EXHIBIT 10.3
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GLOBAL AMENDMENT AND REAFFIRMATION OF SUBORDINATED DEBT DOCUMENTS
This GLOBAL AMENDMENT AND REAFFIRMATION OF SUBORDINATED DEBT DOCUMENTS
(this "Global Amendment") is made as of April 26, 2007, by and among RONHOW,
LLC, a Georgia limited liability company, (the "Lender"), XXXXXX'S STORES, INC.,
an Oklahoma corporation (the "Parent"), XXXXXX'S FINANCIAL CORPORATION, an
Oklahoma corporation, XXXXXX'S DIRECT, INC., an Oklahoma corporation, XXXXXX'S
STORES OF TEXAS, L.P., a Texas limited partnership, XXXXXX'S OF XXXXXXX, INC., a
Mississippi corporation, THE CORNER PROPERTIES, INC., an Oklahoma corporation,
XXXXXX'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").
RECITALS:
WHEREAS, Xxxxxx and Parent have entered into that certain Subordinated
Loan Agreement, dated as of August 31, 2006 ("Subordinated Loan Agreement"), and
Guarantors have guaranteed the obligations of Parent thereunder in favor of
Lender pursuant to that certain Subordinated Guaranty, dated as of August 31,
2006 ("Subordinated Guaranty"). The Subordinated Loan Agreement and the
Subordinated Guaranty are secured by the Subordinated Security Agreement, dated
as of August 31, 2006, by Xxxxxx and Guarantors in favor of Lender
("Subordinated Security Agreement"); and
WHEREAS, on the date hereof, Lender will convert $2,000,000.00 of the
obligations of Parent owed to Lender pursuant to the Tranche A Term Loan
(defined below) under the Subordinated Loan Agreement to Series 2007-A Senior
Preferred (defined below) of Parent; and
WHEREAS, Parent, Guarantors, and Lender desire to amend certain
provisions of the Subordinated Loan Agreement, Subordinated Guaranty and the
Subordinated Security Agreement;
NOW, THEREFORE, in consideration of the foregoing and the agreements
set forth in this Global Amendment, Parent, Guarantors, and Xxxxxx 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
Subordinated Loan Agreement.
SECTION 2. GLOBAL AMENDMENT. All references to any written agreement,
document or note described or defined in the Subordinated Loan
Agreement, Subordinated Guaranty or Subordinated Security Agreement
shall be deemed to refer to such written agreement, document or note as
the same may have been or may be amended, supplemented, modified,
extended or restated from time to time.
SECTION 3. AMENDMENTS TO SUBORDINATED LOAN AGREEMENT.
A. The first WHEREAS clause of the RECITALS of the Subordinated Loan
Agreement is hereby amended by amending and restating such WHEREAS clause in its
entirety as follows:
WHEREAS, Xxxxxxxx has requested that Lender make available to Borrower
a term loan in the aggregate principal amount of up to Twelve Million Dollars
($12,000,000) (the "Loan"), on the terms and conditions hereinafter set forth,
and for the purpose(s) hereinafter set forth; and
B. The second sentence of Section 1.1 of the Subordinated Loan
Agreement is hereby amended by amending and restating such sentence in its
entirety as follows:
The Loan shall be evidenced by an Amended and Restated Subordinated
Secured Promissory Note in the face principal amount of Twelve Million Dollars
($12,000,000), dated as of April 26, 2007, executed by Xxxxxxxx in favor of
Xxxxxx (the "Note").
C. Section 1.2 of the Subordinated Loan Agreement is hereby amended by amending
and restating such Section in its entirety as follows:
1.2 Advances under the Loan.
(a) Borrower has requested that Lender make available to Borrower a
term loan in the aggregate principal amount of Seven Million Dollars
($7,000,000) (the "Tranche A Term Loan"), and a term loan in the aggregate
principal amount of up to Five Million Dollars ($5,000,000) (the "Tranche B Term
Loan").
(b) Lender made an initial advance under the Tranche A Term Loan of
$4,700,000. Subsequently, the Lender made, at the Borrower's request, additional
advances in the aggregate amount of $2,300,000 under the Tranche A Term Loan and
an initial advance under the Tranche B Term Loan of $2,000,000. Subject to
satisfaction of the conditions specified in Section 4.2 of this Agreement and
the provisions of Section 1.4, Lender shall make an additional advance under the
Tranche B Term Loan of $1,000,000. Thereafter, Lender shall not be obligated to
make any further advance to Borrower under the Loan. Any such further advance
shall be made at Xxxxxx's sole discretion and subject to such conditions as
Lender shall specify. Amounts borrowed and repaid under this Note may not be
re-borrowed.
D. Section 1.4 of the Subordinated Loan Agreement is hereby amended by
amending and restating such Section in its entirety as follows:
1.4 Use of Proceeds. Except as otherwise provided in this Section 1.4,
Borrower shall use the proceeds of the advances under the Loan to pay principal
and interest due under the Senior Loan. An advance of $300,000 under the Tranche
A Term Loan was deposited in a deposit account maintained by Borrower that is
not swept by the Senior Lender and may be used
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for analysis and funding of Xxxxxxxx's deregistration under the Securities
Exchange Act of 1934 in a manner approved by Xxxxxxxx's Board of Directors (and
subject in any case to Board approval of such deregistration). If such $300,000
is not fully used in analysis of and/or funding of such deregistration, Borrower
shall use such remaining amount to pay principal and interest due under the
Senior Loan.
E. Section 2.1(e) of the Subordinated Loan Agreement is hereby amended
by amending and restating such subpart in its entirety as follows:
(e) Capitalization. The authorized capital stock of Borrower consists
of 25,000,000 shares of common stock, $0.01 par value (the "Common Stock"), of
which 6,223,508 shares (excluding 205 shares held in treasury) are issued and
outstanding, and 1,000,000 shares of Preferred Stock, $0.01 par value, 500,000
shares of which are presently designated as Amended Series 2001-A Preferred
Stock (the "Amended Series 2001-A Preferred"), 300,000 shares of which are
presently designated as Series 2002-A Preferred Stock (the "Series 2002-A
Preferred"), 100,000 shares of which are presently designated as series 2003-A
Preferred Stock (the "Series 2003-A Preferred"), 75,000 shares of which are
presently designated as Series 2006-A Preferred Stock (the "Series 2006-A
Preferred"), 15,000 shares of which are presently designated as Series 2006-B
Preferred Stock (the "Series 2006-B Preferred"), 5,000 shares of which are
presently designated as Series 2007-A Senior Preferred Stock (the "Series 2007-A
Senior Preferred"), and 5,000 shares of which are presently designated as Series
2007-B Senior Preferred Stock (the "Series 2007-B Senior Preferred"). There are
currently 341,296 shares of Amended Series 2001-A Preferred, 227,372 shares of
Series 2002-A Preferred, 55,673 shares of Series 2003-A Preferred, and 25,000
shares of Series 2006-A Preferred issued and outstanding. Simultaneously with
the additional advance of $1,000,000 under the Tranche B Term Loan, 2,000 shares
of Series 2007-A Senior Preferred will be issued and outstanding. There are
20,000 shares and 30,000 shares of Series 2003-A Preferred and Series 2006-A
Preferred, respectively, reserved for issuance upon exercise of options granted
to RonHow, LLC to convert certain loan participations into such shares. There
are 7,000 shares in the aggregate of Series 2006-B Preferred reserved for
issuance upon exercise of options granted to RonHow, LLC to convert a portion of
the Tranche A Term Loan (which is being reduced to 5,000 shares in the aggregate
as a result of RonHow, LLC's conversion of $2,000,000 of the Tranche A Term Loan
into shares of Series 2007-A Senior Preferred) and 1,032 shares of Series 2006-B
Preferred Stock reserved for issuance on exercise of a warrant to purchase such
shares held by RonHow, LLC. All of the shares of Series 2007-B Senior Preferred
will be reserved for issuance upon exercise of an option being granted to
RonHow, LLC to convert all or a portion of the Tranche B Term Loan into Series
2007-B Senior Preferred. All issued and outstanding shares have been duly
authorized and validly issued, are fully paid and nonassessable and have been
issued in compliance with applicable federal and state securities law. Borrower
has reserved all of its authorized but unissued shares of Common Stock (other
than shares reserved for issuance under the 2002 Performance and Equity
Incentive Plan) for issuance as Underlying Common Stock and has reserved the
balance of the authorized shares of each series of Preferred Stock for issuance
as Dividend Stock on the respective series.
F. Article 4 of the Subordinated Loan Agreement is hereby amended by
adding there to the following Section 4.2:
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4.2 Advances under the Tranche B Term Loan. The obligation of Lender to
fund the initial advance of $2,000,000 under the Tranche B Term Loan was subject
to the acceptance and acknowledgment by execution of Borrower and delivery to
Lender, on or prior to April 4, 2007, of that certain letter agreement between
Xxxxxx and Borrower, dated as of March 30, 2007, regarding the $2,000,000
advance under this Agreement and the Note, a copy of which is attached hereto as
Exhibit B. The obligation of Lender to fund an additional advance of up to
$1,000,000 under the Tranche B Term Loan is subject to the fulfillment of each
of the following conditions:
(a) Borrower shall have and shall have caused Guarantors to have
performed and complied in all material respects with all of the
covenants, agreements, obligations and conditions required by this
Agreement and the other Loan Documents.
(b) All representations and warranties of Borrower and Guarantors set
forth in this Agreement and the other Loan Documents shall be true and
correct in all material respects on and as of the date of such
additional advance, as though made on and as of such date (except to
the extent that such representations and warranties relate solely to an
earlier date).
(c) There does not exist any condition or event that constitutes a
Default or an Event of Default, nor will any thereof occur after giving
effect to such additional advance.
(d) Borrower shall have delivered to Lender an Amended and Restated
Subordinated Secured Promissory Note executed by Borrower, in form and
substance satisfactory to Lender.
(e) Borrower shall have delivered to Lender a Preferred Stock Purchase
Agreement regarding Series 2007-A Senior Preferred executed by
Xxxxxxxx, in form and substance satisfactory to Lender.
(f) Borrower shall have delivered to Lender an Option Agreement,
executed by Xxxxxxxx, in form and substance satisfactory to Lender,
granting to Lender an option to purchase shares of Borrower's 2007-B
Senior Preferred in exchange for forgiveness of principal and accrued
and unpaid interest under the Tranche B Term Loan, on terms and
conditions satisfactory to Lender.
(g) Borrower shall have delivered to Lender a Global Amendment and
Reaffirmation of Subordinated Debt Documents, by and among Xxxxxx,
Borrower, and Guarantors (the "Global Amendment") executed by Xxxxxxxx
and Guarantors, in form and substance satisfactory to Lender.
(h) Borrower shall have delivered to Lender a First Amendment to
Subordination and Intercreditor Agreement, executed by Xxxxxxxx,
Guarantors, and Xxxxx Fargo Retail Finance II, LLC, as the senior
creditor, in form and substance satisfactory to Lender.
(i) Borrower shall have delivered to Lender a certificate of the
secretary or assistant secretary of Borrower certifying that: the copy
of the corporate charter and other publicly filed organizational
documents of Borrower, certified by the Secretary of State or other
appropriate public official in the jurisdiction in which Borrower is
formed and the copy of the bylaws of Borrower delivered to Lender on
August 31, 2006, are true, correct and complete copies and, with the
exception of certain Certificates of Designation or amendments to
Certificates of Designation regarding Series 2006-B Preferred, Series
2007-A Senior Preferred, or the Series 2007-B Senior Preferred, a copy
of which is attached to such certificate, such corporate charters,
organizational documents, and
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bylaws, have not been further amended, modified or rescinded and are in
full force and effect as of the date of the Global Amendment.
(j) Borrower shall have caused each Guarantor to deliver to Lender a
certificate of the secretary or assistant secretary of such Guarantor
certifying that: (x) the copy of the corporate charter and other
publicly filed organizational documents of such Guarantor, certified by
the Secretary of State or other appropriate public official in the
jurisdiction in which such Guarantor is formed and the copy of the
bylaws or limited partnership agreement, as applicable, of such
Guarantor delivered to Lender on August 31, 2006, are true, correct and
complete copies and such corporate charters, organizational documents,
bylaws and limited partnership agreement, as applicable, have not been
further amended, modified or rescinded and are in full force and effect
as of the date of the Global Amendment; and (y) such Guarantor is in
good standing in its jurisdiction of formation as of the date of the
Global Amendment
(k) Borrower shall have delivered to Lender certified copies of all
corporate action taken by Xxxxxxxx and each Guarantor, including
resolutions of its Board of Directors, authorizing the execution,
delivery and performance of the documents described in this Section
4.2.
(l) Borrower shall have delivered to Lender a certificate as to the
legal existence and good standing of Borrower, issued by the Secretary
of State or other appropriate public official in the jurisdiction in
which Borrower, no more than thirty days prior to the effective date of
the Global Amendment.
(m) Borrower shall have delivered to Lender all other documents and
legal matters in connection with the transactions contemplated by this
Agreement or the Global Amendment which shall be in form an substance
satisfactory to Lender.
G. The Subordinated Loan Agreement is hereby amended by adding thereto
as Exhibit B the Exhibit B attached hereto.
H. Schedule 2.1(b) The Subordinated Loan Agreement is herby amended by
amending and restating such schedule as the Schedule 2.1(b) attached hereto.
SECTION 4. REFERENCES TO CERTAIN SUBORDINATED DEBT DOCUMENTS. All
references to each of the Subordinated Loan Agreement, Subordinated
Guaranty and Subordinated Security Agreement in any of the Loan
Documents shall be deemed a reference to each of the Subordinated Loan
Agreement, Subordinated Guaranty and Subordinated Security Agreement as
amended by this Global Amendment. Except as expressly provided in this
Global Amendment, the execution and delivery of this Global Amendment
does not and will not amend, modify or supplement any provision of, or
constitute a consent to or a waiver of any noncompliance with the
provisions of, the Subordinated Loan Agreement, Subordinated Guaranty
and Subordinated Security Agreement or any of the other Loan Documents
executed in connection therewith. To the extent not inconsistent
herewith, the Subordinated Loan Agreement, Subordinated Guaranty and
Subordinated Security Agreement and each of the other Loan Documents
executed by Parent, and Guarantors in connection therewith shall remain
in full force and effect and are hereby ratified and confirmed by the
parties thereto.
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SECTION 5. EFFECTIVE DATE. This Global Amendment shall become effective
as of its date and shall bind all parties only upon (i) the execution
and delivery by Xxxxxx and Guarantors of this Global Amendment to
Lender, (ii) the execution and deliver by Xxxxxx, Guarantors, and Xxxxx
Fargo Retail Finance II, LLC to Lender of that certain First Amendment
to Subordination and Intercreditor Agreement, dated as of the date
hereof, and (iii) such other documents or agreements executed and
delivered by Parent and Guarantors or any other party as Lender shall
reasonably request; and shall be conditioned upon the correctness of
all representations and warranties made by Parent and Guarantors.
SECTION 6. REPRESENTATIONS AND WARRANTIES OF PARENT AND GUARANTORS.
Each of Parent and Guarantors hereby represents and warrants to Lender
as follows:
A. Such party has the right and power, and has taken all necessary
action to authorize it, to execute, deliver and perform this Global Amendment in
accordance with its terms. This Global Amendment has been duly executed and
delivered by such party and is a legal, valid and binding obligation of it,
enforceable against it in accordance with its terms.
B. The execution, delivery and performance of this Global Amendment in
accordance with its terms do not and will not, by the passage of time, the
giving of notice or otherwise,
(i) require any governmental approval or violate any applicable law
relating to such party;
(ii) conflict with, result in a breach of or constitute a default under
the organizational documents of such party, any material provision of any
indenture, agreement or other instrument to which it is a party or by which it
or any of its properties may be bound or any governmental approval relating to
it; or
(iii) result in or require the creation or imposition of any lien
(except as permitted by the Loan Documents) upon or with respect to any property
now owned or hereafter acquired by such party.
C. That, after giving affect to the amendments set forth in this Global
Amendment, the representations and warranties of such party set forth in the
Loan Documents and in any other document, instrument or agreement executed or
delivered in connection therewith are true and correct as of the date hereof as
if made on the date hereof.
D. No Event of Default under the Loan Documents, other than as
specifically waived herein, has occurred and is continuing as of this date.
SECTION 7. NO NOVATION. It is the intention of the parties hereto that
this Global Amendment shall not constitute a novation of the
Subordinated Loan Agreement, Subordinated Guaranty or Subordinated
Security Agreement and shall in no way adversely affect or impair the
validity of the Loan Documents, it being the intention of the parties
hereto merely to amend the Subordinated Loan Agreement, Subordinated
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Guaranty or Subordinated Security Agreement as expressly set forth
herein.
SECTION 8. COUNTERPARTS. This Global Amendment may be executed in one
or more counterparts, each of which shall be deemed an original, but
all of which together shall constitute one and the same instrument.
SECTION 9. GOVERNING LAW. THIS GLOBAL AMENDMENT SHALL BE CONSTRUED IN
ACCORDANCE WITH AND BE GOVERNED BY THE LAWS (WITHOUT GIVING EFFECT TO
THE CONFLICT OF LAW PRINCIPLES THEREOF) OF THE STATE OF GEORGIA.
SECTION 10. THIS GLOBAL AMENDMENT. This Global Amendment is executed
pursuant to the Subordinated Loan Agreement, Subordinated Guaranty and
Subordinated Security Agreement and shall be construed, administered
and applied in accordance with all of the terms and provisions of the
same.
SECTION 11. REAFFIRMATION. Guarantors hereby
(i) acknowledge that, as of the date hereof, the face principal amount
of the Subordinated Note has been increased to $12,000,000, the interest rate on
the Tranche B Term Loan is 18% per annum, Xxxxxx has agreed to defer payment of
up to $1,000,000 of interest on the Loan and permit such accrued but unpaid
interest to be added to the principal balance outstanding under the Amended and
Restated Subordinated Secured Promissory Note, dated the date hereof, in the
face principal amount of $12,000,000 executed by Parent in favor of Xxxxxx (the
"Note") and may, in its sole discretion, defer and/or permitted the addition to
principal of accrued interest under the Note in excess of $1,000,000;
(ii) agree that each of the Subordinated Guaranty and Subordinated
Security Agreement remains in full force and effect and continues to be the
legal, valid and binding obligation of each of the Guarantors enforceable
against each of the Guarantors in accordance with its terms, except as expressly
modified by the relevant provisions of this Global Amendment; and
(iii) affirms that the Subordinated Guaranty guarantees all of the
present and future indebtedness owing by Parent to Lender under or in connection
with the Subordinated Loan Agreement and the other Loan Documents, as modified
by the Amendments, and the Subordinated Security Agreement secures all of the
payment and performance obligations of Parent and Guarantors, whether now
existing or hereafter arising, under the Subordinated Loan Agreement, the Note
or the Subordinated Guaranty, as modified by the Amendments.
[SIGNATURE PAGES FOLLOW]
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IN WITNESS WHEREOF, the undersigned Xxxxxx has executed this Global
Amendment as of the date first above written.
LENDER:
RONHOW, LLC, a Georgia limited liability company
By: Ronus, Inc., a Georgia corporation,
Managing Member
By: /s/ Xxxxxx X. Xxxxxxxx
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Name: Xxxxxx X. Xxxxxxxx
Title: President
IN WITNESS WHEREOF, the undersigned
Xxxxxx and Guarantors have executed
this Global Amendment as of the date
first above written.
PARENT:
HAROLD'S STORES, INC.
By: /s/ Xxx Xxxxxxxxx
Name: Xxx Xxxxxxxxx
Title: CEO
GUARANTORS:
HAROLD'S FINANCIAL CORPORATION
By: /s/ Xxx Xxxxxxxxx
Name: Xxx Xxxxxxxxx
Title: CEO
XXXXXX'S DIRECT, INC.
By: /s/ Xxx Xxxxxxxxx
Name: Xxx Xxxxxxxxx
Title: CEO
HAROLD'S STORES OF TEXAS, L.P.
By: HSTX, Inc., General Partner
By: /s/ Xxx Xxxxxxxxx
Name: Xxx Xxxxxxxxx
Title: CEO
XXXXXX'S OF XXXXXXX, INC.
By: /s/ Xxx Xxxxxxxxx
Name: Xxx Xxxxxxxxx
Title: CEO
THE CORNER PROPERTIES, INC.
By: /s/ Xxx Xxxxxxxxx
Name: Xxx Xxxxxxxxx
Title: CEO
XXXXXX'S DBO, INC.
By: /s/ Xxx Xxxxxxxxx
Name: Xxx Xxxxxxxxx
Title: CEO
HAROLD'S LIMITED PARTNERS, INC.
By: /s/ Xxx Xxxxxxxxx
Name: Xxx Xxxxxxxxx
Title: CEO
HSTX, INC.
By: /s/ Xxx Xxxxxxxxx
Name: Xxx Xxxxxxxxx
Title: CEO
Exhibit B
[attached]
RonHow, LLC
0000 Xxxxxxxxx Xxxxxxx
Xxxxx 000
Xxxxxxx, XX 00000
March 30, 2007
Xxxxxx's Stores, Inc.
000 Xxx Xxxxxx
Xxxxxx, XX 00000
Attn: Xxxx Xxxxxx, Chief Financial Officer
Dear Xxxx:
In conjunction with discussions among Xxxxxx's Stores, Inc. and its
majority investors regarding continued financial support for Xxxxxx's, the
parties have developed a short-term financing plan as outlined in the attached
summary term sheet.
Given Xxxxxx's immediate need for cash, XxxXxx is willing to make an
additional $2 million advance under the existing Subordinated Loan Agreement and
related note, each dated as of August 31, 2006. As a condition to making this
advance, XxxXxx is requiring that Xxxxxx's agree to the following:
1. Subject to the approval of Xxxxxx's senior lender, Xxxxx Fargo
Retail Finance II, LLC, interest will accrue on this $2 million
advance at a rate of 18.0% per annum. Upon such approval, the
18.0% per annum rate will be applied retroactively to the date of
the advance, in place of the 13.5% per annum rate otherwise
applicable pursuant to the current terms of the subordinated
note.
2. Xxxxxx's will use commercially reasonable efforts to obtain, as
promptly as practicable, the approval of Xxxxx Fargo for the
18.0% per annum interest rate on such advance.
3. Xxxxxx's will execute and deliver, and cause the guarantors of
the subordinated loan to execute and deliver, any and all
documents reasonably requested by XxxXxx to evidence the 18.0%
per annum interest rate accruing on the advance and the
continuing effectiveness of the guaranty and security provided by
the guarantors with respect to all of the indebtedness
outstanding under the subordinated debt facility, including this
additional advance.
4. Xxxxxx's will use commercially reasonable efforts to obtain, as
promptly as practicable, the consent and approval of Xxxxx Fargo
to all aspects of the proposed
short-term financing plan as described in the attached summary
term sheet that require Xxxxx Fargo's approval.
If Xxxxxx's is in agreement with the above conditions to the $2 million
advance, please execute the enclosed copy of this letter in the place indicated
below and return it to me.
Sincerely,
/s/ Xxxxxx X. Xxxxxxxx
-------------------------------
Xxxxxx X. Xxxxxxxx
President, Xxxxx, Inc.,
Managing Member of RonHow, LLC
Accepted and agreed to on behalf of Xxxxxx's Stores, Inc.
By: /s/ Xxxx X. Xxxxxx
-------------------------
Title: Chief Financial Officer
Date: March 30, 2007
Schedule 2.1(b)
[attached]
SCHEDULE 2.1(B)
TO
GLOBAL AMENDMENT
SUBSIDIARIES
PERCENTAGE OWNED BY
DIRECT SUBSIDIARY STATE OF ORGANIZATION HAROLD'S STORES, INC.
Harold's Financial Corporation Oklahoma 100%
Xxxxxx's Direct, Inc. Oklahoma 100%
Harold's Limited Partners, Inc. Oklahoma 100%
Xxxxxx's DBO, Inc. Texas 100%
HSTX, Inc. Texas 100%
Xxxxxx's of Xxxxxxx, Inc. Mississippi 100%
The Corner Properties, Inc. Oklahoma 100%
INDIRECT SUBSIDIARY STATE OF ORGANIZATION OWNED BY
Xxxxxx's Stores of Texas, L.P. Texas HSTX, Inc. is a 1% General Partner and
Harold's Limited Partners, Inc. is a
99% Limited Partner.
