EXHIBIT 10.8
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PREFERRED STOCK PURCHASE AGREEMENT
THIS PREFERRED STOCK PURCHASE AGREEMENT (this "AGREEMENT") is made
effective this 26th day of April, 2007, by and between RonHow, LLC, a Georgia
limited liability company ("RONHOW"), and Harold's Stores, Inc., an Oklahoma
corporation (the "COMPANY"), with reference to the following circumstances:
A. RonHow and the Company previously entered into that certain
Subordinated Loan Agreement dated August 31, 2006, as amended of even date
herewith (the "SUBORDINATED LOAN AGREEMENT"), pursuant to which the Company and
certain of its subsidiaries (collectively, the "BORROWERS") may borrow an
aggregate principal amount of up to $12,000,000.00, plus any interest converted
into principal in accordance with the terms of the Subordinated Loan Agreement.
B. RonHow has previously advanced to the Company pursuant to the
Subordinated Loan Agreement $5,000,000.00 on August 31, 2006 (the "FIRST
ADVANCE"), an additional $2,000,000.00 on January 4, 2007 (the "SECOND
ADVANCE"), and certain other advances made subsequent to the First Advance and
the Second Advance.
C. The Company has authorized its Series 2007-A Senior Preferred Stock,
par value $0.01 per share and stated value $1,000.00 per share (the "2007-A
PREFERRED"), pursuant to a Certificate of Designation for the 2007-A Preferred
filed with the Secretary of State of the State of Oklahoma on April 26, 2007
(the "CERTIFICATE").
D. The Company now desires to sell to RonHow, and RonHow desires to
purchase from the Company, 2,000 shares of 2007-A Preferred in exchange for the
surrender by RonHow of its rights to receive payment of, and for the
cancellation of, an amount of principal of the First Advance equal to
$2,000,000.00.
E. Pursuant to the existing Certificates of Designation with respect to
such series of preferred stock, the existing holders of the Company's
outstanding Amended Series 2001-A Preferred Stock, Series 2002-A Preferred
Stock, Series 2003-A Preferred Stock and Series 2006-A Preferred Stock have, by
at least a majority in interest, consented to the transactions contemplated by
this Agreement.
In consideration of the premises and the mutual promises,
representations, warranties and covenants hereinafter set forth, the Company and
RonHow agree as follows:
1. SALE AND PURCHASE OF 2007-A PREFERRED.
1.1 SALE AND PURCHASE. On and subject to the terms and
conditions of this Agreement, the Company agrees to sell, transfer and
deliver to RonHow, and RonHow agrees to purchase from the Company,
2,000 shares of 2007-A Preferred (the "SHARES") at the Closing (as
hereinafter defined).
1.2 PURCHASE PRICE. The purchase price for the Shares shall be
equal to $1,000.00 per Share for a total purchase price of
$2,000,000.00 (the "PURCHASE PRICE"),
payable at the Closing by RonHow's surrender of its rights to receive
payment of, and by the cancellation of, an amount of principal owed by
the Company to RonHow out of the First Advance under the Subordinated
Loan Agreement equal to the Purchase Price.
1.3 CLOSING. The closing of the transactions contemplated by
this Agreement (the "CLOSING") shall occur at the Company's principal
executive offices at 10:00 a.m. on the date of this Agreement.
1.4 DELIVERIES AT CLOSING.
(a) Company's Delivery at Closing. At the Closing, the Company
shall deliver the Shares to RonHow by physical delivery of stock
certificates representing the Shares.
(b) RonHow's Delivery at Closing. At the Closing, RonHow shall
deliver the Purchase Price to the Company as provided above in Section
1.2.
2. REPRESENTATIONS AND WARRANTIES OF THE COMPANY. The Company
represents and warrants to RonHow that:
2.1 ORGANIZATION AND GOOD STANDING. The Company is a
corporation duly organized and validly existing under the laws of the
state of Oklahoma and is in good standing under such laws. The Company
has all requisite corporate power and authority to own and operate its
property and assets, and to carry on its business as presently
conducted and as currently proposed to be conducted.
2.2 CORPORATE POWERS. The Company has all requisite legal and
corporate power and authority to execute and deliver this Agreement, to
sell and issue the Shares hereunder, to issue any additional shares of
2007-A Preferred to be issued in satisfaction of dividends on the
Shares (the "DIVIDEND STOCK") and to issue the Common Stock issuable
upon conversion of the Shares and the Dividend Stock as set forth in
the Certificate (the "UNDERLYING COMMON STOCK").
2.3 VALID ISSUANCE OF STOCK. The Shares, when issued, sold and
delivered in compliance with the provisions of this Agreement, will be
duly and validly issued, fully paid and non-assessable and issued in
compliance with all applicable state and federal securities law. The
Dividend Stock and the Underlying Common Stock have been or will be
duly and validly reserved and, when issued, will be duly and validly
issued, fully paid and non-assessable and issued in compliance with all
applicable state and federal securities laws.
2.4 AUTHORIZATION. All corporate action on the part of the
Company necessary for the authorization, execution, delivery and
performance of this Agreement by the Company, the authorization, sale,
issuance (or reservation of issuance) and delivery of the Shares, the
Dividend Stock and the Underlying Common Stock with respect thereto and
the performance of all of the Company's obligations hereunder have been
taken prior to the date hereof. This Agreement constitutes the valid
and legally binding obligation of the Company, enforceable in
accordance with its terms, subject to
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the laws of general application relating to bankruptcy, insolvency and
the relief of debtors and the rules of law governing specific
performance, injunctive relief or other equitable remedies.
3. REPRESENTATIONS AND WARRANTIES OF RONHOW. RonHow represents and
warrants to the Company as follows:
3.1 INVESTMENT EXPERIENCE. RonHow is capable of evaluating the
merits and risks of its investment in the Company and has the capacity
to protect its own interests. RonHow is an "accredited investor" as
defined in Rule 501 of Regulation D promulgated under the Securities
Act. RonHow is able to bear the economic risk of losing its entire
investment in the Company.
3.2 INVESTMENT. RonHow is acquiring the Shares for investment
for its own account, not as a nominee or agent, and not with the view
to, or for resale in connection with, any distribution thereof. RonHow
understands that the Shares and the Dividend Stock and the Underlying
Common Stock with respect thereto have not been, and will not be when
issued, registered under the Securities Act of 1933 (the "SECURITIES
ACT") or any state securities laws by reason of specific exemptions
from the registration provisions of the Securities Act and such state
laws, the availability of which depends upon, among other things, the
bona fide nature of the investment intent and the accuracy of the
representations as expressed herein.
3.3 RULE 144. RonHow is aware of the provisions of Rule 144
promulgated under the Securities Act that permit limited resale of
shares purchased in a private placement subject to the satisfaction of
certain conditions, which may include, among other things, the
existence of a public market for the shares, the availability of
certain current public information about the Company, the resale
occurring not less than one year after a party has purchased and paid
for the security to be sold, the sale being effected through a
"broker's transaction" or in transactions directly with a "market
maker" and the number of shares being sold during any three-month
period not exceeding specified limitations.
3.4 ACCESS TO INFORMATION. RonHow has had an opportunity to
discuss the Company's management, business plan and financial condition
with the Company's management. RonHow understands that its purchase of
the Shares involves a high degree of risk, and there can be no
assurance that the Company's business objectives will be obtained.
3.5 AUTHORIZATION. RonHow has all requisite legal power and
authority to execute and deliver this Agreement and to carry out and
perform its obligations under the terms of this Agreement and the
transactions contemplated hereby. This Agreement constitutes a valid
and legally binding obligation of RonHow, enforceable in accordance
with its terms, subject to laws of general application relating to
bankruptcy, insolvency and the relief of debtors and rules of law
governing specific performance, injunctive relief or other equitable
remedies.
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3.6 LEGENDS. It is understood that each certificate
representing the Shares and the Dividend Stock and the Underlying
Common Stock with respect thereto shall bear a legend to the following
effect:
THESE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES
ACT OF 1933 OR ANY STATE SECURITIES LAWS. THEY MAY NOT BE
SOLD, OFFERED FOR SALE OR OTHERWISE TRANSFERRED IN THE ABSENCE
OF AN EFFECTIVE REGISTRATION STATEMENT OR THE AVAILABILITY OF
AN EXEMPTION THEREFROM.
4. COVENANTS OF THE COMPANY. The Company shall at all times reserve and
keep available out of its authorized but unissued capital stock (i) such number
of shares of 2007-A Preferred as shall from time to time be sufficient to permit
payment of dividends on the Shares and Dividend Stock and (ii) such number of
shares of Underlying Common Stock as shall from time to time be sufficient to
effect the conversion of all outstanding shares of the 2007-A Preferred; and if
at any time the number of authorized but unissued shares of 2007-A Preferred or
Common Stock shall not be sufficient to effect the payment of dividends or
conversion of all then outstanding shares of the 2007-A Preferred, in addition
to such other remedies as shall be available to the holders of such 2007-A
Preferred, the Company will take such corporate action as may, in the opinion of
its counsel, be necessary to increase the authorized but unissued shares to such
number of shares as shall be sufficient for such purposes.
5. MISCELLANEOUS.
5.1 GOOD FAITH; COOPERATION; FURTHER ASSURANCES. The parties
will in good faith undertake to perform their obligations in this
Agreement, to satisfy all conditions and to cause the transactions
contemplated by this Agreement to be carried out promptly in accordance
with its terms. The parties will cooperate fully with each other and
their respective representatives in connection with any actions
required to be taken as part of their respective obligations under this
Agreement. Each party will at the Closing and from time to time after
the Closing, deliver to the other such further instruments necessary or
desirable, in the reasonable opinion of the requesting party and at the
expense of the requesting party, to consummate or document the
transactions contemplated by this Agreement.
5.2 ENTIRE AGREEMENT; SUCCESSORS AND ASSIGNS. This Agreement
constitutes the entire agreement between the Company and RonHow
relative to the subject matter hereof and supersedes any previous
agreement between the Company and RonHow regarding such subject matter.
The terms and conditions of this Agreement shall inure to the benefit
of and be binding upon the respective executors, administrators, heirs,
successors and assigns of the parties.
5.3 GOVERNING LAW. This Agreement shall be governed by and
construed in accordance with the laws of the State of Oklahoma without
regard to the conflicts of laws principles thereof.
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5.4 COUNTERPARTS. This Agreement may be executed in any number
of counterparts (including by means of facsimile or other electronic
media) with the same effect as if all parties hereto had signed the
same document; however, this Agreement shall not become operative until
all parties have signed a counterpart hereof. All counterparts shall be
construed together and shall constitute one Agreement.
5.5 HEADINGS. The section headings of this Agreement are for
convenience and shall not by themselves determine the interpretation of
this Agreement.
5.6 SURVIVAL OF WARRANTIES. The representations and warranties
of the parties contained in or made pursuant to this Agreement shall
survive for a period of one year from the date of the Closing.
5.7 FINDERS' FEES. The Company and RonHow shall indemnify each
other against all liabilities incurred by one party with respect to
claims related to investment banking or finders' fees in connection
with the transactions contemplated by this Agreement, arising out of
arrangements between the party asserting such claims and the
indemnifying party, and all costs and expenses (including reasonable
fees of counsel) of investigating and defending such claims.
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This Preferred Stock Purchase Agreement is executed and delivered by
the undersigned to be effective as of the date first above written.
"COMPANY" HAROLD'S STORES, INC., an Oklahoma
corporation
By: /s/ Xxxx X. Xxxxxx
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Xxxx X. Xxxxxx, Chief Financial Officer
"RONHOW" RONHOW, LLC, a Georgia limited liability
company
By: Ronus, Inc., a Georgia corporation,
its Managing Member
By: /s/ Xxxxxx X. Xxxxxxxx
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Xxxxxx X. Xxxxxxxx, President
