(a) filing requirements
were met in 1997.
15
<PAGE> 16
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
In early 1997, the Company completed a 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. The Company received none of the
proceeds from the sale of Common Stock by the selling stockholders. 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 Barry J. Feld, President and Chief
Executive Officer of the Company, agreed with Mr. Weinberg to share his guaranty
obligations. The Company paid Mr. Weinberg and Mr. Feld a total of $7,500 in
exchange for their guaranty of the loan. 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 June 1996, the Company entered into a $2.0 million revolving line of
credit which was secured by guarantees from Mesirow V, Mesirow VI, and Mr.
Weinberg. Mr. Feld agreed to share in the obligations of the guarantors. In
exchange for the guarantee of the Company's obligations under its revolving line
of credit by such officers and shareholders, the Company issued warrants to them
to purchase, in the aggregate, 50,000 shares of Common Stock at a price of $6.11
per share, subject to customary anti-dilution adjustments. 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. The
revolving line of credit matured on May 31, 1997.
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.
Pursuant to a formula based on full-time equivalent personnel, the Company pays
approximately 28% of the overhead costs of the headquarters, including rent,
utilities and copying, telephone and other expenses. The aggregate amount of the
payments by the Company for the shared headquarters were approximately $137,000
in 1997, $109,000 in 1996 and $136,000 in 1995.
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 $280,000.
16
<PAGE> 17
Byron S. Krantz, a Director and the Secretary 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 paid legal fees to Kohrman Jackson & Krantz
P.L.L. in 1997 of $333,515 for services in connection with a variety of matters,
including the Offering.
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.
------------------
By Order of the Board of Directors,
/s/ BYRON S. KRANTZ
BYRON S. KRANTZ
Secretary
October 16, 1998
17
