STOCK PURCHASE AGREEMENT
AMONG
OLYMPIC CASCADE FINANCIAL CORPORATION,
XXXXXX X. XXXXXX
AND
XXXXX X. XXXXXXX
RELATING TO ALL OF THE ISSUANCE
AND OUTSTANDING CAPITAL STOCK
OF
XXXXXX CAPITAL, INC.
JULY 10, 1997
TABLE OF CONTENTS
I. PURCHASE AND SALE. . . . . . . . . . . . . . . . . . . . . . . . . . . 2
Section 1.1 TERMS OF PURCHASE AND SALE. . . . . . . . . . . . . . . 2
Section 1.2 CLOSING . . . . . . . . . . . . . . . . . . . . . . . . 2
Section 1.3 OTHER TRANSACTIONS AT CLOSING . . . . . . . . . . . . . 2
II. REPRESENTATIONS AND WARRANTIES OF THE SELLER . . . . . . . . . . . . . 3
Section 2.1 ORGANIZATION AND QUALIFICATION. . . . . . . . . . . . . 4
Section 2.2 CAPITALIZATION. . . . . . . . . . . . . . . . . . . . . 4
Section 2.3 FINANCIAL CONDITION . . . . . . . . . . . . . . . . . . 5
Section 2.4 TAX AND OTHER LIABILITIES . . . . . . . . . . . . . . . 6
Section 2.5 LITIGATION AND CLAIMS . . . . . . . . . . . . . . . . . 9
Section 2.6 PROPERTIES OF XXXXXX CAPITAL. . . . . . . . . . . . . . 9
Section 2.7 CONTRACTS AND OTHER INSTRUMENTS . . . . . . . . . . . . 11
Section 2.8 ERISA . . . . . . . . . . . . . . . . . . . . . . . . . 12
Section 2.9 PATENTS, TRADEMARKS, ET CETERA. . . . . . . . . . . . . 14
Section 2.10 QUESTIONABLE PAYMENTS.. . . . . . . . . . . . . . . . . 15
Section 2.11 BROKER-DEALER REGISTRATION. . . . . . . . . . . . . . . 15
Section 2.12 NO THREATENED SEC PROCEEDINGS.. . . . . . . . . . . . . 16
Section 2.13 NET CAPITAL.. . . . . . . . . . . . . . . . . . . . . . 16
Section 2.14 NASD MEMBERSHIP. . . . . . . . . . . . . . . . . . . . 16
Section 2.15 FEES AND ASSESSMENTS. . . . . . . . . . . . . . . . . . 16
Section 2.16 NASD RESTRICTIONS.. . . . . . . . . . . . . . . . . . . 17
Section 2.17 CRD REGISTRATION. . . . . . . . . . . . . . . . . . . . 17
Section 2.18 STATE BROKER-DEALER REGISTRATIONS.. . . . . . . . . . . 17
Section 2.19 NO STATE INQUIRIES. . . . . . . . . . . . . . . . . . 17
Section 2.20 REGISTERED REPRESENTATIVES. . . . . . . . . . . . . . . 18
Section 2.21 BROKERS BOND. . . . . . . . . . . . . . . . . . . . . . 18
Section 2.22 SIPC REGISTRATION. . . . . . . . . . . . . . . . . . . 18
III. REPRESENTATIONS AND WARRANTIES OF THE PURCHASER. . . . . . . . . . . . 18
Section 3.1 ORGANIZATION AND QUALIFICATION. . . . . . . . . . . . . 18
Section 3.2 AUTHORITY TO BUY. . . . . . . . . . . . . . . . . . . . 18
Section 3.3 DISCLOSURE OF INFORMATION . . . . . . . . . . . . . . . 19
IV. CONDUCT OF THE BUSINESS OF XXXXXX CAPITAL FOLLOWING STOCK PURCHASE . . 19
Section 4.1 LETTER AGREEMENT. . . . . . . . . . . . . . . . . . . . 19
V. INDEMNIFICATION; SURVIVAL; LIMITATIONS ON LIABILITY. . . . . . . . . . 20
Section 5.1 INDEMNIFICATION . . . . . . . . . . . . . . . . . . . . 20
Section 5.2 SURVIVAL. . . . . . . . . . . . . . . . . . . . . . . . 21
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VI. MISCELLANEOUS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
Section 6.1 BROKERAGE FEES. . . . . . . . . . . . . . . . . . . . . 21
Section 6.2 REGULATORY FILINGS. . . . . . . . . . . . . . . . . . . 22
Section 6.3 FURTHER ACTIONS . . . . . . . . . . . . . . . . . . . . 22
Section 6.4 SUBMISSION TO JURISDICTION. . . . . . . . . . . . . . . 22
Section 6.5 MERGER; MODIFICATION. . . . . . . . . . . . . . . . . . 22
Section 6.6 NOTICES . . . . . . . . . . . . . . . . . . . . . . . . 23
Section 6.7 WAIVER. . . . . . . . . . . . . . . . . . . . . . . . . 23
Section 6.8 BINDING EFFECT. . . . . . . . . . . . . . . . . . . . . 24
Section 6.9 NO THIRD-PARTY BENEFICIARIES. . . . . . . . . . . . . . 24
Section 6.10 SEPARABILITY. . . . . . . . . . . . . . . . . . . . . . 24
Section 6.11 HEADINGS. . . . . . . . . . . . . . . . . . . . . . . . 24
Section 6.12 COUNTERPARTS; GOVERNING LAW . . . . . . . . . . . . . . 25
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STOCK PURCHASE AGREEMENT
STOCK PURCHASE AGREEMENT THIS STOCK PURCHASE AGREEMENT (this
"Agreement"), is being made this 10th day of July, 1997, effective
June 30, 1997, by and among OLYMPIC CASCADE FINANCIAL CORPORATION,
a Delaware corporation (the "Purchaser" or "Olympic"), with offices
at 0000 Xxxxxx Xxxxxx, Xxxxx 0000, Xxxxxxx, Xxxxxxxxxx 00000-0000;
XXXXXX X. XXXXXX, an individual with an address of 000 Xxxxxxxxxx Xxx,
Xxxxxxxxx, Xxxx 00000 , and XXXXX X. XXXXXXX, an individual with an address
of 0000 Xxxxx Xxxxxxx Xxx, Xxxx Xxxx Xxxx, Xxxx 00000 (each a "Seller" and
collectively, the "Sellers").
W I T N E S S E T H :
WHEREAS, the Sellers own beneficially and of record all of the
issued and outstanding capital stock (the "Acquired Securities") of Xxxxxx
Capital, Inc. ("XXXXXX CAPITAL"), a Utah corporation with offices at 00
Xxxxxx Xxxxxx, Xxxxx 000, Xxxx Xxxx Xxxx, Xxxx 00000, which capital stock
consists of 4,475 shares of common stock, par value $0.00 per share (the
"XXXXXX CAPITAL Common Stock").
WHEREAS, XXXXXX CAPITAL 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, the Purchaser desires to acquire the Acquired Securities
from the Sellers and the Sellers desire to sell the Acquired Securities to
the Purchaser, subject to the terms and conditions set forth below.
NOW, THEREFORE, in consideration of the premises, representations,
warranties, and covenants contained herein, and intending to be legally bound
hereby, the parties hereto agree as follows:
I. PURCHASE AND SALE.
Section 1.1 TERMS OF PURCHASE AND SALE.
(a) At the Closing (as defined in Section 1.2 below), the Sellers
shall sell, assign, transfer, and convey to the Purchaser the Acquired
Securities. The Sellers shall deliver to the Purchaser at the Closing
certificates representing the Acquired Securities, duly endorsed in blank or
accompanied by stock powers duly endorsed in blank, in each case in proper
form for transfer, with signatures guaranteed, and, if applicable, with all
stock transfer and any other required documentary stamps affixed thereto.
(b) In consideration for the Acquired Securities, the Purchaser
shall deliver to the Seller, at the Closing, Twenty Thousand (20,000) shares
of Common Stock of Olympic).
Section 1.2 CLOSING.
The Closing (the "Closing") of the transactions contemplated by this
Agreement shall take place at the offices of L.H. Friend, Weinress, Xxxxxxxx
& Xxxxxxx, Inc., 0000 Xxxxxxx Xxxx Xxxx, Xxxxxxx Xxxx, Xxxxxxxxxx, or at such
other location mutually agreed upon by the parties, on the third (3rd)
business day following the receipt of all applicable regulatory approvals
(the "Closing Date") or such other time or date as the parties may mutually
agree, but in no event later than August 31, 1997.
Section 1.3 OTHER TRANSACTIONS AT CLOSING.
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In addition to the transactions referred to in this Sections 1.1 and
1.2 above, at the Closing, the Sellers shall deliver to the Purchaser the
following:
(a) The minute books, stock certificate books, stock transfer
ledgers, and corporate seals of XXXXXX CAPITAL;
(b) Resignations of all officers and directors of the XXXXXX CAPITAL,
except as mutually agreed;
(c) The Written Consent of any applicable regulatory authority.
(d) Certificates of Good Standing as to XXXXXX CAPITAL issued by the
appropriate governmental authorities of the State of Utah and each
state in which the XXXXXX CAPITAL is qualified to do business;
(e) Certified copy of the Certificate of Incorporation of XXXXXX
CAPITAL, and all amendments thereto, certified by the Xxxxxxxxx xx Xxxxx xx
xxx Xxxxx xx Xxxx; and
(f) A copy of by-laws of XXXXXX CAPITAL, certified by the secretary
or assistant secretary thereof as being true, complete, and correct.
II. REPRESENTATIONS AND WARRANTIES OF THE SELLER.
The Sellers represents and warrants to the Purchaser as follows:
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Section 2.1 ORGANIZATION AND QUALIFICATION.
XXXXXX CAPITAL does not own any capital stock of any corporation or
any interest in any joint venture, partnership, association, trust, or other
entity. Schedule 2.1 correctly sets forth as to XXXXXX CAPITAL its place of
incorporation, principal place of business, and jurisdictions in which it is
qualified to do business. XXXXXX CAPITAL is a corporation duly organized,
validly existing, and in good standing under the laws of its jurisdiction of
incorporation, with all requisite power and authority, and all necessary
consents, authorizations, approvals, orders, licenses, certificates, and
permits of and from, and declarations and filings with, all federal, state,
local, and other governmental authorities, and all courts and other
tribunals, to own, lease, license, and use its properties and assets and to
carry on the business in which it is now engaged and the business in which it
contemplates engaging. XXXXXX CAPITAL is duly qualified to transact the
business in which it is now engaged and is in good standing as a foreign
corporation in every jurisdiction where the failure to so qualify would have
material adverse effect upon the businesses assets, properties, prospectus,
or financial condition of XXXXXX CAPITAL.
Section 2.2 CAPITALIZATION.
The authorized capital stock of XXXXXX CAPITAL consists of 100,000
shares of common stock, par value $000 per share, of which 4,475 shares are
outstanding. Each of such outstanding shares of XXXXXX CAPITAL Common Stock
is validly authorized, validly issued, fully paid, and nonassessable, has not
been issued and is not owned or held in violation of any preemptive right of
stockholders, and is owned of record and beneficially by the Sellers. The
Acquired Securities are owned by the Sellers free and clear of all liens,
security interests, pledges, charges, encumbrances, stockholders' agreements,
and voting trusts. There is no outstanding security or other instrument
convertible into or exchangeable for capital stock of XXXXXX CAPITAL nor is
there any commitment, plan, or arrangement
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to issue, and no outstanding option, warrant, or other right calling for the
issuance of, any share of capital stock of XXXXXX CAPITAL or any security or
other instrument convertible into, exercisable for, or exchangeable for
capital stock of XXXXXX CAPITAL.
Section 2.3 FINANCIAL CONDITION.
The Sellers have delivered to the Purchaser true and correct copies
of the following: the unaudited balance sheet of XXXXXX CAPITAL as of
[June 30, 1997], the audited balance sheet of XXXXXX CAPITAL as of
[January 31, 1997], the audited statements of income, statements of retained
earnings, and statements of cash flows of XXXXXX CAPITAL for the year ended
[January 31, 1997], and the audited statements of income, statements of
retained earnings and statements of cash flows for the years ended
[January 31, 1996 and 1995]. Each such balance sheet presents fairly the
financial conditions, assets, liabilities, and stockholders' equity of XXXXXX
CAPITAL as of its date; each such statement of income and statement of
retained earnings presents fairly the results of operations of XXXXXX CAPITAL
for the period indicated and their retained earnings as of the date
indicated; and each such statement of cash flows presents fairly the
information purported to be shown therein. The financial statements referred
to in this Section 2.3 have been prepared in accordance with generally
accepted accounting principles consistently applied throughout the periods
involved and are in accordance with the books and records of XXXXXX CAPITAL.
Since June 30, 1997:
(a) There has at no time been a material adverse change in the
financial condition, results of operations, business, properties, assets,
liabilities, or, to the Sellers' knowledge, the future prospects of XXXXXX
CAPITAL.
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(b) XXXXXX CAPITAL has not authorized, declared, paid, or effected
any dividend or liquidating or other distribution in respect of its capital
stock or any direct or indirect redemption, purchase, or other acquisition
of any stock of XXXXXX CAPITAL.
(c) The operations and business of the XXXXXX CAPITAL have been
conducted in all respects only in the ordinary course.
(d) XXXXXX CAPITAL has not suffered an extraordinary loss (whether or
not covered by insurance) or waived any right of substantial value.
(e) XXXXXX CAPITAL has not paid any expense resulting from the
preparation of, or the transactions contemplated by, this Agreement, it
being understood that the Sellers shall have paid or will pay all such
expenses (including, without limitation, its legal expenses resulting from
this Agreement or the transactions contemplated hereby).
There is no fact known to the Sellers, which materially and adversely affects
or in the future (as far as the Sellers can reasonably foresee) may
materially and adversely affect the financial condition, results of
operations, business, properties, assets, liabilities, or future prospects of
XXXXXX CAPITAL; PROVIDED, HOWEVER, that the Sellers express no opinion as to
political or economic matters of general applicability.
Section 2.4 TAX AND OTHER LIABILITIES.
(a) XXXXXX CAPITAL has no liability of any nature, accrued or
contingent, including without limitation liabilities for Taxes (as defined in
Section 2.4(f)) and liabilities to customers or suppliers, other than the
following:
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(b) Liabilities for which full provision has been made on the balance
sheet (the "Last Balance Sheet") as of [June 30, 1997] (the "Last Balance Sheet
Date"); and
(c) Other liabilities arising since the Last Balance Sheet Date and
prior to the Closing in the ordinary course of business which are not
inconsistent with the representations and warranties of any Seller or any other
provision of this Agreement.
(d) Without limiting the generality of Section 2.4(a):
(i) XXXXXX CAPITAL and any combined, consolidated, unitary or
affiliated group of which XXXXXX CAPITAL is or has been a
member prior to the Closing Date: (i) has paid all Taxes
required to be paid on or prior to the Closing Date
(including, without limitation, payments of estimated Taxes)
for which XXXXXX CAPITAL could be held liable, except for
Taxes which are being contested in good faith and by
appropriate proceedings; and (ii) has accurately and timely
filed (or filed an extension for), all federal, state,
local, and foreign tax returns, reports, and forms with
respect to such taxes required to be filed by them on or
before the Closing Date.
(ii) The amount set up as provisions for Taxes on the Last
Balance Sheet are sufficient for all accrued and unpaid
Taxes of XXXXXX CAPITAL, whether or not due and payable and
whether or not in dispute, under tax laws as in effect on
the Last Balance Sheet Date or now in effect, for the period
ended on such date and for all periods prior thereto.
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(e) There is no material dispute or claim concerning any liability
for Taxes of XXXXXX CAPITAL either (i) claimed or raised by any authority in
writing, or (ii) as to which XXXXXX CAPITAL has knowledge based upon personal
contact with any agent of such authority.
(f) Schedule 2.4 sets forth all federal, state, local and foreign
income tax returns filed with respect to XXXXXX CAPITAL for taxable periods on
or after January 1, 1994 ("Tax Returns"), indicates those Tax Returns that
currently are subject to audit. XXXXXX CAPITAL has delivered or made available
to Purchaser complete and correct copies of all Tax Returns, examination
reports, and statements of deficiencies assessed against, or agreed to by XXXXXX
CAPITAL since January 1, 1994. XXXXXX CAPITAL has not waived any statute of
limitations in respect of Taxes or agreed to any extension of time with respect
to any Tax assessment or deficiency.
(g) XXXXXX CAPITAL has not filed a consent under Section 341(f) of
the Internal Revenue Code of 1986, as amended (the "Code"). XXXXXX CAPITAL has
not made any payments, is not obligated to make any payments, nor is a party to
any agreement that under certain circumstances could obligate it to make any
payment that will not be deductible under Section 280G of the Code. XXXXXX
CAPITAL will not have any liability on or after the Closing Date pursuant to any
tax sharing or tax allocation agreement. XXXXXX CAPITAL has no liability for
the Taxes of any other person under Treasury Regulation 1.1502-6 (or any similar
provision of state, local or foreign law), as a transferee or successor, by
contract, or otherwise.
(h) For purposes of this Agreement, "Taxes" shall mean all federal,
state, local or foreign taxes, assessments, duties which are payable or
remittable by XXXXXX CAPITAL or levied upon XXXXXX CAPITAL or any property of
XXXXXX CAPITAL, or levied with respect to either of their
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assets, franchises, income, receipts, including, without limitation, import
duties, excise, franchise, gross receipts, utility, real property, capital,
personal property, withholding, FICA, unemployment compensation, sales or
use, withholding, governmental charges (whether or not requiring the filing
of a return), and all additions to tax, penalties and interest relating
thereto.
Section 2.5 LITIGATION AND CLAIMS.
To the knowledge of Sellers there is no litigation, arbitration,
claim, governmental or other proceeding (formal or informal), or
investigation pending, threatened, or in prospect (or any basis therefor
known to the Seller) with respect to the XXXXXX CAPITAL, or any of their
respective businesses, properties, or assets. XXXXXX CAPITAL is not affected
by any present or threatened strike or other labor disturbance nor to the
knowledge of Sellers is any union attempting to represent any employee of
XXXXXX CAPITAL as collective bargaining agent. XXXXXX CAPITAL is not in
violation of, or in default with respect to, any law, rule, regulation,
order, judgment, or decree; nor is the Company required to take any action in
order to avoid such violation or default which would have a material adverse
effect upon the businesses, assets, properties, prospects or financial
condition of XXXXXX CAPITAL.
Section 2.6 PROPERTIES OF XXXXXX CAPITAL.
(a) Set forth on Schedule 2.6(a) is a list of all real property
owned or leased by XXXXXX CAPITAL. With respect to real property that is
owned by XXXXXX CAPITAL, XXXXXX CAPITAL has good and marketable title to all
such property and such property is clear of all liens, mortgages, security
interests, or encumbrances, except as otherwise disclosed on Schedule 2.6(a).
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(b) Set forth in Schedule 2.6(b) is a true and complete list of all
personal properties and assets (other than real property) owned by XXXXXX
CAPITAL or leased or licensed by XXXXXX CAPITAL from or to a third party.
All such properties and assets owned by XXXXXX CAPITAL are reflected on the
Last Balance Sheet (except for acquisitions subsequent to the Last Balance
Sheet Date which are noted on Schedule 2.6(b)). All such properties and
assets owned, leased, or licensed by XXXXXX CAPITAL are in good and usable
condition (reasonable wear and tear which is not such as to affect adversely
the operation of the business of XXXXXX CAPITAL excepted).
(c) All accounts and notes receivable reflected on the Last Balance
Sheet, or arising since the Last Balance Sheet Date, have been collected in
the ordinary course of XXXXXX CAPITAL's customary practices, or are and will
be good and collectible, without right or recourse, defense, deduction,
return of goods, counterclaim, offsets, or set-off.
(d) No real property owned, leased, or licensed by XXXXXX CAPITAL
lies in an area which is, or to the knowledge of Sellers will be, subject to
zoning, use, or building code restrictions that would prohibit the continued
effective ownership, leasing, licensing, or use of such real property in the
business which the XXXXXX CAPITAL is now engaged.
(e) XXXXXX CAPITAL has not to its knowledge caused or permitted its
respective businesses, properties, or assets to be used to generate,
manufacture, refine, transport, treat, store, handle, dispose of, transfer,
produce, or process any Hazardous Substance (as such term is defined in this
Section 2.6(e)) except in compliance with all applicable laws, rules,
regulations, orders, judgments, and decrees, and has not caused or permitted
the Release (as such term is defined in this Section 2.6(e)) of any Hazardous
Substance on or off the site of any property of XXXXXX CAPITAL. The term
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"Hazardous Substance" shall mean any hazardous waste, as defined by 42 U.S.C.
Section 6903(5), any hazardous substance, as defined by 42 U.S.C. Section
9601(14), any pollutant or contaminant, as defined by 42 U.S.C. Section
9601(33), and all toxic substances, hazardous materials, or other chemical
substances regulated by any other law, rule, or regulation. The term
"Release" shall have the meaning set forth in 42 U.S.C. Section 9601(22).
Section 2.7 CONTRACTS AND OTHER INSTRUMENTS.
Schedule 2.7 accurately and completely sets forth a list of all
material contracts, agreements, loan agreements, instruments, leases,
licenses, arrangements, or understandings with respect to XXXXXX CAPITAL.
The Sellers have furnished to the Purchaser, the certificate of incorporation
(or other charter document) and By-Laws of XXXXXX CAPITAL and all amendments
thereto, as presently in effect, certified by the Secretary of such
corporation. Each such contract, agreement, loan agreement, instrument,
lease, or license is in full force and is the legal, valid, and binding
obligation of XXXXXX CAPITAL, and (subject to applicable bankruptcy,
insolvency, and other laws affecting the enforceability of creditors' rights
generally) is enforceable as to it in accordance with its terms. XXXXXX
CAPITAL, is not in violation, in breach of, or in default with respect to any
material terms of any such contract, agreement, loan agreement, instrument,
lease, or license. Except for employment agreements and as disclosed in
Schedule 2.7, XXXXXX CAPITAL is not a party to any contract, agreement, loan
agreement, instrument, lease, license, arrangement, or understanding with any
Seller or any director, officer, or employee of XXXXXX CAPITAL, or any
relative or affiliate of any Seller or of any such director, officer, or
employee. The stock ledgers and stock transfer books and the minute book
records of XXXXXX CAPITAL relating to all issuances and transfers of the
stockholders, of the Board of Directors and committees thereof of XXXXXX
CAPITAL since its incorporation made available to the Purchaser are the
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original stock ledgers and stock transfer books and minute book records of
XXXXXX CAPITAL or exact copies thereof.
Section 2.8 ERISA.
(a) The name of each plan, program, arrangement, agreement or
commitment sponsored or maintained by or on behalf of XXXXXX CAPITAL or any
ERISA Affiliate (as defined below) or to which XXXXXX CAPITAL or any ERISA
Affiliate makes or is obligated to make contributions or to which XXXXXX
CAPITAL or any ERISA Affiliate made or was 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 2.8 hereto. XXXXXX CAPITAL 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 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 ERISA or any other applicable law or
regulation or to distribute or
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make available any such reports or other information. XXXXXX CAPITAL has and
at the Closing Date will have timely made all required contributions to each
such Plan.
(b) 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.
(c) As of the date hereof and as of the Closing Date, XXXXXX
CAPITAL is entitled to cease its participation in each Plan referred to in
this Section 2.8 and each such Plan, by its provisions, permits XXXXXX
CAPITAL to amend to terminate, in whole or in part, such Plan without
default, penalty, premium or any additional cost to XXXXXX CAPITAL.
(d) The transactions contemplated by this Agreement will not result
in any payment or series of payments by Olympic or XXXXXX CAPITAL of a
"parachute payment" within the meaning of Section 280G of the Code.
(e) With respect to each Plan maintained or sponsored by XXXXXX
CAPITAL 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 1 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 XXXXXX
CAPITAL is not now and has never been liable for any tax under Section 4980B
of the Code.
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(f) None of the Plans is and, at the Closing Date, none will be
under investigation or audit by either the United States Department of Labor
or the Internal revenue Service.
(g) 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 XXXXXX CAPITAL 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(1) of ERISA) that have been fully provided for
by insurance or otherwise, (ii) deferred compensation benefits accrued as
liabilities on the books of XXXXXX CAPITAL or (iv) benefits in the nature of
severance pay.
(h) For purposes of this Section 2.8, 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 XXXXXX CAPITAL 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 ended on March 31, 1997.
Section 2.9 PATENTS, TRADEMARKS, ET CETERA.
Except as disclosed on Schedule 2.9, XXXXXX CAPITAL does not own or
has pending, or is licensed under, any patent, patent application, trademark,
trademark application, trade name, service xxxx, copyright, franchise, or
other intangible property or asset (all of the foregoing being herein called
"Intangibles"). Those Intangibles listed on Schedule 2.9 are in good
standing and uncontested. Neither any Seller, any director, officer, or
employee of XXXXXX CAPITAL, nor any relative or affiliate of any Seller or of
any such director, officer, or employee, possesses any Intangible which
relates to the business of XXXXXX CAPITAL. There is no right under any
Intangible necessary to the business of XXXXXX
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CAPITAL as presently conducted, except such as are so designated in Schedule
2.9. XXXXXX CAPITAL has not infringed, is infringing, or has received notice
of infringement with asserted Intangibles of others. To the knowledge of the
Sellers, there is no infringement by others of Intangibles of XXXXXX CAPITAL.
Section 2.10 QUESTIONABLE PAYMENTS.
No XXXXXX CAPITAL director, officer, agent, employee, or other
person associated with or acting on behalf of the XXXXXX CAPITAL has,
directly, or indirectly: used any corporate funds for unlawful contributions,
gifts, entertainment, or other unlawful expenses relating to political
activity; made any unlawful payment to foreign or domestic government
officials or employees or to foreign or domestic political parties or
campaigns from corporate funds; established or maintained any unlawful or
unrecorded fund of corporate monies or other assets; made any false or
fictitious entry on the books or records of the XXXXXX CAPITAL; or made any
bribe, kickback, or other payment of a similar or comparable nature, whether
lawful or not, to any person or entity, private or public, regardless of
form, whether in money, property, or services, to obtain favorable treatment
in securing business or to obtain special concessions, or to pay for
favorable treatment for business secured or for special concessions already
obtained.
Section 2.11 BROKER-DEALER REGISTRATION.
XXXXXX CAPITAL is a Broker-Dealer duly registered with the SEC
pursuant to Section 15 of the Securities Exchange Act of 1934 as amended,
("xxx 0000 Xxx"). Attached hereto as Schedule 2.11 is a full and complete
copy of XXXXXX CAPITAL's Form BD as amended through June 30, 1997 (the "Form
BD"). To the knowledge of Seller, neither the Form BD nor the application
for registration
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nor any amendment thereto contains any untrue statement of a material fact or
omits to state a material fact required to be stated or necessary in order to
make the statements contained therein not misleading.
Section 2.12 NO THREATENED SEC PROCEEDINGS.
To the knowledge of Seller, 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 XXXXXX CAPITAL or its officers, directors, or registered
representatives.
Section 2.13 NET CAPITAL.
XXXXXX CAPITAL is not in violation of the applicable net capital
provisions of the 1934 Act and the general rules and regulations thereunder.
Section 2.14 NASD MEMBERSHIP.
XXXXXX CAPITAL is a member in good standing the with NASD, and, to
the knowledge of Seller, there has not been for the most recent three years,
nor is there currently pending or to the shareholders knowledge threatened,
any inquiry investigation or disciplinary proceeding undertaken by the NASD
concerning XXXXXX CAPITAL or any of its officers, directors, registered
principals, or registered representatives.
Section 2.15 FEES AND ASSESSMENTS.
As of June 30, 1997 there are no fees or assessments owed to the
NASD or SIPC (as defined in Section 2.22) for which bills have been received
by XXXXXX CAPITAL, other than as set forth in Section 2.3.
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Section 2.16 NASD RESTRICTIONS.
There are no special restrictions or limitations imposed by the NASD
relating to the conduct by XXXXXX CAPITAL of the business of a Broker-Dealer,
except as set forth on Schedule 2.16 or noted on Schedule 2.16 and listed in
the Form BD.
Section 2.17 CRD REGISTRATION.
XXXXXX CAPITAL is registered with the Central Registration Depository
under CRD Number 18186.
Section 2.18 STATE BROKER-DEALER REGISTRATIONS.
XXXXXX CAPITAL is registered as a Broker-Dealer in the states and
jurisdictions enumerated in Form BD, and all of such registrations are
current, and except as set forth on Schedule 2.18, XXXXXX CAPITAL is in good
standing as a registered Broker-Dealer in each such state or jurisdiction
where such registration or qualification is required. As of June 30, 1997,
no renewal or registration fee for which bills have been received is due or
owing to any state other than as set forth in Section 2.3. Also set forth on
the Form BD are all states and jurisdictions in which applications for
registration of XXXXXX CAPITAL as a Broker-Dealer are currently pending.
Section 2.19 NO STATE INQUIRIES.
XXXXXX CAPITAL's state Broker-Dealer registrations have not been
terminated and to the knowledge of Sellers there has not been, nor is there
currently pending to or XXXXXX CAPITAL's knowledge threatened, any inquiry,
investigation, administrative proceeding, or civil action undertaking or
initiated by such states or jurisdictions concerning XXXXXX CAPITAL or its
officers, directors, registered principals or registered representatives.
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Section 2.20 REGISTERED REPRESENTATIVES.
Attached hereto as Schedule 2.20 is a list of all registered
representatives of XXXXXX CAPITAL and each state or jurisdiction in which
each individual is registered.
Section 2.21 BROKERS BOND.
XXXXXX CAPITAL currently has in effect a blanket Broker-Dealer
fidelity bond as summarized in Schedule 2.21.
Section 2.22 SIPC REGISTRATION.
XXXXXX CAPITAL is duly registered with the Security Investors
Protection Corporation ("SIPC"). XXXXXX CAPITAL has paid or has made
adequate provision for the payment of all SIPC assessments as of December 31,
1996.
III. REPRESENTATIONS AND WARRANTIES OF THE PURCHASER.
The Purchaser represents and warrants to Sellers as follows:
Section 3.1 ORGANIZATION AND QUALIFICATION.
The Purchaser is a corporation duly organized, validly existing, and
in good standing under the laws of its jurisdiction of incorporation, with
all requisite power and authority to own, lease, license, and use its
properties and assets and to carry on the business in which it is now engaged
and in which it contemplates engaging.
Section 3.2 AUTHORITY TO BUY.
The Purchaser has all requisite power and authority to execute,
deliver, and perform this Agreement. All necessary corporate proceedings of
the Purchaser have been duly taken to authorize the
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execution, delivery, and performance of this Agreement by the Purchaser.
This Agreement has been duly authorized, executed and delivered by the
Purchaser, is the legal, valid, and binding obligation of the Purchaser.
Section 3.3 DISCLOSURE OF INFORMATION.
The Purchaser has received all the information it considers necessary
or appropriate for deciding whether to purchase the Acquired Securities. The
Purchaser further represents that it has had the opportunity to ask questions
and receive answers from the Sellers and XXXXXX CAPITAL regarding the Acquired
Securities and the businesses, assets, properties, prospects and financial
condition of XXXXXX CAPITAL. The foregoing, however, does not limit or modify
the representations and warranties of the Sellers in Section 2 of this Agreement
and the right of Purchaser to rely thereon, and is enforceable as to it in
accordance with its terms.
IV. CONDUCT OF THE BUSINESS OF XXXXXX CAPITAL FOLLOWING STOCK PURCHASE.
Section 4.1 LETTER AGREEMENT.
Following the stock purchase contemplated by this Agreement, the
business of XXXXXX CAPITAL shall be conducted subject to certain covenants
detailed in the paragraphs numbered 5 through 17 of the letter of intent for
this stock purchase between XXXXXX CAPITAL and OLYMPIC, dated June 16, 1997 (the
"June 16 Letter"), as amended by the letter between the same parties, dated June
30, 1997 (the "June 30 Letter"). The June 16 Letter is attached hereto as
Exhibit A. The June 30 Letter is attached hereto as Exhibit B. The paragraphs
numbered 5 through 17 of the June 16 Letter and the corresponding amendments in
the June 30 Letter are hereby incorporated by reference to this document as if
such paragraphs were set out here in there entirety.
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V. INDEMNIFICATION; SURVIVAL; LIMITATIONS ON LIABILITY.
Section 5.1 INDEMNIFICATION.
(a) Subject to the terms and conditions set forth in Section 5.2,
the Sellers agree to indemnify and hold harmless the Purchaser, its officers,
directors, employees, counsel, and agents, (collectively, the "Indemnitees"),
against and in respect of any and all claims, suits, actions, proceedings
(formal or informal), investigations, judgments, deficiencies, damages,
settlements, liabilities, and reasonable legal and other expenses related
thereto (collectively, "Claims"), as and when incurred, arising out of or
based upon any breach of any covenant or agreement of the Sellers contained
in this Agreement or any document or instrument delivered in connection with
this Agreement or any misrepresentation in or omission from any of the
representations or warranties of the Sellers in this Agreement as of the date
of this Agreement.
(b) Each Indemnitee shall give the Sellers prompt notice of any
claim asserted or threatened against such Indemnitee on the basis of which
such Indemnitee intends to seek indemnification (but the obligations of the
Sellers shall not be conditioned upon receipt of such notice, except to the
extent that the indemnifying party is actually prejudiced by such failure to
give notice). The Sellers shall promptly assume the defense of any
Indemnitee, with counsel reasonably satisfactory to such Indemnitee, and the
fees and expenses of such counsel shall be at the sole cost and expense of
the Seller. Notwithstanding the foregoing, any Indemnitee shall be entitled,
at his or its expense, to employ counsel separate from counsel for the
Sellers and from any other party in such action, proceeding, or
investigation. No Indemnitee may agree to a settlement of a claim without
the prior written approval of the Seller, which approval shall not be
unreasonably withheld.
(c) Notwithstanding the above, if the claim for indemnification
arises of a breach of the representations set forth in Section 2.4, Purchaser,
at its option, shall have the sole right to represent
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XXXXXX CAPITAL in any federal, state, local or foreign tax matter, including
any audit or administrative or judicial proceeding or the filing of an
amended return. Sellers agree that it will cooperate fully with Purchaser and
its counsel in the defense or compromise of any such tax matter.
(d) The Sellers shall not have any obligation to indemnify any
Indemnitee from and against any loss or claim under this Section 5.1 until the
Indemnitees shall have collectively suffered losses in excess of $5,000.
Section 5.2 SURVIVAL.
(a) Subject to the provisions of Section 5.2(b), the covenants,
agreements, representations, and warranties contained in or made pursuant to
this Agreement and the incorporated paragraphs of the June 16 Letter and the
June 30 Letter shall survive the Closing and the delivery of the purchase price
by the Purchaser, irrespective of any investigation made by or on behalf of any
party.
(b) The liabilities and obligations of the Sellers under this
Agreement shall be subject to the following limitations. The Sellers shall
have no liability or obligation with respect to any claim for a breach of a
representation or warranty under this Agreement made after eighteen (18)
months from the Closing Date except for claims arising out of a breach of the
representations as to tax liabilities under Section 2.4, with respect to
which the Sellers shall remain liable until ninety (90) days after the
expiration of the applicable statute of limitations relating to such tax
liabilities.
VI. MISCELLANEOUS.
Section 6.1 BROKERAGE FEES.
If any person shall assert a claim to a fee, commission, or other
compensation on account of alleged employment as a broker or finder, in
connection with or as a result of any of the transactions
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contemplated by this Agreement, the Sellers shall (subject to the next
sentence) indemnify and hold harmless the Indemnitees against any and all
Claims (as defined in Section 5.1), as and when incurred, arising out of,
based upon, or in connection with such Claim by such person, except to the
extent that it is determined in any suit, action, or proceeding that the
Purchaser or any Indemnitee had engaged such broker or finder.
Section 6.2 REGULATORY FILINGS.
XXXXXX CAPITAL 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 given evidence of the transaction contemplated by this Agreement.
Section 6.3 FURTHER ACTIONS.
At any time and from time to time, each party agrees, as its or his
expense, to take such actions and to execute and deliver such documents as
may be reasonably necessary to effectuate the purposes of this Agreement.
Section 6.4 SUBMISSION TO JURISDICTION.
Each of the parties hereto irrevocably submits to the jurisdiction
of the courts of the State of Washington, and of any federal court located in
the State of Washington, in connection with any action or proceeding arising
out of or relating to, or a breach of, this Agreement, or of any document or
instrument delivered pursuant to, in connection with, or simultaneously with
this Agreement.
Section 6.5 MERGER; MODIFICATION.
This Agreement and the Schedules and Exhibits attached hereto set
forth the entire understanding of the parties with respect to the subject
matter hereof, supersede all existing agreements
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among them concerning such subject matter, and may be modified only by a
written instrument duly executed by each party to be charged.
Section 6.6 NOTICES.
Any notice or other communication required or permitted to be given
hereunder shall be in writing and shall be mailed by certified mail, return
receipt requested (or by the most nearly comparable method if mailed from or
to a location outside of the United States) or by Federal Express, Express
Mail, or similar overnight delivery or courier service or delivered (in
person or by telecopy, or similar telecommunications equipment) against
receipt to the party to whom it is to be given at the address of such party
set forth in the preamble to this Agreement (or to such other address as the
party shall have furnished in writing in accordance with the provisions of
this Section 6.6). Any notice given to the Purchaser shall be addressed to
the attention of Xxxx Xxxx, Esq., and a copy of such notice (which copy shall
not constitute notice) shall also be sent to Camhy Xxxxxxxxx & Xxxxx LLP,
0000 Xxxxxxxx, 00xx Xxxxx, Xxx Xxxx, Xxx Xxxx 00000-0000 Attention: Xxxx X.
Annex, Esq. Any notice given to the Sellers shall be addressed to the
attention of Xxxxxx X. Xxxxxx, c/x Xxxxxx Capital, 00 Xxxxxx Xxxxxx, Xxxxx
000, Xxxx Xxxx Xxxx, Xxxx 00000. Notice to the estate of any party shall be
sufficient if addressed to the party as provided in this Section 6.6. Any
notice or other communication given by certified mail (or by such comparable
method) shall be deemed given at the time of certification thereof (or
comparable act) except for a notice changing a party's address which will be
deemed given at the time of receipt thereof. Any notice given by other means
permitted by this Section 6.5 shall be deemed given at the time of receipt
thereof.
Section 6.7 WAIVER.
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Any waiver by any party of a breach of any terms of this Agreement
shall not operate as or be construed to be a waiver of any other breach of
that term or of any breach of any other term of this Agreement. The failure
of a party to insist upon strict adherence to any term of this Agreement on
one or more occasions will not be considered a waiver or deprive that party
of the right thereafter to insist upon strict adherence to that term or any
other term of this Agreement. Any waiver must be in writing.
Section 6.8 BINDING EFFECT.
The provisions of this Agreement shall be binding upon and inure to
the benefit of the Purchaser, and its successors and assigns and each Seller and
his respective assigns, heirs, and personal representatives, and shall inure to
the benefit of each Indemnitee and its successors and assigns (if not a natural
person) and his assigns, heirs, and personal representatives (if a natural
person).
Section 6.9 NO THIRD-PARTY BENEFICIARIES.
This Agreement does not create, and shall not be construed as
creating, any rights enforceable by any person not a party to this Agreement
(except as provided in 6.8).
Section 6.10 SEPARABILITY.
If any provision of this Agreement is invalid, illegal, or
unenforceable, the balance of this Agreement shall remain in effect, and if any
provision is inapplicable to any person or circumstance, it shall nevertheless
remain applicable to all other persons and circumstances.
Section 6.11 HEADINGS.
The headings in this Agreement are solely for convenience of reference
and shall be given no effect in the construction or interpretation of this
Agreement.
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Section 6.12 COUNTERPARTS; GOVERNING LAW.
This Agreement may be executed in any number of counterparts, each of
which shall be deemed an original, but all of which together shall constitute
one and the same instrument. It shall be governed by, and construed in
accordance with, the laws of the State of Washington, without giving effect to
the rules governing the conflict of laws.
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IN WITNESS WHEREOF, the parties have duly executed this Agreement as
of the date first written above.
/s/ Xxxxxx X. Xxxxxx
-------------------------------------
Xxxxxx X. Xxxxxx
/s/ Xxxxx X. Xxxxxxx
-------------------------------------
Xxxxx X. Xxxxxxx
OLYMPIC CASCADE FINANCIAL CORPORATION
By: /s/ Xxxx X. Xxxxxxxxx
---------------------------------
Name: Xxxx X. Xxxxxxxxx
Title: Vice Chairman
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