EXHIBIT 10.3
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EXECUTION VERSION
AMENDMENT NO. 7 TO LOAN AND SECURITY AGREEMENT
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This AMENDMENT NO. 7 TO LOAN AND SECURITY AGREEMENT (this
"Amendment")
is entered into as of September 26, 2007 (the "Effective Date"), by
and among,
on the one hand, the lender identified on the signature page hereof
(such
lender, together with its successors and assigns, is referred to
hereinafter as
the "Lender"), WELLS FARGO RETAIL FINANCE II, LLC, as collateral
agent and
administrative agent (the "Agent") for the Lender and any other
holder of
Obligations (as defined in the Loan Agreement referred to below)
and, on the
other hand, HAROLD'S STORES, INC., an Oklahoma corporation
("Parent"), HAROLD'S
FINANCIAL CORPORATION, an Oklahoma corporation ("Harold's
Finance"), HAROLD'S
DIRECT, INC., an Oklahoma corporation ("Harold's Direct"), HAROLD'S
STORES OF
TEXAS, L.P., a Texas limited partnership ("Harold's Texas"), and
HAROLD'S OF
JACKSON, INC., a Mississippi corporation ("Harold's Mississippi",
and
collectively with Harold's Texas, Harold's Direct, Harold's Finance
and Parent,
the "Borrowers" and each, a "Borrower").
BACKGROUND
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FACT ONE: Lender, Agent, the Borrowers, and Harold's Stores of
Georgia,
L.P., a Georgia limited partnership ("Harold's Georgia"), entered
into that
certain Loan and Security Agreement, dated as of February 5, 2003,
as amended by
each of the following amendments (as so amended, the "Loan
Agreement"): (A) that
certain Amendment No. 1 to Loan and Security Agreement dated July
10, 2003, by
and among Lenders, Agent, Borrowers, and Harold's Georgia; (B) that
certain
Amendment No. 2 to Loan and Security Agreement dated April 29,
2004, by and
among Lenders, Agent, the Borrowers and Harold's Georgia; (C) that
certain
Amendment No. 3 to Loan and Security Agreement dated January 26,
2006, by and
among Lenders, Agent, the Borrowers and Harold's Georgia; (D) that
certain
Amendment No. 4 to Loan and Security Agreement, dated as of June 1,
2006, by and
among Lenders, Agent and the Borrowers, (E) that certain Amendment
No. 5 to Loan
and Security Agreement, dated as of August 31, 2006, by and among
Lenders, Agent
and the Borrowers, and (F) that certain Amendment No. 6 to Loan and
Security
Agreement, dated as of April 26, 2007, by and among Lenders, Agent
and the
Borrowers.
FACT TWO: Pursuant to the Loan Agreement, Lender has agreed to
make
loans and other financial accommodations to, or for the benefit of,
Borrowers on
the terms and otherwise subject to the conditions and limitations
contained
therein.
FACT THREE: Borrowers have requested that Lender and Agent agree
to
modify certain terms and conditions set forth in the Loan Agreement
in the
manner set forth in this Amendment, and Lender and Agent have
agreed to modify
certain terms and conditions set forth in the Loan Agreement in the
manner set
forth in this Amendment, subject in each instance to the
limitations,
qualifications and conditions set forth in this Amendment.
AMENDMENT NO. 7 TO LOAN AND SECURITY AGREEMENT - Page 1
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EXECUTION VERSION
NOW, THEREFORE, Lender, Agent and the Borrowers hereby modify,
supplement and amend the Loan Agreement as follows:
1.
INCORPORATION OF DEFINITIONS. Capitalized terms used in this
Amendment,
to the extent not otherwise defined herein, have the meanings
assigned to such
terms in the Loan Agreement, as amended hereby.
2.
AMENDMENTS AND ADDITIONS TO LOAN AGREEMENT.
2.1 ADDITIONAL DEFINITIONS. As of the Effective Date, Section 1.1
of
the Loan Agreement is hereby amended by the addition of the
following
definitions, in the appropriate alphabetical order:
"`Amendment No. 7' means Amendment No. 7 to Loan and
Security Agreement, dated as of September 26, 2007, by and among
the
Lenders, Agent and Borrowers."
"`Guarantor's Deposit' means, as of any date of
determination, that portion of the $600,000.00 cash deposit
(together
with undisbursed interest from time to time accrued in respect
thereof)
that:
(i) is made by the Letter of Credit Guarantor with
Agent in connection with the Letter of Credit Guarantor's delivery
of
the Letter of Credit Guaranty and held by the Agent in an
identifiable
general ledger account owned by Agent and specifically documented
as
containing the cash deposit made by Letter of Credit guarantor
as
security for the Borrowers' performance of certain obligations
specified in the Letter of Credit Guaranty in respect of L/Cs and
L/C
Undertakings, and as to which the balance thereof shall be payable
to
the Letter of Credit Guarantor upon the termination of the Letter
of
Credit Guaranty, subject to the terms thereof, and
(ii) has not been applied in respect of such
reimbursement or other obligations,
in each instance to the extent such cash deposit shall be available
for
the unconditional application by Agent in satisfaction of
Borrowers'
reimbursement obligations upon draw in respect of an L/C or L/C
Undertaking, as applicable, pursuant to the Letter of Credit
Guaranty."
"`Letter of Credit Guarantor' means RonHow, LLC, a
Georgia limited liability company in its capacity as guarantor
pursuant
to the Letter of Credit Guaranty."
"`Letter of Credit Guaranty' means that certain
Limited Recourse Guaranty and Security Agreement, dated as of
September
26, 2007, executed by the Letter of Credit Guarantor, for the
benefit
of the Lender Group, as the same may be amended, modified, restated
or
supplemented with the written approval of Agent."
"`Qualified
Letter of Credit Inventory' means, as of
any date of determination, Inventory and goods in the process
of
manufacture for the account of one
AMENDMENT NO. 7 TO LOAN AND SECURITY AGREEMENT - Page 2
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EXECUTION VERSION
or more Borrowers that are contemplated to constitute Eligible
Inventory upon completion and delivery at a location specified
on
Schedule E-1, that do not qualify as either Eligible Inventory
or
Eligible In-Transit Inventory under the terms of this Agreement,
and
that meet each of the following criteria, which criteria may be
revised
by Agent in its Permitted Discretion from time to time:
(a) such Inventory or goods in the process of
manufacture are the subject of an issued, outstanding and
undrawn Qualified Import Letter of Credit in an amount
sufficient to pay the full purchase price of such Inventory or
goods in the process of manufacture, and
(f) the applicable Qualified Import Letter of Credit
was issued within sixty (60) days from the applicable date of
determination."
"`Qualified Letter of Credit Inventory Sublimit'
means, with respect to any date of determination, $2,500,000."
2.2 REVISION TO EXISTING DEFINITIONS. As of the Effective Date,
the
following definitions are hereby amended and restated to read in
their entirety
as follows:
"`Eligible In-Transit Inventory" means Inventory of
Borrowers (i) that does not qualify as Eligible Inventory
solely
because it is not at a location set forth on Schedule E-1 or at
a
location designated for a Warehouse Sale in accordance with
this
Agreement and (ii) that meets the following criteria, which
criteria
may be revised by Agent in its Permitted Discretion from time to
time
after the Closing Date:
(a) such Inventory currently is in transit (whether
by vessel, air, or land) either (i) from a location outside
of the continental United States to a location set forth on
Schedule E-1 or a location designated for a Warehouse Sale in
accordance with this Agreement that is the subject of a
Bailee Acknowledgment or a Collateral Access Agreement and
has been in-transit for a period of less than 30 calendar
days or (ii) between locations set forth on Schedule E-1 or
any such location and a location designated for a Warehouse
Sale in accordance with the provisions of this Agreement and
has been in-transit for a period of less than 7 calendar
days,
(b) title to such Inventory has passed to the
applicable Borrower,
(c) such Inventory is insured against types of loss,
damage, hazards, and risks, and in amounts, satisfactory to
Agent in its Permitted Discretion,
(d) such Inventory either
(1) is the subject of a negotiable bill of
lading that (x) is consigned to Agent (either directly
or by means of endorsements), (y) was issued by the
carrier respecting the subject Inventory, and (z)
either is (I) in the possession of Agent or a customs
broker (in each case in a jurisdiction acceptable to
Agent in its Permitted Discretion), or (II) in-transit
by air-courier to Agent or a customs broker (in each
case, in a jurisdiction
AMENDMENT NO. 7 TO LOAN AND SECURITY AGREEMENT - Page 3
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EXECUTION VERSION
acceptable to Agent in its Permitted Discretion) and
for which Agent has received evidence satisfactory to
Agent in its sole discretion that such air-courier
delivery has been initiated, or
(2) is the subject of a negotiable cargo
receipt and is not the subject of a bill of lading
(other than a negotiable bill of lading consigned to,
and in the possession of, a consolidator or Agent, or
their respective agents) and such negotiable cargo
receipt is (x) consigned to Agent (either directly or
by means of endorsements), (y) that was issued by a
consolidator respecting the subject Inventory, (z)
that either is (I) in the possession of Agent or a
customs broker (in each case in a jurisdiction
acceptable to Agent in its Permitted Discretion), or
(II) in-transit by air-courier to Agent or a customs
broker (in each case, in a jurisdiction acceptable to
Agent in its Permitted Discretion) and for which Agent
has received evidence satisfactory to Agent in its
sole discretion that such air-courier delivery has
been initiated,
(e) Administrative Borrower has provided a
certificate to Agent that certifies that, to the best
knowledge of Borrowers, such Inventory meets all of
Borrowers' representations and warranties contained in the
Loan Documents concerning Eligible Inventory, that Borrowers
know of no reason why such Inventory would not be accepted by
the applicable Borrower when it arrives in at a location
specified on Schedule E-1, and that the shipment as evidenced
by the documents conforms to the related order documents, and
(f) to the extent such Inventory previously shall
have been included in the category of Qualified Letter of
Credit Inventory, such Inventory shall have been removed from
such category and the applicable Qualified Letter of Credit
shall have been drawn in accordance with its terms and
Borrowers shall have discharged their reimbursement
obligations to Agent and Lenders in respect of such draw as
contemplated by this Agreement."
"`Loan Documents' means this Agreement, the Bank
Product Agreements, the Cash Management Agreements, the Credit
Card
Agreements, all Control Agreements, the Disbursement Letter,
the
Guaranty, the Letters of Credit, the Letter of Credit Guaranty,
any
Mortgages, each Perfection Certificate, the Copyright Security
Agreement, the Stock Pledge Agreement, the Trademark Security
Agreement, the Intercompany Subordination Agreement, the Assignment
of
Deposit Accounts, any Bank Product Agreement, any certificates
(including without limitation, the Borrowing Base Certificate and
the
Compliance Certificate) from time to time delivered by a
Borrower
pursuant to this Agreement or any other Loan Document, any note
or
notes executed by a Borrower in connection with this Agreement
and
payable to a member of the Lender Group, and any other
agreement
entered into, now or in the future, by any Borrower and the
Lender
Group in connection with this Agreement."
AMENDMENT NO. 7 TO LOAN AND SECURITY AGREEMENT - Page 4
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EXECUTION VERSION
"`Maximum Revolver Amount' means, as of any date, the
lesser of (a) $30,000,000, and (b) the sum of $24,000,000 PLUS
the
outstanding principal amount of any Restricted Advances."
"`Qualified Import Letter of Credit' means a Letter of
Credit that (a) is iss
