<PAGE> 1
SCHEDULE 14A
(Rule 14a-101)
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:
[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 Rule 14a-11(c) or Rule 14a-12
OLYMPIC CASCADE FINANCIAL CORPORATION
- --------------------------------------------------------------------------------
(Name of Registrant as Specified in Charter)
Payment of Filing Fee (Check the appropriate box):
[ ] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(1) 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.:
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(3) Filing Party:
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(4) Date Filed:
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<PAGE> 2
OLYMPIC CASCADE FINANCIAL CORPORATION
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD SATURDAY, JUNE , 1997 AT 10:00 A.M.
To the Shareholders:
The Annual Meeting of Shareholders of Olympic Cascade Financial Corporation
(the "Company") will be held on June , 1997 at 10:00 a.m. at the Company's
facilities at 875 North Michigan Avenue, Suite 1560, Chicago, Illinois 60611 for
the following purposes:
1. To elect directors for the ensuing year;
2. To consider and act upon a proposed amendment to the Company's
certificate of incorporation to provide for the classification of the Board
of Directors into three classes of directors with staggered terms of office
and to make certain related changes.
3. To ratify the appointment of Moss Adams LLP as independent public
accountants of the Company for the fiscal year ending September 26, 1997;
and
4. To transact such other business as may properly come before the
meeting.
Owners of record at the close of business on , 1997 will be
entitled to vote at the meeting or at any adjournments or postponements thereof.
A complete list of the stockholders entitled to vote at the Annual Meeting will
be made available for inspection by any stockholder of record at the offices of
the Company during market hours from May , 1997, through the time of the
Annual Meeting.
By Order of the Board of Directors
Mark Roth, Secretary
1001 Fourth Avenue
Suite 2200
Seattle, Washington 98154
May , 1997
YOUR VOTE IS IMPORTANT
TO ASSURE YOUR REPRESENTATION AT THE MEETING, YOU ARE URGED TO VOTE, SIGN,
DATE AND RETURN THE ENCLOSED PROXY AS PROMPTLY AS POSSIBLE IN THE POSTAGE-PAID
ENVELOPE ENCLOSED FOR THAT PURPOSE. EVEN IF YOU HAVE GIVEN YOUR PROXY, THE PROXY
MAY BE REVOKED AT ANY TIME PRIOR TO EXERCISE BY FILING WITH THE SECRETARY OF THE
COMPANY A WRITTEN REVOCATION, BY EXECUTING A PROXY WITH A LATER DATE, OR BY
ATTENDING AND VOTING AT THE MEETING.
<PAGE> 3
OLYMPIC CASCADE FINANCIAL
CORPORATION
1001 FOURTH AVENUE
SUITE 2200
SEATTLE, WASHINGTON 98154
PROXY STATEMENT
ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD JUNE , 1997
This Proxy Statement is furnished in connection with the solicitation of
proxies by and on behalf of the Board of Directors of Olympic Cascade Financial
Corporation, a Delaware corporation (the "Company"), for use at the 1997 Annual
Meeting of Shareholders of the Company (the "Annual Meeting") to be held at
10:00 a.m. on June , 1997 at the Company's facilities at 875 North Michigan
Avenue, Suite 1560, Chicago, Illinois 60611 and at any adjournment or
postponement thereof for the purposes set forth in the accompanying Notice of
Annual Meeting of Shareholders. Certain of the officers and regular employees of
the Company may solicit proxies by correspondence, telephone or in person,
without extra compensation. The Company may pay to banks, brokers, nominees and
other fiduciaries their reasonable charges and expenses incurred in forwarding
proxy material to their principals. It is anticipated that this Proxy Statement
will first be mailed to the Company's shareholders on or before ,
1997.
The presence, in person or by proxy, of the holders of a majority of the
shares of Common Stock entitled to vote at the Annual Meeting is necessary to
constitute a quorum for the conduct of business at the Annual Meeting. Shares of
Common Stock that are voted to abstain from any business coming before the
Annual Meeting and broker/nominee non-votes will be counted as being in
attendance at the Annual Meeting for purposes of determining whether a quorum is
present.
VOTING SECURITIES AND PRINCIPAL HOLDERS THEREOF
Only shareholders of record at the close of business on May , 1997 will
be entitled to receive notice of, and to vote at, the Annual Meeting. As of that
date, there were outstanding and entitled to vote shares of Common
Stock, $.02 par value (the "Common Stock"). Each share of Common Stock entitles
the holder thereof to one vote upon any proposal submitted for a vote at the
Annual Meeting.
PROPOSAL I:
ELECTION OF DIRECTORS
At the Annual Meeting, six directors are to be elected. If Proposal No. 2
is approved, two nominees will be elected as Class I directors to serve an
initial term of one year, two nominees will be elected as Class II directors to
serve an initial term of two years, and two nominees will be elected as Class
III directors to serve an initial term of three years (or, in all cases, until
their successors have been elected and qualified). After this year's election,
election of directors will be for three year terms. If Proposal No. 2 is not
adopted, each director will serve for one year or until his successor is duly
elected and qualified. The persons named below will be nominated by the Board of
Directors for election as directors. With the exception of Messrs. Holcomb,
Minnerly and Daskal, all of these nominees are currently serving as directors of
the Company.
If any nominee at the time of the election is unable or unwilling to serve
or is otherwise unavailable for election, and the Board of Directors designates
another nominee, the persons named as proxies will vote the proxy for such
substitute, if any. The Board of Directors has no reason to believe that any of
the proposed nominees will be unable or unwilling to serve. The proposed
nominees are not being nominated pursuant to any arrangement or understanding
with any person. Each shareholder will be entitled to one vote for each share of
Common Stock held at the Annual Meeting. Shares represented by your proxy will
be voted in
<PAGE> 4
accordance with your direction as to the election as directors of the persons
listed below as nominees. In the absence of direction, the shares represented by
your proxy will be voted FOR such election.
The following sets forth the names and ages of all directors and executive
officers of the Company and of National Securities Corporation ("National
Securities"), all positions and offices to be held with the Company and with
National Securities by such persons, the classes to which director-nominees will
be elected if proposal 2 is adopted, and the principal occupations of each
during the past five years.
NOMINEES FOR DIRECTOR
<TABLE>
<S> <C> <C>
Steven A. Rothstein 46 Director, Chairman, Chief Executive Officer and President of the
(Class III) Company
Director, Chairman and Chief Executive Officer of National Securities
</TABLE>
Mr. Rothstein became a member of the Board of National Securities in May 1995
and was appointed Chairman on August 1, 1995. From 1979 through 1989, Mr.
Rothstein was a registered representative, and Limited Partner at Bear Stearns &
Co., Inc. in Chicago, Illinois and Los Angeles, California. From 1989 to 1992,
Mr. Rothstein was a Senior Vice President in the Chicago office of Oppenheimer
and Company, Inc. In December 1992 he joined Rodman and Renshaw, Inc., a
Chicago-based broker/dealer serving as Managing Director, and joined H.J.
Meyers, Inc. in Beverly Hills, California, a New York Stock Exchange member firm
in March 1994. He resigned H.J. Meyers and Company in March 1995 to associate
with National Securities. Mr. Rothstein is a 1972 graduate of Brown University,
Providence, Rhode Island. Presently, Mr. Rothstein is a board member of American
Craft Brewing International Limited, Gateway Data Sciences, Inc., New World
Coffee, Inc., Sigmatron International, Inc. and Vita Food Products, Inc.
<TABLE>
<S> <C> <C>
Robert I. Kollack 50 Director of the Company
(Class I) Director and Vice Chairman of National Securities
</TABLE>
Mr. Kollack was elected to the Board and was appointed Chief Executive Officer
of National Securities in August 1987. He served in those capacities until
February, 1997, when he was appointed Vice-Chairman. From February 1981 to
August 1987, Mr. Kollack acted as President and a Director of National
Securities. He joined National Securities as an Investment Executive in 1972.
From 1968 to 1972, he was an Investment Executive for Foster & Marshall, Inc.,
which at that time was a Seattle-based brokerage firm.
<TABLE>
<S> <C> <C>
Gary A. Rosenberg 56 Director and Vice Chairman of the Company
(Class III) Director of National Securities
</TABLE>
Mr. Rosenberg was appointed to the Board of National Securities in December,
1996. Mr. Rosenberg was Chairman and CEO of UDC Homes, Inc. (and its
predecessor) from 1968 to 1994, and the Chairman (non-management) from 1994 to
1996. UDC Homes, Inc. filed a petition for relief under Chapter 11 of the
Bankruptcy Code in May, 1995. Presently, Mr. Rosenberg is Chairman, Chief
Executive and Director of Canterbury Development Corporation, a family held
company with financial, technology, entertainment and real estate interests. He
is also a Director and Chairman of Dimyon Multimedia, Ltd., an Israeli
multimedia and software company; Chairman and Director of the Rosenberg
Foundation; Founder and Chairman of the Real Estate Research Center; member of
the Board at the J.L. Kellogg Graduate School of Management at Northwestern
University; and a Trustee of St. Norbert College. Mr. Rosenberg received his
B.S. and M.B.A. from Northwestern University and his J.D. from the University of
Wisconsin.
<TABLE>
<S> <C> <C>
James C. Holcomb, Jr. 46 Director of the Company
(Class I)
</TABLE>
Since 1982, Mr. Holcomb has been employed by Holcomb Investment Company, a Texas
General Partnership. Holcomb Investment Company is a family-owned investment
vehicle, privately investing in predominantly oil and gas exploration and
development. Mr. Holcomb also is a private investor in wholesale distribution
and manufacturing companies, and is often actively involved in the management of
the companies in which investments are made. Mr. Holcomb received his A.B. in
1972 from Brown University, and his J.D. in 1975 from the University of Texas
School of Law.
2
<PAGE> 5
<TABLE>
<S> <C> <C>
Robert W. Minnerly 62 Director of the Company
(Class II)
</TABLE>
Mr. Minnerly is the retired Headmaster of Charles Wright Academy in Tacoma,
Washington, a position he served from 1986 to 1996. He was elected the Private
School Representative to the Washington State Board of Education in 1997. Prior
to his position at Charles Wright Academy, Mr. Minnerly was principal of the
Upper School at Fort Worth Country Day School in Fort Worth, Texas, and
Headmaster of the Berkshire School in Sheffield, Massachusetts. Mr. Minnerly is
a graduate of Brown University, Providence, Rhode Island.
<TABLE>
<S> <C> <C>
Robert H. Daskal 55 Director of the Company, Senior Vice President, Chief Financial
(Class II) Officer
and Treasurer of the Company
</TABLE>
Mr. Daskal was appointed Senior Vice President, Chief Financial Officer and
Treasurer of the Company in January, 1997. From 1994 to 1997 Mr. Daskal was a
Director, Executive Vice President and Chief Financial Officer of Inco Homes
Corporation, and from 1985 to 1994 he was a Director, Executive Vice President-
Finance and Chief Financial Officer of UDC Homes, Inc. (and its predecessor).
UDC Homes, Inc. filed a petition for relief under Chapter 11 of the Bankruptcy
Code in May, 1995. Mr. Daskal, a former Tax Partner with Arthur Andersen & Co.,
became a CPA in Illinois since 1967. He received his B.B.A. and J.D. from the
University of Michigan in Ann Arbor. Mr. Daskal is presently a director of Inco
Homes Corporation.
The Board of Directors recommends a vote FOR the election of each of the
nominees for director of the Company.
EXECUTIVE OFFICERS
<TABLE>
<S> <C> <C>
Jay W. Hanville 41 Chief Financial Officer, Chief Accounting Officer and Treasurer of
National Securities
</TABLE>
Mr. Hanville joined National Securities as Chief Financial Officer in August
1987. From 1983 to 1987, Mr. Hanville was a Senior Examiner with the National
Association of Securities Dealers. From 1980 to 1983, Mr. Hanville was
Accounting Manager at the regional brokerage firm of Hammerbeck & Co. Mr.
Hanville received his B.S. in Finance from Oregon State University in 1978.
<TABLE>
<S> <C> <C>
Mark T. McCloskey 48 President and Chief Operating Officer of National Securities
</TABLE>
Mr. McCloskey was appointed Executive Vice President and Chief Operating Officer
of National Securities in November 1995. Between 1993 and 1995 he served as
President of G.R. Stuart & Co., Inc., a Massachusetts-based broker/dealer. Mr.
McCloskey worked as a broker at Tucker Anthony between August 1990 and May 1993,
and as Manager of Paine Webber's Newport, Rhode Island office from November 1987
to August 1990.
<TABLE>
<S> <C> <C>
Mark Roth 35 Secretary and General Counsel of the Company
Secretary and General Counsel of National Securities
</TABLE>
Mr. Roth was appointed General Counsel of National Securities in October 1995,
and was appointed Secretary in March, 1997. He received his B.S. in 1984 from
the University of California, Irvine, and his J.D. in 1989 from Pepperdine
University School of Law. Mr. Roth began the private practice of law in Southern
California in 1989. Among other clients, he has represented National Securities
in transactional and litigation matters since moving to Seattle in September
1992.
<TABLE>
<S> <C> <C>
Joanne M. Salisbury 33 Chief Operations Officer of National Securities
</TABLE>
Ms. Salisbury joined National Securities as a cashier in 1983, and has worked
for the Company ever since in various positions in the Company's back office.
Ms. Salisbury was promoted to the position of Assistant Operations Manager in
1986, Operations Manager in 1989, and most recently to Chief Operations Officer
on August 1, 1995.
3
<PAGE> 6
MEETINGS OF DIRECTORS
The Company's Board does not have a nominating or compensation committee.
The Audit Committee (currently comprised of Messrs. Kollack and Rothstein) is to
meet with Company personnel and with representatives of Moss Adams, LLP, the
Company's independent public accountants, to consider and review internal
accounting controls and matters relating to the annual audit of the Company's
financial statements. The new Audit Committee did not formally meet during
fiscal 1996. In the event Messrs. Minnerly and Holcomb are elected to the Board
of Directors, it is contemplated that one or both will be appointed to serve on
the Audit Committee.
During the fiscal year ended September 27, 1996, the Company's Board of
Directors met or acted by Unanimous Written Consent a total of 8 times. No
incumbent director participated in fewer than 75% of the Board's activities.
DIRECTOR COMPENSATION
To date, no director of the Company or of National Securities has received
any cash compensation for serving on the Board. The Company does not anticipate
paying inside directors any cash compensation in the future. However, following
the Annual Meeting, outside directors (i.e., directors who are not also officers
or employees of the Company or of a subsidiary) will be paid $1,000 per meeting
attended in person, and $500 per meeting attended by phone. The Company shall
reimburse all directors for expenses incurred traveling to and from board
meetings.
STOCK OPTIONS
The Company has granted options to certain officers, directors, employees,
and Investment Executives. The options granted to officers and directors are as
follows:
<TABLE>
<CAPTION>
VALUE OF UNEXERCISED
NUMBER OF UNEXERCISED IN-THE-MONEY
STOCK OPTIONS AT STOCK OPTIONS AT
MAY 1, 1997 MAY 1, 1997
OFFICER EXERCISABLE/UNEXERCISABLE EXERCISABLE/UNEXERCISABLE
----------------------------------------- ------------------------- -------------------------
<S> <C> <C>
Steven A. Rothstein...................... 223,644/-- $675,950/$ --
Robert I. Kollack........................ 54,422/-- $163,512/$ --
Norman S. Lynn........................... 86,822/-- $331,078/$ --
Gary A. Rosenberg........................ 50,000/-- 0
Mark T. McCloskey........................ 33,153/-- $ 94,420/$ --
Louis B. Lichtenfeld..................... 10,000/-- 0
Robert H. Daskal......................... 10,000/-- 0
David Williams........................... 11,576/-- $ 42,610/$31,958
</TABLE>
The options expire within five years from date granted or upon termination
of employment, whichever comes first. The options become vested either
immediately or over a three-year period beginning with the date of grant. The
market price of the stock on the date of the grant was less than or equal to the
option price.
4
<PAGE> 7
EXECUTIVE COMPENSATION
The Company was incorporated in September, 1996, and organized in February,
1997. Consequently, the Company did not pay any executive compensation (cash,
stock or otherwise) during fiscal 1996, 1995 or 1994. The following table sets
forth the cash compensation paid by National Securities to each of its most
highly compensated officers during the fiscal years ended 1996, 1995 and 1994:
<TABLE>
<CAPTION>
OTHER
NAME AND CAPACITY YEAR ENDED SALARY BONUS COMPENSATION*
- -------------------------------------------- ---------- -------- -------- -------------
<S> <C> <C> <C> <C>
Steven A. Rothstein......................... 1996 $ 24,000 $194,000 $ 1,775,000**
Chairman 1995 $ 48,000 $ -- $ 138,000
Robert I. Kollack........................... 1996 $150,000 $193,000 $ 495,000
President, CEO and Director 1995 $170,000 $ 58,000 $ 27,000
1994 $108,000 $ 56,000 $ 85,000
Mark T. McCloskey........................... 1996 $110,000 $ 78,000 $ 124,000
Chief Operating Officer
Alexander H. Slivka......................... 1996 $ 84,000 $ 92,000 $ 55,000
Vice President, Compliance 1995 $ 80,000 $ 13,000 $ 11,000
1994 $ 72,000 $ 28,000 $ 8,000
Jay W. Hanville............................. 1996 $ 90,000 $ 92,000 $ 22,000
Chief Financial Officer 1995 $ 79,000 $ 12,000 $ 20,000
Chief Accounting Officer 1994 $ 56,000 $ 28,000 $ 21,000
and Treasurer
Joanne Salisbury............................ 1996 $ 55,000 $ 54,000 $ 1,000
Chief Operations Officer
Mark Roth................................... 1996 $120,000 $ 43,000 $ 9,000
Secretary and General Counsel
</TABLE>
- ---------------
* Amounts relate to commissions earned in the normal course of business, fees
received for Corporate Finance services and profit from the sale of the
Company's stock obtained during the year through the exercise of stock
options.
** This compensation is paid to Mr. Rothstein by National Securities pursuant to
an employment agreement and represents a percentage of business generated or
supervised by Mr. Rothstein: he is paid 50% of the commission generated on
retail trades (compared to the 70% typically paid to Company brokers), and
70% of the compensation collected by the firm (including warrants) on
corporate finance transactions which he introduces and executes. Mr.
Rothstein also receives a percentage of fees collected from all other
corporate finance transactions as well as on business he creates for the
firm.
National Securities has an executive and employee bonus program under which
no bonuses will be paid on the first $200,000 of pretax earnings. After that
point, the following percentages of pretax earnings would be placed in a "bonus
pool" to be divided among the executives and employees.
<TABLE>
<CAPTION>
PRETAX EARNINGS AMOUNT TO BONUS POOL
- ---------------------- --------------------
<S> <C>
$ 200,000 - 500,000 20%
$ 500,000 - 1,000,000 25%
$1,000,000 - 5,000,000 30%
</TABLE>
Bonuses of $1,025,000, $53,000 and $162,000 were paid under this plan for
fiscal year 1996, 1995 and 1994, respectively.
5
<PAGE> 8
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
CERTAIN BENEFICIAL OWNERS
The following information is furnished as of May 1, 1997, as to any person
who the Company knows to be the beneficial owner of more than 5% of the
Company's common stock:
<TABLE>
<CAPTION>
AMOUNT OF
NAME/ADDRESS OF BENEFICIAL PERCENT
BENEFICIAL OWNER OWNERSHIP OF CLASS
------------------------------------------------------- --------- ---------
<S> <C> <C>
Steven A. Rothstein.................................... 403,795(1) 28.5%(2)
875 N. Michigan Avenue
Suite 1560
Chicago, Illinois
Larry H. Friend &...................................... 100,000 8.31%
Darren Friend
3333 Michelson Drive
Suite 650
Irvine, California
Marshall S. Geller..................................... 99,315 8.25%
1875 Century Park East
Suite 2200
Los Angeles, California
Maynard Mall Realty Trust.............................. 66,150 5.49%
95 Main Street
Maynard, MA
</TABLE>
- ---------------
(1) Includes beneficial ownership of 23,794 shares held by spouse and minor
children, and of 215,375 shares which may be acquired by exercise of stock
options.
(2) Assumes exercise of all outstanding options.
MANAGEMENT
The following information is furnished as of May 1, 1997 as to each class
of equity securities of the Company beneficially owned by all directors and
officers of the Company as a group.
<TABLE>
<CAPTION>
AMOUNT OF
BENEFICIAL PERCENT
NAME AND TITLE OF BENEFICIAL OWNER OWNERSHIP OF CLASS
----------------------------------------------------------------- --------- --------
<S> <C> <C>
Steven A. Rothstein -- Chairman, Chief Executive and President... 403,795* 28.5%**
Gary A. Rosenberg -- Vice Chairman of the Board.................. 50,000* 3.9%**
Robert I. Kollack -- Director.................................... 54,422* 4.3%**
Mark T. McCloskey -- President of National Securities............ 33,153* 2.7%**
Robert H. Daskal -- Chief Financial Officer and Treasurer........ 10,000* ***
Reed W. Smith -- Vice President, Trading, National Securities.... 8,409 1.1%**
David Williams -- Controller of National Securities.............. 11,576* ***
Mark Roth -- Secretary and General Counsel....................... 315 ***
Joanne Salisbury -- Vice President, Operations, National
Securities..................................................... 1,625 ***
------- ----
All officers and directors of the Company as a group............. 573,295 36.6%**
======= ====
</TABLE>
- ---------------
* Includes unexercised options
** Assumes exercise of unexercised options
*** Less than one percent
6
<PAGE> 9
INTRODUCTION TO AMENDMENTS OF ARTICLES
The Board of Directors has determined that a certain amendment to the
Company's Articles of Incorporation is advisable and has recommended it to the
Company's shareholders for adoption at the 1997 Annual Meeting. This amendment
is being submitted in the form of a proposal to create a classified Board of
Directors and make certain related changes. The background, reason and effect of
the proposal are set forth below, followed by a more detailed description of the
proposal and how it operates.
PROPOSAL II:
AMENDMENT TO CERTIFICATE OF INCORPORATION
TO PROVIDE FOR A CLASSIFIED BOARD OF DIRECTORS
AND RELATED MATTERS
The Board of Directors recommends that shareholders approve the amendment
of Article Eighth of the Certificate of Incorporation to provide for the
classification of the Company's Board of Directors into three classes with
staggered terms of office. Specifically, the Board of Directors proposes to add
a new paragraph after the first paragraph Eighth that would provide as follows:
THE BOARD OF DIRECTORS SHALL BE DIVIDED INTO THREE CLASSES, DESIGNATED
CLASS I, CLASS II AND CLASS III, AS NEARLY EQUAL IN NUMBER AS POSSIBLE,
AND THE TERM OF OFFICE OF DIRECTORS OF ONE CLASS SHALL EXPIRE AT EACH
ANNUAL MEETING OF STOCKHOLDERS, AND IN ALL CASES AS TO EACH DIRECTOR
UNTIL HIS SUCCESSOR SHALL BE ELECTED AND SHALL QUALIFY (EXCEPT IN CASES
WHERE NO SUCCESSOR IS ELECTED DUE TO A REDUCTION IN THE SIZE OF THE
BOARD) OR UNTIL HIS EARLIER RESIGNATION, REMOVAL FROM OFFICE, DEATH OR
INCAPACITY. ADDITIONAL DIRECTORSHIPS RESULTING FROM AN INCREASE IN THE
NUMBER OF DIRECTORS SHALL BE APPORTIONED AMONG THE CLASSES AS EQUALLY AS
POSSIBLE. VACANCIES, INCLUDING VACANCIES CREATED BY AN INCREASE IN THE
SIZE OF THE BOARD OF DIRECTORS, SHALL BE FILLED BY THE AFFIRMATIVE VOTE
OF A MAJORITY OF THE REMAINING BOARD OF DIRECTORS. THE INITIAL TERM OF
OFFICE OF DIRECTORS OF CLASS I SHALL EXPIRE AT THE ANNUAL MEETING OF
STOCKHOLDERS IN 1998; THAT OF CLASS II SHALL EXPIRE AT THE ANNUAL
MEETING OF STOCKHOLDERS IN 1999; AND THAT OF CLASS III SHALL EXPIRE AT
THE ANNUAL MEETING OF STOCKHOLDERS IN 2000; AND IN ALL CASES AS TO EACH
DIRECTOR UNTIL HIS SUCCESSOR SHALL BE ELECTED AND SHALL QUALIFY (EXCEPT
IN CASES WHERE NO SUCCESSOR IS ELECTED DUE TO A REDUCTION IN THE SIZE OF
THE BOARD) OR UNTIL HIS EARLIER RESIGNATION, REMOVAL FROM OFFICE, DEATH
OR INCAPACITY. AT EACH ANNUAL MEETING OF STOCKHOLDERS, THE NUMBER OF
DIRECTORS EQUAL TO THE NUMBER OF DIRECTORS OF THE CLASS WHOSE TERM
EXPIRES AT THE TIME OF SUCH MEETING (OR, IF LESS, THE NUMBER OF
DIRECTORS PROPERLY NOMINATED AND QUALIFIED FOR ELECTION) SHALL BE
ELECTED TO HOLD OFFICE UNTIL THE THIRD SUCCEEDING ANNUAL MEETING OF
STOCKHOLDERS AFTER THEIR ELECTION. ANY DIRECTOR OF THE ENTIRE BOARD OF
DIRECTORS MAY BE REMOVED, WITH OR WITHOUT CAUSE, BY HOLDERS OF A
MAJORITY OF THE SHARES THEN ENTITLED TO VOTE AT AN ELECTION OF
DIRECTORS.
The proposed amendment to classify the Board of Directors provides that the
directors will be classified into three classes, as nearly equal in number as
possible. If the proposed amendment is approved by the shareholders and,
thereafter, is filed with the Secretary of State of the State of Delaware, the
Company's Board of Directors will be classified into three classes. In that
event, each of the directors elected at the Annual Meeting will continue to
serve as a director, but the term of office for all such directors will no
longer be one year. Instead, Class I directors will hold office until the 1998
annual meeting; Class II directors will hold office until the 1999 annual
meeting; and Class III directors will hold office until the 2000 annual meeting;
and in each case, until their successors are duly elected and qualified (except
in cases where no successor is elected due to a reduction in the size of the
Board), or until earlier resignation, removal from office, death or incapacity.
At each annual meeting commencing with the 1998 annual meeting, directors
elected to succeed those in the class whose terms expire will be elected for
three-year terms so that the terms of one class of directors will expire each
year. Thus, after 1997, shareholders will elect only one-third (or, if one of
the classes has one more or one less director, approximately one-third) of the
directors at each annual meeting. Each director will serve until a successor is
elected and qualified (except in cases where no successor is elected due to a
reduction in the size off the Board), or until earlier resignation, removal from
office, death
7
<PAGE> 10
or incapacity. Vacancies, including vacancies created by an increase in the size
of the Board of Directors, shall be filled by the affirmative vote of a majority
of the entire board. The Board of Directors presently has no plans,
arrangements, commitments or understandings with respect to increasing or
decreasing the size of the board or any class of directors.
If the nominees for election to the Board of Directors at the Annual
Meeting are elected and the amendment to classify the Board of Directors is
thereafter approved, then, upon the filing of the amendment with the Secretary
of State of the State of Delaware, Robert I. Kollack and James C. Holcomb, Jr.
will be members of Class I and will hold office until the 1998 annual meeting;
Robert W. Minnerly and Robert H. Daskal will be members of Class II and will
hold office until the 1999 annual meeting; and Steven A. Rothstein and Gary A.
Rosenberg will be members of Class III and will hold office until the 2000
annual meeting. If any of the above nominees are not elected at the Annual
Meeting, then the person elected instead will become a member of the class of
which the nominee would have been a member had he been elected. If the proposal
to classify the Board of Directors is not approved, all of the directors elected
at the Annual Meeting will serve for a one-year term to expire at the 1997
annual meeting.
The Board of Directors believes that dividing the directors into three
classes is advantageous to the Company and its shareholders. By providing that
directors will serve three-year terms rather than one-year terms, the likelihood
of continuity and stability in leadership and in the policies formulated by the
Board of Directors will be enhanced. While management has not experienced any
problems with continuity or stability in the past, it wishes to ensure that this
experience will continue and believes that the staggered election of directors
will promote continuity because only one-third of the directors will be subject
to election each year.
If Proposal No.2 is approved, because only one of the three classes of a
classified Board will be elected annually, at least two annual shareholders'
meetings, instead of one, will be required to effect a change in control of the
Board through the normal election processes. The classified board amendment and
related changes would require a person seeking to acquire control of the Company
to wait up to two years to obtain control of the Board even though that person
has acquired ownership of a majority of controlling minority interest in the
Company.
The classified board amendment would thus make it more difficult and
time-consuming for any individual or entity who accumulates a substantial stock
or voting position in the Company to obtain control of the Board or to effect a
change in the Company's day-to-day operations. It would therefore reduce the
vulnerability of the Company to takeover proposals that are not in the best
interests of the Company or its shareholders.
The amendment would effect all shareholders, not just those seeking to
acquire control of the Company, in the following ways: (i) because at least two
annual meetings will be required to change majority control of the Board, the
amendment would tend to perpetuate present management; and (ii) the amendment
may tend to discourage accumulations of large blocks of stock by reducing the
control effect of such blocks, thus reducing temporary fluctuations in market
price that could be caused by such accumulations.
Adoption of this proposed amendment requires the affirmative vote of the
holders of a majority of the outstanding shares of Common Stock of the Company
entitled to notice of, and to vote at, the Annual Meeting. Unless otherwise
specified, the agents designated in the proxy will vote the shares covered
hereby at the Annual Meeting FOR the approval of this proposal.
PROPOSAL III:
RATIFICATION OF APPOINTMENT OF INDEPENDENT PUBLIC ACCOUNTANTS
The Board of Directors has appointed Moss Adams, LLP as the Company's
independent public accountants for the fiscal year ending September 26, 1997. A
resolution will be presented at the meeting to ratify the appointment of Moss
Adams, LLP. The Company does not expect that a representative of Moss Adams will
be present at the Annual Meeting.
The Board of Directors recommends a vote FOR ratification of the
appointment of Moss Adams, LLP as the Company's independent public accountants
for the fiscal year ending September 26, 1997.
8
<PAGE> 11
VOTING PROCEDURES
The Company has one class of voting shares outstanding, namely Common
Shares, of which there were outstanding at the close of business on
, 1997 (the "Record Date"). Each shareholder present or represented
at the Annual Meeting will be entitled to one vote per share. Shareholder action
requires the affirmative vote by the holders of a majority of the Common Stock
voting at the Annual Meeting. It is presently anticipated that votes will be
cast by a show of hands.
OTHER MATTERS
The Company will bear the cost of solicitation of proxies. Proxies will be
solicited by mail. They may also be solicited by officers and regular employees
of the Company and its subsidiaries personally or by telephone, but such persons
will not be specifically compensated for such services. Brokerage houses,
custodians, nominees and fiduciaries will be requested to forward the soliciting
material to the beneficial owners of stock held of record by such persons and
will be reimbursed for their reasonable expenses incurred in connection
therewith.
Management knows of no business to be brought before the Annual Meeting of
Stockholders other than that set forth herein. However, if any other matters
properly come before the meeting, it is the intention of the persons named in
the proxy to vote such proxy in accordance with their judgment on such matters.
Even if you plan to attend the meeting in person, please execute, date and
return the enclosed proxy promptly. Should you attend the meeting, you may
revoke the proxy by voting in person. A postage-paid, return-addressed envelope
in enclosed for your convenience. Your cooperation in giving this your prompt
attention will be appreciated.
By Order of the Board of Directors,
MARK ROTH, Secretary
May , 1997
Seattle, Washington
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