EXCHANGE AGREEMENT AND PLAN OF REORGANIZATION
Among
OLYMPIC CASCADE FINANCIAL CORPORATION,
a Delaware corporation
L. H. FRIEND, WEINRESS, FPANKSON & ▇▇▇▇▇▇▇, INC.,
a California corporation
and
THE SHAREHOLDERS
OF
L. H. FRIEND, WEINRESS, ▇▇▇▇▇▇▇▇ & ▇▇▇▇▇▇▇, INC.
Dated: as of February 12, 1997
EXCHANGE AGREEMENT AND PLAN OF REORGANIZATION
This EXCHANGE AGREEMENT AND PLAN OF REORGANIZATION (this "Agreement") dated
as of February 12, 1997, is entered into by and among Olympic Cascade Financial
Corporation, a Delaware corporation ("Olympic"), L. H. Friend. Weinress,
▇▇▇▇▇▇▇▇ & ▇▇▇▇▇▇▇, Inc. a California corporation ("LHF"), and the shareholders
of LHF listed on the signature page hereof (individually, a "Shareholder" and
collectively, the "Shareholders").
RECITALS
WHEREAS, LHF's authorized shares of capital stock consist of 100,000 shares
of common stock, no par value (the "LHF Common Stock");
WHEREAS, the Shareholders own 18,250 shares (the "LHF Shares") of LHF
Common Stock, constituting all of LHF's issued and outstanding shares of capital
stock;
WHEREAS, LHF is a broker-dealer duly registered with the Securities and
Exchange Commission (the "SEC") and is a member in good standing with the
National Association of Securities Dealers, Inc. (the "NASD") engaged in the
general securities business;
WHEREAS, National Securities Corporation, a Washington corporation
("National Securities"), is a broker-dealer duly registered with the SEC and a
wholly-owned subsidiary of Olympic;
WHEREAS, the Shareholders desire to exchange all of the LHF Shares owned by
the Shareholders solely for shares of Olympic's common stock, par value S.02 per
share (the "Olympic Common Stock") pursuant to the provisions contained herein
(the "Exchange"), which Exchange is intended to qualify as a tax free
reorganization pursuant to Section 368(a)(1)(B) of the Internal Revenue Code of
1986, as amended (the "Code"); and
WHEREAS, Olympic desires to consummate the Exchange pursuant to the terms
and conditions set forth herein;
NOW, THEREFORE, in consideration of the mutual promises herein made, and in
consideration of the representations, warranties and covenants herein contained,
the parties hereto agree as follows:
ARTICLE I
EXCHANGE OF STOCK; CLOSING
1.1 EXCHANGE OF STOCK. Subject to the terms and conditions herein
stated and in reliance upon the representations and warranties herein set forth,
(i) the Shareholders agree to transfer, convey, assign and deliver to Olympic at
the Closing (as defined in Section 1.4 below) all of the LHF Shares, and (ii)
Olympic agrees to acquire and accept the LHF Shares from the Shareholders, and
in exchange therefore, further agrees to issue and deliver to the Shareholders
an aggregate of Two Hundred Fifty Thousand (250,000) shares of Olympic Common
Stock (the "Olympic Shares") to be apportioned among the Shareholders in
accordance with their relative percentage ownership interests in LHF immediately
prior to the Closing as set forth on Schedule 1.1 hereto.
1.2 PURCHASE PRICE. The consideration for the LHF Shares shall be the
Olympic Shares.
1.3 TRANSFER TAXES. With respect to the payment of any and all foreign,
federal, state and local taxes, impositions, liens, levies, assessments and
similar charges due and owing as a result of the Exchange, the Shareholders
shall be solely responsible therefor.
1.4 CLOSING. The closing of the transactions contemplated by this
Agreement (the "Closing") shall take place at the offices of Loeb & Loeb LLP,
▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇, on the first
business day following the satisfaction or waiver of all conditions to the
obligations of the parties to consummate the transactions contemplated hereby,
or at such other time and date as the parties hereto shall by written instrument
designate. Such time and date are herein referred to as the "Closing Date."
Notwithstanding the actual date of Closing, the effective date of the transfer
of the LHF Shares and the applicable date for proration of liabilities shall be
February 25, 1997 (the "Deemed Closing Date").
1.4.1 All personal property taxes and assessments, real property
taxes and utility payments with respect to the Remaining Assets (as defined in
Section 8.9), all rental payments under any leases comprising the Remaining
Assets, and all other costs and expenses paid by LHF which relate to the
operation of LHF's business after the Deemed Closing Date, which will benefit
LHF in the operation of its business after the Deemed Closing Date, shall be
prorated as of 12:01 a.m. on the Deemed Closing Date on the basis of the number
of days of the relevant tax year or period which have elapsed through the Deemed
Closing Date, with the Shareholders being responsible for that portion arising
prior to the Deemed Closing Date (the "Shareholders Portion") and LHF being
responsible for that portion arising subsequent thereto. In addition, the
Shareholders shall be credited in full for all security and other deposits paid
by LHF to
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lessors under any leases comprising the Remaining Assets, which credit shall
apply against the Shareholders Portion. All such security and other deposits
are set forth in SCHEDULE 1.4.1.
1.5 DELIVERY BY THE SHAREHOLDERS AT CLOSING. On the Closing Date, the
Shareholders shall deliver to Olympic all certificates representing the LHF
Shares duly endorsed or accompanied by a stock power duly executed in form
for transfer, which LHF Shares shall be duly authorized, fully paid and
non-assessable.
1.6 DELIVERY BY OLYMPIC AT CLOSING. On the Closing Date, Olympic shall,
or shall cause its transfer agent, if any, to issue the Olympic Shares in the
names of each of the Shareholders and to deliver to each of them a stock
certificate dated as of the Closing Date representing the number of Olympic
Shares to which such Shareholder is entitled to receive, as set forth on
Schedule 1.1.
1.7 LEGEND. The following legend shall be placed on certificates for
the Olympic Shares delivered to the Shareholders:
"THESE SECURITIES HAVE NOT BEEN REGISTERED UNDER SECURITIES ACT OF
1933, AS AMENDED, OR ANY STATE SECURITIES LAWS. THEY MAY NOT BE
SOLD OR OFFERED FOR SALE EXCEPT PURSUANT TO AN EFFECTIVE
REGISTRATION STATEMENT AS TO THE SECURITIES UNDER SAID ACT AND ANY
APPLICABLE STATE SECURITIES LAW OR AN OPINION OF COUNSEL REASONABLY
SATISFACTORY TO OLYMPIC CASCADE FINANCIAL CORPORATION THAT SUCH
REGISTRATION IS NOT REQUIRED."
Each of the Shareholders further consents to Olympic instructing its transfer
agent to place a "stop transfer" instruction on its transfer books as to all
certificates representing the Olympic Shares until such times as instructions
may be legally removed.
ARTICLE II
REPRESENTATIONS OF LHF
LHF hereby represents and warrants to Olympic that:
2.1 LHF STOCK. The LHF Shares constitute one hundred percent (100%) of
the issued and outstanding shares of stock of all classes of LHF. The LHF
Shares are duly authorized, fully paid and nonassessable.
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2.2 EXISTENCE AND GOOD STANDING. LHF is a corporation duly organized,
validly existing and in good standing under laws of the State of California.
LHF has the full corporate power and authority to own its property and to carry
on its business all as and in the places where such properties are now owned or
operated or such business is now being conducted. Except as set forth on
Schedule 2.2, (i) LHF has not qualified to do business as a foreign corporation
in any jurisdiction, and (ii) neither the character nor location of the
properties owned or leased by LHF, nor the nature of the business conducted by
LHF, requires such qualification in any jurisdiction other than in those set
forth on Schedule 2.2 and other than such jurisdictions where the failure to so
qualify would not have a material adverse effect on the assets, liabilities,
business, condition (financial or otherwise), or the results of operation of
Olympic. LHF is in good standing in each jurisdiction in which it is qualified
to do business as a foreign corporation as set forth on Schedule 2.2.
2.3 CAPITAL STOCK. The authorized capital stock of LHF consists of
100,000 shares of common stock, no par value, of which 18,250 shares are issued
and outstanding. All outstanding shares have been duly authorized and validly
issued and are fully paid and non-assessable. No other class of capital stock
of LHF is authorized or outstanding. Except as set forth on Schedule 2.3, there
are no outstanding options, warrants, rights, calls, commitments, conversion
rights, rights of exchange, plans or other agreements of any character providing
for the purchase, issuance or sale of any shares of the capital stock of LHF.
2.4 SUBSIDIARIES, AFFILIATES AND INVESTMENTS. Except as set forth in
Schedule 2.4, LHF does not own any capital stock or other equity or ownership or
proprietary interest in any corporation, partnership, association, trust, joint
venture or other entity.
2.5 FINANCIAL STATEMENTS AND NO MATERIAL CHANGES.
2.5.1 LHF has heretofore furnished to Olympic true and correct
copies of a draft of the audited statement of financial condition of LHF as at
December 31, 1996 (the "Balance Sheet") and the related statements of income,
changes in shareholders' equity, changes in liabilities subordinated to the
claims of general creditors, and cash flows for the year ended December 31, 1996
(the "Financial Statements").
2.5.2 The Balance Sheet fairly presents the financial condition of
LHF at the date thereof and, the Financial Statements fairly present the results
of operations of LHF and cash flows for the period indicated.
2.5.3 Since December 31, 1996 (the "Balance Sheet Date"), there
has been no material adverse change in the assets, liabilities, business,
condition (financial
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or otherwise), or the results of operations of LHF, except as contemplated by
this Agreement.
2.5.4 The Balance Sheet and the Financial Statements (including
the notes thereto) have been prepared in accordance with generally accepted
accounting principles, applied on a consistent basis throughout the period
covered thereby and are consistent with the books and records of LHF.
2.6 BOOKS AND RECORDS. All accounts, books, ledgers and official and
other records material to the business of LHF have been properly and accurately
kept and completed in all material respects, and there are no material
inaccuracies or discrepancies of any kind contained or reflected therein. True
and complete copies of the charter documents and bylaws of LHF, and all
amendments thereto, have been delivered to Olympic.
2.7 TITLE TO PROPERTIES: ENCUMBRANCES. Except as set forth in Schedule
2.7, LHF has good and marketable title to (a) all of the material Remaining
Assets (as defined in Section 8.9), (b) all the material Remaining Assets
purchased by LHF since the Balance Sheet Date (except in each case for Remaining
Assets reflected in the Balance Sheet or acquired since the Balance Sheet Date
that have been sold or otherwise disposed of in the ordinary course of
business); in each case subject to no encumbrance, lien, charge or other
restriction of any kind or character, except for liens reflected in the Balance
Sheet.
2.8 LEASES. SCHEDULE 2.8 contains an accurate and complete list of all
real property leases and all equipment leases to which LHF is a party (as lessee
or lessor). Each lease set forth in SCHEDULE 2.8 (or required to be set forth
on SCHEDULE 2.8) is in full force and effect; all rents and additional rents due
to date on each such lease have been paid; in each case, the lessee is in
peaceable possession of the lease and is not in default thereunder, and no
waiver, indulgence or postponement of the lessee' s obligations thereunder has
been granted by the lessor; and, except as set forth in Schedule 2.8, there
exists no default or event of default by LHF or to the knowledge of LHF, by any
other party to such lease. No consent of any party to such leases is required
to consummate the Exchange.
2.9 CONTRACTS. Except as set forth in SCHEDULE 2.9, LHF is not party to
or bound by (a) any agreement, contract or commitment relating to any bonus,
deferred compensation, pension, profit sharing, stock option, employee stock
purchase, retirement or other employee benefit plan, (b) any agreement,
indenture or other instrument which contains restrictions with respect to
payment of dividends or any other distribution in respect of its capital stock,
(c) any agreement, contract or commitment relating to capital expenditures, (d)
any loan or advance to, or investment in, any other Person (as defined in
Section 10.3) or any agreement, contract or
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commitment relating to the making of any such loan advance or investment, (e)
any guarantee or other contingent liability in respect of any indebtedness or
obligation of any other Person (other than the endorsement of negotiable
instruments for collection in the ordinary course of business), (f) any
management service, employment, consulting or any other similar type of
contract, (g) any agreement, contract or commitment which involves Fifty
Thousand Dollars ($50,000) or more and is not cancelable without penalty
within thirty (30) days, (h) any agreement with any officer or director of
LHF, or (i) any contract with any Shareholder. Except as set forth in
SCHEDULE 2.9, each contract or agreement set forth on SCHEDULE 2.9 is in full
force and effect, and there exists no material default or event of default by
LHF or to the knowledge of LHF, by any other party. Notwithstanding anything
herein to the contrary, the parties acknowledge and agree that SCHEDULE 2.9
does not contain a list of existing agreements with clients, it being
understood that such list will be delivered at Closing.
2.10 VALID AGREEMENTS: NO CONFLICTS. LHF has full authority to
execute and deliver this Agreement and to perform its obligations hereunder.
This Agreement has been duly and validly authorized, executed and delivered
by LHF and constitutes a valid and binding agreement of LHF, enforceable
against LHF in accordance with its terms except as the enforcement thereof
may be limited by bankruptcy, reorganization, moratorium, insolvency and
other laws of general applicability relating to or affecting creditors'
rights or general principles of equity. The execution, delivery and
performance of this Agreement and the consummation of the transactions
contemplated hereby will not violate, conflict with or result in the breach
of (i) any provision of the articles of incorporation or bylaws of LHF; (ii)
subject to obtaining necessary consents specified in Schedule 2.20, any of
the terms of, or constitute a default under any material obligation,
contract, agreement, or other instrument to which LHF is a party or by which
LHF or any of its assets or properties is bound or subject; (iii) any order,
writ, judgment, injunction, award or decree of any court, arbitrator or
governmental or regulatory body against, or binding upon, LHF or upon the
assets of LHF; or (iv) any statute, law or regulation to which LHF or any of
its assets is subject.
2.11 LITIGATION. Except as set forth in SCHEDULE 2.11, there is no
action, suit, proceeding at law or in equity by any Person, or any
arbitration or any administrative or other proceeding by or before any
governmental or other instrumentality or agency, pending or, to the knowledge
of LHF, threatened, against or affecting LHF, or its officers, directors,
employees, registered representatives or registered principals, or any of its
properties or rights, which, if adversely determined would have a material
adverse effect on the assets, liabilities, business, condition (financial or
otherwise), or the results of operations of LHF. LHF is not subject to any
judgment, order or decree entered in any lawsuit or proceeding.
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2.12 TAXES PAYABLE BY LHF. LHF and the Shareholders have elected for
LHF as of December 29, 1987, to be treated as an S corporation under Section
1361(a) of the Code and under California Revenue and Taxation Code Section
17087.5. LHF has filed, or caused to be filed, in the manner prescribed by
law, all federal, state, local and foreign returns, reports, declarations,
claims for refunds, or information returns or statements relating to Taxes
(as defined below), including any schedule or attachment thereto, and any
amendment thereof ("Tax Returns") which are required to be filed by, or with
respect to, LHF. Such Tax Returns reflect accurately taxable income and all
liability for Taxes of LHF for the periods covered thereby. LHF has paid all
federal, state, local and foreign income, profits, franchise, sales, use,
occupancy, excise, payroll, accumulated earnings, gross receipts, license,
employment, severance, stamp, occupation, premium, windfall profits,
environmental (including taxes under Section 59A of the Code), customs
duties, capital stock, withholding, social security (or similar),
unemployment, disability, personal property, transfer, registration, value
added, alternative or add-on minimum, estimated, or other tax or assessment
of any kind whatsoever, including any interest, penalty, or addition thereto,
other than those which are being disputed in good faith ("Taxes") that have
become due and payable. No examination of any return of LHF by any taxing
authority is currently in progress and LHF has not received notice of any
proposed audit, proceeding, investigation or examination. There are no
outstanding agreements or waivers extending the statutory period of
limitation applicable to any Tax Return of LHF. No claim has ever been made
by an authority in a jurisdiction where LHF does not file Tax Returns that it
is or may be subject to taxation by that jurisdiction. There are no liens,
encumbrances or other security interests on any of the assets of LHF that
arose in connection with any failure (or alleged failure) to pay any Taxes.
LHF has withheld and paid all Taxes required to have been withheld and paid
in connection with amounts paid or owing to any employee, independent
contractor, shareholder or other third party. LHF has filed on a timely
basis a Form 1099 for each of the four individuals set forth on SCHEDULE 2.12
classified by LHF as an independent contractor for the period in which such
individual performed Devices for LHF. LHF has not filed a consent under
Section 341(f) of the Code (or any corresponding provision of state, local or
foreign tax law) concerning collapsible corporations. LHF has not made any
payments, is not obligated to make any payments, or is not party to any
agreement that under certain circumstances could obligate it to make any
payments that will not be deductible under Section 280G of the Code. LHF has
not been a United States real property holding corporation within the meaning
of Section 897(c)(2) of the Code during the applicable period specified in
Section 897(c)(A)(ii) of the Code. LHF has disclosed on each of its federal
income Tax Returns all positions taken therein that could give rise to a
substantial understatement of federal income Tax within the meaning of
Section 6662 of the Code. LHF (A) has not been a member of an affiliated
group filing a consolidated federal income Tax Return (other than a group the
common parent of which was LHF) or (B) does not have any liability for the
Taxes of any person (other than LHF) under Treas. Reg. Section 1.1502-6 (or
any
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similar provision of state, local, or foreign law), as a transferee or
successor, by contract, or otherwise.
2.13 LIABILITIES. Except as set forth on SCHEDULE 2.13, LHF has no
outstanding claims, liabilities or indebtedness, contingent or otherwise, except
as set forth in the Balance Sheet, other than (i) liabilities incurred
subsequent to the Balance Sheet Date in the ordinary course of business not
involving borrowing by LHF and which ate consistent with past practice and,
individually or in the aggregate, are not material to the business, operations,
properties, or condition (financial or otherwise) of LHF, (ii) liabilities set
forth on any schedule hereto or which are not required to be set forth on any
schedule hereto because such liabilities are specifically excluded from
disclosure on the schedules provided for by the provisions of this Agreement, or
(iii) any other liabilities provided for in this Agreement. SCHEDULE 2.13 sets
forth a list of all current arrangements of LHF for borrowed money and all
outstanding balances as of the date hereof with respect thereto. LHF is not in
default in respect of the terms or conditions of any indebtedness.
2.14 INSURANCE. SCHEDULE 2.14 is a schedule of all insurance policies
(including life insurance) or binders maintained by LHF. All such policies are
in full force and effect and are such amounts, and insure against such losses
and risks, as are generally maintained by comparable businesses and all premiums
that have become due have been currently paid. None of such policies or binders
shall lapse or terminate by reason of the transactions contemplated hereby. LHF
has received no notice of cancellation or nonrenewal of any such policy or
binder.
2.15 INTELLECTUAL PROPERTIES. SCHEDULE 2.15 contains an accurate and
complete list of all trade names, trademarks, copyrights, service marks,
trademark registrations and applications (including those which are pending),
service ▇▇▇▇ registrations and applications, copyright registrations and
applications (whether pending or abandoned), owned or used by LHF in the
operation of its business (collectively, the "Intellectual Property") . No claim
of infringement or misappropriation of intellectual property has been made
against LHF and to the knowledge of LHF, LHF is not infringing or
misappropriating any Intellectual Property.
2.16 COMPLIANCE WITH LAWS. LHF is in compliance in all material
respects with all applicable laws, regulations, orders, judgments and decrees
("Requirements of Law"). LHF (i) has not been charged with, (ii) is not
under any investigation with respect to, and (iii) has not been threatened
with, any charge concerning any violation of any Requirements of Law.
Without limiting the generality of the foregoing, except as set forth on
Schedule 2.16, there is no investigation of, complaint against or inquiry
regarding LHF pending before the National Association of Securities Dealers.
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2.17 LICENSES. LHF has all licenses and permits and other governmental
certificates, authorizations and approvals (collectively, "Licenses") required
by any governmental or regulatory body for the operation of its business and the
use of its properties as presently operated or used, except where the failure to
have such Licenses would not have a material adverse effect on the assets,
liabilities, business, condition (financial or otherwise), or the results of
operations of LHF. All of the Licenses are in full force and effect and no
action or claim is pending, nor to the knowledge of LHF, is threatened, to
revoke or terminate any of the Licenses.
2.18 ERISA.
2.18.1 The name of each plan, program, arrangement, agreement or
commitment sponsored or maintained by or on behalf of LHF or any ERISA
Affiliate (as defined below) or to which LHF or any ERISA Affiliate makes or
is obligated to make contributions or to which LHF or any ERISA Affiliate
made or %,as obligated to make contributions during the five (5) year period
ending on the date hereof, which is a pension, profit sharing, savings,
thrift or other retirement plan, deferred compensation, stock purchase, stock
option, performance share, bonus or other incentive plan, severance pay plan,
policy or procedure, life, health, disability or accident insurance plan,
(including, without limitation, each "employee benefit plan" as defined in
Section 3(3) of the Employee Retirement Income Security Act of 1974, as
amended ("ERISA"), or vacation or other employee benefit plan, program,
arrangement, agreement or commitment, whether or not written) (all of the
foregoing being hereinafter referred to individually as a "Plan" and
collectively as the "Plans") is set forth on SCHEDULE 2.18 hereto. LHF has
substantially complied with all of the provisions of each Plan and all
applicable provisions of ERISA and the Code, has administered each such Plan
(including the payment of benefits thereunder) in all material respects in
accordance with the provisions of each such Plan and all applicable
provisions of ERISA and the Code, and no penalties under ERISA or any other
applicable law or regulation are and at the Deemed Closing Date will be owed
to any Plan participant and/or beneficiary and/or any governmental body with
respect to the failure to file any reports or other information required
under EIUSA or any other applicable law or regulation or to distribute or
make available any such reports or other information. LHF has and at the
Deemed Closing Date will have timely made all required contributions to each
such Plan.
2.18.2 No such Plan is a "defined benefit plan' within the meaning
of Section 3(35) of ERISA nor a "multi-employer plan' within the meaning of
Section 3(37) of ERISA.
2.18.3 As of the date hereof and as of the Deemed Closing Date, LHF
is entitled to cease its participation in each Plan referred to in this Section
2.18 and
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each such Plan, by its provisions, permits LHF to amend to terminate, in whole
or in part, such Plan without default, penalty, premium or any additional cost
to LHF.
2.18.4 The transactions contemplated by this Agreement will not
result in any payment or series of payments by Olympic or LHF of a "parachute
payment" within the meaning of Section 280G of the Code.
2.18.5 With respect to each Plan maintained or sponsored by LHF
which is an "employee welfare benefit plan" within the meaning of Section
3(1) of ERISA (a "Welfare Plan"): (i) the applicable requirements of Part III
of Subchapter 8B of Chapter I of the Code are satisfied if benefits under
such Welfare Plan are intended to qualify for tax-favored treatment; (ii)
there is no disqualified benefit which would subject Olympic to tax under
Section 4976(a) of the Code; and (iii) each such Welfare Plan which is a
group health plan within the meaning of Section 4980B of the Code is and has
at all times been in compliance in all material respects with the applicable
requirements of Sections 601 through 608 of ERISA, and LHF is not now and has
never been liable for any tax under Section 4980B of the Code.
2.18.6 None of the Plans is and, at the Deemed Closing Date, none
will be under investigation or audit by either the United States Department
of Labor or the Internal Revenue Service.
2.18.7 None of the Plans provides benefits including, without
limitation, death or medical benefits (whether or not insured) with respect
to any current or former employee of LHF beyond their retirement or other
termination of service other than (i) coverage mandated by applicable law,
(ii) disability benefits under any "employee welfare benefit plan" (as
defined in Section 3(l) of ERISA) that have been fully provided for by
insurance or otherwise, (iii) deferred compensation benefits accrued as
liabilities on the books of LHF or (iv) benefits in the nature of severance
pay.
2.18.8 For purposes of this Section 2.18, the term "ERISA
Affiliate" shall mean all members of a controlled group of corporations and
all trades and businesses (whether or not incorporated) under common control
and all other entities which, together with LHF are treated as a single
employer under any or all of Sections 414(b), (c), (m), (n) or (o) of the
Code at any time during the period of five (5) years ending on the Deemed
Closing Date.
2.19 NO CHANGES SINCE THE BALANCE SHEET DATE. Since the Balance Sheet
Date (a) except as specifically stated on SCHEDULE 2.19 or contemplated by
this Agreement, LHF has not (i) incurred any liability or obligation of any
nature (whether accrued, absolute, contingent or otherwise), except in the
ordinary course of business, (ii) permitted any of the material Remaining
Assets to be subjected to any mortgage,
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pledge, lien, security interest, encumbrance, restriction or charge of any
kind, (iii) sold, transferred or otherwise disposed of any of the Remaining
Assets except in the ordinary course of business, (iv) made any commitment
for any capital expenditure, except in the ordinary course of business, (v)
written down the value of any work in process except write-downs in the
ordinary course of business, none of which, individually or in the aggregate,
is material to LHF, (vi) except as set forth in the Employment Agreements (as
defined in Section 6.4), granted any increase in the rate of wages, salaries,
bonuses or other remuneration of any employee who after giving effect to such
increase or prior thereto receives compensation at an annual rate of Fifty
Thousand Dollars ($50,000) or more, (vii) made any change in any method of
accounting or auditing practice, (viii) otherwise conducted its business or
entered into any transaction, except in the usual and ordinary manner and in
the ordinary course of its business, (ix) amended or terminated any agreement
which is material to the business of LHF, (x) renewed, extended or modified
any lease of real property, or except in the ordinary course of business, any
lease of personal property, or (xi) agreed, whether or not in writing, to do
any of the foregoing, and (b) there has been no material adverse change in
the assets, liabilities, business, condition (financial or otherwise), or the
results of operations of LHF.
2.20 REQUIRED APPROVALS, NOTICES AND CONSENTS. Except as set forth on
SCHEDULE 2.20, no consent or approval of, other action by, or notice to, any
governmental body or agency, domestic or foreign, or any third party to a
material contract to which LHF is a party is required in connection with the
execution and delivery by the Shareholders and LHF of this Agreement or the
consummation by the Shareholders and LHF of the transactions contemplated
hereby.
2.21 BROKER-DEALER REGISTRATION. LHF is a Broker-Dealer having duly
registered with the SEC pursuant to Section 15 of the Securities Exchange Act
of 1934, as amended (the "1934 Act"). Attached hereto as SCHEDULE 2.21 is a
full and complete copy of LHF's Broker-Dealer application as amended through
December 31, 1996. Neither the application for registration nor any
amendment thereto contains any' untrue statement of a material fact or omits
any statement of a material fact required to be stated or necessary in order
to make statements contained therein not misleading.
2.22 NO THREATENED SEC PROCEEDINGS. LHF's registration as a
Broker-Dealer is in good standing and, there is not currently pending or to
the knowledge of the shareholders, threatened any inquiry, investigation,
administrative proceeding, or civil action undertaken or initiated by the SEC
concerning LHF or its officers, directors, or registered representatives.
2.23 NET CAPITAL. LHF is not in violation of the applicable net
capital provisions of the 1934 Act and the general rules and regulations
thereunder.
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2.24 NASD MEMBERSHIP. LHF is a member in good standing with the NASD and
there has not been for the most recent three years, nor is there currently
pending or to the knowledge of LHF, threatened, any inquiry investigation or
disciplinary proceeding undertaken by the NASD concerning LHF or any of its
officers, directors, registered principals, or registered representatives,
except as set forth on SCHEDULE 2.16.
2.25 FEES AND ASSESSMENTS. As of December 31, 1996 there are no, and as
of the Deemed Closing Date, there shall not be, any fees or assessments owed to
the NASD or the Security Investors Protection Corporation ("SIPC") for which
bills have been received by LHF.
2.26 NASD RESTRICTIONS. There are no special restrictions or
limitations imposed by the NASD relating to the conduct by LHF of the
business of a Broker-Dealer which have a material adverse effect on the
business or operations of LHF as currently conducted.
2.27 CRD REGISTRATION. LHF is registered with the Central Registration
Depository under CRD Number 14152.
2.28 STATE BROKER-DEALER REGISTRATIONS. LHF is registered as a
Broker-Dealer in the states and jurisdictions enumerated in SCHEDULE 2.28,
and all of such registrations are current, and LHF is in good standing as a
registered Broker-Dealer in each such state or jurisdiction. As of the
Deemed Closing Date, no renewal or registration fee for which bills have been
received will be due or owing to any state. Also set forth in SCHEDULE 2.28
are all states and jurisdictions in which applications for registration of
LHF as a Broker-Dealer are currently pending.
2.29 NO STATE INQUIRIES. LHF's state Broker-Dealer registrations are
in good standing and for the most recent three year period, there has not
been, nor is there currently pending, or to LHF's knowledge, threatened, any
inquiry, investigation, administrative proceeding, or civil action undertaken
or initiated by such state or jurisdictions concerning LHF or its officers,
directors, registered principals or registered representatives.
2.30 STATE NET CAPITAL COMPLIANCE. LHF is not in violation of the net
capital provisions required to be maintained by each state or jurisdiction in
which LHF is registered as a Broker-Dealer.
2.31 REGISTERED REPRESENTATIVES. Attached hereto as SCHEDULE 2.31 is a
list of all registered representatives of LHF and each state or jurisdiction
in which each individual is registered.
12
2.32 BROKERS BOND. LHF currently has in effect a blanket Broker-Dealer
fidelity bond as summarized in SCHEDULE 2.32.
2.33 SIPC REGISTRATION. LHF is duly registered with SIPC. LHF has paid
or has made adequate provision for the payment of all SIPC assessments as of
December 31, 1996.
2.34 CLEARING AGREEMENT. LHF presently has a clearing agreement, as
amended and to be effective on and after the Closing, with Bear, Steams & Co.
Inc. ("Bear ▇▇▇▇▇▇▇"), a true copy of which has been provided to Olympic. As of
December 31, 1996, there was, and as of the Deemed Closing Date there will be,
no amount due and owing to Bear Steams, nor was there as of December 31, 1996,
nor will there be as of the Deemed Closing Date, any unsecured debts of
customers for which LHF may be or become responsible.
2.35 DISCLOSURE.
2.35.1 None of this Agreement, the Financial Statements, the
Balance Sheet, or any schedule hereto, or any certificate, document or statement
in writing to be delivered as required under this Agreement by or on behalf of
cLHF or the Shareholders, contains, or will contain, any untrue statement of a
material fact, or omits, or will omit, any statement of a material fact required
to be stated or necessary' in order to make statements contained herein or
therein not misleading.
2.35.2 Notwithstanding specific cross references in the schedules
hereto (each a "Schedule") , any disclosure under any Schedule shall be deemed
to be a disclosure applicable to all representations and warranties of LHF and
the Shareholders under this Agreement and under all other Schedules. To the
extent that the Schedules contain exceptions to the representations and
warranties set forth in Article II and III of this Agreement, the inclusion of
an item in any Schedule shall not be deemed an admission by LHF or any
Shareholder that such item is material to LHF or such Shareholder or that it
will have a material adverse effect on the assets, liabilities, business,
condition (financial or otherwise), or the results of operations of LHF.
2.36 REPRESENTATIONS TRUE AT CLOSING. All representations by LHF in
this Article II or in any document delivered pursuant hereto in connection
with the transactions contemplated hereby shall be true and accurate in all
material respects as of the date when made and shall be deemed to be made
again at the Closing as of the Closing Date and shall then be true and
accurate in all material respects, except as affected by the transactions
contemplated by this Agreement.
13
ARTICLE III
INDIVIDUAL REPRESENTATIONS OF THE SHAREHOLDERS
Each Shareholder hereby represents and warrants, individually on such
Shareholder's own behalf, to Olympic that:
3.1 OWNERSHIP OF STOCK. The Shareholder is the record and beneficial
owner of the LHF Shares specified in SCHEDULE 3.1 hereto, free and clear of all
liens, encumbrances, restrictions and claims of every kind; the Shareholder has
full legal right, power and authority to enter into this Agreement and has full
legal right, power and authority to transfer and convey such Shareholder's LHF
Shares pursuant to this Agreement; the delivery to Olympic of the LHF Shares
pursuant to this Agreement will transfer to Olympic such Shareholder's valid
title thereto, free and clear of all liens, encumbrances, restrictions and
claims of every kind.
3.2 VALID AGREEMENTS; NO CONFLICTS. The Shareholder has full legal
right and capacity to execute and deliver this Agreement and to perform such
Shareholder's obligations hereunder. This Agreement has been duly executed and
delivered by Shareholder and constitutes the valid and binding obligation of the
Shareholder, enforceable against the Shareholder in accordance with its terms
except as the enforcement thereof may be limited by bankruptcy, reorganization,
moratorium, insolvency and other laws of general applicability relating to or
affecting creditors' rights or general principles of equity. The execution,
delivery and performance of this Agreement by the Shareholder and the
consummation of the transactions contemplated hereby by such Shareholder will
not (i) violate any order, writ, judgment, injunction, award or decree of any
court, arbitrator or governmental or regulatory body against, or binding upon
the Shareholder or upon the assets of the Shareholder; or (ii) violate any
statute, law or regulation to which such Shareholder or such Shareholder's
assets is subject.
3.3 INVESTMENT INTENT. The Olympic Shares being acquired by the
Shareholder hereunder are being acquired for such Shareholder's own account and
not with a view to, or for resale in connection with, any distribution other
than resales made in compliance with the registration and prospectus delivery
requirements of Securities Act of 1933, as amended (the "Act"). The Shareholder
understands that the Olympic Shares have not been registered under the Act by
reason of available exemptions from the registration and prospectus delivery
requirements of the Act that such Olympic Shares must be held indefinitely
unless such Olympic Shares are registered under the Act or until any transfer is
exempt from registration, and that reliance of Olympic upon these exemptions is
predicated in part upon these representations and warranties by the Shareholder.
14
3.4 QUALIFICATION AS AN INVESTOR.
3.4.1 The Shareholder hereby represents and warrants that such
Shareholder has. the requisite knowledge and experience in financial and
business matters to assess the relative merits and risks of investment in the
Olympic Shares.
3.4.2 The Shareholder has received certain information concerning
Olympic and has had the opportunity to obtain additional information as desired
in order to evaluate the merits and risks of holding the Olympic Shares, and is
able to bear the economic risk and lack of liquidity inherent in holding the
Olympic Shares. Furthermore, the Shareholder has had the full opportunity to
discuss with Olympic all material aspects of an investment in the Olympic
Shares, including the opportunity to ask, and to receive answers to such
Shareholder's full satisfaction, regarding such questions as such Shareholder
has deemed necessary to evaluate such Shareholder's opportunity to invest.
3.4.3 The Shareholder has had full opportunity to seek advice of'
independent counsel respecting this investment and the tax risks and
implications of the Exchange and all transactions consummated in connection
therewith.
ARTICLE IV
REPRESENTATIONS OF OLYMPIC
Olympic hereby represents and warrants to LHF and the Shareholders that:
4.1 EXISTENCE AND GOOD STANDING. Olympic is a corporation duly
organized, validly existing and in good standing under the laws of the State of
Delaware. Olympic has the full corporate power and authority to own its
property and to carry on its business all as and in the places where such
properties are now owned or operated or such business is now being conducted.
Except in those states in which Olympic is qualified to do business as a foreign
corporation, Olympic has not otherwise qualified to do business as a foreign
corporation, and neither the character nor location of the properties owned or
leased by Olympic, nor the nature of the business conducted by Olympic, requires
such additional qualification in any jurisdiction except for such jurisdictions
where the failure to so qualify would not have a material adverse effect on the
assets, liabilities, business, condition (financial or otherwise), or the
results of operation of Olympic. Olympic is in good standing in each
jurisdiction in which it is qualified to do business as a foreign corporation.
4.2 OLYMPIC SHARES. The Olympic Shares when delivered to the
Shareholders will have been duly authorized and validly issued and be fully paid
and non-assessable.
15
4.3 VALID AGREEMENT; NO CONFLICTS. Olympic has full authority to
execute and deliver this Agreement and to perform its obligations hereunder.
This Agreement has been duly and validly authorized, executed and delivered by
Olympic and constitutes a valid and binding agreement of Olympic, enforceable
against Olympic in accordance with its terms except as the enforcement hereof
may be limited by bankruptcy, reorganization, moratorium, insolvency and other
laws of general applicability relating to or affecting creditors' rights or
general principles of equity. Execution, delivery and performance of this
Agreement and consummation of the transactions contemplated hereby will not
violate, conflict with or result in the breach of any of the terms of, or
constitute a default under (i) the Certificate of Incorporation or the Bylaws of
Olympic, (ii) any material obligation, contract, agreement, or other instrument
to which Olympic is a party or by or to which Olympic or its assets may be bound
or subject; (iii) any order, writ, judgment, injunction, award or decree of any
court, arbitrator or governmental or regulatory body against, or binding upon,
Olympic or its assets; or (iv) any statute, law or regulation to which Olympic
or any of its assets is subject.
4.4 CONSENTS AND APPROVALS OF GOVERNMENTAL AUTHORITIES. No consent,
approval or authorization of, or declaration or registration with, any
governmental or regulatory authority is required in connection with the
execution and delivery of this Agreement by Olympic or the consummation by
Olympic of the transactions contemplated hereby.
4.5 LITIGATION. Except as set forth in SCHEDULE 4.5, there is no
action, suit, proceeding at law or in equity by any Person, or any arbitration
or administrative or other proceeding by or before any governmental or other
instrumentality or agency (including, without limitation, the National
Association of Securities Dealers), pending or, to the knowledge of Olympic,
threatened against or affecting Olympic or any of its properties or rights,
which, if adversely determined would have a material adverse effect on the
assets, liabilities, business, condition (financial or otherwise), or the
results of operations of Olympic. Olympic is not subject to any judgment order
or decree entered in any lawsuit or proceeding.
4.6 CAPITALIZATION. The authorized capital of Olympic consists of
10,000,000 shares of Olympic Common Stock, of which 876,051 shares are issued
and outstanding as of the date of this Agreement and 2,000,000 shares of
preferred stock, none of which are outstanding as of the date of this
Agreement. All of the outstanding shares of Olympic Common Stock have been
duly authorized and validly issued and are fully paid and non-assessable.
Except as set forth in SCHEDULE 4.6, there are no outstanding options,
warrants, fights, calls, commitments, conversion rights, rights of exchange,
plans or other agreements of any character providing for the purchase,
issuance or sale of any shares of the capital stock of Olympic.
16
4.7 FINANCIAL STATEMENTS. Olympic has or will deliver to the
Shareholders copies of the audited balance sheets of National Securities (the
predecessor to Olympic) as of September 29, 1995 and as of September 27, 1996
and the related statements of income, changes in shareholders' equity and cash
flows for the years then ended, and the unaudited balance sheet of National
Securities as at December 31, 1996 and the related statements of income, changes
in shareholders' equity and cash flows for the three-month period then ended
(collectively, the "Olympic Financials"). The Olympic Financials were prepared
in accordance with generally accepted accounting principles consistently applied
and fairly present the financial position of Olympic as of the dates thereof and
the results of operations and changes in financial position of Olympic as of the
dates thereof and the results of operations and changes in financial position
for the periods then ended. Since December 31, 1996, there has not been any
material adverse change in the assets, liabilities, business, condition
(financial or otherwise), or the results of operations of Olympic.
4.8 CONTRACTS. Every contract that is material to the business of
Olympic, taken as a whole, is in full force and effect, and there exists no
material default or any event of default by Olympic or to the knowledge of
Olympic, by any other party.
4.9 COMPLIANCE WITH LAWS. Olympic is in compliance in all material
respects with all Requirements of Law. Olympic (i) has not been charged
with, (ii) is not under any investigation with respect to, and (iii) has not
been threatened with, any charge concerning any violation of any Requirements
of Law. Without limiting the generality of the foregoing, there is no
investigation of, complaint against or inquiry regarding Olympic pending
before the National Association of Securities Dealers.
4.10 SEC MATTERS. The Olympic Common Stock has been registered pursuant
to Section 12(g) of the Securities Exchange Act of 1934. Since January 1, 1995,
Olympic and National Securities have timely filed and, as required by Section 13
of the Securities Exchange Act of 1934, will continue to timely file, all the
required forms, reports and other documents with the Securities and Exchange
Commission ("SEC"). As of the date hereof, and at the Closing Date, all
reports, forms and other documents so filed (including, without limitation,
Olympic's Registration Statement on Form S-4, SEC File No. 333-12907, declared
effected by the SEC on February 3, 1997) complied in all material respects with
all of the statutes, rules and regulations enforced or promulgated by the SEC,
and do not, and will not, contain any untrue statement of a material fact or
omit to state a material fact required to be stated therein or necessary to make
the statements therein, in light of the circumstances under which they were
made, not misleading.
17
4.11 BROKER-DEALER REGISTRATION. National Securities is a Broker-Dealer
having duly registered with the SEC pursuant to Section 15 of the 1934 Act.
4.12 NO THREATENED SEC PROCEEDINGS. National Securities' registration as
a Broker-Dealer is in good standing and, there is not currently pending or to
the knowledge of Olympic, threatened any inquiry, investigation, administrative
proceeding, or civil action undertaken or initiated by the SEC concerning
National Securities or its officers, directors, or registered representatives.
4.13 NET CAPITAL. National Securities is not in violation of the
applicable net capital provisions of the 1934 Act and the general rules and
regulations thereunder.
4.14 NASD MEMBERSHIP. National Securities is a member in good standing
with the NASD and there has not been for the most recent three years, nor is
there currently pending or to the knowledge of Olympic, threatened, any material
inquiry investigation or disciplinary proceeding undertaken by the NASD
concerning National Securities or any of its officers, directors, registered
principals, or registered representatives.
4.15 NASD RESTRICTIONS. There are no special restrictions or limitations
imposed by the NASD relating to the conduct by National Securities of the
business of a Broker-Dealer which have a material adverse effect on the business
or operations of' National Securities as currently conducted.
4.16 STATE BROKER-DEALER REG2ISTRATIONS. National Securities is
registered as a Broker-Dealer in all the states and jurisdictions in which the
nature of the business conducted by National Securities requires such
registration, all of such registrations are current, and National Securities is
in good standing as a registered Broker-Dealer in each such state or
jurisdiction.
4.17 NO STATE INQUIRIES. National Securities' state Broker-Dealer
registrations are in good standing and for the most recent three year period,
there has not been, nor is there currently pending, or to Olympic's knowledge,
threatened, any inquiry, investigation, administrative proceeding, or civil
action undertaken or initiated by such state or jurisdictions concerning
National Securities or its officers, directors, registered principals or
registered representatives.
4.18 STATE NET CAPITAL COMPLIANCE. National Securities is not in
violation of the net capital provisions required to be maintained by each state
or jurisdiction in which National Securities is registered as a Broker-Dealer.
4.19 SIPC REGISTRATION. National Securities is duly registered with SIPC.
18
4.20 DISCLOSURE
4.20.1 None of this Agreement, the Olympic Financials, or any
schedule hereto, or any certificate, document or statement in writing to be
delivered as required under this Agreement by or on behalf of Olympic,
contains, or will contain, any untrue statement of a material fact, or omits,
or will omit, any statement of a material fact required to be stated or
necessary in order to make statements contained herein or therein not
misleading.
4.20.2 Notwithstanding specific cross references in the
Schedules, any disclosure under any Schedule shall be deemed to be a
disclosure applicable to all representations and warranties of Olympic under
this Agreement and under all other Schedules. To the extent that the
Schedules contain exceptions to the representations and warranties set forth
in Article IV of this Agreement, the inclusion of an item in any Schedule
shall not be deemed an admission by Olympic that such item is material to
Olympic or that it will have a material adverse effect on the assets,
liabilities, . business, condition (financial or otherwise), or the results
of operations of Olympic.
4.21 REPRESENTATIONS TRUE AT CLOSING. All representations by Olympic
in this Article IV or in any document delivered pursuant hereto in connection
with the transactions contemplated hereby shall be true and accurate in all
material respects as of the date when made and shall be deemed to be made
again at the Closing and shall then be true and accurate in all material
respects except as affected by the transactions contemplated by this
Agreement.
ARTICLE V
CONDUCT OF BUSINESS; REVIEW
5.1 CONDUCT OF BUSINESS OF LHF. From the date hereof through the
Closing, each of Olympic and LHF shall (i) conduct its business in the ordinary
course and in such a manner so that the representations and warranties contained
herein shall continue to be true and correct as of the Closing as if made at and
as of the Closing and (ii) not enter into any transaction or incur any liability
except in the ordinary course of business.
5.2 REVIEW OF LHF. Prior to the Closing, Olympic shall be entitled,
through its employees and representatives, to make such investigations and
examination of the books, records and financial condition of LHF as Olympic may
request. LHF shall furnish Olympic and its representatives during such period
with all such information concerning the affairs of LHF as Olympic or its
representatives may request and cause LHF's officers, employees, consultants,
agents, accountants and attorneys to cooperate fully with Olympic or its
representatives in connection with
19
such review and examination. Any such investigations and examinations shall
be conducted at reasonable times and under reasonable circumstances.
5.3 REVIEW OF OLYMPIC. Prior to the Closing, LHF shall be entitled,
through its employees and representatives, to make such investigations and
examination of the books, records and financial condition of Olympic as LHF may
request. Olympic shall furnish LHF and its representatives during such period
with all such information concerning the affairs of Olympic as LHF or its
representatives may request and cause Olympic's officers, employees,
consultants, agents, accountants and attorneys to cooperate fully with LHF or
its representatives in connection with such review and examination. Any such
investigations and examinations shall be conducted at reasonable times and under
reasonable circumstances.
5.4 COOPERATION: CONSENTS. Prior to the Closing Date, each party
shall cooperate with the other party to the end that the parties shall (i) in
a timely manner make all necessary filings with, and conduct negotiations
with, all governmental ' authorities and other Persons the consent or
approval of which, or a license or permit from which, is required for the
consummation of the transactions contemplated by this Agreement and (ii)
provide to each other party such information as the other party may
reasonably request in order to enable it to prepare such filings and to
conduct such negotiations. The parties shall also use their respective best
efforts to expedite the review process and to obtain all such necessary
consents, approvals, licenses and permits as promptly as practicable.
5.5 LITIGATION. From the date hereof through the Closing, each party
hereto shall promptly notify the other parties of any lawsuits, claims,
proceedings or investigations which after the date hereof are threatened or
commenced against such party or any of its affiliates or any officer,
director, employee, consultant, agent or shareholder thereof, in their
capacities as such, which, if decided adversely, could reasonably be expected
to have a material adverse effect upon the assets, liabilities, business,
condition (financial or otherwise), or the results of operations of such
party.
5.6 NOTICE OF DEFAULT. From the date hereof through the Closing, each
party hereto shall give to the other parties prompt written notice of the
occurrence or existence of any event, condition or circumstance occurring
which would constitute a violation or breach of this Agreement by such party
or which would render inaccurate in any material respect any of the other
party's representations or warranties contained herein.
5.7 NO SHOP. LHF agrees that for a period from the date hereof through
the earliest of (a) ▇▇▇▇▇ ▇▇, ▇▇▇▇, (▇) the consummation of the transactions
contemplated hereby, or (c) the termination of this Agreement pursuant to the
terms hereof, LHF will not, directly or indirectly: (i) initiate contact with
any person or
20
entity in an effort to solicit any Alternative Proposal (as defined below),
(ii) cooperate with, or furnish or cause to be furnished any non-public
information concerning the financial condition, results of operations,
businesses, properties, assets, liability or future prospects of LHF, to any
person or entity in connection with any Alternative Proposal, (iii) negotiate
with any Person with respect to any Alternative Proposal, or (iv) enter into
any agreement or understanding with the intent to effect an Alternative
Proposal. LHF shall immediately give written notice to Olympic of the
details of any Alternative Proposal of which it becomes aware. As used
herein, "Alternative Proposal" shall mean any proposal, other than as
contemplated by this Agreement, for a merger, consolidation, reorganization,
other business combination or recapitalization involving LHF or for the
acquisition of a substantial portion of its assets other than in the ordinary
course of its business, the effect of which may be to prohibit, restrict or
delay the consummation of the Exchange or impair the contemplated benefits to
Olympic of the Exchange. Olympic agrees to give written notice to LHF of any
transaction which is submitted to its stockholders prior to the Closing.
5.8 REGULATORY FILINGS. LHF and Olympic each agree to prepare and file
all required documents, submissions, notices, amended applications or similar
filings with federal, state, and local regulatory authorities and the NASD to
effect and give evidence of the Exchange and to secure the approval of the
Exchange and to obtain the necessary state "blue sky" clearances, if any are
required with respect to the issuance of the Olympic Shares to the Shareholders.
ARTICLE VI
CONDITIONS TO THE OBLIGATIONS
OF EACH PARTY TO CLOSE
The obligation of Olympic, LHF and the Shareholders to consummate the
transactions contemplated herein shall be subject to the-fulfillment, at or
prior to the Closing, of all of the conditions set forth below in this Article
VI. Olympic, on the one hand, and LHF and the Shareholders, on the other hand,
may, by written notice, waive any or all of these conditions in whole or in part
without prior notice, provided, however, that no such waiver shall constitute a
waiver by Olympic or LHF and the Shareholders of any other right or remedy if
Olympic or LHF and the Shareholders shall be in default of any of its or their
representations, warranties or covenants under this Agreement.
6.1 THIRD PARTY APPROVALS. Any and all permits and approvals from any
governmental authority or other Person necessary to permit the consummation of
the transactions contemplated herein, including, without limitation, approval of
the NASD, shall have been obtained.
21
6.2 INVESTOR RIGHTS AGREEMENT. An Investor Rights Agreement in the form
attached hereto as Exhibit A (the "Investor Rights Agreement"), shall have been
duly executed by Olympic and each of the Shareholders.
6.3 EMPLOYMENT AGREEMENTS. Employment Agreements, in the form of
Exhibit B (the "Employment Agreements"), shall have been duly executed by LHF,
Olympic and each of the following senior executive officers of LHF: ▇▇▇▇▇ ▇.
Friend, ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇ and ▇▇▇▇ ▇▇▇▇▇▇▇▇, ▇▇.
6.4 UPDATED FOCUS REPORTS. LHF shall have delivered to Olympic and
National Securities shall have delivered to LHF copies of all focus reports
filed by it with the SEC.
ARTICLE VII
CONDITIONS TO OLYMPIC'S OBLIG TIONS
The obligation of Olympic to consummate the transactions contemplated
herein shall be subject to the fulfillment, at or prior to the Closing, of all
of the conditions set forth below in this Article VII. Olympic may, by written
notice, waive any or all of these conditions in whole or in part without prior
notice, provided, however, that no such waiver shall constitute a waiver by
Olympic of any other right or remedy if LHF or the Shareholders shall be in
default of any of its or their representations, warranties or covenants under
this Agreement
7.1 GOOD STANDING AND TAX CERTIFICATES. LHF or the Shareholders shall
have delivered to Olympic: (a) a copy of LHF's Articles of incorporation,
including all amendments, certified by the Secretary of State of the State of
California; (b) a certificate from the Secretary of State of the State of
California and each state in which LRF is qualified as a foreign corporation to
do business, to the effect that such corporation is in good standing in such
state; and (c) a certificate as to the tax status of LHF in the State of
California and each state in which it is qualified as a foreign corporation to
do business.
7.2 NO MATERIAL ADVERSE CHANGE. Between the date hereof and the Closing
Date, there shall be, except as provided for in this Agreement, no material
adverse change in the as-sets, liabilities, business, condition (financial or
otherwise), or the results of operations of LHF, and LHF shall have delivered to
Olympic a certificate, dated the Closing Date, to such effect.
7.3 TRUTH OF REPRESENTATIONS AND WARRANTIES. The representations and
warranties of LHF and the Shareholders contained in this Agreement or in any
schedule delivered pursuant hereto shall be true and correct in all material
respects on
22
and as of the Closing Date with the same effect as though such
representations and warranties had been made on and as of such date, and LHF
and the Shareholders shall have delivered to Olympic a certificate, dated the
Closing Date, to such effect.
7.4 PERFORMANCE OF AGREEMENTS. Each and all of the agreements of LHF
and the Shareholders to be performed pursuant to the terms hereof on or before
the Closing Date shall have been duly performed in all material respects, and
LHF and the Shareholders shall have each delivered to Olympic a certificate,
dated the Closing Date, to such effect.
7.5 VOTING AGREEMENT. Olympic shall have received a copy of the Voting
Agreement (the "Voting Agreement"), in the form of Exhibit C, duly executed by
each of the Shareholders.
7.6 OPINION. Olympic shall have received an opinion from Loeb & Loeb
LLP, in form and substance satisfactory to Olympic's counsel.
7.7 RESOLUTIONS. Olympic shall have received a copy of the
resolutions of the Board of Directors of LHF and the Shareholders approving
the transactions contemplated by this Agreement, certified by the Secretary
of LHF.
7.8 LIABILITIES. Either (a) the Shareholders shall have assumed all
of the liabilities of LHF existing immediately prior to the Deemed Closing
Date, other than the Remaining Liabilities (as defined below), jointly, in
accordance with their percentage ownership of the LHF Shares, or (b) the
Shareholders shall have agreed to indemnify LHF, jointly, in accordance with
their percentage ownership of the LHF Shares, for all payments made by LHF
after the Closing on account of any liabilities of LHF existing immediately
prior to the Closing, other than the Remaining Liabilities. As used herein,
"Remaining Liabilities" means the LHF Transaction Costs (as defined in
Section 10.1), PLUS all liabilities and obligations relating to and arising
from the Remaining Assets (as defined in Section 8.9), from and after the
Deemed Closing Date. Without limiting the generality of the foregoing, LHF
shall have paid in full all subordinated debt.
7.9 LOAN. Certain of the Shareholders shall have funded a loan (the
"Loan") to Olympic in the principal amount of $800,000, which Loan shall have
been funded (a) in cash, (b) in the form of marketable securities (the
marketability of which shall be determined by mutual agreement) with a fair
market value (based upon the mid-point between the closing bid price and the
closing ask price on the prior trading day) of the amount of the Loan, or (c)
any combination of cash and marketable securities, the sum of such cash and
the fair market value of such marketable securities is equal to $800,000.
23
7.10 CERTIFICATE OF NON-FOREIGN STATUS. Each Shareholder shall deliver to
Olympic a certificate pursuant to Section 1445(b)(2) of the Code which
states, under penalty of perjury, the Shareholder's taxpayer identification
number and address as well as a statement that the Shareholder is not a
"foreign person" within the meaning of Section 1445(f)(3) of the Code.
7.11 NO LITIGATION THREATENED. No action or proceedings shall have been
instituted or, to the knowledge of LHF, shall have been threatened, before a
court or other governmental body or by any public authority to restrain or
prohibit LHF from consummating any of the transactions contemplated hereby, and
a duly authorized officer of LHIP shall have delivered to Olympic a certificate,
dated the Closing Date, to such effect.
7.12 AUDITED FINANCIAL STATEMENTS. LHF shall have delivered to Olympic
the final version of the audited statement of financial condition of LHF as
at December 31, 1996 and the related statements of income, changes in
shareholders' equity, changes in liabilities subordinated to the claims of
general creditors, and cash flows for the year ended December 31, 1996, which
shall not be materially different from the draft referenced in Section 2.5.1.
7.13 ▇▇▇▇▇▇ & FRIEND AGREEMENT. LHF and ▇▇▇▇▇▇ & Friend Capital
Partners Inc., a California corporation ("G&F") shall have entered into an
agreement in form acceptable to Olympic, pursuant to which G&F shall provide
(i) for the reimbursement by G&F of its portion of the expenses of LHF's
Century City office arising from G&F's occupation of space in that office,
and (ii) that G&F, to the extent reasonably practicable, shall offer to
Affiliates of Olympic the opportunity to pursue business opportunities
relevant to the business of a Broker-Dealer, prior to offering such
opportunities to other Broker-Dealers, subject to the capacity and reasonable
business judgment of G&F and reasonable compensation to G&F.
ARTICLE VIII
CONDITIONS TO THE SHAREHOLDERS' OBLIGATIONS
The obligation of LHF and the Shareholders to consummate the transactions
contemplated herein shall be subject to the fulfillment, at or prior to the
Closing, of all of the conditions set forth below in this Article VIII. LHF and
the Shareholders may, by written notice, waive any or all of these conditions in
whole or in part without prior notice, provided, however, that no such waiver
shall constitute a waiver by LHF or the Shareholders of any other right or
remedy if Olympic shall be in default of any of its representations, warranties
or covenants under this Agreement.
24
8.1 TRUTH OF REPRESENTATIONS AND WARRANTIES. The representations and
warranties of Olympic contained in this Agreement shall be true and correct
in all material respects on and as of the Closing Date with the same effect
as though such representations and warranties had been made on and as of such
date, and a duly authorized officer of Olympic shall have delivered to the
Shareholders a certificate, dated the Closing Date, to such effect.
8.2 PERFORMANCE OF AGREEMENTS. Each and all of the agreements of
Olympic to be performed on or before Closing Date pursuant to the terms
hereof shall have been duly performed in all material respects, and a duly
authorized officer of Olympic shall have delivered to the Shareholders a
certificate, dated the Closing Date, to such effect.
8.3 NO LITIGATION THREATENED. No action or proceedings shall have
been instituted or, to the knowledge of Olympic, shall have been threatened,
before a court or other governmental body or by any public authority to
restrain or prohibit Olympic from consummating any of the transactions
contemplated hereby, and a duly authorized officer of Olympic shall have
delivered to the Shareholders a certificate, dated the Closing Date, to such
effect.
8.4 GOOD STANDING AND TAX CERTIFICATES. Olympic shall have delivered
to the Shareholders: (a) a copy of Olympic's Certificate of Incorporation,
including all amendments, certified by the Secretary of State of the State of
Delaware; (b) a certificate from the Secretary of State of the State of
Delaware and each state in which Olympic is qualified as a foreign
corporation to do business, to the effect that Olympic is in good standing in
such state, and (c) a certificate as to the tax status of Olympic in the
State of Delaware and each state in which it is qualified as a foreign
corporation to do business.
8.5 NO MATERIAL ADVERSE CHANGE. Between the date hereof and the
Closing Date, there shall be, except as provided for in this Agreement, no
material adverse change in the assets, liabilities, business, condition
(financial or otherwise), or the results of operations of Olympic, and a duly
authorized officer of Olympic shall have delivered to the Shareholders a
certificate dated the Closing Date, to such effect.
8.6 PROMISSORY NOTE. The Shareholders of LHF shall have received a
copy of the Senior Subordinated Promissory Note, reflecting the Loan, in the
form of Exhibit D (the "Promissory Note"), duly executed by Olympic.
8.7 OPINION. The Shareholders shall have received an opinion from
Camhy ▇▇▇▇▇▇▇▇▇ & ▇▇▇▇▇ LLP, in form and substance satisfactory to LHF's
counsel.
25
8.8 RESOLUTIONS. The Shareholders shall have received a copy of the
resolutions of the Board of Directors of Olympic approving the transactions
contemplated by this Agreement, certified by the Secretary of Olympic.
8.9 TRANSFER OF ASSETS. LHF shall have transferred to a limited
liability company wholly-owned by the Shareholders, all of the assets of LHF
other than (a) furniture, fixtures and equipment, (b) work in progress,
including, but not limited to, all agreements with clients, including, but
not limited to, those set forth on SCHEDULE 8.9(a) (but excluding those which
appear on SCHEDULE 8.9(b)), (c) equipment and real property leases and the
other agreements set forth on SCHEDULE 8.9(a), and (d) the name of LHF, the
service ▇▇▇▇ described on SCHEDULE 2.15 and the pending application for
registration described therein, and all goodwill relating thereto
(collectively, the "Remaining Assets"). Remaining Assets shall not include
the property listed on SCHEDULE 8.9(b).
8.10 CAPITAL CONTRIBUTION. Olympic shall have contributed to the
capital of LHF (a) an amount of no less than $200,000, PLUS (b) all of the
proceeds of the Loan.
8.11 BONUS PLAN. LRF shall have adopted the Key Executive Bonus Plan
in the form of EXHIBIT E (the "Bonus Plan').
8.12 DEIFICATION OF PROMISSORY NOTE. The issuance of the Promissory
Note shall have been qualified pursuant to the California Corporate
Securities Law of 1968.
ARTICLE IX
SURVIVAL OF REPRESENTATIONS; INDEMNITY
AND OTHER POST-CLOSING COVENANTS
9.1 SURVIVAL OF REPRESENTATIONS AND WARRANTIES OF LHF AND THE
SHAREHOLDERS. All representations, warranties, covenants and agreements of LHF
and the Shareholders contained in this Agreement shall survive the execution and
delivery of this Agreement and the Closing hereunder, and shall thereafter
terminate and expire and any claim based thereon shall be brought one year from
the Closing Date, except as to matters as to which an Indemnitee (as defined in
Section 9.5.1) has made a claim for indemnification or made a Claims Notice,
pursuant to Section 9.5 hereafter, on or prior to such date, in which case the
rights to indemnification shall survive until such claim is finally resolved and
any obligations with respect thereto are fully satisfied, and except for the
representations and warranties set forth in Sections 2.1, 2.3, 2.12 and 3.1,
which shall survive until the third anniversary of the date of the Closing.
26
9.2 OBLIGATION OF THE SHAREHOLDERS TO INDEMNIFY
9.2.1 Subject to Section 9.2.3, the Shareholders (other than
▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇ and ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇) agree jointly and severally, and
▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇ and ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇ agree jointly in accordance with their
percentage ownership of the LHF Shares, to indemnify, defend and hold hurtles s
Olympic, its respective Affiliates, officers, directors, employees, agents,
attorneys and representatives, and any of its successors and assigns from, and
against any and all losses, liabilities, damages, deficiencies, demands, claims,
actions, judgments or causes of action, assessments, costs or expenses
(including, without limitation, interest, penalties and reasonable attorneys'
fees and disbursements) ("Losses"), based upon, .raising out of or otherwise in
respect of (i) any inaccuracy in or any breach of any representation, warranty,
covenant or agreement of LHF and/or the Shareholders contained in this
Agreement, any schedule hereof or any other document executed pursuant to the
terms hereof, and (ii) the operation of LHF prior to the Closing.
9.2.2 Notwithstanding Section 9.2.1 above, the obligation of the
Shareholders to indemnify Olympic under Section 9.2 shall apply (i) only if the
cumulative aggregate amount of Losses thereunder exceeds $40,000 (the "Minimum")
and (ii) only to the amounts in excess of such total; PROVIDED, HOWEVER, that
the Minimum shall not apply either to the breach by LHF of the representations
and warranties set forth in Section 2.13 or the breach by the Shareholders of
any agreement entered into in satisfaction of the condition to Closing set forth
in Section 7.8.
9.2.3 Any claim of indemnification made by Olympic pursuant to this
Section 9.2 with respect to a breach by any Shareholder of such Shareholder's
representations, warranties or agreements contained in Article III shall be made
only against the breaching Shareholder, and Olympic shall not be entitled to
make a claim against or otherwise pursue any other Shareholder.
9.3 SURVIVAL OF REPRESENTATIONS AND WARRANTIES OF OLYMPIC. All
representations, warranties, covenants and agreements of Olympic contained in
this Agreement shall survive the execution and delivery of this Agreement and
the Closing hereunder, and shall thereafter terminate and expire, except for
Olympic's covenants in Sections 9.8, 9.10 and 9.12, and any claim based thereon
shall be brought one year from the Closing Date, except as to matters as to
which an Indemnitee (as defined in Section 9.5. 1) has made a claim for
indemnification or given a Claims Notice under Section 9.5 hereafter on or prior
to such date, in which case the rights to indemnification shall survive until
such claim is finally resolved and any obligations with respect thereto are
fully satisfied, and except for the representations and warranties set forth in
Sections 4.2 and 4.6 which shall survive until the third
27
anniversary of the date of the Closing and the covenants set forth in
Sections 9.14 and 10.8 which shall survive until the second anniversary of
the date of the Closing.
9.4 OBLIGATION OF OLYMPIC TO INDEMNIFY. Olympic agrees to indemnify,
defend and hold harmless the Shareholders, their Affiliates, employees, agents,
attorneys and representatives and their successors and assigns from and against
any and all Losses based upon, arising out of or otherwise in respect of (i) any
inaccuracy in or any breach of any representation, warranty, covenant or
agreement of Olympic contained in this Agreement or in any other document
executed pursuant to the terms hereof, and (ii) the operation of LHF after the
Closing.
9.5 NOTICE AND OPPORTUNITY TO DEFEND.
9.5.1 NOTICE OF ASSERTED LIABILITY. Promptly after receipt by any
party hereto (the "Indemnitee") of notice of any demand, claim or circumstances
which, with the lapse of time, would or might give rise to a claim or the
commencement (or threatened commencement) of any action, proceeding or
investigation (an "Asserted Liability") that may result in any Losses, the
Indemnitee, shall promptly give notice thereof (a "Claims Notice") to any other
party obligated to provide indemnification pursuant to the terms of this
Agreement (the "Indemnifying Party"). The Claims Notice shall describe the
Asserted Liability in reasonable detail, and shall indicate the amount
(estimated, if necessary and to the extent feasible) of the Losses that have
been or may be suffered by the Indemnitee.
9.5.2 OPPORTUNITY TO DEFEND. The Indemnifying Party may elect to
compromise or defend, at its own expense and by its own counsel, any Asserted
Liability. If the Indemnifying Party elects to compromise or defend such
Asserted Liability, it shall within thirty (30) days (or sooner, if the nature
of the Asserted Liability so requires) notify the Indemnitee of its intent to
so, and the Indemnitee shall cooperate, at the expense of Indemnifying Party, in
the compromise of, or defense against, the Asserted Liability. If the
Indemnifying Party elects not to compromise or defend the Asserted Liability,
fails to notify Indemnitee of its election as herein provided, or contests its '
obligation to indemnify under this Agreement the Indemnitee may pay, compromise
or defend such Asserted Liability at the expense of the Indemnifying Party.
Subject to the limitations contained in Section 9.6 on the obligations of the
Indemnifying Party in respect of proposed settlements, the Indemnitee shall have
the fight to employ its own counsel with respect to any Asserted Liability, but
the fees and expenses of such counsel shall be at the expense of such Indemnitee
unless (a) the employment of such counsel shall have been authorized in writing
by the Indemnifying Party in connection with the defense of such action, or (b)
such Indemnifying Party shall not have, as provided above, promptly employed
counsel reasonably satisfactory to such Indemnitee to take charge of the defense
of such action, or (c) such Indemnitee shall have reasonably concluded based on
an
28
opinion of counsel that there may be one or more legal defenses available to
it which are different from or additional to those available to such
Indemnifying Party, in any of which events such reasonable fees and expenses
shall be borne by the Indemnifying Party and the Indemnifying Party shall not
have the right to direct the defense of such action on behalf of the Indemnitee
in respect of such different or additional defenses. If the Indemnifying Party
chooses to defend any claim, the Indemnitee shall make available to the
Indemnifying Party any books, records or other documents within its control that
are necessary or appropriate for such defense.
9.6 SETTLEMENT. Notwithstanding the provisions of Section 9.5.2,
neither the Indemnifying Party nor the Indemnitee may settle or compromise any
claim for which indemnification has been sought and is available hereunder, over
the objection of the other; provided, however, that consent to settlement or
compromise shall not be unreasonably withheld or delayed. If, however, the
Indemnitee refuses to consent to a bona fide offer of settlement which the
Indemnifying Party wishes to accept, the Indemnitee may continue to pursue such
matter, free of any participation by Indemnifying Party, at the sole expense of
the Indemnitee. In such event, the obligation of the Indemnifying Party to the
Indemnitee shall be equal to the lesser of (i) the amount of the offer of
settlement which the Indemnitee refused to accept plus the costs and expenses of
the Indemnitee prior to the date the Indemnifying Party notified the Indemnitee
of the offer of settlement and (ii) the actual out-of-pocket amount the
Indemnitee is obligated to pay as a result of the Indemnitee continuing to
pursue such matter.
9.7 COMPUTATION OF LOSSES. For purposes of calculating any Losses
suffered by an indemnified party pursuant to this Article IX, the amount of the
Losses suffered by the indemnified party shall be the net amount of damage so
suffered after giving effect to any insurance proceeds and tax benefit received
with respect to such matter.
9.8 ACCOUNTS RECEIVABLE. Following the Closing, LHF shall act as agent
for the Shareholders with respect to the collection of LHF's accounts receivable
and all other claims owing to LHF of any nature whatsoever, in existence as of
the Deemed Closing Date, including, without limitation, the accounts receivable
set forth on Schedule 9.8 to be delivered by LHF to Olympic at the Closing, and
shall use best efforts to collect the same. All such payments received by LHF
following the Closing shall be held by LHF in trust for the benefit of the
Shareholders, and LHF shall promptly remit the same to LHFCO, LLC, a California
limited liability company, after receipt thereof.
9.9 LISTING. Olympic shall use its best efforts to list the Olympic
Shares and any other shares of Olympic's common stock issued to the
Shareholders pursuant to the Promissory Note on any national securities
exchange on which the common
29
stock of Olympic is listed, or if not listed on a national securities
exchange, to qualify such shares for inclusion on The NASDAQ Small Cap Market.
9.10 CONDUCT OF BUSINESS. Until the later of the payment and
performance in full of the Promissory Note or the termination of the Bonus
Plan, Olympic shall cause LHF to conduct its business in the ordinary course,
substantially consistent with past practices. Without limiting the
generality of the foregoing, until the later of the payment and performance
in full of the Promissory Note or the termination of the Bonus Plan, Olympic
shall not permit LHF to change its name.
9.11 OLYMPIC BOARD MEETINGS. Until payment and performance in full of
the Promissory Note, Olympic shall permit any one of ▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇▇
▇▇▇▇▇▇▇ or ▇▇▇▇ ▇▇▇▇▇▇▇▇ to attend any meetings of Olympic's Board of
Directors.
9.12 BONUS PLAN. Olympic shall cause the Bonus Plan to remain in full
force and effect so long as any two (2) of the following remain employees of
LHF: ▇▇▇▇▇ ▇. Friend, ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇ and ▇▇▇▇ ▇▇▇▇▇▇▇▇, ▇▇.
9.13 TAXES FOR SHORT YEAR. The parties understand that the year in which
the Closing occurs will be treated as an S termination year within the meaning
of Section 1362(e)(4) of the Code. The portion of the S termination year ending
at the close of the day prior to the termination shall be treated as a short
taxable year for which LHF is an S corporation (the "S short year"). LHF shall
close its books as of the close of the day prior to the Deemed Closing Date.
Olympic will afford to the Shareholders access, upon reasonable prior notice, to
the books and records of LHF for purposes of preparing the S short year federal
income tax return for LHF, and the Shareholders shall prepare an S short year
federal income tax return for LHF, as well as any other Tax Returns of or with
respect to LHF, for the S short year, in an orderly manner, and shall provide a
copy of such Tax Returns to Olympic. The Shareholders will report all income
allocable to them in accordance with such Tax Returns, and will pay (or
reimburse Olympic or LHF for) any and all Taxes relating to the S short year.
9.14 401(k) PLAN. For the balance of the calendar year following the
Closing Date and for one additional calendar year thereafter, Olympic shall
not cause or permit without the prior written consent of ▇▇▇▇▇ ▇. Friend and
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, LHF's 401(k) Plan which exists as of the date hereof (the
"401(k) Plan"), to be modified in any manner whatsoever, terminated or merged
into another 401(k) Plan, except as may be required by law. Additionally,
during such period, Olympic shall permit the 401(k) Plan to be administered
by an Advisory Committee, as provided in the 401(k) Plan, composed of ▇▇▇▇▇
▇. Friend, ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇ and ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇; PROVIDED, that in the
event that any of the foregoing three individuals ceases to be employed by
LHF, the remaining individuals may appoint a replacement, and in the
30
event that all three cease to be employed by LHF, Olympic may appoint the
members of the Advisory Committee.
ARTICLE X
MISCELLANEOUS
10.1 EXPENSES. Except as otherwise provided herein and except for the
legal fees of LHF from Loeb & Loeb LLP incurred solely in connection with and
directly related to the transactions contemplated by this Agreement which are
to be shared equally by LHF, on the one hand, and the Shareholders, on the
other, the parties hereto shall pay all of their own expenses relating to the
transactions contemplated by this Agreement, including, without limitation,
the fees and expenses of their respective counsel and financial advisers (the
'LHF Transaction Costs").
10.2 GOVERNING LAW. The interpretation and construction of this
Agreement, and all matters relating hereto, shall be governed by the laws of
the State of California without reference to any conflict of laws provisions.
10.3 CERTAIN DEFINITIONS.
10.3.1 "AFFILIATE" shall mean any Person that directly, or
indirectly through one or more intermediaries, controls, is controlled by, or
is under common control with such Person.
10.3.2 "KNOWLEDGE" shall mean in the case of a Person which is
not an individual, the knowledge of all executive officers and directors of
such Person after due inquiry, and in the case of an individual, the actual
knowledge of such individual.
10.3.3 "PERSON" shall mean and include an individual, a
partnership, a joint venture, a corporation, a limited liability company, a
trust, an unincorporated organization and a government or other department or
agency thereof.
10.3.4 "TRANSACTION DOCUMENTS" shall mean this Agreement, the
Investor Rights Agreement the Employment Agreements, the Voting Agreement and
the Promissory Note.
10.4 JURISDICTION. Any judicial proceeding brought against any of the
parties to this Agreement on any dispute arising out of this Agreement or any
matter related hereto shall be brought in the courts of the State of
California in Los Angeles County or in United States District Court located
in Los Angeles, California, and by execution and delivery of this Agreement,
each of the parties to this Agreement accepts for itself or himself the
jurisdiction of the aforesaid courts, irrevocably consents to the service
31
of any and all process in any action or proceeding by the mailing of copies
of such process to such party at its or his address as set forth in Section
10.6, and irrevocably agrees to be bound by any judgment rendered thereby in
connection with this Agreement. Each party hereto irrevocably waives to
fullest extent permitted by law any objection that it or he may now or
hereafter have to the laying of the venue of any judicial proceeding brought
in such courts and any claim that any such judicial proceeding has been
brought in an inconvenient forum. the foregoing consent to jurisdiction shall
not constitute general consent to service of process in the State of
California for any purpose except as provided above and shall not be deemed
to confer rights on any Person other than the respective parties to this
Agreement.
10.5 CAPTIONS. The article and section captions used herein are for
reference purposes only, and shall not in any way affect the meaning, or
interpretation of this Agreement.
10.6 NOTICES. Any notice or other communications required or permitted
hereunder shall be in writing and shall be deemed effective (a) upon personal
delivery, if delivered by hand, (b) three days after the date of deposit in the
mails, if mailed by certified or registered mail (return receipt requested), or
(c) on the next business day, if mailed by an overnight mail service to the
parties or sent by facsimile transmission, and in each case, postage prepaid,
addressed to a party at its or his address set forth on the signature page
hereof, or such other address as shall be furnished in writing by like notice by
any such party. A copy of each notice sent to either LHF or any Shareholder
should also be sent to ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇, Esq., Loeb & Loeb LLP, ▇▇▇▇ ▇▇▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇, and a copy of each notice
sent to Olympic should also be sent to ▇▇▇▇ 1. Annex, Esq., Camhy ▇▇▇▇▇▇▇▇▇ &
▇▇▇▇▇ LLP, ▇▇▇▇ ▇▇▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇, ▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇.
10.7 TERMINATION. This Agreement may be terminated at any time prior to
the Closing Date:
10.7.1 By mutual agreement of Olympic and the Shareholders holding
a majority of the LHF Shares;
10.7.2 Olympic if (i) there has been a material misrepresentation,
breach of warranty or breach of covenant by any Shareholder under this Agreement
or (ii) any of the conditions precedent to the Closing set forth in Articles VI
or VII have not been satisfied on the Closing Date, and, in each case, Olympic
is not then in default of its obligations hereunder; and'
10.7.3 By the Shareholders if (i) there has been a material
misrepresentation, breach of warranty or breach of covenant by Olympic under
this Agreement or (ii) any of the conditions precedent to the Closing set
forth in
32
Articles VI or VIII have not been satisfied on the Closing Date, and, in each
case, the Shareholders are not in default of their obligations hereunder.
In the event of termination of this Agreement as provided in Section
10.7.1., this Agreement shall become void and there shall be no liability
hereunder on the part of any party hereto. In the event of termination of this
Agreement as provided in Section 10.7.2, such termination shall be without
prejudice to any of the rights that Olympic may have against the Shareholders or
any other Person under the terms of this Agreement or otherwise. In the event
of termination of this Agreement as provided in Section 10.7.3, such termination
shall be without prejudice to any of the rights that the Shareholders may have
against Olympic or any other Person under the terms of this Agreement or
otherwise.
10.8 TAX RETURNS. Each of Olympic and each Shareholder agrees to report
the Exchange in a manner consistent with a reorganization as described in
Section 368(a)(1)(B) of the Code, in all income tax returns and other filings
which describe the Exchange; PROVIDED, HOWEVER, that Olympic makes no
representation or warranty that the Exchange will qualify as a reorganization
described in Section 368(a)(1)(B)of the Code. Olympic shall not, and shall not
permit LHF after the Closing, to take any action (other than as contemplated by
this Agreement) which would jeopardize treatment of the Exchange in a manner
consistent with a reorganization as described in Section 368(a)(1)(B) of the
Code, including, without the limitation, the liquidation of or the sale of all
or substantially all of the assets of LHF.
10.9 ASSIGNMENTS. This Agreement may not be transferred, assigned,
pledged or hypothecated by any party hereto, other than by operation of law. No
assignment or transfer shall be effective unless the assignee agrees in writing
to assume such assignor's obligations under the Agreement. This Agreement shall
be binding upon and shall inure to the benefit of the parties hereto and their
respective heirs, executors, administrators, successors and assigns.
10.10 PRESS RELEASES AND ANNOUNCEMENTS. No party to this Agreement shall
issue any press release or public announcement relating to the subject matter of
this Agreement without the prior approval of the other parties to this
Agreement; provided, however, that any party to this Agreement may make any
public disclosure it believes in good faith is required by law or regulation,
including any state or federal securities laws (in which case the disclosing
party will advise the other parties prior to making the disclosure).
10.11 FURTHER ASSURANCES. The parties hereby agree from time to time to
execute and deliver such further documents and to do all matters and things
which may be convenient or necessary to more effectively and completely carry
out the intentions of this Agreement.
33
10.12 CONSTRUCTION. The language used in this Agreement will be deemed to
be the language chosen by all of the parties hereto to express their mutual
intent, 'and no rule of construction shall be specified against any party.
10.13 SEVERABILITY. In the event any provision of this Agreement is found
to be void and unenforceable by a court of competent jurisdiction or arbitration
panel, the remaining provisions of this Agreement shall nevertheless be binding
upon the parties with the same effect as though the void or unenforceable part
had been severed and deleted.
10.14 COUNTERPARTS. This Agreement may be executed in two or more
counterparts, all of which taken together shall constitute one instrument.
10.15 ENTIRE AGREEMENT. This Agreement, including the documents referred
to herein which form a part hereof, contains entire understanding of the parties
hereto with respect to the subject matter contained herein and therein. This
Agreement supersedes all prior agreements and understandings between the parties
with respect to such subject matter.
10.16 AMENDMENTS. This Agreement may not be changed orally, but only by
an agreement in writing signed by Olympic, LHF and each Shareholder.
10.17 THIRD-PARTY BENEFICIARIES. Each party hereto intends that this
Agreement shall not benefit or create any right or cause of action in or on
behalf of any Person other than the parties hereto and their respective
Affiliates, officers, directors, employees, agents, attorneys, representatives,
successors and assigns as permitted under Section 10.9.
10.18 CONFIDENTIALITY. Subject to any obligation to comply with any law,
rule or regulation of any governmental authority or any subpoena or other legal
process to make information available to the persons entitled thereto, Olympic
shall, and shall cause its Affiliates, employees, attorneys, accountants and
representatives to keep confidential and Olympic shall not use, or permit its
Affiliates, attorneys, accountants and representatives to use, in any manner
other than for the purpose of evaluating the transaction contemplated herein any
information obtained from LHF or any of the Shareholders, whether or not
obtained or acquired pursuant to the terms of this Agreement, unless such
information is readily ascertainable from public or published information, from
trade sources, or is already known to Olympic. If the transactions contemplated
herein fail to close for any reason whatsoever, Olympic shall immediately return
or cause to be returned to LHF or the Shareholders, as the case may be, all
written data, software, encoded data information, files, records and copies of
documents, worksheets and other materials obtained by Olympic in connection with
the transactions contemplated herein.
34
IN WITNESS WHEREOF, the parties hereto have executed this Exchange
Agreement and Plan of Reorganization as of the date first above written.
"OLYMPIC" OLYMPIC CASCADE FINANCIAL
CORPORATION, a Delaware corporation
By: /s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇
---------------------------------
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇
Chairman of the Board
Address:
▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: General Counsel
Fax: (▇▇▇) ▇▇▇-▇▇▇▇
"LHF" L.H. FRIEND, WEINRESS, ▇▇▇▇▇▇▇▇
& ▇▇▇▇▇▇▇, INC., a California corporation
By:
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▇▇▇▇▇ ▇. Friend
Chairman of the Board and
Chief Executive Officer
Address:
▇▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇
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Fax: (▇▇▇) ▇▇▇-▇▇▇▇
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IN WITNESS WHEREOF, the parties hereto have executed this Exchange
Agreement and Plan of Reorganization as of the date first above written.
"OLYMPIC" OLYMPIC CASCADE FINANCIAL
CORPORATION, a Delaware corporation
By:
---------------------------------
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇
Chairman of the Board
Address:
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▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: General Counsel
Fax: (▇▇▇) ▇▇▇-▇▇▇▇
"LHF" L.H. FRIEND, WEINRESS, ▇▇▇▇▇▇▇▇
& ▇▇▇▇▇▇▇, INC., a California corporation
By: /s/ ▇▇▇▇▇ ▇. Friend
-----------------------------------
▇▇▇▇▇ ▇. Friend
Chairman of the Board and
Chief Executive Officer
Address:
▇▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇-▇▇▇▇
Fax: (▇▇▇) ▇▇▇-▇▇▇▇
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"SHAREHOLDERS"
/s/ ▇▇▇▇▇ ▇. Friend
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▇▇▇▇▇ ▇. Friend
Address:
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▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇-▇▇▇▇
Fax: (▇▇▇) ▇▇▇-▇▇▇▇
/s/ ▇▇▇▇▇▇ Friend
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▇▇▇▇▇▇ Friend
Address:
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▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇-▇▇▇▇
Fax: (▇▇▇) ▇▇▇-▇▇▇▇
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▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
Address:
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▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Fax: (▇▇▇) ▇▇▇-▇▇▇▇
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"SHAREHOLDERS"
------------------------------
▇▇▇▇▇ ▇. Friend
Address:
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▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇-▇▇▇▇
Fax: (▇▇▇) ▇▇▇-▇▇▇▇
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▇▇▇▇▇▇ Friend
Address:
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▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇-▇▇▇▇
Fax: (▇▇▇) ▇▇▇-▇▇▇▇
/s/ ▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
------------------------------
▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
Address:
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▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Fax: (▇▇▇) ▇▇▇-▇▇▇▇
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/s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
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▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇, Trustee of the
Weinress Family Living Trust dated
March 26, 1996
Address:
▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇
▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Fax: (▇▇▇) ▇▇▇-▇▇▇▇
/s/ ▇▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
------------------------------
▇▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇, Trustee of
the Weinress Family Living Trust
dated March 26, 1996
Address:
▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇
▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Fax: (▇▇▇) ▇▇▇-▇▇▇▇
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▇▇▇▇ ▇▇▇▇▇▇▇▇, ▇▇.
Address:
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▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇-▇▇▇▇
Fax: (▇▇▇) ▇▇▇-▇▇▇▇
S-3
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▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇, Trustee of the
Weinress Family Living Trust dated
March 26, 1996
Address:
▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇
▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Fax: (▇▇▇) ▇▇▇-▇▇▇▇
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▇▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇, Trustee of
the Weinress Family Living Trust
dated March 26, 1996
Address:
▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇
▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Fax: (▇▇▇) ▇▇▇-▇▇▇▇
/s/ ▇▇▇▇ ▇▇▇▇▇▇▇▇, ▇▇.
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▇▇▇▇ ▇▇▇▇▇▇▇▇, ▇▇.
Address:
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▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇-▇▇▇▇
Fax: (▇▇▇) ▇▇▇-▇▇▇▇
S-3
/s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
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▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
Address:
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▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇-▇▇▇▇
Fax: (▇▇▇) ▇▇▇-▇▇▇▇
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▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
Address:
▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇
▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Fax: (▇▇▇) ▇▇▇-▇▇▇▇
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▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇
Address:
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▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇-▇▇▇▇
Fax: (▇▇▇) ▇▇▇-▇▇▇▇
S-4
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▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
Address:
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▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇-▇▇▇▇
Fax: (▇▇▇) ▇▇▇-▇▇▇▇
/s/ ▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
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▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
Address:
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▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Fax: (▇▇▇) ▇▇▇-▇▇▇▇
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▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇
Address:
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▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇-▇▇▇▇
Fax: (▇▇▇) ▇▇▇-▇▇▇▇
S-4
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▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
Address:
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▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇-▇▇▇▇
Fax: (▇▇▇) ▇▇▇-▇▇▇▇
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▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
Address:
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▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Fax: (▇▇▇) ▇▇▇-▇▇▇▇
/s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇
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▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇
Address:
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▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇-▇▇▇▇
Fax: (▇▇▇) ▇▇▇-▇▇▇▇
S-4