Document:

Exhibit 10.3

    
      

    

    Exhibit
      10.3

    FIRST
      AMENDMENT TO SECURITY AGREEMENT 

    

    This
      First Amendment to Security Agreement (the “Amendment”) is dated as of the 6th
      day of October, 2006 and is entered into by and between VERICHIP CORPORATION,
      a
      Delaware corporation with a principal place of business at 1690 South Congress
      Avenue, Suite 200, Delray Beach, Florida 33445 (“the Debtor”), and Applied
      Digital Solutions, Inc., a Missouri corporation located at 1690 South Congress
      Avenue, Suite 200, Delray Beach, Florida 33445 (the “Secured Party”).

     

    R E C I T A L S:

     

    WHEREAS,
      Secured Party and Debtor have previously entered into a Security Agreement
      dated
      as of December 27, 2005 (the “Security Agreement”) securing the obligations of
      Debtors under the Commercial Loan Agreement dated December 27, 2005 (the “Credit
      Agreement”) and the Working Capital Revolving Line of Credit made pursuant to
      the Credit Agreement (the “Loan”). 

     

    WHEREAS,
      Debtor has requested and Lender has agreed to increase the principal amount
      of
      the Loan in the amount of $4,500,000.00 and to make certain other amendments
      to
      the Credit Agreement, including a change in the applicable interest rate,
      subject to certain terms and conditions; 

     

    WHEREAS,
      Debtor and Secured Party have agreed to certain modifications to the Security
      Agreement; and

     

    WHEREAS,
      Debtor and Secured Party have executed and delivered that certain First
      Amendment to the Credit Agreement of even date herewith and that certain Amended
      and Restated Revolving Line of Credit Note - Working Capital of even date
      herewith in the principal amount of $13,000,000.00.

     

    NOW
      THEREFORE, in consideration of the mutual covenants, for good and valuable
      consideration, the receipt and sufficiency of which is hereby acknowledged,
      the
      parties hereby agree as follows:

     

    W I T N E S S E T H:

     

    
      1. 
        Incorporation
        and Recitals.
        The
        above recitals are true and correct and are incorporated herein by
        reference.

    

     

    2. Definitions.
      All
      capitalized terms used herein shall, except as modified herein, have the meaning
      subscribed to them
      in the
      Security Agreement. All references to the “Security Agreement” set forth in the
      Loan Documents are hereby deemed to include reference to the Security Agreement,
      as hereby amended. All references to the Security Agreement set forth in the
      Credit Agreement as amended by that First Amendment to Commercial Loan Agreement
      dated as of even date herewith (the “Credit Agreement”) and all other documents
      executed by Debtors, and/or Lender in connection with the Loan (the “Loan
      Documents”) are hereby deemed to refer to the Security Agreement, as hereby
      amended. 

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

    3. Amendment
      to Amount of Loan:
      The
      first whereas clause is amended by replacing “Eight Million Five Hundred
      Thousand Dollars ($8,500,000.00)” with “Thirteen Million Dollars
      ($13,000,000.00)”. 

     

    4. Representations
      and Warranties.
      The
      terms and conditions, representations and warranties, and covenants as set
      forth
      in the Security Agreement and all other loan documents executed by Debtor in
      favor of Lender in connection with the Loan are hereby ratified and affirmed
      by
      Debtor, and Debtor hereby agrees that the said terms and conditions, and
      covenants are valid, true and correct as if made on the date hereof. The Debtor
      hereby ratifies, affirms and acknowledges the continuing and unconditional
      security interest in the Collateral as described in the Security Agreement.
      

     

    5. Cooperation;
      Further Assurances.
      Debtor
      agrees to cooperate with Lender so that the interests of Lender are protected
      and the intent of the Security Agreement can be effectuated. Debtor agrees
      to
      execute all documents
      and to provide whatever further assurances Lender may request or deem necessary
      to effectuate the terms of the Security Agreement.

     

    6. No
      Implied Modifications.
      Except
      as expressly modified hereby, all terms and provisions of the Security Agreement
      shall remain unchanged and in full force and effect.

     

    IN
      WITNESS WHEREOF, the parties have executed this First Amendment to Security
      Agreement as of the day and year first written above.

     

    
      	
               

            	
              DEBTOR:

            
	 	 	 
	
               

            	
              VERICHIP
                CORPORATION

            
	 	 	 
	 	 	 
	
               

            	
              By:

            	
              /s/
                William Caragol

            
	
               

            	
               

            	
              Print
                Name: William
                Caragol

            
	
               

            	
               

            	
              Title:
                CFO

            
	 	 	 
	
               

            	
              SECURED
                PARTY:

            
	 	 	 
	
               

            	
              APPLIED
                DIGITAL SOLUTIONS, INC.

            
	 	 	 
	 	 	 
	
               

            	
              By:

            	
              /s/
                Evan C. McKeown

            
	
               

            	
               

            	
              Print
                Name: Evan
                C. McKeown

            
	
               

            	 	
              Title:
                CFO

            

    

    

    

    
      
        
        

      

      
        2EXHIBIT 10.1
                                                                    ------------

                              EMPLOYMENT AGREEMENT
                              --------------------

         THIS EMPLOYMENT AGREEMENT ("Agreement"), dated this 6th day of October,
2006, is entered into by and between HAROLD'S STORES, INC., an Oklahoma
corporation (the "COMPANY"), and RONALD S. STAFFIERI, an individual
("EMPLOYEE").

         In consideration of the mutual covenants herein contained, the parties
hereto agree as follows:

     1.    EMPLOYMENT. The Company hereby employs Employee and Employee accepts
employment upon the terms and conditions set forth herein.

     2.    TERM. Subject to Section 14, this Agreement shall take effect on the
date hereof, which is the date Employee commences his full time employment
hereunder, and shall continue for a term of three (3) years.

     3.    DUTIES OF EMPLOYEE. Employee shall serve as Chief Executive Officer
of the Company, reporting to its Board of Directors (the "BOARD"). All other
officers and employees of the Company shall report to Employee or, directly or
indirectly, to another executive officer of the Company who in turn reports to
Employee. Employee shall also serve, if elected, on the Board of Directors of
the Company.

     4.    COMPENSATION.

           A.    BASE SALARY. The Company shall pay Employee for all services
rendered hereunder a base salary at the rate of Four Hundred Fifty Thousand
Dollars ($450,000) per annum, payable in accordance with the normal payroll
practices of the Company in effect from time to time with respect to its
executive officers (such salary as the same may be from time to time adjusted
pursuant to this Section, the "BASE SALARY"). The Compensation Committee (the
"COMMITTEE") of the Board or the Board shall review Employee's Base Salary not
less frequently than annually and may recommend an increase to the rate of Base
Salary payable to Employee. Employee's Base Salary shall be subject to
withholding and other applicable taxes.

           B.    BONUS POTENTIAL. Employee's entitlement to a bonus for any year
shall be based upon the Company's achieving pre-determined performance goals to
be established through discussions between Employee and the Company by April 1
of each fiscal year or, if the parties are unable to agree by that date, by the
Board acting in the utmost good faith. The first Bonus shall be payable based on
performance for the fiscal year ending on February 1, 2008.

           C.    EMPLOYEE BENEFITS. Employee shall be reimbursed for all
reasonable travel and business expenses incurred by him in connection with the
performance of his duties. Employee will also receive such vacation, pension,
thrift, medical insurance, life and disability

                                       1
<PAGE>

insurance, expense reimbursement, indemnification rights, liability insurance
benefits and such other benefits as are provided generally to executive
employees of the Company; PROVIDED, HOWEVER, that this Agreement shall not be
construed to afford Employee any greater rights to benefits under any of such
programs than are provided under the terms thereof or prohibit the Company from
amending or discontinuing any such plans in accordance with the terms of such
plans. Notwithstanding the foregoing, the benefits to Employee shall also
include, but not be limited to four (4) weeks of paid vacation per year accrued
annually on the commencement of each year of this Agreement.

           D.    STOCK OPTIONS. Employee shall be granted ten (10) year stock
options for 1,965,165 shares of common stock of the Company (the "OPTIONS"). The
Options shall vest and become exercisable immediately upon grant as to twenty
percent (20%) (393,033) of the total number of shares subject to the Options and
as to 20 percent (20%) (393,033) of the total number of shares subject to the
Options on the day immediately preceding each of the first, second, third and
fourth anniversaries of the first day of employment by Company. The shares
acquired by Employee upon exercise will be covered under an effective
registration statement on Form S-8 under the Securities Act of 1933. The date of
the grant of the Options shall be the effective date of this Agreement. The
exercise (strike) price will be determined at the close of business on the
effective date of this Agreement and shall be equal to the mean between the
closing bid and asked prices as quoted on the OTC Bulletin Board. The Options
shall not be granted under the Company's 2002 Performance and Equity Incentive
Plan (the "STOCK OPTION Plan") because the Stock Option Plan does not have
sufficient shares available, but the Options shall be otherwise subject to the
terms of the Stock Option Plan as if granted thereunder. To the extent not
already vested and to the extent not prohibited by the Stock Option Plan, the
Options shall become fully vested and exercisable immediately prior to the
occurrence of a Change in Control (as hereinafter defined); PROVIDED, that if an
earlier date is fixed as the record date for the ownership of stock of the
Company eligible to participate in the Change in Control, the Options shall
become fully vested and exercisable in time to enable Employee to become an
eligible stockholder on such record date with respect to the shares subject to
the Options.

     5.    EXTENT OF SERVICES. While employed by the Company pursuant to this
Agreement, Employee shall devote his entire business time and attention to the
Company's business; PROVIDED, that nothing herein shall be construed as
restricting Employee's right to engage in community, charitable or similar
activities so long as such other activities do not interfere with the proper
discharge of his duties under this Agreement. Employee may serve on the board of
directors or similar bodies of other organizations so long as such service does
not interfere with the proper discharge of his duties under this Agreement and
the Company's Board of Directors has expressly approved of such service by
Employee.

     6.    JOB LOCATION. Employee's primary job location will be at the
Company's principal offices in Dallas, Texas.

     7.    TERMINATION.

           7.1    TERMINATION FOR CAUSE. The Company may at any time terminate
     Employee's employment with the Company for Cause (as herein defined), and
     Employee

                                       2
<PAGE>

     shall be paid all salary, bonuses and other benefits already earned but not
     yet paid (the "Accrued Amounts") and no more. The term "CAUSE" as used
     herein shall mean (i) conviction of, or a plea of NOLO CONTENDERE to any
     crime involving moral turpitude (ii) conviction of, or a plea of NOLO
     CONTENDERE to any felony resulting or intended to result directly or
     indirectly in gain or personal enrichment to Employee at the expense of the
     Company, (iii) violation by Employee of any law or regulation applicable to
     Employee or to the Company or its business, or any other act of gross
     misconduct by Employee, that is reasonably likely to result in material
     liability to the Company, (iv) material breach by Employee of any provision
     of this Agreement; or (v) willful neglect or repeated failure to perform
     Employee's employment duties pursuant to this Agreement; PROVIDED, that no
     termination shall be treated as a termination for Cause under clause (iv)
     or clause (v) above unless the Board shall have given Employee at least
     thirty (30) days' notice of termination, and providing Employee a
     reasonable opportunity to cure the alleged breach after written notice
     thereof. In the event cause for termination again exists under clauses (iv)
     or (v) above subsequent to Employee's cure, then Company may terminate
     Employee's employment for the reasons set forth in clauses (iv) or (v) at
     any time with or without notice.

           7.2    TERMINATION FOR OTHER THAN CAUSE. The Company may terminate
     the Employee's employment for any reason other than for cause at any time,
     with or without notice. In the event of such termination, Company shall pay
     to Employee an amount equal to one (1) year of Employee's then existing
     annual Base Salary payable on a monthly basis in accordance with Company's
     standard business practices. In the event of termination of Employee under
     this Section 7.2, Employee shall also be entitled to continue his insurance
     benefits under COBRA and Employer shall pay the COBRA premiums for the
     duration of the severance period. Employee's entitlement to the severance
     benefits set forth herein may be subject to reduction pursuant to Section
     10 hereof.

           7.3    TERMINATION BY EMPLOYEE WITHOUT GOOD REASON. Employee may
     terminate his employment under this Agreement upon giving Company sixty
     (60) days written notice. In the event of any such termination by Employee
     that is not for Good Reason (as hereafter defined), the Company shall not
     be obligated to pay severance or any benefits under this Agreement or any
     severance policy of the Company. For purposes of this Agreement, "GOOD
     REASON" means any or any combination of the following occurring without
     Employee's express consent: (i) any material diminution in Employee's title
     or responsibilities; (ii) Employee is not nominated for election or
     reelection to the Board or, if nominated, is not elected or reelected;
     (iii) any material diminution in Employee's remuneration or benefits; or
     (iv) any material breach by the Company of any provision of this Agreement
     which has not been cured within thirty (30) days after notice of such
     noncompliance has been given by the Employee to Company.

           7.4    TERMINATION BY EMPLOYEE FOR GOOD REASON. If Employee
     terminates his employment for Good Reason, he shall be entitled to receive
     the same severance and benefits in the same amount and on the same terms as
     would have been payable or provided to him had he been terminated without
     Cause under Section 7.2. Additionally,

                                       3
<PAGE>

     to the extent that any Options have not already vested and to the extent
     not prohibited by the Stock Option Plan, one third of the Options which
     have not vested prior to termination for Good Reason shall become fully
     vested and exercisable. The same accelerated option vesting shall apply if
     Employee is terminated by the Company (other than for Cause) after Employee
     has given notice to the Company of termination for Good Reason.

           7.5    TERMINATION WITHOUT CAUSE OR GOOD REASON IN CONNECTION WITH
     CHANGE IN CONTROL. For purposes of this Agreement, the term "CHANGE IN
     CONTROL" shall mean (i) the date any entity or person, including a group as
     defined in Section 13(d)(3) of the Securities Exchange Act of 1934, shall
     become the beneficial owner of, or shall have obtained voting control over
     more than 50% of the outstanding common stock of the Company; or (ii) the
     effective date of (a) any merger, consolidation or other reorganization of
     the Company with another corporation in which the Company is not the
     continuing or surviving corporation or pursuant to which any common shares
     of the Company would be converted into cash, securities or other property
     of another corporation, other than a merger, consolidation or
     reorganization of the Company in which holders of Company common stock
     immediately prior to the merger, consolidation or reorganization have more
     than 50% of the outstanding common stock of the surviving corporation
     immediately after the transaction, or (b) any sale or other disposition of
     substantially all of the assets of the Company to any person other than a
     person whose outstanding common stock is more than 50% owned by persons who
     were holders of outstanding Company common stock immediately before such
     sale or disposition. In the event of a Change in Control of the Company and
     a subsequent termination of Employee's employment under circumstances
     described in Section 7.2 or a termination by Employee for Good Reason as
     described in Section 7.4, the Company shall pay to Employee, within thirty
     (30) days of such termination and in lieu of the cash severance payments
     described in Section 7.2 and Section 7.4, (i) a lump sum cash payment equal
     to one year of Employee's Base Salary as in effect immediately prior to his
     termination of employment or, if higher, the Base Salary as in effect
     immediately prior to the Change in Control. In the event of termination
     upon any Change of Control, the Company shall also provide Employee with
     the other non-salary severance benefits set forth in the Company's
     severance policy (or as provided in Sections 7.2 and 7.4, if greater).
     PROVIDED, the exercise of any options, warrants or conversion rights
     currently outstanding by holders of the Company's outstanding preferred
     stock or convertible debt or warrants (the "INVESTOR GROUP") shall not
     constitute a Change in Control for purposes of this Agreement; PROVIDED,
     FURTHER, the following circumstances shall not be deemed to constitute a
     Change in Control: (i) any dilution of the stock ownership or voting rights
     of the Investor Group as long as the Investor Group (or one or more of its
     existing members as of the date of this Agreement) owns in the aggregate at
     least thirty percent (30%) of the common stock and preferred stock on an as
     converted basis; or (ii) the transfer by Ronald de Waal of his interest in
     the Investor Group to any entity or group of entities in which de Waal,
     directly or indirectly, has a controlling interest.

     8.    DEATH OR DISABILITY DURING EMPLOYMENT. If Employee dies during the
term of this Agreement, this Agreement shall automatically terminate and the
Company shall pay to

                                       4
<PAGE>

Employee's estate the compensation and benefits that would be otherwise payable
to Employee up to the end of the month in which his death occurred. If Employee
becomes disabled during the term of this Agreement so that he is unable to
perform his duties under this Agreement for a period of ninety (90) consecutive
days, either the Company or Employee may terminate the employment of Employee by
the Company. In such event, the Company shall continue to pay Employee an amount
equal to sixty percent of his base annual salary during the continuation of the
severance period described in Section 7.2 or until the commencement of payments
to Employee under the Company's long term disability income plan.

     9.    CONFIDENTIAL INFORMATION AND TRADE SECRETS. For purposes of this
Agreement, the term "CONFIDENTIAL INFORMATION" means any and all data, know-how,
designs, customer lists, current and anticipated customer requirements, price
lists, market studies, business plans, historical financial statements,
financial projections and budgets, historical and projected sales, capital
spending budgets and plans, the names and backgrounds of key personnel,
personnel training materials and techniques, computer software and programs,
systems, improvements, devices, discoveries, concepts, ideas, designs, methods
and information concerning the business and affairs of the Company, however
documented, and any other information of the Company that is a trade secret of
the Company, and all notes summaries or compilations containing or based, in
whole or in part, on any information included in the foregoing. Employee
acknowledges that in the course of his employment by the Company, Employee will
become acquainted with Confidential Information belonging to the Company.
Employee acknowledges and agrees that all Confidential Information of the
Company known or obtained by the Employee, whether before or after the date
hereof, is the property of the Company. Therefore, Employee agrees that Employee
will not, at any time, other than in furtherance of Employee's employment
duties, disclose to any unauthorized persons or use for his own account or for
the benefit of any third party any Confidential Information, whether Employee
has such information in Employee's memory or embodied in writing or other
physical form, without the Company's prior written consent, unless and to the
extent that the Confidential Information is or becomes generally known to and
available for use by the public other than as a result of Employee's fault or
the fault of any other person bound by a duty of confidentiality. Employee
agrees, upon any termination of his employment with the Company and at any other
time the Company may request, to deliver to the Company, or such representatives
as the Company may designate, all documents, memoranda, notes, plans, records,
reports, and other documentation, models, components, devices, or computer
software, whether embodied in a disk or in other form (and all copies of all of
the foregoing), relating to the business, operations, or affairs of the Company
and any other Confidential Information that Employee may then possess or have
under Employee's control.

     10.    NON COMPETE AND NON-SOLICITATION COVENANTS. Employee agrees that
during the term of this Agreement and for a period of one (1) year from the date
that Employee ceases to be employed by the Company for any reason, Employee
shall not, directly or indirectly, individually or as an employee, partner,
officer, director or shareholder (other than a 2% or less shareholder) or in any
other capacity whatsoever, (i) solicit the business of any current customers of
the Company; (ii) acquire, operate, manage or take any position with any
specialty retail apparel or accessories organization that has retail stores
within a fifty mile radius of any retail store operated by the Company, (iii)
serve as an officer, director, employee, agent or consultant

                                       5
<PAGE>

to a specialty retail apparel or accessories organization that has retail stores
within a fifty mile radius of any retail store operated by the Company, or (iv)
establish or operate any specialty retail apparel or accessories organization
that has retail stores within a fifty mile radius of any retail store operated
by the Company. Employee further agrees that during the one year period
following termination of this Agreement, Employee will not recruit, hire, assist
others in recruiting or hiring, discuss employment with, or refer to others
concerning employment, any person who to Employee's knowledge is, or within the
preceding twelve (12) months was, an employee of the Company. PROVIDED, HOWEVER,
if Employee desires to take a position or any action prohibited by this Section
10, he shall provide Company with written notice of his intent and Company shall
provide written notice to Employee within fourteen (14) working days of whether
or not Company intends to enforce the covenants set forth in this Section 10. If
Company intends to enforce these covenants, then Company shall pay to Employee
the severance pay set forth in Section 7.2 hereof, even if Employee was
terminated for Cause or if Employee terminated without Good Reason. PROVIDED
FURTHER, if Company terminates Employee's employment for reasons other than
Cause, Company will not unreasonably withhold its consent to Employee taking
employment in violation of this Section 10 UNLESS the job that Employee intends
to accept is a direct competitor of Company (including without limitation, Ann
Taylor and Talbots) or a retailer of ladies apparel with similar price lines. If
Company gives its consent to allow Employee to accept such other employment,
then Employee shall forfeit his right to the severance benefits set forth in
Section 7.2 hereof.

     11.    CONFLICTS OF INTEREST DURING EMPLOYMENT. During his employment with
the Company, Employee shall not, without the express written consent of the
Company, directly or indirectly, render services to or for any person or entity,
for or without compensation, or engage in any activity competitive with or
adverse to the business interests of the Company, whether alone, as a partner,
an officer, director, employee, shareholder (other than a 2% or less
shareholder), trustee, fiduciary, agent, advisor, consultant or other
representative of any other entity. Nothing in this Section 11 shall be
construed as restricting Employee's right to engage in community, charitable or
similar activities so long as such other activities do not interfere with the
proper discharge of his duties under this Agreement, nor does this Section 11
restrict Employee's right to serve on the board of directors or similar bodies
of other organizations, so long as such service does not interfere with the
proper discharge of his duties under this Agreement and the Company's Board of
Directors has expressly approved of such service by Employee.

     12.    CERTAIN REMEDIES. Employee acknowledges and agrees that (i) breach
of any of the covenants and agreements contained in Sections 9, 10 and 11 hereof
will give rise to irreparable injury to the Company or its Affiliates,
inadequately compensable in damages, (ii) the covenants and agreements contained
in Sections 9, 10 and 11 are necessary for the protection of the legitimate
business interests of the Company and its Affiliates and to prevent the Employee
from acquiring an unfair trade advantage and are reasonable in scope and
content, and (iii) the covenants contained in Sections 9, 10 and 11 and the
enforcement of specific performance thereof will not in any way prevent Employee
from earning a reasonable livelihood. In furtherance of the foregoing, the
parties hereto expressly intend and agree that, in the event of any actual or
threatened breach by Employee of the covenants contained in Sections 9, 10 or
11, the Company shall be entitled, in addition to damages and any other remedies
available under

                                       6
<PAGE>

law, to specific performance and to injunctive relief to restrain the actual or
threatened breach of said covenants by Employee. In the event this Agreement or
the covenants or agreements contained in Sections 9, 10 and 11 shall be
determined by any court of competent jurisdiction to be unenforceable by reason
of their being too extensive in any respect, such covenants shall be interpreted
to extend only to the maximum extent in all other respects as to which they may
be enforceable, all as determined by such court in such action.

     13.    MISCELLANEOUS.

           13.1    NOTICES. Whenever any notice, demand or request is required
     or permitted hereunder, such notice, demand or request shall be hand
     delivered in person or sent by mail, registered or certified, return
     receipt requested, postage prepaid, or by Federal Express or other
     overnight delivery service providing evidence of receipt of delivery to the
     addresses as set forth below:

                   If to Employee:      Ronald S. Staffieri
                                        5122 Deloache
                                        Dallas, TX 75220

                   If to the Company:   Harold's Stores, Inc.
                                        765 Asp Avenue
                                        Norman, OK 73069
                                        Attn: Chief Financial Officer

           Any notice, demand or request that shall be served upon either of the
           parties in the manner aforesaid shall be deemed sufficiently given
           for all purposes hereunder (i) at the time such notices, demands or
           requests are hand delivered in person, or (ii) on the date the
           Federal Express or other overnight delivery service receipt was
           signed; or (iii) on the fourth business day after the mailing of such
           notice.

           Either Company or Employee shall have the right from time to time to
           designate by written notice to the other party such other person or
           persons, and such other place or places, as Company or Employee may
           desire written notices to be delivered or sent in accordance
           herewith; provided, however, at no time shall either party be
           required to send more than an original and one (1) copy of any such
           notice, demand or request required or permitted hereunder.

           13.2    GOVERNING LAW. This Agreement and all rights and obligations
     hereunder shall be governed by and construed in accordance with the laws of
     the State of Texas (without regard to its principles of conflicts of laws).

           13.3    ENTIRE AGREEMENT; AMENDMENT AND WAIVER. This Agreement
     contains the entire agreement between the parties relating to the subject
     matter hereof and supersedes any prior agreement, arrangement and
     understanding between the parties regarding the subject matter hereof,
     including, without limitation, any previous agreement of employment or
     compensation. This Agreement may be amended or changed only in a written
     instrument duly executed by each of the parties hereto and any

                                       7
<PAGE>

     alleged amendment or change which is not so documented shall not be
     effective as to the parties. The provisions of this Agreement may be waived
     only by the party hereto who is entitled to the benefit thereof by
     evidencing such waiver in writing, executed by such party. Except to the
     extent waiver or satisfaction is deemed to exist by the express terms of
     this Agreement, the failure of any party hereto to enforce at any time any
     of the provisions of this Agreement shall in no way be construed to be a
     waiver of any such provisions, nor in any way to affect the validity of
     this Agreement or any part thereof or the right of any party thereafter to
     enforce each and every provision. No waiver of any breach of this Agreement
     shall be held to be a waiver of any other or subsequent breach.

           13.4    SEVERABILITY. This Agreement is intended to be performed in
     accordance with and only to the extent permitted by all applicable legal
     requirements. If any provision of this Agreement or the application thereof
     to any person or circumstance shall for any reason and to any extent, be
     invalid or unenforceable, then the performance of such offending provision
     shall be excused by the parties hereto, but the remainder of this Agreement
     and the application of such provision to other persons or circumstances
     shall not be affected thereby, but rather shall be enforced to the greatest
     extent permitted by law.

           13.5    ASSIGNABILITY. Neither this Agreement nor any of Employee's
     rights or obligations hereunder may be assigned without the prior written
     consent of the Company. Subject to the foregoing, this Agreement shall be
     binding upon and inure to the benefit of the parties hereto and their
     respective heirs, executors, administrators, successors, trustees and
     permitted assigns.

           13.6.    ARBITRATION. The parties firmly desire to resolve all
     disputes arising hereunder without resort to litigation in order to protect
     their respective business reputations and the confidential nature of
     certain aspects of their relationship. Accordingly, any controversy or
     claim arising out of or relating to this Agreement, or the breach thereof,
     shall be settled by arbitration administered by the American Arbitration
     Association in accordance with its National Rules for the Resolution of
     Employment Disputes, and judgment on the award rendered by the arbitrator
     or arbitrators shall be binding and conclusive on the parties, and shall be
     kept confidential by the parties to the greatest extent possible. It is
     expressly agreed that the arbitration shall occur in a location in Dallas
     County, Texas. If any suit, action or proceeding with respect to this
     Agreement shall be brought prior to, during or after such arbitration
     proceedings, then such suit, action or proceeding shall be brought
     exclusively in the Texas State courts of competent jurisdiction in Dallas
     County, Texas or in the United States District Court in Dallas County,
     Texas.

           13.7    REMEDIES CUMULATIVE. All remedies available to the parties or
     herein expressly conferred shall be deemed cumulative with and not
     exclusive of any other remedies expressly conferred hereby or available to
     any party, and the exercise of any one remedy shall not preclude the
     exercise of any other remedy.

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<PAGE>

           13.8    SURVIVAL. Unless specifically superseded by any subsequent
     agreement between the Company and Employee, provisions contained in this
     Agreement that by their sense and context are intended to survive the
     completion of performance, termination or cancellation of this Agreement
     (including, without limitation, Sections 9 and 10) shall so survive
     regardless of whether Employee remains thereafter in the employ of the
     Company.

     14.    OTHER AGREEMENTS. Employee represents and warrants that he is not a
party to any contract or agreement with any other person or entity which would
prevent Employee from entering into this Agreement or performing the duties
prescribed herein, or otherwise conflict with this Agreement.

         IN WITNESS WHEREOF, the parties have executed this Employment Agreement
as of the day and year first above written.

"EMPLOYEE"                     /s/ Ronald S. Staffieri
                               ----------------------------------------------
                               Ronald S. Staffieri

"COMPANY"                      HAROLD'S STORES, INC.,
                               an Oklahoma corporation

                               By:    /s/ Jodi L. Taylor
                                      ---------------------------------------
                               Name:  Jodi L. Taylor
                                      ---------------------------------------
                               Title: Chief Financial Officer
                                      ---------------------------------------

                                       9

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