UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
SCHEDULE 14A
(Rule 14a-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a)
of the Securities Exchange Act of 1934
(Amendment No. )
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[X] Preliminary Proxy Statement
[ ] Confidential, for Use of the Commission Only (as permitted by Rule
14a-6(e)2))
[ ] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Rule 14a-11(c) or Rule 14(a)-12
OLYMPIC CASCADE FINANCIAL CORPORATION
(Name of Registrant as Specified in Charter)
Payment of filing fee (check the appropriate box):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
(1) Title of each class of securities to which transaction
applies:
(2) Aggregate number of securities to which transaction applies:
(3) Per unit price or other underlying value of transaction
computed pursuant to Exchange Act Rule 0-11 (Set forth the
amount on which the filing fee is calculated and state how it
was determined):
(4) Proposed maximum aggregate value of transaction:
(5) Total fee paid:
[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number, or
the form or schedule and the date of its filing.
(1) Amount Previously Paid:
(2) Form, Schedule or Registration Statement No.:
(3) Filing Party:
(4) Date Filed:
OLYMPIC CASCADE FINANCIAL CORPORATION
Notice of Annual Meeting of Shareholders
To Be Held __________________ 2006 at 12:00 P.M.
To the Shareholders:
The Annual Meeting of Shareholders of Olympic Cascade Financial Corporation will
be held on _______, 2006 at 12:00 P.M. at the New York offices of the Company's
subsidiary, National Securities Corporation, located at 120 Broadway, 27th
Floor, New York, New York 10271, for the following purposes:
1. To elect one (1) Class I director to serve until the 2008
Annual Meeting of Shareholders and until his successor is
elected and qualified, and to elect two (2) Class II directors
to serve until the 2009 Annual Meeting of Shareholders and
until their successors are elected and qualified;
2. To approve and adopt an amendment to the Company's Certificate
of Incorporation to change the name of the Company from
"Olympic Cascade Financial Corporation" to "National Holdings
Corporation;"
3. To approve and adopt an amendment to the Company's Certificate
of Designation to decrease the conversion price of the
Company's Series A Preferred Stock to $1.25 per share from
$1.50 per share;
4. To approve the Company's 2006 Stock Option Plan;
5. To ratify the appointment of Marcum & Kliegman LLP as
independent public accountants for the fiscal year ending
September 30, 2006; and
6. To transact such other business as may properly come before
the Annual Meeting or any adjournment thereof.
Owners of record at the close of business on January 13, 2006 will be entitled
to vote at the Annual Meeting or at any adjournments or postponements thereof. A
complete list of the shareholders entitled to vote at the Annual Meeting will be
made available for inspection by any shareholder of record at the offices of the
Company during market hours from _______, 2006 through the time of the Annual
Meeting.
By Order of the Board of Directors
/s/ Robert H. Daskal
--------------------
Robert H. Daskal
Acting Secretary
Chicago, Illinois
__________, 2006
OLYMPIC CASCADE FINANCIAL CORPORATION
875 North Michigan Avenue
Suite 1560
Chicago, Illinois 60611
PROXY STATEMENT
ANNUAL MEETING OF SHAREHOLDERS
To Be Held ________, 2006
General
The enclosed proxy is solicited on behalf of the Board of Directors of Olympic
Cascade Financial Corporation, a Delaware corporation ("Olympic" or the
"Company"), for use at the Annual Meeting of Shareholders to be held on
__________, 2006, and any adjournment or postponement thereof. The Annual
Meeting will be held at 12:00 P.M. (local time) at the New York offices of the
Company's subsidiary, National Securities Corporation ("National") located at
120 Broadway, 27th Floor, New York, New York 10271. This Proxy Statement, the
enclosed proxy card and the Company's Annual Report on Form 10-K for the fiscal
year ended September 30, 2005 are being mailed on or about __________, 2006 to
shareholders entitled to vote at the meeting.
The Company filed a proxy statement with the Securities and Exchange Commission
("SEC") on January 27, 2005 with the intention of holding a 2005 Annual Meeting
of Stockholders on March 22, 2005 (the "2005 Meeting"). However, as a result of
the continuing extensive strategic planning in connection with the proposed
merger between the Company and First Montauk Financial Corp. ("First Montauk"),
on March 18, 2005 the Board of Directors of the Company determined to postpone
until further notice the 2005 Meeting. On October 24, 2005, the Company and
First Montauk mutually agreed to terminate their proposed merger, and the
Company has determined to include the matters intended to be voted upon at the
2005 Meeting as part of the 2006 Annual Meeting of Stockholders.
Record Date and Voting Shares
The close of business on ________, 2006 has been fixed as the record date (the
"Record Date") for determining the shareholders of record entitled to notice of
and to vote at the Annual Meeting. At the close of business on the Record Date,
there were outstanding and entitled to vote 5,064,878 shares of Common Stock,
$.02 par value (the "Common Stock"), 33,320 shares of Series A Convertible
Preferred Stock, $.01 par value (the "Series A Preferred Stock") and 10,000
shares of Series B Convertible Preferred Stock, $.01 par value (the "Series B
Preferred Stock" and together with the Series A Preferred Stock, the "Preferred
Stock"). Each share of Series A Preferred Stock is convertible into Common Stock
at the current conversion price of $1.50 per share and each share of Series B
Preferred Stock is convertible into Common Stock at the conversion price of $.75
per share. The holder of each share of Preferred Stock is entitled to the number
of votes equal to the number of shares into which such share of Preferred Stock
could be converted at the Record Date. Accordingly, as of the Record Date, there
were 8,619,542 shares entitled to vote, consisting of 5,064,878 shares of Common
Stock outstanding, 2,221,331 shares of Common Stock issuable upon conversion of
the Series A Preferred Stock and 1,333,333 shares of Common Stock issuable upon
conversion of the Series B Preferred Stock. Each share of Common Stock entitles
the holder thereof to one vote upon any proposal submitted for a vote at the
Annual Meeting.
Directors are elected by a plurality of the votes, which means that the nominee
who receives the largest number of properly executed votes will be elected as a
director. Shares that are represented by proxies that are marked "withhold
authority" for the election of the director nominee will not be counted in
determining the number of votes cast for that person. Proposal Nos. 2 and 3
require the affirmative vote of the holders of a majority of the issued and
outstanding shares of stock entitled to vote on such proposals. Any other
matters properly considered at the meeting will be determined by a majority of
the votes cast.
Voting of Proxies
1
If the enclosed form of proxy is properly signed and returned, the shares
represented thereby will be voted at the Annual Meeting in accordance with the
instructions specified thereon. If the proxy does not specify how the shares
represented thereby are to be voted: the proxy will be voted FOR the election of
the Class I director and the Class II directors proposed by the Board of
Directors unless the authority to vote for the election of such directors is
withheld, unless the proxy contains contrary instructions; the proxy will be
voted FOR the approval to adopt an amendment to the Company's Certificate of
Incorporation to change the name of the Company from "Olympic Cascade Financial
Corporation" to "National Holdings Corporation;" the proxy will be voted FOR the
approval to adopt an amendment to the Company's Certificate of Designation to
decrease the conversion price of the Series A Preferred Stock to $1.25 per share
from $1.50 per share; the proxy will be voted FOR the approval of the Company's
2006 Stock Award and Incentive Plan; the proxy will be voted FOR the approval of
Marcum & Kliegman LLP as independent public accountants for the fiscal year
ending September 30, 2006; and in accordance with the discretion of the proxy
holders as to all other matters that may properly come before the Annual
Meeting. If a broker indicates on the enclosed proxy or its substitute that it
does not have discretionary authority as to certain shares to vote on a
particular matter ("broker non-votes"), those shares will not be considered as
voting with respect to that matter. The Company believes that the tabulation
procedures to be followed by the Inspector of Elections are consistent with the
general requirements of Delaware law concerning voting of shares and
determination of a quorum.
You may revoke or change your proxy at any time before the Annual Meeting by
filing with the Secretary of the Company, at the New York offices of the
Company's subsidiary, National Securities Corporation, located at 120 Broadway,
27th Floor, New York, New York 10271, a notice of revocation or another signed
proxy with a later date. You may also revoke your proxy by attending the Annual
Meeting and voting in person.
If any shareholder is unable to attend the Annual Meeting, such shareholder may
vote by proxy. If a proxy is properly executed and returned to the Company in
time to be voted at the Annual Meeting, it will be voted as specified in the
proxy, unless it is properly revoked prior thereto. Votes cast in person or by
proxy at the Annual Meeting will be tabulated by the Inspectors of Elections
appointed for the meeting and will determine whether or not a quorum is present.
The holders of a majority of the shares of stock entitled to vote at the
meeting, present in person or represented by proxy shall constitute a quorum for
the transaction of business.
Solicitation
The Company will bear the entire cost of solicitation, including the
preparation, assembly, printing and mailing of this Proxy Statement, the proxy
and any additional solicitation materials furnished to the shareholders. Copies
of solicitation materials will be furnished to brokerage houses, fiduciaries and
custodians holding shares in their names that are beneficially owned by others
so that they may forward this solicitation material to such beneficial owners.
In addition, the Company may reimburse such persons for their costs in
forwarding the solicitation materials to such beneficial owners. The original
solicitation of proxies by mail may be supplemented by a solicitation by
telephone, telegram or other means by directors, officers or employees of the
Company. No additional compensation will be paid to these individuals for any
such services. Except as described above, the Company does not presently intend
to solicit proxies other than by mail.
Shareholder Proposals for 2007 Annual Meeting
Any shareholder who intends to present a proposal at the Company's 2007 Annual
Meeting of Shareholers must ensure that the proposal is received by the
Corporate Secretary at Olympic Cascade Financial Corporation, c/o National
Securities Corporation, 120 Broadway, 27th Floor, New York, New York 10271:
o not later than ____________, 2006, if the proposal is submitted for
inclusion in our proxy materials for that meeting pursuant to Rule
14a-8 under the Securities Exchange Act of 1934; or
o on or after __________, 2006, and on or before ____________, 2006,
if the proposal is submitted pursuant to the Company's by-laws, in
which case the notice of the proposal must meet certain requirements
set forth in our by-laws.
Dissenters' Right of Appraisal
Under Delaware law, stockholders are not entitled to dissenters' rights on any
proposal referred to herein.
2
PROPOSAL 1
ELECTION OF DIRECTORS
At the Annual Meeting, one (1) Class I director will be elected by the
shareholders to serve until the 2008 Annual Meeting of Shareholders and until
his successor is elected and qualified, and two (2) Class II directors will be
elected by the shareholders to serve until the 2009 Annual Meeting of
Shareholders and until his successor is elected and qualified. The accompanying
form of proxy will be voted FOR the election of the nominees listed below to
serve as a director, unless the proxy contains contrary instructions.
As of the Record Date, the Board of Directors of the Company is as follows:
Year in Which
Name Class Term will Expire
---- ----- ----------------
Marshall S. Geller I 2008
Robert J. Rosan II 2006
Norman J. Kurlan II 2006
Mark Goldwasser III 2007
Gary A. Rosenberg III 2007
Peter Rettman III 2007
The members of the Board of Directors of the Company are classified into three
(3) classes, one class of which is elected at each Annual Meeting of
Shareholders to hold office for a three-year term and until successors of such
class have been elected and qualified. The nominees to serve as Class II
Directors and a Class I Director of the Board of Directors is set forth below. A
second position for a Class I Director is currently vacant. The proxy holders
intend to vote all proxies received by them in the accompanying form for the
nominees for director listed below. In the event that a nominee is unable or
declines to serve as a director at the time of the Annual Meeting, the proxies
will be voted for any nominee who shall be designated by the present Board of
Directors to fill the vacancy. In the event that additional persons are
nominated for election as a director, the proxy holders intend to vote all
proxies received by them for the nominee listed below. As of the date of this
proxy Statement, the Board of Directors is not aware of any nominee who is
unable or will decline to serve as a director.
Each shareholder will be entitled to one (1) vote for each share of Common Stock
held as of the Record Date. Shares represented by your proxy will be voted in
accordance with your direction as to the election as a director of the person
listed below as a nominee. In the absence of direction, the shares represented
by your proxy will be voted FOR such election. Election requires the affirmative
vote by the holders of a majority of the Common Stock voting at the Annual
Meeting.
The following sets forth the name and age of all directors and executive
officers of the Company and its subsidiaries, all positions and offices to be
held with the Company by such persons, and the principal occupations of each
during the past five (5) years.
Class and Year
In Which Term
Name Age Will Expire
---- --- -----------
Nominees for Director
Marshall S. Geller 66 Class I, 2008
Robert J. Rosan 74 Class II, 2009
Norman J. Kurlan 53 Class II, 2009
The Board of Directors recommends a vote FOR the election of the nominees as a
director of the Company.
3
Directors Not Standing for Election
Class and Year
In Which Term
Name Age Will Expire
---- --- -----------
Mark Goldwasser 47 Class III, 2007
Gary A. Rosenberg 65 Class III, 2007
Peter Rettman 59 Class III, 2007
Mark Goldwasser Chairman
President and Chief Executive Officer
Chairman, President and Chief Executive
Officer of National
Mark Goldwasser has served as a director of the Company since December 28, 2001.
Mr. Goldwasser joined the Company in June 2000. Mr. Goldwasser was named
President in August 2000, Chief Executive Officer in December 2001 and Chairman
in April 2005. Prior to joining the Company, Mr. Goldwasser was the Global High
Yield Sales Manager at ING Barings from 1997 to 2000. From 1995 to 1997, Mr.
Goldwasser was the Managing Director of High Yield Sales at Schroders & Co., and
from 1991 to 1995, the Vice President of Institutional High Yield Sales at
Lazard Freres & Co. From 1984 to 1991, Mr. Goldwasser served as the Associate
Director of Institutional Convertible Sales and Institutional High Yield Sales
at Bear Stearns & Co., Inc. From 1982 to 1984, Mr. Goldwasser was a Floor member
of the New York Mercantile Exchange (NYMEX) and the Commodity Center (COMEX).
Mr. Goldwasser received his BA with Honors from the University of Capetown in
1979.
Gary A. Rosenberg Director
Gary A. Rosenberg has served as a director of the Company since its inception in
February 1997 and served as its President from August 1997 until April 1998. Mr.
Rosenberg was appointed to the Board of National in December 1996, and served as
a Director until April 1998. Mr. Rosenberg was Chairman and CEO of UDC Homes,
Inc. (and its predecessors) from 1968 to 1994, and the Chairman (non-management)
from 1994 to 1996. Presently, Mr. Rosenberg is President and Chief Executive
Officer of Urban R2 Development Company LLC. In February 2004, Mr. Rosenberg
filed for bankruptcy protection under Chapter 7 in the U.S. Bankruptcy Court for
the Northern District of Illinois. Mr. Rosenberg is also Chairman and Director
of the Rosenberg Foundation; Founder and Chairman of the Real Estate Research
Center and a member of the Board at The Kellogg Graduate School of Management at
Northwestern University; and a Trustee of St. Norbert College. Mr. Rosenberg
received his BS and MBA from Northwestern University and his JD from the
University of Wisconsin.
Peter Rettman Director
Registered Representative of National
Peter Rettman has served as a director of the Company since December 28, 2001.
Mr. Rettman has been a stockbroker for more than 35 years, and has served as a
Registered Representative of National Securities Corporation since December
1994. Mr. Rettman has taught investments at the University of Washington
extension program since 1975. Mr. Rettman is an active venture capital investor,
primarily in, but not limited to, the Pacific Northwest.
Robert J. Rosan Director
Robert J. Rosan has served as a director of the Company since December 28, 2001.
He has been a partner in the law firm of Rosan & Rosan P.C. for thirty-three
years, specializing in real estate, banking and contract law. Mr. Rosan received
his LLB from Columbia Law School, and is an active real estate investor and
developer.
Norman J. Kurlan Director
Norman J. Kurlan has served as a director of the Company since July 28, 2003.
Mr. Kurlan is currently an independent commissioned representative with the
broker dealer American Portfolios, and has held similar position with Nathan and
Lewis Securities. Mr. Kurlan was employed by Bear Stearns & Co. in Private
Client Services in New York City from 1981 to 1996. Mr. Kurlan received his BS
in business administration from Boston University, an MBA in accounting from St.
Johns University and an advanced profession post graduate degree in investment
management and finance from New York University.
4
Marshall S. Geller Director
Mr. Geller has served as a director of the Company since January 11, 2006.
Marshall S. Geller is the Co-Founder and Senior Managing Partner of St. Cloud
Capital Partners, L.P., a Los Angeles based private investment fund formed in
December 2001. He is also Chairman, CEO and Founding Partner of Geller & Friend
Capital Partners, Inc., a private merchant bank formed in November 1995. Mr.
Geller has spent more than 35 years in corporate finance and investment banking,
including 21 years as Senior Managing Director for Bear, Stearns and Company,
with oversight of all operations in Los Angeles, San Francisco, Chicago, Hong
Kong and the Far East. Mr. Geller currently serves as Non-Executive Chairman of
the Board of Directors of ShopNBC-Value Vision Media, Inc. (Nasdaq:VVTV) and as
director on the boards of GP Strategies Corporation (NYSE:GPX), 1st Century Bank
N.A., (Nasdaq:FCNA), Viking Systems, Inc. (VKSY:OB) and Blue Holdings, Inc.
(BLHL:OB) and is on the Board of Governors of Cedars-Sinai Medical Center, Los
Angeles. Mr. Geller graduated from California State University, Los Angeles,
with a BS in Business Administration, where he currently serves on the Dean's
Advisory Council for the College of Business & Economics.
Executive Officers
Robert H. Daskal 64 years old Acting Chief Financial
Officer and Acting Secretary
Robert H. Daskal has served as Acting Chief Financial Officer and Acting
Secretary of the Company since January 2002. Mr. Daskal served as Senior Vice
President, Chief Financial Officer, Secretary and Treasurer of the Company from
February 1997 through December 2001. From 1994 to 1997, Mr. Daskal was a
director, Executive Vice President and Chief Financial Officer of Inco Homes
Corporation, and from 1985 to 1994, Mr. Daskal was a director, Executive Vice
President-Finance and Chief Financial Officer of UDC Homes, Inc. (and its
predecessors). Mr. Daskal, a former Tax Partner with Arthur Andersen & Co.,
became a CPA in Illinois in 1967. He received his BBA and JD from the University
of Michigan in Ann Arbor.
Directors Compensation
Effective January 1, 2004, each outside director is paid a directors fee of
$15,000 per annum, payable quarterly. Outside directors are also granted options
to purchase 10,000 shares of the Company's Common Stock each year of their
tenure, which fully vest six (6) months after the date of issuance. The exercise
price of such options equal or exceed fair market value of the Common Stock on
the date of grant. The Company reimburses all directors for expenses
incurred traveling to and from board meetings. The Company does not pay inside
directors any compensation as a director. The compensation for directors was
approved by the disinterested members of the Board of Directors. The
compensation of the Chairman was approved by the disinterested members of the
Compensation Committee.
Certain Relationships and Related Transactions
Messrs. Goldwasser and Rettman have brokerage margin accounts with National. The
transactions, borrowings and interest charges in these accounts are handled in
the ordinary course of business and are consistent with similar third party
customer accounts.
In fiscal year 2002, the Company completed a series of transactions under which
certain new investors (collectively, the "Investors") obtained a significant
ownership in the Company through a $1,572,500 investment in the Company and by
purchasing a majority of shares held by Steven A. Rothstein, a former Chairman,
Chief Executive Officer and principal shareholder of the Company (the
"Investment Transaction"). The Investors included Triage Partners LLC
("Triage"), an affiliate of Steven B. Sands, a former Chairman of the board of
directors of the Company; and One Clark LLC ("One Clark"), an affiliate of Mark
Goldwasser, the current Chairman, President and Chief Executive Officer of the
Company. The Investors purchased an aggregate of $1,572,500 of Series A
Preferred Stock from the Company, which is currently convertible into Common
Stock at a price of $1.50 per share. The Company incurred $100,000 of legal
costs related to these capital transactions. In connection with the Investment
Transaction, Triage also purchased 285,000 shares of Common Stock from Mr.
Rothstein and his affiliates at a price of $1.50 per share. In addition, Mr.
Rothstein and his affiliates granted Triage a three-year voting proxy on 274,660
shares, the balance of their Common Stock, which expired on December 28, 2004.
5
Concurrent with the Investment Transaction, two unrelated individual noteholders
holding $2.0 million of the Company's debt converted one-half of their debt into
the same class of Series A Preferred Stock that was sold in the Investment
Transaction. The noteholders also had 100,000 of their 200,000 warrants to
acquire shares of Common Stock repriced from an exercise price of $5.00 per
share to $1.75 per share. In January 2004, the two noteholders extended the
maturity date on the remaining $1.0 million of notes from January 25, 2004 to
July 31, 2005. Effective February 1, 2004, the interest rate on the notes was
increased from 9% to 12% per annum. Additionally, the remaining 100,000 warrants
to acquire shares of Common Stock was repriced from an exercise price of $5.00
per share to $1.25 per share, and the expiration date for all 200,000 warrants
was extended to July 31, 2005. In August 2005, the two noteholders extended the
maturity date on the notes from July 31, 2005 to July 31, 2007. Additionally,
each of the noteholders' warrants to purchase, in the aggregate, 100,000 shares
of Common Stock at a price of $1.75 per share expiring on July 31, 2005 was
repriced to $1.25 per share, and the expiration date of the noteholders'
warrants to purchase, in the aggregate, a total of 200,000 shares of Common
Stock at a price of $1.25 per share was extended from July 31, 2005 to July 31,
2007.
In March 2004, the Company's board of directors declared an in-kind dividend on
the then outstanding shares of Series A Preferred Stock in the aggregate amount
of 3,352 additional shares of Series A Preferred Stock, in payment of
approximately $503,000 of dividends accrued through January 31, 2004. Such
shares were issued on March 31, 2004. In March 2005, the Company's Board of
Directors declared an in-kind dividend in the aggregate of 2,143 shares of
Series A Preferred Stock, in payment of approximately $322,000 of dividends
accrued through March 31, 2005. Such shares were issued on April 30, 2005.
In February 2001, National Securities Corporation entered into a secured demand
note collateral agreement valued at $1.0 million with Peter Rettman, a member of
the board of directors of the Company, to borrow securities that can be used by
the Company for collateral agreements. This note bears interest at 5% per annum,
payable monthly, and initially was scheduled to mature on February 1, 2004.
Additionally, Mr. Rettman received a warrant to acquire 75,000 shares of Common
Stock with an exercise price of $5.00 per share that was initially scheduled to
expire on February 1, 2004. In February 2004, the term of Mr. Rettman's note was
extended to March 1, 2005, and Mr. Rettman's warrant was repriced to $1.25 per
share, and the expiration date was extended to July 31, 2005. The expiration
date for another warrant held by Mr. Rettman to purchase an additional 75,000
shares of Common Stock at a price of $1.75 per share was also extended from
January 25, 2004 to July 31, 2005. In February 2005, the term of Mr. Rettman's
note was extended to March 1, 2006. In August 2005, Mr. Rettman's warrant to
purchase 75,000 shares of Common Stock at a price of $1.75 per share, scheduled
to expire on July 31, 2005, was repriced to $1.25 per share, and the expiration
date of all the warrants held by Mr. Rettman was extended to July 31, 2007.
In January 2006, the Company completed a transaction under which certain new
investors (collectively, the "New Investors") made a $2,000,000 investment in
the Company (the "New Transaction") by purchasing an aggregate of (i) $1,000,000
of the Company's newly created Series B Preferred Stock, which is currently
convertible into Common Stock at a price of $.75 per share, (ii) 11% convertible
promissory notes in the principal amount of $1,000,000, which is convertible
into Common Stock at a price of $1.00 per share and (iii) warrants to purchase
an aggregate of 300,000 shares of Common Stock at an exercise price of $1.00 per
share (subject to adjustment). The investment by the New Investors include
$1,700,000 by St. Cloud Capital Partners, L.P. ("St. Cloud"), whose managing
partner is Marshall S. Geller, who became a member of the Board of Directors of
the Company simultaneous with the closing of the transaction, and $300,000 by
two unrelated investors.
Executive Compensation
The following table sets forth the cash compensation paid by the Company to each
of its executive officers whose total annual salary and bonus exceeded $100,000
for fiscal year 2005 (the "Named Executive Officers") during the fiscal years
ended 2005, 2004 and 2003:
6
ANNUAL COMPENSATION
Long- Term
Compensation
Securities
Year Underlying
Name and Capacity Ended Salary (1) Bonus Options (2)
---------------------------------------------------------------------------------------------------------
Mark Goldwasser 2005 $ 316,712 $ - 367,000
Chairman, President and Chief 2004 $ 250,000 $ 149,000 250,000
Executive Officer 2003 $ 177,232 $ 40,000 -
Robert H. Daskal 2005 $ 160,000 $ - 110,000
Acting Chief Financial Officer 2004 $ 109,167 $ 39,500 75,000
and Acting Secretary 2003 $ 117,960 $ - -
(1) Amounts include, if any, commissions earned in the normal course of
business, fees received for corporate finance services and profit from the sale
during the year of the Company's Common Stock obtained through the exercise of
options
(2) Amounts include options that were repriced on February 14, 2005 as described
below in "Option Grants in Last Fiscal Year" and "Report on Repricing of
Options."
Securities Authorized for Issuance Under Equity Compensation Plans.
The following table sets forth information as of September 30, 2005 with respect
to compensation plans under which equity securities of the Company are
authorized for issuance.
----------------------------------------------------------------------------------------------------------------------
Number of securities
remaining available for
Number of securities to be Weighted-average exercise future issuance under
issued upon exercise of price of outstanding equity compensation plans
outstanding options, options, warrants and (excluding securities
Plan Category warrants and rights rights reflected in column (a))
----------------------------------------------------------------------------------------------------------------------
(a) (b) (c)
----------------------------------------------------------------------------------------------------------------------
Equity compensation
plans approved by
security holders 783,667 (1) $1.35 216,333 (1)
----------------------------------------------------------------------------------------------------------------------
----------------------------------------------------------------------------------------------------------------------
Equity compensation
plans not approved by
security holders 10,000 (2) $0.90 955,497 (2)
----------------------------------------------------------------------------------------------------------------------
----------------------------------------------------------------------------------------------------------------------
Total 793,667 $1.35 1,171,830
----------------------------------------------------------------------------------------------------------------------
(1) Includes options issued and outstanding under the 2001 Stock Option Plan and
shares available for issuance under the 2001 Stock Option Plan.
(2) Includes 10,000 options issued and outstanding under the 1999 Stock Option
Plan, and 455,497 and 500,000 shares available for issuance under the 1999 and
2000 Stock Option Plans, respectively.
The purposes of both the 1999 and 2000 Stock Option Plans are to retain the
services of valued key employees and consultants of the Company, to encourage
such persons to acquire a greater proprietary interest in the Company, thereby
strengthening their incentive to achieve the objectives of the shareholders of
the Company, and to serve as an aid and inducement in the hiring of new
employees and consultants. Stock options granted under these plans have an
exercise price not less than the fair market value per share of the Common Stock
at the date of grant.
7
Option Grants In Last Fiscal Year
The Company granted options to certain officers, directors, employees,
investment executives and consultants. The options granted to the Named
Executive Officers during the fiscal year ended September 30, 2005 are as
follows:
Option Grants in Last Fiscal Year
----------------------------------------------------------------------------------------
Potential Realized Value
Number of % of Total at Assumed Annual Rates
Securities Options of Stock Price Appreciation
Underlying Granted to for Option Term
Options Employees Exercise Expiration -----------------------------
Name Granted in Fiscal Year Price Date 5% 10%
----------------------- ------------ --------------- ---------- ----------- ------------- --------------
Mark Goldwasser 60,000 40.00% $ 1.375 02/14/10 $ 23,000 $ 50,000
Robert H. Daskal 35,000 23.33% $ 1.25 02/14/10 $ 12,000 $ 27,000
The Company also repriced options previously granted to certain officers,
directors, employees, investment executives and consultants. The options
repriced to the Named Executive Officers during the fiscal year ended September
30, 2005 are as follows:
Options Repriced in Last Fiscal Year
----------------------------------------------------------------------------------------
Potential Realized Value
Number of % of Total at Assumed Annual Rates
Securities Options of Stock Price Appreciation
Underlying Repiced to for Option Term
Options Employees Exercise Expiration -----------------------------
Name Repriced in Fiscal Year Price Date 5% 10%
----------------------- ------------ --------------- ---------- ----------- ------------- --------------
Mark Goldwasser 307,000 58.81% $ 1.375 02/14/10 $ 117,000 $ 258,000
Robert H. Daskal 75,000 14.37% $ 1.25 02/14/10 $ 26,000 $ 57,000
Report on Repricing of Options
The following table sets forth information regarding certain options held by the
Named Executive Officers that have been repriced during the ten year period
ended September 30, 2005
---------------------------------------------------------------------------------------------------------------------
Ten Year Option Repricings
---------------------------------------------------------------------------------------------------------------------
Market Length of
Number of price of original
securities stock at Exercise option term
underlying time of price at remaining
option repricing time of New at date
repriced or or repricing or exercise of repricing
Name Date amended amendment amendment price or amendment
------------------------- ------------ -------------- --------------- -------------- ------------ -------------------
Mark Goldwasser 02/14/05 12,000 $1.25 $3.875 $1.375 329 days
------------------------- ------------ -------------- --------------- -------------- ------------ -------------------
02/14/05 30,000 $1.25 $6.125 $1.375 195 days
------------------------- ------------ -------------- --------------- -------------- ------------ -------------------
02/14/05 15,000 $1.25 $ 2.00 $1.375 1 year, 363 days
------------------------- ------------ -------------- --------------- -------------- ------------ -------------------
02/14/05 250,000 $1.25 $ 2.75 $1.375 3 years, 343 days
------------------------- ------------ -------------- --------------- -------------- ------------ -------------------
Robert H. Daskal 02/14/05 75,000 $1.25 $ 2.50 $ 1.25 3 years, 343 days
------------------------- ------------ -------------- --------------- -------------- ------------ -------------------
No options were exercised by the Named Executive Officers. The fiscal year end
value of unexercised options, are as follows:
8
Aggregated Option Exercises in Last Fiscal Year and Fiscal Year End Option Values
---------------------------------------------------------------------------------------------
Number of Securities Value of Unexercised
Underlying Unexercised In-the-Money Options
Options at Fiscal Year End at Fiscal Year End
------------------------------- ---------------------------------
Name Exercisable Unexercisable Exercisable Unexercisable
------------------------ ------------- ---------------- ---------------- ---------------
Mark Goldwasser 367,000 - $ - $ -
Robert H. Daskal 110,000 - $ - $ -
Employment Agreements
Pursuant to an agreement dated November 29, 2001, Mr. Goldwasser voluntarily
terminated his employment agreement with the Company in exchange for a profit
participation in National's branch office at 120 Broadway in New York City. The
branch office consists of all the business activities conducted at 120 Broadway
as of the date of the agreement, exclusive of retail brokerage activities.
National's profit participation was 40% of the net profits generated by the
branch office, and Mr. Goldwasser received 20% of the net profits generated by
the branch office. In July 2003, the Company and Mr. Goldwasser agreed to
terminate the profit participation and to enter into a new employment agreement
providing for a base annual salary of $300,000. Mr. Goldwasser has been salaried
at that rate since July 2003.
As part of the Investment Transaction, Mr. Daskal entered into a Termination and
Consulting Agreement with the Company dated December 14, 2001. The agreement
with Mr. Daskal provided for the termination of all provisions and obligations
pursuant to his Employment Agreement dated January 1, 1997, as amended on July
1, 1999, his retention as a non-executive employee of the Company for a period
of three (3) months, and payment by the Company of a monthly consulting fee of
$10,000 for a period of 27 months which was to commence April 1, 2002. Mr.
Daskal subsequently agreed to serve as the Company's Acting Chief Financial
Officer and Acting Secretary. The effective date of the payment of his monthly
consulting fee has been correspondingly deferred.
Meetings of the Board of Directors
During the fiscal year ended September 30, 2005, the Company's Board of
Directors met or acted by unanimous written consent a total of 14 times. Each
director attended or participated in 75% or more of the aggregate of the total
number of meetings of the Board of Directors.
Committees of the Board of Directors
The Board of Directors has a Compensation Committee, an Audit Committee and an
M&A Committee, all the members of which are independent, as defined by
Securities and Exchange Commission (the "SEC") rules. Each director attended or
participated in 75% or more of the aggregate of the total number of meetings
held by all committees of the Board of Directors on which such director served
during fiscal year 2005.
The Board of Directors does not currently have a nominating committee. Board of
Director nominations are recommended by the directors, which has recommended the
nominees named above for election at the 2006 Annual Meeting. In making its
nominations, the Board of Director identifies candidates who meet the current
challenges and needs of the Board of Directors. In determining whether it is
appropriate to add or remove individuals, the Board of Directors will consider
issues of judgment, diversity, age, skills, background and experience. In making
such decisions, the Board of Directors considers, among other things, an
individual's business experience, industry experience, financial background and
experiences.
Compensation Committee
The Company's Compensation Committee for fiscal year 2005 consisted of Robert J.
Rosan and Gary Rosenberg, both of whom are considered to be "independent." On
January 12, 2004, the Compensation Committee adopted a formal Compensation
Committee Charter, which contains a detailed description of the committee's
duties and responsibilities.
9
Report of the Compensation Committee
This report of the Compensation Committee shall not be deemed incorporated by
reference by any general statement incorporating the Proxy Statement by
reference into any filing under the Securities Act of 1933 or the Securities
Exchange Act of 1934 (the "Acts"), except to the extent that the Company
specifically incorporates this information by reference, and shall not otherwise
be deemed filed under such Acts.
The Committee is responsible for reviewing and approving the compensation of the
Company's Chief Executive Officer and recommending to the Board of Directors the
compensation of the Company's other officers and the Company's chairman,
consistent with employment contracts, where appropriate. The Committee believes
the compensation paid to the Company's Executive Officers is competitive with
companies within its industry that are comparable in size and by companies
outside the industry with which the Company competes for executive talent.
The Company has a compensation program that consists of salary and performance
bonus (that are generally reviewed annually) and stock options. For the fiscal
year ended September 30, 2004, the Compensation Committee approved a bonus pool,
whereby 20% of the Company's net income was paid as a bonus to certain members
of the Company's senior management. It is expected that a similar bonus pool
plan will be approved by the Compensation Committee for the fiscal year ending
September 30, 2006. The overall executive compensation philosophy is based upon
the premise that compensation should be aligned with and supports the Company's
business strategy and long-term goals. The Company believes it is essential to
maintain an executive compensation program that provides overall compensation
competitive with that paid executives with comparable qualifications and
experience. This is critical to attract and retain competent executives.
Annual cash bonuses are determined by the Compensation Committee. Stock options
may be granted to key employees of the Company pursuant to the Company's stock
option plan that provides additional incentive to maximize stockholder value.
The plans may also utilize vesting periods to encourage option recipients to
continue in the employ of the Company. The Company grants stock options to its
officers, directors, employees, investment executives and consultants.
The Compensation Committee regularly evaluates its policies with respect to
executive compensation. The Compensation Committee believes that a combination
of salary, bonus, and stock options provides a mix of short and long-term
rewards necessary to attract motivate and retain an excellent management team.
The Company intends to comply with the requirements of Section 162 (m) of the
Internal Revenue Code of 1986 for the fiscal year 2006.
Compensation of the Chief Executive Officer. In July 2003, the Company and Mr.
Goldwasser agreed to terminate Mr. Goldwasser's profit participation in
National's branch office at 120 Broadway in New York City, and to enter into a
new employment agreement providing for a base annual salary of $300,000. Mr.
Goldwasser has been salaried at that rate since July 2003. The terms of the
employment agreement will reflect the recognition of Mr. Goldwasser's unique
skills and importance to the Company. The amount of Mr. Goldwasser's
compensation reflects the Committee's philosophy as stated above, and for fiscal
year 2005 included a base salary of $300,000.
Compensation Committee:
Robert J. Rosan
Gary A. Rosenberg
Compensation Committee Interlocks and Insider Participation
No interlocking relationships exist between any members of the Company's Board
of Directors or Compensation Committee and the board of directors or
compensation committee of any other company, nor has any such interlocking
relationship existed in the past.
Audit Committee
The Audit Committee for fiscal year 2005 consisted of Gary A. Rosenberg, Robert
J. Rosan and Norman J. Kurlan. The members are "independent" as defined in SEC
Rule 10A-3 under the Securities Exchange Act of 1934, as amended (the "Exchange
Act").
10
On January 22, 2003, the Board adopted a charter for the Audit Committee, as
amended and restated on January 12, 2004. The Audit Committee oversees the
Company's financial reporting process on behalf of the Board of Directors.
Management is responsible for the Company's internal controls, financial
reporting process and compliance with laws and regulations and ethical business
standards. The independent auditors are responsible for performing an
independent audit of the Company's consolidated financial statements in
accordance with generally accepted auditing standards and to issue a report
thereon. The Audit Committee has the power and authority to engage the
independent auditors, reviews the preparations for and the scope of the audit of
the Company's annual financial statements, reviews drafts of the statements and
monitors the functioning of the Company's accounting and internal control
systems by through discussions with representatives of management, the
independent auditors and the internal auditors.
Under new SEC rules, companies are required to disclose whether their audit
committees have an "audit committee financial expert" as defined in Item 401(h)
of Regulation S-K under the Securities Exchange Act of 1934 and whether that
expert is "independent" as that term is used in Item 7(d)(3)(iv) of Schedule 14A
under the Exchange Act. The Board of Directors has determined that Mr. Rosenberg
is a "financial expert" and is also "independent."
Audit Committee Report
On December 6, 2005, the Audit Committee met to review the results of the 2005
audit. The Audit Committee reviewed the Company's audited financial statements
as of and for the fiscal year ended September 30, 2005 with management and the
Company's independent public accountants, Marcum & Kliegman LLP. This review
included the matters required to be discussed by Statement on Auditing Standards
No. 61, "Communication with Audit Committees," as issued and amended by the
Auditing Standards Board of the American Institute of Certified Public
Accountants. The Audit Committee discussed with Marcum & Kliegman LLP their
independence from management and from the Company.
Based on the above review and discussions, the Audit Committee recommended to
the Board of Directors that the audited financial statements as of and for the
fiscal year ended September 30, 2005 be included in the Company's Annual Report
on Form 10-K for the fiscal year ended September 30, 2005.
Audit Committee:
Gary A. Rosenberg
Robert J. Rosan
Norman J. Kurlan
M&A Committee
The M&A Committee for fiscal year 2005 consisted of Gary A. Rosenberg, Robert J.
Rosan and Norman J. Kurlan. The members are "independent" as defined in SEC Rule
10A-3 under the Exchange Act.
The M&A Committee was created in order to negotiate the terms of the Company's
proposed transaction with First Montauk, and report to and consult with the
Company's management on the status of the discussions with First Montauk during
the negotiation process. The M&A Committee was formed in September 2004 and held
7 meetings in fiscal year 2005.
Section 16(a) Beneficial Ownership Reporting Compliance
Pursuant to Section 16 of the Exchange Act, the Company's directors and
executive officers and beneficial owners of more than 10% of the Common Stock
are required to file certain reports, within specified time periods, indicating
their holdings of and transactions in the Common Stock. Based solely on the
Company's review of the copies of such forms received by it, or written
representations from certain reporting persons, the Company believes that during
fiscal year 2005, the Company's insiders have complied with all Section 16(a)
filing requirements applicable to them.
Comparison of Five-Year Cumulative Total Return
On November 1, 2004 the Company's Common Stock was delisted from The American
Stock Exchange (AMEX) and commenced trading on the Over-the-Counter Bulletin
Board under the symbol "OLYD".
11
The following chart and graph compares cumulative total stockholder return on
the Company's Common Stock with the cumulative total stockholder return on the
common equity of the companies in the AMEX U.S. Index and the AMEX U.S.
Financial Index (the "Peer Group") for the period from October 1, 2000 to
September 30, 2005. We assume a $100 investment on October 1, 2000, in each of
Olympic Cascade Financial Corporation Common Stock, AMEX U.S. Index and the AMEX
U.S. Financial Index (the "Peer Group"), and further assume the reinvestment of
all dividends.
Olympic AMEX
Measurement Period Cascade AMEX U.S. Financial
(Fiscal Year Covered) Financial U.S. Index Index
------------------- --------- ---------- -----
2000 100.00 100.00 100.00
2001 439.44 79.35 145.79
2002 9.86 70.52 158.76
2003 27.91 88.17 182.30
2004 12.09 99.37 197.93
2005 16.74 115.08 203.82
Security Ownership of Certain Beneficial Owners and Management
Certain Beneficial Owners
The following table sets forth certain information with respect to persons known
by the management of the Company to own beneficially more than five percent (5%)
of the voting securities of the Company as of January 26, 2006:
12
Amount and Nature
Name and Address of of Beneficial Percentage of
Beneficial Owner Ownership (1) Class
------------------------------------ --------------------- ---------------
St. Cloud Capital Partners, L.P. 2,238,333(2) 30.65%
10866 Wilshire Boulevard
Suite 1450
Los Angeles, CA 90024
Mark Goldwasser 1,056,819 (3) 17.40%
120 Broadway, 27th Floor
New York, NY 10271
Gregory P. Kusnick and 501,000 (4) 9.00%
Karen Jo Gustafson
5425 Crystal Springs Drive
Bainbridge Island, WA 98110
Gregory C. Lowney and 501,000 (4) 9.00%
Maryanne K. Snyder
15207 NE 68th Street
Redmond, WA 98052
Triage Partners LLC 963,199 (5) 16.77%
90 Park Avenue, 39th Floor
New York, NY 10016
Steven A. Rothstein 449,362 (6) 8.59%
2737 Illinois Road
Wilmette, IL 60091
(1) All securities are beneficially owned directly by the persons listed on
the table (except as otherwise indicated).
(2) Includes 1,133,333 shares issuable upon conversion of 8,500 shares of
Series B Preferred Stock, 850,000 shares issuable upon conversion of a
convertible promissory note and 255,000 restricted stock warrants.
(3) Includes 628,133 shares issuable upon conversion of 9,422 shares of Series
A Preferred Stock owned indirectly through One Clark LLC, 12,425 shares
owned by direct family members, and 367,000 shares of vested unexercised
stock options and 15,386 restricted stock warrants owned directly.
(4) Includes 401,000 shares issuable upon conversion of 6,015 shares of Series
A Preferred Stock and 100,000 restricted stock warrants owned as joint
tenants with rights of survivorship.
(5) Includes 628,199 shares issuable upon conversion of 9,423 shares of Series
A Preferred Stock and 50,000 restricted stock warrants.
(6) Includes 88,750 shares owned by direct family members, and 92,510 shares,
162,999 shares issuable upon conversion of 2,445 shares of Series A
Preferred Stock and 5,000 restricted stock warrants owned by retirement
plan.
Security Ownership of Management
The following information is furnished as of January 26, 2006 as to each class
of equity securities of the Company beneficially owned by all directors and
named executive officers of the Company:
13
Amount and Nature of
Name of Beneficial Owner Beneficial Ownership Percent of Class
---------------------------------------------------------------------------------------------------
Mark Goldwasser - Chairman, President and Chief 1,056,819 (1) 17.40%
Executive Officer
Gary A. Rosenberg - Director 35,000 (2) 0.69%
Peter Rettman - Director 150,000 (3) 2.88%
Robert J. Rosan - Director 30,000 (4) 0.59%
Norman J. Kurlan - Director 22,800 (5) 0.45%
Marshall S. Geller - Director 2,238,333 (6) 30.65%
Robert H. Daskal - Acting Chief Financial Officer and 111,875 (7) 2.16%
Acting Secretary
All executive officers and directors of the Company as a 3,644,827 (8) 42.09%
group (seven persons)
(1) Includes 628,133 shares issuable upon conversion of 9,422 shares of Series
A Preferred Stock owned indirectly through One Clark LLC, 12,425 shares
owned by direct family members, and 367,000 shares of vested unexercised
stock options and 15,386 restricted stock warrants owned directly.
(2) Includes 35,000 shares of vested unexercised stock options.
(3) Includes 150,000 restricted stock warrants.
(4) Includes 35,000 shares of vested unexercised stock options.
(5) Includes 2,800 shares owned by a direct family member and 20,000 shares of
vested unexercised stock options.
(6) Includes 1,133,333 shares issuable upon conversion of 8,500 shares of
Series B Preferred Stock, 850,000 shares issuable upon conversion of a
convertible promissory note and 255,000 restricted stock warrants owned
indirectly through St. Cloud. Mr. Geller disclaims beneficial ownership of
the foregoing securities.
(7) Includes 110,000 shares of vested unexercised stock options.
(8) Includes 628,133 shares issuable upon conversion of 9,422 shares of Series
A Preferred Stock, 1,133,333 shares issuable upon conversion of 8,500
shares of Series B Preferred Stock, 850,000 shares issuable upon
conversion of a convertible promissory note, 562,000 shares of vested
unexercised stock options and 420,386 restricted stock warrants.
PROPOSAL 2
TO AMEND THE CERTIFICATE OF INCORPORATION TO CHANGE THE NAME OF THE
COMPANY TO NATIONAL HOLDINGS CORPORATION
General
The Company's Certificate of Incorporation currently states that the name of the
Corporation is Olympic Cascade Financial Corporation. On November 22, 2005, the
Board of Directors adopted a resolution approving, and declared advisable,
subject to stockholder approval, an amendment to the Certificate of
Incorporation to change the name of the Company to National Holdings
Corporation.
If the stockholders approve this proposal, the certificate of amendment to the
Company's Certificate of Incorporation will be filed with the Delaware Secretary
of State, such that Article FIRST will be amended to read in its entirety as
follows:
"FIRST. The name of the corporation (hereinafter called the
"Corporation") is National Holdings Corporation."
Reason for the Change of the Name of the Company
14
The Company was advised by the United States Olympic Committee ("USOC") that
pursuant to the Ted Stevens Olympic and Amateur Sports Act of 1998, the USOC is
granted the exclusive right to make commercial use in the United States of
certain words, including "Olympic." In order to avoid the costs of litigation,
the Company entered into a Settlement Agreement with the USOC in June 2003,
whereby the Company agreed to change its name. Upon due consideration, the Board
of Directors has selected National Holdings Corporation to be the new name of
the Company, which more accurately reflects the name of our wholly owned
subsidiary National.
The Company does not believe that the proposed amendment will have any material
effect on our business, operations, assets or reporting requirements. However,
we expect to change our common stock symbol on the Over-the-Counter Bulletin
Board shortly following stockholder approval of this proposal.
Stockholders are not required to have new stock certificates issued reflecting
the name change. New stock certificates will be issued to stockholders when old
stock certificates are returned to our transfer agent in connection with a
transfer of shares or if requested by the stockholder. Do not send any stock
certificates to us with your proxy card.
If this proposal is approved by the stockholders, it will become effective on
the date the certificate of amendment is filed with the Delaware Secretary of
State.
Required Vote
Approval of the amendment to the Company's Certificate of Incorporation will
require the affirmative vote of the holders of a majority of the issued and
outstanding shares of stock entitled to vote on the proposal at the Annual
Meeting.
The Board of Directors recommends a vote FOR the amendment to the Certificate of
Incorporation to change the name of the Company to National Holdings
Corporation.
PROPOSAL 3
TO AMEND THE CERTIFICATE OF DESIGNATION TO DECREASE THE CONVERSION
PRICE OF THE SERIES A PREFERRED STOCK
General
The Company's Certificate of Designations, Preferences, and Relative Optional or
Other Special Rights of Preferred Stock and Qualifications, Limitations and
Restrictions Thereof of Series A Convertible Preferred Stock (the "Certificate
of Designation") currently states that the price at which shares of Common Stock
shall be deliverable upon conversion of the Series A Preferred Stock (the
"Series A Conversion Price") shall initially be $1.50 per share of Common Stock.
On November 22, 2005, the Board of Directors adopted a resolution approving, and
declared advisable, subject to stockholder approval, an amendment to the
Certificate of Designation to reduce the Series A Conversion Price to $1.25 per
share.
If the stockholders approve this proposal, the certificate of amendment to the
Certificate of Designation will be filed with the Delaware Secretary of State,
such that the penultimate sentence of Section 5(a) of the Certificate of
Designation will be amended to read in its entirety as follows:
"The price at which shares of Common Stock shall be deliverable upon
conversion of the Series A Preferred Stock (the "Series A Conversion
Price") shall initially be $1.25 per share of Common Stock."
Reason for the Decrease in the Series A Conversion Price
In October 2004, the Company entered into a preliminary letter of intent to
consummate a merger or other similar combination with First Montauk Financial
Corp. ("First Montauk"), a publicly traded company whose wholly owned subsidiary
is also a registered broker-dealer with a similar business to National. In
February 2005, the Company and First Montauk entered into a definitive merger
agreement, and in June 2005, the Company and First Montauk entered into an
amended and restated definitive merger agreement. In October 2005, the Company
and First Montauk mutually agreed to terminate their proposed merger.
15
The structure of the merger agreement, and the amended and restated definitive
merger agreement, was such that the consummation of the transaction may have
been deemed to be a "Liquidity Event" as such term is defined in Section 3(c) of
the Certificate of Designation creating the Series A Shares. If the transaction
were to deemed to be a Liquidity Event, the holders of the Series A preferred
stock would have had the right to have there shares redeemed by the Company.
In order to avoid a possible redemption, the Company requested that a majority
of the holders of the Series A Shares waive their rights to a possible
redemption. In exchange for such waiver, the Company agreed to submit a proposal
to its shareholders to amend the Certificate of Designation to reduce the Series
A Conversion Price from $1.50 per share to $1.25 per share.
If this proposal is approved by the stockholders, it will become effective on
the date the certificate of amendment is filed with the Delaware Secretary of
State.
Required Vote
Approval of the amendment to the Company's Certificate of Designation will
require the affirmative vote of the holders of a majority of the issued and
outstanding shares of stock entitled to vote on the proposal at the Annual
Meeting.
The Board of Directors recommends a vote FOR the amendment to the Certificate of
Designation decreasing the conversion price of the Series A Preferred Stock.
PROPOSAL 4
TO APPROVE THE COMPANY'S 2006 STOCK OPTION PLAN
The Board of Directors believe that the availability of stock incentives is an
important factor in the Company's ability to not only attract and maintain
officers, directors, employees, investment executives and consultants, but also
to give them an added incentive to exert their best efforts on behalf of the
Company. The Board of Directors also believe that additional shares are needed
to provide option grants to key persons during the next year. Accordingly, the
Board of Directors adopted the Company's 2006 Stock Option Plan ("2006 Option
Plan"), subject to shareholder approval, and reserved 1,500,000 shares of the
Common Stock for issuance pursuant to the exercise of options granted under such
2006 Option Plan. The 2006 Option Plan will be effective April 1, 2006, subject
to shareholder approval. Once the 2006 Option Plan becomes effective, no further
options will be granted under the Company's 1999, 2000 and 2001 Option Plans.
Description of the 2006 Option Plan
The 2006 Option Plan will provide for the grant of either incentive stock
options under Section 422 of the Internal Revenue Code or nonstatutory options.
The committee which will administer the 2006 Option Plan (the "Committee") will
consist of not less than two directors. Committee members will be non-employee
directors as defined by applicable SEC rules and outside directors as defined by
Internal Revenue Code regulations. On the day of the Annual Meeting, each
individual who, on such date, is a non-employee director shall receive an option
for 10,000 shares of Common Stock. With respect to grants of options to
non-employee directors, the Board of Directors will administer and interpret the
2006 Option Plan, prescribe, amend and rescind any rules or regulations
necessary or appropriate for the administration of the 2006 Option Plan and make
any such other determinations and take such other actions it deems necessary or
advisable. Subject to any limitations imposed by the Board of Directors of the
Company and the terms of the 2006 Option Plan, the Committee periodically will
determine which people associated with the Company or its subsidiaries will
receive options under the 2006 Option Plan, the type of option, the number of
shares covered by the option, the per share purchase price and the terms of the
option, which may include limited transferability of non-statutory options to
certain family members and certain entities controlled by them. Options shall
not otherwise be transferable other than by will or the laws of descent and
distribution.
16
The proposed 2006 Option Plan provides that payment in full for shares purchased
under an option shall be made in cash (including check) at the time the option
is exercised or, with the consent of the Committee, (i) by tendering shares of
Common Stock owned at least six months and valued at the fair market value of
such shares on the date the option is exercised, or (ii) by requesting the
Company to withhold from issuance that number of shares having a fair market
value of such shares on the date of exercise equal to the exercise price.
The number of shares with respect to which options may be granted under the 2006
Option Plan will be one million five hundred thousand (1,500,000) shares,
subject to the limitation that the total number of shares with respect to which
incentive stock options may be granted shall not exceed One Million Five Hundred
Thousand (1,500,000), and such limitations shall be subject to adjustment in
certain events. Any shares covered by options which, for any reason, expire or
are terminated may be re-optioned under the 2006 Option Plan.
The 2006 Option Plan provides that the option price of incentive stock options
shall be not less than 100% of the fair market value of the stock at the time of
grant and will be an amount not less than 110% of the fair market value of the
stock at the time of grant for options granted to an employee owning 10% or more
of the Common Stock. Nonstatutory options shall be granted at a price determined
by the Committee. The maximum term of any option under the 2006 Option Plan is
ten years from date of grant (five (5) years for employees owning 10% or more of
the Common Stock), and the 2006 Option Plan contains provisions with respect to
earlier termination of options upon termination of employment.
In the case of specified executive officers of the Company, the number of option
shares granted in a fiscal year to any such officer shall not exceed 250,000
shares. In the case of incentive stock options, the aggregate fair market value
(determined at the time the option is granted) of the stock with respect to
which incentive stock options are exercisable for the first time by any optionee
during any calendar year shall not exceed $100,000.
Members of the Committee are appointed by the Company's Board of Directors and
serve at the pleasure of the Board. The Board may at any time amend or
discontinue the 2006 Option Plan, provided that no Board action may increase the
number of shares available for option (except to adjust for stock splits, etc.),
reduce the option price for incentive stock options below 100% of fair market
value at date of grant, or change the requirements for eligibility to
participate in the 2006 Option Plan without shareholder approval. No options may
be granted under the 2006 Option Plan after December 31, 2015.
If shareholders approve the proposed 2006 Option Plan, the Company expects to
register one million five hundred thousand (1,500,000) shares issuable upon
exercise of option grants under the 2006 Option Plan under the Securities Act of
1933.
Federal Income Tax Consequences
The Company believes that under current law the following Federal income tax
consequences generally would arise with respect to awards under the 2006 Option
Plan.
Options that are not deemed to be deferral arrangements under Section 409A of
the Internal Revenue Code (the "Code") would have the following tax
consequences: The grant of an option will create no federal income tax
consequences for the participant or the Company. A participant will not have
taxable income upon exercising an option which is an incentive stock option,
except that the alternative minimum tax may apply. Upon exercising a
nonstatutory option, the participant generally must recognize ordinary income
equal to the difference between the exercise price and the fair market value of
the freely transferable and nonforfeitable shares acquired on the date of
exercise.
Upon a disposition of shares acquired upon exercise of an incentive stock option
before the end of the applicable incentive stock option holding periods (two
years from the date of grant and one year from the date of exercise of the
incentive stock option), the participant must generally recognize ordinary
income equal to the lesser of (i) the fair market value of the incentive stock
option shares at the date of exercise minus the exercise price or (ii) the
amount realized upon the disposition of the incentive stock option shares minus
the exercise price. Otherwise, a participant's sale of shares acquired by
exercise of an option generally will result in short-term or long-term capital
gain or loss measured by the difference between the sale price and the
participant's tax "basis" in such shares. The tax "basis" normally is the
exercise price plus any amount recognized as ordinary income in connection with
the option's exercise.
17
The Company normally can claim a tax deduction equal to the amount recognized as
ordinary income by a participant in connection with an option, but no tax
deduction relating to a participant's capital gains. Accordingly, the Company
will not be entitled to any tax deduction with respect to an incentive stock
option if the participant holds the shares for the applicable incentive stock
option holding periods before selling the shares.
Some options may be subject to Section 409A of the Code, which regulates
deferral arrangements. In such case, the distribution to the participant of
shares or cash relating to the award would have to meet certain restrictions in
order for the participant not to be subject to tax and a tax penalty at the time
of vesting. One significant restriction would be a requirement that the
distribution not be controlled by the participant's discretionary exercise of
the option (subject to limited exceptions). If the distribution and other award
terms meet applicable requirements under Section 409A of the Code, the
participant would realize ordinary income at the time of distribution rather
than earlier, with the amount of ordinary income equal to the distribution date
value of the shares less any exercise price actually paid.
The foregoing provides only a general description of the application of federal
income tax laws to certain awards under the 2006 Option Plan. This discussion is
intended for the information of stockholders considering how to vote at the
Annual Meeting and not as tax guidance to participants in the 2006 Option Plan,
as the consequences may vary with the types of awards made, the identity of the
recipients and the method of payment or settlement. Different tax rules may
apply, including in the case of variations in transactions that are permitted
under the 2006 Option Plan (such as payment of the exercise price of an option
by surrender of previously acquired shares). The summary does not address the
effects of other federal taxes or taxes imposed under state, local or foreign
tax laws.
Required Vote
Approval of the 2006 Option Plan will require the affirmative vote of the
holders of a majority of the shares of Common Stock present, or represented, and
entitled to vote on the proposal at the Annual Meeting.
The Board of Directors considers the 2006 Option Plan to be in the best
interests of the Company and its stockholders and therefore recommends a vote
FOR the approval of the 2006 Option Plan.
PROPOSAL 5
RATIFICATION OF APPOINTMENT OF INDEPENDENT PUBLIC ACCOUNTANTS
The Board of Directors, acting on the recommendation of the Audit Committee, has
appointed Marcum & Kliegman LLP, as the independent public accountants for the
Company for the fiscal year ending September 30, 2006. The Board of Directors
requests that the shareholders ratify the appointment. If the shareholders do
not ratify the appointment, the Board of Directors will consider the selection
of another public accounting firm for fiscal year 2006 and future years. One or
more representatives of Marcum & Kliegman LLP may attend the Annual Meeting and,
if so, will have an opportunity to make a statement if they so desire, and would
be available to answer questions.
Audit Fees. Fees for services performed by Marcum & Kliegman LLP during fiscal
years 2005 and 2004 relating to the audit of the consolidated annual financial
statements and preparation of Federal and state income tax returns were
approximately $219,000 and $173,000, respectively.
Audit-Related Fees. "Audit-related fees" include fees billed for assurance and
related services that are reasonably related to the performance of the audit and
not included in the "audit fees" mentioned above. There were no such fees paid
in fiscal years 2005 or 2004.
Tax Fees. The fees billed in fiscal years 2005 and 2004 for tax compliance, tax
advice or tax planning are included in Audit Fees above.
All Other Fees. There were no fees for other audit related services in fiscal
years 2005 and 2004.
Pre-Approval Policies
18
Pursuant to the rules and regulations of the SEC, before the Company's
independent accountant is engaged to render audit or non-audit services, the
engagement must be approved by the Company's audit committee or entered into
pursuant to the committee's pre-approval policies and procedures. The policy
granting pre-approval to certain specific audit and audit-related services and
specifying the procedures for pre-approving other services is set forth in the
Amended and Restated Charter of the Audit Committee.
Required Vote
The affirmative vote of the holders of a majority of the shares present, or
represented, and entitled to vote at the Annual Meeting is needed to ratify the
appointment of Marcum & Kliegman LLP as the Company's independent auditors.
The Board of Directors recommends a vote FOR the ratification of the appointment
of Marcum & Kliegman LLP as independent public accountants for the Company in
fiscal year 2006.
OTHER BUSINESS
Management knows of no business to be brought before the Annual Meeting of
Shareholders other than that set forth herein. However, if any other matters
properly come before the meeting, it is the intention of the persons named in
the proxy to vote such proxy in accordance with their judgment on such matters.
Even if you plan to attend the meeting in person, please execute, date and
return the enclosed proxy promptly. Should you attend the meeting, you may
revoke the proxy by voting in person. A postage-paid, return-addressed envelope
in enclosed for your convenience. Your cooperation in giving this your prompt
attention will be appreciated.
By Order of the Board of Directors
/s/ Robert H. Daskal
--------------------
Robert H. Daskal
Acting Secretary
19
EXHIBIT A
Olympic Cascade Financial Corporation
2006 Stock Option Plan
1. Purpose of the Plan. Under this 2006 Stock Option Plan of Olympic
Cascade Financial Corporation, eligible employees, key independent contractors
and advisors and non-employee members of the Board of Directors may be granted
the opportunity to purchase shares of the Company's common stock under specified
terms and conditions. The Plan is designed to enable the Employers to attract,
retain and motivate employees, advisors, key independent contractors and
non-employee members of the Board of Directors by providing for or increasing
their proprietary interests in the Company. The Plan provides for options which
qualify as incentive stock options under section 422 of the Internal Revenue
Code of 1986, as amended ("Incentive Options"), as well as options which do not
so qualify ("Non-statutory Options"). Any Option granted under Plan will be
clearly identified as either an Incentive Option or a Non-statutory Option, and
independent contractors, advisors and non-employee directors will only be
eligible to receive Non-statutory Options.
2. Definitions. The following terms, when appearing in the text of this
Plan in capitalized form, will have the meanings set out below.
(a) "Board" will mean the Board of Directors of the Company.
(b) "Cause" will mean, in connection with the termination of an Optionee's
employment with an Employer (or the severance of an independent contractor's
service or a non-employee member of the Board of Directors' relationship with an
Employer), termination because of: (i) conviction of a felony; (ii) gross
negligence or willful misconduct in the performance of the Optionee's duties;
(iii) deliberate material injury to any Employer, including but not limited to
the property, reputation or goodwill of such Employer, by or permitted by the
Optionee; (iii) other willful misconduct by Optionee, including but not limited
to sexual misconduct, (iv) breach of the Optionee's written employment or
independent contractor agreement; (v) any act or acts of moral turpitude by
Optionee which negatively affects the interest, property, operations, business
or reputation of any Employer; (vi) Optionee's violation of a federal, state or
local law or regulation or any of the ethical standards applicable to any
Employer's business which negatively affects the interest, property, operations,
business or reputation of any Employer; (vii) a material breach by Optionee of
any of an Employer's written policies; or (viii) breach of an Employer's
internal financial controls (as defined below). By way of amplification, and not
by way of limitation, "Cause" includes unlawful possession, use or sale of
illegal narcotics or other controlled substances, being under the influence of
illegal narcotics or other controlled substances while performing job duties or
operating a vehicle in the course of employment. "Breach of an Employer's
internal financial controls" means: (A) actions prohibited by a written conflict
of interest or business ethics policy of an Employer made known to the Optionee;
(B) engaging or acquiescing in any transaction or transactions which taken
together are material and which are not promptly and accurately recorded on the
books and records of the appropriate Employer; or (C) engaging in any
transaction in the cash or other assets of an Employer for the Optionee's own
benefit which is not de minimis and which is not approved or ratified by the
Board, either by specific resolution or the adoption of a general policy. If an
Employer could have terminated an employee's employment (or severed an
independent contractor's service relationship) for Cause, but lacked actual
knowledge of any act or omission described above at the time of termination, the
termination will nevertheless be deemed for Cause upon the later discovery of
such act or omission. Whether a termination is for "Cause" shall be determined,
in its sole discretion, by the Company. A determination that a termination is
for Cause, as defined above, will be effective only for the purpose of the Plan
and will not be determinative with respect to any other contract or arrangement
between an Employer and the Optionee, unless the Company makes a specific
determination to the contrary. The Committee may vary this definition, at its
discretion, in the case of any individual Option Agreement. Notwithstanding the
foregoing provisions of this subsection (b), in the case of an Optionee who has
entered into a written employment or independent contractor agreement with an
Employer, if such agreement contains a specific definition of "Cause", the term
"Cause" as used herein shall have the meaning ascribed to it in such employment
agreement.
(c) "Code" will mean the Internal Revenue Code of 1986, as the same may
from time to time be amended. References to sections of the Code will include
the corresponding provisions of any subsequent and applicable federal tax law.
20
(d) "Committee" will mean the committee appointed by the Board pursuant to
Section 14, which will have the duty and power to administer this Plan,
including, but not limited to the duties and powers of designating Optionees,
granting Options and fixing the terms of Option Agreements in a manner
consistent with this Plan.
(e) "Company" will mean Olympic Cascade Financial Corporation, a Delaware
corporation and, in the appropriate circumstances, any successor in interest.
(f) "Disabled Optionee" will mean an Optionee who is disabled within the
meaning of section 422(c)(6) of the Code. The Committee may vary this
definition, at its discretion, in the case of any individual Option Agreement,
to the extent that such Option Agreement applies to Non-statutory Options or to
key independent contractors. The determination of the Committee as to whether an
Optionee is a Disabled Optionee shall be final and binding on all persons.
(g) "Effective Date" will mean April 1, 2006, subject to shareholder
approval of the Plan.
(g) "Employer" will mean the Company and any "subsidiary corporation" of
the Company, as that term is defined by section 424(f) of the Code, as may now
or hereafter exist. For the purposes of this Plan, cessation of the employment
(or independent contractor) relationship with one Employer, followed by
continued or new employment (or an independent contractor relationship, in the
case of an individual who was originally an independent contractor) with another
Employer, will not be deemed to be a termination of employment (or the
independent contractor relationship).
(i) "Executive Officer" means those individuals who, on the last day of
the taxable year at issue (i) served as the Company's chief executive officer or
was acting in a similar capacity, regardless of compensation level; and (ii) the
four most highly compensated executive officers (other than the chief executive
officer) all as determined pursuant to Treasury Regulation ss.1.162-27(c)(2).
(j) "Fair Market Value" will mean, with respect to the Stock, the price
determined in good faith by the Committee in accordance with a valuation method
which is consistent with the guidelines set forth in Treasury Regulation
ss.1.422-2(e) and any applicable regulations of the Secretary of the Treasury.
The determination of the Committee will be final and binding on all Optionees.
(k) "Option" will mean the grant to an eligible employee, independent
contractor, advisor or non-employee member of the Board of Directors of the
opportunity to purchase a specified number of shares of Stock pursuant to the
terms and conditions of this Plan and an Option Agreement.
(l) "Option Agreement" will mean an agreement entered into between a
representative of the Committee (acting on the behalf of the Company) and an
individual Optionee and specifying the terms and conditions of the Option
granted to the Optionee, which terms and conditions will recite or incorporate
by reference: (i) the provisions of this Plan which are not subject to
variation; and (ii) the variable terms and conditions of the Option which will
apply to that Optionee.
(m) "Optionee" will mean an eligible employee, independent contractor or
non-employee member of the Board of Directors (and, under the appropriate
circumstances, the Optionee's guardian: representative, agent, heir, legatee or
successor in interest) who has been granted an Option.
(n) "Plan" will mean this 2006 Stock Option Plan, as set out in this
document and as the same may from time to time be amended.
(o) "Preexisting Plans" means each of the following Company plans: the
1999 Stock Option Plan, the 2000 Stock Option Plan, and the 2001 Stock Option
Plan.
(p) "Stock" will mean the common stock of the Company.
(q) "Ten Percent Employee" will mean an employee who, immediately prior to
the grant of an Option, owns stock possessing more than ten percent (10%) of the
total combined voting power of all classes of stock (excluding treasury and
authorized, but unissued shares) of any Employer. An employee will be: (i)
considered as owning not only shares of stock owned personally, but also all
shares that are at the time owned, directly or indirectly, by or for the spouse,
ancestors, lineal descendants and brothers and sisters (whether by the whole or
haft blood) of the employee; and (ii) considered as owning proportionately any
shares owned, directly or indirectly by or for any corporation, partnership,
estate or trust in which such individual is a shareholder, partner or
beneficiary. Stock which may be purchased pursuant to the Option will not be
deemed to be owned by the employee.
21
3. Stock Subject to Plan.
(a) The aggregate number of shares of Stock which may be issued under
Options is One Million Five Hundred Thousand (1,500,000); provided, however,
that the total number of shares with respect to which Incentive Options may be
granted shall not exceed One Million Five Hundred Thousand (1,500,000), and such
limitations shall be subject to the adjustments hereinafter provided. Such
number of shares shall be reserved by the Company for options granted under this
Plan. The shares which may be issued or delivered under the Plan may be either
authorized but unissued shares or treasury shares or partly each. Shares of
Stock subject to the unexercised portions of any Options which expire, terminate
or are canceled may again be subject to Options under the Plan. If there is a
merger, consolidation, stock dividend, split-up, combination or exchange of
shares, recapitalization or change in capitalization with respect to the Stock,
the total number of shares provided for in this Section 3 will be adjusted by
the Committee, as it, in its sole discretion, may deem fair, just and equitable,
to accurately reflect that event.
(b) As of the Effective Date, no further options shall be granted under
the Preexisting Plans.
4. Eligibility and Grant.
(a) The class of individuals eligible to be considered for the grant of
Options hereunder will consist of key independent contractors and advisors (as
identified by the Committee), members of the Board of Directors who are not
employees of the Company, and individuals regularly employed by the Employer.
(b) The Committee referred to in Section 14 will designate, from among the
eligible independent contractors, advisors, and employees, those who will be
granted Options and will specify: (i) the number of shares of Stock each such
individual will be entitled to purchase pursuant to the Option; and (ii) the
nature of each Option as an Incentive Option, a Non-statutory Option or partly
each type of Option. Only Non-statutory Options will be granted to independent
contractors or other individuals who are not employees of the Company. The
Committee may make such grants at any time and in any amounts that it, in its
discretion, may designate, subject to the other relevant limitations set out in
this Plan.
(c) The number of Option shares granted in a fiscal year to each Executive
Officer shall not exceed Two Hundred and Fifty Thousand (250,000) shares for the
fiscal year during which he or she becomes an Executive Officer or for any
subsequent fiscal year during which he or she serves as an Executive Officer.
The number of shares set forth in this subsection shall be subject to adjustment
as provided in Section 3.
(d) On the day after the date of the Annual Meeting of the Board of
Directors, each individual who, on such date, is a member of the Board of
Directors and who is not regularly employed by the Company shall receive, an
Option for Ten Thousand (10,000) shares of Stock. Each such Option shall be a
Non-statutory Option, shall be issued with an exercise price equal to 100% of
the Fair Market Value of the Stock on the date of grant, shall be for a term of
five (5) years from the date of grant and shall be 100% vested on the date which
is the sixth (6th) month anniversary of the date of grant (provided that such
individual is still a member of the Board of Directors on such date).
(e) No Options will be granted under this Plan after December 31, 2015.
5. $100,000 Incentive Option Exercise Limitation. The aggregate Fair
Market Value of the Stock with respect to which an Incentive Option (under this
Plan and all incentive stock option plans of the Company, its parent(s) and
subsidiaries) is exercisable for the first time by an Optionee during a calendar
year will not exceed $100,000. For this purpose, Fair Market Value will be
determined as of the time the Incentive Option is granted. To the extent any
grant of Incentive Options would, by its terms, be in conflict with the
preceding sentence, either of itself or when considered in connection with
earlier grants to the same Optionee, the portion of the Option which violates
the $100,000 restriction shall be treated as a Non-statutory Option consistent
with applicable regulations of the Secretary of the Treasury.
22
6. Option Price. The price or consideration that must be supplied by the
Optionee to the Company in order to exercise an Option (the "Option Price") will
be determined according to the following rules.
(a) Non-statutory Option Rule. Except as otherwise provided herein, the
Option Price of each Non-statutory Option will be determined at the date of
grant at the discretion of the Committee.
(b) General Incentive Option Rule. Except as provided to the contrary in
subsection (c) below, the Option Price of each Incentive Option will be
determined as of the date of grant by the Committee as an amount not less than
one hundred percent (100%) of the then Fair Market Value per share of the Stock
covered by the Option.
(c) Ten Percent Employee Rule. In the case of an Incentive Option granted
to a Ten Percent Employee, the Option Price will be determined as of the date of
grant by the Committee as an amount not less than one hundred ten percent (110%)
of the then Fair Market Value per share of the Stock covered by the Option.
7. Exercise of Option. Except as otherwise provided herein, the manner in
which an Optionee may exercise an Option will be determined according to the
following rules.
(a) Full or Partial Exercise. The Option Agreement may provide for partial
exercise in installments. Exercisable Options may be exercisable in full or in
part. Notwithstanding anything contained herein to the contrary, the minimum
number of shares with respect to which an Option may be exercised in part at any
time is one hundred (100) or, if less, all remaining shares with respect to
which the Option is vested.
(b) Period of Exercise. The period of time in which an Option may be
exercised will be the period designated in the Option Agreement by the
Committee. In the case of an Incentive Option, except as specified below, such
period will not exceed ten (10) years from the date the Incentive Option is
granted. With respect to the Incentive Options held by a Ten Percent Employee,
such period of time will not exceed five (5) years from the date the Incentive
Option is granted.
(c) First Date Exercisable. The Committee will specify in the Option
Agreement when an Option will first become exercisable. As a general rule and in
cases where the Committee fails to explicitly designate a schedule of when
Options first became exercisable, an Option may be first exercised as to an
incremental twenty-five percent (25%) of the shares of Stock to which it applies
on the date of grant, with an incremental twenty-five percent (25%) of the
shares of Stock to which it applies on each of the first three (3) anniversaries
of the date of grant following the date of grant, but the Committee may vary or
accelerate this schedule at its discretion.
(d) Change in Control. Unless otherwise determined by the Committee, any
and all Options that have been outstanding under the Plan for at least six (6)
months at the time of occurrence of any of the events (a "Change in Control")
described in subparagraphs (i), (ii) and (iii) below (an "Eligible Option")
shall become immediately vested and fully exercisable for the periods indicated
(each such exercise period referred to as an "Acceleration Window")":
(i) For a period of forty-five (45) days beginning on the day on which any
"Person", as such term is used in sections 13(d) and 14 of the Exchange Act
(other than a shareholder of the Company on the date of this Plan, the Company,
a subsidiary or an employee benefit plan of the Company, including any trustee
of such plan acting as trustee) together with all affiliates and associates of
such Person, becomes, after the date of this Plan, the "beneficial owner" (as
defined in Rule 13d-3 under the Exchange Act), of fifty percent (50%) or more of
the shares of Stock then outstanding;
(ii) Beginning on the date that a tender or exchange offer for Stock by
any Person (other than the Company, any subsidiary of the Company, any employee
benefit plan of the Company or of any subsidiary of the Company, or any Person
organized, appointed or established by the Company for or pursuant to the terms
of any such employee benefit plan) is first published or sent or given within
the meaning of Rule 14d-2 under the Exchange Act, and continuing so long as such
offer remains open (including any extensions or renewals of such offer), unless
by the terms of such offer the offeror, upon consummation thereof, would be the
beneficial owner of less than fifty percent (50%) of the shares of Common Stock
then outstanding; or
23
(iii) For a period of twenty (20) days beginning on the day on which the
shareholders of the Company duly approve any merger, consolidation,
reorganization or other transaction providing for the conversion or exchange of
more than fifty percent (50%) of the outstanding shares of Stock into securities
or any entity, or cash, or property, or a combination of any of the foregoing;
provided, however, that with respect to the event specified in subparagraph (i)
above, such accelerated vesting shall not occur if the event that would
otherwise trigger the accelerated vesting of Eligible Options has received the
prior approval by the affirmative vote of a majority of all of the directors of
the Company, excluding for such purposes the votes of directors who are director
or officers of, or have a material financial interest in any entity (other than
the Company) who is a party of the event specified in subparagraph 1(i) above.
The exercisability of any Eligible Option which remains unexercised
following expiration of an Acceleration Window shall be governed by the vesting
schedule and other terms of this Plan and the Option Agreement.
(e) Deliveries. In order to exercise all or part of an Option, the
Optionee will deliver to the Company:
(i) the Notice of Exercise attached to the Option Agreement; and
(ii) the consideration required by Section 8 below.
8. Payment of Option Price. Payment for Stock purchased under any exercise
of an Option will be made in full in cash or cash equivalents concurrently with
such exercise. Payment may also be made, at the discretion of the Committee
(which discretion may be exercised either at the time of grant or at the time of
exercise), according to one or more of the following alternatives; provided,
however, that if the Committee decides, at the time of grant, to permit payment
in the form of Stock, the Committee may not revoke that permission at a later
time.
(a) Stock. Payment may be made in whole or in part with shares of the same
class of Stock that is subject to the Option, delivered in lieu of cash
concurrently with such exercise. The shares so delivered will be valued on the
basis of the Fair Market Value of the Stock on the date of exercise. However,
this alternative method of payment will not be available if the Company is, at
the time of attempted exercise, prohibited from purchasing or acquiring the
shares of tendered Stock. Notwithstanding the foregoing, the Company shall not
be obligated to accept payment of the exercise price pursuant to this paragraph
unless the Stock tendered as payment for the exercise price has been held by the
Optionee for at least six (6) months.
(b) Immaculate Exercise. Payment may be made in whole or in part by
withholding from Optionee sufficient shares having a Fair Market Value
(determined on the date of exercise) equal to the aggregate exercise price.
(c) Other. Any other method of payment permitted by the Committee,
including payment through a broker in accordance with procedures permitted by
rules or regulations of the Federal Reserve Board. The Company also has the
discretion to refuse any other method of payment that would cause the Plan or
the option agreements issued thereunder to be treated for accounting purposes as
creating stock appreciation rights or other "variable stock plan"
characteristics which would cause the Company to recognize a charge to earnings.
9. Limited Transferability. The Committee shall retain the authority and
discretion to permit a Non-statutory Option, but in no case an Incentive Option,
to be transferable as long as such transfers are made only to one or more of the
following: family members, limited to children of Optionee, spouse of Optionee,
or grandchildren of Optionee, or family members as defined in the instructions
to SEC Form S-8, or trusts in which Optionee and/or such family members
("Permitted Transferee") have more than 50% of the beneficial interests,
provided that such transfer is a bona fide gift and accordingly, the Optionee
receives no value for the transfer, as provided in the instructions to SEC Form
S-8, and that the Options transferred continue to be subject to the same terms
and conditions that were applicable to the Options immediately prior to the
transfer. Options are also subject to transfer by will or the laws of descent
and distribution. Options granted pursuant to this Plan shall not be otherwise
transferred, assigned, pledged, hypothecated or disposed of in any way, whether
by operation of law or otherwise and an Incentive Option shall be exercisable
during the lifetime of the individual to whom such option was granted only by
such individual. A Permitted Transferee may not subsequently transfer an Option.
The designation of a beneficiary shall not constitute a transfer.
24
10. Termination and Acceleration of Option. Except as otherwise provided
herein and subject to the Committee's discretion to vary these rules in any
individual Option Agreement (provided, that, in the case of an Incentive Option,
the time periods specified below may be shortened, but not, other than in the
case of death or Disability, be lengthened), Options will lapse and the exercise
date of Options may be accelerated according to the following rules:
(a) Termination without Cause. If the employment, independent contractor
relationship or, in the case of a non-employee member of the Board of Directors,
service as a member of the Board of Directors, of an Optionee who is not a
Disabled Optionee is terminated without Cause and for reasons other than death,
any Option that is then exercisable under Section 7(c) above will be exercisable
by such an Optionee at any time prior to the earliest of expiration date of such
Option or within thirty (30) days after the date of termination of employment,
independent contractor relationship or service as a member of the Board of
Directors, whichever is applicable. All Options not exercisable or not exercised
under this subsection will lapse.
(b) Disabled Optionee. If employment, independent contractor relationship
or, in the case of a non-employee member of the Board of Directors, service as a
member of the Board of Directors, of an Optionee who is a Disabled Optionee is
terminated without Cause, any Option that is then exercisable under Section 7(c)
above will be exercisable by such an Optionee, or the Optionee's agent or
guardian, at any time prior to the earliest of expiration date of such Option or
within ninety (90) days after the date of such termination of employment,
independent contractor relationship or service as a member of the Board of
Directors, whichever is applicable. All Options not exercisable or not exercised
under this subsection will lapse.
(c) Death of Optionee. If employment, independent contractor relationship
or, in the case of a non-employee member of the Board of Directors, service as a
member of the Board of Directors, of an Optionee terminates on account of death,
any Option that is then exercisable under Section 7(c) above will be exercisable
by the person or persons entitled to do so under the will of the Optionee, or,
if the Optionee fails to make testamentary disposition of the Option, by the
legal representative of the Optionee's estate at any time prior to the
expiration date of such Option or within ninety (90) days after the date of
death, whichever is the shorter period. All Options not exercisable or not
exercised under this subsection will lapse.
(d) Termination for Cause. If an Employer terminates the employment,
independent contractor relationship or, in the case of a non-employee member of
the Board of Directors, service as a member of the Board of Directors, of an
Optionee for Cause, all outstanding Options held by the Optionee at the time of
such termination, regardless whether then exercisable, will automatically lapse
unless the Committee notifies the Optionee that the Options will not terminate.
If an Option is exercised after the act or omission of the Optionee that defines
the termination as a termination for Cause, but before the Employer determines
that termination is for Cause, such exercise will be void ab initio and reversed
by the parties.
11. Cancellation of Unexercised Options. To the extent an Option is not
exercised before the expiration of its term or before the expiration of any
shorter exercise period under Sections 7, 10, or 12 it will be cancelled.
12. Written Option Agreement. All Options will be evidenced by written
Option Agreements which shall set forth the name of the Optionee, the number of
shares of Stock subject to the Option, the exercise price per share of Stock,
whether the Option is an Incentive Option or a Non-statutory Option and the term
over which the Option may be exercised. Option Agreements will comply with and
be subject to all of the terms, conditions and limitations set forth in this
Plan and such further provisions, not inconsistent with this Plan, as the
Committee will deem appropriate.
13. Adjustments. Changes or adjustments in the Option Price, number of
shares subject to an Option or other specifics as the Committee should decide
will be considered or made pursuant to the following rules.
(a) General Rule. If the outstanding Stock of the Company is increased or
decreased, or is changed into or exchanged for a different number or kind of
shares or securities, as a result of one or more reorganizations,
recapitalizations, stock splits, reverse stock splits, stock dividends or the
like, appropriate adjustments will be made in the exercise price or the number
and/or kind of shares or securities for which Options may thereafter be granted
under this Plan and for which Options then outstanding under this Plan may
thereafter be exercised. The Committee will make such adjustments as it may deem
fair, just and equitable to prevent substantial dilution or enlargement of the
rights granted to or available for Optionees. No adjustment provided for in this
Section 13 will require the Company to issue or sell a fraction of a share or
other security. Nothing in this subsection will be construed to require the
Committee to make any specific or formula adjustment.
25
(b) Prohibited Adjustment. If any such adjustment provided for in this
Section 13 requires the approval of shareholders in order to enable the Company
to grant or amend Options, then no such adjustment will be made without the
required shareholder approval. Notwithstanding the foregoing, if the effect of
any such adjustment would be to cause an Incentive Option to fail to continue to
qualify under section 422 of the Code or to cause an event described in section
424(h) of the Code, the Committee may omit such adjustment.
(c) Further Limitations. Nothing in this section will entitle the Optionee
to adjustment of his or her Option in the following circumstances:
(i) the issuance or sale of additional shares of the Company's
common stock, through public offering or otherwise;
(ii) a transaction described in Section 23 below;
(iii) the issuance or authorization of an additional class of stock
of the Company; or
(iv) the conversion of convertible preferred stock or debt of the
Company into common stock.
14. Administration. Except as otherwise specifically reserved to the Board
of Directors, the Plan will be administered by a committee of not less than two
members each of whom is a "non-employee director" as defined in Rule
16b-3(b)(3)(i), promulgated under the Securities Exchange Act of 1934, as
amended ("1934 Act"), and who are also "outside directors" within the meaning of
section 162(m) of the Code. Any vacancy occurring on the Committee may be filled
by appointment by the Board, in accordance with the foregoing rules. The Board
may remove any Committee member at its discretion. An individual Committee
member will not participate in any deliberations or decisions relating to the
grant or administration of Options with respect to which such person is or may
be the Optionee.
The Committee may, in its discretion, interpret the Plan, prescribe, amend
and rescind any rules or regulations necessary or appropriate for the
administration of the Plan, and make such other determinations and take such
other actions it deems necessary or advisable, except as otherwise expressly
reserved for the Board. All decisions, interpretations and other actions of the
Committee shall be final and binding on all Optionees and all persons deriving
their rights from an Optionee. No member of the Board or any Committee shall be
liable for the action taken or failed to be taken in good faith or determination
made pursuant to the Plan.
Notwithstanding anything contained herein to the contrary, only the Board
of Directors may determine the terms and conditions of awards to non-employee
directors (to the extent not set forth in Section 4), including acceleration of
exercise dates and waivers or modifications of restrictions.
15. Conformity with Section 422. It is the intent of the Company that the
Plan and its administration conform strictly to the requirements of section 422
of the Code with regard to Incentive Options. Therefore, notwithstanding any
other provision of this Plan, nothing herein will contravene any requirement set
forth in section 422 of the Code with respect to Incentive Options and if
inconsistent provisions are otherwise found herein, they will be deemed void and
unenforceable or automatically amended to conform, as the case may be.
16. Withholding. If, upon exercise of any Non-statutory Option (or any
Incentive Option which is treated as a Non-statutory Option because it fails to
meet the requirements set forth herein for Incentive Options), the Optionee
fails to tender payment to the Company any required federal income tax
withholding, the Committee shall withhold from the Optionee sufficient shares or
fractional shares having a Fair Market Value equal to any amount which the
Company is required to withhold under the Code.
17. Rights as a Shareholder. An Optionee, or the Optionee's executor,
administrator or legatee if the Optionee is deceased, will have no rights as a
shareholder with respect to any Stock covered by an Option until the date of
issuance of the stock certificate to such person after receipt of the
consideration in full set forth in the Option Agreement. Except as provided in
Section 13 hereof, no adjustments will be made for dividends, whether ordinary
or extraordinary, whether in cash, securities, or other property, or for any
distributions for which the record date is prior to the date on which the Option
is exercised.
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18. Modification, Extension and Renewal. Subject to the conditions of, and
within the limitations prescribed in, Section 15 hereof, the Committee (or the
Board of Directors in the case of Options granted to non-employee directors) may
modify, extend or renew outstanding Options. Notwithstanding the foregoing, no
modification will, without the prior written consent of the Optionee, alter,
impair or waive any rights or obligations associated with any Option earlier
granted under the Plan.
19. Investment Purposes, Etc. Unless the transfer, sale, assignment,
pledge, hypothecation or other disposition of the shares may be accomplished at
the time of exercise pursuant to effective registrations under the Securities
Act of 1933 (the "1933 Act") and any applicable state or foreign securities laws
or pursuant to appropriate exemptions from any such registrations, prior to the
issuance or delivery of any shares of Stock under the Plan, the person
exercising the Option may be required to:
(a) represent and warrant that the shares of the Stock to be acquired upon
exercise of the Option are being acquired for investment for the account of such
person and not with a view to resale or other distribution thereof;
(b) represent and warrant that such person will not, directly or
indirectly, transfer, sell assign, pledge, hypothecate or otherwise dispose of
any such shares; and
(c) execute such further documents as may be reasonably required by the
Committee upon exercise of the Option or any part thereof.
The certificate or certificates representing the shares of Stock to be issued or
delivered upon exercise of an Option may bear a legend evidencing the foregoing
and other legends required by any applicable securities laws.
Furthermore, nothing herein or any Option granted hereunder will require the
Company to issue any Stock upon exercise of any Option if the issuance would, in
the opinion of counsel for the Company, constitute a violation of the 1933 Act,
as amended, the State of Delaware securities laws, or any other applicable rule
or regulation then in effect.
20. Limitation of Effect. This Plan, and any Option granted under this
Plan: will not confer upon any Optionee any right with respect to continued
employment or independent contractor status by any Employer nor shall they
alter, modify, limit or interfere with any right or privilege of the Employers
under any employment or independent contractor agreement heretofore or
hereinafter executed with any Optionee, including the right to terminate any
Optionee's employment or independent contractor status at any time for or
without Cause, to change the Optionee's level of compensation or to change the
Optionee's responsibilities or position.
21. Notice of Disqualifying Dispositions. The Committee will notify each
Optionee that he or she will lose the tax benefits of section 421 of the Code if
he or she disposes of Stock acquired by the exercise of an Incentive Option,
other than by will or the laws of descent and distribution, within two (2) years
after the date of grant or within one (1) year after exercise.
22. Compliance with Other Laws and Regulations. The Plan, the Options
granted hereunder, and the obligation of the Company to sell and deliver Stock
under such Options, will be subject to all applicable federal and state laws,
rules, regulations and to such approvals by any government or regulatory
authority or investigative agency as may be required. The Company will not be
required to issue or deliver any certificates for shares of Stock prior to (a)
the listing of any such Stock to be acquired pursuant to the exercise of any
Option on any stock exchange on which the Stock may then be listed, and (b) the
compliance with any registration requirements or qualification of such shares
under any federal, state or foreign securities laws, or obtaining any ruling or
waiver from any government body which the Company will, in its sole discretion,
determine to be necessary or advisable, or which, in the opinion of counsel to
the Company, is otherwise required. With respect to persons subject to section
16 of the 1934 Act, transactions under this Plan are intended to comply with all
applicable conditions of Rule 16b-3 or its successors under the 1934 Act. To the
extent any provision of the Plan or action by the Committee fails to so comply,
it will be deemed null and void, to the extent permitted by law and deemed
advisable by the Committee.
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23. Corporate Reorganizations. Upon the dissolution or liquidation of the
Company, the Plan will terminate and all Options will lapse. The result
described above will not occur if provision is made in writing in connection
with such transaction for the continuance of the Plan and/or for the assumption
of Options earlier granted, or the substitution for such Options of options
covering the stock of a successor corporation, or a parent or a subsidiary
thereof, with appropriate adjustments as to the number and kind of shares and
prices, in which event the Plan and Options theretofore granted will continue in
the manner and under the terms so provided. If Options hereunder shall terminate
pursuant to the foregoing provisions of this section, the Committee, in its sole
discretion, may grant to each affected Optionee the right, at such time prior to
the consummation of the transaction causing such termination as the Committee
shall designate, to exercise the unexercised portions (including any unvested
portions) of this Option.
24. Amendment and Termination. The Board may alter, amend, suspend or
terminate this Plan, provided that no such action will deprive an Optionee,
without his or her consent, of any Option granted to such person or of any of
his or her rights under such Option, other than as specifically permitted by
this Plan (as in effect on the Effective Date) or the relevant Option Agreement.
Except as herein provided, no such action of the Board, unless approved by the
shareholders of the Company within twelve months prior or twelve months after
such action, may: (a) Increase the maximum number of shares for which Options
granted under the Plan may be exercised; (b) reduce the minimum permissible
Option Price; (c) extend the ten-year duration of this Plan set forth herein; or
(d) alter the class of employees or independent contractors eligible to receive
Options.
25. Golden Parachute Limitation. If any benefit to an Optionee hereunder
may be considered, by itself or in the aggregate with any other benefit received
or owed to the Optionee, an "excess parachute payment," as that term is defined
by section 280G of the Code, the Committee, at its discretion may vary the terms
of the Option Agreement prospectively or retroactively with the intent of
preserving the rights and obligations of the parties to the Option Agreement
while avoiding treatment of the benefit as an excess parachute payment.
26. Severability. If any provision of this Plan is held illegal or invalid
for any reason, such illegality or invalidity will not affect the remaining
provisions. Instead, each provision is fully severable and this Plan will be
construed and enforced as if any illegal or invalid provision had never been
included.
27. Governing Law. All questions arising with respect to the provisions of
the Plan will be determined by application of the Code and the laws of the State
of Delaware except to the extent that Delaware laws are preempted by any federal
law.
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PROXY CARD
OLYMPIC CASCADE FINANCIAL CORPORATION
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS OF
OLYMPIC CASCADE FINANCIAL CORPORATION
The undersigned shareholder of Olympic Cascade Financial Corporation, a Delaware
corporation (the "Company"), hereby constitutes and appoints Mark Goldwasser and
Robert H. Daskal, and each of them, attorneys and proxies of the undersigned,
with full power of substitution, to attend, vote and act for and in the name,
place and stead of the undersigned at the Annual Meeting of Shareholders of the
Company, to be held on _______, 2006 at 12:00 P.M. at 120 Broadway, 27th Floor,
New York, New York 10271, and at any adjournments thereof, with respect to the
following:
Proposals:
1. Election of Directors:
__ FOR the nominees listed below (except as marked to the contrary below)
__ WITHHOLD AUTHORITY to vote for the nominees listed below
INSTRUCTION: To withhold authority to vote for an individual nominee, strike a
line through the nominee's name listed below.
Marshall S. Geller Robert J. Rosan Norman J. Kurlan
2. To approve and adopt an amendment to the Company's Certificate of
Incorporation to change the name of the Company from Olympic Cascade Financial
Corporation to National Holdings Corporation.
__ For __ Against __ Abstain
3. To approve and adopt an amendment to the Company's Certificate of Designation
to decrease the conversion price of the Company's Series A Preferred Stock to
$1.25 per share from $1.50 per share.
__ For __ Against __ Abstain
4. To approve the Company's 2006 Stock Option Plan.
__ For __ Against __ Abstain
5. To ratify the appointment of Marcum & Kliegman LLP as independent public
accountants of the Company for the fiscal year ending September 30, 2006.
__ For __ Against __ Abstain
This proxy will be voted as directed, but if no direction is indicated, it will
be voted FOR the election of the nominees named in proposal 1 and FOR proposals
2, 3, 4 and 5 as described herein.
The Board of Directors recommends voting in favor of each of the five (5)
proposals.
Signature __________________________
Date _______________________________
Signature __________________________
(if held jointly)
Note: Please sign exactly as your name appears hereon. If signing as attorney,
executor, administrator, trustee, guardian or the like, please give your full
title as such. If signing for a corporation, please give your title.
PLEASE DATE, SIGN AND MAIL AT ONCE IN THE ENCLOSED POSTAGE PAID ENVELOPE.
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