-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, Dduvkye5j7+3MSd53G5LBsMrTdX1xQ3g4dwO3HNBfS7ZVfZ1xeQol117/Wh4VQ6i /hdKfbTiCvSgxUcLFUyFrA== 0001144204-06-002324.txt : 20060123 0001144204-06-002324.hdr.sgml : 20060123 20060123165656 ACCESSION NUMBER: 0001144204-06-002324 CONFORMED SUBMISSION TYPE: SC 13D PUBLIC DOCUMENT COUNT: 4 FILED AS OF DATE: 20060123 DATE AS OF CHANGE: 20060123 GROUP MEMBERS: MARSHALL S. GELLER GROUP MEMBERS: SCGP, LLC GROUP MEMBERS: ST. CLOUD CAPITAL, LLC SUBJECT COMPANY: COMPANY DATA: COMPANY CONFORMED NAME: OLYMPIC CASCADE FINANCIAL CORP CENTRAL INDEX KEY: 0001023844 STANDARD INDUSTRIAL CLASSIFICATION: SECURITY & COMMODITY BROKERS, DEALERS, EXCHANGES & SERVICES [6200] IRS NUMBER: 364128138 STATE OF INCORPORATION: DE FISCAL YEAR END: 0926 FILING VALUES: FORM TYPE: SC 13D SEC ACT: 1934 Act SEC FILE NUMBER: 005-51125 FILM NUMBER: 06544082 BUSINESS ADDRESS: STREET 1: 1001 FOURTH AVENUE STREET 2: STE 2200 CITY: SEATTLE STATE: WA ZIP: 98154 BUSINESS PHONE: 3127518833 MAIL ADDRESS: STREET 1: 1001 FOURTH AVENUE STREET 2: STE 2200 CITY: SEATTLE STATE: WA ZIP: 98154 FILED BY: COMPANY DATA: COMPANY CONFORMED NAME: ST CLOUD CAPITAL PARTNERS LP CENTRAL INDEX KEY: 0001164263 IRS NUMBER: 954883837 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: SC 13D BUSINESS ADDRESS: STREET 1: 433 NORTH CAMDEN DRIVE STREET 2: FIFTH FLOOR CITY: BEVERLY HILLS STATE: CA ZIP: 90210 BUSINESS PHONE: 3105530177 MAIL ADDRESS: STREET 1: 433 NORTH CAMDEN DRIVE STREET 2: FIFTH FLOOR CITY: BEVERLY HILLS STATE: CA ZIP: 90210 SC 13D 1 v033726_sc13d.txt UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 SCHEDULE 13D Under the Securities Exchange Act of 1934 (Amendment No. )* OLYMPIC CASCADE FINANCIAL CORPORATION (Name of Issuer) Common Stock (Title of Class of Securities) 68158N106 (CUSIP Number) Marshall S. Geller St. Cloud Capital Partners, L.P. 10866 Wilshire Boulevard, Suite 1450 Los Angeles, California 90024 (310) 475-2700 (Name, Address and Telephone Number of Person Authorized to Receive Notices and Communications) January 11, 2006 (Date of Event which Requires Filing of this Statement) If the filing person has previously filed a statement on Schedule 13G to report the acquisition that is the subject of this Schedule 13D, and is filing this schedule because of Rule 13d-1(e), 13d-1(f) or 13d-1(g), check the following box [ ]. NOTE: Schedules filed in paper format shall include a signed original and five copies of the schedule, including all exhibits. See Rule 13d-7 for other parties to whom copies are to be sent. *The remainder of this cover page shall be filled out for a reporting person's initial filing on this form with respect to the subject class of securities, and for any subsequent amendment containing information which would alter disclosures provided in a prior cover page. The information required on the remainder of this cover page shall not be deemed to be "filed" for the purpose of Section 18 of the Securities Exchange Act of 1934 ("Act") or otherwise subject to the liabilities of that section of the Act but shall be subject to all other provisions of the Act (however, see the Notes). SCHEDULE 13D (Amendment No. ) CUSIP NO. 68158N106 - -------------------------------------------------------------------------------- 1 NAME OF REPORTING PERSON S.S. OR I.R.S. IDENTIFICATION NO. OF ABOVE PERSON St. Cloud Capital Partners, L.P. - -------------------------------------------------------------------------------- 2 CHECK THE APPROPRIATE BOX IF MEMBER OF A GROUP (a) (b) X - -------------------------------------------------------------------------------- 3 SEC USE ONLY - -------------------------------------------------------------------------------- 4 SOURCE OF FUNDS WC, OO - -------------------------------------------------------------------------------- 5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURUANT TO ITEMS 2(d) or 2(e) - -------------------------------------------------------------------------------- 6 CITIZENSHIP OR PLACE OF ORGANIZATION Delaware - -------------------------------------------------------------------------------- 7 SOLE VOTING POWER NUMBER OF SHARES 2,238,333* BENEFICIALLY ----------------------------------------------------- OWNED BY 8 SHARED V*OTING POWER EACH REPORTING 2,238,333* PERSON ----------------------------------------------------- WITH 9 SOLE DISPOSITIVE POWER 2,238,333* ----------------------------------------------------- 10 SHARED DISPOSITIVE POWER 2,238,333* - -------------------------------------------------------------------------------- 11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON 2,238,333* - -------------------------------------------------------------------------------- 12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES - -------------------------------------------------------------------------------- 13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11) 30.65%** - -------------------------------------------------------------------------------- 14 TYPE OF REPORTING PERSON IV, PN - -------------------------------------------------------------------------------- * See response to Item 5(a) and Item 5(b). ** Based on 5,064,878 shares of the Company's Common Stock outstanding as of January 12, 2006, as reported by the Company. SCHEDULE 13D (Amendment No. ) CUSIP NO. 68158N106 - -------------------------------------------------------------------------------- 1 NAME OF REPORTING PERSON S.S. OR I.R.S. IDENTIFICATION NO. OF ABOVE PERSON SCGP, LLC - -------------------------------------------------------------------------------- 2 CHECK THE APPROPRIATE BOX IF MEMBER OF A GROUP (a) (b) X - -------------------------------------------------------------------------------- 3 SEC USE ONLY - -------------------------------------------------------------------------------- 4 SOURCE OF FUNDS AF - -------------------------------------------------------------------------------- 5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURUANT TO ITEMS 2(d) or 2(e) X - -------------------------------------------------------------------------------- 6 CITIZENSHIP OR PLACE OF ORGANIZATION Delaware - -------------------------------------------------------------------------------- 7 SOLE VOTING POWER NUMBER OF SHARES 0* BENEFICIALLY ----------------------------------------------------- OWNED BY 8 SHARED VOTING POWER EACH REPORTING 2,238,333* PERSON ----------------------------------------------------- WITH 9 SOLE DISPOSITIVE POWER 0* ----------------------------------------------------- 10 SHARED DISPOSITIVE POWER 2,238,333* - -------------------------------------------------------------------------------- 11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON 2,238,333* - -------------------------------------------------------------------------------- 12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES - -------------------------------------------------------------------------------- 13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11) 30.65%** - -------------------------------------------------------------------------------- 14 TYPE OF REPORTING PERSON OO - -------------------------------------------------------------------------------- * See response to Item 5(a) and Item 5(b). ** Based on 5,064,878 shares of the Company's Common Stock outstanding as of January 12, 2006, as reported by the Company. SCHEDULE 13D (Amendment No. ) CUSIP NO. 68158N106 - -------------------------------------------------------------------------------- 1 NAME OF REPORTING PERSON S.S. OR I.R.S. IDENTIFICATION NO. OF ABOVE PERSON St. Cloud Capital, LLC - -------------------------------------------------------------------------------- 2 CHECK THE APPROPRIATE BOX IF MEMBER OF A GROUP (a) (b) X - -------------------------------------------------------------------------------- 3 SEC USE ONLY - -------------------------------------------------------------------------------- 4 SOURCE OF FUNDS AF - -------------------------------------------------------------------------------- 5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURUANT TO ITEMS 2(d) or 2(e) - -------------------------------------------------------------------------------- 6 CITIZENSHIP OR PLACE OF ORGANIZATION California - -------------------------------------------------------------------------------- 7 SOLE VOTING POWER NUMBER OF SHARES 0* BENEFICIALLY ------------------------------------------------------- OWNED BY 8 SHARED VOTING POWER EACH REPORTING 2,238,333* PERSON ------------------------------------------------------- WITH 9 SOLE DISPOSITIVE POWER 0* ------------------------------------------------------- 10 SHARED DISPOSITIVE POWER 2,238,333* - -------------------------------------------------------------------------------- 11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON 2,238,333* - -------------------------------------------------------------------------------- 12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES - -------------------------------------------------------------------------------- 13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11) 30.65%** - -------------------------------------------------------------------------------- 14 TYPE OF REPORTING PERSON OO - -------------------------------------------------------------------------------- * See response to Item 5(a) and Item 5(b). ** Based on 5,064,878 shares of the Company's Common Stock outstanding as of January 12, 2006, as reported by the Company. SCHEDULE 13D (Amendment No. ) CUSIP NO. 68158N106 - -------------------------------------------------------------------------------- 1 NAME OF REPORTING PERSON S.S. OR I.R.S. IDENTIFICATION NO. OF ABOVE PERSON Marshall S. Geller - -------------------------------------------------------------------------------- 2 CHECK THE APPROPRIATE BOX IF MEMBER OF A GROUP (a) (b) X - -------------------------------------------------------------------------------- 3 SEC USE ONLY - -------------------------------------------------------------------------------- 4 SOURCE OF FUNDS AF - -------------------------------------------------------------------------------- 5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURUANT TO ITEMS 2(d) or 2(e) X - -------------------------------------------------------------------------------- 6 CITIZENSHIP OR PLACE OF ORGANIZATION USA - -------------------------------------------------------------------------------- 7 SOLE VOTING POWER NUMBER OF SHARES 0* BENEFICIALLY ------------------------------------------------------- OWNED BY 8 SHARED VOTING POWER EACH REPORTING 2,238,333* PERSON ------------------------------------------------------- WITH 9 SOLE DISPOSITIVE POWER 0* ------------------------------------------------------- 10 SHARED DISPOSITIVE POWER 2,238,333* - -------------------------------------------------------------------------------- 11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON 2,238,333* - -------------------------------------------------------------------------------- 12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES - -------------------------------------------------------------------------------- 13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11) 30.65%** - -------------------------------------------------------------------------------- 14 TYPE OF REPORTING PERSON IN - -------------------------------------------------------------------------------- * See response to Item 5(a) and Item 5(b). ** Based on 5,064,878 shares of the Company's Common Stock outstanding as of January 12, 2006, as reported by the Company. SCHEDULE 13D (Amendment No. ) Item 1. Security and Issuer. This statement relates to the common stock, par value $.02 per share (the "Common Stock"), of Olympic Cascade Financial Corporation, a Delaware corporation (the "Company" or the "Issuer"). The Company's principal executive offices are located at 875 N. Michigan Avenue, Suite 1560, Chicago, Illinois 60611. Item 2. Identity and Background (a) This statement is being filed by the following persons: St. Cloud Capital Partners, L.P., a Delaware limited partnership ("St. Cloud Partners"), SCGP, LLC, a Delaware limited liability company ("SCGP"), St. Cloud Capital, LLC, a California limited liability company ("St. Cloud Capital") and Marshall S. Geller, an individual ("Mr. Geller" and collectively with St. Cloud Partners, SCGP and St. Cloud Capital, the "Reporting Persons"). (b) The address of the principal business of each of the Reporting Persons is 10866 Wilshire Boulevard, Suite 1450, Los Angeles, California 90024. (c) St. Cloud Partners is licensed by the United States Small Business Administration as a Small Business Investment Company, whose principal business is to invest in companies. The principal business of SCGP is to act as the general partner of St. Cloud Partners. The principal business of St. Cloud Capital is to provide management services to St. Cloud Partners and investment advice to SCGP. Mr. Geller is a venture capitalist. (d) None of the Reporting Persons have during the last five years been convicted in a criminal proceeding (excluding traffic violations or similar misdemeanors). (e) None of the Reporting Persons have, during the last five years, been a party to a civil proceeding of a judicial or administrative body of competent jurisdiction as a result of which such person was or is subject to a judgment, decree or final order enjoining future violations of, or prohibiting or mandating activities subject to, federal or state securities laws or finding any violation with respect to such laws. (f) Mr. Geller is a citizen of the United States. Item 3. Source and Amount of Funds or Other Consideration On January 11, 2006, St. Cloud Partners, entered into that certain Securities Purchase Agreement (the "Purchase Agreement"), by and among the Company, St. Cloud Partners and the additional purchasers named therein (collectively, with St. Cloud Partners, the "Purchasers," and such Purchasers excluding St. Cloud Partners, the "Other Purchasers"). Pursuant to the Purchase Agreement, among other things, St. Cloud Partners purchased (i) 8,500 shares (the "St. Cloud Shares") of the Company's Series B Convertible Preferred Stock, par value $0.01 per share (the "Series B Preferred Stock") at a purchase price of $100.00 per share, (ii) a convertible promissory note of the Company in the aggregate principal amount of $850,000 (the "St. Cloud Note") and (iii) a warrant (the "St. Cloud Warrant") to purchase 255,000 shares of the Company's common stock, par value $0.02 per share (the "Common Stock") for an aggregate purchase price of $1,700,000. The Purchase Agreement, the Company's Certificate of Designation of the Series B Preferred Stock (the "Certificate of Designation"), the St. Cloud Note and the St. Cloud Warrant are attached hereto as Exhibit 1, Exhibit 2, Exhibit 3 and Exhibit 4, respectively, and are incorporated by reference herein. The funds were obtained from working capital of St. Cloud Partners and borrowings of St. Cloud Partners from the United States Small Business Administration. Item 4. Purpose of Transaction. St. Cloud Partners acquired the Series B Preferred Stock, the St. Cloud Note and the St. Cloud Warrant for investment purposes. Its investment is subject to the terms of the Purchase Agreement, the Certificate of Designation, the St. Cloud Note, the St. Cloud Warrant and the Registration Rights Agreement, dated as of January 11, 2006, by and among the Company, St. Cloud Partners and the Other Purchasers (the "Registration Rights Agreement"), which are attached hereto as Exhibit 1 , Exhibit 2 , Exhibit 3 , Exhibit 4 and Exhibit 5, respectively, and are incorporated herein by reference. Pursuant to the terms of the Purchase Agreement, one nominee of St. Cloud Partners reasonably acceptable to the Company is to be elected by the Board of Directors of the Company to fill an existing vacancy on the Board of Directors. Effective January 11, 2006, the Board of Directors elected Marshall S. Geller, the Senior Managing Member of SCGP, LLC, the General Partner of St. Cloud Partners, to fill an existing vacancy on the Board of Directors. The Series B Preferred Stock is convertible, at the option of the holder thereof, at any time after the date of issuance, into such number of shares of Common Stock as is determined by dividing the Initial Series B Preferred Stock Price of $100.00 by the Series B Conversion Price, which is initially $0.75. Accordingly, the 8,500 shares of Series B Preferred Stock purchased by St. Cloud Partners are initially convertible into a total of 1,133,333 shares of Common Stock. The Series B Conversion Price may be adjusted to reflect subdivisions or combinations of Common Stock such as through stock splits, dividends, distributions and similar adjustments to the Company's capital stock. In addition, commencing January 11, 2007, if (A) (x) the closing price of the Common Stock equals or exceeds $1.80 per share for 30 consecutive trading days and the average daily volume during such 30 day trading period exceeds 10,000 shares; or (y) the closing price of the Common Stock equals or exceeds $3.00 per share during such 30 day trading period irrespective of any average daily trading volume, and (B) all of the shares of Common Stock into which the shares of Series B Preferred Stock are convertible are then covered by an effective registration statement permitting the resale of such shares of Common Stock without restrictions, then the Company will have the right to require St. Cloud Partners to convert the Series B Preferred Stock into Common Stock at the then effective Series B Conversion Price. Each share of Series B Preferred Stock is entitled to receive a dividend thereon at the annual rate of 10% of the Initial Series B Preferred Stock Price payable out of any assets or funds legally available therefore. The dividends are cumulative and accrue, whether or not declared by the Board of Directors of the Company, and are to be paid quarterly in arrears. The holders of Series B Preferred Stock generally have the right to vote on any matter with the holders of Common Stock on an "as converted" basis and are entitled to certain protective provisions pursuant to which the majority of the Series B Preferred Stock have the right to approve certain actions as further described in the Certificate of Designation. In the event of any liquidation, dissolution or winding up of the Company, either voluntary or involuntary, the holders of the Series B Preferred Stock will be entitled to receive, on a pari passu basis with the holders of the Company's Series A Convertible Preferred Stock, par value $0.01 per share, and with any class or series of capital stock of the Company created specifically ranking, by its terms, on parity with the Series B Preferred Stock, and prior and in preference to any distribution of any of the assets or surplus funds of the Company to the holders of the Common Stock, an amount equal to the Initial Series B Preferred Stock Price then held by them plus all cumulated and unpaid dividends on the Series B Preferred Stock. The Certificate of Designation also contains a redemption feature which provides that the holders of the Series B Preferred Stock will have the right to have their Series B Preferred Stock redeemed by the Corporation following the death of Mark Goldwasser, the Company's Chief Executive Officer and President, at the Initial Series B Preferred Stock Price plus accrued and unpaid dividends thereon. The St. Cloud Note bears interest at 11% per annum payable quarterly in arrears, matures five years from the date of issuance and is convertible into shares of Common Stock at St. Cloud Partner's option at $1.00 per share, subject to adjustment in the event of stock splits, dividends, distributions and similar adjustments to our capital stock. In addition, if: (x) (i) the closing price of the Common Stock equals or exceeds $2.00 per share for 10 consecutive trading days and the average daily volume during such 10 day trading period exceeds 10,000 shares; or (ii) the closing price of the Common Stock equals or exceeds $3.00 per share for 10 consecutive trading days irrespective of any average daily trading volume, and (y) all of the shares of Common Stock issuable upon conversion of the St. Cloud Note are then covered by an effective registration statement permitting the resale of such shares of Common Stock without restrictions, the Company will have the right to require the holders to convert the principal and accrued interest under the St. Cloud Note to Common Stock. The St. Capital Note may be prepaid, at the option of the Company, in whole or in part, at any time at a redemption price of 120% of the principal amount of the Note, together with accrued interest through the date of prepayment. In addition, upon the occurrence of any transaction or series of related transactions resulting in the transfer of 50% or more of the outstanding voting power of the Company or a sale of all or substantially all of the assets of the Company, the St. Capital Note will be automatically due and payable. Also, upon the death of Mr. Goldwasser, St. Cloud Note will have the right to demand prepayment of the St. Capital Note. Events of default which would cause the St. Cloud Note to accelerate, causing the principal and interest on the St. Cloud Note to become immediately due and payable, include, among other things: (i) the failure by the Company to perform or observe in any material respect any material covenant or agreement of the Company contained in the Purchase Agreement, which remains uncured for a period of five (5) business days from the date the Company is notified of such default; (ii) any representation or warranty made by the Company under any of the Purchaser Agreement, the Certificate of Designations, the Notes (as defined in Section 5(a)(1) below), the Warrants (as defined in Section 5(a)(1) below) and the Registration Rights Agreement was, when made, untrue or misleading, the result of which is reasonably likely to have a material adverse effect; (iii) the failure of the Company to make any payment of principal or interest on the St. Cloud Note when due, whether at maturity, upon acceleration or otherwise and the continuation of such failure for a period of five (5) business days following notice; (iv) there shall have occurred an acceleration of the stated maturity of any indebtedness for borrowed money of the Company (other than the Notes) of One Hundred Thousand United States Dollars ($100,000) or more in aggregate principal amount (which acceleration is not rescinded, annulled or otherwise cured within fifteen (15) business days of receipt by the Company of notice of such acceleration); (v) the Company makes an assignment for the benefit of creditors or admits in writing its inability to pay its debts generally as they become due; or an order, judgment or decree is entered adjudicating the Company as bankrupt or insolvent; or any order for relief with respect to the Company is entered under the Federal Bankruptcy Code or any other bankruptcy or insolvency law; or the Company petitions or applies to any tribunal for the appointment of a custodian, trustee, receiver or liquidator of the Company or of any substantial part of the assets of the Company, or commences any proceeding relating to it under any bankruptcy, reorganization, arrangement, insolvency, readjustment of debt, dissolution or liquidation law of any jurisdiction; or any such petition or application is filed, or any such proceeding is commenced, against the Company and either (i) the Company by any act indicates its approval thereof, consents thereto or acquiescence therein or (ii) such petition application or proceeding is not dismissed within sixty (60) days; or (vi) a final, non-appealable judgment which, in the aggregate with other outstanding final judgments against the Company and its subsidiaries, exceeds Two Hundred Thousand United States Dollars ($200,000) shall be rendered against the Company or a subsidiary and within sixty (60) days after entry thereof, such judgment is not discharged or execution thereof stayed pending appeal, or within sixty (60) days after the expiration of such stay, such judgment is not discharged. The St. Cloud Note is attached hereto as Exhibit 3 and is incorporated by reference herein. The St. Cloud Warrant issued pursuant to the terms of the Purchase Agreement is exerciseable for 255,500 shares of Common Stock, at an exercise price of $1.00 per share (subject to adjustment), on or prior to 5:00 p.m. (Eastern time) on January 11, 2011. The St. Cloud Warrant is attached hereto as Exhibit 4 and is incorporated by reference herein. The Reporting Persons intend to review their investment in the Company from time to time. Subject to the limitations set forth herein and depending upon (i) the price and availability of the Common Stock, (ii) subsequent developments affecting the Company, (iii) the Company's business and prospects, (iv) other investment and business opportunities available to the Reporting Persons, (v) general stock market and economic conditions, (vi) tax considerations, and (vii) other factors deemed relevant, the Reporting Persons may decide to convert and/or exercise all or a portion of the Series B Convertible Stock, the St. Cloud Note and the St. Cloud Warrant and/or increase or decrease the size of their investment in the Company and/or make a proposal with respect to a recapitalization of the Company or similar transaction. Except as described in this Schedule 13D, none of the Reporting Persons have any present plan or proposal which relates to, or could result in, any of the events referred to in paragraphs (a) through (j), inclusive, of Item 4 of Schedule 13D. However, the Reporting Persons will continue to review the business of the Company and, depending upon one or more of the factors referred to above, may in the future propose that the Company take one or more of such actions. Item 5. Interest in Securities of the Issuer (a)(1) Pursuant to the Purchase Agreement, St. Cloud Partners acquired the St. Cloud Shares, the St. Cloud Note and the St. Cloud Warrant which, as of January 11, 2006, are convertible into and exerciseable for an aggregate of 2,238,333 shares of Common Stock. Assuming conversion of the St. Cloud Shares and the St. Cloud Note and exercise of the St. Cloud Warrant in full, following the issuance of such shares upon such conversion and exercise, based on 5,064,878 shares of Common Stock outstanding on January 12, 2006 (and excluding outstanding options and warrants), such shares constitute approximately 30.65% of the Common Stock outstanding. Pursuant to the terms and conditions of the Purchase Agreement, the Other Purchasers acquired in the aggregate (i) 1,500 shares of the Series B Convertible Preferred Stock at a purchase price of $100.00 per share (the "Other Purchasers Shares", and, collectively with the St. Cloud Shares, the "Shares"), (ii) convertible promissory notes in an aggregate amount of $150,000, on the same terms and conditions as the St. Cloud Note (the "Other Purchasers Notes", and, collectively with the St. Cloud Note, the "Notes"), and (iii) warrants to purchase an aggregate of 45,000 shares of Common Stock (the "Other Purchasers Warrants", and collectively with the St. Cloud Warrant, the "Warrants"), on the same terms and conditions as the St. Cloud Warrant. Such Other Purchaser Shares are convertible into an aggregate of 200,000 shares of Common Stock, such Other Purchasers Notes are convertible into an aggregate of 150,000 shares of Common Stock and such Other Purchasers Warrants are exercisable for an aggregate of 45,000 shares of Common Stock. Assuming conversion of the Other Purchasers Notes and exercise of the Other Purchasers Warrants in full, following the issuance of such shares upon such conversion and exercise, based on 5,064,878 shares of Common Stock outstanding on January 12, 2006 (and excluding outstanding options and warrants), such shares constitute approximately 7.23% of the Common Stock outstanding. The Reporting Persons disclaim membership in a group. Neither the filing of Schedule 13D nor any of its contents shall be deemed to constitute an admission that St. Cloud Partners, SCGP, St. Cloud Capital or Mr. Geller are the beneficial owners of the securities described in this paragraph for purposes of Section 13(d) of the Exchange Act or for any other purposes, and such beneficial ownership is expressly disclaimed. (a)(2) SCGP is a general partner of St. Cloud Partners and may be deemed to beneficially own the 2,238,333 shares of Common Stock beneficially owned by St. Cloud Partners. Neither the filing of Schedule 13D nor any of its contents shall be deemed to constitute an admission that SCGP is the beneficial owner of the securities described in Item 5(a)(1) above for purposes of Section 13(d) of the Exchange Act or for any other purposes, and such beneficial ownership is expressly disclaimed. (a)(3) St. Cloud Capital provides management services to St. Cloud Partners and investment advice to SCGP and may be deemed to beneficially own the 2,238,333 shares of Common Stock beneficially owned by St. Cloud Partners and/or SCGP. Neither the filing of Schedule 13D nor any of its contents shall be deemed to constitute an admission that St. Cloud Capital is the beneficial owner of the securities described in Item 5(a)(1) or Item 5(a)(2) above for purposes of Section 13(d) of the Exchange Act or for any other purposes, and such beneficial ownership is expressly disclaimed. (a)(4) In Mr. Geller's capacity as a co-founder and senior manager of SCGP, Mr. Geller may be deemed to beneficially own the 2,238,333 shares of Common Stock beneficially owned by St. Cloud Partners and/or SCGP. Neither the filing of Schedule 13D nor any of its contents shall be deemed to constitute an admission that Mr. Geller is the beneficial owner of the securities described in Item 5(a)(1) or Item 5(a)(2) above for purposes of Section 13(d) of the Exchange Act or for any other purposes, and such beneficial ownership is expressly disclaimed. Assuming conversion of the St. Cloud Shares and the St. Cloud Note and exercise of the St. Cloud Warrants in full: (b)(1) St. Cloud Partners has sole power to vote or to direct the vote and dispose or to direct the disposition of 2,238,333 shares of Common Stock. (b)(2) SCGP, as the general partner of St. Cloud Partners, shares the power to vote or to direct the vote and dispose or to direct the disposition of 2,238,333 shares of Common Stock owned by St. Cloud Partners. (b)(3) St. Cloud Capital, as a provider of management services to St. Cloud Partners and investment advice to SCGP, shares the power to vote or to direct the vote and dispose or to direct the disposition of 2,238,333 shares of Common Stock owned by St. Cloud Partners and/or SCGP. (b)(4) Mr. Geller, as a co-founder and senior manager of St. Cloud Partners, shares the power to vote or to direct the vote and dispose or to direct the disposition of 2,238,333 shares of Common Stock owned by St. Cloud Partners and/or SCGP. (c) Except as filed in Schedule 13D or Schedule 13G with the Securities and Exchange Commission, none to the knowledge of the Reporting Persons. (d) None, to the knowledge of the Reporting Persons. (e) Not applicable. Item 6. Contracts, Arrangements, Understandings or Relationships with Respect to Securities of the Issuer. SECURITIES PURCHASE AGREEMENT In addition to the description of the Purchase Agreement set forth in Items 3 and 4 above, pursuant to the Purchase Agreement, the Company paid St. Cloud Partners a closing fee in the amount of $20,000 and reimbursed St. Cloud Partners for certain fees and expenses incurred by St. Cloud Partners in the amount of approximately $10,000. The Purchase Agreement contains customary representations and warranties and covenants. The Purchase Agreement is attached hereto as Exhibit 1 and incorporated by reference herein. The terms and conditions of the Purchase Agreement, the Certificate of Designation, the St. Cloud Note and St. Cloud Warrant issued thereunder, are further described in Item 4 and Item 5 above and are incorporated by reference herein. REGISTRATION RIGHTS AGREEMENT In addition to the description of the Registration Rights Agreement set forth in Item 4 above, pursuant to the Registration Rights Agreement, at any time after April 11, 2006, the holders of at least a majority in interest of the (i) the shares of Common Stock that are issuable upon conversion of Shares and the Notes and (ii) the shares of Common Stock upon issuable upon exercise of the Warrants (collectively, "Registrable Shares") held by the Purchasers may make a written demand for registration under the Securities Act of 1933, as amended, of all or part of their Registrable Securities. The Company is required to prepare and file with the SEC a registration statement within 90 days following the Company's receipt of such demand notice and shall use commercially reasonable efforts to have the registration statement declared effective as soon as practicable, but in any event within 120 days after filing. The Registration Rights Agreement is attached hereto as Exhibit 5 and incorporated by reference herein. Item 7. Material to be Filed as Exhibits 1 Securities Purchase Agreement dated as of January 11, 2006 by and among the Company, St. Cloud Partners and the additional purchasers named therein (incorporated by reference from Exhibit 10.48 to the Company's Current Report on Form 8-K, filed January 18, 2006). 2 Certificate of Designation of Series B Preferred Stock, filed with the Secretary of State of the State of Delaware on January 11, 2006 (incorporated by reference from Exhibit 3.5 to the Company's Current Report on Form 8-K, filed January 18, 2006). 3 Convertible Promissory Note, dated January 11, 2006 issued by the Company to St. Cloud Partners. 4 Warrant, dated January 11, 2006 issued by the Company to St. Cloud Partners. 5 Registration Rights Agreement dated as of January 11, 2006 by and among the Company, St. Cloud Partners and the additional purchasers named therein (incorporated by reference from Exhibit 10.49 to the Company's Current Report on Form 8-K, filed January 18, 2006). 6 Joint Filing Agreement dated January 23, 2006 by and among St. Cloud Partners, SCGP, St. Cloud Capital and Marshall S. Geller. SIGNATURE After reasonable inquiry and to the best of my knowledge and belief, I certify that the information set forth in this statement is true, complete and correct. Dated: January 23, 2006 St. Cloud Capital Partners, L.P. By: SCGP, LLC Its: General Partner By: /s/ Marshall S. Geller ------------------------------ Name: Marshall S. Geller Title: Senior Managing Member SCGP, LLC By: /s/ Marshall S. Geller ------------------------------ Name: Marshall S. Geller Title: Senior Managing Member St. Cloud Capital, LLC By: /s/ Marshall S. Geller ------------------------------ Name: Marshall S. Geller Title: Senior Managing Director /s/ Marshall S. Geller ---------------------------------- Marshall S. Geller EX-10.3 2 v033726_ex10-3.txt Exhibit 3 THE SECURITIES REPRESENTED HEREBY MAY NOT BE TRANSFERRED UNLESS (I) SUCH SECURITIES HAVE BEEN REGISTERED FOR SALE PURSUANT TO THE SECURITIES ACT OF 1933, AS AMENDED, (II) SUCH SECURITIES MAY BE SOLD PURSUANT TO RULE 144(K), OR (III) THE COMPANY HAS RECEIVED AN OPINION OF COUNSEL REASONABLY SATISFACTORY TO IT THAT SUCH TRANSFER MAY LAWFULLY BE MADE WITHOUT REGISTRATION UNDER THE SECURITIES ACT OF 1933 OR QUALIFICATION UNDER APPLICABLE STATE SECURITIES LAWS. 11% CONVERTIBLE PROMISSORY NOTE US$850,000.00 January 11, 2006 FOR VALUE RECEIVED, Olympic Cascade Financial Corporation, a Delaware corporation (the "Company"), hereby unconditionally promises to pay to the order of St. Cloud Capital Partners, L.P. (the "Holder"), having an address at 10866 Wilshire Blvd., Suite 1450, Los Angeles, CA 90024, at such address or at such other place as may be designated in writing by the Holder, or its assigns, the aggregate principal sum of EIGHT HUNDRED FIFTY THOUSAND AND 00/100 UNITED STATES DOLLARS ($850,000.00), together with interest from January 11, 2006 on the unpaid principal balance of this Note outstanding at a rate equal to eleven percent (11.0%) (computed on the basis of the actual number of days elapsed in a 365-day year) per annum and continuing on the outstanding principal until this 11% Convertible Promissory Note (the "Note") is converted into Common Stock as provided herein or indefeasibly and irrevocably paid in full by the Company, and such interest shall be paid quarterly in arrears on the first day of January, April, July and October in each year. Subject to the other provisions of this Note, the principal of this Note and all accrued and unpaid interest hereon shall mature and become due and payable on the fifth (5th) anniversary of the date hereof (the "Stated Maturity Date"). Except as provided herein, all payments of principal and interest by the Company under this Note shall be made in United States dollars in immediately available funds to an account specified by the Holder. 1. Definitions. Unless the context otherwise requires, when used herein the following terms shall have the meaning indicated: "Board" shall mean the Board of Directors of the Company. "Business Day" other than a Saturday or Sunday, on which banks in New York City are open for the general transaction of business. "Change of Control" shall mean (i) any transaction or series of related transactions (including any reorganization, merger or consolidation) that results in the transfer of 50% or more of the outstanding voting power of the Company, and (ii) a sale of all or substantially all of the assets of the Company to another person. "Company Mandated Conversion" shall have the meaning ascribed to such term in Section 5 hereof. "Company Mandated Conversion Date" shall have the meaning ascribed to such term in Section 5 hereof. "Company Mandated Conversion Notice" shall have the meaning ascribed to such term in Section 5 hereof. "Common Stock" shall mean the common stock, par value $0.02 per share, of the Company. "Company" shall have the meaning ascribed to such term in the first paragraph herein. "Company Notes" shall have the meaning ascribed to such term in Section 2 hereof. "Conversion Price" shall mean initially $1.00 per share, subject to adjustment as provided in Section 6. "Convertible Securities" shall have the meaning ascribed to such term in Section 6 hereof. "Exchange Act" shall mean the Securities Exchange Act of 1934, as amended. "Event of Default" shall have the meaning ascribed to such term in Section 7 herein. "Holder" shall have the meaning ascribed to such term in the first paragraph herein. "Investors" shall have the meaning ascribed to such term in the Purchase Agreement. "Market Price" as of a particular date (the "Valuation Date") shall mean the following: (a) if the Common Stock is then listed on a national stock exchange, the closing sale price of one share of Common Stock on such exchange on the last Trading Day prior to the Valuation Date, provided that if such security has not traded in the prior ten (10) trading sessions, the Market Price shall be the average closing bid price of such security in the most recent ten (10) trading sessions during which such security has traded; (b) if the Common Stock is then quoted on The Nasdaq Stock Market, Inc. ("Nasdaq"), the National Association of Securities Dealers, Inc. OTC Bulletin Board (the "Bulletin Board") or such similar exchange or association, the closing sale price of one share of Common Stock on Nasdaq, the Bulletin Board or such other exchange or association on the last Trading Day prior to the Valuation Date, provided that if such security has not traded in the prior ten (10) trading sessions, the Market Price shall be the average closing price of one share of such security in the most recent ten (10) trading sessions during which such security has traded; or (c) if the Common Stock is not then listed on a national stock exchange or quoted on Nasdaq, the Bulletin Board or such other exchange or association, the fair market value of one share of Common Stock as of the Valuation Date, shall be determined in good faith by the Board of Directors of the Company. If the Common Stock is not then listed on a national securities exchange, the Bulletin Board or such other exchange or association, the Board of Directors of the Company shall respond promptly, in writing, to an inquiry by the Holder as to the fair market value of a share of Common Stock as determined by the Board of Directors of the Company. -2- "Material Adverse Effect" shall have the meaning ascribed to such term in the Purchase Agreement. "Note" shall have the meaning ascribed to such term in the first paragraph herein. "Optional Conversion" shall have the meaning ascribed to such term in Section 5 hereof. "Optional Conversion Notice" shall have the meaning ascribed to such term in Section 5 hereof. "Options" shall have the meaning ascribed to such term in Section 6 hereof. "Person" means an individual, corporation, partnership, limited liability company, trust, business trust, association, joint stock company, joint venture, sole proprietorship, unincorporated organization, governmental authority or any other form of entity not specifically listed herein. "Purchase Agreement" shall mean the Securities Purchase Agreement, dated as of January 11, 2006, and as that agreement may be amended from time to time, by and among the Company and the Investors. "Registration Rights Agreement" shall mean the Registration Rights Agreement, dated as of January 11, 2006, and as that agreement may be amended from time to time, by and among the Company and the Investors. "Stated Maturity Date" shall have the meaning ascribed to such term in the first paragraph herein. "Subsidiary" of any Person means another Person, an amount of the voting securities, other voting ownership or voting partnership interests of which is sufficient to elect at least a majority of its Board of Directors or other governing body (or, if there are no such voting interests, 50% or more of the equity interests of which) is owned directly or indirectly by such first Person. "Trading Day" means (i) if the relevant stock or security is listed or admitted for trading on The New York Stock Exchange, Inc. or any other national securities exchange, a day on which such exchange is open for business; (ii) if the relevant stock or security is quoted on the Nasdaq Stock Market or any other system of automated dissemination of quotations of securities prices, a day on which trades may be effected through such system; or (iii) if the relevant stock or security is not listed or admitted for trading on any national securities exchange or quoted on the Nasdaq Stock Market or any other system of automated dissemination of quotation of securities prices, a day on which the relevant stock or security is traded in a regular way in the over-the-counter market and for which a closing bid and a closing asked price for such stock or security are available. "Transaction Documents" shall have the meaning ascribed to such term in the Purchase Agreement. -3- 2. Purchase Agreement. This Note is one of the several 11% Convertible Promissory Notes of the Company issued pursuant to the Purchase Agreement (the "Company Notes"). This Note is subject to the terms and conditions of, and entitled to the benefit of, the provisions of the Purchase Agreement. This Note is transferable and assignable to any person to whom such transfer is permissible under the Purchase Agreement and applicable law. The Company agrees to issue from time to time a replacement Note in the form hereof to facilitate such transfers and assignments. In addition, after delivery of an indemnity in form and substance reasonably satisfactory to the Company, the Company also agrees to promptly issue a replacement Note if this Note is lost, stolen, mutilated or destroyed. 3. Right of Prepayment; Mandatory Prepayment. This Note may be prepaid, at the option of the Company, as a whole or in part, at any time or from time to time, upon ten (10) business days notice, in each case on any date on or after the date of issuance and prior to maturity, at a redemption price of 120% of the principal amount of this Note, together with accrued interest through the date of prepayment. Within five (5) business days following the full payment of the redemption price, the Holder shall deliver to the Company the Note so redeemed. Holder shall do all further acts and things and execute all further documents reasonably required in the circumstances to effect the provisions of this Section 3. In addition, upon the occurrence of a Change of Control, this Note shall be automatically due and payable. The Company will give the Lender not less than ten (10) business day prior written notice of the occurrence of any Change of Control event. Lastly, upon the death of Mark Goldwasser, the Company's President and Chief Executive Officer, the Holder shall have the right to demand immediate prepayment of this Note by delivering a written notice to the Company ("Prepayment Notice") within thirty (30) days of its receipt of written notice of such death. The Company shall have 120 days from the date of the Company's receipt of the Prepayment Notice to make full prepayment of this Note. 4. Intentionally Omitted. 5. Conversion Rights. (a) Optional Conversion. (i) Subject to and upon compliance with the provisions of this Note, prior to the Stated Maturity Date, the Holder shall have the right, at its option at any time, to convert some or all of the Note into such number of fully paid and nonassessable shares of Common Stock as is obtained by: (a) adding (i) the principal amount of this Note to be converted and (ii) the amount of any accrued but unpaid interest with respect to such portion of this Note to be converted; and (b) dividing the result obtained pursuant to clause (a) above by the Conversion Price then in effect. The rights of conversion set forth in this Section 5 shall be exercised by the Holder by giving written notice to the Company ("Optional Conversion Notice") that the Holder elects to convert a stated amount of this Note into Common Stock and by surrender of this Note (or, in lieu thereof, by delivery of an appropriate lost security affidavit in the event this Note shall have been lost or destroyed) to the Company at its principal office (or such other office or agency of the Company as the Company may designate by notice in writing to the Holder), together with a statement of the name or names (with address) in which the certificate or certificates for shares of Common Stock shall be issued. -4- (ii) Promptly after receipt of the Optional Conversion Notice and surrender of this Note (or, in lieu thereof, by delivery of an appropriate lost security affidavit in the event this Note shall have been lost or destroyed), the Company shall issue and deliver, or cause to be issued and delivered, to the Holder, registered in such name or names as the Holder may direct in writing, a certificate or certificates for the number of whole shares of Common Stock issuable upon the conversion of such portion of this Note. Such conversion shall be deemed to have been effected, and the Conversion Price shall be determined, as of the close of business on the date on which Optional Conversion Notice shall have been received by the Company and this Note shall have been surrendered as aforesaid (or, in lieu thereof, an appropriate lost security affidavit has been delivered to the Company), and at such time, the rights of the Holder shall cease with respect to the principal amount of the Notes being converted, and the Person or Persons in whose name or names any certificate or certificates for shares of Common Stock shall be issuable upon such conversion shall be deemed to have become the holder or holders of record of the shares represented thereby. (iii) No fractional shares shall be issued upon any Optional Conversion of this Note into Common Stock. If any fractional share of Common Stock would, except for the provisions of the first sentence of this Section 5(a)(iii), be delivered upon such conversion, the Company, in lieu of delivering such fractional share, shall pay to the Holder an amount in cash equal to the Market Price of such fractional share of Common Stock. In case the principal amount of this Note exceeds the principal amount being converted, the Company shall, upon such conversion, execute and deliver to the Holder, at the expense of the Company, a new Note for the principal amount of this Note surrendered which is not to be converted. (b) Company Mandated Conversion. (i) This Note shall be convertible, at the option of the Company ("Company Mandated Conversion"), into such number of fully paid and nonassessable shares of Common Stock as is obtained by: (a) adding (i) the principal amount of this Note to be converted and (ii) the amount of any accrued but unpaid interest with respect to such portion of this Note to be converted; and (b) dividing the result obtained pursuant to clause (a) above by the Conversion Price then in effect, provided that such conversion shall only occur if: (x) (i) the closing price of the Common Stock on the principal exchange or market on which it is then traded has equaled or exceeded $2.00 per share for the 10 consecutive Trading Days immediately prior to the date of conversion and the average daily volume during such 10 day trading period exceeds 10,000 shares; or (ii) the closing price of the Common Stock on the principal exchange or market on which it is then traded has equaled or exceeded $3.00 per share for the 10 consecutive Trading Days immediately prior to the date of conversion irrespective of any average daily trading volume, and (y) all of the shares of Common Stock are then covered by an effective registration statement filed under the Securities Act of 1933, as amended, permitting the resale of such shares of Common Stock without restrictions. The Company shall provide written notice of the Company Mandated Conversion within five (5) business days following the satisfaction of the foregoing conditions ("Company Mandated Conversion Notice") by mailing, by first class mail, postage prepaid, a copy of such notice to the Holder. The Company Mandated Conversion Notice shall include the effective date of the Company Mandated Conversion ("Company Mandated Conversion Date"), along with instructions on surrendering this Note for conversion. -5- (ii) Promptly after the Company Mandated Conversion Date, the Holder of this Note shall deliver this Note (or, in lieu thereof, an appropriate lost security affidavit in the event this Note shall have been lost or destroyed) to the Company at its principal office (or such other office or agency of the Company as the Company may designate by notice in writing to the Holder), together with a statement of the name or names (with address) in which the certificate or certificates for shares of Common Stock shall be issued. Promptly following the surrender of this Note (or, in lieu thereof, delivery of an appropriate lost security affidavit in the event this Note shall have been lost or destroyed) as aforesaid, the Company shall issue and deliver, or cause to be issued and delivered, to the Holder, registered in such name or names as the Holder may direct in writing, a certificate or certificates for the number of whole shares of Common Stock issuable upon the conversion of this Note. To the extent permitted by law, such conversion shall be deemed to have been effected, and the Conversion Price shall be determined, as of the close of business on the Company Mandated Conversion Date, and at such time, the rights of the Holder shall cease with respect to the Note being converted, and the Person or Persons in whose name or names any certificate or certificates for shares of Common Stock shall be issuable upon such conversion shall be deemed to have become the holder or holders of record of the shares represented thereby. (iii) No fractional shares shall be issued upon any Company Mandated Conversion of this Note into Common Stock. If any fractional share of Common Stock would, except for the provisions of the first sentence of this Section 5(b)(iii), be delivered upon such conversion, the Company, in lieu of delivering such fractional share, shall pay to the Holder an amount in cash equal to the Market Price of such fractional share of Common Stock. 6. Adjustment to Conversion Price. (a) If the Company shall, at any time or from time to time while existing obligations under the Note remain outstanding, pay a dividend or make a distribution on its Common Stock in shares of Common Stock, subdivide its outstanding shares of Common Stock into a greater number of shares or combine its outstanding shares of Common Stock into a smaller number of shares or issue by reclassification of its outstanding shares of Common Stock any shares of its capital stock (including any such reclassification in connection with a consolidation or merger in which the Company is the continuing corporation), then the Conversion Price in effect immediately prior to the date upon which such change shall become effective, shall be adjusted by the Company so that the Holder thereafter converting this Note shall be entitled to receive the number of shares of Common Stock or other capital stock which the Holder would have received if the Note had been converted immediately prior to such event upon payment of a Conversion Price that has been adjusted to reflect a fair allocation of the economics of such event to the Holder, without regard to any conversion limitation specified in this Section 6. Such adjustments shall be made successively whenever any event listed above shall occur. (b) If any capital reorganization, reclassification of the capital stock of the Company, consolidation or merger of the Company with another corporation in which the Company is not the survivor, or sale, transfer or other disposition of all or substantially all of the Company's assets to another corporation shall be effected, then, as a condition of such reorganization, reclassification, consolidation, merger, sale, transfer or other disposition, lawful -6- and adequate provision shall be made whereby the Holder shall thereafter have the right to purchase and receive upon the basis and upon the terms and conditions herein specified and in lieu of the shares of Common Stock immediately theretofore issuable upon conversion of this Note, without regard to any conversion limitation specified in Section 6, such shares of stock, securities or assets as would have been issuable or payable with respect to or in exchange for a number of shares of Common Stock equal to the number of shares of Common Stock immediately theretofore issuable upon conversion of this Note, had such reorganization, reclassification, consolidation, merger, sale, transfer or other disposition not taken place, without regard to any conversion limitation specified in Section 6, and in any such case appropriate provision shall be made with respect to the rights and interests of the Holder to the end that the provisions hereof (including, without limitation, provision for adjustment of the Conversion Price) shall thereafter be applicable, as nearly equivalent as may be practicable in relation to any shares of stock, securities or assets thereafter deliverable upon the conversion hereof. The Company shall not effect any such consolidation, merger, sale, transfer or other disposition unless prior to or simultaneously with the consummation thereof the successor corporation (if other than the Company) resulting from such consolidation or merger, or the corporation purchasing or otherwise acquiring such assets or other appropriate corporation or entity shall assume the obligation to deliver to the Holder, at the last address of the Holder appearing on the books of the Company, such shares of stock, securities or assets as, in accordance with the foregoing provisions, the Holder may be entitled to purchase, without regard to any conversion limitation specified in Section 6, and the other obligations under this Note. The provisions of this Section 6(b) shall similarly apply to successive reorganizations, reclassifications, consolidations, mergers, sales, transfers or other dispositions. (c) In case the Company shall fix a payment date for the making of a distribution to all holders of Common Stock (including any such distribution made in connection with a consolidation or merger in which the Company is the continuing corporation) of evidences of indebtedness or assets (other than cash dividends or cash distributions payable out of consolidated earnings or earned surplus or dividends or distributions referred to in Section 6(a)), or subscription rights or warrants, the Conversion Price to be in effect after such payment date shall be determined by multiplying the Conversion Price in effect immediately prior to such payment date by a fraction, the numerator of which shall be the total number of shares of Common Stock outstanding multiplied by the Market Price of Common Stock immediately prior to such payment date, less the fair market value (as determined by the Board of Directors in good faith) of said assets or evidences of indebtedness so distributed, or of such subscription rights or Notes, and the denominator of which shall be the total number of shares of Common Stock outstanding multiplied by such Market Price immediately prior to such payment date. Such adjustment shall be made successively whenever such a payment date is fixed. (d) An adjustment to the Conversion Price shall become effective immediately after the payment date in the case of each dividend or distribution and immediately after the effective date of each other event which requires an adjustment. (e) In the event that, as a result of an adjustment made pursuant to this Section 6, the Holder shall become entitled to receive any shares of capital stock of the Company other than shares of Common Stock, the number of such other shares so receivable upon conversion of this Note shall be subject thereafter to adjustment from time to time in a manner and on terms as nearly equivalent as practicable to the provisions contained in this Note. -7- (f) In case at any time: (i) the Company shall declare any dividend upon its Common Stock or any other class or series of capital stock of the Company payable in cash or stock or make any other distribution to the holders of its Common Stock or any such other class or series of capital stock; (ii) the Company shall offer for subscription pro rata to the holders of its Common Stock or any other class or series of capital stock of the Company any additional shares of stock of any class or other rights; or (iii) there shall be any capital reorganization or reclassification of the capital stock of the Company, any acquisition or a liquidation, dissolution or winding up of the Company; then, in any one or more of said cases, the Company shall give, by delivery in person or by certified or registered mail, return receipt requested, addressed to the Holder at the address of such Holder as shown on the books of the Company, (a) at least 20 Business Days' prior written notice of the date on which the books of the Company shall close or a record shall be taken for such dividend, distribution or subscription rights or for determining rights to vote in respect of any event set forth in clause (iii) of this Section 6(f) and (b) in the case of any event set forth in clause (iii) of this Section 6(f), at least 20 Business Days' prior written notice of the date when the same shall take place. Such notice in accordance with the foregoing clause (a) shall also specify, in the case of any such dividend, distribution or subscription rights, the date on which the holders of Common Stock or such other class or series of capital stock shall be entitled thereto and such notice in accordance with the foregoing clause (b) shall also specify the date on which the holders of Common Stock and such other series or class of capital stock shall be entitled to exchange their Common Stock and other stock for securities or other property deliverable upon consummation of the applicable event set forth in clause (iii) of this Section 6(f). (g) Upon any adjustment of the Conversion Price, then and in each such case the Company shall give prompt written notice thereof, by delivery in person or by certified or registered mail, return receipt requested, addressed to the Holder at the address of such Holder as shown on the books of the Company, which notice shall state the Conversion Price resulting from such adjustment and setting forth in reasonable detail the method upon which such calculation is based. (h) The Company shall at all times reserve and keep available out of its authorized Common Stock, solely for the purpose of issuance upon conversion of this Note as herein provided, such number of shares of Common Stock as shall then be issuable upon the conversion of this Note. The Company covenants that all shares of Common Stock which shall be so issued shall be duly and validly issued and fully paid and nonassessable, and free from all taxes, liens and charges with respect to the issue thereof, and, without limiting the generality of -8- the foregoing, and that the Company will from time to time take all such action as may be requisite to assure that the par value per share of the Common Stock is at all times equal to or less than the Conversion Price in effect at the time. The Company shall not take any action which results in any adjustment of the Conversion Price if the total number of shares of Common Stock issued and issuable after such action upon conversion of this Note would exceed the total number of shares of Common Stock then authorized by the Company's articles of association or memorandum of association. (i) The issuance of certificates for shares of Common Stock upon conversion of this Note shall be made without charge to the holders thereof for any issuance tax in respect thereof, provided that the Company shall not be required to pay any tax which may be payable in respect of any transfer involved in the issuance and delivery of any certificate in a name other than that of the Holder. (j) The Company will not at any time close its transfer books against the transfer, as applicable, of this Note or of any shares of Common Stock issued or issuable upon the conversion of this Note in any manner which interferes with the timely conversion of this Note, except as may otherwise be required to comply with applicable securities laws. 7. Event of Default. The occurrence of any of following events shall constitute an "Event of Default" hereunder: (a) the failure by the Company to perform or observe in any material respect any material covenant or agreement of the Company contained in the Purchase Agreement, which remains uncured for a period of five (5) business days from the date the Company is notified of such default; or (b) any representation or warranty made by the Company under any of the Transaction Documents was, when made, untrue or misleading, the result of which is reasonably likely to have a Material Adverse Effect; (c) the failure of the Company to make any payment of principal or interest on this Note when due, whether at maturity, upon acceleration or otherwise and the continuation of such failure for a period of five (5) business days following notice; (d) there shall have occurred an acceleration of the stated maturity of any indebtedness for borrowed money of the Company (other than Company Notes) of One Hundred Thousand United States Dollars ($100,000) or more in aggregate principal amount (which acceleration is not rescinded, annulled or otherwise cured within fifteen (15) business days of receipt by the Company of notice of such acceleration); (e) the Company makes an assignment for the benefit of creditors or admits in writing its inability to pay its debts generally as they become due; or an order, judgment or decree is entered adjudicating the Company as bankrupt or insolvent; or any order for relief with respect to the Company is entered under the Federal Bankruptcy Code or any other bankruptcy or insolvency law; or the Company petitions or applies to any tribunal for the appointment of a custodian, trustee, receiver or liquidator of the Company or of any substantial part of the assets of the Company, or commences any proceeding relating to it under any bankruptcy, -9- reorganization, arrangement, insolvency, readjustment of debt, dissolution or liquidation law of any jurisdiction; or any such petition or application is filed, or any such proceeding is commenced, against the Company and either (i) the Company by any act indicates its approval thereof, consents thereto or acquiescence therein or (ii) such petition application or proceeding is not dismissed within sixty (60) days; or (f) a final, non-appealable judgment which, in the aggregate with other outstanding final judgments against the Company and its Subsidiaries, exceeds Two Hundred Thousand United States Dollars ($200,000) shall be rendered against the Company or a Subsidiary and within sixty (60) days after entry thereof, such judgment is not discharged or execution thereof stayed pending appeal, or within sixty (60) days after the expiration of such stay, such judgment is not discharged. Upon the occurrence of any such Event of Default all unpaid principal and accrued interest under this Note shall become immediately due and payable (A) upon election of the Holder, with respect to (a), (b), (c), (d) and (f), and (B) automatically, with respect to (e). Upon the occurrence of an Event of Default, the Holder shall have the right to exercise any other right, power or remedy as may be provided herein. Upon the occurrence of an Event of Default, the rate of interest on the unpaid principal shall be increased to fourteen percent (14%), or such lower rate that is the maximum rate allowed by law, from the date of such Event Default until such unpaid principal is repaid in full. 8. No Waiver. No delay or omission on the part of the Holder in exercising any right under this Note shall operate as a waiver of such right or of any other right of the Holder, nor shall any delay, omission or waiver on any one occasion be deemed a bar to or waiver of the same or any other right on any future occasion. 9. Amendments in Writing. None of the terms or provisions of this Note may be excluded, modified or amended except by a written instrument duly executed by the Holder and the Company expressly referring to this Note and setting forth the provision so excluded, modified or amended. 10. Waivers. The Company hereby forever waives presentment, demand, presentment for payment, protest, notice of protest, notice of dishonor of this Note and all other demands and notices in connection with the delivery, acceptance, performance and enforcement of this Note. 11. Waiver of Jury Trial. THE COMPANY HEREBY WAIVES ITS RIGHT TO A JURY TRIAL OF ANY CLAIM OR CAUSE OF ACTION ARISING OUT OF OR BASED UPON THIS NOTE OR ANY CONTEMPLATED TRANSACTION, INCLUDING CONTRACT, TORT, BREACH OF DUTY AND ALL OTHER CLAIMS. THE COMPANY HAS REVIEWED THIS WAIVER WITH ITS COUNSEL. -10- 12. Governing Law; Consent to Jurisdiction. This Note shall be governed by and construed under the law of the State of New York, without giving effect to the conflicts of law principles thereof. The Company and, by accepting this Note, the Holder, each irrevocably submits to the exclusive jurisdiction of the courts of the State of New York located in New York County and the United States District Court for the Southern District of New York for the purpose of any suit, action, proceeding or judgment relating to or arising out of this Note and the transactions contemplated hereby. Service of process in connection with any such suit, action or proceeding may be served on each party hereto anywhere in the world by the same methods as are specified for the giving of notices under this Note. The Company and, by accepting this Note, the Holder, each irrevocably consents to the jurisdiction of any such court in any such suit, action or proceeding and to the laying of venue in such court. The Company and, by accepting this Note, the Holder, each irrevocably waives any objection to the laying of venue of any such suit, action or proceeding brought in such courts and irrevocably waives any claim that any such suit, action or proceeding brought in any such court has been brought in an inconvenient forum. 13. Costs. If action is instituted to collect on this Note, the Company promises to pay all costs and expenses, including reasonable attorney's fees, incurred in connection with such action. 14. Notices. All notices hereunder shall be given in writing and shall be deemed delivered when received by the other party hereto at the address set forth in the Purchase Agreement or at such other address as may be specified by such party from time to time in accordance with the Purchase Agreement. 15. Successors and Assigns. This Note shall be binding upon the successors or assigns of the Company and shall inure to the benefit of the successors and assigns of the Holder. [Remainder of Page Intentionally Left Blank] -12- OLYMPIC CASCADE FINANCIAL CORPORATION By: /s/ Mark Goldwasser ------------------------------- Name: Mark Goldwasser Title: President and Chief Executive Officer EX-10.4 3 v033726_ex10-4.txt Exhibit 4 THE SECURITIES REPRESENTED HEREBY MAY NOT BE TRANSFERRED UNLESS (I) SUCH SECURITIES HAVE BEEN REGISTERED FOR SALE PURSUANT TO THE SECURITIES ACT OF 1933, AS AMENDED, (II) SUCH SECURITIES MAY BE SOLD PURSUANT TO RULE 144(K), OR (III) THE COMPANY HAS RECEIVED AN OPINION OF COUNSEL REASONABLY SATISFACTORY TO IT THAT SUCH TRANSFER MAY LAWFULLY BE MADE WITHOUT REGISTRATION UNDER THE SECURITIES ACT OF 1933 OR QUALIFICATION UNDER APPLICABLE STATE SECURITIES LAWS. THIS WARRANT SHALL BE VOID AFTER 5:00 P.M. EASTERN TIME ON THE FIFTH ANNIVERSARY OF THE INITIAL EXERCISE DATE (the "EXPIRATION DATE"). No. SC-1 OLYMPIC CASCADE FINANCIAL CORPORATION WARRANT TO PURCHASE 255,000 SHARES OF COMMON STOCK, PAR VALUE $0.02 PER SHARE For VALUE RECEIVED, St. Cloud Capital Partners, L.P. ("Warrantholder"), is entitled to purchase, subject to the provisions of this Warrant, from Olympic Cascade Financial Corporation, a Delaware corporation ("Company"), at any time from and after January 11, 2006 (the "Initial Exercise Date") and not later than 5:00 P.M., Eastern time, on the Expiration Date, at an exercise price per share equal to $1.00 (the exercise price in effect being herein called the "Warrant Price"), 255,000 shares ("Warrant Shares") of the Company's Common Stock, par value $0.02 per share ("Common Stock"). The number of Warrant Shares purchasable upon exercise of this Warrant and the Warrant Price shall be subject to adjustment from time to time as described herein. Section 1. Registration. The Company shall maintain` books for the transfer and registration of the Warrant. Upon the initial issuance of this Warrant, the Company shall issue and register the Warrant in the name of the Warrantholder. Section 2. Transfers. As provided herein, this Warrant may be transferred only pursuant to a registration statement filed under the Securities Act of 1933, as amended (the "Securities Act"), or an exemption from such registration. Subject to such restrictions, the Company shall transfer this Warrant from time to time upon the books to be maintained by the Company for that purpose, upon surrender thereof for transfer properly endorsed or accompanied by appropriate instructions for transfer and such other documents as may be reasonably required by the Company, including, if required by the Company, an opinion of its counsel to the effect that such transfer is exempt from the registration requirements of the Securities Act, to establish that such transfer is being made in accordance with the terms hereof, and a new Warrant shall be issued to the transferee and the surrendered Warrant shall be canceled by the Company. Section 3. Exercise of Warrant. Subject to the provisions hereof, the Warrantholder may exercise this Warrant in whole or in part at any time from and after the Initial Exercise Date and not later than 5:00 P.M., Eastern time, on the Expiration Date upon surrender of the Warrant, together with delivery of the duly executed Warrant exercise form attached hereto as Appendix A (the "Exercise Agreement") and payment by cash, certified check or wire transfer of funds for the aggregate Warrant Price for that number of Warrant Shares then being purchased, to the Company during normal business hours on any business day at the Company's principal executive offices (or such other office or agency of the Company as it may designate by notice to the Warrantholder). The Warrant Shares so purchased shall be deemed to be issued to the Warrantholder or the Warrantholder's designee, as the record owner of such shares, as of the close of business on the date on which this Warrant shall have been duly surrendered (or evidence of loss, theft or destruction thereof and security or indemnity satisfactory to the Company), the Warrant Price shall have been paid and the completed Exercise Agreement shall have been delivered. Certificates for the Warrant Shares so purchased, representing the aggregate number of shares specified in the Exercise Agreement, shall be delivered promptly to the Warrantholder after this Warrant shall have been so exercised. The certificates so delivered shall be in such denominations as may be requested by the Warrantholder and shall be registered in the name of the Warrantholder or such other name as shall be designated by the Warrantholder. If this Warrant shall have been exercised only in part, then, unless this Warrant has expired, the Company shall, at its expense, at the time of delivery of such certificates, deliver to the Warrantholder a new Warrant representing the number of shares with respect to which this Warrant shall not then have been exercised. As used herein, "business day" means a day, other than a Saturday or Sunday, on which banks in New York City are open for the general transaction of business. Each exercise hereof shall constitute the re-affirmation by the Warrantholder that the representations and warranties contained in Section 5 of the Purchase Agreement (as defined below) are true and correct in all material respects with respect to the Warrantholder as of the time of such exercise. Section 4. Compliance with the Securities Act of 1933. The Company may cause the legend set forth on the first page of this Warrant to be set forth on each Warrant or similar legend on any security issued or issuable upon exercise of this Warrant, unless counsel for the Company is of the opinion as to any such security that such legend is unnecessary. Section 5. Payment of Taxes. The Company will pay any documentary stamp taxes attributable to the initial issuance of Warrant Shares issuable upon the exercise of the Warrant; provided, however, that the Company shall not be required to pay any tax or taxes which may be payable in respect of any transfer involved in the issuance or delivery of any certificates for Warrant Shares in a name other than that of the Warrantholder in respect of which such shares are issued, and in such case, the Company shall not be required to issue or deliver any certificate for Warrant Shares or any Warrant until the person requesting the same has paid to the Company the amount of such tax or has established to the Company's reasonable satisfaction that such tax has been paid. The Warrantholder shall be responsible for income taxes due under federal, state or other law, if any such tax is due. -2- Section 6. Mutilated or Missing Warrants. In case this Warrant shall be mutilated, lost, stolen, or destroyed, the Company shall issue in exchange and substitution of and upon cancellation of the mutilated Warrant, or in lieu of and substitution for the Warrant lost, stolen or destroyed, a new Warrant of like tenor and for the purchase of a like number of Warrant Shares, but only upon receipt of evidence reasonably satisfactory to the Company of such loss, theft or destruction of the Warrant, and with respect to a lost, stolen or destroyed Warrant, reasonable indemnity or bond with respect thereto, if requested by the Company. Section 7. Reservation of Common Stock. The Company hereby represents and warrants that there have been reserved, and the Company shall at all applicable times keep reserved until issued (if necessary) as contemplated by this Section 7, out of the authorized and unissued shares of Common Stock, sufficient shares to provide for the exercise of the rights of purchase represented by this Warrant. The Company agrees that all Warrant Shares issued upon due exercise of the Warrant shall be, at the time of delivery of the certificates for such Warrant Shares, duly authorized, validly issued, fully paid and non-assessable shares of Common Stock of the Company. Section 8. Adjustments. Subject and pursuant to the provisions of this Section 8, the Warrant Price and number of Warrant Shares subject to this Warrant shall be subject to adjustment from time to time as set forth hereinafter. (a) If the Company shall, at any time or from time to time while this Warrant is outstanding, pay a dividend or make a distribution on its Common Stock in shares of Common Stock, subdivide its outstanding shares of Common Stock into a greater number of shares or combine its outstanding shares of Common Stock into a smaller number of shares or issue by reclassification of its outstanding shares of Common Stock any shares of its capital stock (including any such reclassification in connection with a consolidation or merger in which the Company is the continuing corporation), then the number of Warrant Shares purchasable upon exercise of the Warrant and the Warrant Price in effect immediately prior to the date upon which such change shall become effective, shall be adjusted by the Company so that the Warrantholder thereafter exercising the Warrant shall be entitled to receive the number of shares of Common Stock or other capital stock which the Warrantholder would have received if the Warrant had been exercised immediately prior to such event upon payment of a Warrant Price that has been adjusted to reflect a fair allocation of the economics of such event to the Warrantholder. Such adjustments shall be made successively whenever any event listed above shall occur. (b) If any capital reorganization, reclassification of the capital stock of the Company, consolidation or merger of the Company with another corporation in which the Company is not the survivor, or sale, transfer or other disposition of all or substantially all of the Company's assets to another corporation shall be effected, then, as a condition of such reorganization, reclassification, consolidation, merger, sale, transfer or other disposition, lawful and adequate provision shall be made whereby each Warrantholder shall thereafter have the right to purchase and receive upon the basis and upon the terms and conditions herein specified and in lieu of the Warrant Shares immediately theretofore issuable upon exercise of the Warrant, such shares of stock, securities or assets as would have been issuable or payable with respect to or in exchange for a number of Warrant Shares equal to the number of Warrant Shares immediately theretofore issuable upon exercise of the Warrant, had such reorganization, reclassification, consolidation, merger, sale, transfer or other disposition not taken place, and in any such case appropriate provision shall be made with respect to the rights and interests of each Warrantholder to the end that the provisions hereof (including, without limitation, provision for adjustment of -3- the Warrant Price) shall thereafter be applicable, as nearly equivalent as may be practicable in relation to any shares of stock, securities or assets thereafter deliverable upon the exercise hereof. The Company shall not effect any such consolidation, merger, sale, transfer or other disposition unless prior to or simultaneously with the consummation thereof the successor corporation (if other than the Company) resulting from such consolidation or merger, or the corporation purchasing or otherwise acquiring such assets or other appropriate corporation or entity shall assume the obligation to deliver to the Warrantholder, at the last address of the Warrantholder appearing on the books of the Company, such shares of stock, securities or assets as, in accordance with the foregoing provisions, the Warrantholder may be entitled to purchase, and the other obligations under this Warrant. The provisions of this paragraph (b) shall similarly apply to successive reorganizations, reclassifications, consolidations, mergers, sales, transfers or other dispositions. Notwithstanding the provisions of the paragraph (b), in the event that holders of Common Stock receive only cash for their shares of Common Stock as a result of any such reorganization, reclassification, consolidation, merger, sale, transfer or other disposition, not later than one Business Day after the effective date of such reorganization, reclassification, consolidation, merger, sale, transfer or other disposition, the Warrantholder shall be entitled to receive in full satisfaction of its rights under this Warrant an amount in cash (the "Spread") equal to (x) the difference between (A) the per share cash to be received by holders of Common Stock in connection with such reorganization, reclassification, consolidation, merger, sale, transfer or other disposition and (B) the Warrant Price in effect immediately prior to the effective date of such reorganization, reclassification, consolidation, merger, sale, transfer or other disposition, multiplied by (y) the number of shares of Common Stock for which this Warrant is exercisable immediately prior to the effective date of such reorganization, reclassification, consolidation, merger, sale, transfer or other disposition. Upon payment in full of the Spread to the Warrantholder as provided above, this Warrant shall expire and be of no further force and effect. In the event that the Spread is not a positive number, no amount shall be payable to the Warrantholder as a result of such reorganization, reclassification, consolidation, merger, sale, transfer or other disposition, and this Warrant shall expire and be of no further force and effect as of the effective date of such reorganization, reclassification, consolidation, merger, sale, transfer or other disposition. (c) In case the Company shall fix a payment date for the making of a distribution to all holders of Common Stock (including any such distribution made in connection with a consolidation or merger in which the Company is the continuing corporation) of evidences of indebtedness or assets (other than cash dividends or cash distributions payable out of consolidated earnings or earned surplus or dividends or distributions referred to in Section 8(a)), or subscription rights or warrants, the Warrant Price to be in effect after such payment date shall be determined by multiplying the Warrant Price in effect immediately prior to such payment date by a fraction, the numerator of which shall be the total number of shares of Common Stock outstanding multiplied by the Market Price (as defined below) per share of Common Stock immediately prior to such payment date, less the fair market value (as determined by the Company's Board of Directors in good faith) of said assets or evidences of indebtedness so distributed, or of such subscription rights or warrants, and the denominator of which shall be the total number of shares of Common Stock outstanding multiplied by such Market Price per share of Common Stock immediately prior to such payment date. "Market Price" as of a particular date (the "Valuation Date") shall mean the following: (a) if the Common Stock is then listed on a national stock exchange, the closing sale price of one share of Common Stock on such exchange -4- on the last trading day prior to the Valuation Date, provided that if such security has not traded in the prior ten (10) trading sessions, the Market Price shall be the average closing bid price of such security in the most recent ten (10) trading sessions during which such security has traded; (b) if the Common Stock is then quoted on The Nasdaq Stock Market, Inc. ("Nasdaq"), the National Association of Securities Dealers, Inc. OTC Bulletin Board (the "Bulletin Board") or such similar exchange or association, the closing sale price of one share of Common Stock on Nasdaq, the Bulletin Board or such other exchange or association on the last trading day prior to the Valuation Date, provided that if such security has not traded in the prior ten (10) trading sessions, the Market Price shall be the average closing price of one share of such security in the most recent ten (10) trading sessions during which such security has traded; or (c) if the Common Stock is not then listed on a national stock exchange or quoted on Nasdaq, the Bulletin Board or such other exchange or association, the fair market value of one share of Common Stock as of the Valuation Date, shall be determined in good faith by the Board of Directors of the Company. If the Common Stock is not then listed on a national securities exchange, the Bulletin Board or such other exchange or association, the Board of Directors of the Company shall respond promptly, in writing, to an inquiry by the Warrantholder prior to the exercise hereunder as to the fair market value of a share of Common Stock as determined by the Board of Directors of the Company. (d) An adjustment to the Warrant Price shall become effective immediately after the payment date in the case of each dividend or distribution and immediately after the effective date of each other event which requires an adjustment. (e) In the event that, as a result of an adjustment made pursuant to this Section 8, the Warrantholder shall become entitled to receive any shares of capital stock of the Company other than shares of Common Stock, the number of such other shares so receivable upon exercise of this Warrant shall be subject thereafter to adjustment from time to time in a manner and on terms as nearly equivalent as practicable to the provisions with respect to the Warrant Shares contained in this Warrant. Section 9. Fractional Interest. The Company shall not be required to issue fractions of Warrant Shares upon the exercise of this Warrant. If any fractional share of Common Stock would, except for the provisions of the first sentence of this Section 9, be deliverable upon such exercise, the Company, in lieu of delivering such fractional share, shall pay to the exercising Warrantholder an amount in cash equal to the Market Price of such fractional share of Common Stock on the date of exercise. Section 10. Registration Rights. The holder of this Warrant shall be entitled to the rights set forth under the Registration Rights Agreement dated as of January 11, 2006 (the "Registration Rights Agreement") to allow for the registration of the resale of the Warrant Shares under the Securities Act of 1933, as amended. Section 11. Benefits. Nothing in this Warrant shall be construed to give any person, firm or corporation (other than the Company and the Warrantholder) any legal or equitable right, remedy or claim, it being agreed that this Warrant shall be for the sole and exclusive benefit of the Company and the Warrantholder. -5- Section 12. Notices to Warrantholder. Upon the happening of any event requiring an adjustment of the Warrant Price, the Company shall promptly give written notice thereof to the Warrantholder at the address appearing in the records of the Company, stating the adjusted Warrant Price and the adjusted number of Warrant Shares resulting from such event and setting forth in reasonable detail the method of calculation and the facts upon which such calculation is based. Failure to give such notice to the Warrantholder or any defect therein shall not affect the legality or validity of the subject adjustment. Section 13. Identity of Transfer Agent. The Transfer Agent for the Common Stock is Computershare Trust Company, Inc. Upon the appointment of any subsequent transfer agent for the Common Stock or other shares of the Company's capital stock issuable upon the exercise of the rights of purchase represented by the Warrant, the Company will mail to the Warrantholder a statement setting forth the name and address of such transfer agent. Section 14. Notices. Unless otherwise provided, any notice required or permitted under this Warrant shall be given in writing and shall be deemed effectively given as hereinafter described (i) if given by personal delivery, then such notice shall be deemed given upon such delivery, (ii) if given by telex or facsimile, then such notice shall be deemed given upon receipt of confirmation of complete transmittal, (iii) if given by mail, then such notice shall be deemed given upon the earlier of (A) receipt of such notice by the recipient or (B) three days after such notice is deposited in first class mail, postage prepaid, and (iv) if given by an internationally recognized overnight air courier, then such notice shall be deemed given one business day after delivery to such carrier. All notices shall be addressed as follows: if to the Warrantholder, at its address as set forth in the Company's books and records and, if to the Company, at the address as follows, or at such other address as the Warrantholder or the Company may designate by ten days' advance written notice to the other: If to the Company: Olympic Cascade Financial Corporation 120 Broadway, 27th Floor New York, NY 10271 Attention: Mark Goldwasser, CEO Fax: (212) 417-8010 With a copy to: Littman Krooks LLP 655 Third Avenue, 20th Floor New York, NY 10017 Attention: Mitchell C. Littman, Esq. Fax: (212) 490-2990 Section 15. Registration Rights. The initial Warrantholder is entitled to the benefit of certain registration rights with respect to the shares of Common Stock issuable upon the exercise of this Warrant as provided in the Registration Rights Agreement, and any subsequent Warrantholder may be entitled to such rights. -6- Section 16. Successors. All the covenants and provisions hereof by or for the benefit of the Warrantholder shall bind and inure to the benefit of its respective successors and assigns hereunder. Section 17. Governing Law; Consent to Jurisdiction; Waiver of Jury Trial. This Warrant shall be governed by, and construed in accordance with, the internal laws of the State of Delaware, without reference to the choice of law provisions thereof. The Company and, by accepting this Warrant, the Warrantholder, each irrevocably submits to the exclusive jurisdiction of the courts of the State of New York located in New York County and the United States District Court for the Southern District of New York for the purpose of any suit, action, proceeding or judgment relating to or arising out of this Warrant and the transactions contemplated hereby. Service of process in connection with any such suit, action or proceeding may be served on each party hereto anywhere in the world by the same methods as are specified for the giving of notices under this Warrant. The Company and, by accepting this Warrant, the Warrantholder, each irrevocably consents to the jurisdiction of any such court in any such suit, action or proceeding and to the laying of venue in such court. The Company and, by accepting this Warrant, the Warrantholder, each irrevocably waives any objection to the laying of venue of any such suit, action or proceeding brought in such courts and irrevocably waives any claim that any such suit, action or proceeding brought in any such court has been brought in an inconvenient forum. EACH OF THE COMPANY AND, BY ITS ACCEPTANCE HEREOF, THE WARRANTHOLDER HEREBY WAIVES ANY RIGHT TO REQUEST A TRIAL BY JURY IN ANY LITIGATION WITH RESPECT TO THIS WARRANT AND REPRESENTS THAT COUNSEL HAS BEEN CONSULTED SPECIFICALLY AS TO THIS WAIVER. Section 18. No Rights as Stockholder. Prior to the exercise of this Warrant in accordance with Section 3 hereof, the Warrantholder shall not have or exercise any rights as a stockholder of the Company by virtue of its ownership of this Warrant. Section 19. Amendment; Waiver. This Warrant is one of a series of Warrants of like tenor issued by the Company pursuant to that certain Securities Purchase Agreement dated January 11, 2006, among the Company and the Investors named therein (the "Purchase Agreement") and covering an aggregate of 300,000 shares of Common Stock (collectively, the "Company Warrants"). Any term of this Warrant may be amended or waived (including the adjustment provisions included in Section 8 of this Warrant) upon the written consent of the Company and the holders of Company Warrants representing at least 51% of the number of shares of Common Stock then subject to all outstanding Company Warrants (the "Majority Holders"), which consent shall be binding on all holders of Company Warrants; provided, that (x) any such amendment or waiver must apply to all Company Warrants; and (y) the number of Warrant Shares subject to this Warrant, the Warrant Price and the Expiration Date may not be amended, and the right to exercise this Warrant may not be altered or waived, without the written consent of the Warrantholder. Section 20. Section Headings. The section headings in this Warrant are for the convenience of the Company and the Warrantholder and in no way alter, modify, amend, limit or restrict the provisions hereof. -7- IN WITNESS WHEREOF, the Company has caused this Warrant to be duly executed, as of the 11th day of January, 2006. OLYMPIC CASCADE FINANCIAL CORPORATION By: /s/ Mark Goldwasser -------------------------- Mark Goldwasser President and Chief Executive Officer -8- APPENDIX A OLYMPIC CASCADE FINANCIAL CORPORATION WARRANT EXERCISE FORM To Olympic Cascade Financial Corporation: The undersigned hereby irrevocably elects to exercise the right of purchase represented by the within Warrant ("Warrant") for, and to purchase thereunder by the payment of the Warrant Price and surrender of the Warrant, _______________ shares of Common Stock ("Warrant Shares") provided for therein, and requests that certificates for the Warrant Shares be issued as follows: ______________________________________ Name ______________________________________ Address ______________________________________ ______________________________________ ______________________________________ Federal Tax ID or Social Security No. and delivered by (certified mail to the above address, or (other (specify): _________________________________). and, if the number of Warrant Shares shall not be all the Warrant Shares purchasable upon exercise of the Warrant, that a new Warrant for the balance of the Warrant Shares purchasable upon exercise of this Warrant be registered in the name of the undersigned Warrantholder or the undersigned's Assignee as below indicated and delivered to the address stated below. Dated: ___________________, ____ Note: The signature must correspond with the name of the Warrantholder as written Signature:____________________ on the first page of the Warrant in every ______________________________ particular, without alteration or enlargement Name (please print) or any change whatever, unless the Warrant has been assigned. ______________________________ Address ______________________________ ______________________________ Federal Identification or Social Security No. Assignee: ______________________________ ______________________________ ______________________________ EX-10.6 4 v033726_ex99-1.txt Exhibit 6 JOINT FILING AGREEMENT The undersigned hereby agree to jointly file a statement on Schedule 13D, together with any amendments thereto (collectively, the "Schedule 13Ds"), with the Securities and Exchange Commission pursuant to the requirements of Rule 13d-1(k) under the Securities Exchange Act of 1934, as amended. This Joint Filing Agreement may be signed in counterpart copies: Dated: January 23, 2006 St. Cloud Capital Partners, L.P. By: SCGP, LLC Its: General Partner By: /s/ Marshall S. Geller ------------------------------- Name: Marshall S. Geller Title: Senior Managing Member SCGP, LLC By: /s/ Marshall S. Geller ------------------------------- Name: Marshall S. Geller Title: Senior Managing Member St. Cloud Capital, LLC By: /s/ Marshall S. Geller ------------------------------- Name: Marshall S. Geller Title: Senior Managing Director /s/ Marshall S. Geller ----------------------------------- Marshall S. Geller -----END PRIVACY-ENHANCED MESSAGE-----