17
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-
July 31, 1999 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 August 26, 1999, the registrant had 6,075,272 shares of
Common Stock outstanding.
Harold's Stores, Inc.
Index to
Quarterly Report on Form 10-Q
For the Period Ended July 31, 1999
Part I. - FINANCIAL INFORMATION Page
Item 1. Financial Statements
Consolidated Balance Sheets - July 31, 1999 (unaudited) and
January 30, 1999 3
Consolidated Statements of Earnings -
Thirteen Weeks and Twenty-Six Weeks ended July 31, 1999
(unaudited) and August 1, 1998 (unaudited) 5
Consolidated Statements of Cash Flows -
Twenty-Six Weeks ended July 31, 1999 (unaudited) and August
1, 1998 (unaudited) 6
Notes to Interim Consolidated Financial Statements 7
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations 8
Item 3. Quantitative and Qualitative Disclosure about Market Risk 12
Part II - OTHER INFORMATION
Item 1. Legal Proceedings 14
Item 4. Submission of Matters to a Vote of Security Holders 14
Item 6. Exhibits and Reports on Form 8-K 15
Signature 16
HAROLD'S STORES, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
ASSETS
(In Thousands)
July 31, 1999 January 30, 1999
(Unaudited)
Current assets:
Cash $ 482 450
Trade accounts receivable, less
allowance for doubtful accounts
of $228 in July and $223 in January 5,981 6,335
Other accounts receivable 2,208 1,059
Merchandise inventories 33,457 29,486
Prepaid expenses 3,158 2,428
Deferred income taxes 1,268 1,268
Total current assets 46,554 41,026
Property and equipment, at cost 32,372 31,304
Less accumulated depreciation and
amortization (12,333) (10,671)
Net property and equipment 20,039 20,633
Other receivables, non-current 1,167 1,750
Other assets 313 508
Total assets $68,073 63,917
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)
July 31, 1999 January 30, 1999
(Unaudited)
Current liabilities:
Current maturities of long-term debt $ 551 549
Accounts payable 3,732 4,460
Redeemable gift certificates 308 782
Accrued bonuses and payroll expenses 1,103 1,533
Accrued rent expense 357 178
Income taxes payable 20 480
Total current liabilities 6,071 7,982
Long-term debt, net of current maturities 21,763 16,330
Deferred income taxes 84 84
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
outstanding 6,075,182 in July, 6,073,868
in January 60 60
Additional paid-in capital 34,170 34,161
Retained earnings 5,925 5,300
Total stockholders' equity 40,155 39,521
Total liabilities and stockholders' equity $68,073 63,917
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 Ended 26 Weeks Ended
July 31, August 1, July 31, August 1,
1999 1998 1999 1998
(Unaudited)
Sales 29,828 27,714 65,128 61,255
Costs and expenses:
Cost of goods sold (including
occupancy and central buying
expenses, exclusive of items
shown separately below) 19,310 18,226 42,530 40,543
Selling, general and
administrative expenses 9,113 7,893 18,943 17 205
Depreciation and amortization 1,084 943 2,233 1,861
Interest expense 182 196 398 423
29,689 27,258 64,104 60,032
Earnings before income taxes and
cumulative effect of change in
accounting principle 139 456 1,024 1,223
Provision for income taxes 45 183 399 489
Earnings before cumulative effect
of change in accounting principle 94 273 625 734
Cumulative effect of change in
accounting principle - - - 50
Net earnings 94 273 625 684
Net earnings per common share
before cumulative effect of
change in accounting principle:
Basic and diluted 0.02 0.05 0.10 0.12
Net earnings per common share:
Basic and diluted 0.02 0.05 0.10 0.11
Weighted average number of
common shares - basic 6,075,041 6,063,786 6,074,499 6,057,403
See accompanying notes to interim consolidated financial statements.
HAROLD'S STORES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In Thousands)
26 Weeks 26 Weeks
Ended Ended
July 31, 1999 August 1, 1998
(Unaudited)
Cash flows from operating activities:
Net earnings $ 625 $ 684
Adjustments to reconcile net earnings
to net cash provided by (used in)
operating activities:
Depreciation and amortization 2,233 1,861
Gain on sale of assets (4) (10)
Shares issued under employee
incentive plan 9 188
Changes in assets and liabilities:
Increase in trade and other
accounts receivable (795) (64)
Decrease (increase) in
merchandise inventories (3,971) 857
Decrease in other assets 195 292
Decrease (increase) in prepaid
expenses (730) 253
Decrease in prepaid income tax - 684
Decrease in accounts payable (728) (51)
Decrease in income taxes payable (460) -
Decrease in accrued expenses (725) (151)
Net cash provided by (used in)
operating activities (4,351) 4,543
Cash flows from investing activities:
Acquisition of property and equipment (1,642) (2,511)
Proceeds from disposal of property
and equipment 7 48
Payment of principal on term loan 583 232
Net cash used in investing activities (1,052) (2,231)
Cash flows from financing activities:
Advances on revolving line of credit 27,367 20,832
Payments on revolving line of credit (21,252) (22,280)
Payments on long-term debt (680) (944)
Net cash (used in) provided by
financing activities 5,435 (2,392)
Increase (decrease) in cash 32 (80)
Cash at beginning of period 450 130
Cash at end of period $ 482 $ 50
See accompanying notes to interim consolidated financial statements.
HAROLD'S STORES, INC. AND SUBSIDIARIES
NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS
July 31, 1999 and August 1, 1998
(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 July 31, 1999
and the results of its operations and cash flows for the thirteen week
periods and twenty-six week periods ended July 31, 1999 and August 1,
1998. The results of operations for the thirteen week periods and twenty-
six week periods ended July 31, 1999 and August 1, 1998 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 that ends on the Saturday
closest to January 31. The period from January 31, 1999 through January
29, 2000 has been designated as fiscal 2000.
3. Net Earnings Per Common Share
Basic earnings per common share are based upon the weighted average
number of common shares outstanding during the period. Diluted earnings
per share reflect 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 26 Weeks 26 Weeks
ended ended ended ended
July 31, August 1, July 31, August 1,
1999 1998 1999 1998
(Amounts in thousands, except per share data)
Net earnings applicable to
common shares, basic
and diluted 94 273 625 684
Weighted average number of
common shares outstanding -
basic 6,075 6,064 6,074 6,057
Dilutive effect of potential
common shares issuable upon
exercise of employee stock
options 9 18 10 13
Weighted average number of
common shares outstanding - 6,084 6,082 6,084 6,070
diluted
Net earnings per common share:
Basic and Diluted $0.02 $0.05 $0.10 $0.11
Options to purchase 704,977 and 572,399 shares of common stock at
prices ranging from $7.38 to $16.71 were outstanding on July 31, 1999,
and August 1, 1998, respectively, but were not included in the
computation of earnings per share because the options' exercise price was
greater than average market price of common shares. The options expire
through the year 2009.
4. Impact of New Accounting Pronouncement
During the thirteen weeks ended May 2, 1998, 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.
In June 1998, the Financial Accounting Standards Board issued
Statement of Financial Accounting Standards (SFAS) No. 133, "Accounting
for Derivative Instruments and Hedging Activities." SFAS No. 133 is
effective for fiscal years beginning after June 15, 2000. SFAS No. 133
establishes standards for accounting and reporting for derivative
instruments, including certain derivative instruments embedded in other
contracts, and for hedging activities. It requires that an entity
recognize all derivatives as either assets or liabilities in the
statement of financial position and measure those instruments at fair
value. The accounting for changes in fair value of a derivative depends
on the intended use of the derivative and the resulting designation.
Management is currently evaluating the impact of this standard and
believes its adoption will not materially affect the Company's
consolidated financial position or results of operations.
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:
13 Weeks Ended 26 Weeks Ended
July 31, August 1, July 31, August 1,
1999 1998 1999 1998
Sales 100.0% 100.0% 100.0% 100.0%
Cost of goods sold
(including occupancy and
central buying expenses,
exclusive of items shown
separately below) (64.7) (65.8) (65.3) (66.2)
Selling, general and
administrative expenses (30.6) (28.5) (29.1) (28.1)
Depreciation and
amortization (3.6) (3.4) (3.4) (3.0)
Interest expense (0.6) (0.7) (0.6) (0.7)
Earnings before income
taxes and cumulative
effect of change in
accounting principle 0.5 1.6 1.6 2.0
Provision for income taxes (0.2) (0.6) (0.6) (0.8)
Earnings before cumulative
effect of change in
accounting principle 0.3 1.0 1.0 1.2
Cumulative effect of change
in accounting principle - - - (0.1)
Net earnings 0.3% 1.0% 1.0% 1.1%
The following table reflects the sources of the increases in Company
sales for the periods indicated:
13 Weeks Ended 26 Weeks Ended
July 31, August 1, July 31, August 1,
1999 1998 1999 1998
Store sales (000's) $28,697 26,015 61,851 56,480
Catalog sales (000's) $ 1,131 1,699 3,277 4,775
Sales (000's) $29,828 27,714 65,128 61,255
Total sales growth 7.5% 3.3% 6.3% 10.9%
Growth in comparable store 1.3% (4.3)% 1.9% (2.6)%
sales (52 week basis)
Growth in catalog sales (33.4)% (7.2)% (31.4)% 3.6%
Store locations:
Existing stores 46 42 44 41
Stores closed - - (1) -
New stores opened 2 - 5 1
Total stores at end of
period 48 42 48 42
The Company opened two new locations (Houston, Texas and
Indianapolis, Indiana) during the thirteen weeks ended July 31, 1999 as
compared to relocating one location (the Galleria mall store in Dallas,
Texas) to a larger location in the comparable period of the prior year.
During the twenty-six weeks ended July 31, 1999, the Company opened five
new store locations (Palo Alto, California; Tampa, Florida; Southlake,
Texas; Houston, Texas and Indianapolis, Indiana), as compared to the
opening of one store (San Antonio, Texas) in the same period of the prior
year. The opening of new stores and expansion of existing stores
contributed to total sales growth for the second quarter and the twenty-
six weeks ended July 31, 1999. This growth was partially offset by a
decrease in catalog sales. Catalog sales declined during the twenty-six
week period ended July 31, 1999 as compared to the same period of the
prior year as a result of a strategic initiative to reduce by 14% the
total number of catalogs circulated during the period.
Comparable stores sales increased during the second quarter and
twenty-six week period of fiscal 2000, as compared to the same periods of
fiscal 1999. The Company believes the increase experienced in comparable
store sales during the periods was primarily attributable to improved
customer acceptance of product offerings.
The Company's gross margin was 35.3% for the second quarter of
fiscal 2000, as compared to 34.2% in the same period of last year. The
gross margin also increased for the twenty-six week period ended July 31,
1999 to 34.7%, from 33.8% in the same period of last year. The increase
in gross margin for both periods can be primarily attributed to improved
inventory management, increased initial margins.
Selling, general and administrative expenses (including advertising
and catalog production costs) increased 2.1% of sales from the second
quarter of fiscal 1999 to the second quarter of fiscal 2000 and 1.0% of
sales for the twenty-six weeks ended July 31, 1999 as compared to the
same period of the prior year. The increase was principally the result
of increased selling expenses and expenses incurred toward new store
openings.
The average balance on total outstanding debt was $18,368,000 for
the second quarter ended July 31, 1999 compared to $17,400,000 for the
second quarter of fiscal 1999. This increase in average balances resulted
principally from increases in working capital needs. Average interest
rates on the Company's line of credit were approximately the same for the
quarter ended July 31, 1999 and the comparable quarter in the prior
fiscal year. As the Company's growth continues, cash flow may require
additional borrowed funds that may cause an increase in interest expense.
Capital Expenditures, Capital Resources and Liquidity
Cash Flows From Operating Activities. For the twenty-six weeks
ended July 31, 1999, net cash used in operating activities was $4,351,000
as compared to net cash provided by operating activities of $4,543,000
for the same period of fiscal 1999. The significant decrease can be
primarily attributed to a $3,971,000 increase in the Company's
inventories for the twenty-six weeks ended July 31, 1999 as compared to a
decrease of $857,000 for the same period of fiscal 1999. Management
expects the dollar amounts 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
a decrease in accounts payable of $728,000 for the twenty-six weeks ended
July 31, 1999 as compared to a decrease in accounts payable of $51,000
during the same period of fiscal 1999 and (ii) a decrease in accrued
expenses of $725,000 for the twenty-six weeks ended July 31, 1999
compared to a decrease in accrued expenses of $151,000 during the same
period of fiscal 1999.
Cash Flows From Investing Activities. For the twenty-six weeks ended
July 31, 1999, net cash used in investing activities totaled $1,052,000
compared to net cash used in investing activities of $2,231,000 for the
same period in fiscal 1999. Capital expenditures were invested in new
stores, and remodeling and equipment expenditures in existing operations.
Cash Flows From Financing Activities. During the twenty-six weeks
ended July 31, 1999, 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 $14,507,000 and $12,451,000 for the
twenty-six weeks ended July 31, 1999 and August 1, 1998, respectively.
During the twenty-six weeks ended July 31, 1999, this line of credit had
a high balance of $18,984,000 and a high balance of 15,036,000 for the
twenty-six weeks ended August 1, 1998. The balance outstanding on July
31, 1999 was $18,984,000 compared to $13,588,000 on August 1, 1998.
Liquidity. The Company considers the following as measures of
liquidity and capital resources as of the dates indicated:
January 30, July 31, August 1,
1999 1999 1998
Working capital (000's) $33,044 $40,483 $33,914
Current ratio 5.14:1 7.67:1 5.70:1
Ratio of working capital
to total assets .52:1 .59:1 .54:1
Ratio of total debt to
stockholders' equity .43:1 .56:1 .48:1
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 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 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.
Year 2000
Many computer systems use only two digits to identify a year (for
example, "99" is used for the year "1999"). As a result, these systems may
be unable to process accurately dates later than December 31, 1999, since
they may recognize "00" as the year "1900", instead of the year "2000".
This anomaly is often referred to as the "Year 2000 compliance" issue.
Since 1997, the Company has been executing a plan to remediate or replace
affected systems on a timely basis. Equipment and other non-information
technology systems that use microchips or other embedded technology, such
as certain conveyor systems at the Company's distribution center, are also
covered by the Company's Year 2000 compliance project.
The Company's Year 2000 compliance project includes four phases: (1)
evaluation of the Company's owned or leased systems and equipment to
identify potential Year 2000 compliance issues; (2) remediation or
replacement of Company systems and equipment determined to be non-compliant
(and testing of remediated systems before returning them to production);
(3) inquiry regarding Year 2000 readiness of material business partners and
other third parties on whom the Company's business is dependent; and (4)
development of contingency plans, where feasible, to address potential
third party non-compliance or failure of material Company systems.
The initial phase of the Company's Year 2000 compliance project was
the evaluation of all software, hardware and equipment owned, leased or
licensed by the Company, and identification of those systems and equipment
requiring Year 2000 remediation. This analysis was completed during fiscal
1999.
All computer hardware in the Company's corporate office and
distribution center that was not Year 2000 compliant has been remediated or
replaced, and all computer hardware in the Company's retail stores that was
not Year 2000 compliant was remediated or replaced by the end of the second
quarter of fiscal 2000. Of those software systems that were found not to
be Year 2000 compliant, substantially all material systems have been
remediated or replaced by Year 2000 compliant software as of the date of
this report.
Over the past few years, the Company's strategic plan has included
significant investment in and modernization of many of the Company's
computer systems. As a result, much of the costs and timing for replacement
of certain of the Company's systems that were not Year 2000 compliant were
already anticipated as part of the Company's planned information systems
spending and did not need to be accelerated as a result of the Company's
Year 2000 project. The total cost to the Company specifically associated
with addressing the Year 2000 issue with respect to its systems and
equipment has not been, and is not anticipated to be, material to the
Company's financial position or results of operations in any given year.
The Company estimates that the total additional cost of managing its Year
2000 project, remediating existing systems and replacing non-compliant
systems, is approximately $2 million, of which approximately $500,000 is
anticipated to be expended in fiscal 2000.
Although the Company believes its Year 2000 compliance efforts with
respect to its systems will be successful, any failure or delay could
result in actual costs and timing differing materially from that presently
contemplated, and in a disruption of business. The Company is developing a
contingency plan to permit its primary operations to continue if the
Company's modifications and conversions of its systems are not successfully
completed on a timely basis, but the foregoing cost estimates do not take
into account any expenditures arising out of a response to any such
contingencies that materialize. The Company's cost estimates also do not
include time or costs that may be incurred as a result of third parties'
failure to become Year 2000 compliant on a timely basis.
The Company is communicating with its business partners, including
key manufacturers, vendors, banks and other third parties with whom it does
business, to obtain information regarding their state of readiness with
respect to the Year 2000 issue. Assessment of third party Year 2000
readiness of those third parties whose services are most significant to the
Company's business was substantially completed by the end of the second
quarter of fiscal 2000. The Company intends to continue to monitor the
Year 2000 readiness of its key suppliers of its goods and services.
Potential interruptions of such third parties' businesses or services to
the Company resulting from Year 2000 issues will be addressed in the
Company's contingency planning efforts, discussed below. Failure of third
parties to remediate Year 2000 issues affecting their respective businesses
on a timely basis, or to implement contingency plans sufficient to permit
uninterrupted continuation of their businesses in the event of a failure of
their systems, could have a material adverse effect on the Company's
business and results of operations.
The Company's Year 2000 compliance project also includes development
of a contingency plan designed to support critical business operations in
the event of the occurrence of systems failures or the occurrence of
reasonably likely worst case scenarios. Such contingency plans were
substantially developed by the end of the second quarter of fiscal 2000.
The Company operates a large number of retail stores in widely disbursed
geographical locations, and Company merchandise is manufactured by a large
number of suppliers and factories. The Company believes that these factors
will help to mitigate the adverse impact of potential Year 2000 failures by
third party suppliers or utilities. The Company believes that the most
reasonably likely worst case scenarios would involve an interruption of the
supply of merchandise to the Company's stores, as a result of the delay in
completion of the Company's merchandise orders by manufacturers, or a delay
in the delivery of merchandise to the Company's stores due to a disruption
of service at ports of export or at the U.S. port of import, or a
disruption in service by transportation providers, or a disruption in
operation of the Company's distribution center.
The Company may not be able to compensate adequately for business
interruption caused by certain third parties. Potential risks include
suspension or significant curtailment of service or significant delays by
banks, utilities or common carriers, or at U.S. ports of entry. The
Company's business also could be materially adversely affected by the
failure of governmental agencies to address Year 2000 issues affecting the
Company's operations. For example, a significant amount of the Company's
merchandise is manufactured outside the United States, and the Company is
dependent upon the issuance by foreign governmental agencies of export
visas for, and upon the U.S. Customs Service to process and permit entry
into the United States of, such merchandise. If failures in government
systems result in the suspension or delay of these agencies' services, the
Company could experience significant interruption or delays in its
inventory flow.
The costs and timing for management's completion of Year 2000
compliance modification and testing processes are based on management's
best estimates, which were derived utilizing numerous assumptions of future
events, including the continued availability of certain resources, the
success of third parties' Year 2000 compliance efforts and other factors.
There can be no assurance that these assumptions will be realized or that
actual results will not materially vary.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK
The primary objective of the following information is to provide
forward-looking quantitative and qualitative information about the
Company's potential exposure to market risks. The term "market risk" for
the Company refers to the risk of loss arising from adverse changes in
interest rates and various foreign currencies. The disclosures are not
meant to be precise indicators of expected future losses, but rather
indicators of reasonably possible losses. This forward-looking
information provides indicators of how the Company views and manages its
ongoing market risk exposures.
Interest Rate
At July 31, 1999, the Company had long-term debt outstanding of
approximately $22.3 million. Of this amount, $1.8 million bears interest
at a weighted average fixed rate of 8.07%. The remaining $20.5 million
bears interest at variable rates which averaged approximately 6.34% at
July 31, 1999. A 10% increase in short-term interest rates on the
variable rate debt outstanding at July 31, 1999 would approximate 63
basis points. Such an increase in interest rates would increase the
Company's interest expense by approximately $65,000 during the remainder
of fiscal 2000 assuming borrowed amounts remain outstanding.
The above sensitivity analysis for interest rate risk excludes
accounts receivable, accounts payable and accrued liabilities because of
the short-term maturity of such instruments. The analysis does not
consider the effect this movement may have on other variables including
changes in sales volumes that could be indirectly attributed to changes
in interest rates. The actions that management would take in response to
such a change is also not considered. If it were possible to quantify
this impact, the results could well be different than the sensitivity
effects shown above.
Foreign Currency
Substantially all of the Company's purchases are priced in U.S.
dollars. However, some European purchases are denominated in local
currency and, therefore, are subject to the fluctuation in currency
exchange rates. From time to time the Company utilizes forward exchange
contracts to secure firm pricing related to purchase commitments to be
denominated in foreign currencies. The contracts are of varying short-
term durations and amounts include a window delivery feature, which
provides the Company with an option to enter into a swap agreement in the
event that all of the currency is not utilized at the end of the
contract's delivery term. The Company's objective in managing its
exposure to foreign currency exchange rate fluctuations is to reduce the
impact of adverse fluctuations in earnings and cash flows associated with
foreign currency exchange rate changes. The principal currency hedged is
the Italian lira. The Company regularly monitors its foreign exchange
exposures to ensure the overall effectiveness of its foreign currency
hedge positions. However, there can be no assurance the Company's
foreign currency hedging activities will substantially offset the impact
of fluctuations in currency exchange rates on its results of operations
and financial position.
The table below provides information about the Company's foreign
exchange forward contracts as of July 31, 1999 and August 1, 1998,
respectively:
July 31, 1999 August 1, 1998
Notional Notional
Amount of Amount of
Forward Forward
Average Contract Average Contract
Contract in U.S. Fair Contract in U.S. Fair
Rate Dollars Value Rate Dollars Value
Foreign Exchange
forward contracts
Italian lira $1,840 $2,074,276 $2,159,055 $ - $ - $ -
PART II
ITEM 1. LEGAL PROCEEDINGS
The Company is from time to time involved in routine litigation
incidental to the conduct of its business. As of this date, the Company
is not a party to, nor is any of its property subject to, any material
pending legal proceedings.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
The 1999 Annual Meeting of Shareholders of the Company was held on
June 25, 1999. The following matters were submitted to a vote of the
Company's shareholders:
1. The election of ten directors (constituting the entire board of
directors) for the ensuing year and until their successors are duly elected
and qualified. The results of the election for each director were as
follows:
Director Votes For Votes Withheld
Harold G. Powell 5,651,786 32,207
Rebecca Powell Casey 5,651,814 32,179
H. Rainey Powell 5,651,751 32,242
Kenneth C. Row 5,653,281 30,712
Michael T. Casey 5,650,998 32,995
Robert B. Cullum, Jr. 5,653,281 30,712
Lisa Powell Hunt 5,643,603 40,390
W. Howard Lester 5,646,192 37,801
Gary C. Rawlinson 5,653,281 30,712
William F. Weitzel 5,653,281 30,712
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
10.1* Third Amendment to the Third Amended and Restated Credit Agreement
dated June 30, 1999 between Registrant and NationsBank.
27.1 Financial Data Schedule
(b) Reports on Form 8-K; There were no reports on Form 8-K filed by
the Company during the fiscal quarter ended July 31, 1999.
___________________________
* Constitutes a management contract or compensatory plan or
arrangement required to be filed as an exhibit to this report.
INDEX TO EXHIBITS
Description
No.
10.1* Third Amendment to the Third Amended and Restated Credit
Agreement dated June 30, 1999 between Registrant and NationsBank
27.1 Financial Data Schedule
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: September 13, 1999
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<ARTICLE> 5
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> JAN-29-2000
<PERIOD-END> JUL-31-1999
<CASH> 482
<SECURITIES> 0
<RECEIVABLES> 6,209
<ALLOWANCES> 228
<INVENTORY> 33,457
<CURRENT-ASSETS> 46,554
<PP&E> 32,372
<DEPRECIATION> 12,333
<TOTAL-ASSETS> 68,073
<CURRENT-LIABILITIES> 6,071
<BONDS> 21,763
0
0
<COMMON> 60
<OTHER-SE> 40,095
<TOTAL-LIABILITY-AND-EQUITY> 68,073
<SALES> 65,128
<TOTAL-REVENUES> 65,128
<CGS> 42,530
<TOTAL-COSTS> 42,530
<OTHER-EXPENSES> 21,176
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 398
<INCOME-PRETAX> 1,024
<INCOME-TAX> 399
<INCOME-CONTINUING> 625
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 625
<EPS-BASIC> $0.10
<EPS-DILUTED> $0.10
</TABLE>
-12-
THIRD AMENDMENT TO THIRD AMENDED
AND RESTATED CREDIT AGREEMENT
THIS THIRD AMENDMENT TO THIRD AMENDED AND RESTATED CREDIT
AGREEMENT (this "Amendment") is made effective June 30, 1999, 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 Third
Amended and Restated Credit Agreement dated November 10, 1997, as
amended by a First Amendment to Third Amended and Restated Credit
Agreement dated effective June 30, 1998 and a Second Amendment to
Third Amended and Restated Credit Agreement dated effective
August 31, 1998 (collectively the "Agreement"); and
WHEREAS, Borrower has requested that the Agreement be
amended to permit Borrower to increase and consolidate the
Revolving Note, the Tenant Improvement Note and the Letter of
Credit Note, to extend the maturity dates of the Loans and to
otherwise amend the terms of the Agreement; and
WHEREAS, Lender is willing to amend the Agreement as
described above 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:
1. Amended Definitions. The definitions of "Letter of
Credit Note", "Liabilities", "LIBOR Rate", "Loan Documents",
"Notes", "Revolving Loan Borrowing Base", "Revolving Loan Maximum
Revolving Facility", "Revolving Note", "Tenant Improvement Note",
and "Term Note" in the Agreement are hereby deleted in their
entirety and replaced with the following:
"Letter of Credit Note" for purposes hereof, shall
be deemed to be the Revolving Note, which is a
consolidation and continuation of all prior Letter of
Credit Notes.
"Liabilities" shall mean all liabilities,
obligations and indebtedness to Lender or any affiliate
of the 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 and any
affiliate of the Lender under this Agreement, the other
Loan Documents or the Notes."
"LIBOR Rate" shall mean the London Interbank
Offered Rate for one (1) month as published in the
"Money Rates" section of The Wall Street Journal
(Southwest Edition) 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 the 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 fall on a
date when The Wall Street Journal is not published,
then the one (1) 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,
guaranties, mortgages, deeds of trust, subordination
agreements, pledges, powers of attorney, consents,
assignments, contracts, notices, financing statements
and other written matters whether heretofore, now or
hereafter executed by or on behalf of Borrower in favor
of Lender or any affiliate of the Lender, including
without limitation, any or all agreements between
Borrower and the Lender, or any affiliate of the Lender
which provides for an interest rate or commodity swap,
cap, floor, collar, forward foreign exchange
transaction, currency swap, cross-currency rate swap,
currency option, or any combination of, or option with
respect to, these or similar transactions, for the
purpose of hedging the Borrower's exposure to
fluctuations in interest rates, currency valuations or
commodity prices, together with all agreements, and
documents referred to any of the above or contemplated
thereby, and all amendments, modifications and
substitutions to any of the foregoing.
"Notes" shall mean collectively the Revolving
Note, the Term Note and any other notes entered into
under the Loan Documents and any extensions, renewals,
amendments, replacements or modifications of the
foregoing.
"Revolving Loan Borrowing Base" shall mean an
amount equal to the sum of (i) eighty percent (80%) of
Eligible Accounts, plus (ii) fifty percent (50%) of
Eligible Inventory for the first and second fiscal
quarters, or sixty-five percent (65%) of Eligible
Inventory for the third and fourth fiscal quarters, as
applicable, plus (iii) fifty percent (50%) of
outstanding commercial Letters of Credit for the first
and second fiscal quarters, or sixty-five percent (65%)
of commercial Letters of Credit for the third and
fourth fiscal quarters, as applicable, plus (iv) one
hundred percent (100%) of amounts due from landlords
for the unreimbursed costs of tenant finish, minus (v)
one hundred percent (100%) of all outstanding
commercial Letters of Credit, minus (vi) one hundred
percent (100%) of all issued stand-by Letters of
Credit. This amount shall not exceed $28,000,000.00 as
reflected in the most recent 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
the Borrower. The Revolving Loan Maximum Revolving
Facility shall be $28,000,000.00, which shall include
the amount of the Letter of Credit Facility.
"Revolving Note" shall mean that certain Amended
and Restated Revolving Note dated even date herewith
executed by the Borrower substantially in the form of
Exhibit "A" to the Third Amendment, as the same may be
extended, renewed, amended or modified from time to
time pursuant to the terms of this Agreement , which
Note is an amendment and restatement of, a substitute
and replacement for, and a consolidation of, the
following: (a) that certain Fifteenth Amended and
Restated Revolving Note (Revolving Note) dated June 30,
1998, in the principal amount of $19,000,000.00 payable
to the order of Lender; (b) that certain First Amended
and Restated Revolving Note (Tenant Improvement Note)
dated June 30, 1998, in the principal amount of
$3,000,000.00 payable to the order of Lender; and (c)
that certain First Amended and Restated Revolving Note
(Letter of Credit Facility) dated June 30, 1998, in the
principal amount of $5,700,000.00 payable to the order
of Lender.
"Tenant Improvement Note" for purposes hereof,
shall be deemed to be the Revolving Note, which is a
consolidation and continuation of all prior Tenant
Improvement Notes."
"Term Note" shall mean that certain Second Amended
and Restated Term Note date even date herewith in the
principal amount of $1,912,501.75 executed by the
Borrower substantially in the form of Exhibit "B" to
the Third Amendment, as the same may be extended,
renewed, amended or modified from time to time pursuant
to the terms of this Agreement.
2. Agreement Definitions. The definitions of "Tenant
Improvement Loan Borrowing Base" and "Tenant Improvement Loan
Maximum Revolving Facility" are hereby deleted in their
entireties.
3. Agreement Definitions. The following definitions are
hereby added to the Agreement which shall read as follows:
"Cash Flow Leverage" shall mean: (i) the sum of
(a) the Borrower's consolidated annualized lease
expenses times the number eight (8), plus (b) Total
Funded Debt; divided by (ii) EBITDAR. The Cash Flow
Leverage shall be determined on a rolling four (4)
quarter basis. The Cash Flow Leverage shall be
determined within sixty (60) calendar days of the end
of each fiscal quarter, based upon the results of such
quarter and the three (3) preceding quarters.
"Funded Line Maximum" shall mean the principal
amount of $15,000,000.00, not to include the
$6,000,000.00 Letter of Credit Facility.
"Third Amendment" shall mean that certain Third
Amendment to Third Amended and Restated Credit
Agreement date effective June 30, 1999.
"Total Funded Debt" shall mean that part of the
Total Liabilities of the Borrower and the Harold's
Subsidiaries which has been funded and has an
outstanding balance.
"Working Capital" shall mean the difference
between (i) the Borrower's consolidated current assets,
and (ii) the sum of (a) the Borrower's consolidated
current liabilities, and (b) the outstanding principal
balance of the Revolving Note.
4. Revolving Loan.
4.1 Section 2.1.4 of the Agreement is hereby deleted in its
entirety and replaced by the following:
"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
following rates: (a) prior to maturity, at a rate
equal to the LIBOR Rate plus the following amount,
determined according to the current calculation of Cash
Flow Leverage:
Cash Flow Leverage Interest Rate
> 4.50 x LIBOR Rate plus 1.375%
4.49 x to 3.51 x LIBOR Rate plus 1.250%
< 3.50 x LIBOR Rate plus 1.125%;
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 in effect.
4.2 Section 2.1.5 of the Agreement is hereby deleted in its
entirety and replaced by the following:
"2.1.5 Payment. The unpaid principal balance
of the Revolving Loan shall be due and payable on the
earlier of June 30, 2001 or upon the occurrence of a
Default. Accrued interest shall be payable monthly in
arrears beginning July 31, 1999 and on the last day of
each month thereafter, upon the date of any prepayment
and at maturity. All interest 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 the Lender interest from the date of such
Default at the per annum rate of five percent (5%) plus
the then applicable annual rate in effect on the
outstanding principal balance of the liabilities under
the Revolving Loan."
4.3 Section 2.1.6 of the Agreement is hereby deleted in its
entirety and replaced by the following:
"2.1.6 Term. The Revolving Loan will mature on
June 30, 2001, 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."
4.4 A new Section 2.1.7 is hereby added to the Agreement
which shall read in its entirety as follows:
"2.1.7 Funded Line Maximum. During each year
of the Revolving Loan ending on each June 30, Borrower
shall cause the outstanding principal balance of the
Revolving Loan to be equal to or less than the Funded
Line Maximum for a period of thirty (30) consecutive
days."
5. Tenant Improvement Loan.
5.1 Section 2.2.1 of the Agreement is hereby deleted in its
entirety and replaced by the following:
"2.2.1 Advances for Tenant Improvements.
Borrower may, as long as otherwise in compliance with
the terms of this Agreement, borrow, repay without
penalty or premium and reborrow under the Revolving
Loan for the purpose of making Tenant Improvements.
All advances and extensions of credit for Tenant
Improvements shall hereafter be evidenced by the
Revolving Note, which is a continuation and
consolidation of all prior Tenant Improvement Loans.
All references herein to a Tenant Improvement Loan
shall hereafter be deemed to be an extension of credit
under the Revolving Loan."
5.2 Sections 2.2.7, 2.2.8, 2.2.9 and 2.2.10 of the
Agreement are hereby deleted in their entireties.
6. Letters of Credit.
6.1 Section 2.3.1 of the Agreement is hereby deleted in its
entirety and replaced by the following:
"2.3.1 Principal Amount. The Letter of Credit
Facility shall be in the principal amount of not to
exceed $6,000,000.00 and shall be deemed a part of the
Revolving Loan which is a continuation and
consolidation of all prior Letter of Credit Notes. All
references herein to a Letter of Credit Note shall
hereafter be deemed to be an extension of credit under
the Revolving Loan."
6.2 Section 2.3.2 of the Agreement is hereby deleted in its
entirety.
6.3 Section 2.3.3 of the Agreement is hereby deleted in its
entirety and replaced by the following:
"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 three hundred sixty-five (365) 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, 2001."
6.4 Sections 2.3.4 and 2.3.5 of the Agreement are hereby
deleted in their entireties.
7. Term Note.
7.1 Section 2.4.1 of the Agreement is hereby deleted in its
entirety and replaced by the following:
"2.4.1 Principal Amount. The Term Note shall
be in the principal amount of $1,912.501.75."
7.2 Section 2.4.2 of the Agreement is hereby deleted in its
entirety and replaced by the following:
"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) shall be due and payable on the
last day of each calendar month beginning July 31, 1999
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 2.4.3, 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 2.4.6 shall be applied
first to the unpaid interest accrued on the Term
Note and then to the principal balance thereof."
7.3 Section 2.4.3 of the Agreement is hereby deleted in its
entirety and replaced by the following:
"2.1.4 Interest. Prior to Default, Borrower
shall pay to Lender interest on the average daily
outstanding balance of the Liabilities under the Term
Note at a rate per annum equal to the following
rates: (a) prior to maturity, at a rate equal to the
LIBOR Rate plus the following amount, determined
according to the current calculation of Cash Flow
Leverage:
Cash Flow Leverage Interest Rate
> 4.50 x LIBOR Rate plus 1.375%
4.49 x to 3.51 x LIBOR Rate plus 1.250%
< 3.50 x LIBOR Rate plus 1.125%;
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 in effect.
7.4 Section 2.4.6 of the Agreement is hereby deleted in its
entirety and replaced by the following:
"2.4.6 Term. The Term Loan will mature on June
30, 2001, 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."
8. Reporting and Eligibility Requirements.
8.1 Section 3.2 of the Agreement is hereby deleted in its
entirety and replaced by the following:
"3.2 Quarterly Reports. Borrower shall submit to
Lender not later than the sixtieth (60th) 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 as Exhibit "C" to the Third Amendment.
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 7.9 has been complied
with during such quarter."
9. Conditions of Advances.
9.1 Section 4.4 of the Agreement is hereby deleted in its
entirety and replaced by the following:
"4.4 Evidence satisfactory to the Lender of the
Borrower's qualification to do business in any
applicable jurisdiction."
10. Financial Statements.
10.1 Section 7.1(ii) of the Agreement is hereby amended only
to the extent that the reference therein to "one hundred twenty
(120) days" is deleted and replaced by "one hundred fifty (150)
days".
11. Financial Covenants.
11.1 Section 7.9 of the Agreement is hereby deleted in its
entirety and replaced by the following:
"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 sixty (60) calendar days of the end of
each fiscal quarter.
(B) EBITDAR to Fixed Charges Plus Rent Ratio.
Borrower shall maintain an EBITDAR to Fixed Charges
plus rent ratio of no less than 1.20 to 1 at all times
on a rolling four (4) quarter basis. The EBITDAR to
Fixed Charges plus rent ratio shall be tested within
sixty (60) calendar days of the end of each fiscal
quarter, based upon the results of such quarter and the
three (3) preceding quarters.
(C) Funded Line Maximum. During each year ending
on each June 30, Borrower shall cause the outstanding
principal balance of the Revolving Loan to be equal to
or less than the Funded Line Maximum for a period of
thirty (30) consecutive days.
(D) Working Capital. Borrower shall maintain a
minimum working capital of $5,000,000.00 throughout the
term of this Agreement."
11.2 Section 7.11 of the Agreement is hereby deleted in its
entirety and replaced by the following:
"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
Emeritus of the Board of Borrower; (ii) Rebecca Powell
Casey, Chairman and Chief Executive Officer of
Borrower; (iii) H. Rainey Powell, President of
Borrower; and (iv) Kenneth C. Row, Executive Vice
President of Borrower."
12. Negative Covenants.
12.1 Section 8.5 of the Agreement is hereby deleted in its
entirety and replaced by the following:
"8.5 Basic Business. Borrower and Harold's
Subsidiaries shall not discontinue or enter into
businesses materially different than the specialty
apparel retail business."
12.2 Section 8.9 of the Agreement is hereby deleted in its
entirety and replaced by the following:
"8.9 Settlement or Restructure of CMT Loan.
Borrower shall not settle or extend the maturity of the
CMT Loan beyond December 31, 2002."
12.3 Section 8.10 of the Agreement is hereby deleted in its
entirety and replaced by the following:
"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 2000 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 first
quarter of fiscal 2000; 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."
13. Notices.
13.1 Section 10.13(i) of the Agreement is hereby deleted in
its entirety and replaced by the following:
"(i) If to Lender at:
NationsBank, N.A.
211 North Robinson Avenue
P. O. Box 25189
Oklahoma City, Oklahoma 73102-0189
Attention: Robert Dudley, Senior Vice President
Fax: (405) 230-4089"
13.2 Section 10.13(ii) of the Agreement is hereby amended
only to the extent of changing the following address for copies
of notices to Borrower:
"with a copy to:
Crowe & Dunlevy, Luttrell, Pendarvis & Rawlinson
2500 S. McGee, Suite 140
Norman, Oklahoma 73072-6705
Attention: Gary C. Rawlinson, Esq.
Fax: (405) 272-5292"
14. Participations.
14.1 Section 10.14 of the Agreement is hereby deleted in its
entirety and replaced by the following:
"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.
Lender will provide prior notice to Borrower of any
sale of a participation in any Loan or Note. 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."
15. 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.
16. 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 Loan Documents.
17. Miscellaneous.
17.1 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 Loan
Documents 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.
17.2 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.
17.3 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., a national
banking association
By:
_________________________________
Robert Dudley,
Senior Vice President
353168/ljh/30515-041
