1
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
__________________________
FORM 10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended Commission File No. 1-
November 1, 1997 10892
HAROLD'S STORES, INC.
(Exact name of registrant as specified in its charter)
Oklahoma 73-1308796
(State or other jurisdiction of (IRS Employer
incorporation or organization) Identification No.)
765 Asp Norman, Oklahoma 73069 (405)329-4045
(Address of principal executive (Registrant's
offices) telephone number,
(Zip Code) including area code)
Indicate by check mark whether the registrant (1) has
filed all reports required to be filed by Section 13 or
15(d) of the Securities Exchange Act of 1934 during the
preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has
been subject to such filing requirements for the past 90
days.
Yes X . No .
Indicate the number of shares outstanding of each of the
issuer's classes of common stock, as of the latest practicable
date.
As of December 8, 1997, the registrant had 5,749,627 shares of
Common Stock outstanding.
Harold's Stores, Inc. & Subsidiaries
Index to
Quarterly Report on Form 10-Q
For the Period Ended November 1, 1997
Part I. - FINANCIAL INFORMATION Page
Item 1. Financial Statements
Consolidated Balance Sheets - November 1,1997 (unaudited) and
February 1, 1997 3
Consolidated Statements of Earnings -
Thirteen Weeks and Thirty-nine Weeks ended November 1, 1997
(unaudited)
and November 2, 1996 (unaudited) 5
Consolidated Statements of Stockholders' Equity -
Thirty-nine Weeks ended November 1, 1997 (unaudited) and
November 2, 1996(unaudited) 6
Consolidated Statements of Cash Flows -
Thirty-nine Weeks ended November 1, 1997 (unaudited) and
November 2, 1996(unaudited)
7
Notes to Interim Consolidated Financial Statements 8
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 9
Part II - OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K 12
Signature 13
HAROLD'S STORES, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
ASSETS
(In Thousands)
November 1, February 1,
1997 1997
(unaudited)
Current Assets:
Cash and cash equivalents $16 433
Trade accounts receivable, less
allowance 6,977 5,476
for doubtful accounts of $226 in
1998 & $215 in 1997
Other receivables 771 673
Merchandise inventories 37,103 28,544
Prepaid expenses 2,659 2,174
Prepaid income tax 751 -
Deferred income taxes
1,615 1,615
Total current assets
49,892 38,915
Property and equipment, at cost 27,571 25,001
Less accumulated depreciation and
amortization (9,685) (7,897)
Net property and equipment
17,886 17,104
Other receivables, non current 2,211 2,603
Other assets
322 986
Total assets $70,311 59,608
HAROLD'S STORES, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
LIABILITIES AND STOCKHOLDERS' EQUITY
(In Thousands Except Share Data)
November 1, February 1,
1997 1997
(unaudited)
Current liabilities:
Current maturities of long-term debt $259 110
Accounts payable 10,209 6,668
Redeemable gift certificates 674 923
Accrued bonuses and payroll expenses 1,509 1,958
Accrued rent expense 164 298
Income taxes payable
- 942
Total current liabilities
12,815 10,899
Long-term debt, net of current maturities 21,291 12,528
Deferred income taxes 146 146
Stockholders' equity:
Preferred stock of $.01 par value
Authorized 1,000,000 shares; none - -
issued
Common stock of $.01 par value
Authorized 25,000,000 shares; issued
and 57 57
outstanding 5,745,706 in November
and 5,713,526 in February
Additional paid-in capital 31,858 31,548
Retained earnings
4,144 4,430
Total stockholders' equity
36,059 36,035
Total liabilities and stockholders' $70,311 59,608
equity
HAROLD'S STORES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF EARNINGS
(In Thousands Except Share Data)
13 Weeks Ended 39 Weeks Ended
November 1, November 2, November 1, November
1997 1996 1997 2, 1996
(unaudited)
Sales $31,979 29,397 87,214 76,310
Costs and expenses:
Cost of goods sold
(including occupancy and
central buying 22,440 18,885 59,696 49,258
expenses, exclusive of
items
shown separately
below)
Selling, general and 6,050 5,812 17,464 15,463
administrative expenses
Advertising 2,018 2,070 7,220 5,494
Depreciation and 884 690 2,603 2,001
Amortization
Interest expense, net
314 34 708 214
31,706 27,491 87,691 72,430
Earnings (loss) before 273 1,906 (477) 3,880
income taxes
Provision for income taxes
109 762 (191) 1,552
Net earnings (loss)
164 1,144 (286) 2,328
Net earnings (loss) per
common share .03 .20 (.05) .41
Weighted average number of
common shares
outstanding 5,748,837 5,840,163 5,728,541 5,602,946
HAROLD'S STORES INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
(Dollars in Thousands)
39 Weeks Ended
November 1, November 2,
1997 1996
(unaudited)
Common stock:
Balance, beginning of period $57 50
Issuance of 460,000 shares in 1997
- 4
Balance, end of period $57 54
Additional paid-in capital:
Balance, beginning of period $31,548
20,572
Issuance of 460,000 shares in 1997, - 6,860
net of issuance costs of $143
Employee Stock Purchase Plan
310 268
Balance, end of period $31,858 27,700
Retained earnings:
Balance, beginning of period $4,430 4,677
Net earnings (loss)
(286) 2,328
Balance, end of period $4,144 7,005
HAROLD'S STORES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In Thousands)
39 Weeks 39 Weeks
Ended Ended
November 1, November 2,
1997 1996
(unaudited)
Cash flows from operating
activities:
Net earnings (loss) $(286) 2,328
Adjustments to reconcile net
earnings (loss) to net cash
provided by operating
activities:
Depreciation and 2,603 2,001
amortization
Gain on sale of assets (2) -
Shares issued under 310 268
employee incentive plan
Changes in assets and
liabilities:
Increase in trade and (1,599) (1,349)
other accounts receivable
Increase in merchandise (8,559) (8,115)
inventories
Decrease (increase) in 664 (449)
other assets
Increase in prepaid (485) (174)
expenses
Increase in prepaid (751) -
income tax
Increase in accounts 3,541 4,197
payable
Decrease in income taxes (942) (470)
payable
Increase (decrease) in
accrued expenses (832) 133
Net cash used in operating
activities (6,338) (1,630)
Cash flows from investing
activities:
Acquisition of property (3,392) (6,067)
and equipment
Proceeds from disposal of 9 91
property and equipment
Payment of principal from
term loan to others 392 -
Net cash used in investing (2,991) (5,976)
activities
Cash flows from financing
activities:
Advances on debt 35,096 31,417
Payments on debt (26,184) (30,402)
Issuance of common stock
- 6,864
Net cash provided by financing
activities 8,912 7,879
Net increase (decrease) in cash (417) 273
and cash equivalents
Cash and cash equivalents at
beginning of period 433 2
Cash and cash equivalents at $16 275
end of period
HAROLD'S STORES, INC. AND SUBSIDIARIES
NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS
November 1, 1997 and November 2, 1996
(Unaudited)
1. Unaudited Interim Periods
In the opinion of the Company's management, all
adjustments (all of which are normal and recurring) have been
made which are necessary to fairly state the financial position
of the Company as of November 1, 1997 and the results of its
operations and cash flows for the thirteen week period and
thirty-nine week periods ended November 1, 1997 and November 2,
1996. The results of operations for the thirteen week period
and thirty-nine week periods ended November 1, 1997 and
November 2, 1996 are not necessarily indicative of the results
of operations that may be achieved for the entire fiscal year.
2. Definition of Fiscal Year
The Company has a 52-53 week fiscal year which ends on the
Saturday closest to January 31. The period from February 2,
1997 through January 31, 1998, has been designated as fiscal
1998.
3. Reclassifications
Certain comparative prior year amounts in the consolidated
financial statements have been reclassified to conform with the
current year presentation.
4. Net Earnings Per Common Share
Net earnings per common share are based upon the weighted
average number of common shares outstanding during the period
restated for the five percent stock dividend in fiscal 1997 and
includes common stock equivalents. The common stock
equivalents for the thirteen week period ended November 1, 1997
and November 2, 1996 were 8,513 shares and 131,283 shares,
respectively. There were no common stock equivalents for the
thirty-nine week period ended November 1, 1997 compared to
140,684 shares for the thirty-nine week period ended November
2, 1996.
5. Long-term Debt
The Company has available a line of credit with its bank,
which was increased effective September 30, 1997 from $20
million to $21.5 million, through and including November 30,
1997, at which time the maximum amount of the line of credit
will reduce to $19 million, maturing on June 30, 1999. During
the thirty-nine weeks ended November 1, 1997, the Company
obtained (i) a term note in the amount of $2,340,792 and (ii) a
revolving note in the amount of $3 million, each maturing on
June 30, 1999.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Results of Operations
The following table sets forth for the periods indicated,
the percentage of net sales represented by items in the
Company's statement of earnings.
13 Weeks Ended 39 Weeks Ended
November November 2, November 1, November 2,
1, 1997 1996 1997 1996
Sales 100.0% 100.0% 100.0% 100.0%
Cost of good sold (70.2) (64.2) (68.4) (64.5)
Selling, general and
administrative (18.9) (19.8) (20.0) (20.3)
expenses
Advertising expense (6.3) (7.1) (8.3) (7.2)
Depreciation and (2.8) (2.3) (3.0) (2.6)
amortization
Interest expense, net
(0.9) (0.1) (0.8) (0.3)
Earnings (loss) 0.9 6.5 (0.5) 5.1
before income taxes
Provision for income
taxes (0.4) (2.6) 0.2 (2.0)
Net earnings (loss) 3.9%
0.5% (0.3)% 3.1%
The following table reflects the sources of the increases
in Company sales for the periods indicated.
13 Weeks Ended 39 Weeks Ended
November 1, November 2, November 1, November 2,
1997 1996 1997 1996
Store sales (000's) $ 29,558 27,114 80,183 70,297
Catalog sales 6,013
(000's) 2,421 2,283 7,031
Net sales (000's) $31,979 29,397 87,214 76,310
Total sales growth 8.8% 15.7% 14.3% 16.0%
Growth in comparable
store sales (5.7)% 0.0% (4.5)% 2.2%
(52 week basis)
Growth in catalog 6.0% (11.7)% 16.9% (9.0)%
sales
Store locations:
Existing stores 39 32 36 29
New stores opened
2 3 5 6
Total stores at
end of period 41 35 41 35
The opening of new stores, the expansion of existing stores,
as well as an increase in catalog sales contributed to total
sales growth for the third quarter and thirty-nine week periods
of fiscal 1998 and 1997. Comparable store sales declined during
the thirteen week period and thirty-nine week periods of fiscal
1998 as compared to the same periods of fiscal 1997. The opening
of second stores in each of the market areas of Birmingham, AL;
Norman, OK; Memphis, TN; Houston, TX and Washington, D.C., in the
opinion of management, resulted in a decline in comparable store
sales of existing stores located in the new store trade area. In
other locations, management attributes the decline in comparable
store sales to merchandise and personnel problems.
New stores opened during the prior twelve months, include a
15,521 square foot outlet store opened in Norman, Oklahoma in
January, 1997 (fourth quarter); a 6,300 square foot full-line
men's and ladies' store opened in Wolfchase Galleria in Cordova,
Tennessee (Memphis metro) in March 1997 (first quarter); a 5,500
square foot full-line men's and ladies' store opened in Wichita,
Kansas in May 1997 (second quarter); a 6,000 square foot full-
line men's and ladies' store opened in Columbus, Ohio in July,
1997 (second quarter); a 5,000 square foot full-line men's and
ladies' store opened in Richmond, Virginia and a 5,500 square
foot full-line men's and ladies' store opened in Birmingham,
Alabama in October, 1997 (third quarter).
The Company's gross margin decreased during the thirteen
week period and thirty-nine week periods ended November 1, 1997
compared to the same periods in the prior fiscal year. This
decrease is primarily the result of additional markdowns in
inventory related to the excess inventory that resulted from
lower than anticipated sales. Merchandise inventories are
valued at the lower of cost or market using the retail method
of accounting.
Selling, general and administrative expenses decreased as
a percentage of sales during the thirteen week period and
thirty-nine week periods ended November 1, 1997 compared to the
same periods in the prior fiscal year. The decrease is due to
an improvement in store selling expenses.
Advertising expense (including catalog production costs)
decreased as a percentage of sales during the thirteen week
period and increased for the thirty-nine week period ended
November 1, 1997 compared to the same period in the prior fiscal
year. The decrease for the thirteen week period was due to lower
catalog production costs resulting from the Company's efforts to
control the expansion of this segment of the business. The
cumulative increase for the thirty-nine week period was due in
part to the promotional efforts to liquidate the excess inventory
in the Company's retail stores during the first half of fiscal
1998.
The average balance on total outstanding debt was
$19,304,000 compared to $8,134,000 for the first thirty-nine
weeks of fiscal 1998 and fiscal 1997, respectively. This
increase in outstanding debt was due to borrowings under the
Company's line of credit to finance inventory purchases, store
expansion, remodeling and equipment purchases. Average
interest rates on the Company's line of credit were
approximately the same in both the current and prior fiscal
years. Total interest expense before capitalization for product
development costs for the thirteen weeks ended November 1, 1997
was $440,000 compared to $139,000 for the same period ended
November 2, 1996, and was $1,110,000 for the thirty-nine weeks
ended November 1, 1997 compared to $479,000 for the same period
in fiscal 1996. As the Company's growth continues, cash flow
may require additional borrowed funds which may cause an
increase in interest expense.
Capital Expenditures, Capital Resources and Liquidity
Cash Flows From Operating Activities. For the thirty-
nine weeks ended November 1, 1997, net cash used in operating
activities was $6,338,000 as compared to $1,630,000 for the
same period in fiscal 1997. The difference in cash flows from
operating activities between the fiscal periods is partially
due to (i) a net loss from operations of $286,000 compared to
net earnings of $2,328,000 for the same period in fiscal 1997,
(ii) an increase of $8,559,000 in the Company's merchandise
inventories as compared to an increase of $8,115,000 during the
same period of fiscal 1997, (iii) a decrease of $832,000 in
accrued expenses compared to an increase of $133,000 during
fiscal 1997 and (iv) an increase in accounts payable of
$3,541,000 compared to an increase in accounts payable of
$4,197,000 for the same period in fiscal 1997.
Management expects the dollar amount of the Company's
merchandise inventories to continue to increase with the
expansion of its product development programs, private label
merchandise and chain of retail stores, with related increases in
trade accounts receivable and accounts payable and that period-to-
period differences in timing of inventory purchases and
deliveries will affect comparability of cash flows from operating
activities.
In order to conform with the current year presentation of
certain costs associated with new store openings, comparative
fiscal 1997 amounts were re-classified from prepaid expenses to
acquisition of property and equipment. This change resulted in a
decrease in net cash used in operating activities and an increase
in net cash used in investing activities in the aggregate amount
of $1,398,000.
Cash Flows From Investing Activities. For the thirty-nine
weeks ended November 1, 1997, net cash used in investing
activities totaled $2,991,000 compared to $5,976,000 for the same
period in fiscal 1997. The reduction in capital expenditures is
primarily the result of the expansion of the distribution center
during fiscal 1997. Capital expenditures were invested in new
stores, and remodeling and equipment in existing operations.
Cash Flows From Financing Activities. During the thirty-
nine weeks ended November 1, 1997, the Company made periodic
borrowings under its revolving credit facility (described
below) to finance its inventory purchases, product development
and private label programs, store expansion, remodeling and
equipment purchases.
The Company has available a line of credit with its bank,
which was increased effective September 30, 1997 from $20
million to $21.5 million, through and including November 30,
1997, at which time the maximum amount of the line of credit
will reduce to $19 million, maturing on June 30, 1999. This
line had an average balance of $17,037,000 and $6,961,000 for
the first thirty-nine weeks of fiscal 1998 and 1997,
respectively. The balance of this line of credit on December
8, 1997 was $16,714,000. During the thirty-nine weeks ended
November 1, 1997, the Company obtained (i) a term note in the
amount of $2,340,792, and (ii) a revolving note in the amount
of $3 million, each maturing on June 30, 1999.
Liquidity. The Company considers the following as
measures of liquidity and capital resources as of the dates
indicated.
February November 1, November 2,
1, 1997 1997 1996
Working capital (000's) $28,016 $37,077 $29,243
Current ratio 3.57:1 3.89:1 3.56:1
Ratio of working capital .47:1 .53:1 .51:1
to total assets
Ratio of total debt to .35:1 .60:1 .31:1
stockholders' equity
The Company's primary needs for liquidity are to finance
its inventories and revolving charge accounts and to invest in
new stores, remodeling, fixtures and equipment. Cash flow from
operations and proceeds from credit facilities represent the
Company's principal sources of liquidity. Management
anticipates these sources of liquidity to be sufficient to meet
its operating and capital requirements in the forseeable
future.
Seasonality
The Company's business is subject to seasonal influences,
with the major portion of sales realized during the fall season
(third and fourth quarters) of each fiscal year, which includes
the back-to-school and Christmas selling seasons. In light of
this pattern, selling, general and administrative expenses are
typically higher as a percentage of sales during the spring
season (first and second quarters) of each fiscal year.
Inflation
Inflation affects the costs incurred by the Company in its
purchase of merchandise and in certain components of its
selling, general and administrative expenses. The Company
attempts to offset the effects of inflation through price
increases and control of expenses, although the Company's
ability to increase prices is limited by competitive factors in
its markets. Inflation has had no meaningful effect on the
other assets of the Company.
Part II
Item 6. Exhibits and Reports on Form 8-K.
(a) Exhibits. See Exhibits Index immediately
preceding exhibits.
10.5 Seventh Amendment to Second Amended and Restated
Credit Agreement dated September 30, 1997 between
Registrant and NationsBank.
10.6 Third Amended and Restated Credit Agreement dated
November 10, 1997 between Registrant and NationsBank.
27.1 Financial Data Schedule.
(b) Reports on Form 8-K. The Company filed no
reports on Form 8-K during the quarter ended
November 1, 1997.
SIGNATURE
Pursuant to the requirements of the Securities Exchange
Act of 1934, the Registrant has duly caused this report to be
signed on its behalf by the undersigned, hereunto duly
authorized.
HAROLD'S STORES, INC.
By:/s/H. Rainey Powell
H. Rainey Powell
President and Chief Financial Officer
Date: December 16, 1997
SEVENTH AMENDMENT TO
SECOND AMENDED AND RESTATED CREDIT AGREEMENT
THIS SEVENTH AMENDMENT TO SECOND AMENDED AND RESTATED CREDIT
AGREEMENT (this "Amendment") is made effective September 30,
1997, by and between HAROLD'S STORES, INC., an Oklahoma
corporation ("Borrower"), and NATIONSBANK, N.A. ("Lender").
W I T N E S S E T H:
WHEREAS, Borrower and Lender have entered into a Second
Amended and Restated Credit Agreement dated February 28, 1996, as
amended by a First Amendment dated June 28, 1996, a Second
Amendment dated November 6, 1996, a Third Amendment dated April
24, 1997, a Fourth Amendment dated June 25, 1997, a Fifth
Amendment dated July 10, 1997 and a Sixth Amendment dated July
31, 1997 (as amended, the "Agreement");
WHEREAS, Borrower has requested that the Agreement be
amended to permit Borrower to extend the date through and
including which the Maximum Revolving Facility shall be
Twenty-One Million Five Hundred Thousand Dollars ($21,500,000.00)
from September 30, 1997 to November 30, 1997, after which time
the Maximum Revolving Facility would reduce to $19,000,000.00;
and
WHEREAS, Lender is willing to amend the Agreement to extend
the maturity date of the Revolving Loan upon the terms and
conditions set forth in this Amendment.
NOW, THEREFORE, in consideration of the premises and the
mutual agreements set forth herein, the parties agree as follows:
I. Loan Agreement Definitions. The definitions of
"Agreement," "Borrowing Base," "Maximum Revolving Facility" and
"Revolving Loan Note" in the Agreement are hereby amended in
their entirety as follows:
"Agreement" shall mean that certain Second Amended and
Restated Credit Agreement dated February 28, 1996 between
Borrower and Lender as amended by a First Amendment dated
June 28, 1996, a Second Amendment dated November 6, 1996, a
Third Amendment dated April 24, 1997, a Fourth Amendment
dated June 25, 1997, a Fifth Amendment dated July 10, 1997,
a Sixth Amendment dated July 31, 1997 and a Seventh
Amendment dated September 30, 1997.
"Borrowing Base" shall mean an amount equal to the sum
of (i) eighty percent (80%) of Eligible Accounts, and (ii)
sixty percent (60%) of Eligible Inventory not to exceed
$21,500,000.00 through and including November 30, 1997, and
fifty percent (50%) of Eligible Inventory not to exceed
$19,000,000.00 beginning December 1, 1997, as reflected in
the most current Monthly Report less all Letters of Credit.
"Maximum Revolving Facility" shall mean the maximum
aggregate amount which Lender has agreed to consider as a
ceiling on the outstanding principal balance of loans to be
made to the Borrower and Letters of Credit issued pursuant
to Section 2. The Maximum Revolving Facility shall be
Twenty-One Million Five Hundred Thousand Dollars
($21,500,000.00) through and including November 30, 1997 and
Nineteen Million Dollars ($19,000,000.00) beginning December
1, 1997.
"Revolving Loan Note" shall mean that certain
Thirteenth Amended and Restated Reducing Revolving Note
executed by the Borrower substantially in the form of
Exhibit "A" attached to the Seventh Amendment to this
Agreement, dated the effective date of such Seventh
Amendment, as same may be extended, renewed, amended or
modified from time to time pursuant to the terms of this
Agreement.
I. Reporting and Eligibility Requirements. Sections
3.1 and 3.2 of the Agreement are hereby deleted in their
entirety and replaced by the following:
3.1 Monthly Reports. The Borrower shall submit to the
Lender, not later than the twenty-fifth (25th) day following
the end of each month, a monthly report ("Monthly Report"),
accompanied by a Borrowing Base certificate in the form
attached to the Seventh Amendment to this Agreement as
Exhibit "B", which shall be signed by the President, chief
financial officer or other authorized officer of the
Borrower. Each Monthly Report shall include, as of the
closing day for the preceding month: (i) a summary aged
trial balance of Accounts for the Borrower ("Accounts Trial
Balance"); (ii) calculations of the current Borrowing Base;
(iii) the amount of the outstanding principal balance of the
Liabilities; and (iv) a representation by the Borrower that
no Default or Event of Default occurred during such month
or, if a Default or Event of Default has occurred during
such month, a description of such Default or Event of
Default and of the actions the Borrower has taken or intends
to take to cure the same. Upon Lender's request therefor,
the Borrower shall furnish with such specificity as is
satisfactory to Lender, concerning matters included,
described or referred to in the Monthly Reports and any
other documents in connection therewith requested by Lender
including, without limitation, but only if specifically
requested by Lender, copies of all invoices prepared in
connection with the Accounts. The Monthly Reports shall
contain such additional information as Lender may reasonably
require.
3.2 Quarterly Reports. The Borrower shall submit to
the Lender not later than the forty-fifth (45th) day
following the end of each fiscal quarter and shall be
accompanied by the Quarterly Borrowing Base and Compliance
Certificate (the "Quarterly Report") in the form attached to
the Seventh Amendment to this Agreement as Exhibit "C".
Each Quarterly Report shall include, as of the closing day
of the preceding fiscal quarter: (i) calculations of the
current Borrowing Base; (ii) the quarterly itemization of
Inventory described in Section 3.7; and (iii) evidence
satisfactory to Lender that each of the covenants set forth
in Section 6.9 has been complied with during such quarter.
3. Definitions. Except as specifically defined in this
Amendment, capitalized terms used in this Amendment shall have
the same meanings ascribed to them in the Agreement.
4. No Default, Event of Default or Claims. No event has
occurred which constitutes a Default or Event of Default and the
Borrower has no and waives any claims, rights, setoff or defense
against the Lender under the Agreement, as amended by this
Amendment, or the other Financing Agreements.
5. Miscellaneous.
5.1. Effect of Amendment. The Agreement, as
amended, modified and supplemented by this Amendment, shall
continue in full force and effect in accordance with its
covenants and terms and is hereby ratified, restated and
reaffirmed in every respect by the Borrower and the Lender,
including any security interests granted pursuant thereto,
as of the date hereof. Each of the Borrower's
representations and warranties contained in the Agreement
and other Financing Agreements are true and correct as of
the date hereof and with the same force and effect. To the
extent the terms of this Amendment are inconsistent with the
terms of the Agreement, this Amendment shall control and the
Agreement shall be amended, modified or supplemented so as
to give full effect to the transaction contemplated by this
Amendment.
5.2 Descriptive Headings. The descriptive headings of
the sections of this Amendment are inserted for convenience
only and shall not be used in the construction or the
content of this Amendment.
5.3 Multiple Counterparts. This Amendment may be
executed in one or more counterparts, each of which shall,
for all purposes of this Amendment, be deemed an original,
but all of which shall constitute one and the same
agreement.
IN WITNESS WHEREOF, the parties have executed this Amendment
effective the date shown above.
"BORROWER": HAROLD'S
STORES, INC., an Oklahoma
corporation
By:
H. Rainey Powell, President and
Chief Operating Officer
"LENDER":
NATIONSBANK, N.A.
By:
Kelly H. Sachs, Vice President
THIRD AMENDED AND RESTATED CREDIT AGREEMENT
THIS THIRD AMENDED AND RESTATED CREDIT AGREEMENT
("Agreement") is entered into effective the 10th day of November,
1997, by HAROLD'S STORES, INC. an Oklahoma corporation
("Borrower"), and NATIONSBANK, N.A. ("Lender").
W I T N E S S E T H:
WHEREAS, pursuant to the terms and conditions of that
certain Second Amended and Restated Credit Agreement by and
between Borrower and Lender dated February 28, 1996 as most
recently amended by a Seventh Amendment to Second Amended and
Restated Credit Agreement dated effective September 30, 1997 (as
amended, the "Original Agreement"), Borrower agreed to borrow up
to the aggregate principal amount of $21,500,000.00 from Lender
on a revolving loan basis (the "Original Revolving Loan");
WHEREAS, Borrower has requested an extension of the maturity
date of the Original Revolving Loan, which is to be used for
working capital purposes, and has requested additional loans for
other purposes; and
WHEREAS, Lender is willing to extend the maturity date of
the Original Revolving Loan and to make the additional loans to
Borrower upon the terms and conditions set forth herein;
NOW, THEREFORE, in consideration of the terms and conditions
contained herein, and of any loans or extensions of credit hereto
fore, now or hereafter made to or for the benefit of Borrower by
Lender, the parties hereto hereby agree as follows:
I. DEFINITIONS.
1.1 General Terms. When used herein, the following terms
shall have the following meanings:
"Accounts" shall mean all present and future rights of
Borrower and each of the Harold's Subsidiaries to payment
for retail services rendered or retail Goods sold, purchased
or leased, which are not evidenced by Instruments or Chattel
Paper, and whether or not they have been earned by
performance, including Accounts owned by Borrower or any of
the Harold's Subsidiaries doing business under any other
name.
"Account Debtor" shall mean the party who is obligated
on or under an Account.
"Accounts Trial Balance" shall have the meaning
assigned to that term in Section 3.1.
"Affiliate" shall mean any Person (a) that directly or
indirectly, through one or more intermediaries, controls or
is controlled by, or is under common control of Borrower,
(b) that directly or beneficially owns or holds 5% or more
of any class of the voting stock of Borrower, or (c) 5% or
more of whose voting stock (or in the case of a person which
is not a corporation, 5% or more of the equity interest) is
owned directly or beneficially or held by Borrower.
"Agreement" shall mean this Third Amended and Restated
Credit Agreement dated November 10, 1997.
"Bober" shall mean Franklin I. Bober.
"Business Day" shall mean any day of the year on which
banks are not required or authorized to close in Oklahoma
City, Oklahoma.
"Cash Collateral" shall mean the certificate of deposit
in the name of CMT in the amount of $339,558.00 issued by
Chase as security for the Chase Letter of Credit.
"Cash Equivalent Investments" shall mean (i) short-term
direct obligations of the United States Government, (ii)
readily marketable commercial paper rated A1 or better by
Standard & Poor's Corporation (or a similar rating by a
similar organization which rates commercial paper), (iii)
federally insured negotiable certificates of deposit or
bankers acceptances, payable to the order of Borrower or to
bearer, issued by one or more commercial banks or trust
companies operating in the United States and (iv) cash
deposits maintained by Borrower at Lender.
"Chase" shall mean The Chase Manhattan Bank, a New York
corporation.
"Chase Letter of Credit" shall mean the letter of
credit secured by the Cash Collateral and issued by Chase to
Shinyei Corporation of America, as beneficiary, for the
account of CMT.
"Chattel Paper" shall mean a writing or writings which
evidence both a monetary obligation and a security interest
in or a lease of specific goods. The transaction is
evidenced by both such a security agreement or a lease and
by an Instrument or series of Instruments, a group of
writings taken together constitutes Chattel Paper.
"CMT" shall mean CMT Enterprises Inc., a New York
corporation.
"CMT Loan" shall mean the loan in the original
principal amount of $2,750,000.00 made by Borrower to CMT
pursuant to the CMT Loan Documents.
"CMT Loan Assignments" shall mean the Collateral
Assignment and Security Agreement in the form of attached
Exhibit "H" and such other collateral assignments,
endorsements, assignments, UCC-1s or other instruments as
shall be reasonably required by Lender whereby Lender is
assigned and granted a first priority security interest in
all right, title and interest of Borrower in and to the CMT
Loan Documents.
"CMT Loan Documents" shall mean all documents executed
by Borrower, CMT, Bober or any other party dated effective
November 6, 1996 evidencing or otherwise relating to the CMT
Loan as more fully described in Section 2.4.5.1.
"Code" shall have the meaning assigned to that term in
Section 1.3.
"Collateral" shall mean (i) all terms and covenants
more particularly described in the Negative Pledge
Agreement, (ii) the first priority lien or security interest
on all of the Tenant Improvement Reimbursements, (iii) the
CMT Loan Assignments and (iv) all property and interests in
all property in or upon which a security interest, lien or
mortgage is granted to Lender by Borrower or a Harold's
Subsidiary, whether under this Agreement, the other Loan
Documents, or under any other documents, instruments or
writings executed by Borrower and delivered to Lender.
"Default" shall mean the occurrence or existence of any
one or more of the following events:
(a) Borrower fails to pay any of the Liabilities
within ten (10) calendar days following the date such
Liabilities are due or are declared due;
(b) Borrower or a Harold's Subsidiary fails or
neglects to perform, keep or observe any of the
covenants, conditions or agreements contained in this
Agreement or in any of the other Loan Documents and
such failure or neglect continues for more than thirty
(30) days after written notice from Lender of such
failure or neglect; provided that such grace period
shall not apply, and a Default shall exist upon the
occurrence of such failure or neglect, if (i) such
Default may not, in Lender's reasonable determination,
be cured by Borrower during such thirty (30) day grace
period (such failure or neglect incapable of cure shall
not include the failure to comply with the financial
covenants set forth in Section 7.9 for which the thirty
(30) day grace period shall continue to apply but shall
include, without further limitation, the failure to
obtain the written consent of Lender prior to taking
any action described in this Agreement which requires
such prior written consent) or (ii) the covenant to
have been performed was the delivery to Lender of a
Monthly Report; provided, further, that with respect to
any Financing Agreement other than this Agreement, the
grace period provided under this clause (b) shall be
concurrent with, and not in addition to, any grace
period that may be provided under such Financing
Agreement;
(c) any warranty or representation now or
hereafter made by Borrower or a Harold's Subsidiary in
connection with this Agreement or any of the other Loan
Documents is untrue or incorrect in any material
respect, or any schedule, certificate, statement,
report, financial data, notice, or writing furnished at
any time by Borrower to Lender is untrue or incorrect
in any material respect on the date as of which the
facts set forth therein are stated or certified;
(d) a judgment or order requiring payment in
excess of $10,000.00 shall be rendered against
Borrower, and such judgment or order shall remain
unsatisfied or undischarged and in effect for thirty
(30) consecutive days; provided that this clause (d)
shall not apply to any judgment with respect to which
(i) a stay of enforcement has been entered within such
thirty (30) day period; (ii) an appeal, properly
bonded, has been taken within such thirty (30) day
period; or (iii) Borrower is fully insured, and with
respect to which the insurer has admitted in writing
its liability for the full amount thereof;
(e) a notice of lien, levy or assessment is filed
or recorded with respect to all or a substantial part
of the assets of Borrower or any of the Harold's
Subsidiaries by the United States, or any department,
agency or instrumentality thereof, or by any state,
county, municipality or other governmental agency or
any taxes or debts owing at any time or times hereafter
to any one or more of them, provided that this clause
(e) shall not apply to any liens, levies, or
assessments which relate to current taxes not yet due
and payable or any liens, levies or assessments which
are being contested and properly bonded;
(f) all or any part of the assets of Borrower is
attached, seized, subjected to a writ or distress
warrant, or is levied upon, or comes within the
possession of any receiver, trustee, custodian or
assignee for the benefit of creditors and on or before
the tenth (10th) Business Day thereafter such assets
are not returned to Borrower and/or such writ, distress
warrant or levy is not dismissed, stayed or lifted;
(g) a proceeding under any bankruptcy,
reorganization, arrangement of debt, insolvency,
readjustment of debt or receivership law or statute is
filed by or against Borrower, or Borrower makes an
assignment for the benefit of creditors or Borrower
takes any corporate action to authorize any of the
foregoing;
(h) Borrower voluntarily or involuntarily
dissolves or is dissolved, terminates or is terminated;
(i) Borrower becomes insolvent or fails generally
to pay its debts as they become due;
(j) Borrower is enjoined, restrained or in any way
prevented (whether by affirmative order, by the
suspension of any license, permit or approval to
conduct business, or otherwise) by the order of any
court or any administrative or regulatory agency from
conducting all or any material part of its business
affairs;
(k) a breach by Borrower shall occur under any
material factoring agreement, document or instrument or
similar arrangement for the financing of Borrower's
Accounts and Inventory, whether heretofore, now or
hereafter existing between Borrower and any other
Person, and such breach continues for more than thirty
(30) days after such breach first occurs (or thirty
(30) days after any notice with respect to such breach
if such notice is required to be given to Borrower
thereunder), provided that such grace period shall not
apply, and Borrower shall be in Default upon the
occurrence of such breach, if such breach may not, in
Lender's reasonable determination, be cured by
Borrower, during such thirty (30) day grace period;
(l) a material and adverse change shall occur in
Borrower or any of its operations or financial condi
tions; or
(m) a material change shall occur in Lender's sole
determination in the management or management structure
of Borrower.
"Documents" shall mean a bill of lading, dock warrant,
dock receipt, warehouse receipt or other order of delivery
of goods, and also any other documents which in the regular
course of business financing is treated as adequately
evidencing that the Person in possession of it is entitled
to receive, hold and dispose of the document and the goods
it covers.
"Eligible Accounts" shall mean an amount which shall be
calculated by Borrower and submitted for the approval of
Lender, from time to time, which shall equal the sum of
Borrower's Accounts generated by Borrower's billings or
invoices to retail Account Debtors in respect of goods
actually delivered or services actually performed for
Borrower's and the Harold's Subsidiaries' customers and
which Accounts shall represent a sum of money
unconditionally due and owing to Borrower from a retail
Account Debtor, but excluding: (i) Accounts totaling more
than 3% of the total of Borrower's Accounts and which are or
may be subject to any dispute, set-off, recoupment,
counterclaim or other claim which would reduce the amount to
be paid by the Account Debtor to Borrower, (ii) each Account
in respect of which either Borrower or Lender believes that
complete and timely collection thereof may be doubtful,
(iii) the entirety of each Account if the required minimum
payment shall be unpaid for a period of time in excess of
sixty (60) days from the date of first invoice, (iv) each
Account due from an Affiliate (inter company or inter store)
of Borrower, including the Harold's Subsidiaries. In making
such a determination, Lender shall be generally guided by
the following minimum requirements:
(a) the required minimum payment on the Account has
not remained unpaid for a period of more than
sixty (60) days after the date of Borrower's credit
billing:
(b) the account is not owing from an Account Debtor
who has failed to make the required minimum payment
owing within sixty (60)days of the invoice date;
(c) the Account is a valid, legally enforceable
obligation of the Account Debtor thereunder and is
not, to the extent it is considered eligible,
subject to any offset or other known defense on the
part of such retail Account Debtor provided, however, that
(i) reasonable and customary discounts for prompt payment will be
allowed, or (ii) if it is subject to any other offset, defense or
claim, it shall be ineligible to the extent of such offset,
defense or claim; and
(d) the Account is not subject to any consensual lien
or security interest whatsoever.
"Eligible Inventory" shall mean an amount which shall
be calculated by Borrower and submitted for approval of
Lender from time to time (separated into categories of raw
materials, work in process and finished goods on a quarterly
basis until such time as Borrower has the capability of
generating such categories on a monthly basis), which shall
equal the sum of all Inventory actually owned by Borrower
and the Harold's Subsidiaries located at any of Borrower's
or Harold's Subsidiaries' principal places of business for
which all costs of acquisition and purchase of such
Inventory have been satisfied or will be satisfied by an
advance on the Revolving Loan, the Tenant Improvement Loan,
the Letter of Credit Facility or any Letter of Credit
Agreement made by Lender directly to the seller of such
Inventory and which Inventory should properly, under
generally accepted accounting principles, be listed as an
asset on Borrower's consolidated balance sheet with no
corresponding entry of a liability to any Person other than
Lender.
"ERISA" shall have the meaning assigned to that term in
Section 6.15.
"Execution Date" shall mean November 10, 1997.
"Event of Default" shall mean an event which through
the passage of time, or the service or giving of notice, or
both would (assuming the action necessary to cure the same
is not taken by Borrower) mature into a Default.
"General Intangibles" shall mean all choses in action,
causes of action and all other intangible personal property
of every kind and nature (other than Accounts) including,
without limitation, corporate or other business records,
liens, inventions, designs, patents, patent applications,
service marks, trademarks, tradenames, trade secrets,
goodwill, registrations, copyrights, licenses, permits,
franchises, customer lists, tax refund claims and the like,
wherever located.
"Goods" shall mean all things which are movable at the
time a security interest attaches or which are fixtures, but
does not include money, Documents, Instruments, Accounts,
Chattel Paper and General Intangibles.
"Harold's Subsidiaries" shall mean Harold's of Norman,
Inc., an Oklahoma corporation, Harold's Financial
Corporation, an Oklahoma corporation, Harold's Service
Corporation, Inc., an Oklahoma corporation, Harold's of
Oklahoma City, Inc., an Oklahoma corporation, Harold's of
Tulsa, Inc., an Oklahoma corporation, Harold's of Utica
Square, Inc., an Oklahoma corporation, Harold's of Penn
Place, Inc., an Oklahoma corporation, Harold's Clothing,
Inc., a Texas corporation, Harold's of Texas, Inc., a Texas
corporation, Harold's of Fort Worth, Inc., a Texas
corporation, Harold's of Dallas, Inc., a Texas corporation,
Harold's of the Galleria, Inc., a Texas corporation, HSTX,
Inc., a Texas corporation, Harold's Limited Partners, Inc.,
an Oklahoma corporation, Harold's Stores of Texas, L.P., a
Texas limited partnership, Harold's DBO, Inc., a Texas
corporation, Harold's of White Flint, Inc., a Maryland
corporation, Harold's of Jackson, Inc., a Mississippi
corporation, Harold's Direct, Inc., an Oklahoma corporation,
Harold's Air Trans, Inc., an Oklahoma corporation, and
Corner Properties, Inc., an Oklahoma corporation.
"Instruments" shall mean a negotiable instrument, as
defined in 12A O.S. 3-104, or a security, as defined in 12A
O.S. 8-102, or any other writing which evidences a right to
the payment of money and is not itself a security agreement
or lease and is of a type which is in ordinary course of
business transferred by delivery with any necessary endorse
ment or assignment.
"Inventory" shall mean any and all Goods, wheresoever
located, whether now owned or hereafter acquired by Borrower
or any of the Harold's Subsidiaries, which are held for
sale.
"Landlords" shall mean the Lessors under the Lease
Agreements and "Landlord" shall mean any one of the
Landlords under any of the Lease Agreements.
"Lease Agreements" shall mean those lease agreements
entered into by Borrower or a Harold's Subsidiary and any of
the Landlords for present or future Premises.
"Letter of Credit Agreements" shall mean the written
agreements with the Lender executed or hereafter executed in
connection with the issuance by the Lender of the Letters of
Credit, such agreements to be on the Lender's customary form
for commercial or standby letters of credit of comparable
amount and purpose, as from time to time in effect.
"Letter of Credit Facility" shall have the meaning
assigned to that term in Section 2.3.
"Letter of Credit Note" shall mean that certain
Revolving Note executed by Borrower substantially in the
form of attached Exhibit "C".
"Letters of Credit" shall mean the commercial letters
of credit hereafter issued under the terms of the Letter of
Credit Facility by Lender pursuant to Section 2.3 and all
reimbursement obligations pertaining to such letters of
credit, and "Letter of Credit" shall mean any one of the
Letters of Credit and the reimbursement obligations
pertaining thereto.
"Liabilities" shall mean all liabilities, obligations,
and indebtedness to Lender of Borrower or any Harold's
Subsidiary which is a party to a Security Agreement of any
and every kind and nature, whether heretofore, now or
hereafter owing, arising, due or payable and howsoever
evidenced, created, incurred, acquired or owing, whether
primary, secondary, direct, indirect, contingent, fixed or
otherwise (including obligations of performance) and whether
arising or existing under written agreement, oral agreement
or operation of law, including without limitation, all of
Borrower's indebtedness and obligations to Lender under this
Agreement, the other Loan Documents, the Revolving Note, the
Tenant Improvement Note, the Letter of Credit Note and the
Term Note.
"LIBOR Rate" shall mean the London Interbank Offered
Rate for either (i) one (1) month or (ii) three (3) months,
as published in The Wall Street Journal indicating the
average of interbank offered rates for dollar deposits in
the London market based on the quotation at five major
banks, as elected by Borrower on the 15th day of each month,
such election to be effective until the 15th day of the
following month. If the 15th day of a month falls on a date
when The Wall Street Journal is not published, then the one
(1) month or three (3) month LIBOR Rate published in the
following issue of The Wall Street Journal shall be the
basis of the applicable LIBOR Rate to be elected by
Borrower.
"Loan Documents" shall mean all agreements, instruments
and documents, including, without limitation, this
Agreement, the Notes, the Security Agreements, the Negative
Pledge Agreement, the CMT Loan Assignments, the Letters of
Credit and all other security agreements, loan agreements,
notes, guarantees, mortgages, deeds of trust, subordination
agreements, pledges, powers of attorney, consents,
assignments, contracts, notices, financing statements and
all other written matters whether heretofore, now, or
hereafter executed by or on behalf of Borrower in favor of
Lender, together with all agreements and documents referred
to therein or contemplated thereby.
"Loans" shall have the meaning assigned to that term in
Section 2.
"Monthly Report" shall have the meaning assigned to
that term in Section 3.1.
"Negative Pledge Agreement" shall mean that certain
Negative Pledge Agreement executed by Borrower
substantially in the form of Exhibit "G" attached to this
Agreement, of even date herewith, as same may be extended,
renewed, amended or modified from time to time pursuant to
the terms of this Agreement.
"Notes" shall mean collectively Revolving Note, the
Tenant Improvement Note, the Letter of Credit Note and the
Term Note and any other notes entered into under the Loan
Documents and any extensions, renewals, amendments,
replacements or modifications of the foregoing.
"Pension Plan" shall have the meaning assigned to that
term in Section 6.15.
"Person" shall mean any individual, sole
proprietorship, partnership, joint venture, trust,
unincorporated organization, association, corporation,
institution, entity, party, or government (whether national,
federal, state, provincial, county, city, municipal or
otherwise, including, without limitation, any
instrumentality, division, agency, body or department
thereof).
"Premises" shall mean any premises leased by Borrower
or a Harold's Subsidiary pursuant to a Lease Agreement.
"Quarterly Report" shall have the meaning assigned to
that term in Section 3.2.
"Revolving Loan" shall have the meaning assigned to
that term in Section 2.1.
"Revolving Loan Borrowing Base" shall mean an amount
equal to the sum of (i) eighty percent (80%) of Eligible
Accounts, and (ii) sixty percent (60%) of Eligible
Inventory. This amount shall not exceed $21,500,000.00
through and including November 30, 1997 and, beginning
December 1, 1997, shall not exceed $19,000,000.00, as
reflected in the most current Monthly Report.
"Revolving Loan Maximum Revolving Facility" shall mean
the maximum aggregate amount which Lender has agreed to
consider as a ceiling on the outstanding principal balance
of the Revolving Loan to be made to Borrower. The Revolving
Loan Maximum Revolving Facility shall be $21,500,000.00
through and including November 30, 1997 and $19,000,000.00
beginning December 1, 1997.
"Revolving Note" shall mean that certain Fourteenth
Amended and Restated Revolving Note executed by Borrower
substantially in the form of Exhibit "A" attached to this
Agreement, of even date herewith, in the original principal
amount of $21,500,000.00 through and including November 30,
1997 and $19,000,000.00 beginning December 1, 1997 as same
may be extended, renewed, amended or modified from time to
time pursuant to the terms of this Agreement.
"Security Agreements" shall collectively mean the
respective Security Agreement and Assignment of even date
herewith executed by each of Borrower in favor of Lender
substantially in the form of Exhibit "I-1" attached to this
Agreement and by Harold's Stores of Texas, L.P. and other
Harold's Subsidiaries in the future, if applicable, in favor
of Lender substantially in the form of Exhibit "I-2"
attached to this Agreement, and any amendments or
restatements of any such agreements.
"Subsidiary" shall mean any corporation of which more
than fifty percent (50%) of the outstanding capital stock
having ordinary voting power to elect a majority of the
board of directors of such corporation (irrespective of
whether at the time stock of any other class or classes of
such corporation shall have or might have voting power by
reason of the happening of any contingency) is at the time,
directly or indirectly, owned by Borrower.
"Tangible Net Worth" shall mean stockholder's equity in
Borrower, plus debt expressly subordinated to Lender,
determined in accordance with generally accepted accounting
principles consistent with those applied in the preparation
of the financial statements referred to in Section 7.1,
less: (i) General Intangibles, (ii) receivables from any
shareholders of Borrower or any of the Harold's
Subsidiaries, and (iii) notes or amounts received or
receivable from any other Affiliate or Subsidiary.
"Tenant Improvement Agreements" shall mean those
agreements contained in the Lease Agreements or related
agreements between Borrower or a Harold's Subsidiary and a
Landlord pursuant to which Borrower is entitled to Tenant
Improvement Reimbursement.
"Tenant Improvement Loan" shall have the meaning
assigned to that term in Section 2.2.
"Tenant Improvement Loan Borrowing Base" shall mean an
amount equal to the sum of outstanding Tenant Improvement
Reimbursements under Tenant Improvement Agreements approved
by Lender. This amount shall not exceed $3,000,000.00.
"Tenant Improvement Loan Maximum Revolving Facility"
shall mean the maximum aggregate amount which Lender has
agreed to consider as a ceiling on the outstanding principal
balance of the Tenant Improvement Loan to be made to
Borrower. The Tenant Improvement Loan Maximum Revolving
Facility shall be $3,000,000.00.
"Tenant Improvement Note" shall mean that certain
Revolving Note executed by Borrower substantially in the
form of Exhibit "B" attached to this Agreement, of even date
herewith, in the original principal amount of $3,000,000.00
as same may be extended, renewed, amended or modified from
time to time pursuant to the terms of this Agreement.
"Tenant Improvement Reimbursement" shall mean the
entitlement of Borrower or a Harold's Subsidiary to
reimbursement from a Landlord pursuant to a Tenant
Improvement Agreement for the cost of Tenant Improvements.
"Tenant Improvements" shall mean all improvements made
by Borrower or a Harold's Subsidiary to any of the Premises
for which Borrower or such Harold's Subsidiary is entitled
to Tenant Improvement Reimbursement.
"Term Loan" shall have the meaning assigned to that
term in Section 2.4.
"Term Note" shall mean that certain Term Note of even
date herewith in the original principal amount of
$2,340,792.00 executed by Borrower in favor of Lender
attached hereto as Exhibit "D", as the same may be extended,
renewed or modified from time to time pursuant to the terms
of this Agreement.
"Total Liabilities" shall mean with respect to any
Person (i) all obligations of such Person which, in
accordance with generally accepted accounting principles,
would be shown on the balance sheet of such Person as a
liability (including, without limitation, obligations for
borrowed money and for the deferred purchase price of
property or services, and obligations evidenced by bonds,
debentures, notes or other similar instruments); (ii) all
rental obligations under leases required to be capitalized
under generally accepted accounting principles; (iii) all
guarantees (direct or indirect) and other contingent
obligations of such Person in respect of, or obligations to
purchase or otherwise acquire or to assure payment of,
liabilities of others; and (iv) liabilities of others
secured by a lien, security interest or other encumbrance
upon property owned by such Person, whether or not assumed;
(v) less debt expressly subordinated to Lender.
"UCC-1" shall mean a Uniform Commercial Code Form 1
financing statement.
1.2 Accounting Terms. Any accounting terms used in
this Agreement which are not specifically
defined herein shall have the meanings customarily
given them in accordance with generally accepted
accounting principles.
1.3 Others Defined in Oklahoma Uniform Commercial
Code. All other terms contained in this Agreement
(and which are not otherwise specifically defined
herein) shall have the meanings provided by the
Uniform Commercial Code of the State of Oklahoma (the
"Code") to the extent the same are used or defined therein.
2. THE LOANS. Subject to the terms and conditions, and
relying upon the representations and conditions hereinafter set
forth, Lender agrees to lend and Borrower agrees to borrow as
follows:
2.1 Revolving Loan.
2.1.1 Borrowing Base. Borrower may, as long
as otherwise in compliance with the terms of this
Agreement, borrow, repay without penalty or
premium and reborrow hereunder, the lesser of
(i) the Revolving Loan Maximum Revolving Facility,
or (ii) the Revolving Loan Borrowing Base.
2.1.2 Advances. Each request for advance
under the Revolving Loan may be made by
telephone by the authorized representative of
Borrower no later than 2:00 p.m. on the date
on which an advance is requested to be made. Each
advance to Borrower shall be in immediately available funds
and deposited in Borrower's demand deposit accounts with
Lender.
2.1.3 Maximum Principal Balance. Borrower
agrees that if at any time the aggregate outstanding
principal balance of the Revolving Loan shall
exceed an amount equal to the lesser of (i) the
Revolving Loan Maximum Revolving Facility or (ii)
the Revolving Loan Borrowing Base, Borrower shall promptly
pay to Lender the amount necessary to eliminate such excess.
2.1.4 Interest. Prior to Default, Borrower
shall pay to Lender interest on the average
daily outstanding balance of the Liabilities under the
Revolving Loan at a rate per annum equal to the
LIBOR Rate plus one and five-eighths of one
percent (1.625%).
2.1.5 Payment. The unpaid principal balance
of the Revolving Loan shall be due and
payable on the earlier of June 30, 1999 or
upon the occurrence of a Default. Accrued interest
shall be payable monthly in arrears beginning
November 30, 1997 and on the last day of each month
thereafter, upon the date of any prepayment and at maturity.
All interest accrued shall be computed on the basis of a
year of 360 days, and the actual number of days elapsed in
the period in which it accrues. Following the occurrence of
a Default, Borrower shall pay to Lender interest from the
date of such Default at the per annum rate of five percent
(5%) in excess of the then applicable annual rate on the
outstanding principal balance of the liabilities under the
Revolving Loan.
2.1.6 Term. The Revolving Loan will mature on
June 30, 1999, at which time all principal and
accrued interest shall be immediately due and
payable. All of Lender's rights and remedies under
this Agreement shall survive such maturity until
all of the Liabilities under this Agreement and the
other Loan Documents have been paid in full. In addition,
this Agreement may be terminated as set forth in Section 8.
2.2 Tenant Improvement Loan.
2.2.1 Borrowing Base. Borrower may, as long
as otherwise in compliance with the terms of this
Agreement, borrow, repay without penalty or
premium and reborrow hereunder, the lesser of
(i) the Tenant Improvement Loan Maximum Revolving
Facility, or (ii) the Tenant Improvement Loan Borrowing
Base.
2.2.2 Advances. Each request for advance
hereunder may be made by either H. Rainey
Powell or Linda L. Daugherty on behalf of
Borrower in writing no later than 2:00 p.m. on the
date on which an advance is requested to be made, such
request to be made utilizing the form attached as Exhibit
"J". Each advance to Borrower shall be in immediately
available funds and deposited in Borrower's demand deposit
accounts with Lender.
2.2.3 UCC-1 Forms. For the Tenant Improvement
Agreements pursuant to each of the following
Lease Agreements, Borrower, Harold's Stores
of Texas, L.P. or other applicable Harold's
Subsidiary shall execute such UCC-1 forms as Lender
may reasonably require:
2.2.3.1 Lease Agreement by and between
Smokestack Partners, Inc., as Landlord, and Borrower, as
tenant, dated September 13, 1996 for Premises located in San
Antonio, Bexar County, Texas;
2.2.3.2 Lease Agreement by and between
Third Horizon Group Limited Partnership, as
Landlord, Harold's Stores of Texas, L.P., as
tenant, and Borrower, as guarantor,
dated October 2, 1997 for Premises located in
Sealy, Austin County, Texas;
2.2.3.3 Lease Agreement by and among Dallas
Galleria Limited, as Landlord, Harold's Stores of Texas,
L.P., as tenant, and Borrower, as guarantor, dated September
25, 1997 for Premises located in Addison, Dallas County,
Texas; and
2.2.3.4 any other Lease Agreement for
Premises I into which Borrower or a Harold's
Subsidiary enters during the term of this
Agreement for which there may exist Tenant
Improvement Reimbursement Agreements.
2.2.4 New Tenant Improvement Agreements.
Borrower agrees to continue to perform the
same level of due diligence in negotiating
with Landlords for future Tenant Improvement
Agreement as contemplated by Section 2.2.3.4 as Borrower has
performed in connection with existing Tenant Improvement
Agreements, including but not limited to evaluation of the
financial capacity of each such Landlord and the associated
credit risk. At the request of Lender, Borrower agrees to
provide Lender with copies of any financial statements
received from a Landlord.
2.2.5 Assignment of Security from Landlords.
To the extent Borrower obtains security in any form to
collateralize or otherwise ensure a Landlord's
obligation to pay Tenant Improvement
Reimbursements, Borrower or the applicable
Harold's Subsidiary shall execute such additional pledges,
assignments or other instruments to provide Lender with a
perfected security interest and assignment in such security
provided by a Landlord.
2.2.6 Doubtful Tenant Improvement
Reimbursements. In the event Borrower determines
that payment of a Tenant Improvement
Reimbursement is doubtful for any reason,
Borrower shall immediately notify Lender of such
determination and shall make no further requests for
advances against remaining unpaid Tenant Improvement
Reimbursements from the applicable Landlord.
2.2.7 Maximum Principal Balance. Borrower
agrees that if at any time the aggregate outstanding
principal balance of the Tenant Improvement Loan
shall exceed an amount equal to the lesser of (i)
the Tenant Improvement Loan Maximum Revolving
Facility or (ii) the Tenant Improvement Loan Borrowing Base,
Borrower shall promptly pay to Lender the amount necessary
to eliminate such excess.
2.2.8 Interest. Prior to Default, Borrower
shall pay to Lender interest on the average
daily outstanding balance of the liabilities under the
Tenant Improvement Loan at a rate per annum equal to
the LIBOR Rate plus the following amount, determined
according to the current calculation of Tangible Net
Worth under Section 7.9(B):
Minimum Tangible Net Worth Rate
Differential
$35,800,000.00 plus 1.625%
$35,000,000.00 plus 1.875%
$34,000,000.00 plus 2.125%.
2.2.9 Payment. The unpaid principal balance
of the Tenant Improvement Loan shall be due and
payable on the earlier of June 30, 1999 or upon the
occurrence of a Default. Accrued interest shall be
payable monthly in arrears beginning
November 30, 1997 and on the last day of each month
thereafter, upon the date of any prepayment and at maturity.
All interest accrued shall be computed on the basis of a
year of 360 days, and the actual number of days elapsed in
the period in which it accrues. Following the occurrence of
a Default, Borrower shall pay to Lender interest from the
date of such Default at the per annum rate of five percent
(5%) in excess of the then applicable annual rate on the
outstanding principal balance of the liabilities under the
Tenant Improvement Loan.
2.2.10 Term. The Tenant Improvement Loan will
mature on June 30, 1999, at which time all
principal and accrued interest shall be
immediately due and payable. All of Lender's
rights and remedies under this Agreement shall
survive such maturity until all of the Liabilities under
this Agreement and the other Loan Documents have been paid
in full.
2.3 Letter of Credit Note.
2.3.1 Principal Amount. The Letter of Credit
Facility shall be in the original principal amount of
$2,000,000.00.
2.3.2 Interest. Prior to Default, Borrower
shall pay to Lender interest on the average
daily outstanding balance of the liabilities under the
Letter of Credit Facility at a rate per annum
equal to the LIBOR Rate plus two percent
(2.00%).
2.3.3 Letters of Credit. (i) Lender agrees to
extend credit to Borrower at any time and from time to
time by issuing, extending, re-issuing or
amending Letters of Credit. (ii) Each of the
Letters of Credit shall (a) be issued by Lender
pursuant to separate agreements with Borrower, (b) contain
such terms and provisions as required by Lender, including
payment of customary fees, (c) be for the account of
Borrower in favor of a beneficiary reasonably acceptable to
Lender, (d) expire not later than the expiration date set
forth respectively in each Letter of Credit, which shall not
be more than one hundred eighty (180) days from the date of
issuance, unless prior approval of Lender is obtained for a
longer period, but in no event shall any Letter of Credit
have an expiration date beyond June 30, 1998.
2.3.4 Payment. The unpaid principal balance
of the Letter of Credit Facility shall be due and
payable on the earlier of demand or June 30,
1998. Accrued interest shall be payable monthly
in arrears beginning November 30, 1997 and on
the last day of each month thereafter, upon the date of
any prepayment and at maturity. All interest accrued shall
be computed on the basis of a year of 360 days, and the
actual number of days elapsed in the period in which it
accrues. Following the occurrence of a Default, Borrower
shall pay to Lender interest from the date of such Default
at the per annum rate of five percent (5%) in excess of the
then applicable annual rate on the outstanding principal
balance of the liabilities under the Letter of Credit
Facility.
2.3.5 Term. The Letter of Credit Facility
will mature on the earlier of demand or June
30, 1998, at which time all principal and
accrued interest shall be immediately due and
payable. All of Lender's rights and remedies under this
Agreement shall survive such maturity until all of the
Liabilities under this Agreement and the other Loan
Documents have been paid in full.
2.4 Term Note.
2.4.1 Principal Amount. The Term Note shall
be in the original principal amount of
$2,340,792.00.
2.4.2 Repayment of Principal and Interest
Monthly payments of principal and interest
(subject to acceleration upon the occurrence of an
Event of Default under this Agreement or
termination of this Agreement)shall be due and
payable on the last day of each calendar month beginning
November 30, 1997 as follows:
2.4.2.1 Principal and interest shall be
payable in monthly installments of principal
as due that month from CMT pursuant to the CMT Loan
plus accrued interest at the rate set forth in
Section 2.4.4, Borrower being entitled to
retain the difference, if any, between any interest
collected by Borrower from CMT and the interest payable to
Lender hereunder.
2.4.2.2 All monthly installment payments
made pursuant to Section 2.4.2 shall be
applied first to the unpaid interest accrued
on the Term Note and then to the principal
balance thereof.
2.4.3 Interest. Prior to Default, Borrower
shall pay to Lender interest on the average
daily outstanding balance of the liabilities under
the Term Loan at a rate per annum equal to the
LIBOR Rate plus the following amount,
determined according to the current calculation of Tangible
Net Worth under Section 7.9(B):
Minimum Tangible Net Worth Rate
Differential
$35,800,000.00 plus 1.625%
$35,000,000.00 plus 1.875%
$34,000,000.00 plus 2.125%.
2.4.4 Conditions of Closing. The obligation of
Lender to fund the Term Loan is subject to
the satisfaction of the following:
2.4.4.1 CMT Loan Assignments. Borrower
shall execute the CMT Loan Assignments and make such
deliveries of original instruments as
required in order to collaterally assign and
endorse to Lender, and grant and perfect a
security interest in favor of Lender, in and to all of
Borrower's rights and interest in the originals of each of
the following CMT Loan documents:
(i) Amended and Restated Term Loan and
Security Agreement dated as of November 6, 1996
by and among CMT, Bober and Borrower;
(ii) Term Note in the original amount of
$2,750,000.00 dated as of November 6, 1996 executed by CMT
in favor of Borrower;
(iii) Second Amended and Restated
Guaranty dated as of November 6, 1996 executed by
Bober in favor of Borrower;
(iv) Stock Pledge Agreement dated as of
November 6, 1996 executed by Bober in favor of
Borrower;
(v) Real Estate Mortgage on real property in
Dutchess County, New York owned by Bober dated as of
November 6, 1996 executed by Bober in favor of Borrower;
(vi) Common Stock Purchase Warrant dated
as of November 6, 1996 by and between CMT and
Borrower;
(vii) Forbearance Agreement dated as of
November 6, 1996 by and between Bober and Borrower;
(viii) UCC-1 Financing Statements executed
by CMT, as debtor, and Borrower, as secured
party, and filed with the New York Secretary of
State, the County Clerk of Bergen County, New
Jersey and any other state clerk, registrar
or recording entity;
(ix) CMT Stock Certificate No. 1
representing ten (10) shares of the Capital
Stock of CMT in Bober's name;
(x) Assignment Separate from Certificate
dated as of November 6, 1996 from Bober to Borrower;
(xi) Cash Collateral Account Agreement
dated as of November 6, 1996 by and between
Bober and Borrower;
(xii) Consent to Default - Assignment of
Lease dated as of November 6, 1996 executed by
Bober in favor of Borrower;
(xiii) First Amendment to Trademark
Collateral Security Agreement dated as of
November 6, 1996 by and between CMT and Borrower;
(xiv) Trademark Assignment of Security
dated as of November 6, 1996 from CMT to Borrower;
(xv) Agreement between The CIT
Group/Commercial Services, Inc. and Assignor
dated November 7, 1996;
(xvi) Life Insurance Policy issued by
Equitable Life Insurance Company as Policy No. 96-
021-968 insuring the life of Bober;
(xvii) Life Insurance Policy issued by
First Transamerica Life Insurance Company as
Policy No. 75017613 insuring the life of
Bober;
(xviii) Disability Insurance Policy issued
by Reliance Insurance Company as Policy No. RN
HLD 0545 providing for a payment of a single
benefit in the event of the disability of Bober; and
(xix) any other document evidencing or
securing the CMT Loan.
2.4.5 Chase Letter of Credit. Upon full
payment and satisfaction of a judgment entered
against CMT and in favor of Shinyei Corporation of
America, which judgment is being paid and
satisfied by the Chase Letter of Credit, Borrower
shall have a priority lien and security interest in and to
the Cash Collateral, to be assigned to Lender immediately
thereafter.
2.4.6 Term. The Term Loan will mature on
June 30, 1999, at which time all principal and
accrued interest shall be immediately due and
payable. All of Lender's rights and remedies
under this Agreement shall survive such maturity
until all of the Liabilities under this Agreement and the
other Loan Documents have been paid in full.
2.5 Repayment. Unless otherwise agreed in writing
from time to time hereafter, all payments which Borrower is
required to make to Lender under this Agreement or under any
of the other Loan Documents shall be made without defense, set-
off and counterclaim and in same day funds and delivered to
Lender not later than 2:30 p.m. (Oklahoma City, Oklahoma time)
on the date due at Lender's offices located at 211 North
Robinson, Oklahoma City, Oklahoma, 73102, for the account of
Lender; funds received by Lender after that time shall be
deemed to have been paid by Borrower on the next succeeding
Business Day. Borrower hereby authorizes Lender to charge
its account with Lender in order to cause timely payment to be
made to Lender of all principal, interest and fees due
hereunder (subject to sufficient funds being available in
Borrower's accounts for that purpose).
2.6 Termination of Agreement. This Agreement may be
terminated as set forth in Section 8. Upon the effective
date of maturity or termination of the Loans, all of the
respective liabilities under the Loans shall become immediately
due and payable without notice or demand; provided, however,
that if termination is by reason of an event specified in
Section 9, all such liabilities shall become immediately due
and payable at such time without notice or demand.
3. REPORTING AND ELIGIBILITY REQUIREMENTS. The following
are reporting and eligibility requirements:
3.1 Monthly Reports. Borrower shall submit to Lender,
not later than the twenty-fifth (25th) day following the end
of each month, a monthly report ("Monthly Report"),
accompanied by a Borrowing Base certificate in the form
attached hereto as Exhibit "E" which shall be signed by the
President, chief financial officer or other authorized
officer of Borrower. Each Monthly Report shall include, as
of the closing day for the preceding month: (i) a summary
aged trial balance of Accounts for Borrower ("Accounts Trial
Balance"); (ii) calculation of the current Borrowing Base;
(iii) the amount of the outstanding principal balance of the
Liabilities; and (iv) a representation by Borrower that no
Default or Event of Default occurred during such month or,
if a Default or Event of Default has occurred during such
month, a description of such Default or Event of Default and
of the actions Borrower has taken or intends to take to cure
the same. Upon Lender's request therefor, Borrower shall
furnish with such specificity as is satisfactory to Lender,
concerning matters included, described or referred to in the
Monthly Report and any other documents in connection
therewith requested by Lender including, without limitation,
but only if specifically requested by Lender, copies of all
invoices prepared in connection with the Accounts. The
Monthly Report shall contain such additional information as
Lender may reasonably require.
3.2 Quarterly Reports. Borrower shall submit to
Lender not later than the forty-fifth (45th) day following
the end of each fiscal quarter a Quarterly Report which
shall be accompanied by a Quarterly Borrowing Base and
Compliance Certificate (the "Quarterly Reports") in the form
attached hereto as Exhibit "F". Each Quarterly Report shall
include, as of the closing day of the preceding fiscal
quarter: (i) calculations of the current Borrowing Bases;
(ii) the quarterly itemization of Inventory described in
Section 3.7; and (iii) evidence satisfactory to Lender
that each of the covenants set forth in Section 7.9 has been
complied with during such quarter.
3.3 Account Representations and Warranties. With
respect to Accounts scheduled, listed or referred to on
the initial Accounts Trial Balance or on any subsequent
Accounts Trial Balance, Borrower warrants and represents to
Lender that: (i) they are genuine, are in all respects what
they purport to be, and are not evidenced by a judgment;
(ii) they represent undisputed, bona fide transactions
completed in accordance with the terms and provisions
contained in the documents entered into between Borrower and
its respective Account Debtors with respect thereto; (iii)
the amounts shown on the respective Accounts Trial
Balance, Borrower's books and records and all invoices and
statements which may be delivered to Lender with respect
thereto are actually and absolutely owing to Borrower and
are not in any way contingent; (iv) no payments have been or
shall be made thereon to any person other than Borrower to
Lender; (v) there are no set-offs, counterclaims or disputes
existing or asserted with respect thereto and Borrower has
not made any agreement with any of the Account Debtors for
any deduction therefrom except a purchase discount for
prompt payment or return allowance allowed by Borrower in
the ordinary course of their businesses; (vi) there are no
facts, events or occurrences which in any way impair the
validity or enforcement thereof or tend to reduce the amount
payable thereunder as shown on the respective Accounts Trial
Balance, Borrower's books and records and all invoices and
statements delivered to Lender with respect thereto; (vii)
to the best of Borrower's knowledge, all Account Debtors
have the capacity to contract and are solvent; (viii) the
services furnished and/or goods sold giving rise thereto are
not subject to any lien, claim, encumbrance or security
interest except that of Lender and except as specifically
permitted below; (ix) Borrower has no knowledge of any fact
or circumstance which would impair the validity or
collectibility thereof; and (x) to the best of Borrower's
knowledge, there are no proceedings or actions which are
threatened or pending against any of its respective Account
Debtors which might result in any material adverse change in
such Account Debtor's financial condition, results of
operations or business.
3.4 Verification of Accounts. Lender shall have the
right, at any time or times hereafter, within its reason
able judgment with respect to the frequency thereof, after
prior notice to Borrower, to verify by mail, telephone,
telegraph or otherwise the validity, amount or any other
matter relating to any Accounts.
3.5 Collections and Payments. Borrower hereby agrees
that in the event any payments are received by Lender
whether from Borrower or from any other Person, all such
payments will be the sole and exclusive property of
Lender. All payments received by Lender will be applied on
account of the liabilities of the respective Loans as
follows: (i) after allowing two (2) Business Days for
collection of checks and other instruments received by
Lender at its offices in Oklahoma City, Oklahoma, Lender
will credit (conditional upon final collection) all such
payments against Borrower's outstanding loan balance, with
the exception of checks drawn on accounts with Lender with
immediately available funds for which Borrower shall
receive immediate credit upon receipt, (ii) all cash
payments received by Lender prior to 2:30 p.m. (Oklahoma
City, Oklahoma time) at its offices in Oklahoma City,
Oklahoma including, without limitation, payments made by
wire transfer of immediately available funds, will be
credited against Borrower's outstanding loan balance
immediately upon receipt and (iii) all cash payments
received by Lender at a time later than that specified
in clause (ii) of this Section 3.5 will be credited against
Borrower's outstanding loan balance on the first
Business Day following Lender's receipt thereof.
3.6 Inventory Representations and Warranties. With
respect to Inventory, Borrower represents and warrants
to Lender that (i) it is not subject to any lien or
security interest whatsoever except for the security
interest granted to Lender hereunder and except as specifi
cally permitted herein and (ii) it is of good and
merchantable quality, free from any defects which would
affect the market value of such Inventory.
3.7 Inventory Records. Borrower shall at all
times hereafter maintain correct and accurate
records with respect to Inventory, in reasonably sufficient
detail as may be satisfactory to Lender including, without
limitation, the quarterly itemization of raw materials,
work-in-process and finished goods, all of which records
shall be available during Borrower's usual business hours
at the request of any of Lender's officers, employees or
agents. As soon as Borrower has installed the computer
capability of generating detailed reports on a monthly
basis, Borrower will provide a monthly itemization or raw
materials, work-in-process and finished goods.
4. CONDITIONS OF ADVANCES. Notwithstanding any other
provision contained in this Agreement or in any of the other Loan
Documents to the contrary, the obligation of Lender to make
advances hereunder is subject to the satisfaction of all the
following:
4.1 Insurance programs and coverage thereunder
determined by Lender to be adequate shall have been instituted
by Borrower;
4.2 Borrower shall have implemented reporting and
monitoring systems satisfactory to Lender capable
of providing Borrower with the information necessary to
compile and deliver the reports required under this
Agreement, including without limitation, the Monthly Reports
and the Quarterly Reports;
4.3 No Default or Event of Default under this
Agreement shall exist or be continuing as of the date of the
advance;
4.4 Good standing certificates, as of the most recent
date practicable, for Borrower from the Secretaries of
State or other appropriate governmental authority, of
each state in which Borrower is qualified to do business, if
any, shall have been delivered to Lender;
4.5 A copy of the Bylaws of Borrower certified as of
the Execution Date by the corporate secretary or an
assistant secretary of Borrower shall have been delivered
to Lender;
4.6 A resolution of the Board of Directors of Borrower
approving and authorizing the execution, delivery and
performance of each of the Loan Documents, certified as
of the Execution Date by the corporate secretary or an
assistant secretary of Borrower shall have been delivered to
Lender;
4.7 A signature and incumbency certificate of the
officers of Borrower;
4.8 Certificates of public officials, bonded
abstracters or title search companies satisfactory to
Lender relating to the nonexistence of UCC financing
statement filings, liens, charges and other encumbrances on
the Accounts and Inventory of Borrower, except as may
exist in favor of Lender or as described on Schedule
"1";
4.9 Financial statements for Borrower and such other
financial information as required by this Agreement and the
other Loan Documents or as otherwise reasonably may be
required by Lender, all in form satisfactory to Lender;
4.10 Duly executed initial Monthly Report dated the
Execution Date;
4.11 Borrower shall have executed, or caused to be
executed, and delivered to Lender on or before the Execution
Date, the Loan Documents, including, without limitation, this
Agreement, together with such consents, certificates,
endorsements, opinions, guarantees and assurances as Lender and
Lender's counsel may reasonably request;
4.12 Lender shall have received (a) with respect to any
advance under the Revolving Loan or the Tenant Improvement
Loan a request for an advance in a specific amount, in the
manner described in Sections 2.1.2 and 2.2.2, from the
appropriate officer of Borrower, (b) a Monthly Report from
Borrower dated no more than thirty-one (31) days prior
to the date of such advance, provided that with respect to
the initial advance hereunder, Lender shall have received a
pro forma Monthly Report dated the date of such advance, and
(c) copies of all other documents required to be delivered
to Lender under Section 7.1;
4.13 No material adverse change, as determined by
Lender in its sole discretion, in the financial condition
or operation of Borrower shall have occurred at any time
or times subsequent to the most recent annual financial
statement provided pursuant to Section 7.1;
4.14 Lender shall have received, in form and substance
satisfactory to Lender, all additional certificates, orders,
authorities, consents, affidavits, schedules, instruments,
security agreements, financing statements, mortgages and other
documents which Lender may at any time reasonably request;
4.15 Lender shall have received an originally executed
copy of a favorable written opinion of counsel for Borrower
confirming (a) that Borrower is a validly existing
corporation, (b) that Borrower is duly authorized to execute
this Agreement and all other Loan Documents, (c) that Borrower's
execution of this Agreement and other Loan Documents does
not violate any other lending agreement, and (d) as to any
other matters as Lender may reasonably request;
4.16 The representations and warranties contained in
this Agreement shall be true, correct and complete in
all material respects as of the date of a request for
advance; and
4.17 There shall not be pending or, to the knowledge of
Borrower, threatened, any action, suit, proceeding,
governmental investigation or arbitration against or
affecting Borrower or any Harold's Subsidiary or any property
of Borrower or any Harold's Subsidiary which has not been
disclosed by Borrower to Lender prior to the making of the
last preceding advance and there shall have occurred no
development not so disclosed in any such action, suit,
proceeding, governmental investigation or arbitration so
disclosed, which, in either event, in the opinion of Lender,
would reasonably be expected to materially and adversely
affect the business, operations, properties, assets or
condition (financial or otherwise) of Borrower or to impair the
ability of Borrower to perform its obligations under the Loan
Documents.
5. COLLATERAL SECURITY AND CROSS-COLLATERALIZATION. The
performance of all covenants and agreements contained in this
Agreement and the other Loan Documents and the payment of the
Liabilities shall all be secured and cross-collateralized by the
Collateral. The payment or release of any of the Liabilities
shall not release any of the Collateral until all of the
Liabilities have been paid in full.
6. REPRESENTATIONS AND WARRANTIES. Borrower represents
and warrants that as of the Execution Date, and continuing so
long as any Liabilities remain outstanding, and (even if there
shall be no Liabilities outstanding) so long as this Agreement
remains in effect:
6.1 Corporate Existence. Borrower is a corporation
duly organized, validly existing and in good standing
under the laws of the State of Oklahoma and is duly
qualified as a foreign corporation and in good standing in
all states where the nature and extent of the business
transacted by it or the ownership of its assets makes
such qualification necessary, except for those jurisdictions
in which the failure so to qualify would not, in the
aggregate, have a material adverse effect on Borrower's
financial condition, results of operations or business.
Each Harold's Subsidiary is a corporation duly organized,
validly existing and in good standing under the laws of
the state of its incorporation and is duly qualified as
a foreign corporation and in good standing in all states
where the nature and extent of the business transacted by it
or the ownership of its assets makes such qualification
necessary, except for those jurisdictions in which the
failure so to qualify would not, in the aggregate, have a
material adverse effect on such Harold's Subsidiary's
financial condition, results of operations or business.
6.2 Corporate Authority. The execution and delivery
by Borrower of this Agreement and all of the other Loan
Documents, and the performance of Borrower's obligations
hereunder and thereunder: (i) are within Borrower's
corporate powers; (ii) are duly authorized by Borrower's
Board of Directors and, if necessary, Borrower's stock
holders; (iii) are not in contravention of the terms of
Borrower's Certificate of Incorporation or Bylaws, or of any
or governmental restriction binding upon Borrower; and (vi)
will not, except as contemplated herein, result in the
imposition of any lien, claim, charge, security interest
or other encumbrance upon any property of Borrower under any
existing indenture, mortgage, deed of trust, loan or credit
agreement or other material agreement or instrument to
which Borrower is a party or by which it or any of its
property may be bound or affected.
6.3 Binding Effect. This Agreement and all of the
other Loan Documents are the legal, valid and binding,
obligation of Borrower and are enforceable against Borrower
in accordance with their respective terms.
6.4 Financial Data. Borrower has delivered to Lender
those certain consolidated financial statements dated
_____________. Such statements were prepared in
accordance with generally accepted accounting principles and
fairly present the financial position of Borrower as of
the date thereof. Borrower does not have any material
contingent liability, or contingent liability or liability
for taxes, long-term lease or long-term commitment, which is
not reflected in the foregoing financial statements, the
notes thereto or otherwise in writing to Lender.
6.5 Solvency. Borrower is solvent, is able to pay its
debts as they become due and has capital sufficient to
carry on its business as the same is now being conducted
and all businesses in which it is about to engage, and now
owns property having a value both at fair valuation and at
present fair saleable value greater than the amount
required to pay Borrower's debts. Borrower will not be
rendered insolvent by the execution and delivery of this
Agreement or any of the other Loan Documents or by the
transactions contemplated hereunder or thereunder.
6.6 Chief Place of Business. As of the Execution
Date, the principal offices of Borrower are located at
765 Asp, Norman, Oklahoma 73069. If any change is to
occur, Borrower shall notify Lender thereof at least sixty
(60) days prior to such change. As of the Execution
Date, the books and records of Borrower and all chattel
paper and all records of account are located at the
principal offices of Borrower.
6.7 Books and Records. The books and records of
Borrower properly reflect Borrower's financial condition.
6.8 Tax Liabilities. Borrower has filed all federal,
state and local tax reports and returns required by any
law, rule, or regulation to be filed by these except for
extensions duly obtained, and has either duly paid all
taxes, duties and charges indicated due on the basis of
such returns and reports, or made adequate provision for
the payment thereof, and the assessment of any material
amount of additional taxes in excess of those paid and
reported is not reasonably expected. The reserves for taxes
reflected on the balance sheets of Borrower submitted to
Lender in accordance with the terms of Section 7.1 will be
adequate in amount for the payment of all liabilities for
all taxes (whether or not disputed) of Borrower accrued
through the date of each such balance sheet. There are
no material unresolved questions or claims concerning any
tax liability of Borrower.
6.9 Loans. Except as disclosed on the financial
statements specifically identified in Section 6.4, and except
for trade payables arising in the ordinary course of
Borrower's business, there are currently no loans or other
indebtedness for borrowed money.
6.10 Margin Security. Borrower does not own any margin
securities and none of the loans advanced hereunder will
be used for the purpose of purchasing or carrying any
margin securities or for the purpose of reducing or
retiring any indebtedness which was originally incurred to
purchase any margin securities or for any other purpose
not permitted by Regulation G of the Board of Governors of
the Federal Reserve System.
6.11 Litigation and Proceedings. Except as disclosed
on Schedule "2" attached hereto, no judgments are
outstanding against Borrower or any Harold's
Subsidiary, nor is there now pending or, to the best of
Borrower's knowledge after diligent inquiry, threatened
any litigation, contested claim or governmental proceeding
by or against Borrower or any Harold's Subsidiary.
6.12 Other Agreements. Borrower is not in default
under any contract, lease, commitment or other agreement in
excess of $10,000.00 which it is a party or by which it is
bound. Borrower knows of no dispute regarding any contract,
lease, commitment or other agreement.
6.13 Employee Controversies. There are no
controversies pending or, to the best of Borrower's knowledge,
threatened between Borrower or any Harold's Subsidiary and
any of its employees, other than employee grievances
arising in the ordinary course of business which are not, in
the aggregate, material to the continued financial success and
well- being of Borrower.
6.14 Compliance with Laws and Regulations. The
execution and delivery by Borrower of this Agreement and
all of the other Loan Documents and the performance of
Borrower's obligations hereunder and thereunder are not,
to the best of Borrower's knowledge, in contravention of any
law, order, rule or regulation. Borrower is in
compliance with all laws, orders, rules, regulations and
ordinances of all federal, foreign, state and local
governmental authorities relating to the business
operations and the assets of Borrower except for laws,
orders, rules, regulations and ordinances the violation of
which would not, in the aggregate, have a material adverse
effect on Borrower's financial condition, results of
operations or businesses.
6.15 Pension Reform Act. No events, including, without
limitation, any "Reportable Event" or "Prohibited Transac
tions", as those terms are defined in the Employee
Retirement Income Security Act of 1974, as the same may
be amended from time to time (herein, including any and all
such amendments, called "ERISA"), have occurred in
connection with any "Employee Benefit Plan" (herein
called "Pension Plan") of Borrower which might
reasonably be expected to constitute grounds for the
termination of any such Pension Plan by the Pension Benefit
Guaranty Corporation or for the appointment by the
appropriate United States District Court of a trustee to
administer any such Pension Plan. Borrower's Pension Plan,
if any, meet the minimum funding standards of Section 302
of ERISA.
6.16 Survival of Representations and Warranties. All
representations and warranties contained in this
Agreement or any of the other Loan Documents shall
survive the execution and delivery of this Agreement.
7. AFFIRMATIVE COVENANTS. Borrower covenants and agrees
that, so long as any Liabilities remain outstanding, and (even if
there shall be no Liabilities outstanding) so long as this
Agreement remains in effect:
7.1 Financial Statements. Except as otherwise
expressly provided for herein, Borrower shall keep proper
books of record and account in which full and true
entries will be made of all dealings or transactions of or
in relation to the business and affairs of Borrower, in
accordance with generally accepted accounting
principles consistently applied. Borrower shall cause to be
furnished to Lender:
(i) as soon as practicable and in any event within
sixty (60) days after the end of each of the first three
(3) fiscal quarters, a copy of the Form 10-Q most
recently filed by Borrower with the Securities and
Exchange Commission;
(ii) as soon as practicable and in any event within one
hundred twenty (120) days after the end of each fiscal year, (a)
consolidated statements of income, retained earnings and changes
in financial condition of Borrower for such year, and a
consolidated balance sheet of Borrower as of the end of such
year, in reasonable detail and satisfactory in scope to
Lender and examined by independent certified public
accountants of recognized national standing selected by
Borrower and satisfactory to Lender, whose opinion shall
be in scope and substance satisfactory to Lender and
shall be accompanied by such accountants' "Management
Letter" to Borrower, and (b) a copy of the Form 10-K filed for
the previous fiscal year by Borrower with the Securities
and Exchange Commission;
(iii) as soon as practicable but in any event
within ten (10) days of delivery to Borrower, a
copy of any letter issued by Borrower's independent
certified public accountants or other management
consultants with respect to Borrower's financial or
accounting systems or controls;
(iv) as soon as practicable but in any event not more
than ten (10) days after the President or chief
financial officer of Borrower obtains knowledge of
the occurrence of an event or the existence of a
circumstance giving rise to an Event of Default or a
Default, notice of any and all Events of Default or Defaults
hereunder;
(v) Monthly Reports for Borrower and the Harold's
Subsidiaries as required pursuant to Section 3.1;
(vi) Quarterly Reports for Borrower and the Harold's
Subsidiaries as required pursuant to Section 3.2; and
(vii) with reasonable promptness, such other
business or financial data as Lender may
request.
All financial statements delivered to Lender pursuant
to the requirements of this Section 7.1 (except where
otherwise expressly indicated) shall be prepared in
accordance with generally accepted accounting principles
consistently applied. Together with each delivery of
financial statements required by Section 7.1(i), Borrower
shall deliver to Lender an officer's certificate (the
"Compliance Certificate") stating that there exists no
Default or Event of Default, or, if any Default or Event of
Default exists, specifying the nature thereof, the period of
existence thereof and what action Borrower proposes to take
to cure the same. Together with each delivery of financial
statements required by Section 7.1(ii)(b), Borrower shall
deliver to Lender a certificate of the accountants who
performed the audit in connection with such statements
stating that in making the audit necessary to the issuance
of a report on such financial statements, they have obtained
no knowledge of any Default or Event of Default, or, if such
accountants have obtained knowledge of a Default or Event of
Default, specifying the nature and period of existence
thereof. Such accountants shall not be liable by reason of
any failure to obtain knowledge of any Default or Event of
Default which would not be disclosed in the ordinary course
of an audit. Lender shall exercise reasonable efforts to
keep such information, and all information acquired by a
result of any inspection conducted in accordance with
Section 7.2, confidential, provided that Lender may
communicate such information (a) to any other Person in
accordance with the customary practices of commercial banks
relating to routine trade inquiries, (b) to any court or
regulatory authority having jurisdiction over Lender, (c) to
any other Person in connection with Lender's sale of any
participation in the Liabilities, or (d) to any other Person
in connection with the exercise of Lender's rights hereunder
or under any of the other Loan Documents. Borrower
authorizes Lender to discuss the financial condition of
Borrower with Borrower's independent public accountants and
agrees that such discussion or communication shall be
without liability to either Lender or Borrower's independent
public accountants.
7.2 Inspection. Lender, or any Person designated by
Lender in writing, shall have the right, from time to time
hereafter, to call at Borrower's place or places of
business during reasonable business hours, and, without
hindrance or delay, (i) to inspect, audit, check and make
copies of and extracts from Borrower's books, records,
journals, orders, receipts and any correspondence and
other data relating to Borrower's business or to any
transactions between the parties hereto, (ii) to discuss the
affairs, finances and business of Borrower with any
officers, employees or directors of Borrower. Such
inspections shall include, without limitation, a field audit
of the operations of Borrower and Harold's Subsidiaries to
take place within ninety (90) days of the Execution Date,
such field audit to be at the cost and expense of Lender.
7.3 Conduct of Business. Except as contemplated
herein, Borrower shall maintain its corporate existence,
shall maintain in full force and effect all licenses,
permits, bonds, franchises, leases, patents, contracts and
other rights necessary or desirable to the profitable
conduct of its business, shall continue in, and limit
its operations to, the same general line of business as that
presently conducted by it and shall comply with all
applicable laws, rules and regulations of any federal,
state or local governmental authority, except for such laws,
rules and regulations the violation of which would not,
in the aggregate, have a material adverse effect on
Borrower's financial condition, results of operations or
business.
7.4 Claims and Taxes. Borrower agrees to indemnify
and hold Lender harmless from and against any and all
claims, demands, liabilities, losses, damages,
penalties, costs, and expenses (including reasonable
attorneys' fees) relating to or in any way arising out
of the possession, use, operation or control of any of
Borrower's assets. Borrower shall pay or cause to be paid
all bonding premiums and related taxes and charges, and
shall pay or cause to be paid all of Borrower's real and
personal property taxes, assessments and charges and all of
Borrower's franchise, income, unemployment, use, excise,
old age benefit, withholding, sales and other taxes and
other governmental charges assessed against Borrower, or
payable by Borrower, at such times and in such manner as to
prevent any penalty from accruing or any lien or charge
from attaching to its property, provided that Borrower shall
have the right to contest in good faith, by an appropriate
proceeding promptly initiated and diligently conducted, the
validity, amount or imposition of any such tax, assessment
or charge, and upon such good faith contest to delay or
refuse payment thereof, if (i) Borrower establishes adequate
reserves to cover such contested taxes, assessment or
charges, and (ii) such contest does not have a material
adverse effect on the financial condition of Borrower, the
ability of Borrower to pay any of the Liabilities.
7.5 Borrower's Liability Insurance. Borrower shall
maintain, at its expense, such public liability and third
party property damage insurance in such amounts, with
such deductibles and with such coverage as is consistent
with the practice of other companies engaged in the same or
similar industry as that of Borrower and otherwise
acceptable to Lender.
7.6 Borrower's Property Insurance. Borrower shall
provide the following insurance coverage:
(A) At its sole expense, keep and maintain its
assets insured against loss or damage by fire, theft,
explosion, spoilage and all other hazards and risks
ordinarily insured against by other owners or users of
such properties in similar businesses in an amount at
least equal to the lesser of (i) the outstanding
maximum revolving facility of the Liabilities or (ii)
the full insurable value of all such property.
(B) All such policies of insurance shall be in
form and substance satisfactory to Lender. On or prior
to the Execution Date, Borrower shall deliver to Lender
a certificate evidencing each policy of insurance and
evidence of payment of all premiums therefor (and,
promptly thereafter, shall deliver to Lender the
original (or a certified) copy of each such policy of
insurance) and, thereafter, the original (or a
certified) copy of each substitution therefor or
renewal or amendment thereof promptly following each
such substitution, renewal or amendment. If Borrower,
at any time or times hereafter, shall fail to obtain or
maintain any of the policies of insurance required
above or to pay any premium in whole or in part
relating thereto, then Lender, without waiving or
releasing any obligation or default by Borrower
hereunder, may at any time or times thereafter (but
shall be under no obligation to do so) obtain and
maintain such policies of insurance and pay such
premiums and take any other action with respect thereto
which Lender deems advisable.
(C) (i) in the event insurance proceeds with
respect to loss of or damage to any Goods or other
material assets of Borrower are received by Lender as
required herein, such proceeds shall be remitted to
Borrower promptly if (a) no Default of Event or Default
exists at the time of receipt by Lender of such
proceeds and (b) Lender shall have received from
Borrower evidence satisfactory to Lender that Borrower
shall apply such proceeds to the repair or replacement
of the assets of Borrower, the loss of or damage to
which gave rise to the proceeds, (ii) all insurance
proceeds received by Lender shall, unless remitted to
Borrower pursuant to clause (C)(i) of this Section 7.6,
be applied to the outstanding Liabilities, in the
inverse order of their maturity.
7.7 Pension Plans. Borrower shall (i) keep in full
force and effect any and all Pension Plans which are
presently in existence or may, from time to time, come into
existence under ERISA, unless such Pension Plans can be
terminated without material liability to Borrower in
connection with such termination (as distinguished from
any continuing funding obligation); (ii) make
contributions to all of Borrower's Pension Plan in a timely
manner and in a sufficient amount to comply with the
requirements of ERISA; (iii) comply with all material
requirements of ERISA which relate to such plans; and (iv)
notify Lender immediately upon receipt by Borrower of any
notice of the institution of any proceeding or other action
which may result in the termination of any Pension Plan.
7.8 Notice of Suit or Adverse Change in Business.
Borrower shall, as soon as possible, and in any event
within thirty (30) days after Borrower learns of the
following, give written notice to Lender of (i) any
proceeding in excess of $500,000.00 being instituted or
threatened in writing to be instituted by or against
Borrower or its respective Subsidiaries, including the
Harold's Subsidiaries, if any, in any federal, state, local
or foreign court or before any commission or other
regulatory body (federal, state, local or foreign), and (ii)
any material adverse change in Borrower's financial
condition, results of operation or businesses.
7.9 Financial Covenants. Borrower shall maintain the
following:
(A) Total Liabilities to Tangible Net Worth
Ratio. Borrower shall maintain a Total Liabilities to
Tangible Net Worth ratio of no greater than 1.25 to 1.
The Total Liabilities to Tangible Net Worth Ratio shall
be tested within forty-five (45) calendar days of the
end of each fiscal quarter.
(B) Minimum Tangible Net Worth. Borrower shall
maintain a minimum consolidated Tangible Net Worth of
$34,000,000.00. The Minimum Tangible Net Worth shall
be tested within forty-five (45) calendar days of the
end of each fiscal quarter.
7.10 CMT Financial Statements. Borrower shall
provide to Lender, immediately upon receipt, all monthly
financial statements of CMT (including certificates of
compliance) provided to Borrower by CMT or, alternatively,
Borrower shall arrange for CMT to provide such financial
statements directly to Lender.
7.11 Management of Borrower. There shall be no
change in the management of Borrower during the term of
this Agreement, except that no fewer than two of the
following individuals shall hold the offices reflected in
this Section 7.11: (i) Harold G. Powell, Chairman of the
Board of Borrower; (ii) Rebecca Powell Casey, Chief
Executive Officer of Borrower; (iii) H. Rainey Powell,
President of Borrower; and (iv) Kenneth C. Row, Executive
Vice President of Borrower.
7.12 Ownership of Borrower. Harold G. Powell,
Rebecca Powell Casey, H. Rainey Powell, Lisa Powell Hunt,
Michael T. Casey, the spouses of any of the foregoing
individuals or the trustees of any trust established by one
of the foregoing individuals for the benefit of family
members will in the aggregate maintain either
(i) control no less than forty percent (40%) of the
voting common stock of Borrower, or (ii) control such number
of shares and hold options for additional shares to be able
to obtain no less than forty percent (40%) of the voting
common stock of Borrower.
8. NEGATIVE COVENANTS. Borrower covenants and agrees that
so long as any Liabilities remain outstanding, and (even if there
shall be no Liabilities outstanding) so long as this Agreement
remains in effect (unless Lender shall give its prior written
consent thereto):
8.1 Encumbrances. Except as set forth on Schedule "3"
attached hereto, or as otherwise contemplated herein,
Borrower will not create, incur, grant, assume or suffer to
exist any security interest, mortgage, pledge, lien or
other encumbrance of any nature whatsoever on any of its
Accounts or Inventory other than (i) liens securing the
payment of taxes, either not yet due or the validity of
which is being contested in good faith and with due
diligence by appropriate proceedings, and as to which
Borrower shall, if appropriate under generally accepted
accounting principles, have set aside on its books and
records adequate reserves; (ii) deposits under workmen's
compensation, unemployment insurance, social security and
other similar laws, or to secure the performance of bids,
tenders or contracts (other than for the repayment of
borrowed money) or to secure indemnity, performance or other
similar bonds for the performance of bids, tenders or
contracts (other than for the repayment of borrowed money)
or to secure statutory obligations or surety or appeal
bonds, or to secure indemnity, performance or other similar
bonds in the ordinary course of business; and (iii) liens
which arise by operation of law; and (iv) zoning
restrictions, easements, licenses, covenants and other
restrictions affecting the use of real property.
8.2 Sale or Other Disposition of Assets. Borrower
will not sell, transfer or otherwise dispose of any assets
except in the ordinary course of business.
8.3 Other Liabilities. Borrower will incur no
Liabilities other than as specifically contemplated in this
Agreement.
8.4 Consolidations, Mergers or Acquisitions. Borrower
shall not recapitalize or consolidate with, merge with, or
otherwise acquire all or substantially all of the assets or
properties of any other Person other than Harold's
Subsidiaries.
8.5 Basic Business. Borrower and Harold's
Subsidiaries shall not discontinue or enter into businesses
materially different from their basic businesses as they now
exist, provided, however, that notwithstanding anything to
the contrary set forth in this Agreement, Lender consents to
the proposed dissolution of Harold's of Dallas, Inc.,
Harold's of the Galleria, Inc., Harold's of Ft. Worth,
Inc., Harold's Clothing, Inc. and Harold's of Texas, Inc. as
previously disclosed to Lender.
8.6 Investments. Borrower shall not make or permit to
exist investments except investments in Cash Equivalent
Investments or loans to others as permitted under
Section 8.8.
8.7 Guarantees. Borrower shall not guarantee, endorse
or otherwise in any way become or be responsible for
obligations of any other Person, whether by agreement to
purchase the indebtedness of any other Person or through the
purchase of goods, supplies or services, or maintenance of
working capital or other balance sheet covenants or
conditions, or by way of stock purchase, capital
contribution, advance or loan for the purpose of paying or
discharging any indebtedness or obligation of such other
person or otherwise, except endorsements of negotiable
instruments for collection in the ordinary course of business.
8.8 Loans to Others. Borrower will not loan funds to
any Person except: (a) temporary financing for the creation
of new Harold's stores, (b)loans to employees or
stockholders of Borrower which at any time are less than
$450,000.00 in the aggregate, (c) loans to Corner
Properties, Inc., a Harold's Subsidiary, (d) extensions of
credit made to other Harold's Subsidiaries in the
ordinary course of business or (e) the CMT Loan.
8.9 Settlement or Restructure of CMT Loan. Borrower
shall not settle or restructure the CMT Loan.
8.10 New Outlets or Stores. Borrower covenants and
agrees that without the prior written consent of Lender,
neither it nor any Harold's Subsidiary will execute a Lease
Agreement for any new retail outlets or Harold's stores to
open in fiscal year 1999 if Borrower reports a loss, as
indicated by negative net income reflected in the Forms 10-Q
provided to Lender pursuant to Section 7.1(i), for any two
consecutive quarters commencing with the third quarter of
fiscal quarter 1998, provided, however, that for purposes of
this Section, "new" retail outlets or Harold's stores shall not
include relocations of existing stores to another location
within the same shopping center or elsewhere in the same
retail market.
8.11 Amendment of Certificate of Incorporation or
Bylaws. Borrower shall not amend its Certificate of
Incorporation or Bylaws except in such a manner as would
neither (i) adversely affect the ability of Borrower to
perform its obligations under this Agreement or the other
Loan Documents nor (ii) violate any other provision of this
Agreement or the other Loan Document.
8.12 Transactions with Subsidiaries and Affiliates.
Borrower shall not enter into any transaction including,
without limitation, the purchase, sale or exchange of
property or the rendering of any service to any Subsidiary,
including the Harold's Subsidiaries, or Affiliate except in
the ordinary course of and pursuant to the reasonable
requirements of Borrower's business and upon fair and
reasonable terms no less favorable to Borrower than would be
obtained in a comparable arm's length transaction with an
unaffiliated person or corporation.
9. DEFAULT, RIGHTS AND REMEDIES OF LENDER.
9.1 Liabilities. In the event a Default described in
clause (g) of the definition of "Default" shall exist or
occur, all of the Liabilities shall automatically, without
notice of any kind, be immediately due and payable; and
in the event any other Default shall exist or occur, any or
all of the Liabilities may, at the option of Lender, and
after applicable grace period and without demand or
notice of any kind, be declared, and thereupon shall become,
immediately due and payable.
9.2 Rights and Remedies Generally. In the event of a
Default, Lender shall have, in addition to any other rights
and remedies contained in this Agreement or in any of the
other Loan Documents, all of the rights and remedies of a
secured party under the Code or other applicable laws, all
of which rights and remedies shall be cumulative, and none
exclusive, to the extent permitted by law.
9.3 Waiver of Demand. Demand, presentment, protest,
notice of protest, and notice of nonpayment are hereby
waived by Borrower.
10. MISCELLANEOUS.
10.1 Waiver. Lender's failure, at any time or times
hereafter, to require strict performance by Borrower of any
provision of this Agreement shall not constitute a waiver,
or affect or diminish any right of Lender thereafter to
demand strict compliance and performance therewith. Any
suspension or waiver by Lender of a Default by Borrower on
any occasion under this Agreement or any of the other Loan
Documents shall not suspend, constitute a waiver or
affect any other Default by Borrower under this Agreement or
any of the other Loan Documents, whether the same is
prior or subsequent thereto and whether of the same or of
a different kind or character. None of the undertakings,
agreements, warranties, covenants and representations of
Borrower contained in this Agreement or any of the other
Loan Documents and no Default by Borrower under this
Agreement or any of the other Loan Documents shall be
deemed to have been suspended or waived by Lender unless
such suspension or waiver is in writing signed by an officer
of Lender, and directed to Borrower specifying such
suspension or waiver.
10.2 Lender's Closing Costs and Expenses. Borrower
shall reimburse Lender on demand for all reasonable
expenses and fees paid or incurred in connection with the
documentation, negotiation and closing of the financing
transactions described herein, including, without
limitation, filing and recording fees, including
governmental, and the reasonable costs and expenses of
Lender's attorneys.
10.3 Other Costs and Attorneys' Fees. If at any time
or times after the Execution Date, Lender employs counsel in
connection with collecting the Liabilities or in connection
with any matters contemplated by or arising out of this
Agreement or any of the Loan Documents, then Borrower shall
pay all of the reasonable attorneys' fees, expenses, charges
and costs arising pursuant thereto and such fees,
expenses, charges and costs, together with interest,
depending upon the Loan or Loans at issue, at the respective
rates prescribed in Sections 2.1.4, 2.2.8, 2.3.2 or 2.4.3,
as applicable, shall be part of the Liabilities, payable
on demand.
10.4 Expenditures by Lender. In the event Borrower
shall fail to pay taxes, insurance, assessments, costs or
expenses which Borrower is are, under any of the terms
hereof, required to pay Lender may, in its sole discretion,
make expenditures for any or all of such purposes, and the
amount so expended, together with interest thereon at the
Default rate prescribed in Section 2.3.4, shall be part of
the Liabilities, payable on demand.
10.5 Reliance by Lender. All covenants, agreements,
representations and warranties made herein by Borrower
shall, notwithstanding any investigation by Lender, be
deemed to be material to and to have been relied upon by
Lender.
10.6 Parties. Whenever in this Agreement there is
reference made to any of the parties hereto, such
reference shall be deemed to include, wherever applicable, a
reference to the successors and assigns of Borrower and the
successors and assigns of Lender. Borrower shall not,
without the prior written consent of Lender, assign or
delegate any of its rights or obligations hereunder or any
part of the Liabilities to any other Person.
10.7 Applicable Law; Severability. This Agreement
shall be construed in all respects in accordance with, and
governed by, all of the provisions of the Code and by the
other internal laws (as opposed to conflicts of law
provisions) of the State of Oklahoma. Wherever possible,
each provision of this Agreement shall be interpreted in
such manner as to be effective and valid under
applicable law, but if any provision of this Agreement shall
be prohibited by or invalid under applicable law, such
provision shall be ineffective only to the extent of such
prohibition or invalidity, without invalidating the
remainder of such provisions or the remaining
provisions of this Agreement.
10.8 Submission to Jurisdiction. Borrower hereby
consents to the jurisdiction of any local, state or federal
court located within the Western District of the State of
Oklahoma and waives any objection which Borrower may have
based on improper venue or forum non conveniens to the
conduct of any proceeding in any such court.
10.9 Application of Payments. From and after the occur
rence of a Default, notwithstanding any contrary
provision contained in this Agreement or in any of the
other Loan Documents, Borrower irrevocably waives the right
to direct the application of any and all payments at any
time or times thereafter received by Lender from
Borrower and Borrower hereby irrevocably agrees that
Lender shall have the continuing exclusive right to apply
and reapply any and all payments received at any time
or times hereafter against the Liabilities in such
manner as Lender may deem advisable, notwithstanding any
entry by Lender upon any of its books and records.
10.10 Marshalling; Payments Set Aside. Lender
shall be under no obligation to marshall any assets in favor
of Borrower or any other party or against or in payment of
any or all of the Liabilities. To the extent that
Borrower makes a payment or payments to Lender and such
payment or payments or set-off or any part thereof is
subsequently invalidated, declared to be fraudulent or
preferential, set aside and/or required to be repaid to a
trustee, receiver or any other party under any bankruptcy
law, state or federal law, common law or equitable cause,
then to the extent of such recovery, the obligation or
part thereof originally intended to be satisfied shall be
revived and continued in full force and effect as if such
payment had not been made or such set-off had not occurred.
10.11 Section Titles. The section titles contained
in this Agreement shall be without substantive meaning or
content of any kind whatsoever and are not a part of the
agreement between the parties.
10.12 Continuing Effect. This Agreement and all of
the other Loan Documents shall continue in full force and
effect so long as any Liabilities shall be owed to Lender,
and (even if there shall be no Liabilities outstanding) so
long as this Agreement has not been terminated as provided
in Section 2.6.
10.13 Notices. Except as otherwise expressly
provided herein, any notice required or desired to be
served, given or delivered hereunder shall be in writing,
shall be addressed to the Person to be notified as follows
(or to such other address or addresses as may hereafter
be furnished in writing by the Person to be notified):
(i) If to Lender at:
NationsBank, N.A.
211 North Robinson Avenue
P. O. Box 25189
Oklahoma City, Oklahoma 73102-0189
Attention: Kelly H. Sachs, Vice President
Fax: (405) 230-4089
with a copy to:
Phillips McFall McCaffrey McVay & Murrah
12th Floor, One Leadership Square
211 North Robinson
Oklahoma City, Oklahoma 73102
Attention: J. Mark Lovelace, Esq.
Fax: (405) 235-4133
(ii) If to Borrower at:
Harold's Stores, Inc.
765 Asp
P. O. Box 2970
Norman, Oklahoma 73069
Attention: H. Rainey Powell, President
and Chief Operating Officer
Fax: (405) 366-2588
with a copy to:
Crowe & Dunlevy, Luttrell, Pendarvis & Rawlinson
104 E. Eufaula Street
P. O. Box 1286
Norman, Oklahoma 73070-1286
Attention: Gary C. Rawlinson, Esq.
Fax: (405) 272-5292
and notice shall be deemed to have been validly served,
given or delivered on (i) the date of delivery, if delivered
in person. (ii) the third Business Day after deposit in the
United States mails, if delivered by certified mail, return
receipt requested, (iii) the first Business Day after
delivery to the courier, if delivered by private overnight
courier service, or (iv) upon actual receipt thereof, if
delivered by facsimile or in any other manner.
10.14 Participations. Lender may sell
participations in all or in part of any Loan or Note or
any part thereof, to another bank or other entity. All
amounts payable by Borrower hereunder shall be made as if
Lender had not sold such participation. Lender may
furnish any information in possession of Lender and
concerning Borrower from time to time to participants or
prospective participants.
10.15 Entire Agreement. This Agreement constitutes
the entire agreement and understanding among the parties
with respect to the matters contained in this Agreement, and
supersedes all other agreements among and representations
by the parties with respect to such matters.
10.16 Effect of Amendment. This Agreement is, in
part, a renewal, extension and restatement of, and an
amendment to, the Original Agreement. The Liabilities of
Borrower originally evidenced by the Original Agreement and
the other Loan Documents are continuing and nothing
contained herein shall be construed to be paid any
portion of the outstanding balance of the Liabilities or
the releasing or terminating of any mortgage, lien, pledge,
assignment, security interest or encumbrances securing
payment of the Liabilities.
10.17 Counterparts. This Agreement may be executed
in any number of counterparts, each of which shall be deemed
to be an original, but all of which together shall
constitute but one and the same instrument.
IN WITNESS WHEREOF, this Agreement has been duly executed as
of the day and year first above written.
"LENDER": NATIONSBANK, N.A.
By:
Kelly H. Sachs, Vice President
"BORROWER": HAROLD'S STORES, INC.
By:
H. Rainey Powell, President
and Chief Operating Officer
Exhibits
Exhibit "A" Fourteenth Amended and Restated
Revolving Note
Exhibit "B" Tenant Improvement Note
Exhibit "C" Letter of Credit Note
Exhibit "D" Term Note
Exhibit "E" Borrower's Monthly Report
Exhibit "F" Borrower's Quarterly Report
Exhibit "G" Negative Pledge Agreement
Exhibit "H" Collateral Assignment and Security
Agreement
Exhibit "I-1" Security Agreement and Assignment of Borrower
Exhibit "I-2" Security Agreement and Assignment of Harold's
Subsidiaries
Exhibit "J" Borrower's Request for Advance
Exhibit "A"
FOURTEENTH AMENDED AND RESTATED REDUCING REVOLVING NOTE
(Revolving Loan)
$21,500,000.00 November 10, 1997
Oklahoma City, Oklahoma
For value received, HAROLD'S STORES, INC., an Oklahoma
corporation ("Maker"), promises to pay to the order of
NATIONSBANK, N.A., P. O. Box 25189, 211 North Robinson Avenue,
Oklahoma City, Oklahoma, 73125-0189 ("Lender"), on or before June
30, 1999, the principal sum of Twenty-One Million Five Hundred
Thousand and No/100 Dollars ($21,500,000.00), together with
interest thereon from the date of funding at the rates
hereinafter specified, payable as follows:
The unpaid principal amount from time to time
outstanding under this Note shall bear interest from the
date hereof at the following rates per annum: (a) prior to
maturity, at a rate equal to one and five-eighths of one
percent (1.625%) plus either the one (1) month or three (3)
month LIBOR Rate, as hereinafter defined, from time to time
in effect; and (b) after maturity of any installment,
whether by acceleration or otherwise, until paid at a rate
equal to the sum of (i) five percent (5%) plus (ii) the then
applicable annual rate then in effect.
"LIBOR Rate" shall mean the London Interbank Offered
Rate for either (i) one (1) month or (ii) three (3) months,
as published in The Wall Street Journal indicating the
average of interbank offered rates for dollar deposits in
the London market based on the quotation at five major
banks, as elected by Borrower on the 15th day of each month,
such election to be effective until the 15th day of the
following month. If the 15th day of a month falls on a date
when The Wall Street Journal is not published, then the one
(1) month or three (3) month LIBOR Rate published in the
following issue of The Wall Street Journal shall be the
basis of the applicable LIBOR Rate to be elected by
Borrower.
Accrued interest shall be payable monthly beginning
November 30, 1997 and on the last day of each month
thereafter until maturity, at which time all principal and
accrued interest shall become due and payable.
Interest shall be computed on the actual number of days
elapsed on the basis of a 360 day year.
Payments of both principal and interest are to be made in
the lawful money of the United States of America.
This Note is subject to the terms and provisions of that
certain Third Amended and Restated Credit Agreement of even date
herewith (the "Credit Agreement"), by and between Maker and
Lender, to which reference is made for a statement of such terms
and provisions, including those under which the indebtedness
evidenced by this Note may be declared to be immediately due and
payable. Additionally, the availability under this Note shall be
reduced to a maximum of Nineteen Million Dollars ($19,000,000.00)
immediately after the close of business on November 30, 1997, as
more fully set forth in the Credit Agreement. Unless otherwise
defined, the terms used herein have the meanings provided in the
Credit Agreement.
This Note is an amendment and restatement of, and substitute
and replacement for, that certain Thirteenth Amended and Restated
Reducing Revolving Note dated September 30, 1997 in the original
principal amount of $21,500,000.00 payable to the order of Lender
(the "Prior Note"). The indebtedness of Maker originally
evidenced by the Prior Note is a continuing indebtedness all of
which is now evidenced by this Note and nothing herein contained
shall be construed to deem paid the Prior Note.
Maker shall have the right to prepay this Note in whole or
in part at any time and from time to time without premium or
penalty, but with interest to the date of payment on the amount
prepaid. All payments under this Note shall be applied first to
any accrued interest and then to principal.
Maker agrees that if, and as often as, this Note is placed
in the hands of an attorney for collection or to defend or
enforce any of the holder's rights hereunder, Maker shall pay to
the holder hereof its reasonable attorney's fees, together with
all court costs and other expenses incurred and paid by such
holder.
Maker, endorsers, sureties and all other persons who may
become liable for all or any part of this obligation severally
waive presentment for payment, protest and notice of nonpayment.
Said parties consent to any extension of time (whether one or
more) of payment hereof, any renewal (whether one or more)
hereof, and any release of any party liable for payment of this
obligation. Any such extension, renewal or release may be made
without notice to such party and without discharging said party's
liability hereunder.
The failure of the holder of this Note to exercise any of
the remedies or options set forth in this Note or in any
instrument securing payment hereof, upon the occurrence of one or
more events of default, shall not constitute a waiver of the
right to exercise the same or any other remedy at any subsequent
time in respect to the same or any other event of default. The
acceptance of the holder hereof of any payment which is less than
the total of all amounts due and payable at the time of such
payment shall not constitute a waiver of the right to exercise
any of the foregoing remedies or options at that time or any
subsequent time, or nullify any prior exercise of any such remedy
or option, without the express consent of the holder hereof,
except as and to the extent otherwise provided by law.
It is the intention of Maker and Lender to comply strictly
with all applicable usury laws; accordingly, it is agreed that
notwithstanding any provisions to the contrary in this Note, or
in any of the documents securing payment hereof or otherwise
relating hereto, in no event shall this Note or other documents
require the payment or permit the collection of an aggregate
amount of interest in excess of the maximum amount permitted by
any laws which may apply to this transaction, including the laws
of the State of Oklahoma.
If any such excess of interest is contracted for, charged or
received under this Note or under the terms of any of the
documents securing payment hereof or otherwise relating hereto,
or if the maturity of the indebtedness evidenced by this Note is
accelerated in whole or in part, or if all or part of the
principal or interest of this Note shall be prepaid, so that
under any of such circumstances the amount of interest (including
all amounts payable hereunder or in connection with the loan
evidenced hereby which are not denominated as interest but which
constitute interest under applicable laws) contracted for,
charged or received under this Note shall exceed the maximum
amount of interest permitted by the applicable usury laws, as now
or hereafter enacted, then in any such event (a) the provisions
of this paragraph shall govern and control, (b) neither Maker
hereof nor any other person or entity now or hereafter liable for
the payment hereof shall be obligated to pay the amount of such
interest to the extent that it is in excess of the maximum amount
of interest permitted by the applicable usury laws, as now or
hereafter enacted, (c) any such excess interest which may have
been collected shall be either applied as a credit against the
then unpaid principal amount hereof or, if this Note shall have
been paid in full, refunded to Maker, and (d) the effective rate
of interest shall be automatically reduced to the maximum lawful
contract rate allowed under the applicable usury laws as now or
hereafter construed by the courts having jurisdiction thereof.
It is further agreed that without limitation of the foregoing,
all calculations of the rate of interest contracted for, charged
or received under this Note or under such other documents which
are made for the purpose of determining whether such rate exceeds
the maximum lawful contract rate, shall be made, to the extent
permitted by applicable usury laws, by amortizing, prorating,
allocating and spreading in equal parts during the period of the
full stated term of the loan evidenced hereby, all interest at
any time contracted for, charged or received from Maker or
otherwise by the holder or holders hereof in connection with such
loan.
Maker and Lender intend and believe that each provision in
this Note comports with all applicable local, state and federal
laws and judicial decisions. However, if any provision or
provisions, or if any portion of any provision or provisions, in
this Note is found by a court of law to be in violation of any
applicable local, state or federal ordinance, statute, law,
administrative or judicial decision, or public policy, and if
such court should declare such portion, provision or provisions
of this Note to be illegal, invalid, unlawful, void or
unenforceable as written, then it is the intent of all parties
hereto that such portion, provision or provisions shall be given
force to the fullest possible extent that they are legal, valid
and enforceable, that the remainder of this Note shall be
construed as if such illegal, invalid, unlawful, void or
unenforceable portion, provision or provisions were not contained
therein, and that the rights, obligations and interest of Maker
and Lender under the remainder of this Note shall continue in
full force and effect.
The records of the holder of this Note shall be prima facie
evidence of the amount owing on this Note. This Note may be
assigned by holder without the prior consent of Maker.
This Note is made under and governed by the laws of the
State of Oklahoma.
IN WITNESS WHEREOF, the undersigned Maker has executed this
instrument effective the date indicated above.
"MAKER": HAROLD'S
STORES, INC., an Oklahoma
corporation
By:
H. Rainey Powell, President
and Chief Operating Officer
STATE OF OKLAHOMA )
) SS.
COUNTY OF CLEVELAND )
This instrument was acknowledged before me this 10th day of
November, 1997 by H. Rainey Powell, as President and Chief
Operating Officer of Harold's Stores, Inc., an Oklahoma
corporation.
Notary Public
My Commission Expires:
[SEAL]
Exhibit "B"
REVOLVING NOTE
(Tenant Improvement Loan)
$3,000,000.00 November 10, 1997
Oklahoma City, Oklahoma
For value received, HAROLD'S STORES, INC., an Oklahoma
corporation ("Maker"), promises to pay to the order of
NATIONSBANK, N.A., P. O. Box 25189, 211 North Robinson Avenue,
Oklahoma City, Oklahoma, 73125-0189 ("Lender"), on or before
June 30, 1999, the principal sum of Three Million and No/100
Dollars ($3,000,000.00), together with interest thereon from the
date of funding at the rates hereinafter specified, payable as
follows:
The unpaid principal amount from time to time
outstanding under this Note shall bear interest from the
date hereof at the following rates per annum: (a) prior to
maturity at a rate per annum equal to the LIBOR Rate plus
the following amount, determined according to the current
calculation of Tangible Net Worth under Section 7.9(B) of
the Credit Agreement as hereinafter defined:
Minimum Tangible Net Worth Rate
Differential
$35,800,000.00 plus 1.625%
$35,000,000.00 plus 1.875%
$34,000,000.00 plus 2.125%;
and (b) after maturity of any installment, whether by
acceleration or otherwise, until paid at a rate of (i) five
percent (5%) plus (ii) the then applicable annual rate then
in effect.
"LIBOR Rate" shall mean the London Interbank Offered
Rate for either (i) one (1) month or (ii) three (3) months,
as published in The Wall Street Journal indicating the
average of interbank offered rates for dollar deposits in
the London market based on the quotation at five major
banks, as elected by Borrower on the 15th day of each month,
such election to be effective until the 15th day of the
following month. If the 15th day of a month falls on a date
when The Wall Street Journal is not published, then the one
(1) month or three (3) month LIBOR Rate published in the
following issue of The Wall Street Journal shall be the
basis of the applicable LIBOR Rate to be elected by
Borrower.
Accrued interest shall be payable monthly beginning
November 30, 1997 and on the last day of each month
thereafter until maturity, at which time all principal and
accrued interest shall become due and payable.
Interest shall be computed on the actual number of days
elapsed on the basis of a 360 day year.
Payments of both principal and interest are to be made in
the lawful money of the United States of America.
This Note is subject to the terms and provisions of that
certain Third Amended and Restated Credit Agreement of even date
herewith (the "Credit Agreement"), by and between Maker and
Lender, to which reference is made for a statement of such terms
and provisions, including those under which the indebtedness
evidenced by this Note may be declared to be immediately due and
payable. Unless otherwise defined, the terms used herein have the
meanings provided in the Credit Agreement.
Maker shall have the right to prepay this Note in whole or
in part at any time and from time to time without premium or
penalty, but with interest to the date of payment on the amount
prepaid. All payments under this Note shall be applied first to
any accrued interest and then to principal.
Maker agrees that if, and as often as, this Note is placed
in the hands of an attorney for collection or to defend or
enforce any of the holder's rights hereunder, Maker shall pay to
the holder hereof its reasonable attorney's fees, together with
all court costs and other expenses incurred and paid by such
holder.
Maker, endorsers, sureties and all other persons who may
become liable for all or any part of this obligation severally
waive presentment for payment, protest and notice of nonpayment.
Said parties consent to any extension of time (whether one or
more) of payment hereof, any renewal (whether one or more)
hereof, and any release of any party liable for payment of this
obligation. Any such extension, renewal or release may be made
without notice to such party and without discharging said party's
liability hereunder.
The failure of the holder of this Note to exercise any of
the remedies or options set forth in this Note or in any
instrument securing payment hereof, upon the occurrence of one or
more events of default, shall not constitute a waiver of the
right to exercise the same or any other remedy at any subsequent
time in respect to the same or any other event of default. The
acceptance of the holder hereof of any payment which is less than
the total of all amounts due and payable at the time of such
payment shall not constitute a waiver of the right to exercise
any of the foregoing remedies or options at that time or any
subsequent time, or nullify any prior exercise of any such remedy
or option, without the express consent of the holder hereof,
except as and to the extent otherwise provided by law.
It is the intention of Maker and Lender to comply strictly
with all applicable usury laws; accordingly, it is agreed that
notwithstanding any provisions to the contrary in this Note, or
in any of the documents securing payment hereof or otherwise
relating hereto, in no event shall this Note or other documents
require the payment or permit the collection of an aggregate
amount of interest in excess of the maximum amount permitted by
any laws which may apply to this transaction, including the laws
of the State of Oklahoma.
If any such excess of interest is contracted for, charged or
received under this Note or under the terms of any of the
documents securing payment hereof or otherwise relating hereto,
or if the maturity of the indebtedness evidenced by this Note is
accelerated in whole or in part, or if all or part of the
principal or interest of this Note shall be prepaid, so that
under any of such circumstances the amount of interest (including
all amounts payable hereunder or in connection with the loan
evidenced hereby which are not denominated as interest but which
constitute interest under applicable laws) contracted for,
charged or received under this Note shall exceed the maximum
amount of interest permitted by the applicable usury laws, as now
or hereafter enacted, then in any such event (a) the provisions
of this paragraph shall govern and control, (b) neither Maker
hereof nor any other person or entity now or hereafter liable for
the payment hereof shall be obligated to pay the amount of such
interest to the extent that it is in excess of the maximum amount
of interest permitted by the applicable usury laws, as now or
hereafter enacted, (c) any such excess interest which may have
been collected shall be either applied as a credit against the
then unpaid principal amount hereof or, if this Note shall have
been paid in full, refunded to Maker, and (d) the effective rate
of interest shall be automatically reduced to the maximum lawful
contract rate allowed under the applicable usury laws as now or
hereafter construed by the courts having jurisdiction thereof.
It is further agreed that without limitation of the foregoing,
all calculations of the rate of interest contracted for, charged
or received under this Note or under such other documents which
are made for the purpose of determining whether such rate exceeds
the maximum lawful contract rate, shall be made, to the extent
permitted by applicable usury laws, by amortizing, prorating,
allocating and spreading in equal parts during the period of the
full stated term of the loan evidenced hereby, all interest at
any time contracted for, charged or received from Maker or
otherwise by the holder or holders hereof in connection with such
loan.
Maker and Lender intend and believe that each provision in
this Note comports with all applicable local, state and federal
laws and judicial decisions. However, if any provision or
provisions, or if any portion of any provision or provisions, in
this Note is found by a court of law to be in violation of any
applicable local, state or federal ordinance, statute, law,
administrative or judicial decision, or public policy, and if
such court should declare such portion, provision or provisions
of this Note to be illegal, invalid, unlawful, void or
unenforceable as written, then it is the intent of all parties
hereto that such portion, provision or provisions shall be given
force to the fullest possible extent that they are legal, valid
and enforceable, that the remainder of this Note shall be
construed as if such illegal, invalid, unlawful, void or
unenforceable portion, provision or provisions were not contained
therein, and that the rights, obligations and interest of Maker
and Lender under the remainder of this Note shall continue in
full force and effect.
The records of the holder of this Note shall be prima facie
evidence of the amount owing on this Note. This Note may be
assigned by holder without the prior consent of Maker.
This Note is made under and governed by the laws of the
State of Oklahoma.
IN WITNESS WHEREOF, the undersigned Maker has executed this
instrument effective the date indicated above.
"MAKER": HAROLD'S
STORES, INC., an Oklahoma
corporation
By:
H. Rainey Powell, President
and Chief Operating Officer
STATE OF OKLAHOMA )
) SS.
COUNTY OF CLEVELAND )
This instrument was acknowledged before me this 10th day of
November, 1997 by H. Rainey Powell, as President and Chief
Operating Officer of Harold's Stores, Inc., an Oklahoma
corporation.
Notary Public
My Commission Expires:
[SEAL]
Exhibit "C"
REVOLVING NOTE
(Letter of Credit Facility)
$2,000,000.00 November 10, 1997
Oklahoma City, Oklahoma
For value received, HAROLD'S STORES, INC., an Oklahoma
corporation ("Maker"), promises to pay to the order of
NATIONSBANK, N.A., P. O. Box 25189, 211 North Robinson Avenue,
Oklahoma City, Oklahoma, 73125-0189 ("Lender"), on or before June
30, 1998, the principal sum of Three Million and No/100 Dollars
($3,000,000.00), together with interest thereon from the date of
funding at the rates hereinafter specified, payable as follows:
The unpaid principal amount from time to time
outstanding under this Note shall bear interest from the
date hereof at the following rates per annum: (a) prior to
maturity on the average daily outstanding balance of the
liabilities under the Letter of Credit Facility at a rate
per annum equal to the LIBOR Rate plus two percent (2.00%);
and (b) after maturity of any installment, whether by
acceleration or otherwise, until paid at a rate of (i) five
percent (5%) plus (ii) the then applicable annual rate then
in effect.
"LIBOR Rate" shall mean the London Interbank Offered
Rate for either (i) one (1) month or (ii) three (3) months,
as published in The Wall Street Journal indicating the
average of interbank offered rates for dollar deposits in
the London market based on the quotation at five major
banks, as elected by Borrower on the 15th day of each month,
such election to be effective until the 15th day of the
following month. If the 15th day of a month falls on a date
when The Wall Street Journal is not published, then the one
(1) month or three (3) month LIBOR Rate published in the
following issue of The Wall Street Journal shall be the
basis of the applicable LIBOR Rate to be elected by
Borrower.
Accrued interest shall be payable monthly beginning
November 30, 1997 and on the last day of each month
thereafter until maturity, at which time all principal and
accrued interest shall become due and payable.
Interest shall be computed on the actual number of days
elapsed on the basis of a 360 day year.
Payments of both principal and interest are to be made in
the lawful money of the United States of America.
This Note is subject to the terms and provisions of that
certain Third Amended and Restated Credit Agreement of even date
herewith (the "Credit Agreement"), by and between Maker and
Lender, to which reference is made for a statement of such terms
and provisions, including those under which the indebtedness
evidenced by this Note may be declared to be immediately due and
payable. Unless otherwise defined, the terms used herein have the
meanings provided in the Credit Agreement.
Maker shall have the right to prepay this Note in whole or
in part at any time and from time to time without premium or
penalty, but with interest to the date of payment on the amount
prepaid. All payments under this Note shall be applied first to
any accrued interest and then to principal.
Maker agrees that if, and as often as, this Note is placed
in the hands of an attorney for collection or to defend or
enforce any of the holder's rights hereunder, Maker shall pay to
the holder hereof its reasonable attorney's fees, together with
all court costs and other expenses incurred and paid by such
holder.
Maker, endorsers, sureties and all other persons who may
become liable for all or any part of this obligation severally
waive presentment for payment, protest and notice of nonpayment.
Said parties consent to any extension of time (whether one or
more) of payment hereof, any renewal (whether one or more)
hereof, and any release of any party liable for payment of this
obligation. Any such extension, renewal or release may be made
without notice to such party and without discharging said party's
liability hereunder.
The failure of the holder of this Note to exercise any of
the remedies or options set forth in this Note or in any
instrument securing payment hereof, upon the occurrence of one or
more events of default, shall not constitute a waiver of the
right to exercise the same or any other remedy at any subsequent
time in respect to the same or any other event of default. The
acceptance of the holder hereof of any payment which is less than
the total of all amounts due and payable at the time of such
payment shall not constitute a waiver of the right to exercise
any of the foregoing remedies or options at that time or any
subsequent time, or nullify any prior exercise of any such remedy
or option, without the express consent of the holder hereof,
except as and to the extent otherwise provided by law.
It is the intention of Maker and Lender to comply strictly
with all applicable usury laws; accordingly, it is agreed that
notwithstanding any provisions to the contrary in this Note, or
in any of the documents securing payment hereof or otherwise
relating hereto, in no event shall this Note or other documents
require the payment or permit the collection of an aggregate
amount of interest in excess of the maximum amount permitted by
any laws which may apply to this transaction, including the laws
of the State of Oklahoma.
If any such excess of interest is contracted for, charged or
received under this Note or under the terms of any of the
documents securing payment hereof or otherwise relating hereto,
or if the maturity of the indebtedness evidenced by this Note is
accelerated in whole or in part, or if all or part of the
principal or interest of this Note shall be prepaid, so that
under any of such circumstances the amount of interest (including
all amounts payable hereunder or in connection with the loan
evidenced hereby which are not denominated as interest but which
constitute interest under applicable laws) contracted for,
charged or received under this Note shall exceed the maximum
amount of interest permitted by the applicable usury laws, as now
or hereafter enacted, then in any such event (a) the provisions
of this paragraph shall govern and control, (b) neither Maker
hereof nor any other person or entity now or hereafter liable for
the payment hereof shall be obligated to pay the amount of such
interest to the extent that it is in excess of the maximum amount
of interest permitted by the applicable usury laws, as now or
hereafter enacted, (c) any such excess interest which may have
been collected shall be either applied as a credit against the
then unpaid principal amount hereof or, if this Note shall have
been paid in full, refunded to Maker, and (d) the effective rate
of interest shall be automatically reduced to the maximum lawful
contract rate allowed under the applicable usury laws as now or
hereafter construed by the courts having jurisdiction thereof.
It is further agreed that without limitation of the foregoing,
all calculations of the rate of interest contracted for, charged
or received under this Note or under such other documents which
are made for the purpose of determining whether such rate exceeds
the maximum lawful contract rate, shall be made, to the extent
permitted by applicable usury laws, by amortizing, prorating,
allocating and spreading in equal parts during the period of the
full stated term of the loan evidenced hereby, all interest at
any time contracted for, charged or received from Maker or
otherwise by the holder or holders hereof in connection with such
loan.
Maker and Lender intend and believe that each provision in
this Note comports with all applicable local, state and federal
laws and judicial decisions. However, if any provision or
provisions, or if any portion of any provision or provisions, in
this Note is found by a court of law to be in violation of any
applicable local, state or federal ordinance, statute, law,
administrative or judicial decision, or public policy, and if
such court should declare such portion, provision or provisions
of this Note to be illegal, invalid, unlawful, void or
unenforceable as written, then it is the intent of all parties
hereto that such portion, provision or provisions shall be given
force to the fullest possible extent that they are legal, valid
and enforceable, that the remainder of this Note shall be
construed as if such illegal, invalid, unlawful, void or
unenforceable portion, provision or provisions were not contained
therein, and that the rights, obligations and interest of Maker
and Lender under the remainder of this Note shall continue in
full force and effect.
The records of the holder of this Note shall be prima facie
evidence of the amount owing on this Note. This Note may be
assigned by holder without the prior consent of Maker.
This Note is made under and governed by the laws of the
State of Oklahoma.
IN WITNESS WHEREOF, the undersigned Maker has executed this
instrument effective the date indicated above.
"MAKER": HAROLD'S
STORES, INC., an Oklahoma
corporation
By:
H. Rainey Powell, President
and Chief Operating Officer
STATE OF OKLAHOMA )
) SS.
COUNTY OF CLEVELAND )
This instrument was acknowledged before me this 10th day of
November, 1997 by H. Rainey Powell, as President and Chief
Operating Officer of Harold's Stores, Inc., an Oklahoma
corporation.
Notary Public
My Commission Expires:
[SEAL]
Exhibit "D"
TERM NOTE
$2,340,792.00 November 10, 1997
Oklahoma City, Oklahoma
For value received, HAROLD'S STORES, INC., an Oklahoma
corporation ("Maker"), promises to pay to the order of
NATIONSBANK, N.A., P. O. Box 25189, 211 North Robinson Avenue,
Oklahoma City, Oklahoma, 73125-0189 ("Lender"), on or before
June 30, 1999 the principal sum of Two Million Three Hundred
Forty Thousand Seven Hundred Ninety-Two and No/100 Dollars
($2,340,792.00), together with interest thereon from the date of
funding at the rates hereinafter specified, payable as follows:
The unpaid principal amount from time to time
outstanding under this Note shall bear interest from the
date hereof at the following rates per annum: (a) prior to
maturity at a rate per annum equal to the LIBOR Rate plus
the following amount, determined according to the current
calculation of Tangible Net Worth under Section 7.9(B) of
the Credit Agreement, as hereinafter defined:
Minimum Tangible Net Worth Rate
Differential
$35,800,000.00 plus 1.625%
$35,000,000.00 plus 1.875%
$34,000,000.00 plus 2.125%;
and (b) after maturity of any installment, whether by
acceleration or otherwise, until paid at a rate of (i) five
percent (5%) plus (ii) the then applicable annual rate then
in effect.
"LIBOR Rate" shall mean the London Interbank Offered
Rate for either (i) one (1) month or (ii) three (3) months,
as published in The Wall Street Journal indicating the
average of interbank offered rates for dollar deposits in
the London market based on the quotation at five major
banks, as elected by Maker on the 15th day of each month,
such election to be effective until the 15th day of the
following month. If the 15th day of a month falls on a date
when The Wall Street Journal is not published, then the one
(1) month or three (3) month LIBOR Rate published in the
following issue of The Wall Street Journal shall be the
basis of the applicable LIBOR Rate to be elected by Maker.
Principal in an amount equal to the amount of principal
due to Maker from CMT pursuant to the CMT Loan, plus accrued
interest, shall be payable monthly beginning November 30,
1997 and on the last day of each month thereafter until
maturity, at which time all principal and accrued interest
shall become due and payable. Each monthly installment
payment made under this Note shall be applied first to the
unpaid interest accrued and then to the principal balance
thereof.
Interest shall be computed on the actual number of days
elapsed on the basis of a 360 day year.
Payments of both principal and interest are to be made in
the lawful money of the United States of America.
This Note is subject to the terms and provisions of that
certain Third Amended and Restated Credit Agreement of even date
herewith (the "Credit Agreement"), by and between Maker and
Lender, to which reference is made for a statement of such terms
and provisions, including those under which the indebtedness
evidenced by this Note may be declared to be immediately due and
payable. Unless otherwise defined, the terms used herein have the
meanings provided in the Credit Agreement.
Maker shall have the right to prepay this Note in whole or
in part at any time and from time to time without premium or
penalty, but with interest to the date of payment on the amount
prepaid. All payments under this Note shall be applied first to
any accrued interest and then to principal.
Maker agrees that if, and as often as, this Note is placed
in the hands of an attorney for collection or to defend or
enforce any of the holder's rights hereunder, Maker shall pay to
the holder hereof its reasonable attorney's fees, together with
all court costs and other expenses incurred and paid by such
holder.
Maker, endorsers, sureties and all other persons who may
become liable for all or any part of this obligation severally
waive presentment for payment, protest and notice of nonpayment.
Said parties consent to any extension of time (whether one or
more) of payment hereof, any renewal (whether one or more)
hereof, and any release of any party liable for payment of this
obligation. Any such extension, renewal or release may be made
without notice to such party and without discharging said party's
liability hereunder.
The failure of the holder of this Note to exercise any of
the remedies or options set forth in this Note or in any
instrument securing payment hereof, upon the occurrence of one or
more events of default, shall not constitute a waiver of the
right to exercise the same or any other remedy at any subsequent
time in respect to the same or any other event of default. The
acceptance of the holder hereof of any payment which is less than
the total of all amounts due and payable at the time of such
payment shall not constitute a waiver of the right to exercise
any of the foregoing remedies or options at that time or any
subsequent time, or nullify any prior exercise of any such remedy
or option, without the express consent of the holder hereof,
except as and to the extent otherwise provided by law.
It is the intention of Maker and Lender to comply strictly
with all applicable usury laws; accordingly, it is agreed that
notwithstanding any provisions to the contrary in this Note, or
in any of the documents securing payment hereof or otherwise
relating hereto, in no event shall this Note or other documents
require the payment or permit the collection of an aggregate
amount of interest in excess of the maximum amount permitted by
any laws which may apply to this transaction, including the laws
of the State of Oklahoma.
If any such excess of interest is contracted for, charged or
received under this Note or under the terms of any of the
documents securing payment hereof or otherwise relating hereto,
or if the maturity of the indebtedness evidenced by this Note is
accelerated in whole or in part, or if all or part of the
principal or interest of this Note shall be prepaid, so that
under any of such circumstances the amount of interest (including
all amounts payable hereunder or in connection with the loan
evidenced hereby which are not denominated as interest but which
constitute interest under applicable laws) contracted for,
charged or received under this Note shall exceed the maximum
amount of interest permitted by the applicable usury laws, as now
or hereafter enacted, then in any such event (a) the provisions
of this paragraph shall govern and control, (b) neither Maker
hereof nor any other person or entity now or hereafter liable for
the payment hereof shall be obligated to pay the amount of such
interest to the extent that it is in excess of the maximum amount
of interest permitted by the applicable usury laws, as now or
hereafter enacted, (c) any such excess interest which may have
been collected shall be either applied as a credit against the
then unpaid principal amount hereof or, if this Note shall have
been paid in full, refunded to Maker, and (d) the effective rate
of interest shall be automatically reduced to the maximum lawful
contract rate allowed under the applicable usury laws as now or
hereafter construed by the courts having jurisdiction thereof.
It is further agreed that without limitation of the foregoing,
all calculations of the rate of interest contracted for, charged
or received under this Note or under such other documents which
are made for the purpose of determining whether such rate exceeds
the maximum lawful contract rate, shall be made, to the extent
permitted by applicable usury laws, by amortizing, prorating,
allocating and spreading in equal parts during the period of the
full stated term of the loan evidenced hereby, all interest at
any time contracted for, charged or received from Maker or
otherwise by the holder or holders hereof in connection with such
loan.
Maker and Lender intend and believe that each provision in
this Note comports with all applicable local, state and federal
laws and judicial decisions. However, if any provision or
provisions, or if any portion of any provision or provisions, in
this Note is found by a court of law to be in violation of any
applicable local, state or federal ordinance, statute, law,
administrative or judicial decision, or public policy, and if
such court should declare such portion, provision or provisions
of this Note to be illegal, invalid, unlawful, void or
unenforceable as written, then it is the intent of all parties
hereto that such portion, provision or provisions shall be given
force to the fullest possible extent that they are legal, valid
and enforceable, that the remainder of this Note shall be
construed as if such illegal, invalid, unlawful, void or
unenforceable portion, provision or provisions were not contained
therein, and that the rights, obligations and interest of Maker
and Lender under the remainder of this Note shall continue in
full force and effect.
The records of the holder of this Note shall be prima facie
evidence of the amount owing on this Note. This Note may be
assigned by holder without the prior consent of Maker.
This Note is made under and governed by the laws of the
State of Oklahoma.
IN WITNESS WHEREOF, the undersigned Maker has executed this
instrument effective the date indicated above.
"MAKER": HAROLD'S
STORES, INC., an Oklahoma
corporation
By:
H. Rainey Powell, President
and Chief Operating Officer
STATE OF OKLAHOMA )
) SS.
COUNTY OF CLEVELAND )
This instrument was acknowledged before me this 10th day of
November, 1997 by H. Rainey Powell, as President and Chief
Operating Officer of Harold's Stores, Inc., an Oklahoma
corporation.
Notary Public
My Commission Expires:
[SEAL]
Exhibit "E"
MONTHLY BORROWING BASE AND COMPLIANCE CERTIFICATE
HAROLD'S STORES, INC.
DATE: For Period Ending
NationsBank, N.A.
P. O. Box 25189
Oklahoma City, Oklahoma 73125-0189
ATTN: Kelly H. Sachs, Vice President
Dear Kelly:
This certificate is hereby submitted in compliance with the
requirements of that certain Third Amended and Restated Credit
Agreement entered into and effective November 10, 1997 (the
"Credit Agreement") by and between HAROLD'S STORES, INC., an
Oklahoma corporation ("Borrower"), and NATIONSBANK, N.A.
("Lender").
By execution hereof, the undersigned duly authorized
officer, on behalf of Borrower certifies that: (1) no Default
and no Event of Default has occurred or is continuing under the
terms of any of the Financing Agreements or, if a Default or
Event of Default has occurred during such month, attached hereto
as Schedule "2" is a description of such Default or Event of
Default and of the actions Borrower has taken or intends to take
to cure the same, (2) all representations and warranties
contained in the Financing Agreements remain as true and correct
on this date as when they were originally submitted to the
Lender, and (3) the facts and information provided herein and in
the case of any accompanying request for disbursement on
Borrower's Revolving Note is true and correct. The following
information is a true and correct summary of all eligible
accounts receivable and inventory and the financial condition of
the Borrower. Attached hereto as Schedule "1" is a true and
correct summary of all trade accounts receivable.
A.
The Borrowing Base is correctly computed below:
1. Accounts resulting from
invoices to retail customers
of Borrower for purchases $
billed to such customers'
accounts
(a) Less each Account ($ )
subject to setoff or other
claim
(b) Less each Account ($ )
where collection is doubtful
(c) Less each Account if
any minimum portion is ($ )
unpaid for more than 60 days
under any statement
(d) Less any Account
where the account debtor is ($ )
insolvent or in receivership
(e) Less any affiliate,
intercompany or interstore ($ )
accounts
(f) Less Accounts
subject to liens in favor of ($ )
Persons other than Lender
(g) Eligible Accounts -
Net $
[1 - (a) - (b) -
(c) - (d) - (e) - (f)]
2. Inventory (Estimated) $
3. Borrowing Base $
Calculation
(a) multiply
1(g) by .80
(b) multiply 2 by $
.60
(c) Enter the
lesser of (i) $21,500,000 $
(commencing
December 1, 1997,
$19,000,000) or
(ii) the sum of 3(a) plus
3(b)
(d) less amount ($ )
funded on facility
(e) less ($ )
Commercial L/Cs issued
(f) less Standby ($ )
L/Cs issued
Borrowing Base $
B. The following are correct computations of Borrower's Total
Liabilities and Tangible Net Worth.
1. Borrower's Total
Liabilities Calculation
(a) All
obligations of Borrower
which, in accordance with $
GAAP, would be shown on
Borrower's balance sheet as
a liability
(b) All
rental obligations under $
leases required to be
capitalized under GAAP
(c) All $
guarantees and other
contingent liabilities
(d)
Liabilities of others $
secured by lien or security
interest in Borrower's
property
(e) Less ($ )
debt expressly subordinated
to Lender
(f)
Borrower's Total Liabilities $
[(a) + (b) + (c) +
(d) - (e)]
2. Borrower's Tangible Net
Worth Calculation
(a) $
Stockholders' equity in
Borrower
(b) Plus $
debt expressly subordinated
to Lender
(c) Less ($ )
General Intangibles
(d) Less ($ )
receivables due from
shareholders
(e) Less
receivables due from any ($ )
Affiliate or Subsidiary
(f)
Borrower's Tangible Net $
Worth
[(a) + (b) - (c) -
(d) - (e)]
The Tangible Net Worth shall be no less than $34,000,000 at
all times.
C. The following ratio is correctly computed below (on a
Quarterly Basis):
1. Total Liabilities to
Tangible Net Worth Ratio
[calculated as 1(e) :1
divided by 2(f)]
The Total Liabilities to Tangible Net Worth Ratio shall not
exceed 1.25:1.
D. New Stores openings scheduled for this month (list by
date and location):
1.
2.
3.
4.
Sincerely,
HAROLD'S STORES, INC.
By:
Title:
Exhibit "F"
QUARTERLY BORROWING BASE & COMPLIANCE CERTIFICATE
HAROLD'S STORES, INC.
DATE: For Period Ending
NationsBank, N.A.
P. O. Box 25189
Oklahoma City, Oklahoma 73125-0189
ATTN: Kelly H. Sachs, Vice President
Dear Kelly:
This certificate is hereby submitted in compliance with the
requirements of that certain Third Amended and Restated Credit
Agreement entered into and effective November 10, 1997 (the
"Credit Agreement") by and between HAROLD'S STORES, INC., an
Oklahoma corporation ("Borrower") and NATIONSBANK, N.A.
("Lender").
By execution hereof, the undersigned duly authorized
officer, on behalf of Borrower certifies that: (1) all
representations and warranties contained in the Financing
Agreements remain as true and correct on this date as when they
were originally submitted to the Lender, and (2) the facts and
information provided herein and in the case of any accompanying
request for disbursement on Borrower's Revolving Note is true and
correct. The following information is a true and correct summary
of all eligible accounts receivable and inventory and the
financial condition of Borrower. Attached hereto as Schedule "1"
is a true and correct summary of all trade accounts receivable.
A.
The Borrowing Base is correctly computed below:
1. Eligible Accounts - Net
(as calculated on most $
recent monthly borrowing
base certificate)
2. Inventory (as
reported on most recent 10Q
filed with the Securities $
and Exchange Commission):
(a) Raw
Materials
(b) Work In $
Process
(c) Finished $
Goods
(d) Total
Inventory owned by Borrower
and Harold's Subsidiaries
and located at Borrower's $
and Harold's Subsidiaries'
principal places of business
[2(a) + 2(b) +
2(c)]
(e) Less
Inventory that cannot or
will not be held for sale to
customers; and, ($ )
specifically, that Inventory
which is damaged, obsolete,
or not readily saleable
(f) Less
Inventory which is subject ($ )
to any rescission or
reclamation right
(g) Less ($ )
Inventory which is subject
to any lien in favor of any
Person other than Lender
(h) Eligible
Inventory - Net $
[2(d) - 2(e) -
2(f) - 2(g)]
3. Borrowing Base
Calculation
$
(a) multiply
item 1 by .80
(b) multiply $
item 2(h) by .60
(c) Enter the
lesser of (i) $21,500,000 $
(commencing
December 1, 1997,
$19,000,000) or
(ii) the sum of 3(a) plus
3(b)
(d) less amount ($ )
funded on facility
(e) less ($ )
Commercial L/Cs issued
(f) less Standby ($ )
L/Cs issued
Borrowing Base $
B. The following are correct computations of Borrower's
Total Liabilities and Tangible Net Worth to be tested
quarterly within 45 days of each fiscal quarter end.
1. Borrower's Total
Liabilities Calculation
(a) All
obligations of Borrower
which, in accordance with $
GAAP, would be shown on
Borrower's balance sheet as
a liability
(b) All
rental obligations under $
leases required to be
capitalized under GAAP
(c) All $
guarantees and other
contingent liabilities
(d) Liabilities
of others secured by lien or $
security interest in
Borrower's property
(e) Less ($ )
debt expressly subordinated
to Lender
(f)
Borrower's Total Liabilities $
[(a) + (b) + (c) +
(d) - (e)]
2. Borrower's Tangible Net
Worth Calculation
(a) Stockholders' $
equity in Borrower
(b) Plus debt $
expressly subordinated to
Lender
(c) Less General ($ )
Intangibles
(d) Less receivables ($ )
due from shareholders
(e) Less receivables
due from any Affiliate or ($ )
Subsidiary
(f) Borrower's
Tangible Net Worth $
[(a) + (b) - (c) -
(d) - (e)]
The Tangible Net Worth shall be no less than $34,000,000 at
all times.
C. The following ratio is correctly computed below and is
tested quarterly within forty-five (45) days of each company
quarter end:
Total Liabilities to Tangible
Net Worth Ratio
[calculated as 1(e) :1
divided by 2(f)]
The Total Liabilities to Tangible Net Worth Ratio shall not
exceed 1.25:1.
Sincerely,
HAROLD'S STORES, INC.
By:
Title:
Exhibit "G"
NEGATIVE PLEDGE AGREEMENT
THIS NEGATIVE PLEDGE AGREEMENT (this "Agreement") is made
this 10th day of November, 1997 by and between HAROLD'S STORES,
INC., an Oklahoma corporation ("Borrower"), and NATIONSBANK, N.A.
("Lender").
WHEREAS, Borrower desires to obtain loans (together with all
extensions and renewals thereof hereafter referred to as the
"Loans") as more fully described in Section 2 of the Third
Amended and Restated Credit Agreement of even date herewith (the
"Credit Agreement"); and
WHEREAS, Lender is willing to grant the Loans provided
Borrower agrees not to encumber certain real or personal
property;
NOW, THEREFORE, for and in consideration of the Loan made or
to be made by Lender to Borrower, and for other good and valuable
consideration, the receipt and sufficiency of which is hereby
acknowledged by both Borrower and Lender, the parties hereto do
agree as follows:
1. Property Borrower hereby agrees that, for so long as
any part of the Loans remain outstanding, that it will not,
without first obtaining the prior written consent of Lender,
create or permit any lien, encumbrance, charge, or security
interest of any kind to exist on any Accounts and Inventory as
more fully described in the Credit Agreement whether now owned or
hereafter acquired.
2. Recording. Lender is hereby authorized and permitted
to cause this instrument to be filed or recorded at such time and
at such place as Lender, at its option, may elect.
3. Representations and Warranties of Borrower. Borrower
represents and warrants to Lender as follows:
a. That Borrower owns the personal property
referenced above and there are no existing liens or
encumbrances upon or affecting such property.
b. Borrower is a corporation duly organized and
validly existing and in good standing under the
laws of Oklahoma and has all requisite power and
authority to enter into this Agreement.
c. The execution and delivery by Borrower of this
agreement and the notes (the "Notes") evidencing the Loans
and the performance of the respective obligations
hereunder and thereunder have been duly
authorized. This Agreement and the Notes constitute the legal
valid and binding obligation of Borrower enforceable in
accordance with their terms. The execution and delivery
of this Agreement and the compliance with the
provisions thereof will not conflict with or
constitute a breach of, or default under, any of the
provisions of any other agreement to which Borrower is a
party.
d. The continued validity in all respects of the
aforesaid representations and warranties shall be
a condition precedent to Lender's obligation to
fund the Loans. If any of the representations
and warranties shall not be correct at the time the
same is made or at the time a request for an advance under the
Loans is made, Lender will be under no obligation to make any
such advance under the Loans.
4. Default. Any failure by Borrower to comply with the
terms of this Agreement shall constitute an event of default
under the documents evidencing the Loans and Borrower agrees that
in such event Lender shall have the right in addition to such
other remedies as may be available to it, to injunctive relief
enjoining such breach of this Agreement and neither Borrower, its
officers, directors, employees, agents or representatives shall
urge that such remedy is not appropriate under the circumstances,
it being expressly acknowledged by Borrower that such action
shall cause Lender irreparable damage for which legal remedies
are inadequate to protect Lender.
5. Termination. This Agreement shall remain in full force
and effect until the Loans described above shall have been paid
in full.
NOTICE OF FINAL AGREEMENT: THIS WRITTEN NEGATIVE PLEDGE
AGREEMENT REPRESENTS THE FINAL AGREEMENT BETWEEN THE PARTIES AND
MAY NOT BE CONTRADICTED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS OR
SUBSEQUENT ORAL AGREEMENTS OF THE PARTIES. THERE ARE NO
UNWRITTEN ORAL AGREEMENTS BETWEEN THE PARTIES.
IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be executed by their duly authorized
representatives.
"BORROWER": HAROLD'S STORES, INC.
By: ________________________________
H. Rainey Powell, President
STATE OF OKLAHOMA )
) SS.
COUNTY OF CLEVELAND )
This instrument was acknowledged before me on November 10,
1997 by H. Rainey Powell, President of Harold's Stores, Inc., an
Oklahoma corporation, on behalf of said corporation.
___________________________________
Notary Public
My commission expires:
___________________
[SEAL]
Exhibit "H"
COLLATERAL ASSIGNMENT AND SECURITY AGREEMENT
HAROLD'S STORES, INC., an Oklahoma corporation
("Assignor"), in consideration of Ten Dollars ($10.00) and other
good and valuable consideration received from NATIONSBANK, N.A.
("Assignee"), receipt of which Assignor acknowledges, does hereby
assign, transfer, pledge, deliver, hypothecate and set over to
Assignee, and grant Assignee a security interest in
(collectively, this "Assignment") all of the following loan and
security documents by and among Assignor, CMT Enterprises Inc., a
New York corporation ("CMT"), and Franklin I. Bober ("Bober")
(collectively, the "Collateral"):
A. Amended and Restated Term Loan and Security
Agreement dated as of November 6, 1996 by and among CMT, Bober
and Assignor;
B. Term Note in the original amount of $2,750,000.00
dated as of November 6, 1996 executed by CMT in favor of
Assignor, the original of which Assignor is simultaneously
herewith endorsing in blank and delivering to Assignee, including
all sums due and payable, or to become due and payable, under
such Note;
C. Second Amended and Restated Guaranty dated as of
November 6, 1996 executed by Bober in favor of Assignor;
D. Stock Pledge Agreement dated as of November 6,
1996 executed by Bober in favor of Assignor;
E. Real Estate Mortgage on real property in Dutchess
County, New York owned by Bober dated as of November 6, 1996
executed by Bober in favor of Assignor recorded in the Office of
the County Clerk of Dutchess County, New York, on November 15,
1996, at Liber 2286 at Page 101 (the "Mortgage"), with respect to
which Mortgage Assignor is simultaneously herewith executing and
delivering to Assignee a separate recordable Collateral
Assignment in favor of Assignee and a separate recordable undated
assignment in blank;
F. Common Stock Purchase Warrant dated as of November
6, 1996 by and between CMT and Assignor;
G. Forbearance Agreement dated as of November 6, 1996
by and between Bober and Assignor;
H. UCC-1 Financing Statements executed by CMT, as
debtor, and Assignor, as secured party, and filed with the New
York Secretary of State, the County Clerk of Bergen County, New
Jersey and any other state clerk, registrar or recording entity,
with respect to which UCC-1 Financing Statements Assignor is
simultaneously executing and delivering to Assignee executed UCC
Assignment forms;
I. CMT Stock Certificate No. 1 representing ten (10)
shares of the Capital Stock of CMT in Bober's name;
J. Assignment Separate from Certificate dated as of
November 6, 1996 from Bober to Assignor, together with an
Assignment Separate from Collateral executed by Assignor in
blank;
K. Cash Collateral Account Agreement dated as of
November 6, 1996 by and between Bober and Assignor;
L. Consent to Default - Assignment of Lease dated as
of November 6, 1996 executed by Bober in favor of Assignor;
M. First Amendment to Trademark Collateral Security
Agreement dated as of November 6, 1996 by and between CMT and
Assignor;
N. Trademark Assignment of Security dated as of
November 6, 1996 from CMT to Assignor;
O. Consolidated and Restated Nonnegotiable Note in
the original amount of $721,000.00 dated as of October 15, 1996
executed by Bober in favor of CMT and endorsed to Assignor, the
original of which Assignor is simultaneously endorsing in blank
and delivering to Assignee, including all sums due and payable,
or to be come due and payable, under such Note;
P. Agreement between The CIT Group/Commercial
Services, Inc. and Assignor dated November 7, 1996;
Q. Life Insurance Policy issued by Equitable Life
Insurance Company as Policy No. 96-021-968 insuring the life of
Bober;
R. Life Insurance Policy issued by First Transamerica
Life Insurance Company as Policy No. 75017613 insuring the life
of Bober;
S. Disability Insurance Policy issued by Reliance
Insurance Company as Policy No. RN HLD 0545 providing for a
payment of a single benefit in the event of the disability of
Bober;
T. Any and all assignments of rents, security
agreements, financing statements, escrow deposits, reserve
accounts, letters of credit, guaranties, indemnity agreements,
estoppel certificates, certificates, affidavits, nondisturbance
agreements, title insurance policies, other insurance policies,
and other documents or agreements otherwise securing, evidencing,
or relating to the obligations of CMT or Bober under, or
delivered to Assignor in connection with, the foregoing
Collateral;
U. All rights and remedies that Assignor might
exercise with respect to any and all of the foregoing but for the
execution of this Assignment; and
V. Any and all proceeds and products of the
foregoing, including condemnation awards and insurance proceeds.
ALL FOR THE PURPOSES OF SECURING Assignor's payment and per
formance of all obligations of Assignor (such obligations of
Assignor, collectively, the "Loan") evidenced by the following
documents (collectively, together with this Assignment, the "Loan
Documents"): (a) that certain Third Amended and Restated Credit
Agreement dated ____________, 1997 between Assignor and Assignee
(together with any and all amendments thereof, the "Loan
Agreement") and all other Financing Agreements described therein;
(b) this Assignment; and (c) all such other present and future
agreements and obligations of Assignor as may by their terms
state they are secured by this Assignment.
PROVIDED, HOWEVER, that upon Assignor's payment in full of
the Loan and performance of all obligations under the Loan
Documents, all rights of Assignee hereby created shall cease,
terminate, and become void and Assignee, at Assignor's expense,
shall execute and deliver such instruments, in recordable form,
as Assignor shall reasonably request to cancel the lien hereof
on, and the security interest created hereby in, all of the
Collateral, shall re-assign and endorse such Collateral as shall
be required by Assignor and shall return to Assignor the original
documents evidencing the Collateral or, as to any document that
Assignee cannot locate, a lost document affidavit and indemnity
in Assignee's standard form.
AND Assignor hereby agrees with Assignee as follows:
1. Representations. Assignor represents and warrants to
Assignee as follows:
1.1 Ownership. Assignor owns the Collateral and all
sums now or hereafter due thereunder, free and clear of
all liens, claims, security interests, encumbrances,
setoffs, defenses and counterclaims, except for the security
interest granted to Assignee by this instrument.
1.2 Outstanding Balance. There is unpaid and
unconditionally owing to Assignor with respect to the
Collateral the principal sum of $ , with all interest thereon
paid and current through the date hereof and through a date
no later than thirty days after the date hereof.
1.3 Status of Collateral. CMT is not entitled to
assert any offset or defense against any of its
obligations under the Collateral, nor has CMT asserted any
such offset or defense. Assignor has no knowledge of
any facts that would impair the validity of the Collateral
or result in a diminution of the value or collectibility
of the Collateral or CMT's obligations thereunder. Each
instrument or document constituting the Collateral is
genuine and in all respects what it purports to be. The
Collateral has not been altered in any way. All obligations
of CMT under the Collateral are valid, binding, and
enforceable against CMT in accordance with their terms.
CMT is solvent and is not in default in any of its
obligations under the Collateral.
1.4 No Breach. Neither the execution and delivery of
this Assignment by Assignor nor the consummation of the
transactions contemplated hereby nor the fulfillment of the
terms hereof will result in a breach of any of the terms or
provisions of, or constitute a default under, or constitute
an event that with notice or lapse of time or both will
result in a breach of or constitute a default under, any
agreement, indenture, mortgage, deed of trust, equipment
lease, instrument, or other document to which Assignor
is a party or conflict with any law, order, rule, or
regulation applicable to Assignor of any court or any fed
eral or state government, regulatory body or administrative
agency, or any other governmental body having jurisdiction
over Assignor or Assignor's properties.
2. Assignor's Covenants.
2.1 Right to Collect. Except as provided in the Loan
Agreement, so long as no Event of Default (as defined
below) shall have occurred: (i) Assignee shall not take any
action with respect to the Collateral assigned hereby or
the sums payable pursuant to the Collateral, and (ii)
Assignor shall receive and collect directly all sums
payable to Assignor pursuant to the terms of the Collateral,
and may take such action as Assignor may deem necessary or
desirable for the enforcement of any right or privilege
Assignor may have in respect of the Collateral and, at
Assignee's direction, shall take such action as Assignee
deems appropriate to maintain the validity of, or to
perfect, the security interest granted to Assignee
hereby. Upon the occurrence of any Event of Default,
Assignor authorizes Assignee, and its employees and agents,
at Assignee's option, exercised in the name of Assignor or
in the name of Assignee as assignee, to collect any
amounts due at any time under any of the Collateral.
Assignor shall send to Assignee a copy of any written
payment notice given to any CMT concurrently with sending
such notice to such CMT.
2.2 Statements of Collateral. Assignor shall at any
time, and from time to time, upon request of Assignee,
deliver to Assignee a certificate executed by an authorized
representative of Assignor setting forth with respect to the
Collateral the principal amount of debt outstanding and the
total amount of accrued and unpaid interest and such
other matters as Assignee shall reasonably request.
2.3 Performance. Assignor shall perform all its
obligations with respect to the Collateral, whether such
obligations arise pursuant to the express terms of the
Collateral or pursuant to governing law. If Assignor fails
to perform any obligation with respect to the Collateral,
then Assignee may do so, and Assignor shall immediately
upon demand reimburse Assignor for any cost and expense,
including reasonable attorneys' fees, incurred by Assignor
in connection with such performance.
2.4 No Transfers. Without the prior written consent
of Assignee, which Assignee may withhold for any reason
or no reason, and except as otherwise expressly provided in
the Loan Documents: (i) Assignor shall not further assign,
transfer, pledge, or otherwise dispose of, in whole or in
part, any Collateral or any of its rights under any
Collateral; (ii) no owner of any direct or indirect interest
in Assignor shall sell, transfer, convey or assign (by
operation of law or otherwise) any direct or indirect
interest in Assignor or any part thereof; and (iii) no other
transaction shall occur that may result in or produce a
change in the ultimate ownership of Assignor. If the
Collateral, or any part thereof, is sold, transferred,
assigned, exchanged, or otherwise disposed of in violation
of these provisions, Assignee's security interest shall
continue in such Collateral or part thereof notwithstanding
such sale, transfer, assignment, exchange or other
disposition, and Assignor shall hold the proceeds thereof in
trust in a separate account for Assignee's benefit. Assignor
shall, at Assignee's request, transfer such proceeds to
Assignee in kind.
2.5 Consents. To the extent that, pursuant to the
terms of the Collateral, Assignor's consent is required
as to any matter, Assignor shall not grant such consent
without Assignee's consent, which consent by Assignee shall
be subject to the same reasonableness requirements and
restrictions (if any) that apply to Assignor pursuant to
the Collateral. Assignor shall not consent or agree to any
subordination of the Collateral to any other estate or
interest (other than routine utility easements) without
Assignee's prior written consent, which may be withheld
for any reason or no reason.
2.6 Defense and Maintenance of Collateral. Assignor
shall defend the Collateral against all claims and
demands of all persons at any time claiming the same or any
interest therein except as expressly provided in the Loan
Documents. The Collateral shall not be modified or amended
in any respect without the prior written consent of
Assignee, nor shall any rights or remedies of Assignor, or
obligations of CMT, under any Collateral be waived without
the prior written Consent of Assignee, which consent
Assignee may withhold for any reason or no reason.
2.7 Further Assurances. Assignor shall do, execute,
acknowledge and deliver, at Assignor's sole cost and
expense, all such further acts, conveyances, assignments,
estoppel certificates, notices of assignment, transfers and
assurances as Assignee may require from time to time to
better assure, convey, assign, transfer, and confirm to
Assignee, the rights now or hereafter intended to be granted
to Assignee under this Assignment, or under any other
instrument under which Assignor may be or may hereafter
become bound to convey or assign to Assignee for carrying
out the intention or facilitating this Assignment.
2.8 Protection of Security. Assignee shall have the
right at any time, but shall not be obligated, to make
any payments and perform any other acts that Assignee may
deem necessary to protect its security interest in the
Collateral, including, without limitation, (a) the rights to
cure any default or breach by Assignor; (b) the right
to pay, purchase, contest or compromise any encumbrance,
charge or lien that, in Assignee's judgment, appears to
be prior to or superior to the security interest granted
hereunder, and to appear in and defend any action or
proceeding purporting to affect its security interest in
and/or the value of the Collateral, and (c) in exercising
any such powers or authority, to pay all expenses
incurred in connection therewith, including attorneys' fees.
Assignor shall promptly repay all amounts advanced by
Assignee in connection with the foregoing. Assignor shall be
bound by any such payment made or action taken by Assignee
hereunder. Assignee shall have no obligation to make any of
the foregoing payments or perform any of the foregoing acts.
3. Collateral Enforcement by Assignor.
3.1 Assignee's Joinder. Assignor may not exercise any
rights or remedies under any Collateral, or accept a
conveyance in lieu of the exercise of such remedies (all,
collectively, "Collateral Enforcement") unless such
Collateral Enforcement is consented to by Assignee. As
between Assignor and Assignee, Assignee agrees to
consent to any Collateral Enforcement if Assignor has
provided such assurances as Assignee shall require to the
effect that all Enforcement Proceeds shall be applied as
required by this Assignment. Any Collateral Enforcement
shall in all cases be subject to the rights and interests of
Assignee hereunder.
3.2 Enforcement Proceeds. Without limiting the
generality of the foregoing, if, pursuant to any
Collateral Enforcement, Assignor receives any funds, prop
erty, or other assets (including ownership of any real
property previously encumbered by any mortgage constituting
part of the Collateral) (the "Enforcement Proceeds"), then
such Enforcement Proceeds shall not be the property of
Assignor and shall instead be delivered, immediately and
directly, to Assignee and not Assignor to be applied as if
they were proceeds from the sale of the Collateral.
3.3 Release of Enforcement Proceeds. Notwithstanding
the foregoing, Assignee agrees that any real property
that constitutes Enforcement Proceeds may be delivered to,
and shall become the property of Assignor, if and only if
simultaneously with receipt thereof, Assignor executes and
delivers to and in favor of Assignee a mortgage
encumbering such real property, which mortgage shall be in
form and substance satisfactory to Assignee and shall
secure the Loan.
4. Events of Default; Remedies.
4.1 Definition: "Event of Default." If a "Default"
exists under the Loan Agreement, then an "Event of
Default" shall be deemed to have occurred under this
Assignment.
4.2 Rights and Remedies. If any Event of Default
shall occur, then Assignee may exercise any right or remedy
it may have by law or under any of the Loan Documents. In
connection therewith:
A. Assignee may declare the entire principal of
and interest on the Loan and all other sums required to
be paid by Assignor pursuant to the Loan Documents to
be immediately due and payable.
B. Assignee may, without being required to give
any notice except as hereinafter provided, apply the
cash, if any, then held, or thereafter acquired, by it
on account of the Collateral hereunder to the payment
of the Loan and to the payment of any other obligations
of Assignor under the Loan Documents, in such order of
priority as Assignee shall determine in its sole and
absolute discretion.
C. Assignee may sell the Collateral, or any part
thereof, at public or private sale for cash, upon
credit or for future delivery, and Assignee may be the
purchaser or purchasers of any and all of the
Collateral so sold and thereafter hold the same,
absolutely, free from any right or claim of whatsoever
kind. Upon any such sale, Assignee shall have the right
to deliver, assign and transfer to the purchaser
thereof the Collateral so sold, all without recourse to
Assignor.
D. Each purchaser at any such sale shall hold
the property sold absolutely, free from any claim or
right of whatsoever kind, including any equity or right
of redemption of Assignor, which hereby specifically
waives all rights of redemption, stay, appraisal or
marshaling of assets which it has or may have under any
rule of law or statute now existing or hereafter
adopted. Assignee shall give Assignor 10 days' notice
of intention to make any such public or private sale.
Any such public sale made by Assignee shall be held at
such time or times within ordinary business hours and
at such place or places in Oklahoma City, Oklahoma
County, Oklahoma, or at Assignee's option, in the
county seat of the county where the real property
affected by the Collateral is located, as Assignee may
fix in the notice of such sale. At any such sale the
Collateral may be sold as an entirety or in separate
parcels, as Assignee may determine. Assignee shall not
be obligated to make any sale pursuant to any such
notice. Assignee may without notice or publication,
adjourn any public or private sale made by Assignee or
cause the same to be adjourned from time to time by
announcement at the time and place fixed for the sale,
and such sale may without further notice be made at any
time or place to which the same may be so adjourned.
E. In case of any sale of all or any part of the
Collateral made by Assignee on credit or for future
delivery, the Collateral so sold may be retained by
Assignee until the selling price is paid by the
purchaser thereof, but Assignee shall not incur any
liability in case of the failure of such purchase to
take up and pay for the Collateral so sold and, in case
of any such failure, such Collateral may again be sold
upon like notice.
F. Instead of exercising the foregoing power of
sale, Assignee may, at its option (with no obligation
to do so), proceed by a suit or suits at law or in
equity to foreclose this Assignment and sell the
Collateral, or any portion thereof, under a judgment or
decree of a court or courts of competent jurisdiction.
G. Assignor hereby appoints Assignee (or such
person(s) as Assignee shall designate in writing) as
Assignor's attorney in fact, which agency is coupled
with an interest, to execute in Assignor's name any and
all documents that may be necessary or appropriate to
consummate any transfer of any Collateral pursuant to
any exercise of remedies by Assignee under this
Assignment. In addition to the foregoing, Assignor
hereby authorizes Assignee, in Assignee's own name, to
execute, deliver and record any assignments of any
Collateral that may be necessary or appropriate to
implement any transfer thereof pursuant to any exercise
of remedies by Assignee under this Assignment. Any such
assignment(s) shall be fully effective to divest and
convey to the assignee(s) named therein full title to
the Collateral, free of any right, title, claim or
interest of Assignor.
H. Assignee may hold the Collateral and apply
all pro ceeds thereof against the Loan.
4.3 Application of Proceeds. The proceeds of any sale
of all or any part of the Collateral made by Assignee in
exercising its remedies for an Event of Default shall be
applied by Assignee as follows in the following order:
A. To payment of the costs and expenses of such
sale, including reasonable compensation to Assignee
and its agents and counsel;
B. To payment of the principal of and interest
and prepayment premium, if any, on the Loan and to the
payment of any other obligations of Assignor under any
documents relating to such Loan, under any instrument
or document executed in connection therewith, and under
this Assignment, all in such order as Assignee shall
see fit; and
C. To payment to Assignor, or its successor or
assigns, or as a court of competent jurisdiction may
direct, of any surplus then remaining from such
proceeds.
4.4 Delivery of Books and Records. If Assignee holds
a foreclosure or other sale with respect to any Collateral,
or otherwise exercises any rights or remedies under the Loan
Documents or applicable law pursuant to which Assignor is
divested of title to any Collateral, then Assignor shall
within 10 days thereafter deliver to the transferee of such
Collateral any and all correspondence, books, records and
documentation in Assignor's possession, or in the possession
of any affiliate of Assignor, relating to such Collateral.
4.5 No Duty of Care. Assignee shall have no duty or
obligation to care for the Collateral or to take any actions
to protect the value of the Collateral or any rights or
privileges the Assignor might have with respect thereto,
except that Assignee shall exercise the same degree of care
in the physical preservation of items of Collateral in
Assignee's possession as it exercises with respect to any
other original security instruments in its possession.
Assignee shall have no obligation to take any actions to
preserve any rights that Assignor or any other party may
have against any third party with respect to any item of
Collateral.
4.6 Waivers. Assignor waives all rights of notice and
hearing of any kind prior to Assignee's exercise of its
rights from and after the occurrence of an Event of Default
to repossess the Collateral with or without judicial process
or to replevy, attach or levy upon the Collateral. Assignor
waives the posting of any bond otherwise required of
Assignee in connection with any judicial or nonjudicial
process or proceeding to obtain possession of, replevy,
attach or levy upon Collateral or other security for the
Obligations, to enforce any judgment or other court order
entered in favor of Assignee, or to enforce by specific
performance, temporary restraining order or preliminary or
permanent injunction this Assignment or any other Loan
Document.
4.7 Remedies Not Exclusive. The remedies set forth
above shall not be exclusive. Assignee shall have available
to it any and all other remedies with respect to the
Collateral that may be available to a secured party pursuant
to the Uniform Commercial Code. Assignee may exercise its
rights under this Assignment independently of any other
collateral or guaranty that Assignor may have granted or
provided to Assignee in order to secure payment and
performance of the Loan. Assignee shall be under no
obligation or duty to foreclose or levy upon any other
collateral given by Assignor to secure the Loan or to
proceed against any guarantor before enforcing its rights
under this Assignment. The remedies granted herein shall be
cumulative and the exercise of any one remedy shall not
preclude the exercise of any other, and any repossession or
retaking or sale of the Collateral pursuant to this
Assignment shall not operate to release Assignor or any
other collateral or security held by Assignee with respect
to the Loan until full payment of any deficiency has been
made in cash
5. Miscellaneous.
5.1 Attorney in Fact. Assignor hereby irrevocably
appoints Assignee its attorney in fact, coupled with an
interest and therefore irrevocable, to give notices or
payment instructions to CMT in accordance with this
Assignment; to take any actions necessary or desirable, in
Assignee's sole discretion, to collect the amounts due under
the Collateral, including compromising any amounts due under
any item of Collateral and acknowledging satisfaction of
CMT's liability thereunder; to execute and deliver any
documents that this Assignment requires Assignor to execute
and deliver to Assignee; to take any other actions that this
Assignment requires Assignor to take; to endorse and cash
checks and other instruments representing proceeds of
Collateral; and to perform any and all other acts as
Assignee in its sole judgment reasonably exercised shall
deem necessary or desirable with respect to this Assignment,
including the signing and filing of any financing statements
necessary or appropriate for the Collateral.
5.2 Waivers. Assignor waives all rights of notice and
hearing to Assignee's exercise of its rights from and after
the occurrence of an Event of Default to repossess the
Collateral with or without judicial process or to plevy,
attach or levy upon the Collateral. Assignor waives the
posting of any bond otherwise required of Assignee in
connection with any judicial or non-judicial process or
proceeding to obtain possession of, replevy, attach or levy
upon Collateral or other security for the Obligations, to
enforce any judgment or other court order entered in favor
of Assignee, or to enforce by specific performance,
temporary restraining order or preliminary or permanent
injunction this Assignment or any other Loan Document.
5.3 Notices. All notices hereunder shall be in
writing and shall be defined to have been sufficiently given
or saved for all purposes when delivered in person or sent
by nationally recognized overnight delivery service to any
party hereto at its address above stated or at such other
address of which it shall have notified the party giving
such notice in writing as aforesaid.
5.4 Amendment. This Assignment may not be amended or
modified orally.
5.5 Assignee's Costs and Expenses. Assignor shall
within five days after demand reimburse Assignee for any
costs and expenses, including reasonable attorneys' fees,
incurred by Assignee in exercising its rights, and enforcing
its rights and remedies, under this Assignment or with
respect to the Collateral.
5.6 Governing Law. This Assignment shall be governed
by and construed in accordance with the laws of the State of
Oklahoma, except to the extent that the laws of the State of
New York require that the laws of that state govern the
assignment of mortgage described in this Assignment and the
exercise of rights and remedies thereunder.
IN WITNESS WHEREOF, Assignor has caused this Assignment to
be duly executed as of November 10, 1997.
"ASSIGNOR": HAROLD'S STORES, INC.
By:
H. Rainey Powell, President
and Chief Operating Officer
"ASSIGNEE": NATIONSBANK, N.A.
By:
Kelly H. Sachs, Vice President
Exhibit "I-1"
SECURITY AGREEMENT AND ASSIGNMENT
This SECURITY AGREEMENT AND ASSIGNMENT (the "Security
Agreement") is entered into and effective as of the 10th day of
November, 1997, by and between HAROLD'S STORES, INC., an Oklahoma
corporation ("Debtor"), and NATIONSBANK, N.A. ("Secured Party").
W I T N E S S E T H:
WHEREAS, pursuant to that certain Third Amended and Restated
Credit Agreement (the "Credit Agreement") of even date herewith
by and between Debtor and Secured Party, Secured Party has agreed
to make, from time to time, the Loans to Debtor;
WHEREAS, Debtor has agreed to grant to Secured Party a
security interest in certain of its assets to secure its
obligations under the Secured Indebtedness, as hereinafter
defined, and Debtor has also agreed to assign to Secured Party
all of Debtor's interest in all existing and future Tenant
Improvement Reimbursement Agreements; and
WHEREAS, unless otherwise defined herein, all terms used
herein shall have the same meaning as used in the Credit
Agreement, the terms, conditions and provisions of which are
incorporated herein by reference.
NOW, THEREFORE, in consideration of the foregoing, the
mutual covenants and agreements contained herein, and other fair
and valuable consideration, the receipt and adequacy of which are
hereby acknowledged, Debtor and Secured Party hereby agree as
follows:
1. Security Interest. For value received Debtor hereby
grants a security interest in and assigns to Secured Party to
secure the payment of the Secured Indebtedness all of the
following, which shall be referred to herein collectively as the
"Collateral":
a. all Debtor's right, title and interest in and to the
Tenant Reimbursement Agreements, whether now existing or
hereafter arising; and
b. all Accounts, Documents, Chattel Paper and Instruments,
now owned or hereafter acquired or created, arising from the
Tenant Improvement Agreements
including all of the proceeds, renewals and replacements of the
foregoing.
2. Secured Indebtedness. This Security Agreement is given
to secure the payment of the Liabilities including, without
limitation, the following (the "Secured Indebtedness"):
a. the Notes;
b. all other obligations and liabilities of Debtor under
this Security Agreement, the Credit Agreement and the
other Loan Documents, including, without limitation, any
foreign exchange obligations or liabilities;
c. all obligations taken in substitution of the
indebtedness evidenced by the Notes and all renewals,
amendments, modifications, or extensions of, or further
advances under, the Notes, together with all interest,
attorneys' fees, costs of collection and enforcement and other
charges thereof, incurred in connection therewith;
d. all fees and expenses incurred by Secured Party in
connection with amending, supplementing and continuing this
Security Agreement; and
e. any and all other obligations of whatsoever kind or
nature and howsoever evidenced, now or hereafter owed by
Debtor to Secured Party, whether matured or unmatured,
direct, indirect or contingent.
3. Term. This Security Agreement shall remain in full
force and effect until the full amount of the Secured
Indebtedness has been received by Secured Party as provided
above. When all such amounts have been received by Secured
Party, then this Security Agreement and all the rights, title,
interests and powers and privileges assigned or conveyed
hereunder to Secured Party in or to the Collateral shall
forthwith terminate and vest in Debtor, and upon the happening of
that event, Secured Party agrees upon the request and at the
expense of Debtor to execute and deliver all such
acquittances, documents, releases or instruments as may be
necessary to vest the Collateral in Debtor.
4. Covenants of Debtor. In addition to the
representations, warranties and covenants contained in the Credit
Agreement and the other Loan Documents, Debtor hereby represents
and expressly warrants and covenants that:
a. Collection. Prior to the occurrence of an Event of
Default, as hereinafter defined, proceeds from the Tenant
Reimbursement Agreements shall be paid jointly to Debtor and
Secured Party pursuant to the Credit Agreement to be applied
to reduce the outstanding balance under the Tenant
Improvement Note. Upon the occurrence of an Event of
Default, Debtor hereby authorizes Secured Party to collect
all sums of money derived from and attributable to Debtor's
interest in the Collateral and apply the same against the
Secured Indebtedness. Debtor hereby absolves Secured Party
and its successors and assigns of any liability for failure
to enforce collection of funds, proceeds or products derived
from the Collateral and all other responsibility in
connection therewith, except the responsibility to account
to Debtor for the funds actually received.
b. Ownership. Except for the security interest granted
hereby Debtor now owns the Collateral free from all prior
liens, security agreements or encumbrances, and Debtor will
defend the Collateral against all claims and demands of
all persons at any time claiming the same or any interest
therein.
c. Rights Cumulative. Nothing herein contained shall
detract from or limit the absolute obligation of Debtor to
make prompt payments of all indebtedness of Debtor to
Secured Party when and as the same becomes due, regardless
of whether the proceeds of the Collateral herein assigned
are sufficient to pay the same, and all rights of Secured
Party under this Security Agreement, Credit Agreement, and
other Loan Documents shall be cumulative of all other
security in every character now or hereafter existing to
secure the payment of the Secured Indebtedness.
d. Authority. No authorization, consent, approval, filing
or registration of any court or governmental department,
commission, board, bureau or agency, instrumentality or
contracting party is or will be necessary to the valid
execution, delivery or performance by Debtor of this
Security Agreement.
e. Indemnity. Debtor shall indemnify and exonerate
Secured Party against all liabilities, expenses (including
attorney's fees and court costs incurred by Secured Party)
and losses incurred by Secured Party as a result of: (i)
failure of Debtor to perform any covenant required to be
performed by Debtor hereunder or in collecting on the
Collateral by reason of Debtor's default; and (ii) failure
to comply with any requirement of any governmental
authority.
f. Debtor's Place of Business. The address set forth on
the signature page hereto is and will remain Debtor's
principal place of business and the location of its chief
executive offices. Debtor will advise Secured Party of each
location where any Collateral is located and will not remove
said Collateral from such location unless and until
Secured Party's security interest hereunder is perfected in
such a manner as to assure the continued priority of the
security interest created hereby. Debtor will not change
the principal or any other place of business or its name
without at least 60 days prior written notice to Secured
Party.
g. Financing Statements. Debtor will execute and deliver
to Secured Party such financing statements, continuation
statements, certificates and other documents or instruments
as may be necessary to enable Secured Party to perfect, or
from time to time renew, the security interest created
hereby including, without limitation, such financing
statements, certificates and other documents as may be
necessary to perfect the security interest created hereby
and any Collateral hereafter acquired by Debtor or any
replacements or proceeds of Collateral. This Security
Agreement or a photocopy or facsimile hereof may be filed
as a financing statement by Secured Party.
h. Taxes. Debtor shall pay, before any delinquency, any
tax or governmental charge which is or may become through
assessment, distraint, or otherwise a lien or charge on the
Collateral, or any portion thereof, or any interest
thereon, and will pay any tax which may be levied on any
obligation secured hereby.
i. Insurance. Debtor shall insure the Collateral against
loss, theft, damage, fire, and such other casualties,
hazards, public liabilities and risks, and such other
hazards as Secured Party shall specify, in amounts, under
policies and by insurers acceptable to Secured Party.
Debtor shall cause Secured Party to be named in such
policies as secured party or mortgagee and loss payee or
additional insured, in a manner acceptable to Secured Party.
Each policy of insurance shall contain a clause or
endorsement requiring the insurer to give not less than
thirty (30) days prior written notice to Secured Party in
the event of cancellation of the policy for any reason
whatsoever and a clause or endorsement stating that the
interest of Secured Party shall not be impaired or
invalidated by any act or neglect of Debtor or the owner of
any premises where Collateral is located nor by the use of
such premises for purposes more hazardous than are permitted
by such policy. All premiums for such insurance shall be
paid by Debtor when due, and certificates of insurance and,
if requested, photocopies of the policies shall be delivered
to Secured Party. If Debtor fails to procure such insurance
or to pay the premiums therefor when due, Secured Party may
(but shall not be required to) do so and charge the costs
thereof to Debtor's loan account. Debtor shall promptly
notify Secured Party of any loss, damage, or destruction to
the Collateral or arising from its use, whether or not
covered by insurance. Secured Party is hereby authorized to
collect all insurance proceeds directly. After deducting
from such proceeds the expenses, if any, incurred by Secured
Party in the collection or handling thereof, Secured Party
may apply such proceeds to the reduction of the Liabilities,
in such order as Secured Party determines, or at Secured
Party's option may permit or require Debtor to use such
money, or any part thereof, to replace, repair, restore or
rebuild the Collateral in a diligent and expeditious manner
with materials and workmanship of substantially the same
quality as existed before the loss, damage or destruction.
5. Waiver. No waiver or modification by Secured Party of
any of the terms and conditions hereof shall be effective unless
reduced to writing and signed by Secured Party. No waiver or
indulgence by Secured Party as to any required performance by
Debtor hereunder shall constitute a waiver as to any subsequent
required performance or any other obligation of Debtor hereunder.
6. Performance by Secured Party. In the event Debtor at
any time fails to perform any obligation for which it is
obligated hereunder or under the Credit Agreement, including,
without limitation, any payment of taxes, insurance premiums, or
other sums of money required to be paid hereunder or under the
Credit Agreement, Secured Party may, but shall be under no
obligation to do so, pay such amount as is required to be paid,
in which event Secured Party shall be immediately reimbursed
therefore by Debtor. Such amounts paid by Secured Party shall be
deemed a portion of the Secured Indebtedness and such items shall
bear interest at the rate applicable under the Credit Agreement
until paid by Debtor. Provided, however, the accrual of interest
hereunder shall not prejudice any other remedies which may be
available to Secured Party hereunder.
7. Default. Debtor shall be in default hereunder in the
event of any default by Debtor under the Credit Agreement, the
Notes, this Security Agreement and the other Loan Documents or
any other instrument or agreement executed pursuant to or in
connection with the transaction described in the Credit
Agreement. The occurrence of any such events shall herein be
referred to as an "Event of Default."
8. Remedies. If an Event of Default occurs, Secured Party
shall have the following rights and remedies without notice to
Debtor:
a. All Legal Remedies. Secured Party may proceed to
selectively and successfully enforce and exercise any
and all rights and remedies which Secured Party may have
hereunder, under the Credit Agreement, the Notes or any
other instrument or agreement executed pursuant to or in
connection with the transaction described in the Credit
Agreement, or under applicable law.
b. Assembly of Collateral. At the request of Secured
Party, Debtor will assemble the Collateral and make it
available to Secured Party at a place designated by Secured
Party reasonably convenient to both parties.
c. Cash Equivalent. With respect to any portion of the
Collateral which consists of cash equivalent items
(e.g., drafts, checks or other items convertible at face
value), Secured Party may immediately apply such items
against the amounts owed Secured Party, and Debtor agrees
that such items will be considered identical in
character to cash proceeds.
d. Costs and Expenses. Debtor agrees to pay, on demand,
the amount of all expenses reasonably incurred by Secured
Party in protecting, preserving, storing, and selling the
Collateral, and Debtor further agrees that if this Security
Agreement, or any obligation secured by it, is referred to
an attorney for protecting or defending the provisions
thereof, Debtor shall pay a reasonable attorneys' fee,
expenses of title search, and all court costs and costs of
public officials and all costs incurred by Secured Party in
the taking possession of, preservation, maintenance, and
sale of the Collateral, which amounts shall be deemed a
portion of the indebtedness secured hereby, and any and all
such items shall bear interest from the date incurred at
the applicable rate under the Credit Agreement.
e. Disposition. Secured Party may, without any notice
except as herein provided, sell any of the Collateral at
public or private sales, for cash, upon credit or for future
delivery, and Secured Party may be the purchaser of any
and all of the Collateral so sold and may apply the purchase
price thereon against the Secured Indebtedness and
thereafter hold the Collateral so purchased absolutely free
from any right or claim of whatsoever kind. Every
purchaser at any such sale shall hold the property sold
absolutely free of any claim or right whatsoever, including
any equity or right of redemption of Debtor, who
specifically waives all right of redemption, stay or
appraisal which it has or may have under any rule, law or
statute now existing or hereafter adopted. Debtor agrees
that a period of ten (10) days from the time the notice
is sent shall be a reasonable period for notification of any
sale or other disposition of Collateral by or for
Secured Party. At any sale, the Collateral may be sold in
one lot or in separate parcels as Secured Party may
determine. Secured Party shall not be obligated to make any
sale pursuant to any such notice. Secured Party may,
without notice or publication, adjourn any public or private
sale or cause the same to be adjourned from time to time
by announcement at any time and place fixed for the sale,
and such sale shall be made at any time or place to which
the same may be so adjourned. In the case of any sale of
any or all of the Collateral on credit or for future
delivery, the Collateral so sold may be retained by Secured
Party until the sales price is paid by the purchaser
thereof, but Secured Party shall incur no liability in the
case of the failure of the purchaser to take up and pay for
the Collateral so sold, and in each case of any such
failure, the Collateral may be again sold upon like notice.
f. Selective Enforcement. In the event Secured Party
elects to selectively and successively enforce its right and
remedies in respect to any of the Collateral, pursuant to
any applicable agreement or otherwise, such action shall not
be deemed a waiver or discharge of any other right, remedy,
lien or encumbrance until such time as Secured Party shall
have been paid in full all indebtedness or obligations
secured hereby.
g. Waiver of Default. Secured Party may, in writing,
waive an event of default and, in such event, Secured Party
and Debtor shall be restored to their respective positions,
rights and obligations as if such event of default had not
occurred. No such wavier shall cure or extend any other
event of default or any subsequent action of Debtor or any
of the Companies.
h. Application of Proceeds. Any amounts held, realized or
received by Secured Party from any sale of the Collateral,
or any part thereof, shall be applied by Secured Party to
the following, in such order and in such respective amounts
as Secured Party shall elect:
(i) all costs, expenses and liabilities
(including attorneys' fees and expenses referred to
herein);
(ii) the payment of principal and interest owing
as evidenced by the Notes; and
(iii) all other amounts owing to Secured Party by
Debtor hereunder, under the Credit Agreement, the Notes
or any other instrument or agreement executed pursuant
to or in connection with the transactions described in
the Credit Agreement.
9. Notices. All notices, requests, demands, instructions,
and other communications called for hereunder or
contemplated hereby shall be given in the manner set forth
in the Credit Agreement.
10. Severability. The agreements and covenants of this
Security Agreement are severable, and in the event any of
them shall be held to be invalid by a court of competent
jurisdiction, this Security Agreement shall be interpreted
as if such invalid agreements or covenants were not
contained in this Security Agreement.
11. Captions. All captions contained in this Security
Agreement are for convenience of reference only and shall
not affect the meaning, substance or construction of any of
the provisions or terms of this Security Agreement.
12. Counterparts. This Security Agreement may be executed
in one or more counterparts, each of which shall, for all
purposes of this Security Agreement, be deemed an original,
but all of which shall constitute one and the same
agreement.
13. Binding Effect. This Security Agreement shall be
binding upon, and shall inure to the benefit of, the
respective parties hereto their successors, legal
representatives, and, to the extent herein permitted,
assigns.
14. Governing Law. This Security Agreement and any
performance under this Security Agreement shall be
construed, and enforced in accordance with, and governed by,
the laws of the State of Oklahoma.
15. Time of the Essence. Time is of the essence of this
Security Agreement.
IN WITNESS WHEREOF, the parties have executed and delivered
or caused their duly authorized representatives or officers to
have executed and delivered this Security Agreement to be
effective the day and year first above written.
"DEBTOR":
HAROLD'S STORES, INC.,
an Oklahoma corporation
By:
H. Rainey Powell,
President
765 Asp
Norman, Oklahoma 73069
"SECURED PARTY":
NATIONSBANK, N.A.
By:
Kelly H. Sachs, Vice
President
211 North Robinson
P. O. Box 25189
Oklahoma City, OK 73125-
0189
Exhibit "I-2"
SECURITY AGREEMENT AND ASSIGNMENT
This SECURITY AGREEMENT AND ASSIGNMENT (the "Security
Agreement") is entered into and effective as of the 10th day of
November, 1997, by and between _______________________________,
("Debtor"), and NATIONSBANK, N.A. ("Secured Party").
W I T N E S S E T H:
WHEREAS, pursuant to that certain Third Amended and Restated
Credit Agreement (the "Credit Agreement") of even date herewith
by and between Harold's Stores, Inc. ("Borrower") and Secured
Party, Secured Party has agreed to make, from time to time, the
Loans to Borrower;
WHEREAS, Debtor has agreed to grant to Secured Party a
security interest in certain of its assets to secure the
obligations of Borrower and Debtor under the Secured
Indebtedness, as hereinafter defined, and Debtor has also agreed
to assign to Secured Party all of Debtor's interest in all
existing and future Tenant Improvement Reimbursement Agreements;
and
WHEREAS, unless otherwise defined herein, all terms used
herein shall have the same meaning as used in the Credit
Agreement, the terms, conditions and provisions of which are
incorporated herein by reference.
NOW, THEREFORE, in consideration of the foregoing, the
mutual covenants and agreements contained herein, and other fair
and valuable consideration, the receipt and adequacy of which are
hereby acknowledged, Debtor and Secured Party hereby agree as
follows:
1. Security Interest. For value received Debtor hereby
grants a security interest in and assigns to Secured Party to
secure the payment of the Secured Indebtedness all of the
following, which shall be referred to herein collectively as the
"Collateral":
a. all Debtor's right, title and interest in and to the
Tenant Reimbursement Agreements, whether now existing or
hereafter arising; and
b. all Accounts, Documents, Chattel Paper and Instruments,
now owned or hereafter acquired or created, arising from the
Tenant Improvement Agreements
including all of the proceeds, renewals and replacements of
the foregoing.
2. Secured Indebtedness. This Security Agreement is given
to secure the payment of the Liabilities including, without
limitation, the following (the "Secured Indebtedness"):
a. the Notes;
b. all other obligations and liabilities of Borrower under
a Security Agreement and Assignment executed by Borrower in
favor of Secured Party of even date herewith (the
"Borrower's Security Agreement"), the Credit Agreement and
the other Loan Documents, including, without limitation, any
foreign exchange obligations or liabilities;
c. all obligations and liabilities of Debtor under this
Security Agreement;
d. all obligations taken in substitution of the
indebtedness evidenced by the Notes and all renewals,
amendments, modifications, or extensions of, or further
advances under, the Notes, together with all interest,
attorneys' fees, costs of collection and enforcement and
other charges thereof, incurred in connection therewith;
e. all fees and expenses incurred by Secured Party in
connection with amending, supplementing and continuing this
Security Agreement; and
f. any and all other obligations of whatsoever kind or
nature and howsoever evidenced, now or hereafter owed by
Debtor to Secured Party, whether matured or unmatured,
direct, indirect or contingent.
3. Term. This Security Agreement shall remain in full
force and effect until the full amount of the Secured
Indebtedness has been received by Secured Party as provided
above. When all such amounts have been received by Secured
Party, then this Security Agreement and all the rights, title,
interests and powers and privileges assigned or conveyed
hereunder to Secured Party in or to the Collateral shall
forthwith terminate and vest in Debtor, and upon the happening of
that event, Secured Party agrees upon the request and at the
expense of Debtor to execute and deliver all such acquittances,
documents, releases or instruments as may be necessary to vest
the Collateral in Debtor.
4. Covenants of Debtor. In addition to the
representations, warranties and covenants contained in the Credit
Agreement and the other Loan Documents, Debtor hereby represents
and expressly warrants and covenants that:
a. Collection. Prior to the occurrence of an Event of
Default, as hereinafter defined, proceeds from the Tenant
Reimbursement Agreements shall be paid jointly to Debtor and
Secured Party pursuant to the Credit Agreement to be applied
to reduce the outstanding balance under the Tenant
Improvement Note. Upon the occurrence of an Event of
Default, Debtor hereby authorizes Secured Party to collect
all sums of money derived from and attributable to Debtor's
interest in the Collateral and apply the same against the
Secured Indebtedness. Debtor hereby absolves Secured Party
and its successors and assigns of any liability for failure
to enforce collection of funds, proceeds or products derived
from the Collateral and all other responsibility in
connection therewith, except the responsibility to account
to Debtor for the funds actually received.
b. Ownership. Except for the security interest granted
hereby Debtor now owns the Collateral free from all prior
liens, security agreements or encumbrances, and Debtor will
defend the Collateral against all claims and demands of all
persons at any time claiming the same or any interest
therein.
c. Rights Cumulative. Nothing herein contained shall
detract from or limit the absolute obligation of Debtor to
make prompt payments of all indebtedness of Debtor to
Secured Party when and as the same becomes due, regardless
of whether the proceeds of the Collateral herein assigned
are sufficient to pay the same, and all rights of Secured
Party under this Security Agreement, Credit Agreement, and
other Loan Documents shall be cumulative of all other
security in every character now or hereafter existing to
secure the payment of the Secured Indebtedness.
d. Authority. No authorization, consent, approval, filing
or registration of any court or governmental department,
commission, board, bureau or agency, instrumentality or
contracting party is or will be necessary to the valid
execution, delivery or performance by Debtor of this
Security Agreement.
e. Indemnity. Debtor shall indemnify and exonerate
Secured Party against all liabilities, expenses (including
attorney's fees and court costs incurred by Secured Party)
and losses incurred by Secured Party as a result of: (i)
failure of Debtor to perform any covenant required to be
performed by Debtor hereunder or in collecting on the
Collateral by reason of Debtor's default; and (ii) failure
to comply with any requirement of any governmental
authority.
f. Debtor's Place of Business. The address set forth on
the signature page hereto is and will remain Debtor's
principal place of business and the location of its chief
executive offices. Debtor will advise Secured Party of each
location where any Collateral is located and will not remove
said Collateral from such location unless and until Secured
Party's security interest hereunder is perfected in such a
manner as to assure the continued priority of the security
interest created hereby. Debtor will not change the
principal or any other place of business or its name without
at least 60 days prior written notice to Secured Party.
g. Financing Statements. Debtor will execute and deliver
to Secured Party such financing statements, continuation
statements, certificates and other documents or instruments
as may be necessary to enable Secured Party to perfect, or
from time to time renew, the security interest created
hereby including, without limitation, such financing
statements, certificates and other documents as may be
necessary to perfect the security interest created hereby
and any Collateral hereafter acquired by Debtor or any
replacements or proceeds of Collateral. This Security
Agreement or a photocopy or facsimile hereof may be filed as
a financing statement by Secured Party.
h. Taxes. Debtor shall pay, before any delinquency, any
tax or governmental charge which is or may become through
assessment, distraint, or otherwise a lien or charge on the
Collateral, or any portion thereof, or any interest thereon,
and will pay any tax which may be levied on any obligation
secured hereby.
i. Insurance. Debtor shall insure the Collateral against
loss, theft, damage, fire, and such other casualties,
hazards, public liabilities and risks, and such other
hazards as Secured Party shall specify, in amounts, under
policies and by insurers acceptable to Secured Party.
Debtor shall cause Secured Party to be named in such
policies as secured party or mortgagee and loss payee or
additional insured, in a manner acceptable to Secured Party.
Each policy of insurance shall contain a clause or
endorsement requiring the insurer to give not less than
thirty (30) days prior written notice to Secured Party in
the event of cancellation of the policy for any reason
whatsoever and a clause or endorsement stating that the
interest of Secured Party shall not be impaired or
invalidated by any act or neglect of Debtor or the owner of
any premises where Collateral is located nor by the use of
such premises for purposes more hazardous than are permitted
by such policy. All premiums for such insurance shall be
paid by Debtor when due, and certificates of insurance and,
if requested, photocopies of the policies shall be delivered
to Secured Party. If Debtor fails to procure such insurance
or to pay the premiums therefor when due, Secured Party may
(but shall not be required to) do so and charge the costs
thereof to Debtor's loan account. Debtor shall promptly
notify Secured Party of any loss, damage, or destruction to
the Collateral or arising from its use, whether or not
covered by insurance. Secured Party is hereby authorized to
collect all insurance proceeds directly. After deducting
from such proceeds the expenses, if any, incurred by Secured
Party in the collection or handling thereof, Secured Party
may apply such proceeds to the reduction of the Liabilities,
in such order as Secured Party determines, or at Secured
Party's option may permit or require Debtor to use such
money, or any part thereof, to replace, repair, restore or
rebuild the Collateral in a diligent and expeditious manner
with materials and workmanship of substantially the same
quality as existed before the loss, damage or destruction.
5. Waiver. No waiver or modification by Secured Party of
any of the terms and conditions hereof shall be effective unless
reduced to writing and signed by Secured Party. No waiver or
indulgence by Secured Party as to any required performance by
Debtor hereunder shall constitute a waiver as to any subsequent
required performance or any other obligation of Debtor hereunder.
6. Performance by Secured Party. In the event Debtor at
any time fails to perform any obligation for which it is
obligated hereunder or Borrower at any time fails to perform any
obligation for which it is obligated under the Borrower's
Security Agreement or the Credit Agreement, including, without
limitation, any payment of taxes, insurance premiums, or other
sums of money required to be paid hereunder or under the Credit
Agreement, Secured Party may, but shall be under no obligation to
do so, pay such amount as is required to be paid, in which event
Secured Party shall be immediately reimbursed therefore by
Debtor. Such amounts paid by Secured Party shall be deemed a
portion of the Secured Indebtedness and such items shall bear
interest at the rate applicable under the Credit Agreement until
paid by Debtor. Provided, however, the accrual of interest
hereunder shall not prejudice any other remedies which may be
available to Secured Party hereunder.
7. Default. Debtor shall be in default hereunder in the
event of any default by Debtor under this Security Agreement or
any default by Borrower under the Credit Agreement, the Notes,
the Borrower's Security Agreement and the other Loan Documents or
any other instrument or agreement executed pursuant to or in
connection with the transaction described in the Credit
Agreement. The occurrence of any such events shall herein be
referred to as an "Event of Default."
8. Remedies. If an Event of Default occurs, Secured Party
shall have the following rights and remedies without notice to
Debtor:
a. All Legal Remedies. Secured Party may proceed to
selectively and successfully enforce and exercise any and
all rights and remedies which Secured Party may have
hereunder, under the Credit Agreement, the Notes or any
other instrument or agreement executed pursuant to or in
connection with the transaction described in the Credit
Agreement, or under applicable law.
b. Assembly of Collateral. At the request of Secured
Party, Debtor will assemble the Collateral and make it
available to Secured Party at a place designated by Secured
Party reasonably convenient to both parties.
c. Cash Equivalent. With respect to any portion of the
Collateral which consists of cash equivalent items (e.g.,
drafts, checks or other items convertible at face value),
Secured Party may immediately apply such items against the
amounts owed Secured Party, and Debtor agrees that such
items will be considered identical in character to cash
proceeds.
d. Costs and Expenses. Debtor agrees to pay, on demand,
the amount of all expenses reasonably incurred by Secured
Party in protecting, preserving, storing, and selling the
Collateral, and Debtor further agrees that if this Security
Agreement, or any obligation secured by it, is referred to
an attorney for protecting or defending the provisions
thereof, Debtor shall pay a reasonable attorneys' fee,
expenses of title search, and all court costs and costs of
public officials and all costs incurred by Secured Party in
the taking possession of, preservation, maintenance, and
sale of the Collateral, which amounts shall be deemed a
portion of the indebtedness secured hereby, and any and all
such items shall bear interest from the date incurred at the
applicable rate under the Credit Agreement.
e. Disposition. Secured Party may, without any notice
except as herein provided, sell any of the Collateral at
public or private sales, for cash, upon credit or for future
delivery, and Secured Party may be the purchaser of any and
all of the Collateral so sold and may apply the purchase
price thereon against the Secured Indebtedness and
thereafter hold the Collateral so purchased absolutely free
from any right or claim of whatsoever kind. Every purchaser
at any such sale shall hold the property sold absolutely
free of any claim or right whatsoever, including any equity
or right of redemption of Debtor, who specifically waives
all right of redemption, stay or appraisal which it has or
may have under any rule, law or statute now existing or
hereafter adopted. Debtor agrees that a period of ten (10)
days from the time the notice is sent shall be a reasonable
period for notification of any sale or other disposition of
Collateral by or for Secured Party. At any sale, the
Collateral may be sold in one lot or in separate parcels as
Secured Party may determine. Secured Party shall not be
obligated to make any sale pursuant to any such notice.
Secured Party may, without notice or publication, adjourn
any public or private sale or cause the same to be adjourned
from time to time by announcement at any time and place
fixed for the sale, and such sale shall be made at any time
or place to which the same may be so adjourned. In the case
of any sale of any or all of the Collateral on credit or for
future delivery, the Collateral so sold may be retained by
Secured Party until the sales price is paid by the purchaser
thereof, but Secured Party shall incur no liability in the
case of the failure of the purchaser to take up and pay for
the Collateral so sold, and in each case of any such
failure, the Collateral may be again sold upon like notice.
f. Selective Enforcement. In the event Secured Party
elects to selectively and successively enforce its right and
remedies in respect to any of the Collateral, pursuant to
any applicable agreement or otherwise, such action shall not
be deemed a waiver or discharge of any other right, remedy,
lien or encumbrance until such time as Secured Party shall
have been paid in full all indebtedness or obligations
secured hereby.
g. Waiver of Default. Secured Party may, in writing,
waive an event of default and, in such event, Secured Party
and Debtor shall be restored to their respective positions,
rights and obligations as if such event of default had not
occurred. No such wavier shall cure or extend any other
event of default or any subsequent action of Debtor or any
of the Companies.
h. Application of Proceeds. Any amounts held, realized or
received by Secured Party from any sale of the Collateral,
or any part thereof, shall be applied by Secured Party to
the following, in such order and in such respective amounts
as Secured Party shall elect:
(i) all costs, expenses and liabilities
(including attorneys' fees and expenses referred to
herein);
(ii) the payment of principal and interest owing
as evidenced by the Notes; and
(iii) all other amounts owing to Secured Party by
Debtor hereunder, owing to Secured Party by Borrower
under the Credit Agreement, the Borrower's Security
Agreement, the Notes or any other instrument or
agreement executed pursuant to or in connection with
the transactions described in the Credit Agreement.
9. Notices. All notices, requests, demands, instructions,
and other communications called for hereunder or contemplated
hereby shall be given in the manner set forth in the Credit
Agreement.
10. Severability. The agreements and covenants of this
Security Agreement are severable, and in the event any of them
shall be held to be invalid by a court of competent jurisdiction,
this Security Agreement shall be interpreted as if such invalid
agreements or covenants were not contained in this Security
Agreement.
11. Captions. All captions contained in this Security
Agreement are for convenience of reference only and shall not
affect the meaning, substance or construction of any of the
provisions or terms of this Security Agreement.
12. Counterparts. This Security Agreement may be executed
in one or more counterparts, each of which shall, for all
purposes of this Security Agreement, be deemed an original, but
all of which shall constitute one and the same agreement.
13. Binding Effect. This Security Agreement shall be
binding upon, and shall inure to the benefit of, the respective
parties hereto their successors, legal representatives, and, to
the extent herein permitted, assigns.
14. Governing Law. This Security Agreement and any
performance under this Security Agreement shall be construed, and
enforced in accordance with, and governed by, the laws of the
State of Oklahoma.
15. Time of the Essence. Time is of the essence of this
Security Agreement.
IN WITNESS WHEREOF, the parties have executed and delivered
or caused their duly authorized representatives or officers to
have executed and delivered this Security Agreement to be
effective the day and year first above written.
"DEBTOR":
"SECURED PARTY":
NATIONSBANK, N.A.
By:
Kelly H. Sachs, Vice
President
211 North Robinson
P. O. Box 25189
Oklahoma City, OK 73125-
0189
Exhibit "J"
REQUEST FOR ADVANCE UNDER TENANT IMPROVEMENT LOAN
(Harold's Stores, Inc.)
Reference is made to that certain Third Amended and Restated
Credit Agreement (the "Credit Agreement") between HAROLD'S
STORES, INC., an Oklahoma corporation ("Borrower"), and
NATIONSBANK, N.A. ("Lender") dated November 10, 1997. Terms
which are defined in the Credit Agreement and which are used but
not defined in this Certificate shall have the meanings given
them in the Credit Agreement.
Pursuant to the terms of the Credit Agreement, Borrower
hereby requests Lender to advance funds to Borrower in the
principal amount of $_____________ under the Tenant Improvement
Loan, to which amount Borrower is entitled pursuant to the terms
of the Credit Agreement.
Borrower hereby certifies as follows:
1. The amount requested represents advances against Tenant
Reimbursements from the following Landlord(s) in the indicated
amount(s):
$
TOTAL $
2. The advance requested against each Tenant Reimbursement
represents an amount for which Borrower or the applicable
Harold's Subsidiary as "tenant" has not previously received an
advance from Lender.
3. To the best of Borrower's knowledge, Borrower or the
applicable Harold's Subsidiary as "tenant" has performed and
complied with all agreements and conditions in each Lease
Agreement for which advances against Tenant Reimbursements have
been made by Lender to Borrower in order for Borrower or the
applicable Harold's Subsidiary to be entitled to payment of
Tenant Reimbursements by the applicable Landlord and that each
Landlord has no claims, rights, setoff or defense to the timely
payment of Tenant Reimbursements.
4. To the best of Borrower's knowledge, there is no
action, suit or administrative proceeding pending or threatened,
affecting Borrower or the applicable Harold's Subsidiary or any
Tenant Improvement project, at law or in equity, before any
federal, state, municipal or other governmental agency or
authority which involves the likelihood of any liability which
would result in any material adverse change in the business
operations, properties or condition (financial or otherwise) of
Borrower or the applicable Harold's Subsidiary or such Tenant
Improvement project.
The foregoing certifications, representations and warranties
shall survive the execution of this Certificate.
IN WITNESS WHEREOF, Borrower has executed this Certificate
this ______ day of ____________, 199 .
"BORROWER": HAROLD'S
STORES, INC., an Oklahoma
corporation
By:
Name:
Title:
(this
Certificate is to be signed by
either H. Rainey Powell or Linda
Daugherty on behalf of Borrower)
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<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> JAN-31-1998
<PERIOD-END> NOV-01-1997
<CASH> 16
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<RECEIVABLES> 7,203
<ALLOWANCES> 226
<INVENTORY> 37,103
<CURRENT-ASSETS> 49,892
<PP&E> 27,571
<DEPRECIATION> 9,685
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<CURRENT-LIABILITIES> 12,851
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0
0
<COMMON> 5,745
<OTHER-SE> 36,002
<TOTAL-LIABILITY-AND-EQUITY> 70,311
<SALES> 87,214
<TOTAL-REVENUES> 87,214
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<INCOME-PRETAX> (477)
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