16
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-
May 2, 1998 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 .
APPLICABLE ONLY TO CORPORATE ISSUERS:
Indicate the number of shares outstanding of each of the
issuer's classes of common stock, as of the latest practicable
date.
As of June 10, 1998, the registrant had 6,062,552 shares of
Common Stock outstanding.
Harold's Stores, Inc. and Subsidiaries
Index to
Quarterly Report on Form 10-Q
For the Period Ended May 2, 1998
Part I. - FINANCIAL INFORMATION Page
Item 1. Financial Statements
Consolidated Balance Sheets - May 2, 1998 (unaudited)
and January 31, 1998. 3
Consolidated Statements of Earnings -
Thirteen Weeks ended May 2, 1998 (unaudited) and
May 3, 1997 (unaudited) 5
Consolidated Statements of Stockholders' Equity -
Thirteen Weeks ended May 2, 1998 (unaudited) and
May 3, 1997 (unaudited) 6
Consolidated Statements of Cash Flows -
Thirteen Weeks ended May 2, 1998 (unaudited) and
May 3, 1997 (unaudited) 7
Notes to Interim Consolidated Financial Statements -
May 2, 1998 (unaudited) and May 3, 1997
(unaudited) 8
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 9
Part II - OTHER INFORMATION
Item 1. Legal Proceedings 11
Item 6. Exhibits and Reports on Form 8-K 12
Signature 13
HAROLD'S STORES, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
ASSETS
(In Thousands)
May 2, 1998 January 31, 1998
(unaudited)
Current assets:
Cash $ 44 130
Trade accounts receivable, less
allowance 6,413 5,822
for doubtful accounts of $231 in
1999 and $228 in 1998
Other accounts receivable 726 886
Merchandise inventories 28,026 31,440
Prepaid expenses 2,316 2,688
Prepaid income tax 677 961
Deferred income taxes 1,154 1,154
Total current assets 39,356 43,081
Property and equipment, at cost 29,676 28,533
Less accumulated depreciation and (10,906) (10,197)
amortization
Net property and equipment 18,770 18,336
Other receivables, non-current 2,107 2,084
Other assets 281 428
Total assets $ 60,514 63,929
See accompanying notes to interim consolidated financial
statements.
HAROLD'S STORES, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
LIABILITIES AND STOCKHOLDERS' EQUITY
(In Thousands Except Share Data)
May 2, 1998 January 31,
1998
(unaudited)
Current liabilities:
Current maturities of long-term debt $ 490 734
Accounts payable 5,243 4,789
Redeemable gift certificates 646 916
Accrued bonuses and payroll expenses 1,411 953
Accrued rent expense 103 259
Total current liabilities 7,893 7,651
Long-term debt, net of current maturities 15,573 19,708
Deferred income taxes 104 104
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 61 60
outstanding 6,054,226 in May;
6,044,105 in January
Additional paid-in capital 34,013 33,947
Retained earnings 2,870 2,459
Total stockholders' equity 36,944 36,466
Total liabilities and stockholders' $ 60,514 63,929
equity
See accompanying notes to interim consolidated financial
statements.
HAROLD'S STORES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF EARNINGS
(In Thousands Except Share Data)
13 Weeks 13 Weeks
Ended Ended
May 2, May 3,
1998 1997
(Unaudited)
Sales $ 33,541 28,408
Costs and expenses:
Cost of goods sold 22,317 18,746
(including occupancy and
central buying expenses,
exclusive of items shown
separately below)
Selling, general and 6,868 5,634
administrative expenses
Advertising (includes catalog 2,444 2,818
production costs)
Depreciation and amortization 918 838
Interest expense 227 161
32,774 28,197
Earnings before income taxes and
cumulative effect of 767 211
change in accounting principle
Provision for income taxes 306 84
Net earnings before cumulative 461 127
effect of change in
accounting principle
Cumulative effect of change in
accounting principle 50 -
Net earnings $ 411 127
Net earnings per common share
before cumulative effect
of change in accounting
principle:
Basic and diluted $ .08 .02
Net earnings per common share:
Basic and diluted $ .07 .02
Weighted average number of common
shares 6,050,599 5,924,087
See accompanying notes to interim consolidated financial
statements.
HAROLD'S STORES INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
(Dollars in Thousands)
13 Weeks 13 Weeks
Ended Ended
May 2, 1998 May 3, 1997
(Unaudited)
Common stock:
Balance, beginning of period $ 60 57
Employee Stock Purchase Plan 1 -
Balance, end of period $ 61 57
Additional paid-in capital:
Balance, beginning of period 33,947 31,548
Employee Stock Purchase Plan 66 93
Balance, end of period $ 34,013 31,641
Retained earnings:
Balance, beginning of period 2,459 4,430
Net earnings 411 127
Balance, end of period $ 2,870 4,557
See accompanying notes to interim consolidated financial
statements.
HAROLD'S STORES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In Thousands)
13 Weeks 13 Weeks
Ended Ended
May 2, 1998 May 3, 1997
(Unaudited)
Cash flows from operating activities:
Net earnings $ 411 127
Adjustments to reconcile net earnings
to net cash
provided by operating activities:
Depreciation and amortization 918 838
Shares issued under employee 67 93
incentive plan
Changes in assets and liabilities:
Increase in trade and other (585) (720)
accounts receivable
Decrease (increase) in 3,414 (803)
merchandise inventories
Decrease in prepaid income taxes 284 -
Decrease in other assets 147 367
Decrease (increase) in prepaid 372 (384)
expenses
Increase (decrease) in accounts 454 (2,181)
payable
Increase in income taxes payable - (452)
Increase (decrease) in accrued
expenses 32 (978)
Net cash provided by (used in)
operating activities 5,514 (4,093)
Cash flows from investing activities:
Acquisition of property and (1,355) (2,253)
equipment
Proceeds from disposal of property 3 -
and equipment
Payment of principal on term loan
to others 131 46
Net cash used in investing activities (1,221) (2,207)
Cash flows from financing activities:
Advances on revolving line of 9,316 13,807
credit
Payments of revolving line of (13,423) (8,460)
credit
Borrowings on long-term debt - 1,024
Payments of long-term debt
(272) (50)
Net cash provided by (used in)
financing activities (4,379) 6,321
Net increase (decrease) in cash and (86) 21
cash equivalents
Cash and cash equivalents at beginning
of period 130 433
Cash and cash equivalents at end of $ 44 454
period
See accompanying notes to interim consolidated financial
statements.
HAROLD'S STORES, INC. AND SUBSIDIARIES
NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS
May 2, 1998 and May 3, 1997
(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 May 2, 1998 and the results of its
operations and cash flows for the thirteen week periods ended
May 2, 1998 and May 3, 1997. The results of operations for the
thirteen weeks ended May 2, 1998 and May 3, 1997 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 1,
1998 through January 30, 1999, has been designated as fiscal
1999.
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
Basic 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
1998. Diluted earnings per share reflects the potential
dilution that could occur if the Company's outstanding stock
options were exercised (calculated using the treasury stock
method).
13 Weeks 13 Weeks
ended May ended May
2, 1998 3, 1997
(Amounts in thousands,
except per share data)
Net earnings applicable to common $ 411 127
shares, basic and diluted
Weighted average number of common 6,051 5,924
shares outstanding - basic
Dilutive effect of potential common
shares issuable upon 5 113
exercise of employee stock
options
Weighted average number of common 6,056 6,037
shares outstanding - diluted
Net earnings per common share:
Basic and Diluted $ 0.07 0.02
5. Adoption of New Accounting Pronouncement
The Company elected early adoption of The American Institute
of Certified Public Accountants Statement of Position (SOP) 98-5
"Reporting on the Costs of Start-Up Activities" This SOP
requires that costs incurred during start-up activities,
including organization costs, be expensed as incurred. The
$83,000 effect ($50,000 net of tax) of this early adoption is
reported as the cumulative effect of a change in accounting
principle. Had the Company not elected early adoption of SOP 98-
5, net earnings would have increased by $12,000.
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 sales represented by items in the Company's
statement of earnings:
52 Weeks 13 Weeks 13 Weeks
Ended Ended Ended
January 31, May 2, 1998 May 3, 1997
1998
Sales 100.0% 100.0% 100.0%
Cost of goods sold (68.2) (66.5) (66.0)
(including occupancy
and central buying
expenses, exclusive of
items shown
separately below)
Selling, general and (19.9) (20.5) (19.8)
administrative expenses
Advertising expense (8.3) (7.3) (9.9)
(includes catalog
production costs)
Depreciation and (2.9) (2.7) (2.9)
amortization
Interest expense (0.7) (0.7) (0.6)
Earnings before income 0.0 2.3 0.8
taxes and cumulative
effect of change in
accounting principle
Provision for income taxes 0.0 (0.9) (0.3)
Net earnings before 0.0 1.4 0.5
cumulative effect of
accounting principle
Cumulative effect of change
in accounting - (0.2) -
principle
Net earnings 0.0% 1.2% 0.5%
The following table reflects the sources of the increases
in Company sales for the periods indicated:
13 Weeks 13 Weeks
Ended Ended
May 2, 1998 May 3, 1997
Store sales (000's) $ 30,465 $25,629
Catalog sales (000's) 3,076 2,779
Net sales (000's) 33,541 28,408
Total sales growth 18.1% 15.8%
Growth in comparable store (0.8)% (3.7)%
sales (52 week basis)
Growth in catalog sales 10.7% 9.8%
Store locations:
Existing stores beginning of 41 36
period
New stores opened during
period 1 1
Total stores at end of
period 42 37
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 first quarters of fiscal 1999 and 1998. The
Company opened one store in San Antonio, Texas during the first
quarter ended May 2, 1998.
Comparable store sales declined during the thirteen week
period of fiscal 1999. The Company believes that the decline
experienced in comparable store sales during the period was
primarily attributable to the opening of a second store in
several key markets, including: Birmingham, Alabama; Memphis,
Tennessee; San Antonio, Texas and Norman, Oklahoma.
The Company's gross margin declined from 34.0% in the
quarter ended May 3, 1997 to 33.5% during comparable period in
the current fiscal year. The Company experienced slightly
higher markdowns due to excess inventory levels, resulting from
lower than anticipated sales.
The combined total of selling, general and administrative
expenses and advertising expense (including catalog production
costs) declined from 29.7% of sales in the quarter ended May 3,
1997 to 27.8% in the comparable period of the current fiscal
year. This decline is primarily attributable to a reduction in
catalog production costs resulting from the Company's efforts
to better control the expansion and profitability of the
catalog operations.
The average balance on total outstanding debt was
$18,314,000 for the quarter ended May 2, 1998 compared to
$15,473,000 for the comparable period in the prior fiscal year.
This increase in average balances resulted principally from
increases related to working capital needs. Average interest
rates on the Company's line of credit were approximately the
same for the quarter ended May 2, 1998 and the comparable
quarter in the prior fiscal year. 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 quarter
ended May 2, 1998, net cash provided by operating activities
was $5,514,000 as compared to net cash used in operating
activities of $4,093,000 for the same period in fiscal 1998.
The significant increase can be partially attributable to a
$3,414,000 decrease in the Company's inventories for the
quarter ended May 2, 1998, as compared to an increase of
$803,000 during the first quarter of fiscal 1998. Management
expects the dollar amount of the Company's merchandise
inventories 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. Period to period differences
in timing of inventory purchases and deliveries will affect
comparability of cash flows from operating activities.
In addition, the difference in cash flows from operating
activities is partially due to (i) the timing of cash
disbursements as reflected in an increase in accounts payable
of $454,000 compared to a decrease in accounts payable of
$2,181,000 during the first quarter of fiscal 1998 and (ii) a
decrease in prepaid expenses of $372,000 for the quarter ended
May 2, 1998, as compared to an increase in prepaid expenses of
$384,000 during the first quarter of fiscal 1998.
Cash Flows From Investing Activities. For the quarter
ended May 2, 1998, net cash used in investing activities was
$1,221,000 as compared to $2,207,000 for the first quarter
ended May 3, 1997. Capital expenditures totaled $1,355,000 for
the first quarter ended May 2, 1998 compared to $2,253,000 for
the quarter ended May 3, 1997. Capital expenditures during
such periods were invested in new stores and remodeling and
equipment expenditures in existing operations.
Cash Flows From Financing Activities. During the quarter
ended May 2, 1998, the Company made periodic borrowings under
its revolving long-term line of credit to finance its inventory
purchases, product development and private label programs,
store expansion, remodeling and equipment purchases.
The Company has available a long term line of credit with
its bank. This line had an average balance of $13,162,000 and
$13,403,000 for the first quarter of fiscal 1998 and 1997,
respectively. During the first quarter ended May 2, 1998, this
line of credit had a high balance of $15,292,000 and a high
balance of $16,532,000 for the first quarter ended May 3, 1997.
The balance outstanding on May 2, 1998 was $10,929,000 compared
to $16,532,000 on May 3, 1997.
Liquidity. The Company considers the following as
measures of liquidity and capital resources as of the dates
indicated.
January May 2, May 3,
31, 1998 1998 1997
Working capital (000's) $35,430 $31,463 $33,502
Current ratio 5.63:1 4.98:1 5.51:1
Ratio of working capital .55:1 .52:1 .54:1
to total assets
Ratio of total debt to .56:1 .43:1 .52:1
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 sources of liquidity. Management anticipates these
sources of liquidity to be sufficient in the foreseeable
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 holiday selling season. 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 1. LEGAL PROCEEDINGS
NONE
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits: The following exhibits are filed as part of
this Form 10-Q:
No. Description Page
10.24* Employment and Deferred Compensation Agreement dated N/A
February 1, 1998 between Registrant and Rebecca Powell
Casey
10.25* Employment and Deferred Compensation Agreement dated N/A
February 1, 1998 between Registrant and Harold G. Powell
10.26* Employment and Deferred Compensation Agreement dated N/A
February 1, 1998 between Registrant and H. Rainey
Powell
27.1 Financial Data Schedule N/A
(b) Reports on Form 8-K; There were no reports on Form 8-K
filed by the Company during the fiscal quarter ended May 2,
1998.
____________________________
* Constitutes a management contract or compensatory plan or
arrangement required to be filed as an exhibit to this report.
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, Chief Operating Officer
By: /s/Jodi L. Taylor
Jodi L. Taylor
Chief Financial Officer
Date: June 16, 1998
REBECCA POWELL CASEY
EMPLOYMENT AGREEMENT
THIS AGREEMENT, made and effective as of the 1st day of
February, 1998, between HAROLD'S STORES, INC. ("Harold's"), and
REBECCA POWELL CASEY ("Casey").
WHEREAS, Harold's desires to secure the services of
Casey and Casey desires to accept such employment.
NOW, THEREFORE, in consideration of the mutual
covenants contained herein, Harold's and Casey agree as follows:
1.01 Employment of Casey. Casey will render full time
professional services to Harold's in the capacity of Chairman of
the Board and Chief Executive Officer of Harold's and such other
affiliates and subsidiaries as may be designated by the Board of
Directors of Harold's from time to time. She will at all times,
faithfully, industriously and to the best of her ability, perform
all duties that may be required of her and as set forth in the
Bylaws of Harold's by virtue of her position as Chairman of the
Board and Chief Executive Officer to the reasonable satisfaction
of the Board of Directors of Harold's. Her duties shall
specifically include supervision of personnel and financial
matters, attendance at meetings of the Board and the making of
reports to the Board. Casey is hereby vested with authority to
act on behalf of the Board in keeping with policies adopted by
the Board, as amended from time to time. In addition, she shall
perform in the same manner any special duties assigned or
delegated to her by the Board.
2.01 Compensation. In consideration for the services
which Casey performs as Chief Executive Officer, Harold's agrees
to pay her as follows:
2.01(a) Base Salary. Casey shall receive a base
salary of Two Hundred Twenty Thousand Dollars
($220,000.00) per year, which shall be paid to her
bi-weekly.
2.01(b) Cash Bonus. Annually, Casey shall be
entitled to a consideration for cash bonus in an amount
approved by Harold's Compensation Committee.
2.01(c) Stock Bonuses. Casey shall be entitled to
participate in any stock bonus program adopted by the
Board of Directors for the benefit of the executive
officers, upon such terms as shall be established by
the Board of Directors.
3.01 Fringe Benefits. Except as specified below to
indicate minimums, Casey shall receive such fringe benefits,
including life, health, dental, disability and other forms of
insurance, sick leave, vacation, automobile, professional dues,
community, civic and country club memberships as other executive
officers of Harold's receive from time to time.
3.01(a) Vacation. Casey shall be entitled to
three (3) weeks of compensated vacation time annually.
Unused vacation may not be accumulated.
3.01(b) Meetings. Casey will be permitted to be
absent from Harold's during working days to attend
meetings and to attend to such outside professional
duties in the retailing field as she deems appropriate.
Attendance at such meetings and accomplishment of such
duties shall be fully compensated service time and
shall not be considered vacation time. Harold's shall
reimburse Casey for all expenses incurred by her
incident to attendance at such meetings, and such
entertainment incurred by Casey in furtherance of the
interests of Harold's; provided, however, that such
reimbursement shall be approved by the Board.
3.01(c) Dues and Fees. Harold's agrees to pay
dues and fees to professional associations and
societies and to such community organizations, civic
clubs, country clubs, service organizations and other
organizations of which Casey is, or becomes, a member.
3.01(d) Insurance and Automobile. Harold's also
agrees to:
(i) Insure Casey under its general liability
insurance policy for all acts done by
her in good faith as Chief Executive
Officer throughout the term of this
contract;
(ii) Provide, throughout the term
of this contract, a group life insurance
policy, payable to the beneficiary of
his choice;
(iii) Provide disability
insurance for Casey payable to the
beneficiary of her choice;
(iv) Provide comprehensive health,
major medical and dental insurance for
Casey and her family; and
(v) Continue furnishing for Casey for the
first three (3) years of the term of
this Agreement, the vehicle which
Harold's currently furnishes to her, and
pay or reimburse her for expenses of its
operation, including, but not limited
to, insurance. After three (3) years,
Casey shall be entitled to a new
vehicle, in accordance with the Board of
Directors' guidelines governing the
purchase of vehicles for officers which
are in effect at that time.
4.01 Duration. This Agreement shall extend from the
date first above written until January 31, 2003, unless mutually
extended by Casey and Harold's.
4.02 Termination. This Agreement shall terminate upon
the death of Casey and may be terminated by either party upon the
showing of "good cause." In the event there is a dispute as to
the existence of good cause, the dispute shall be referred to
arbitration in accordance with the rules of the American
Arbitration Association. The cost of arbitration shall be
divided equally between the parties.
5.01 Entire Agreement. This contract constitutes the
entire agreement between the parties and contains all the
agreements between them with respect to the subject matter
hereof. It also supersedes any and all other agreements or
contracts, either oral or written, between the parties with
respect to the subject matter hereof.
5.02 Amendment. Except as otherwise specifically
provided, the terms and conditions of this contract may be
amended at any time by mutual agreement of the parties, provided
that before any amendment shall be valid or effective, it shall
have been reduced to writing and signed by an executive officer
and Casey.
5.03 Separability. The invalidity or unenforceability
of any particular provision of this contract shall not affect its
other provisions, and this contract shall be construed in all
respects as if such invalid or unenforceable provision had been
omitted.
5.04 Successors. This Agreement shall be binding upon
and inure to the benefit of Harold's, its successors and assigns,
and shall be binding upon Casey, her administrators, executors,
legatees, heirs and assigns.
5.05 Applicable Law. This Agreement shall be
construed and enforced under and in accordance with the laws of
the State of Oklahoma without giving effect to its conflicts of
laws provisions.
THIS CONTRACT SIGNED this day of
, 1998.
ATTEST: HAROLD'S STORES, INC.
By:
H. RAINEY POWELL, PRESIDENT
WITNESS:
REBECCA POWELL CASEY
HAROLD G. POWELL
EMPLOYMENT AND DEFERRED COMPENSATION AGREEMENT
THIS AGREEMENT, made and effective as of the 1st day of
February, 1998, between HAROLD'S STORES, INC. ("Harold's"), and
HAROLD G. POWELL ("Powell"),
WHEREAS, Harold's desires to secure the services of
Powell, and Powell desires to accept such employment.
NOW, THEREFORE, in consideration of the mutual
covenants contained herein, Harold's and Powell agree as follows:
1.01 Employment of Powell. Powell will render
professional services to Harold's in the capacity of Chairman of
the Board Emeritus of Harold's and such other affiliates and
subsidiaries as may be designated by the Board of Directors of
Harold's from time to time. He will at all times, faithfully,
industriously and to the best of his ability, perform all duties
that may be required of him and as established by the Board of
Directors or the Bylaws of Harold's. His duties shall
specifically include attendance at meetings of the Board. Powell
is hereby vested with authority to act on behalf of the Board in
keeping with policies adopted by the Board, as amended from time
to time. In addition, he shall perform in the same manner any
special duties assigned or delegated to him by the Board.
2.01 Compensation. In consideration for the services
which Powell performs as Chairman of the Board, Harold's agrees
to pay him as follows:
2.01(a) Base Salary. Powell shall receive a
base salary of One Hundred Twenty-Five Thousand
Dollars ($125,000.00) per year, which shall be
paid to him bi-weekly.
2.01(b) Cash Bonus. Annually, Powell shall
be entitled to consideration for a cash bonus in
an amount approved by Harold's Compensation
Committee.
2.01(c) Stock Bonuses. Powell shall be
entitled to participate in any stock bonus program
adopted by the Board of Directors for the benefit
of the executive officers, upon such terms as
shall be established by the Board of Directors.
2.02Deferred Compensation. In addition, Harold's
agrees to deferred compensation for Powell in an amount of
Twenty-Five Thousand Dollars ($25,000.00) per annum.
2.02(a) Method of Payment. Upon the termination
of the employment of Powell by Harold's for any reason,
the full amount of the deferred compensation then
earned shall be paid out to Powell in such of the
following manners as he may select:
(i) A lump sum
distribution;
(ii) Installment payments over a
fixed period of time;
(iii) Installment payments over
the balance of Powell's lifetime based upon the
actuarial assumptions described below; or
(iv) Such other method of payment
as mutually agreed upon between Powell and
Harold's.
2.02(b) Actuarial and Interest Assumptions. In
computing monthly or other installments, calculations
shall be made based on an assumed rate of interest
equal to the one-year Treasury Bill Rate as of the date
of termination. Actuarial assumptions shall be made by
an actuary chosen by the Board of Harold's in its sole
discretion. Any such actuary shall use the 1997 Unisex
Mortality Tables. The Board shall have the authority
to give the actuary any additional instructions needed
to make necessary calculations.
2.02(c) Disability of Powell. In the event of
the disability of Powell to such an extent that he
should not be able to continue his employment at
Harold's as determined in the sole discretion of the
Board, the deferred compensation benefits
payable under this Agreement shall commence with the
date of the determination by the Board that Powell is
so disabled.
2.02(d) Death of Powell. In the event of the
death of Powell, the amount in the deferred
compensation account of Powell shall be paid to the
Anna M. Powell or as otherwise arranged by Powell with
Harold's in writing.
2.02(e) Source of Funds. Harold's has no
obligation to set aside, earmark or entrust any fund or
money with which to pay its obligations under this
Agreement. Powell is to be and remain simply a
creditor of Harold's in the same manner as any other
creditor having a claim for unpaid compensation.
Harold's reserves the absolute right, at its sole and
exclusive discretion, either to fund or to refrain from
funding its obligations under this Agreement. If
Harold's should choose to fund its obligations with
life insurance or annuity contracts, or both, Harold's
reserves the absolute right, in its sole discretion, to
terminate such life insurance or annuity contract or
contracts at any time. At no time should Powell be
deemed to have any right, title or interest in or to
any specified asset or assets of Harold's, including
any life insurance or annuity contract. Powell does
agree, however, to cooperate with Harold's in the
funding of the obligation of Harold's under this
Agreement in such manner as may be determined to be
appropriate by it and to furnish medical information
and sign appropriate forms and applications at the
direction of Harold's.
3.01 Fringe Benefits. Except as specified below to
indicate minimums, Powell shall receive such fringe benefits,
including life, health, dental, disability and other forms of
insurance, sick leave, vacation, automobile, professional dues,
community, civic and country club memberships as other executive
officers of Harold's receive from time to time.
3.01(a) Vacation. Powell shall be entitled to
four (4) weeks of compensated vacation time annually.
Unused vacation time may not be accumulated.
3.01(b) Meetings. Powell will be permitted to be
absent from Harold's during working days to attend
meetings and to attend to such outside professional
duties in the retailing field as he deems appropriate.
Attendance at such meetings and accomplishment of such
duties shall be fully compensated service time and
shall not be considered vacation time. Harold's shall
reimburse Powell for all expenses incurred by him
incident to attendance at such meetings, and such
entertainment incurred by Powell in furtherance of the
interests of Harold's; provided, however, that such
reimbursement shall be approved by the Board.
3.01(c) Duties and Fees. Harold's agrees to pay
dues and fees to professional associations and
societies and to such community organizations, civic
clubs, country clubs, service organizations and other
organizations of which Powell is, or becomes, a member.
3.01(d) Insurance and Automobile. Harold's also
agrees to:
(i) Insure Powell under its general
liability insurance policy for all acts
done by him in good faith as Chairman of
the Board throughout the term of this
contract;
(ii) Provide, throughout the term of this
contract, a group life insurance policy, payable
to the beneficiary of his choice;
(iii) Provide disability
insurance for Powell, payable to the beneficiary
of his choice;
(iv) Provide comprehensive health,
major medical and dental insurance for Powell and
his family; and
(v) Continue furnishing
to Powell, for the term hereof, the
vehicle which Harold's currently
furnishes to him for business purposes,
and to pay or reimburse him for expenses
of its operation, including, but not
limited to, insurance.
4.01 Duration. The Agreement shall extend from the
date first above written until January 31, 1999, unless mutually
extended by Powell and Harold's.
4.02 Consulting by Powell. Upon the termination of
this Agreement other than because of the death or disability of
Powell, or as set forth in Sections 4.03 or 4.04 below, Powell
shall act as a general advisor and consultant to the management
of Harold's for a period of ten (10) years. Powell shall devote
such time as shall be necessary to perform his consulting duties,
subject to reasonable vacations compatible with his position, and
with due regard for preservation of his health. Because of the
goodwill attributable to Powell's association with Harold's and
the desire of Harold's to prevent Powell's expertise being
availed of by its competitors, Harold's agrees to pay to Powell
the compensation set forth below, notwithstanding Powell's
disability or other inability to render such services. Harold's
shall pay to Powell the sum of Fifty Thousand Dollars
($50,000.00) per annum for such services.
4.03 Termination. The Board may terminate Powell's
duties as Chairman of the Board Emeritus only for acts involving
willful malfeasance in office as determined in good faith by
majority vote of the entire Board. Such termination shall become
effective when such vote is taken. Written notice shall be given
Powell of such termination, specifying the effective date. After
such termination, all rights, duties and obligations of both
parties shall cease, except that Powell shall be entitled to the
payments provided for in section 2.02 of this Agreement.
4.04 Termination by Powell. Should Powell, in his
discretion, elect to terminate this contract for any other reason
than as stated in Section 4.03 above, he shall give the Board
ninety (90) days written notice of his decision to terminate. At
the end of these ninety (90) days, all rights, duties and
obligations of both parties to the contract shall cease.
5.01 Entire Agreement. This contract constitutes the
entire agreement between the parties, and contains all the
agreements between them with respect to the subject matter
hereof. It also supersedes any and all other agreements or
contracts, either oral or written, between the parties with
respect to the subject matter hereof.
5.02 Amendment. Except as otherwise specifically
provided, the terms and conditions of this contract may be
amended at any time by mutual agreement of the parties, provided
that before any amendment shall be valid or effective, it shall
have been reduced to writing and signed by the President of
Harold's and Powell.
5.03 Separability. The invalidity or unenforceability
of any particular provision of this contract shall not affect its
other provisions, and this contract shall be construed in all
respects as if such invalid or unenforceable provision had been
omitted.
5.04 Successors. This Agreement shall be binding upon
and inure to the benefit of Harold's, its successors and assigns,
and shall be binding upon Powell, his administrators, executors,
legatees, heirs and assigns.
5.05 Applicable Law. This Agreement shall be
construed and enforced under and in accordance with the laws of
the State of Oklahoma without giving effect to its conflicts of
laws provisions.
THIS CONTRACT signed this day of day of
, 1998.
ATTEST: HAROLD'S STORES, INC.
By:
H. RAINEY POWELL, PRESIDENT
WITNESS:
HAROLD G. POWELL
H. RAINEY POWELL
EMPLOYMENT AGREEMENT
THIS AGREEMENT, made and effective as of the 1st day of
February, 1998, between HAROLD'S STORES, INC. ("Harold's"), and
H. RAINEY POWELL ("Powell").
WHEREAS, Harold's desires to secure the services of
Powell, and Powell desires to accept such employment.
NOW, THEREFORE, in consideration of the mutual
covenants contained herein, Harold's and Powell agree as follows:
1.01 Employment of Powell. Powell will render full
time professional services to Harold's in the capacity of
President and Chief Operating Officer of Harold's and such other
affiliates and subsidiaries as may be designated by the Board of
Directors of Harold's from time to time. He will at all times,
faithfully, industriously and to the best of his ability, perform
all duties that may be required of him and as set forth in the
Bylaws of Harold's by virtue of his position as President and
Chief Operating Officer to the reasonable satisfaction of the
Board of Directors of Harold's. His duties shall specifically
include supervision of personnel and financial matters,
attendance at meetings of the Board and the making of reports to
the Board. Powell is hereby vested with authority to act on
behalf of the Board in keeping with policies adopted by the
Board, as amended from time to time. In addition, he shall
perform in the same manner any special duties assigned or
delegated to him by the Board.
2.01 Compensation. In consideration for the services
which Powell performs as President and Chief Operating Officer,
Harold's agrees to pay him as follows:
2.01(a) Base Salary. Powell shall receive a base
salary of One Hundred Eighty Thousand Dollars
($180,000.00) per year, which shall be paid to him
bi-weekly.
2.01(b) Cash Bonus. Annually, Powell shall be
entitled to consideration for a cash bonus in an amount
approved by Harold's Compensation Committee.
2.01(c) Stock Bonuses. Powell shall be entitled
to participate in any stock bonus program adopted by
the Board of Directors for the benefit of the executive
officers, upon such terms as shall be established by
the Board of Directors.
3.01 Fringe Benefits. Except as specified below to
indicate minimums, Powell shall receive such fringe benefits,
including life, health, dental, disability and other forms of
insurance,
sick leave, vacation, automobile, professional dues, community,
civic and country club memberships as other executive officers of
Harold's receive from time to time.
3.01(a) Vacation. Powell shall be entitled to
three (3) weeks of compensated vacation time annually.
Unused vacation may not be accumulated.
3.01(b) Meetings. Powell will be permitted to be
absent from Harold's during working days to attend
meetings and to attend to such outside professional
duties in the retailing field as he deems appropriate.
Attendance at such meetings and accomplishment of such
duties shall be fully compensated service time and
shall not be considered vacation time. Harold's shall
reimburse Powell for all expenses incurred by him
incident to attendance at such meetings, and such
entertainment incurred by Powell in furtherance of the
interests of Harold's; provided, however, that such
reimbursement shall be approved by the Board.
3.01(c) Dues and Fees. Harold's agrees to pay
dues and fees to professional associations and
societies and to such community organizations, civic
clubs, country clubs, service organizations and other
organizations of which Powell is, or becomes, a member.
3.01(d) Insurance and Automobile. Harold's also
agrees to:
(i) Insure Powell under its general
liability insurance policy for all acts
done by him in good faith as President
and Chief Operating Officer throughout
the term of this contract;
(ii) Provide, throughout the term
of this contract, a group life insurance
policy, payable to the beneficiary of
his choice;
(iii) Provide disability
insurance for Powell, payable to the
beneficiary of his choice;
(iv) Provide comprehensive health,
major medical and dental insurance for
Powell and his family; and
(v) Continue furnishing for Powell, for the
first three (3) years of the term of
this Agreement, the vehicle which
Harold's currently furnishes to him, and
pay or reimburse him for expenses of its
operation, including, but not limited
to, insurance. After three (3) years,
Powell shall be entitled to a new
vehicle, in accordance with the Board of
Directors' guidelines governing the
purchase of vehicles for officers which
are in effect at that time.
4.01 Duration. This Agreement shall extend from the
date first above written until January 31, 2003, unless mutually
extended by Powell and Harold's.
4.02 Termination. This Agreement shall terminate upon
the death of Powell, and may be terminated by either party upon
the showing of "good cause." In the event there is a dispute as
to the existence of good cause, the dispute shall be referred to
arbitration in accordance with the rules of the American
Arbitration Association. The cost of arbitration shall be
divided equally between the parties.
5.01 Entire Agreement. This contract constitutes the
entire agreement between the parties and contains all the
agreements between them with respect to the subject matter
hereof. It also supersedes any and all other agreements or
contracts, either oral or written, between the parties with
respect to the subject matter hereof.
5.02 Amendment. Except as otherwise specifically
provided, the terms and conditions of this contract may be
amended at any time by mutual agreement of the parties, provided
that before any amendment shall be valid or effective, it shall
have been reduced to writing and signed by an executive officer
and Powell.
5.03 Separability. The invalidity or unenforceability
of any particular provision of this contract shall not affect its
other provisions, and this contract shall be construed in all
respects as if such invalid or unenforceable provision had been
omitted.
5.04 Successors. This Agreement shall be binding upon
and inure to the benefit of Harold's, its successors and assigns,
and shall be binding upon Powell, his administrators, executors,
legatees, heirs and assigns.
5.05 Applicable Law. This Agreement shall be
construed and enforced under and in accordance with the laws of
the State of Oklahoma without giving effect to its conflicts of
laws provisions.
THIS CONTRACT SIGNED this day of
, 1998.
ATTEST: HAROLD'S STORES, INC.
By:
REBECCA P. CASEY
CHIEF EXECUTIVE OFFICER
WITNESS:
H. RAINEY POWELL
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