EXHIBIT 10.1
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EXECUTION VERSION
SECOND AMENDMENT
TO
SUBORDINATION AND INTERCREDITOR AGREEMENT
This SECOND AMENDMENT TO SUBORDINATION AND INTERCREDITOR
AGREEMENT
(this "Second Amendment") is made as of September 26, 2007, by and
among RONHOW,
LLC, a Georgia limited liability company, (the "Subordinated
Creditor" or
"Subordinated Lender"), HAROLD'S STORES, INC., an Oklahoma
corporation (the
"Parent"), HAROLD'S FINANCIAL CORPORATION, an Oklahoma corporation,
HAROLD'S
DIRECT, INC., an Oklahoma corporation, HAROLD'S STORES OF TEXAS,
L.P., a Texas
limited partnership, HAROLD'S OF JACKSON, INC., a Mississippi
corporation, THE
CORNER PROPERTIES, INC., an Oklahoma corporation, HAROLD'S DBO,
INC., a Texas
corporation, HAROLD'S LIMITED PARTNERS, INC., an Oklahoma
corporation, and HSTX,
INC., a Texas corporation (each, individually, a "Guarantor" and
collectively
the "Guarantors"), and WELLS FARGO RETAIL FINANCE II, LLC, as agent
(the
"Agent") and lender (together with any other lenders under the
Senior Loan
Agreement as defined below, collectively the "Lender"; the Agent,
the Lender,
and their respective successors, transferees, and assigns, being
herein
sometimes collectively referred to as the "Senior Creditor").
RECITALS:
WHEREAS, Parent, certain of the Guarantors, and Wells Fargo
Retail
Finance II, LLC, as Agent and Lender, have entered into that
certain Loan and
Security Agreement, dated as of February 5, 2003, as amended by
Amendment No. 1
to Loan and Security Agreement, dated as of July 10, 2003,
Amendment No. 2 to
Loan and Security Agreement, dated as of April 29, 2004, Amendment
No. 3 to Loan
and Security Agreement, dated as of January 24, 2006, Amendment No.
4 to Loan
and Security Agreement, dated as of June 1, 2006, Amendment No. 5
to Loan and
Security Agreement, dated as of August 31, 2006, Amendment No. 6 to
Loan and
Security Agreement, dated as of April 26, 2007, and Amendment No. 7
to Loan and
Security Agreement, dated as of the date hereof (as further
amended, modified,
supplemented, extended or restated from time to time, the "Senior
Loan
Agreement"), pursuant to which, among other things, the Lender has
agreed,
subject to the terms and conditions set forth in the Senior Loan
Agreement, to
make certain loans and financial accommodations to the Parent and
certain of the
Guarantors, which loans and financial accommodations are secured by
the Senior
Security Documents (as defined in the Subordination Agreement);
and
WHEREAS, the Subordinated Creditor and the Parent have entered
into
that certain Subordinated Loan Agreement, dated as of August 31,
2006 (as
amended, restated, supplemented or otherwise modified from time to
time,
"Subordinated Loan Agreement"), and the Guarantors have guaranteed
the
obligations of the Parent thereunder in favor of the Subordinated
Creditor
pursuant to the Subordinated Guaranty (as amended, restated,
supplemented or
otherwise modified from time to time, "Subordinated Guaranty"). The
Subordinated
Loan Agreement and the Subordinated Guaranty are secured by the
Subordinated
Security Documents (as defined in the Subordination Agreement);
and
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WHEREAS, as an inducement to Lender to consent to the execution
and
delivery of the Subordinated Loan Agreement, Subordinated Creditor
agreed to
subordinate all obligations, liabilities and indebtedness of Parent
to
Subordinated Creditor pursuant to that certain Subordination and
Intercreditor
Agreement, dated as of August 31, 2006, as amended by that certain
First
Amendment to Subordination and Intercreditor Agreement, dated as of
April 26,
2007 (the "Subordination Agreement"); and
WHEREAS, Parent, Guarantors, and Subordinated Creditor desire to
amend
certain provisions of the Subordinated Loan Agreement, Subordinated
Guaranty and
Subordinated Security Documents and to amend and restate in its
entirety the
Subordinated Note (as defined in the Subordination Agreement) and
Senior
Creditor gives its prior written consent to the same herein as
required by
Section 3.2 of the Subordination Agreement; and
WHEREAS, Parent, Guarantors, Senior Creditor and Subordinated
Creditor
desire to amend certain provisions of the Subordination Agreement
in connection
with the modifications to the Subordinated Loan Agreement,
Subordinated Note,
Subordinated Guaranty and Subordinated Security Documents;
NOW, THEREFORE, in consideration of the foregoing and the
agreements
set forth in this Second Amendment, Parent, Guarantors, Senior
Creditor and
Subordinated Creditor hereby agree as follows:
SECTION 1. DEFINITIONS. Capitalized terms used herein and not
otherwise
defined herein shall have the meanings ascribed to them in the
Subordination
Agreement.
SECTION 2.
AMENDMENTS.
A. Section 1 of the Subordination Agreement is hereby amended
by adding the following definition, in the appropriate alphabetical
order:
"LIMITED RECOURSE GUARANTY" means that certain
Limited Recourse Guaranty and Security Agreement, dated as of
September
26, 2007, by and between Subordinated Creditor and Senior Creditor,
as
the same may be amended, modified, supplemented or restated from
time
to time.
B. Section 1 of the Subordination Agreement is hereby amended
by amending and restating the definitions of "Subordinated Debt",
"Subordinated
Note", and "Permitted Subordinated Debt Payments" to read in their
entirety as
follows:
"SUBORDINATED DEBT" shall mean all of the obligations
of any Obligor to the Subordinated Creditor (a) evidenced by or
incurred pursuant to the Subordinated Debt Documents
(including,
without limitation, each future advance made pursuant to such
Subordinated Debt Documents), (b) any and all obligations to pay
the
Deposit Account Fee (as defined in the Subordinated Loan Agreement)
and
(c) all obligations, whether pursuant to the Subordinated Debt
Documents or otherwise, to refund or reimburse Subordinated
Creditor in
respect of amounts that Senior Creditor may at any time, and
2
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from time to time, set off or otherwise apply against any
obligations
owed by Subordinated Creditor to Senior Creditor pursuant to
the
Limited Recourse Guaranty.
"SUBORDINATED NOTE" shall mean that certain Second
Amended and Restated Subordinated Secured Promissory Note, dated as
of
September 26, 2007, made by Parent to the order of Subordinated
Creditor, in the stated principal amount of $15,000,000, as the
same
may be amended, modified, restated and supplemented from time to
time.
"PERMITTED SUBORDINATED DEBT PAYMENTS" means each of
the following: (i) scheduled monthly payments of accrued but
unpaid
interest at the rates set forth in the Subordinated Note
(including
interest at the default rate to the extent then applicable) and
payments on a scheduled monthly payment date of any accrued
interest
that remains unpaid due to application of this Agreement with
respect
to prior periods; provided, however, that on each Interest Payment
Date
(as defined in the Subordinated Loan Agreement) through and
including
the first Interest Payment Date on which the aggregate amount
of
interest accruing from March 1, 2007, through such Interest
Payment
Date under the Subordinated Note equals or exceeds $1,000,000,
the
accrued interest under the Subordinated Note shall be added to
the
principal balance thereof in lieu of cash payment of such
accrued
interest by Parent; (ii) with respect to that portion of the
Guarantor's Deposit placed with Senior Creditor pursuant to the
Limited
Recourse Guaranty against which Senior Creditor has not exercise
its
right of set-off, or against which a set-off by the Senior Creditor
is
restored through payment or credit to the principal balance of
the
general ledger account in which such deposit is held, an amount
payable
monthly in arrears equal to the excess of (a) the amount of
interest
that would accrue on such amounts in the deposit account if
such
amounts were outstanding principal under the Tranche B Term Loan
(as
defined in the Subordinated Debt Documents) over (b) the amount
of
interest paid by Senior Cre
