Exhibit 10.48
SECURITIES PURCHASE AGREEMENT
THIS SECURITIES PURCHASE AGREEMENT ("Agreement") is made as of the
11th day of January, 2006 by and among Olympic Cascade Financial Corporation, a
Delaware corporation (the "Company"), and the Investors set forth on the
signature pages affixed hereto (each an "Investor" and collectively the
"Investors").
Recitals
A. The Company and the Investors are executing and delivering this
Agreement in reliance upon the exemption from securities registration afforded
by the provisions of Regulation D ("Regulation D"), as promulgated by the U.S.
Securities and Exchange Commission (the "SEC") under the Securities Act of 1933,
as amended; and
B. The Investors wish to purchase from the Company, and the Company
wishes to sell and issue to the Investors, upon the terms and conditions stated
in this Agreement, (i) an aggregate of 10,000 shares of Series B Convertible
Preferred Stock, par value $0.01 per share (the "Preferred Stock"), such
Preferred Stock to have the relative rights, preferences and designations set
forth in the Certificate of Designations set forth in Exhibit A hereto (the
"Certificate of Designations"), at a purchase price of $100.00 per share, (ii)
11% convertible promissory notes in the principal amount of $1,000,000 (the
"Notes"), in the form attached as Exhibit B hereto and (iii) warrants to
purchase an aggregate of 300,000 shares of common stock, par value $0.02 per
share, of the Company (together with any securities into which the common stock
may be reclassified, the "Common Stock") at an exercise price of $1.00 per share
(subject to adjustment) in the form attached hereto as Exhibit C (the
"Warrants"); and
C. Contemporaneous with the sale of the Preferred Stock, the Notes
and Warrants, the parties hereto will execute and deliver a Registration Rights
Agreement, in the form attached hereto as Exhibit D (the "Registration Rights
Agreement"), pursuant to which the Company will agree to provide certain
registration rights under the Securities Act of 1933, as amended, and the rules
and regulations promulgated thereunder, and applicable state securities laws.
In consideration of the mutual promises made herein and for other
good and valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereto agree as follows:
1. Definitions. In addition to those terms defined above and elsewhere in
this Agreement, for the purposes of this Agreement, the following terms shall
have the meanings set forth below:
"Affiliate" means, with respect to any Person, any other Person
which directly or indirectly through one or more intermediaries Controls, is
controlled by, or is under common control with, such Person.
"Business Day" means a day, other than a Saturday or Sunday, on
which banks in New York City are open for the general transaction of business.
"Company's Knowledge" means the actual knowledge of the executive
officers (as defined in Rule 405 under the 1933 Act) of the Company, after due
inquiry.
"Control" (including the terms "controlling", "controlled by" or
"under common control with") means the possession, direct or indirect, of the
power to direct or cause the direction of the management and policies of a
Person, whether through the ownership of voting securities, by contract or
otherwise.
"Conversion Shares" means the shares of Common Stock issuable upon
conversion of (i) the Preferred Stock and (ii) the Notes.
"Effective Date" means the date on which the initial Registration
Statement is declared effective by the SEC.
"Effectiveness Deadline" means the date on which the initial
Registration Statement is required to be declared effective by the SEC under the
terms of the Registration Rights Agreement.
"Intellectual Property" means all of the following: (i) patents,
patent applications, patent disclosures and inventions (whether or not
patentable and whether or not reduced to practice); (ii) trademarks, service
marks, trade dress, trade names, corporate names, logos, slogans and Internet
domain names, together with all goodwill associated with each of the foregoing;
(iii) copyrights and copyrightable works; (iv) registrations, applications and
renewals for any of the foregoing; and (v) proprietary computer software
(including but not limited to data, data bases and documentation).
"Material Adverse Effect" means a material adverse effect on (i) the
assets, liabilities, results of operations, condition (financial or otherwise),
or business of the Company and its Subsidiaries taken as a whole, or (ii) the
ability of the Company to perform its obligations under the Transaction
Documents.
"Notes" means the 11% Convertible Promissory Notes being purchased
by the Investors hereunder.
"Person" means an individual, corporation, partnership, limited
liability company, trust, business trust, association, joint stock company,
joint venture, sole proprietorship, unincorporated organization, governmental
authority or any other form of entity not specifically listed herein.
"Purchase Price" means Two Million Dollars ($2,000,000.00).
"SEC Filings" has the meaning set forth in Section 4.6.
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"Registration Statement" has the meaning set forth in the
Registration Rights Agreement.
"Regulatory Violation" shall mean, with respect to St. Cloud, (i) a
diversion of the proceeds of the issuance by Company of the St. Cloud Note from
the use reported thereof on the SBA form No. 1031 delivered at the Closing, if
such diversion was effected without obtaining the prior written consent of St.
Cloud (which may be withheld in its sole discretion) or (ii) a change in the
principal business activity of Company and its Subsidiaries to an ineligible
business activity (within the meaning of the SBIC Regulations) if such change
occurs within one year after the date of the initial transactions hereunder.
"SBIC" shall mean a small business investment company licensed under
the SBIC Act.
"SBIC Act" shall mean the Small Business Investment Act of 1958, as
amended.
"SBIC Regulations" shall mean the Small Business Investment Company
Act of 1958, as amended, and the regulations issued by the SBA thereunder,
codified at Title 13 of the Code of Federal Regulations ("13 C.F.R."), 107 and
121, as amended.
"Securities" means the Shares, the Notes, the Warrants, the
Conversion Shares and the Warrant Shares.
"Series B Preferred Stock" means the Company's Series B Convertible
Preferred Stock, par value $0.01 per share.
"Shares" means the shares of Series B Preferred Stock being
purchased by the Investors hereunder.
"St. Cloud" means St Cloud Capital Partners, L.P.
"Subsidiary" of any Person means another Person, an amount of the
voting securities, other voting ownership or voting partnership interests of
which is sufficient to elect at least a majority of its Board of Directors or
other governing body (or, if there are no such voting interests, 50% or more of
the equity interests of which) is owned directly or indirectly by such first
Person.
"Transaction Documents" means this Agreement, the Certificate of
Designations, the Notes, the Warrants and the Registration Rights Agreement.
"Warrant Shares" means the shares of Common Stock issuable upon the
exercise of the Warrants.
"1933 Act" means the Securities Act of 1933, as amended, or any
successor statute, and the rules and regulations promulgated thereunder.
"1934 Act" means the Securities Exchange Act of 1934, as amended, or
any successor statute, and the rules and regulations promulgated thereunder.
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2. Purchase and Sale of the Shares, Notes and Warrants. Subject to the
terms and conditions of this Agreement, on the Closing Date, each of the
Investors shall severally, and not jointly, purchase, and the Company shall sell
and issue to the Investors, the Shares, the Notes and Warrants in the respective
amounts set forth opposite the Investors' names on the signature pages attached
hereto in exchange for the Purchase Price as specified in Section 3 below.
3. Closing. Upon confirmation that the other conditions to closing
specified herein have been satisfied or duly waived by the Investors, the
Company shall file the Certificate of Designations with the Secretary of State
of Delaware. Upon confirmation that the Certificate of Designations has been
filed and has become effective, the Company shall deliver to Latham & Watkins
LLP, in trust, a certificate or certificates, registered in such name or names
as the Investors may designate, representing the Shares and Warrants, along with
original instrument or instruments, registered in such name or names as the
Investors may designate, representing the Notes, with instructions that such
certificates and instruments are to be held for release to the Investors only
upon payment in full of the Purchase Price to the Company by all the Investors.
Upon such receipt by Latham & Watkins LLP of the certificates and instruments,
each Investor shall promptly, but no more than one Business Day thereafter,
cause a wire transfer in same day funds to be sent to the account of the Company
as instructed in writing by the Company, in an amount representing such
Investor's pro rata portion of the Purchase Price as set forth on the signature
pages to this Agreement. On the date (the "Closing Date") the Company receives
the Purchase Price, the certificates evidencing the Shares and Warrants and
instruments evidencing the Notes shall be released to the Investors (the
"Closing"). The Closing of the purchase and sale of the Shares, Notes and
Warrants shall take place at the offices of Littman Krooks LLP, 655 Third
Avenue, 20th Floor, New York, New York 10017 (or remotely via the exchange of
documents and signatures), or at such other location and on such other date as
the Company and the Investors shall mutually agree.
4. Representations and Warranties of the Company. The Company hereby
represents and warrants to the Investors that, except as set forth in the
schedules delivered herewith (collectively, the "Disclosure Schedules"):
4. 1 Organization, Good Standing and Qualification. Each of the
Company and its Subsidiaries is a corporation duly organized, validly existing
and in good standing under the laws of the jurisdiction of its incorporation and
has all requisite corporate power and authority to carry on its business as now
conducted and to own its properties. Each of the Company and its Subsidiaries is
duly qualified to do business as a foreign corporation and is in good standing
in each jurisdiction in which the conduct of its business or its ownership or
leasing of property makes such qualification or leasing necessary unless the
failure to so qualify has not and could not reasonably be expected to have a
Material Adverse Effect. The Company's Subsidiaries are listed on Schedule 4.1
hereto.
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4.2 Authorization. The Company has full power and authority and has
taken all requisite action on the part of the Company necessary for (i) the
authorization, execution and delivery of the Transaction Documents, (ii) the
authorization of the performance of all obligations of the Company hereunder or
thereunder and (iii) the authorization, issuance (or reservation for issuance)
and delivery of the Securities. The Transaction Documents constitute the legal,
valid and binding obligations of the Company, enforceable against the Company in
accordance with their terms, subject to bankruptcy, insolvency, fraudulent
transfer, reorganization, moratorium and similar laws of general applicability,
relating to or affecting creditors' rights generally.
4.3 Capitalization. Schedule 4.3 sets forth the authorized capital
stock of the Company on the date hereof. All of the issued and outstanding
shares of the Company's capital stock have been duly authorized and validly
issued, fully paid, and nonassessable. Except as described on Schedule 4.3,
there are no outstanding warrants, options, convertible securities or other
rights, agreements or arrangements of any character under which the Company or
any of its Subsidiaries is obligated to issue any equity securities of any kind.
Except as described on Schedule 4.3, except for the Registration Rights
Agreement, there are no voting agreements, buy-sell agreements, option or right
of first purchase agreements or other agreements of any kind among the Company
and any of the securityholders of the Company relating to the securities of the
Company held by them.
4.4 Valid Issuance. The Shares, the Conversion Shares and the
Warrant Shares have been duly and validly authorized. Upon the due conversion of
the Shares and Notes, the Conversion Shares will be validly issued, fully paid
and nonassessable, and shall be free and clear of all encumbrances and
restrictions, except for restrictions on transfer set forth in the Transaction
Documents or imposed by applicable securities laws and except for those created
by the Investors. Upon the due exercise of the Warrants and payment of the
exercise price thereunder, the Warrant Shares will be validly issued, fully paid
and nonassessable, and shall be free and clear of all encumbrances and
restrictions, except for restrictions on transfer set forth in the Transaction
Documents or imposed by applicable securities laws and except for those created
by the Investors.
4.5 Consents. The execution, delivery and performance by the Company
of the Transaction Documents and the offer, issuance and sale of the Securities
require no consent of, action by or in respect of, or filing with, any Person,
governmental body, agency, or official other than filings that have been made
pursuant to applicable state securities laws and post-sale filings pursuant to
applicable state and federal securities laws which the Company undertakes to
file within the applicable time periods.
4.6 Delivery of SEC Filings. The Company has made available to the
Investors through the EDGAR system, true and complete copies of the Company's
most recent Annual Report on Form 10-K for the fiscal year ended September 30,
2005 (the "2005 10-K"), and all other reports filed by the Company pursuant to
the 1934 Act since the filing of the 2005 10-K, if any and prior to the date
hereof (collectively, the "SEC Filings").
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4.7 Use of Proceeds. The net proceeds of the sale of the Shares,
Notes and the Warrants hereunder shall be used by the Company for (i) retirement
of certain outstanding indebtedness and (ii) working capital and general
corporate purposes.
4.8 No Material Adverse Change. Since September 30, 2005, except as
identified and described in the SEC Filings, there has not been any change in
the consolidated assets, liabilities, financial condition or operating results
of the Company from that reflected in the financial statements included in the
2005 10-K, except for changes in the ordinary course of business which have not
had and could not reasonably be expected to have a Material Adverse Effect,
individually or in the aggregate.
4.9 SEC Filings. At the time of filing thereof, the SEC Filings
complied as to form in all material respects with the requirements of the 1934
Act and did not contain any untrue statement of a material fact or omit to state
any material fact necessary in order to make the statements made therein, in the
light of the circumstances under which they were made, not misleading.
4.10 No Conflict, Breach, Violation or Default. The execution,
delivery and performance of the Transaction Documents by the Company and the
issuance and sale of the Securities will not conflict with or result in a breach
or violation of any of the terms and provisions of, or constitute a default
under (i) the Company's Certificate of Incorporation or the Company's Bylaws,
both as in effect on the date hereof (true and complete copies of which have
been made available to the Investors through the EDGAR system), or (ii)(a) any
statute, rule, regulation or order of any governmental agency or body or any
court, domestic or foreign, having jurisdiction over the Company, any Subsidiary
or any of their respective assets or properties, or (b) any agreement or
instrument to which the Company or any Subsidiary is a party or by which the
Company or a Subsidiary is bound or to which any of their respective assets or
properties is subject.
4.11 Tax Matters. The Company and each Subsidiary has prepared and
filed all tax returns required to have been filed by the Company or such
Subsidiary with all appropriate governmental agencies and timely paid all taxes
shown thereon or otherwise owed by it. The charges, accruals and reserves on the
books of the Company in respect of taxes for all fiscal periods are adequate in
all material respects, and there are no material unpaid assessments against the
Company or any Subsidiary nor, to the Company's Knowledge, any basis for the
assessment of any additional taxes, penalties or interest for any fiscal period
or audits by any federal, state or local taxing authority except for any
assessment which is not material to the Company and its Subsidiaries, taken as a
whole. All taxes and other assessments and levies that the Company or any
Subsidiary is required to withhold or to collect for payment have been duly
withheld and collected and paid to the proper governmental entity or third party
when due. There are no tax liens or claims pending or, to the Company's
Knowledge, threatened against the Company or any Subsidiary or any of their
respective assets or property. Except as described on Schedule 4.11, there are
no outstanding tax payment or tax sharing agreements or other such arrangements
between the Company and any Subsidiary or other corporation or entity.
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4.12 Title to Properties. Except as disclosed in the SEC Filings,
the Company and each Subsidiary has good and marketable title to all properties
and assets owned by it, in each case free from liens, encumbrances and defects
that would materially affect the value thereof or materially interfere with the
use made or currently planned to be made thereof by them; and except as
disclosed in the SEC Filings, the Company and each Subsidiary holds any leased
real or personal property under valid and enforceable leases with no exceptions
that would materially interfere with the use made or currently planned to be
made thereof by them.
4.13 Certificates, Authorities and Permits. Except as disclosed in
the SEC Filings, the Company and each Subsidiary possess adequate certificates,
authorities or permits issued by appropriate governmental agencies or bodies
necessary to conduct the business now operated by it, and neither the Company
nor any Subsidiary has received any notice of proceedings relating to the
revocation or modification of any such certificate, authority or permit that, if
determined adversely to the Company or such Subsidiary, could reasonably be
expected to have a Material Adverse Effect, individually or in the aggregate.
4.14 Labor Matters.
(a) The Company is not a party to or bound by any collective
bargaining agreements or other agreements with labor organizations. The Company
has not violated in any material respect any laws, regulations, orders or
contract terms, affecting the collective bargaining rights of employees, labor
organizations or any laws, regulations or orders affecting employment
discrimination, equal opportunity employment, or employees' health, safety,
welfare, wages and hours.
(b) The Company is, and at all times has been, in compliance in all
material respects with all applicable laws respecting employment (including laws
relating to classification of employees and independent contractors) and
employment practices, terms and conditions of employment, wages and hours, and
immigration and naturalization.
4.15 Intellectual Property. All Intellectual Property of the Company
and its Subsidiaries is currently in compliance with all legal requirements
(including timely filings, proofs and payments of fees) and, to the Company's
Knowledge, is valid and enforceable. No Intellectual Property of the Company or
its Subsidiaries which is necessary for the conduct of Company's and each of its
Subsidiaries' respective businesses as currently conducted or as currently
proposed to be conducted has been or is now involved in any cancellation,
dispute or litigation, and, to the Company's Knowledge, no such action is
threatened.
4.16 Environmental Matters. Neither the Company nor any Subsidiary
is in violation of any statute, rule, regulation, decision or order of any
governmental agency or body or any court, domestic or foreign, relating to the
use, disposal or release of hazardous or toxic substances or relating to the
protection or restoration of the environment or human exposure to hazardous or
toxic substances (collectively, "Environmental Laws"), owns or operates any real
property contaminated with any substance that is subject to any Environmental
Laws, is liable for any off-site disposal or contamination pursuant to any
Environmental Laws, and is subject to any claim relating to any Environmental
Laws, which violation, contamination, liability or claim has had or could
reasonably be expected to have a Material Adverse Effect, individually or in the
aggregate; and there is no pending or, to the Company's Knowledge, threatened
investigation that might lead to such a claim.
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4.17 Litigation. Except as described in the SEC Filings or on
Schedule 4.17, there are no pending actions, suits or proceedings against or
affecting the Company, its Subsidiaries or any of its or their properties; and
to the Company's Knowledge, no such actions, suits or proceedings are threatened
or contemplated.
4.18 Financial Statements. The financial statements included in each
SEC Filing present fairly, in all material respects, the consolidated financial
position of the Company as of the dates shown and its consolidated results of
operations and cash flows for the periods shown, and such financial statements
have been prepared in conformity with United States generally accepted
accounting principles applied on a consistent basis ("GAAP") (except as may be
disclosed therein or in the notes thereto, and, in the case of quarterly
financial statements, as permitted by Form 10-Q under the 1934 Act). Except as
set forth in the financial statements of the Company included in the SEC Filings
filed prior to the date hereof, neither the Company nor any of its Subsidiaries
has incurred any liabilities, contingent or otherwise, except those incurred in
the ordinary course of business, consistent (as to amount and nature) with past
practices since the date of such financial statements, none of which,
individually or in the aggregate, have had or could reasonably be expected to
have a Material Adverse Effect.
4.19 Insurance Coverage. The Company and each Subsidiary maintains
in full force and effect insurance coverage that is customary for comparably
situated companies for the business being conducted and properties owned or
leased by the Company and each Subsidiary, and the Company reasonably believes
such insurance coverage to be adequate against all liabilities, claims and risks
against which it is customary for comparably situated companies to insure.
4.20 Brokers and Finders. No Person will have, as a result of the
transactions contemplated by the Transaction Documents, any valid right,
interest or claim against or upon the Company, any Subsidiary or an Investor for
any commission, fee or other compensation pursuant to any agreement, arrangement
or understanding entered into by or on behalf of the Company.
4.21 No Directed Selling Efforts or General Solicitation. Neither
the Company nor any Person acting on its behalf has conducted any general
solicitation or general advertising (as those terms are used in Regulation D) in
connection with the offer or sale of any of the Securities.
4.22 Private Placement. Subject to the accuracy of the Investors'
representations in Section 5 of this Agreement, the offer and sale of the
Securities to the Investors as contemplated hereby is exempt from the
registration requirements of the 1933 Act.
4.23 Small Business Matters.
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(a) The Company acknowledges that St. Cloud is a federally licensed
SBIC under the SBIC Act. Company, together with its "affiliates" (as that term
is defined in 13 C.F.R. Section 121.103), is a "small business concern" within
the meaning of the SBIC Regulations, including 13 C.F.R. Section 121.103. After
giving effect to the transactions contemplated by the Transaction Documents,
Company will have 500 or fewer full-time equivalent employees. The information
regarding Company and its affiliates set forth in the SBA forms Nos. 480, 652
and 1031 delivered at the Closing is accurate and complete. Copies of such forms
have been completed and executed by Company and delivered to St. Cloud at the
Closing together with a written statement of Company regarding its planned use
of the proceeds from the transactions contemplated by the Transaction Documents.
The Company does not presently engage in, and it shall not hereafter engage in,
any activities, nor shall it use directly or indirectly the proceeds of the
transactions contemplated by the Transaction Documents for any purpose, for
which an SBIC is prohibited from providing funds by the SBIC Regulations
(including 13 C.F.R. Section 107.720).
(b) The primary business activity of Company does not involve,
directly or indirectly, providing funds to others, purchasing or discounting
debt obligations, factoring or long-term leasing of equipment with no provision
for maintenance or repair, and Company is not classified under Section 53 (Real
Estate) of the North American Industry Classification System manual. The assets
of the business of Company (the "Business") will not be reduced or consumed,
generally without replacement, as the life of the Business progresses, and the
nature of the Business does not require that a stream of cash payments be made
to the Business's financing sources, on a basis associated with the continuing
sale of assets.
4.24 Sarbanes Oxley Act. The Company is in compliance in all
material respects with applicable requirements of the Sarbanes-Oxley Act of 2002
and applicable rules and regulations promulgated by the SEC thereunder in effect
as of the date of this Agreement, except where such noncompliance could not be
reasonably expected to have, individually or in the aggregate, a Material
Adverse Effect.
4.25 Disclosure. The Transaction Documents, including the Schedules
to this Agreement, as the same relate to the Company, are true and correct in
all material respects and do not contain any untrue statement of a material fact
or omit to state any material fact necessary in order to make the statements
made therein, in the light of the circumstances under which they were made, not
misleading; it being understood that the Company has not provided the Investors,
and the Investors are not relying on, any information constituting a forecast or
projection.
5. Representations, Warranties and Covenants of the Investors. Each of the
Investors hereby severally, and not jointly, represents, warrants and covenants
to the Company that:
5.1 Organization and Existence. Such Investor is a validly existing
corporation, limited partnership or limited liability company and has all
requisite corporate, partnership or limited liability company power and
authority to invest in the Securities pursuant to this Agreement. Such Investor
was not formed solely for the purpose of investing in the Securities.
5.2 Authorization. The execution, delivery and performance by such
Investor of the Transaction Documents to which such Investor is a party have
been duly authorized and will each constitute the valid and legally binding
obligation of such Investor, enforceable against such Investor in accordance
with their respective terms, subject to bankruptcy, insolvency, fraudulent
transfer, reorganization, moratorium and similar laws of general applicability,
relating to or affecting creditors' rights generally.
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5.3 Purchase Entirely for Own Account. The Securities to be received
by such Investor hereunder will be acquired for such Investor's own account, not
as nominee or agent, and not with a view to the resale or distribution of any
part thereof in violation of the 1933 Act, and such Investor has no present
intention of selling, granting any participation in, or otherwise distributing
the same in violation of the 1933 Act without prejudice, however, to such
Investor's right at all times to sell or otherwise dispose of all or any part of
such Securities in compliance with applicable federal and state securities laws.
Nothing contained herein shall be deemed a representation or warranty by such
Investor to hold the Securities for any period of time. Neither such Investor
nor any Affiliate of such Investor is a broker-dealer registered with the SEC
under the 1934 Act or an entity engaged in a business that would require it to
be so registered.
5.4 Investment Experience. Such Investor acknowledges that it can
bear the economic risk and complete loss of its investment in the Securities and
has such knowledge and experience in financial or business matters that it is
capable of evaluating the merits and risks of the investment contemplated
hereby.
5.5 Disclosure of Information. Such Investor has had an opportunity
to receive all information related to the Company requested by it and to ask
questions of and receive answers from the Company regarding the Company, its
business and the terms and conditions of the offering of the Securities. Such
Investor acknowledges receipt of and has reviewed copies of the SEC Filings.
5.6 Restricted Securities. Such Investor understands that the
Securities are characterized as "restricted securities" under the U.S. federal
securities laws inasmuch as they are being acquired from the Company in a
transaction not involving a public offering and that under such laws and
applicable regulations such securities may be resold without registration under
the 1933 Act only in certain limited circumstances.
5.7 Legends. It is understood that, except as provided below,
certificates and instruments evidencing the Securities may bear the following or
any similar legend:
(a) "The securities represented hereby may not be transferred
unless (i) such securities have been registered for sale pursuant to the
Securities Act of 1933, as amended, (ii) such securities may be sold pursuant to
Rule 144(k), or (iii) the Company has received an opinion of counsel reasonably
satisfactory to it that such transfer may lawfully be made without registration
under the Securities Act of 1933 or qualification under applicable state
securities laws."
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(b) If required by the authorities of any state in connection
with the issuance of sale of the Securities, the legend required by such state
authority.
5.8 Accredited Investor. Such Investor is an accredited
investor as defined in Rule 501(a) of Regulation D, as amended, under the
1933 Act.
5.9 No General Solicitation. Such Investor did not learn of
the investment in the Securities as a result of any public advertising or
general solicitation.
5.10 Brokers and Finders. No Person will have, as a result of the
transactions contemplated by the Transaction Documents, any valid right,
interest or claim against or upon the Company, any Subsidiary or an Investor for
any commission, fee or other compensation pursuant to any agreement, arrangement
or understanding entered into by or on behalf of such Investor.
5.11 Prohibited Transactions. During the last thirty (30) days prior
to the date hereof, neither such Investor nor any Affiliate of such Investor
which (x) had knowledge of the transactions contemplated hereby, (y) has or
shares discretion relating to such Investor's investments or trading or
information concerning such Investor's investments, including in respect of the
Securities, or (z) is subject to such Investor's review or input concerning such
Affiliate's investments or trading (collectively, "Trading Affiliates") has,
directly or indirectly, effected or agreed to effect (i) any purchase or long
sale of the Company's securities or (ii) any short sale, whether or not against
the box, established any "put equivalent position" (as defined in Rule 16a-1(h)
under the 1934 Act) with respect to the Common Stock, granted any other right
(including, without limitation, any put or call option) with respect to the
Common Stock or with respect to any security that includes, relates to or
derived any significant part of its value from the Common Stock or otherwise
sought to hedge its position in the Securities (each of such transactions
specified in this clause (ii), a "Prohibited Transaction"). Prior to the
earliest to occur of (i) the termination of this Agreement, (ii) the Effective
Date or (iii) the Effectiveness Deadline, such Investor shall not, and shall
cause its Trading Affiliates not to, engage, directly or indirectly, in a
Prohibited Transaction. Such Investor acknowledges that the representations,
warranties and covenants contained in this Section 5.11 are being made for the
benefit of the Investors as well as the Company and that each of the other
Investors shall have an independent right to assert any claims against such
Investor arising out of any breach or violation of the provisions of this
Section 5.11.
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5.12 Voting Matters; Stock Option Pool, Etc. Such Investor has been
apprised of the Company's intention to submit for approval to its shareholders
in the Company's next proxy statement proposals providing for (i) an additional
stock option pool for up to 10% of the Company's fully diluted outstanding
shares in such form established and approved by the Company's Board of Directors
and (ii) a reduction to the conversion price of the Company's Series A Preferred
Stock from $1.50 to $1.25 per share to be set forth in an amendment to the
Company's Certificate of Incorporation. Subject to its existing fiduciary
obligations under applicable laws, each Investor agrees to vote in favor of the
foregoing proposals and shall take such further action, including the execution
of a voting agreement, as may hereinafter be requested by the Company in this
regard. In addition, such Investor has been apprised of the Company's intention
that the Board of Directors adopt a cash bonus plan for its senior management
and subject to existing fiduciary duties under applicable laws, shall cause its
designee to the Board to vote in favor of the adoption of such plan subject to
such director's fiduciary obligations.
6. Conditions to Closing.
6.1 Conditions to the Investors' Obligations. The obligation of each
Investor to purchase the Shares, Notes and the Warrants at the Closing is
subject to the fulfillment to such Investor's satisfaction, on or prior to the
Closing Date, of the following conditions, any of which may be waived by such
Investor (as to itself only):
(a) The representations and warranties made by the Company in
Section 4 hereof qualified as to materiality shall be true and correct at all
times prior to and on the Closing Date, except to the extent any such
representation or warranty expressly speaks as of an earlier date, in which case
such representation or warranty shall be true and correct as of such earlier
date, and, the representations and warranties made by the Company in Section 4
hereof not qualified as to materiality shall be true and correct in all material
respects at all times prior to and on the Closing Date, except to the extent any
such representation or warranty expressly speaks as of an earlier date, in which
case such representation or warranty shall be true and correct in all material
respects as of such earlier date. The Company shall have performed in all
material respects all obligations and conditions herein required to be performed
or observed by it on or prior to the Closing Date.
(b) The Company shall have obtained any and all consents,
permits, approvals, registrations and waivers necessary or appropriate for
consummation of the purchase and sale of the Securities and the consummation of
the other transactions contemplated by the Transaction Documents, all of which
shall be in full force and effect.
(c) No judgment, writ, order, injunction, award or decree of
or by any court, or judge, justice or magistrate, including any bankruptcy court
or judge, or any order of or by any governmental authority, shall have been
issued, and no action or proceeding shall have been instituted by any
governmental authority, enjoining or preventing the consummation of the
transactions contemplated hereby or in the other Transaction Documents.
(d) The Company shall have paid one designee of the Investors
a closing fee equal to $20,000.
(e) The Company shall have executed and delivered the
Registration Rights Agreement.
(f) The Company shall have delivered a Certificate, executed
on behalf of the Company by its Chief Executive Officer or its Chief Financial
Officer, dated as of the Closing Date, certifying to the fulfillment of the
conditions specified in subsections (a), (b) and (c) of this Section 6.1.
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(g) The Company shall have delivered a Certificate, executed
on behalf of the Company by its Secretary, dated as of the Closing Date,
certifying the resolutions adopted by the Board of Directors of the Company
approving the transactions contemplated by this Agreement and the other
Transaction Documents, and the issuance of the Securities, certifying the
current versions of the Certificate of Incorporation and Bylaws of the Company
and certifying as to the signatures and authority of persons signing the
Transaction Documents and related documents on behalf of the Company.
(h) The Investors shall have received an opinion of counsel to
the Company substantially in the form attached hereto as Exhibit E.
6.2 Conditions to Obligations of the Company. The Company's
obligation to sell and issue the Shares, Notes and the Warrants at the Closing
is subject to the fulfillment to the satisfaction of the Company on or prior to
the Closing Date of the following conditions, any of which may be waived by the
Company:
(a) The representations and warranties made by the Investors
in Section 5 hereof, other than the representations and warranties contained in
Sections 5.3, 5.4, 5.5, 5.6, 5.7, 5.8 and 5.9 (the "Investment
Representations"), shall be true and correct in all material respects when made,
and shall be true and correct in all material respects on the Closing Date with
the same force and effect as if they had been made on and as of said date. The
Investment Representations shall be true and correct in all respects when made,
and shall be true and correct in all respects on the Closing Date with the same
force and effect as if they had been made on and as of said date. The Investors
shall have performed in all material respects all obligations and conditions
herein required to be performed or observed by them on or prior to the Closing
Date.
(b) The Investors shall have executed and delivered the
Registration Rights Agreement.
(c) The Investors shall have delivered or caused to be
delivered the Purchase Price to the Company.
7. Covenants and Agreements of the Company.
7.1 Reservation of Common Stock. The Company shall at all times
reserve and keep available out of its authorized but unissued shares of Common
Stock, solely for the purpose of providing for the conversion of the Notes and
the Shares and the exercise of the Warrants, such number of shares of Common
Stock as shall from time to time equal the number of shares sufficient to permit
the issuance of the Conversion Shares and the Warrant Shares pursuant to the
Transaction Documents in accordance with their respective terms.
7.2 No Conflicting Agreements. The Company will not take any action,
enter into any agreement or make any commitment that would conflict or interfere
in any material respect with the Company's obligations to the Investors under
the Transaction Documents.
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7.3 Insurance. The Company shall not materially reduce the insurance
coverages described in Section 4.19.
7.4 Compliance with Laws. The Company will comply in all material
respects with all applicable laws, rules, regulations, orders and decrees of all
governmental authorities.
7.5 Board Composition. At or promptly following the Closing, one
nominee of SCC (as hereinafter defined) reasonably acceptable to the Company
shall be elected by the Board of Directors of the Company to fill an existing
vacancy on the Board of Directors and the Company shall undertake to include
such nominee in its proxy statement for the Company's 2006 Annual Meeting to
continue to serve on the Company's Board of Directors.
7.6 Board Observer Rights. So long as St. Cloud Capital Partners,
L.P. ("SCC") or any of its Affiliates are the beneficial owners (as defined
under Rule 13d-3 promulgated under the 1934 Act) of at least 10% of the Common
Stock (as determined pursuant to such Rule 13d-3), the Company shall give SCC
written notice of each meeting of the Company's Board of Directors and each
committee thereof at least at the same time and in the same manner as notice is
given to the directors, and the Company shall permit a representative of SCC to
attend as an observer all meetings of the Company's Board of Directors and all
committees thereof; provided that in the case of telephonic meetings conducted
in accordance with the Company's bylaws and applicable law, the SCC
representative shall be given the opportunity to listen to such telephonic
meetings; and provided, further, that the Company shall have the right to
exclude the SCC representative from any portion of a meeting if, in the good
faith judgment of the Company's counsel, the inclusion of the SCC representative
therein would result in the waiver of any applicable privilege. The SCC
representative shall be entitled to receive all written materials and other
information (including without limitation copies of meeting minutes) given to
directors in connection with such meetings at the same time such materials and
information are given to the directors; provided, however, that the Company
shall have the right to provide information to the SCC representative if, in the
good faith judgment of the Company's counsel, the provision of such information
to the SCC representative would result in the waiver of any applicable
privilege. If the Company proposes to take any action by written consent in lieu
of a meeting of its Board of Directors or of any committee thereof, the Company
shall give written notice thereof to the SCC representative and each of the
Company's directors prior to the effective date of such consent describing in
reasonable detail the nature and substance of such action. The Company shall pay
the reasonable out-of-pocket expenses of the SCC representative incurred in
connection with attending such board and committee meetings.
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7.7 Certain Negative Covenants. From and after the date of this
Agreement and for so long as any Notes remain outstanding, the Company shall not
without first obtaining the approval (by vote or written consent, as provided by
law) of the holders of a majority of the outstanding principal face amount of
the Notes, which consent shall not be unreasonably withheld or delayed, take any
of the following actions:
(a) Incur additional indebtedness, provided however that the Company may
incur additional indebtedness so long as the total indebtedness of the Company
after taking into account such additional indebtedness does not exceed the sum
of (i) the total existing indebtedness of the Company as of the date hereof
(inclusive of the indebtedness represented by the Notes) and (ii) $500,000. In
addition, the foregoing restriction shall not preclude (i) additional debt that
is expressly subordinated to the Note, as evidenced by a subordination agreement
reasonably acceptable to the holder of the Notes and (ii) indebtedness under
purchase money security interests incurred in the ordinary course of business;
(b) Pay or authorize any dividend or make or authorize any distribution or
payment upon any of its common stock equity securities;
(c) Make loans, advances to, guarantees for the benefit of, or investments
in, any Person except investments made in the ordinary course of business in (A)
obligations of the United States government or any agency thereof or obligations
guaranteed by the United States government, (B) certificates of deposit of
commercial banks insured by the Federal Deposit Insurance Corporation, or (C)
commercial paper with a rating of at least Prime-l according to Moody's
Investors Service, Inc., in each case having a maturity not in excess of one (1)
year;
(d) Enter into the active management or operation of any business other
than the business currently conducted by Company and a similar business;
(e) Enter into any transaction with any shareholder, officer, or employee
of Company other than in the ordinary course of business which shall in the
aggregate exceed twenty-five thousand dollars ($25,000) outstanding at any one
time, except that Company may enter into "at-will" employment arrangements;
(f) Enter into employment agreements not terminable at will with new or
existing employees (other than employment agreements with senior management that
are approved by the Board); or renew any existing employment agreements with
non-senior management (except those which are terminable at will) or establish
or modify equity options (unless approved by the Board), retirement allowances,
pensions and remuneration of Directors (unless approved by the Board),
consultants or strategic partners of Company;
(g) Allow any officer of Company to use any assets of Company in such a
manner as would violate such person's fiduciary duties to Company or its
shareholders;
(h) Enter or consummate any off-balance sheet transactions other than
operating leases;
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(i) Change the tax or accounting policies of Company, other than to comply
with Generally Accepted Accounting Principles ("GAAP") or existing rules of the
Internal Revenue Code;
(j) Settle claims, litigation or disputes (including tax claims or audits)
involving an amount in excess of one-hundred thousand dollars ($100,000), unless
approved by the Board, other than any claims to the extent covered by Company's
errors and omissions, worker's compensation or general liability insurance;
(k) File any petition for bankruptcy or similar action relating to Company
or voluntarily dissolve or terminate Company.
7.8 Key Man Life Insurance. The Company shall undertake to obtain a
$2 million key-man life insurance policy on Mark Goldwasser, President and Chief
Executive Officer of the Company, naming the Company as beneficiary, on
commercially reasonable rates. The foregoing covenant shall remain in place
until such date as the Notes are paid in full.
7.9 Termination of Covenants. The provisions of Sections 7.2 through
7.6 shall terminate and be of no further force and effect on the later of the
date (i) on which the Company's obligations under the Registration Rights
Agreement to register or maintain the effectiveness of any registration covering
the Registrable Securities (as such term is defined in the Registration Rights
Agreement) shall terminate and (ii) of full repayment of obligations under the
Notes.
8. Survival and Indemnification.
8.1 Survival. The representations, warranties, covenants and
agreements contained in this Agreement shall survive the Closing of the
transactions contemplated by this Agreement; provided, however, that the
representations and warranties contained in this Agreement shall expire twelve
(12) months after the Closing.
8.2 Indemnification. Subject to the provisions of Section 8.1, the
Company agrees to indemnify and hold harmless each Investor and its Affiliates
and their respective directors, officers, employees and agents from and against
any and all losses, claims, damages, liabilities and expenses (including without
limitation reasonable attorney fees and disbursements and other expenses
incurred in connection with investigating, preparing or defending any action,
claim or proceeding, pending or threatened and the costs of enforcement thereof)
(collectively, "Losses") to which such Person may become subject as a result of
any breach of representation, warranty, covenant or agreement made by or to be
performed on the part of the Company under the Transaction Documents, and will
reimburse any such Person for all such amounts as they are incurred by such
Person.
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8.3 Conduct of Indemnification Proceedings. Promptly after receipt
by any Person (the "Indemnified Person") of notice of any demand, claim or
circumstances which would or might give rise to a claim or the commencement of
any action, proceeding or investigation in respect of which indemnity may be
sought pursuant to Section 8.2, such Indemnified Person shall promptly notify
the Company in writing and the Company shall assume the defense thereof,
including the employment of counsel reasonably satisfactory to such Indemnified
Person, and shall assume the payment of all fees and expenses; provided,
however, that the failure of any Indemnified Person so to notify the Company
shall not relieve the Company of its obligations hereunder except to the extent
that the Company is materially prejudiced by such failure to notify. In any such
proceeding, any Indemnified Person shall have the right to retain its own
counsel, but the fees and expenses of such counsel shall be at the expense of
such Indemnified Person unless: (i) the Company and the Indemnified Person shall
have mutually agreed to the retention of such counsel; or (ii) in the reasonable
judgment of counsel to such Indemnified Person representation of both parties by
the same counsel would be inappropriate due to actual or potential differing
interests between them. The Company shall not be liable for any settlement of
any proceeding effected without its written consent, which consent shall not be
unreasonably withheld, but if settled with such consent, or if there be a final
judgment for the plaintiff, the Company shall indemnify and hold harmless such
Indemnified Person from and against any loss or liability (to the extent stated
above) by reason of such settlement or judgment. Without the prior written
consent of the Indemnified Person, which consent shall not be unreasonably
withheld, the Company shall not effect any settlement of any pending or
threatened proceeding in respect of which any Indemnified Person is or could
have been a party and indemnity could have been sought hereunder by such
Indemnified Party, unless such settlement includes an unconditional release of
such Indemnified Person from all liability arising out of such proceeding.
9. SBIC Regulatory Provisions.
(a) Use of Proceeds-Statements and Access. At such times as St.
Cloud reasonably requests, Company shall deliver to St. Cloud a written
statement certified by Company's chief financial officer describing in
reasonable detail the use of the proceeds from the transactions contemplated by
the Loan Documents by Company. In addition to any other rights granted
hereunder, Company shall grant St. Cloud and the SBA access to Company's books
and records for the purpose of verifying the use of such proceeds and verifying
the certifications made by Company in SBA forms Nos. 480, 652 and 1031,
delivered pursuant to Section 3.1.6 and for the purpose of determining whether
the principal business activity of Company and its Subsidiaries continues to
constitute an eligible business activity (within the meaning of the SBIC
Regulations).
(b) Use of Proceeds - Foreign Operations. The Company shall not, and
shall not permit its Subsidiaries to, use any proceeds from the transactions
contemplated by the Loan Documents substantially for a foreign operation, and no
more than forty-nine percent (49%) of the employees or tangible assets of
Company and its Subsidiaries will be outside the United States (unless Company
can show to the SBA's satisfaction, that proceeds from the transactions
contemplated by the Transaction Documents will be used for a specific domestic
purpose).
(c) Use of Proceeds - Public Interest. The Company shall not, and
shall not permit its Subsidiaries to, use any proceeds from the transactions
contemplated by the Loan Documents for any purpose contrary to public interest
(including, but not limited to, activities which are in violation of law) or
inconsistent with free enterprise, in each case, within the meaning of 13 C.F.R.
Section 107.720
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(d) Regulatory Violation. Upon the occurrence of a Regulatory
Violation or in the event that St. Cloud determines in its good faith judgment
that a Regulatory Violation has occurred, in addition to any other rights and
remedies to which it may be entitled as a holder of the Securities under any of
the Transaction Documents, St. Cloud shall have the right to the extent required
under the SBIC Regulations to demand the immediate repayment of the principal
balance of the Note, plus all accrued interest on the applicable Note, by
delivering written notice of such demand to the Company. The Company shall make
such payment by a cashier's or certified check or by wire transfer of
immediately available funds to St. Cloud within thirty (30) days after the
Company's receipt of the demand notice.
(e) Regulatory Violation Cooperation. In the event that an Investor
believes that it has a Regulatory Problem, such Investor shall have the right to
transfer its Securities without regard to any restrictions on transfer set forth
in this Agreement or any of the Transaction other than the restrictions under
applicable securities law, and the Company shall take all such actions as are
reasonably requested by such Investor in order to effectuate and facilitate any
transfer by such Investor of the Securities then held by such Investor to any
Person designated by such Investor.
(f) Economic Impact Information. Promptly after the end of each
calendar year (but in any event prior to February 28 of each year), the Company
shall deliver to St. Cloud a written assessment of the economic impact of St.
Cloud's investment in the Company, specifying the full-time equivalent jobs
created or retained in connection with the investment, the impact of the
investment on the businesses of the Company and its Subsidiaries and on taxes
paid by Company and its employees.
(g) Business Activity. For a period of one (1) year following the
date hereof, neither the Company nor any of its Subsidiaries will change its
business activity if such change would render the Company ineligible to receive
financial assistance from St. Cloud (within the meanings of 13 C.F.R. Sections
107.720 and 107.760(b)).
(h) Compliance with Non-Discrimination Requirements. The Company
shall comply at all times with the non-discrimination requirements of 13 C.F.R.
Parts 112, 113 and 117.
10. Miscellaneous.
10.1 Successors and Assigns. This Agreement may not be assigned by a
party hereto without the prior written consent of the Company or the Investors,
as applicable, provided, however, that an Investor may assign its rights and
delegate its duties hereunder in whole or in part to an Affiliate or to a third
party acquiring some or all of its Securities in a private transaction without
the prior written consent of the Company or the other Investors, after notice
duly given by such Investor to the Company provided, that no such assignment or
obligation shall affect the obligations of such Investor hereunder. The
provisions of this Agreement shall inure to the benefit of and be binding upon
the respective permitted successors and assigns of the parties. Nothing in this
Agreement, express or implied, is intended to confer upon any party other than
the parties hereto or their respective successors and assigns any rights,
remedies, obligations, or liabilities under or by reason of this Agreement,
except as expressly provided in this Agreement.
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10.2 Counterparts; Faxes. This Agreement may be executed in two or
more counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument. This Agreement may also
be executed via facsimile, which shall be deemed an original.
10.3 Titles and Subtitles. The titles and subtitles used in this
Agreement are used for convenience only and are not to be considered in
construing or interpreting this Agreement.
10.4 Notices. Unless otherwise provided, any notice required or
permitted under this Agreement shall be given in writing and shall be deemed
effectively given as hereinafter described (i) if given by personal delivery,
then such notice shall be deemed given upon such delivery, (ii) if given by
telex or telecopier, then such notice shall be deemed given upon receipt of
confirmation of complete transmittal, (iii) if given by mail, then such notice
shall be deemed given upon the earlier of (A) receipt of such notice by the
recipient or (B) three days after such notice is deposited in first class mail,
postage prepaid, and (iv) if given by an internationally recognized overnight
air courier, then such notice shall be deemed given one Business Day after
delivery to such carrier. All notices shall be addressed to the party to be
notified at the address as follows, or at such other address as such party may
designate by ten days' advance written notice to the other party:
If to the Company:
Olympic Cascade Financial Corporation
120 Broadway, 27th Floor
New York, NY 10271
Attention: Mark Goldwasser, CEO
Fax: (212) 417-8010
With a copy to:
Littman Krooks LLP
655 Third Avenue, 20th Floor
New York, NY 10017
Attention: Mitchell C. Littman, Esq.
Fax: (212) 490-2990
If to the Investors:
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to the addresses set forth on the signature pages hereto.
10.5 Expenses. The parties hereto shall pay their own costs and
expenses in connection herewith, except that the Company shall pay the
reasonable fees and expenses of Latham & Watkins LLP not to exceed $10,000. Such
expenses shall be paid not later than the Closing. In the event that legal
proceedings are commenced by any party to this Agreement against another party
to this Agreement in connection with this Agreement or the other Transaction
Documents, the party or parties which do not prevail in such proceedings shall
severally, but not jointly, pay their pro rata share of the reasonable
attorneys' fees and other reasonable out-of-pocket costs and expenses incurred
by the prevailing party in such proceedings. In addition and notwithstanding
anything contained herein to the contrary, the Company agrees to pay the
following: (a) all reasonable fees and expenses of St. Cloud incurred with
respect to any amendments or waivers (whether or not the same become effective)
under or in respect of each of the Transaction Documents and (b) the reasonable
fees and expenses incurred by St. Cloud in connection with its preparation,
filing and updating of all required SEC filings related to this transaction;
provided that counsel to the Company prepares the Schedule 13(d) and related
amendments required to be filed.
10.6 Amendments and Waivers. Any term of this Agreement may be
amended and the observance of any term of this Agreement may be waived (either
generally or in a particular instance and either retroactively or
prospectively), only with the written consent of the Company and the Investors.
Any amendment or waiver effected in accordance with this paragraph shall be
binding upon each holder of any Securities purchased under this Agreement at the
time outstanding, each future holder of all such Securities, and the Company.
10.7 Publicity. Except as set forth below, no public release or
announcement concerning the transactions contemplated hereby shall be issued by
the Company or the Investors without the prior consent of the Company (in the
case of a release or announcement by the Investors) or the Investors (in the
case of a release or announcement by the Company) (which consents shall not be
unreasonably withheld), except as such release or announcement may be required
by law or the applicable rules or regulations of any securities exchange or
securities market, in which case the Company or the Investors, as the case may
be, shall allow the Investors or the Company, as applicable, to the extent
reasonably practicable in the circumstances, reasonable time to comment on such
release or announcement in advance of such issuance. In addition, the Company
will make such other filings and notices in the manner and time required by the
SEC.
10.8 Severability. Any provision of this Agreement that is
prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction,
be ineffective to the extent of such prohibition or unenforceability without
invalidating the remaining provisions hereof but shall be interpreted as if it
were written so as to be enforceable to the maximum extent permitted by
applicable law, and any such prohibition or unenforceability in any jurisdiction
shall not invalidate or render unenforceable such provision in any other
jurisdiction. To the extent permitted by applicable law, the parties hereby
waive any provision of law which renders any provision hereof prohibited or
unenforceable in any respect.
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10.9 Entire Agreement. This Agreement, including the Exhibits and
the Disclosure Schedules, and the other Transaction Documents constitute the
entire agreement among the parties hereof with respect to the subject matter
hereof and thereof and supersede all prior agreements and understandings, both
oral and written, between the parties with respect to the subject matter hereof
and thereof, other than any written confidentiality agreement between the
Company and an Investor, which shall continue in full force and effect.
10.10 Further Assurances. The parties shall execute and deliver all
such further instruments and documents and take all such other actions as may
reasonably be required to carry out the transactions contemplated hereby and to
evidence the fulfillment of the agreements herein contained.
10.11 Governing Law; Consent to Jurisdiction; Waiver of Jury Trial.
This Agreement shall be governed by, and construed in accordance with, the
internal laws of the State of California without regard to the choice of law
principles thereof. Each of the parties hereto irrevocably submits to the
exclusive jurisdiction of the courts of the State of New York located in New
York County and the United States District Court for the Southern District of
New York for the purpose of any suit, action, proceeding or judgment relating to
or arising out of this Agreement and the transactions contemplated hereby.
Service of process in connection with any such suit, action or proceeding may be
served on each party hereto anywhere in the world by the same methods as are
specified for the giving of notices under this Agreement. Each of the parties
hereto irrevocably consents to the jurisdiction of any such court in any such
suit, action or proceeding and to the laying of venue in such court. Each party
hereto irrevocably waives any objection to the laying of venue of any such suit,
action or proceeding brought in such courts and irrevocably waives any claim
that any such suit, action or proceeding brought in any such court has been
brought in an inconvenient forum. EACH OF THE PARTIES HERETO WAIVES ANY RIGHT TO
REQUEST A TRIAL BY JURY IN ANY LITIGATION WITH RESPECT TO THIS AGREEMENT AND
REPRESENTS THAT COUNSEL HAS BEEN CONSULTED SPECIFICALLY AS TO THIS WAIVER.
10.12 Independent Nature of Investors' Obligations and Rights. The
obligations of each Investor under any Transaction Document are several and not
joint with the obligations of any other Investor, and no Investor shall be
responsible in any way for the performance of the obligations of any other
Investor under any Transaction Document. The decision of each Investor to
purchase Securities pursuant to the Transaction Documents has been made by such
Investor independently of any other Investor. Nothing contained herein or in any
Transaction Document, and no action taken by any Investor pursuant thereto,
shall be deemed to constitute the Investors as a partnership, an association, a
joint venture or any other kind of entity, or create a presumption that the
Investors are in any way acting in concert or as a group with respect to such
obligations or the transactions contemplated by the Transaction Documents. Each
Investor acknowledges that no other Investor has acted as agent for such
Investor in connection with making its investment hereunder and that no Investor
will be acting as agent of such Investor in connection with monitoring its
investment in the Securities or enforcing its rights under the Transaction
Documents. Each Investor shall be entitled to independently protect and enforce
its rights, including, without limitation, the rights arising out of this
Agreement or out of the other Transaction Documents, and it shall not be
necessary for any other Investor to be joined as an additional party in any
proceeding for such purpose. The Company acknowledges that each of the Investors
has been provided with the same Transaction Documents for the purpose of closing
a transaction with multiple Investors and not because it was required or
requested to do so by any Investor.
-21-
10.13 Confidentiality. Each party hereto agrees that, except with
the prior written permission of the other party, it shall at all times keep
confidential and not divulge, furnish or make accessible to anyone any
confidential information, knowledge or data concerning or relating to the
business or financial affairs of the other parties to which such party has been
or shall become privy by reason of this Agreement, discussions or negotiations
relating to this Agreement, the performance of its obligations hereunder or the
ownership of Shares purchased hereunder. The provisions of this Section 10.13
shall be in addition to, and not in substitution for, the provisions of any
separate nondisclosure agreement executed by the parties hereto with respect to
the transactions contemplated hereby.
[SIGNATURE PAGE FOLLOWS]
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IN WITNESS WHEREOF, the parties have executed this Agreement or
caused their duly authorized officers to execute this Agreement as of the date
first above written.
The Company: OLYMPIC CASCADE FINANCIAL CORPORATION
By: /s/ Mark Goldwasser
Mark Goldwasser
President and Chief Executive Officer
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The Investors:
ST. CLOUD CAPITAL PARTNERS, L.P.
By: SCGP, LLC
Its: General Partner
By: /s/ Marshall S. Geller
--------------------------
Name: Marshall S. Geller
Its: Senior Managing Member
Series B Preferred Stock:
Aggregate Purchase Price: $850,000
Number of Shares: 8,500
Warrants:
No. of Warrants: 255,000
Convertible Promissory Notes:
Principal Amount: $850,000
Address for Notice:
10866 Wilshire Blvd.
Suite 1450
Los Angeles, CA 90024
with a copy to:
Latham & Watkins LLP
633 West 5th Street
Suite 4000
Los Angeles, CA 90071
Attn: W. Alex Voxman, Esq.
Telephone: 213.485.1234
Facsimile: 213.891.8763
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Fred B. Tarter and Lois Tarter JTWROS:
/s/ Fred B. Tarter
- ------------------
Fred B. Tarter
/s/ Lois Tarter
- ---------------
Lois Tarter
Series B Preferred Stock:
Aggregate Purchase Price: $50,000
Number of Shares: 500
Warrants:
No. of Warrants: 15,000
Convertible Promissory Notes:
Principal Amount: $50,000
Address for Notice:
210 E. 39th Street
New York, NY 10016
Fax: 212.679.3816
Phone: 212.679.3800
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GKW Unified Holdings, LLC
By: /s/ Gerry R. Ginsberg
--------------------------
Gerry R. Ginsberg
General Counsel and
Authorized Signatory
Series B Preferred Stock:
Aggregate Purchase Price: $100,000
Number of Shares: 1,000
Warrants:
No. of Warrants: 30,000
Convertible Promissory Notes:
Principal Amount: $100,000
Address for Notice:
1999 Avenue of the Stars #3900
Los Angeles, CA 90067
9355 Wilshire Boulevard, 4th Floor, Beverly Hills, CA 90210 (effective
February 1, 2006)
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