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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
SCHEDULE 13D
Under the Securities Exchange Act of 1934
(Amendment No. 1)*
OLYMPIC CASCADE FINANCIAL CORPORATION
- --------------------------------------------------------------------------------
(Name of Issuer)
Common Stock, $.02 par value
- --------------------------------------------------------------------------------
(Title of Class of Securities)
68158N106
---------------------------------------------------------------
(CUSIP Number)
Morton M. Rosenfeld, Esq., Rosenfeld & Wolff (310) 556-1221
2049 Century Park East, Suite 600, Los Angeles, CA 90067
- --------------------------------------------------------------------------------
(Name, Address and Telephone Number of Person Authorized to Receive Notices
and Communications)
December 2, 1997
---------------------------------------------------------------
(Date of Event which Requires Filing of this Statement)
If the filing person has previously filed a statement on Schedule 13G to
report the acquisition which is the subject of this Schedule 13D, and is
filing this schedule because of Rule 13d-1(b)(3) or (4), check the following
box [_].
Check the following box if a fee is being paid with the statement [_]. (A
fee is not required only if the reporting person: (1) has a previous statement
on file reporting beneficial ownership of more than five percent of the class
of securities described in Item 1; and (2) has filed no amendment subsequent
thereto reporting beneficial ownership of five percent or less of such class.)
(See Rule 13d-7.)
NOTE: Six copies of this statement, including all exhibits, should be filed
with the Commission. See Rule 13d-1(a) for other parties to whom copies are
to be sent.
*The remainder of this cover page shall be filled out for a reporting person's
initial filing on this form with respect to the subject class of securities,
and for any subsequent amendment containing information which would alter
disclosures provided in a prior cover page.
The information required on the remainder of this cover page shall not be
deemed to be "filed" for the purpose of Section 18 of the Securities Exchange
Act of 1934 ("Act") or otherwise subject to the liabilities of that section of
the Act but shall be subject to all other provisions of the Act (however, see
the Notes).
(Continued on following page(s))
Page 1 of 6 pages
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SCHEDULE 13D
- ----------------------------- -------------------------
CUSIP No. 68158N106 Page 2 of 6 Pages
- ----------------------------- -------------------------
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1. NAME OF REPORTING PERSON
S.S. OR I.R.S. IDENTIFICATION NO. OF ABOVE PERSON
Marshall S. Geller
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2. CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP* (a) [_]
(b) [_]
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3. SEC USE ONLY
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4. SOURCE OF FUNDS*
PF
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5. CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO ITEMS
2(d) or 2(e) [_]
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6. CITIZENSHIP OR PLACE OF ORGANIZATION
U.S.A.
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7. SOLE VOTING POWER
NUMBER OF ---
SHARES ------------------------------------------------------------------
BENEFICIALLY 8. SHARED VOTING POWER
OWNED BY
EACH 159,858
REPORTING ------------------------------------------------------------------
PERSON 9. SOLE DISPOSITIVE POWER
WITH
159,858
------------------------------------------------------------------
10. SHARED DISPOSITIVE POWER
---
- --------------------------------------------------------------------------------
11. AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
159,858
- --------------------------------------------------------------------------------
12. CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES*
[_]
- --------------------------------------------------------------------------------
13. PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
10.4%
- --------------------------------------------------------------------------------
14. TYPE OF REPORTING PERSON*
IN
- --------------------------------------------------------------------------------
*SEE INSTRUCTIONS BEFORE FILLING OUT!
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Amendment No. 1 to Schedule 13D of Marshall S. Geller, an individual
("Geller") continues as follows:
ITEM 3. SOURCE AND AMOUNT OF FUNDS OR OTHER CONSIDERATION.
-------------------------------------------------
Geller used personal funds of $135,000 to acquire the 27,000 shares of
common stock of Olympic Cascade Financial Cor poration (the "Issuer") described
in Item 5(c) hereof.
ITEM 4. PURPOSE OF TRANSACTION.
----------------------
Geller has no present intention of taking any actions which relate to
or would result in (a) the acquisition by any person of additional securities of
the Issuer, or the disposition of securities of the Issuer; (b) an extraordinary
corporate trans action, such as a merger, reorganization or liquidation,
involving the Issuer or any of its subsidiaries; (c) a sale or transfer of a
material amount of assets of the Issuer or any of its subsidiaries; (d) any
change in the present Board of Directors or management of the Issuer, including
any plans or proposals to change the number or term of directors or to fill any
existing vacancies on the Board; (e) any material change in the present
capitalization or dividend policy of the Issuer; (f) any other material change
in the Issuer's business or corporate structure; (g) changes in the Issuer's
charter, bylaws or instruments corresponding thereto or other actions which may
impede the acquisition of control of the Issuer by any person; (h) causing a
class of securities of the Issuer to be delisted or to cease to be authorized to
be quoted in the NASDAQ Inter-Dealer Quotation System; (i) a class of equity
securities of the Issuer becoming eligible for termination of registration
pursuant to Section 12(g)(4) of the Securities Exchange Act of 1934; or (j) any
action similar to any of those enumerated above.
However, Geller intends to follow closely the policies and practices
of the Issuer, the financial performance of the Issuer and the market price of
the Issuer's common stock. Geller may elect to purchase more shares of the
Issuer's common stock or to dispose of all or a portion of his shares subject to
the con tractual limitations to which he is subject pursuant to an Investor
Rights Agreement between the Issuer and Geller, among others. See Item 6 hereof.
Such determination will depend on a number of factors, including without
limitation, the prospects and plans of the Issuer and the personal plans of
Geller, including the avail ability of funds and the consideration of
alternative investments, which Geller reviews on a continuing basis.
ITEM 5. Interest in Securities of the Issuer.
------------------------------------
(a) Geller owns beneficially 159,858 shares of the Issuer's common
stock, including 16,537 shares underlying presently
Page 3 of 6 pages
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exercisable warrants, which 159,858 shares represent approximately 10.4% of the
outstanding shares of the Issuer's common stock.
(b) Geller has sole dispositive or investment power over the 159,858
shares beneficially owned. Pursuant to an existing Voting Agreement between the
Issuer and Geller, among others, Geller has shared voting power over the 159,858
shares. Such Voting Agreement requires Geller to vote all of his shares in favor
of the election of the person or persons nominated by the Issuer's Board of
Directors to serve as directors. On all other matters, Geller has unrestricted
power to vote his beneficially owned shares.
(c) On December 2, 1997, Geller acquired 27,000 shares of the
Issuer's common stock in a market transaction at a price of $5 per share. Such
27,000 shares are adjusted to 28,350 shares herein to account for the 5% stock
dividend effected by the Issuer on December 8, 1997 and are included in the
aggregate of 159,858 shares beneficially owned by Geller. The original Issuer
shares acquired by Geller in March, 1997 as reported on this Schedule 13D are
also adjusted for 5% stock dividends effected by the Issuer on May 20, 1997 and
August 29, 1997.
(d) Not applicable.
(e) Not applicable.
ITEM 6. Contracts, Arrangements, Understandings or Relationships With Respect
---------------------------------------------------------------------
to Securities of the Issuer.
---------------------------
All of the shares of the Issuer's common stock bene ficially owned by
Geller are subject to an Investor Rights Agree ment between the Issuer and
Geller, among others. Pursuant to such agreement, Geller is entitled to certain
demand registration rights on the shares originally acquired by Geller in March,
1997, which demand rights are currently exercisable. Geller may elect to exer
cise such demand registration rights by furnishing written notice to the Issuer
as required by such agreement. Should Geller deter mine to exercise such demand
registration rights, the Issuer would be required to register approximately
114,500 of Geller's shares together with the other shares issued concurrently
with the shares issued to Geller in March, 1997. An aggregate of approximately
289,000 shares would be included in such registration statement if Geller
determines to elect his demand registration rights. Pur suant to other terms of
the Investor Rights Agreement, Geller is prohibited from selling any shares of
the Issuer's common stock until March 17, 1998. Additionally, until March 17,
1999, the Issuer holds a right of first refusal as to transfer of certain shares
originally acquired by Geller. For additional information, see the Investor
Rights Agreement attached as Exhibit 7.2 hereto.
Page 4 of 6 pages
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ITEM 7. Material to be Filed as Exhibits.
--------------------------------
The following is filed as an exhibit to this Amendment No. 1 to
Schedule 13D:
Exhibit 7.2: Investor Rights Agreement dated March 17, 1997 by
and between, among others, Olympic Cascade
Financial Corporation and Marshall S. Geller.
Page 5 of 6 pages
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After reasonable inquiry and to the best of my knowledge and belief, I
certify that the information set forth in this state ment is true, complete and
correct.
/s/ Marshall S. Geller
-----------------------------
MARSHALL S. GELLER
Date: January 29, 1998
Page 6 of 6 pages
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EXHIBIT 7.2
INVESTOR RIGHTS AGREEMENT
This INVESTOR RIGHTS AGREEMENT ("Agreement") is entered into as of
this 17th day of March, 1997, by and between Olympic Cascade Financial
Corporation, a Delaware corporation (the "Company"), and the stockholders of the
Company listed on the signature page hereof (individually, a "Stockholder" and
collectively, the "Stockholders"), with respect to the following facts:
A. Immediately prior to the execution of this Agreement, the
Company issued 250,000 shares (the "Initial Shares") of the Company's
unregistered $.02 par value common stock (the "Common Stock") to the
Stockholders.
B. The Initial Shares were issued in connection with, and as a
condition of, an exchange of shares effected pursuant to that certain Exchange
Agreement and Plan of Reorganization (the "Exchange Agreement"), dated as of
February 12, 1997, by and between the Company, L.H. Friend, Weinress, Frankson &
Presson, Inc., a California corporation ("LHF"), and the Stockholders, pursuant
to which the Stockholders transferred to the Company, all of the issued and
outstanding capital stock of LHF (the "LHF Stock") in exchange for the issuance
to the Stockholders of the Initial Shares.
C. In connection with the transactions consummated pursuant to
the aforementioned Exchange Agreement, the Company agreed to grant the
Stockholders the registration rights contained in this Agreement, and the
Stockholders agreed to restrict the transfer and transferability of the Shares
to the extent set forth in this Agreement.
NOW, THEREFORE, in consideration of the promises and mutual covenants
and obligations hereinafter set forth, the Company and the Stockholders hereby
agree as follows:
1. Definitions. As used in this Agreement, the following terms
-----------
shall have the following meanings:
"Commission" shall mean the Securities and Exchange Commission.
"Common Stock" shall mean the common stock, $.02 par value, of the
Company.
"Holders" shall mean the Stockholders and their transferees and
assignees.
Exhibit A
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"Register," "Registered" and "Registration" refer to a registration
effected by the Company involving the preparing and filing of a registration
statement in compliance with the Securities Act, and the declaration by the
Commission ordering the effectiveness of such registration statement.
"Registration Statement" shall mean a registration statement filed by
the Company under the Securities Act to register shares of Common Stock.
"Securities Act" shall mean the Securities Act of 1933, as amended.
"Shares" shall mean the (a) Initial Shares issued to the Stockholders,
(b) any shares of Common Stock (the "Extension Shares") issued pursuant to the
extension of the Senior Subordinated Note of the Company dated as of the date
hereof, and (c) any shares of Common Stock hereafter received in respect of the
Initial Shares and the Extension Shares.
2. Demand Registration. At any time after the date which is eight
-------------------
(8) months after the Closing Date (as defined in the Exchange Agreement),
any Holder or Holders may make a written request for a registration with the
Commission under and in accordance with the provisions of the Securities Act of
all or part of his Shares. Within ten (10) business days after receipt of such
request, the Company will give notice of such request to all Holders. The
Holders shall notify the Company in writing within fifteen (15) calendar days
after receipt of the Company's notice whether they wish to have all or a part of
their Shares included in the requested registration. If Holders of fifty
thousand (50,000) or more of the Shares request to be included in the
registration, within twenty (20) calendar days after receipt of such request by
the Holders, the Company shall prepare and file with the Commission, a shelf
Registration Statement pursuant to Rule 415 of the Securities Act, covering all
of the Shares, and shall thereafter use its best efforts to cause such
Registration Statement to be declared effective by the Commission within three
(3) months thereafter; provided, however, that if such Registration Statement
-------- -------
has not been declared effective within such three (3) month period (the "Three
Month Deadline"), all of the Company's rights, the Holders' obligations, and the
restrictions on the Initial Shares set forth in Sections 6 and 7 of this
Agreement and in that certain Voting Agreement, of even date herewith, by and
among the Holders shall be of no force or effect during the period commencing on
the Three Month Deadline and terminating on the date when such Registration
Statement becomes effective (the "Suspension Period"). The term of the
restrictions set forth in Sections 6 and 7 of this Agreement and in the
foregoing Voting Agreement shall not be tolled but shall continue to run during
the Suspension Period. After the Registration Statement becomes effective, the
Company shall use its best efforts to keep the Registration Statement
continuously effective during the period beginning on the date the Registration
Statement has been declared effective and ending on the date three (3) years
from the date hereof, or such earlier date as the Holders may specify.
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The Company shall file amendments to the Registration Statement and otherwise
comply with all applicable federal and state securities laws and regulations as
necessary to permit continuing sales of the Shares during the period the
Registration Statement is effective. The Holders shall be entitled to an
unlimited number of such demand registrations.
3. Registration Procedures. The Company shall:
-----------------------
(a) Furnish to the Holders, to brokers or dealers effecting
transactions in the Shares on behalf of the Holders, and to the underwriters of
the securities being registered, such reasonable number of copies of the
Registration Statement, preliminary prospectus, final prospectus and such other
documents as the Holders, brokers or dealers and underwriters may reasonably
request in order to facilitate the public offering of such securities;
(b) Use its best efforts to register or qualify the Shares covered
by such Registration Statement under such state securities or blue sky laws of
such jurisdiction as the Holders may reasonably request, except that the Company
shall not for any purpose be required to execute a general consent to service of
process or to qualify to do business as a foreign corporation in any
jurisdiction wherein it is not so qualified;
(c) Promptly notify the Holders of the time when such registration
statement has become effective or when a supplement to any prospectus included
in such Registration Statement has been filed;
(d) Notify the Holders promptly of any request by the Commission
for the amending or supplementing of such Registration Statement or prospectus
or for additional information;
(e) Promptly advise the Holders of the issuance of any stop order
by the Commissioner suspending the effectiveness of such Registration Statement
or the initiation or threatening of any proceeding for that purpose and promptly
use its best efforts to prevent the issuance of any stop order or obtain its
withdrawal if such stop order should be issued;
(f) At the request of the Holders, furnish at the closing provided
for in any underwriting agreement, (i) an opinion, dated such date, of the
counsel representing Company for the purposes of such registration, addressed to
any underwriters, covering such matters relating to the Company or its
securities as such underwriters may reasonably request, and (ii) a letter dated
as of such date, from the independent certified public accountants of the
Company, addressed to the underwriters, covering such matters as such
underwriters may reasonably request, in
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which letter such accountants shall state (without limiting the generality of
the foregoing) that they are independent certified public accountants within the
meaning of the Securities Act and that in the opinion of such accountants the
financial statements and other financial data of the Company included in the
Registration Statement or any amendment or supplement thereto comply in all
material respects with the applicable accounting requirements of the Securities
Act;
(g) Make available for inspection by a representative of the
Holders and the Holders' attorneys or accountants all financial and other
records of the Company required to prepare such Registration Statement, and
shall supply all other information requested by such representative reasonably
related to the preparation and filing of such Registration Statement; and
(h) File all applications necessary to list all Shares included in
such a Registration Statement on any national securities exchange on which the
shares of the Common Stock are then listed or, if the Common Stock is not then
listed on a national securities exchange, use its best efforts to qualify such
Shares for inclusion on The Nasdaq Stock Market.
4. Expenses.
--------
(a) With respect to each inclusion of Shares in a Registration
Statement pursuant to Section 2, any and all fees, costs and expenses of or
incidental to, incurred in connection with such registration and public offering
shall (to the extent specified in Section 4(b) below) be borne by the Company;
provided, however, that the Holders shall bear their pro rata share of any
underwriting discounts and commissions and transfer taxes.
(b) The fees, costs and expenses of or incidental to each such
registration to be borne by the Company as provided in Section 4(a) above shall
include, without limitation, all registration and filing fees, NASD filing fees,
printing expenses, fees and disbursements of counsel and accountants for the
Company, fees and disbursements of counsel for the underwriter or underwriters
of such securities (if the Company and/or selling stockholders are required to
bear such fees and disbursements) and the reasonable fees, costs and expenses of
one counsel for the Holders, and all legal fees and disbursements and other
expenses of complying with state securities or blue sky laws of any
jurisdictions in which the securities to be offered are to be registered or
qualified.
5. Indemnification.
---------------
(a) The Company hereby agrees to indemnify, hold harmless and
defend the Holders and any underwriter (as defined in the Securities Act) and
each
4
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person, if any, who controls the Holders or such underwriter within the meaning
of the Securities Act, from and against, and will reimburse the Holders and each
such underwriter and controlling person with respect to any and all losses,
damages, liabilities, costs and expenses (as and when incurred), including
without limitation, the costs of investigation and defense of any legal action,
proceeding or investigation, to which the Holders or any such underwriter or
controlling person may become subject under the Securities Act, the Securities
Exchange Act of 1934, as amended, or otherwise, insofar as such losses, damages,
liabilities, costs or expenses are caused by or arise out of any untrue
statement or alleged untrue statement of any material fact contained in such
Registration Statement, any prospectus contained therein, or any amendment or
supplement thereto, or arise out of or are based upon the omission or alleged
omission to state therein a material fact required to be stated therein or
necessary to make the statements therein not misleading; provided, however, that
the Company will not be liable in any such case to the extent that any such
loss, damage, liability, cost or expense arises out of or is based upon an
untrue statement or alleged untrue statement or omission or alleged omission so
made in conformity with information furnished by the Holders, such underwriter
or such controlling person in writing specifically for use in the preparation
thereof.
(b) The Holders hereby agree to indemnify and hold harmless the
Company, any controlling person and any underwriter from and against, and will
reimburse the Company, any controlling person and any underwriter with respect
to, any and all losses, damages, liabilities, costs or expenses to which the
Company or any controlling person and/or any underwriter may become subject
under the Securities Act, the Securities Exchange Act of 1934, as amended, or
otherwise, insofar as such losses, damages, liabilities, costs or expenses are
caused by any untrue or alleged untrue statement of any material fact contained
in such Registration Statement, any prospectus contained therein or any
amendment or supplement thereto, or arise out of or are based upon the omission
or the alleged omission to state therein a material fact required to be stated
therein or necessary to make the statements therein not misleading, in each case
to the extent, but only to the extent, that such untrue statement or alleged
untrue statement or omission or alleged omission was so made in reliance upon
and in conformity with written information furnished by the Holder specifically
for use in the preparation thereof.
(c) Promptly after receipt by an indemnified party pursuant to the
provisions of Section 5(a) or 5(b) of notice of the commencement of any action
involving the subject matter of the foregoing indemnity provisions such
indemnified party will, if a claim thereof is to be made against the
indemnifying party pursuant to the provisions of said Section 5(a) or 5(b),
promptly notify the indemnifying party of the commencement thereof; but the
omission to so notify the indemnifying party will not relieve it from any
liability which it may have to any indemnified party otherwise than hereunder.
In case such action is brought against any indemnified party and it
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notifies the indemnifying party of the commencement thereof, the indemnifying
party shall have the right to participate in, and, to the extent that it may
wish, jointly with any other indemnifying party similarly notified, to assume
the defense thereof, with counsel reasonably satisfactory to such indemnified
party; provided, however, if the defendants in any action include both the
indemnifying party and the indemnified party and if there is a conflict of
interest which would prevent counsel for the indemnifying party from also
representing the indemnified party, or any of the indemnified parties have
available to them defenses or counterclaims not available to the indemnifying
party even though this does not result in a conflict of interest, the
indemnified party or parties shall have the right to select one separate counsel
to participate in the defense of such action on behalf of all such indemnified
party or parties at the expense of the indemnifying party. After notice from
the indemnified party to such indemnifying party of its election so to assume
the defense thereof, the indemnifying party will not be liable to such
indemnified party pursuant to the provisions of said Section 5(a) or (b) for any
reasonable legal or other reasonable expense subsequently incurred by such
indemnified party in connection with the defense thereof other than reasonable
costs of investigation, unless (i) the indemnified party shall have employed
counsel in accordance with the proviso of the preceding sentence, (ii) the
indemnifying party shall not have employed counsel reasonably satisfactory to
the indemnified party to represent the indemnified party within a reasonable
time after the notice of the commencement of the action, or (iii) the
indemnifying party has authorized the employment of counsel for the indemnified
party at the expense of the indemnifying party.
6. Lock-Up.
-------
(a) Each of the Stockholders hereby agrees that for a period of
twelve (12) months following the date of this Agreement, he will not, without
the prior written consent of the Company, directly or indirectly, sell, assign,
transfer, or otherwise dispose of or hypothecate any of the Initial Shares owned
by such Stockholder (either pursuant to Rule 144 of the regulations under the
Securities Act, or otherwise), or dispose of any beneficial interest therein,
except for a pledge of any or all of said Shares in connection with the
extension of a bona fide loan to a Stockholder where the beneficiary of such
pledge agrees to be bound by the terms of this Section 6 in the event such
beneficiary enforces its security interest in such Shares.
(b) Notwithstanding the provisions of this Section 6, Shares
subject to the lock-up provisions of this Section at the time that a
Registration Statement is filed pursuant to Section 2 hereof may, to the extent
otherwise permitted in this Agreement, be included in such Registration
Statement; provided, however, that any such Shares included in a Registration
-------- -------
Statement (i) shall continue to be subject to the restrictions of this Section 6
and (ii) may be sold, pursuant to the Registration Statement or otherwise, only
if and when permitted by this Section 6.
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7. Right of First Refusal as to Transfer of Shares.
-----------------------------------------------
(a) Option to Purchase Shares. For a period of two (2) years from
-------------------------
the date hereof, in the event a Stockholder (the "Selling Stockholder") shall
decide to sell or otherwise dispose of all or any part of his Initial Shares or
any interest therein ("Offered Shares") for value, the following provisions
shall apply:
(i) Stockholder Sale Notice. In the event that the Selling
-----------------------
Stockholder elects to sell his Initial Shares, he shall give to the Company a
written notice (the "Stockholder Sale Notice") setting forth (i) the number of
Offered Shares proposed to be sold; (ii) the manner in which the sale is
proposed to be made; and (iii) the price at which or other consideration for
which and the material terms upon which, the sale is proposed to be made.
(ii) Purchase Option - Company. Upon receipt of the Stockholder
-------------------------
Sale Notice, the Company shall then have the right and option (the "Purchase
Option"), for a period ending two (2) business days following its receipt
thereof, to elect to purchase all or any part of the Offered Shares at the
purchase price and upon the terms specified in the Stockholder Sale Notice;
provided, however, that such two (2) business day period shall be extended to
- -------- -------
seven (7) business days in the event any consideration offered for the Offered
Shares consists of rights, interests or property other than money or marketable
securities (in each case, the "Company Exercise Deadline"). If the Company
desires to exercise the Purchase Option, the Company shall, by the Company
Exercise Deadline, deliver to the Selling Stockholder a written notice (the
"Exercise Notice") so informing the Selling Stockholder, and at the time the
Exercise Notice is received by the Selling Stockholder a binding agreement shall
arise between the Selling Stockholder and the Company concerning the sale of
such shares at the price and upon the terms provided in the Stockholder Sale
Notice.
Notwithstanding the foregoing, however, if the Company does not elect
to purchase all of the Offered Shares subject to the right of first refusal
---
pursuant to this Section 7, the Selling Stockholder may sell or dispose of all
of the Offered Shares upon the terms set forth in the Stockholder Sale Notice
and the Offered Shares shall no longer be subject to this Agreement.
Notwithstanding the foregoing, however, this Section 7 shall not apply
to an aggregate of 25,000 Initial Shares which the Stockholders in the aggregate
desire to sell or otherwise dispose of.
(b) Consideration Other Than Money. For purposes hereof, in the
------------------------------
event any consideration offered for the Offered Shares consists of rights,
interests or property other than money, the price allocable to such rights,
interests or
7
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property shall be cash equal to the fair market value of the rights, interests
or property on the date the Company receives the Stockholder Sale Notice, as
agreed upon within three (3) business days after receipt thereof by the Company
and the Selling Stockholder or, if such parties are unable to agree, as
determined within twenty (20) calendar days thereafter by such investment
banking firm as is mutually agreeable to both parties. In the event that the
parties are unable to agree upon an investment banking firm for these purposes,
each party shall name (and bear the costs and expenses of) its own investment
banking firm, which firms, if they are unable to agree upon the fair value,
shall select a third investment banking firm to determine the value pursuant to
this Section 7(b), all in such manner as to insure that the final determination
of fair value is made within twenty (20) calendar days after the Company's
receipt of the Stockholder Sale Notice. All costs and expenses of the third
investment banking firm shall be borne equally by the Selling Stockholder and
the Company, and the time periods for the delivery of any Exercise Notices shall
be extended for the period during which this fair value determination is being
made.
(c) Closing of Purchase Option. The closing of any purchase of the
--------------------------
Offered Shares pursuant to the Purchase Option shall take place at the principal
offices of the Company on the second business day following the delivery of the
Exercise Notice. At the closing, the Selling Stockholder shall deliver to the
Company certificates representing the Offered Shares, duly endorsed for transfer
or accompanied by duly executed stock powers with the signature of the Selling
Stockholder and the Company shall deliver to the Selling Stockholder the
purchase price to be paid as herein provided. The transfer of title to the
Offered Shares at the closing shall be made without representation or warranty
by the Selling Stockholder, except as to his good and marketable title to the
Offered Shares and the absence of any liens, security interests or adverse
claims of any kind arising by, through or under him.
8. Right of First Negotiation.
--------------------------
(a) Option to Negotiate. If, during the period commencing on the
-------------------
date hereof and terminating five (5) years thereafter (the "Restricted Period"),
an Acquisition Transaction is proposed (as defined below), the following
provisions shall apply:
(i) Negotiation Notice. In the event that the Company and/or LHF
------------------
desires to engage in an Acquisition Transaction, it shall give to the
Stockholders a written notice thereof (the "Negotiation Notice").
(ii) Negotiation. Upon receipt of the Negotiation Notice, the
-----------
Stockholders shall then have the right and option, for a period ending thirty
(30) calendar days following their receipt thereof, to negotiate and enter into
a letter of intent (a "Letter of Intent") with the Company setting forth the
terms of an
8
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Acquisition Transaction. The Company and the Stockholders will negotiate in
good faith to enter into a Letter of Intent.
(b) Acquisition Transaction. As used herein, "Acquisition
-----------------------
Transaction" means any of the following: (i) the sale of all or substantially
all of the assets of LHF (an "Asset Sale"), (ii) the sale or other transfer by
Olympic of all or substantially all of LHF's capital stock, including without
limitation, the LHF Stock (a "Stock Sale"), or (iii) LHF's merger,
reorganization or other transaction with a non-affiliate of the Company which
results in a change in control of the LHF (a "Reorganization").
9. Right of First Refusal as to Acquisition Transaction.
----------------------------------------------------
(a) Option to Acquire. If, during the Restricted Period, the
-----------------
parties are unable to enter into a Letter of Intent pursuant to Section 8, and
LHF and/or Olympic proposes to consummate an Acquisition Transaction with
parties other than the Stockholders, the following provisions shall apply:
(i) Sale Notice. The Company shall give to the Stockholders a
-----------
written notice (the "Sale Notice") setting forth (i) a description of the
proposed Acquisition Transaction, and (ii) the price at which or other
consideration for which and the material terms upon which, the Acquisition
Transaction is proposed to be consummated.
(ii) Purchase Option - Stockholders. Upon receipt of the Sale
------------------------------
Notice, the Stockholders shall then have the right and option (the "Stockholders
Purchase Option"), for a period ending forty-eight (48) hours following their
receipt thereof, to elect to: (i) purchase the subject assets at the purchase
price and upon the terms specified in the Sale Notice, if the proposed
Acquisition Transaction is an Asset Sale, (ii) purchase the LHF Stock at the
purchase price and upon the terms specified in the Sale Notice, if the proposed
Acquisition Transaction is Stock Sale, and (iii) act as the acquiring party for
the consideration and upon the terms specified in the Sale Notice, if the
proposed Acquisition Transaction is a Reorganization; provided, however, that
-------- -------
such two (2) business day period shall be extended to seven (7) business days in
the event any consideration offered in connection with such Acquisition
Transaction consists of rights, interests or property other than money or
marketable securities (in each case, the "Stockholders Exercise Deadline"). If
some or all of the Stockholders desire to exercise the Stockholders Purchase
Option, such Stockholders shall, by the Stockholders Exercise Deadline, deliver
to the Company a written notice (the "Stockholders Exercise Notice") so
informing the Company, and at the time the Stockholders Exercise Notice is
received by the Company a binding agreement shall arise between the Company and
the
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<PAGE>
Stockholders concerning the sale of such shares at the price and upon the terms
provided in the Sale Notice.
(b) Consideration Other Than Money. For purposes hereof, in the
------------------------------
event any consideration offered for an Acquisition Transaction consists of
rights, interests or property other than money, the price allocable to such
rights, interests or property shall be cash equal to the fair market value of
the rights, interests or property on the date the Stockholders receive the Sale
Notice, as agreed upon within three (3) business days after receipt thereof by
the Stockholders and the Company or, if such parties are unable to agree, as
determined within twenty (20) calendar days thereafter by such investment
banking firm as is mutually agreeable to both parties. In the event that the
parties are unable to agree upon an investment banking firm for these purposes,
each party shall name (and bear the costs and expenses of) its own investment
banking firm, which firms, if they are unable to agree upon the fair value,
shall select a third investment banking firm to determine the value pursuant to
this Section 9(b) , all in such manner as to insure that the final determination
of fair value is made within twenty (20) calendar days after the Stockholders'
receipt of the Sale Notice. All costs and expenses of the third investment
banking firm shall be borne equally by the Company and the Stockholders, and the
time periods for the delivery of any Stockholders Exercise Notices shall be
extended for the period during which this fair value determination is being
made.
(c) Closing of Stockholders Purchase Option. The closing of any
---------------------------------------
Acquisition Transaction pursuant to the Stockholders Purchase Option shall take
place at the principal offices of the Company, in the case of a Stock Sale, on
the second business day following the delivery of the Stockholders Exercise
Notice, and in the case of an Asset Sale or Reorganization, within a reasonable
period of time following the delivery of the Stockholders Exercise Notice.
(i) If the Acquisition Transaction is a Stock Sale, at the closing,
the Company shall deliver to the Stockholders certificates representing the
subject stock, duly endorsed for transfer or accompanied by duly executed stock
powers with the signature of the Company and the Stockholders shall deliver to
the Company the purchase price to be paid as herein provided. The transfer of
title to the subject stock at the closing shall be made without representation
or warranty by the Company, except as to its good and marketable title thereto
and the absence of any liens, security interests or adverse claims of any kind
arising by, through or under the Company.
(ii) If the Acquisition Transaction is an Asset Sale or a
Reorganization, the parties shall execute and deliver to each other such
agreements and other instruments as are necessary to consummate the Acquisition
Transaction.
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<PAGE>
10. Successors and Assigns. This Agreement shall bind and inure
----------------------
to the benefit of the Company, the Stockholders and, subject to Section 11, the
respective successors and assigns of the Company and the Stockholders.
11. Assignment. The Stockholders may assign their rights hereunder,
----------
in whole or in part, to any purchaser or transferee of some or all of the
Shares; provided, however, that (i) such assignment, transfer or other
-------- -------
disposition of the Shares is effected in accordance with Sections 6 and 7 hereof
and (ii) such purchaser or transferee shall, as a condition to the effectiveness
of such assignment, be required to execute a counterpart to this Agreement
agreeing to be treated as a Stockholder hereunder whereupon such purchaser or
transferee shall have the benefits of, and shall be subject to restrictions
contained in, this Agreement.
12. Entire Agreement. This Agreement contains the entire agreement
----------------
among the parties with respect to the subject matter hereof and supersedes all
prior and contemporaneous arrangements or understandings with respect thereto.
13. Notices. All notices, requests, consents and other
-------
communications hereunder to any party shall be deemed to be sufficient if
contained in a written instrument delivered in person or sent by telecopy,
nationally-recognized overnight courier or first-class registered or certified
mail, return receipt requested, postage prepaid, addressed to such party at the
address set forth on the signature page hereof or such other address as may
hereafter be designated in writing by such party to the other party.
All such notices, requests, consents and other communications shall be
deemed to have been delivered (a) in the case of personal delivery or delivery
by telecopy, on the date of such delivery, (b) in the case of dispatch by
nationally-recognized overnight courier, on the next business day following such
dispatch, and (c) in the case of mailing, on the third business day after the
posting thereof. A copy of each notice sent to any Stockholder should also be
sent to David L. Ficksman, Esq., Loeb & Loeb LLP, 1000 Wilshire Boulevard,
Suite 1800, Los Angeles, California 90017, and a copy of each notice sent to the
Company should also be sent to Alan I. Annex, Esq., Camhy Karlinsky & Stein LLP,
1740 Broadway, 16th Floor, New York, New York 10019.
14. Modifications; Amendments; Waivers. The terms and provisions
----------------------------------
of this Agreement may not be modified or amended, nor may any provision be
waived, except pursuant to a writing signed by the Company and the Stockholders.
15. Counterparts. This Agreement may be executed in any number
------------
of counterparts, and each such counterpart hereof shall be deemed to be an
original instrument, but all such counterparts together shall constitute but one
agreement.
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16. Headings. The headings of the various sections of this
--------
Agreement have been inserted for convenience of reference only and shall not be
deemed to be a part of this Agreement.
17. Governing Law. This Agreement shall be governed by and
-------------
construed in accordance with the laws of the State of California applicable to
contracts made and to be performed wholly therein.
18. Termination. In the event that (a) the Company or LHF, as
-----------
the case may be, fails to timely and properly observe, keep or perform any of
its agreements or covenants under (i) the Exchange Agreement or, (ii) the
Employment Agreements (as defined in the Exchange Agreement, and such failure
shall continue for a period of thirty (30) calendar days, or (b) the
Stockholders become entitled to and do elect to declare the entire unpaid
principal amount of the Promissory Note (as defined in the Exchange Agreement)
together with all accrued interest thereon to be due and payable upon the
occurrence of an Event of Default (as defined in the Promissory Note), then, in
each case, Sections 6 and 7 of this Agreement shall terminate and be of no
further force or effect.
12
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Investor
Rights Agreement on the date first written above.
COMPANY:
OLYMPIC CASCADE FINANCIAL CORPORATION,
a Delaware corporation
By: /s/ Steven A. Rothstein
------------------------------
Steven A. Rothstein
Chairman of the Board
Address:
Olympic Cascade Financial Corporation
1001 Fourth Avenue, Suite 2200
Seattle, Washington 98154
Attention: General Counsel
Telecopier: (206) 343-6132
STOCKHOLDERS:
/s/ Larry H. Friend
----------------------------------
Larry H. Friend
Address:
3333 Michelson Drive, Suite 650
Irvine, California 92612-1686
Fax: (714) 852-0430
/s/ Darren Friend
----------------------------------
Darren Friend
Address:
3333 Michelson Drive, Suite 650
Irvine, California 92612-1686
Fax: (714) 852-0430
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<PAGE>
/s/ Marshall S. Geller
----------------------------------
Marshall S. Geller
Address:
1875 Century Park East, Suite 2200
Los Angeles, California 90067
Fax: (310) 553-0257
/s/ Stephen D. Weinress
----------------------------------
Stephen D. Weinress, Trustee of the
Weinress Family Living Trust dated
March 26, 1996
Address:
1875 Century Park East, Suite 2200
Los Angeles, California 90067
Fax: (310) 229-3740
/s/ Catherine M. Weinress
----------------------------------
Catherine M. Weinress, Trustee of
the Weinress Family Living Trust
dated March 26, 1996
Address:
1875 Century Park East, Suite 2200
Los Angeles, California 90067
Fax: (310) 229-3740
/s/ Carl Franskson, Jr.
----------------------------------
Carl Frankson, Jr.
Address:
3333 Michelson Drive, Suite 650
Irvine, California 92612-1686
Fax: (714) 852-0430
S-2
<PAGE>
/s/ Gregory E. Presson
----------------------------------
Gregory E. Presson
Address:
3333 Michelson Drive, Suite 650
Irvine, California 92612-1686
Fax: (714) 852-0430
/s/ Marjorie E. Goddard
----------------------------------
Marjorie E. Goddard
Address:
1875 Century Park East, Suite 2200
Los Angeles, California 90067
Fax: (310) 229-3740
/s/ Kenneth L. Fader
----------------------------------
Kenneth L. Fader
Address:
3333 Michelson Drive, Suite 650
Irvine, California 92612-1686
Fax: (714) 852-0430
S-3
