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▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇ 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) ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇, Chairman
Emeritus of the Board of Borrower; (ii) ▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇, Chairman and Chief Executive Officer of
Borrower; (iii) H. ▇▇▇▇▇▇ ▇▇▇▇▇▇, President of
Borrower; and (iv) ▇▇▇▇▇▇▇ ▇. 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.
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
P. O. ▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇-▇▇▇▇
Attention: ▇▇▇▇▇▇ ▇▇▇▇▇▇, Senior Vice President
Fax: (▇▇▇) ▇▇▇-▇▇▇▇"
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:
▇▇▇▇▇ & Dunlevy, Luttrell, ▇▇▇▇▇▇▇▇▇ & ▇▇▇▇▇▇▇▇▇
▇▇▇▇ ▇. ▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇-▇▇▇▇
Attention: ▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇, Esq.
Fax: (▇▇▇) ▇▇▇-▇▇▇▇"
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. ▇▇▇▇▇▇ ▇▇▇▇▇▇,
President and Chief Operating
Officer
"LENDER" NATIONSBANK, N.A., a national
banking association
By:
_________________________________
▇▇▇▇▇▇ ▇▇▇▇▇▇,
Senior Vice President
353168/ljh/30515-041