2
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington D.C. 20549
FORM 10-Q
[ X ] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended April 29, Commission File No. 1-
2000 10892
OR
[ ] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
HAROLD'S STORES, INC.
(Exact name of registrant as specified in its charter)
Oklahoma 73-1308796
(State or other (IRS Employer
jurisdiction of Identification No.)
incorporation or
organization)
765 Asp Norman, Oklahoma (405)329-4045
73069 (Registrant's telephone
(Address of principal number,
executive offices) including area code)
(Zip 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 May 31, 2000, the registrant had 6,075,182 shares of Common
Stock outstanding.
Harold's Stores, Inc. & Subsidiaries
Index to
Quarterly Report on Form 10-Q
For the Period Ended April 29, 2000
Part I - FINANCIAL INFORMATION Page
Item 1. Financial Statements
Consolidated Balance Sheets - April 29, 2000 (unaudited) and
January 29, 2000 3
Consolidated Statements of Earnings -
Thirteen Weeks ended April 29, 2000 (unaudited) and May 1,
1999 (unaudited) 5
Consolidated Statements of Cash Flows -
Thirteen Weeks ended April 29, 2000 (unaudited) and May 1,
1999 (unaudited) 6
Notes to Interim Consolidated Financial Statements 7
Report of Independent Public Accountants 8
Item 2. Management's Discussion and Analysis of Financial Condition and 9
Results of Operations
Part II - OTHER INFORMATION
Item 1. Legal Proceedings 11
Item 5. Other Information 11
Item 6. Exhibits and Reports on Form 8-K 12
Signatures 14
HAROLD'S STORES, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
ASSETS
(In Thousands)
April 29, January 29,
2000 2000
(Unaudited)
Current assets:
Cash and cash equivalents $ 746 $ 721
Trade accounts receivable, less
allowance for doubtful accounts
of $200 in April and January 7,171 6,413
Note and other receivables 725 2,247
Merchandise inventories 34,035 37,357
Prepaid expenses 2,757 2,514
Prepaid income tax 570 1,368
Deferred income taxes 1,582 1,582
Total current assets 47,586 52,202
Property and equipment, at cost 34,911 33,983
Less accumulated depreciation
and amortization (13,507) (12,665)
Net property and equipment 21,404 21,318
Deferred income taxes, non-
current 232 232
Goodwill (net) 3,510 -
Other assets 122 127
Total assets $72,854 $73,879
HAROLD'S STORES, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
LIABILITIES AND STOCKHOLDERS' EQUITY
(In Thousands Except Share Data)
April 29, January 29,
2000 2000
(Unaudited)
Current liabilities:
Accounts payable $ 4,854 $ 6,329
Redeemable gift certificates 619 966
Accrued bonuses and payroll
expenses 1,570 1,294
Accrued rent expense 612 529
Current maturities of long-term
debt 1,624 630
Total current liabilities 9,279 9,748
Long-term debt, net of current
maturities 26,463 27,063
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 April and
January 60 60
Additional paid-in capital 34,170 34,170
Retained earnings 2,882 2,838
Total stockholders' equity 37,112 37,068
Total liabilities and
stockholders' equity $72,854 $73,879
HAROLD'S STORES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF EARNINGS
(In Thousands Except Per Share Data)
13 Weeks Ended
April 29, May 1,
2000 1999
(Unaudited)
Sales $34,323 $35,300
Costs and expenses:
Costs of goods sold (including
occupancy, central buying
expenses and product
development interest,
exclusive of items shown
separately below) 23,343 23,220
Selling, general and
administrative expenses 9,365 9,830
Depreciation and amortization 1,109 1,149
Interest expense 432 216
34,249 34,415
Earnings before income taxes 74 885
Provision for income taxes 30 354
Net earnings $ 44 $ 531
Net earnings per common share:
Basic and diluted $ 0.01 $ 0.09
Weighted average number of
common shares - basic 6,075 6,074
HAROLD'S STORES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In Thousands)
13 Weeks Ended
April 29, May 1,
2000 1999
(Unaudited)
Cash flows from operating
activities:
Net earnings $ 44 $ 531
Adjustments to reconcile net
earnings to net cash provided by
(used in) operating activities:
Depreciation and amortization 1,109 1,149
Loss (gain) on sale of assets 26 (4)
Changes in assets and
liabilities:
Increase in trade and other
accounts receivable (656) (831)
Decrease (increase) in
merchandise inventories 3,322 (905)
Decrease (increase) in prepaid
expenses (141) 268
Decrease in prepaid income tax 798 -
Decrease in other assets 5 241
(Decrease) increase in accounts
payable (1,475) 35
(Decrease) increase in accrued
expenses 12 (415)
Increase in income taxes payable - 256
Net cash provided by operating
activities 3,044 325
Cash flows from investing
activities:
Acquisition of property and
equipment (932) (1,579)
Proceeds from disposal of
property and equipment 66 7
Payments received for notes
receivable 35 84
Net cash used in investing
activities (831) (1,488)
Cash flows from financing
activities:
Payments on long-term debt (412) (137)
Advances on revolving line of
credit 10,758 12,175
Payments on revolving line of
credit (12,534) (9,353)
Net cash provided by (used in)
financing activities (2,188) 2,685
Increase in cash 25 1,522
Cash and cash equivalents at
beginning of period 721 450
Cash and cash equivalents at end
of period $ 746 $ 1,972
Non-cash investing and financing
activities:
Debt issued to purchase stock of
CMT 2,545 -
Capital lease obligation assumed
in acquisition of CMT 37 -
HAROLD'S STORES, INC. AND SUBSIDIARIES
NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS
April 29, 2000 and May 1, 1999
(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 April 29, 2000
and the results of its operations and cash flows for the thirteen-week
periods ended April 29, 2000 and May 1, 1999. The results of operations
for the thirteen-week periods ended April 29, 2000 and May 1, 1999 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 January 30, 2000 through February
3, 2001, has been designated as fiscal 2001.
3. Derivatives
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 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 Company regularly monitors its
foreign exchange exposures to ensure the overall effectiveness of its
foreign currency hedge positions. Unrealized gains or losses related to
hedges of firm commitments are deferred and included in the basis of the
transaction when completed.
4. Acquisition
On February 18, 2000, the Company entered into a stock purchase
agreement pursuant to which the Company purchased all of the issued and
outstanding shares of CMT Enterprises, Inc. ("CMT"), a New York
corporation. CMT is a company exclusively devoted to product design,
development and sourcing of the Company's clothing. The Company issued a
promissory note to Franklin I. Bober, the sole shareholder of CMT, in the
amount of $2.54 million, payable with interest at a monthly rate of .466%
in thirty (30) monthly installments, and assumed long-term debt of CMT,
payable to the Company, in the amount of $1.385 million. The net book
value of CMT assets received by the Company is approximately $400,000,
and to the extent that the net book value of such assets is less than
$400,000, the amount of the promissory note shall be reduced on a dollar-
for-dollar basis. In addition, the Company entered into a consulting
agreement with PrimaTech Corporation, an entity wholly owned by Franklin
I. Bober, which will provide consulting services to the Company for two
years at a fee of $405,000 per year, plus potential incentive payments.
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Board of Directors and Stockholders of
Harold's Stores, Inc.:
We have reviewed the accompanying consolidated balance sheet of Harold's
Stores, Inc. (an Oklahoma corporation) and its subsidiaries as of April
29, 2000, and the related consolidated statements of earnings and cash
flows for the three-month period then ended. These financial statements
are the responsibility of the Company's management.
We conducted our review in accordance with standards established by the
American Institute of Certified Public Accountants. A review of interim
financial information consists principally of applying analytical
procedures to financial data and making inquiries of persons responsible
for financial and accounting matters. It is substantially less in scope
than an audit conducted in accordance with auditing standards generally
accepted in the United States, the objective of which is the expression
of an opinion regarding the financial statements taken as a whole.
Accordingly, we do not express such an opinion.
Based on our review, we are not aware of any material modifications that
should be made to the financial statements referred to above for them to
be in conformity with accounting principles generally accepted in the
United States.
ARTHUR ANDERSEN LLP
Oklahoma City, Oklahoma
June 7, 2000
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
From time to time, the Company may publish forward-looking
statements relating to certain matters including anticipated financial
performance, business prospects, the future opening of stores, inventory
levels, anticipated capital expenditures, and other matters. All
statements other than statements of historical fact contained in this
Form 10-Q or in any other report of the Company are forward-looking
statements. The Private Securities Litigation Reform Act of 1995
provides a safe harbor for forward-looking statements. In order to
comply with the terms of that safe harbor, the Company notes that a
variety of factors, individually or in the aggregate, could cause the
Company's actual results and experience to differ materially from the
anticipated results or other expectations expressed in the Company's
forward-looking statements including, without limitation, the following:
consumer spending trends and habits; competition in the retail clothing
segment; weather conditions in the Company's operating regions; laws and
government regulations; general business and economic conditions;
availability of capital; success of operating initiatives and marketing
and promotional efforts; and changes in accounting policies. In
addition, the Company disclaims any intent or obligation to update those
forward-looking statements.
Results of Operations
The following table sets forth for the periods indicated, the
percentage of net sales represented by items in the Company's statement
of earnings.
52 13 13
Weeks Weeks Weeks
Ended Ended Ended
January 29, April 29, May 1,
2000 2000 1999
Sales 100.0% 100.0% 100.0%
Costs of goods sold (69.8) (68.0) (65.8)
Selling, general and
administrative expenses (29.1) (27.3) (27.8)
Depreciation and amortization (3.3) (3.2) (3.3)
Interest expense (0.8) (1.3) (0.6)
Earnings (loss) before income
taxes (3.0) 0.2 2.5
(Provision) benefit for
income taxes 1.2 (1.0) (1.0)
Net earnings (loss) (1.8)% 0.1% 1.5%
The following table reflects the sources of the increases in Company
sales for the periods indicated.
13 Weeks Ended
April 29, May 1,
2000 1999
Sales (000's) 34,323 35,300
Total sales growth (2.8)% 5.2%
Change in comparable store
sales (52 week basis) (9.8)% 2.4%
Store locations:
Existing stores 51 44
Stores closed - (1)
New stores opened 1 3
Total stores at end of period 52 46
The Company opened one new location, Dawsonville, Georgia, during
the thirteen weeks ended April 29, 2000 compared to the opening of three
new locations in the comparable period of the prior year. The decline in
total sales growth and comparable store sales growth is primarily
attributable to disappointing spring ladies' business, in large part
driven by the Company's offerings in the dress and formal business attire
categories. The Company was encouraged by sales on certain ladies'
apparel items reflecting interpretations of current trends. A challenge
now being addressed is continuing to provide current styles while
maintaining traditional, conservative looks for the more professional
occasions.
The Company's gross margin was 32.0% for the first quarter of fiscal
2001, as compared to 34.2% in the same period of last year. The decline
is primarily attributable to increased markdowns as a result of the sales
declines experienced. In addition, the occupancy costs did not leverage
as planned due to the sales shortfall during the period.
Selling, general and administrative expenses (including advertising
and catalog production costs) as a percent of sales decreased 0.5
percentage points from the first quarter of fiscal 2000 to the first
quarter of fiscal 2001. The decrease can generally be attributed to an
emphasis on expense controls, combined with reductions of advertising and
catalog expenditures. In addition, the Company incurred greater store
opening costs in first quarter of last year as compared to this year due
to three stores being opened in the first quarter of fiscal 2000 compared
to one new store in the first quarter of fiscal 2001.
The average balance of total outstanding debt was $30,418,000 for
the quarter ended April 29, 2000 compared to $18,019,000 for the first
quarter of fiscal 2000. This increase in average balances resulted
principally from borrowing associated with capital expenditures and
inventories related to new store openings as well as the acquisition of
CMT Enterprises, Inc. on February 18, 2000. Also, average interest rates
on the Company's line of credit were slightly higher for the quarter
ended April 29, 2000 compared to first quarter of the prior fiscal year.
Capital Expenditures, Capital Resources and Liquidity
Cash Flows From Operating Activities. For the thirteen weeks ended
April 29, 2000, net cash provided by operating activities was $3,044,000
as compared to net cash provided by operating activities of $325,000 for
the same period of fiscal 2000. The increase can be primarily attributed
to a decrease of $3,322,000 in the Company's inventories for the thirteen
weeks ended April 29, 2000 as compared to an increase of $905,000 for the
same period of fiscal 2000. The significant decrease in inventory levels
for the quarter ended April 29, 2000 is attributable to a focused effort
to edit assortments and reduce inventory. The increase for the prior
year is primarily due to the opening of three new stores in the first
quarter of fiscal 2000. Management expects the dollar amounts of the
Company's merchandise inventories to increase slightly with the expansion
of its chain of retail stores with related increases in trade accounts
receivable and accounts payable. Also, period to period differences in
timing of inventory purchases and deliveries will affect comparability of
cash flows from operating activities.
Cash Flows From Investing Activities. For the thirteen weeks ended
April 29, 2000, net cash used in investing activities totaled $831,000
compared to net cash used in investing activities of $1,488,000 for the
same period in fiscal 2000. Capital expenditures were invested in new
stores, and remodeling and equipment expenditures in existing operations.
The primary reason for the decrease in cash used in investing activities
is that the Company opened three new stores in the first quarter of
fiscal 2000 compared to one new store in the first quarter of fiscal
2001.
Cash Flows From Financing Activities. During the thirteen weeks
ended April 29, 2000, 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. For the thirteen weeks ended April
29, 2000, net cash used in financing activities totaled $2,188,000
compared to net cash provided by financing activities of $2,685,000 for
the same period in fiscal 2000. The increase in cash used in financing
activities is mainly attributable to decreased store expansion which
enabled the Company to pay down more of its revolving line of credit than
it utilized during the quarter. Another notable use of cash during the
quarter was the Company's installment payments related to the CMT
acquisition.
The Company has available a long-term line of credit with its bank.
This line had an average balance of $24,249,000 and $14,075,000 for the
thirteen weeks ended April 29, 2000 and May 1, 1999, respectively.
During the thirteen weeks ended April 29, 2000, this line of credit had a
high balance of $25,763,000 and a high balance of $15,820,000 for the
thirteen weeks ended May 1, 1999. The balance outstanding on April 29,
2000 was $21,619,000 compared to $15,694,000 on May 1, 1999.
Liquidity. The Company considers the following as measures of
liquidity and capital resources as of the dates indicated:
January 29, April 29, May 1,
2000 2000 1999
Working capital (000's) $42,454 $38,307 $36,122
Current ratio 5.36:1 5.13:1 5.58:1
Ratio of working capital .57:1 .53:1 .54:1
to total assets
Ratio of total debt to .75:1 .76:1 .49:1
stockholders' equity
The Company's primary needs for liquidity are to finance its
inventories and revolving charge accounts and to invest in new stores,
remodeling, fixtures and equipment. Cash flow from operations and
proceeds from credit facilities represent the Company's principal sources
of liquidity. Management anticipates these sources of liquidity to be
sufficient in the foreseeable future.
As the Company's growth continues, cash flow may require additional
borrowed funds that may cause an increase in interest expense. In
addition, rising interest rates could have a similar impact on interest
expense. However, the Company is committed to reducing its average debt
levels in the coming fiscal year through a number of initiatives
including the reduction of inventory levels through improved editing of
assortments and better flow of goods; lowering of capital expenditures
due to slower expansion; and improving the Company's profitability.
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 Company's
operations.
Impact of Year 2000
The year 2000 problem concerns the inability of information systems
to recognize properly and process date-sensitive information beyond
December 31, 1999. At the time of this filing, the Company had not
experienced any year 2000 problems with any of its financial or operating
systems or with any of its suppliers. The Company will continue to
monitor these systems, but it does not anticipate any problems or
significant expenditures in the future.
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 5. OTHER INFORMATION
The following unaudited pro forma financial information presents
total sales, net earnings and net earnings per common share of the
Company after giving effect to the acquisition of CMT Enterprises, Inc.
The unaudited pro forma financial information for the thirteen weeks
ended April 29, 2000 gives effect to the acquisition as if it had
occurred at January 30, 2000. The unaudited pro forma financial
information for the thirteen weeks ended May 1, 1999 gives effect to the
acquisition as if it had occurred at January 31, 1999.
The following unaudited pro forma information has been prepared
from, and should be read in conjunction with, the historical consolidated
financial statements and related notes thereto of the Company and CMT
Enterprises, Inc. The following information is not necessarily
indicative of the financial position or operating results that would have
occurred had the transaction been consummated on the date, or at the
beginning of the periods, for which the transaction is being given effect
nor is it necessarily indicative of future operating results or financial
position.
HAROLD'S STORES, INC.
UNAUDITED PRO FORMA FINANCIAL STATEMENTS
13 Weeks Ended
April 29, May 1,
2000 1999
Sales $34,323 $35,353
Net earnings 44 814
Net earnings per common
share:
Basic and diluted $0.01 $0.13
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits: The following exhibit is filed as part of this Form 10-Q:
No. Description
10.1 Fifth Amendment to the Third Amended and Restated
Credit Agreement dated February 18, 2000 between
Registrant and Bank of America, N.A.
27.1 Financial Data Schedule
(b) Reports on Form 8-K: A Form 8-K/A was filed on May 2, 2000,
with the Securities and Exchange Commission ("SEC") regarding the
Registrant's acquisition of CMT Enterprises, Inc. This Form 8-K/A
amended a Form 8-K filed on March 3, 2000, with the SEC to include pro
forma financial statements required by Regulation S-K and the audited
financial statements of CMT Enterprises, Inc.
INDEX TO EXHIBITS
No. Description
10.1 Fifth Amendment to the Third Amended and Restated
Credit Agreement dated February 18, 2000 between
Registrant and Bank of America, N.A.
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: June 13, 2000
EXHIBIT 10.1
FIFTH AMENDMENT TO THIRD AMENDED
AND RESTATED CREDIT AGREEMENT
THIS FIFTH AMENDMENT TO THIRD AMENDED AND RESTATED CREDIT AGREEMENT
(this "Amendment") is made effective February 18, 2000, by and between
HAROLD'S STORES, INC., an Oklahoma corporation ("Borrower"), and BANK OF
AMERICA, N.A., a national banking association, formerly 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, a Second Amendment to Third Amended and Restated Credit
Agreement dated effective August 31, 1998, a Third Amendment to Third
Amended and Restated Credit Agreement dated effective June 30, 1999, and
a Fourth Amendment to Third Amended and Restated Credit Agreement dated
effective November 24, 1999 (collectively the "Agreement"); and
WHEREAS, under the Agreement and the Loan Documents (as defined
therein), the Borrower has collaterally assigned to the Lender its
interests in a certain loan made by the Borrower to CMT Enterprises, Inc.
("CMT") together with related collateral for such loan, all of which are
defined in the Agreement as the "CMT Loan Assignments", "CMT Loan" and
the "CMT Loan Documents", respectively; and
WHEREAS, the Borrower now desires to acquire all of the outstanding
stock of CMT (the "Acquisition") from CMT's shareholder, Franklin I.
Bober ("Bober") resulting in CMT becoming a wholly owned subsidiary of
Borrower; and
WHEREAS, as a result of the aforedescribed Acquisition, CMT shall
continue to fully and completely obligated for payment of the CMT Loan to
the Borrower and such loan shall continue to be subject to the liens and
security interests of the Borrower as evidenced by the CMT Loan
Documents; and
WHEREAS, the collateral assignments in favor of the Lender of the
CMT Loan and the CMT Loan Documents and the obligations of CMT will
continue to be effective subsequent to the Acquisition, subject to the
terms and conditions of this Amendment; and
WHEREAS, as conditions precedent to the Acquisition, the Borrower
has requested the Lender release certain collateral interests in the CMT
Loan and CMT Loan Documents under the CMT Loan Assignments and waive
certain covenants in the Agreement which may be violated as a result of
the Acquisition, all of which are more fully described herein; and
WHEREAS, Lender is willing to release such interests and waive such
covenants as described above upon the terms and conditions set forth in
this Amendment conditional upon the Borrower providing certain additional
collateral to the Lender as hereafter described.
NOW THEREFORE, in consideration of the premises and the mutual
agreements set forth herein, the parties agree as follows:
1. Partial Releases. Conditional upon the consummation of the
Acquisition and effective as of that date, Lender hereby releases and
discharges from the CMT Loan Assignments those CMT Loan Documents
identified in Section 2.4.4.1 (iii), (iv), (v), (vi), (vii), (ix), (x)
and (xi) of the Agreement and in Paragraphs C, D, E, F, G, I, J, K and O
of the Collateral Assignment and Security Agreement. Lender agrees to
execute and deliver such additional release documents in recordable form
as may be necessary to effectuate the proper release of said items in any
public filing office. All other CMT Loan Assignments with respect to all
other CMT Loan Documents and the CMT Loan shall remain in full force and
effect and continue to be binding upon the respective parties thereto.
2. Waivers. Lender hereby waives any and all defaults, breaches
or violations resulting from the Acquisition in connection with Sections
8.2, 8.3, 8.4, 8.6, 8.9 and 8.12 of the Agreement. The waivers hereby
granted are given solely in connection with the Acquisition and shall not
be construed to apply to any other or subsequent defaults, breaches or
violations of the Agreement.
3. Additional Collateral. In consideration for the releases and
waivers described above, Borrower shall grant a security interest to the
Lender in all of Borrower's right, title and interest in and to all of
the outstanding capital stock of CMT pursuant to a Security Agreement
dated even date herewith and other security documents all in form
satisfactory to the Lender. Additionally, Borrower shall cause CMT to
grant a security interest to the Lender in all of CMT's right, title and
interest in and to all its tangible and intangible assets, including
without limitation, all Accounts, Inventory, Equipment, Chattel Paper,
Documents, Goods, Instruments, and General Intangibles, pursuant to a
Security Agreement dated even date herewith and other security documents
all in form satisfactory to the Lender. All of the aforedescribed
Security Agreements and other security documents shall constitute the
"Security Agreement" as defined in the Agreement.
4. 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.
5. No Default, Event of Default or Claims. Except as waived
herein, no event has occurred which constitutes a Default or Event of
Default and the Borrower has no (and waives any and all) claims, rights,
setoffs or defenses against the Lender under the Agreement, as amended by
this Amendment or the other Loan Documents.
6. Miscellaneous.
6.1 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.
6.2 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.
6.3 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: _________________________________
Title:______________________________
"LENDER" BANK OF AMERICA, N.A., a national
banking association, formerly
NationsBank, N.A.
By: _________________________________
Title:_____________________________
377591/CVC/30515-041
