EXHIBIT 10.1
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FIRST AMENDMENT TO SUBORDINATION AND INTERCREDITOR AGREEMENT
This FIRST AMENDMENT TO SUBORDINATION AND INTERCREDITOR AGREEMENT
(this
"First Amendment") is made as of April 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, and Amendment No.
6 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
WHEREAS, as an inducement to Lender to consent to the Subordinated
Loan
Agreement, Subordinated Creditor agreed to subordinate all
obligations,
liabilities and
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indebtedness of Parent to Subordinated Creditor pursuant to that
certain
Subordination and Intercreditor Agreement, dated as of August 31,
2006 (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 First 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
deleting the definitions of "Permitted Subordinated Debt Payments"
and
"Subordinated Note" appearing therein in their entirety and
replacing the same
with the following:
"PERMITTED SUBORDINATED DEBT PAYMENTS" means
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; provided, however, until such time
as
the aggregate amount of interest accruing from and after March 1,
2007,
under the Subordinated Note equals $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.
"SUBORDINATED NOTE" shall mean that certain Amended
and Restated Subordinated Secured Promissory Note, dated as of
April
26, 2007, made by Parent to the order of Subordinated Creditor, in
the
face principal amount of $12,000,000, as the same may be
amended,
modified, restated and supplemented from time to time.
B. Section 2.3(d) of the Subordination Agreement is hereby amended
by
amending and restating such subpart in its entirety as follows:
(d) Notwithstanding the provisions of Section 2.3(a)
preceding and irregardless of an occurrence and continuation of
any
Senior Default, Subordinated Creditor may receive and retain
the
following deemed payments in respect of the
2
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Subordinated Debt so long as such payments do not involve any
cash
payment by any Obligor to, or for the benefit of, Subordinated
Creditor: (i) the payment of Subordinated Debt deemed to be made
upon
conversion of all, or a portion of, the Subordinated Debt into
common
stock (as defined in the Senior Loan Agreement) of Parent, the
Series
2006-B Preferred Stock of Parent, the Series 2007-A Senior
Preferred
Stock of Parent, the Series 2007-B Senior Preferred Stock of Parent
or
any other preferred stock of Parent if the terms of such
preferred
stock have been approved by Senior Creditor; and (ii) the payment
of
Subordinated Debt deemed to be made as a result of an
additional
advance of Subordinated Debt for the account of Parent as a result
of
Parent's failure to make a scheduled interest payment in respect of
the
Subordinated Debt when due and payable.
C. Section 2.6(b) of the Subordination Agreement is hereby amended
by
amending and restating such subpart in its entirety as follows:
(b) Senior Creditor and Subordinated Creditor agree
that, until the indefeasible payment in full in cash of all Senior
Debt
and all lending commitments under the Senior Debt Documents have
been
terminated, Senior Creditor shall (i) hold or control all of
the
collateral for the Senior Debt or the Subordinated Debt as to which
the
security interest therein is perfected by obtaining possession,
dominion and control, recordation of collateral assignment with
an
insurer, or recordation of a mortgage with the Library of Congress,
as
applicable, of such collateral (the "Controlled Collateral") and
(ii)
for so long as the Controlled Collateral forms a part of the
collateral
for the Subordinated Debt, Senior Creditor shall be deemed to hold
or
control all of the Controlled Collateral pledged to the
Subordinated
Creditor pursuant to the Subordinated Loan Documents as agent,
bailee
or otherwise for the benefit of Senior Creditor and
Subordinated
Creditor for the limited purpose of perfecting the rights of
Subordinated Creditor in and to the Controlled Collateral pursuant
to
the Subordinated Loan Documents. In the event that the Senior Debt
is
indefeasibly paid in full in cash and all lending commitments under
the
Senior Debt Documents have been terminated in accordance with
the
Senior Debt Documents, the Senior Creditor (a) will deliver
such
Controlled Collateral possessed by it to the Subordinated Creditor
to
the extent permitted by governing law and (b) upon Subordinated
Creditor's request and at Subordinated Creditor's sole cost and
expense, will assign (without representation, warranty or recourse)
to
Subordinated Creditor all of Senior Creditor's rights and
interests
under (i) any bailee agreement, collateral assignment, mortgage
or
similar agreements related to the Controlled Collateral in each
instance to the extent permitted under applicable law and
Senior
Credito
