EXHIBIT 10.7
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AMENDMENT NO. 1 TO
OPTION AGREEMENTS
THIS AMENDMENT NO. 1 TO OPTION AGREEMENTS (this "FIRST AMENDMENT") is
executed and delivered on this 26th day of April, 2007, to be effective as of
such date, by and between RonHow, LLC, a Georgia limited liability company
("RONHOW"), and Harold's Stores, Inc., an Oklahoma corporation (the "COMPANY"),
with reference to the following circumstances:
A. RonHow and the Company are parties to that certain Option Agreement
dated effective as of August 31, 2006 (the "INITIAL OPTION AGREEMENT"), pursuant
to which RonHow holds an option to convert, in whole or in part, up to
$5,000,000 of principal amount outstanding under the Subordinated Loan Agreement
dated August 31, 2006, together with accrued and unpaid interest thereon, into
shares of the Company's Series 2006-B Preferred Stock.
B. RonHow and the Company are parties to that certain Option Agreement
dated effective as of January 4, 2007 (the "SECOND OPTION AGREEMENT," and
collectively with the Initial Option Agreement, the "OPTION AGREEMENTS"),
pursuant to which RonHow holds an option to convert, in whole or in part, up to
$2,000,000 of principal amount outstanding under the Subordinated Loan Agreement
dated August 31, 2006, together with accrued and unpaid interest thereon, into
shares of the Company's Series 2006-B Preferred Stock.
C. RonHow and the Company are simultaneously entering into an amendment
to the Subordinated Loan Agreement to provide for additional advances and to
provide for two tranches of subordinated loans bearing interest at different
rates: Tranche A Term Loan consisting of $7,000,000 in principal amount and
Tranche B Term Loan consisting of amounts advanced in excess of such amount.
D. RonHow and the Company have entered into that certain Preferred
Stock Purchase Agreement dated of even date herewith (the "PURCHASE AGREEMENT"),
pursuant to which RonHow has agreed to purchase from the Company, and the
Company has agreed to sell to RonHow, shares of the Company's Series 2007-A
Senior Preferred Stock in exchange for the surrender by RonHow of its rights to
receive payment for, and for the cancellation of, an amount of principal of the
Tranche A Term Loan outstanding under the Subordinated Loan Agreement, as
amended, equal to $2,000,000.00.
E. The parties desire to (i) amend the Initial Option Agreement to
cancel and terminate (without consideration) the option to acquire 2,000 shares
of the Company's Series 2006-B Preferred Stock subject to the Initial Option
Agreement and (ii) amend the Option Agreements to remove references to the XXX
Amendment, such references no longer being required to effect the transactions
contemplated by the Option Agreements as a result of certain changes effected by
that certain Fourth Amendment to Investor Rights Agreement dated of even date
herewith by and among the Company, Inter-Him, N.V., W. Xxxxxx Xxxxxx and RonHow.
F. Capitalized terms used in this First Amendment without further
definition have the meanings ascribed to them in the Option Agreements.
In consideration of the premises, it is agreed that the Option
Agreements shall be and are amended as follows:
1. DEFINITION OF INITIAL ADVANCE. The following new recital paragraph
is added to the Initial Option Agreement:
E. Effective as of August 31, 2006, pursuant to the
terms of the Subordinated Loan Agreement, RonHow made an
initial advance to the Company in the amount of $5,000,000
(the "Initial Advance"), the Company's obligation to repay
$2,000,000 of the principal of which was cancelled pursuant to
the terms of that certain Preferred Stock Purchase Agreement
dated April 26, 2007, by and between the Company and RonHow,
such that the Initial Advance now has a principal balance
outstanding of $3,000,000.
2. AMENDMENT TO OPTION. Section 1.1 of the Initial Option Agreement is
amended and restated in its entirety as follows:
1.1 OPTION. Subject to the terms and conditions of
this Agreement, the Company grants to RonHow an option (the
"Option") to purchase at a price per share ("Purchase Price
Per Share") of One Thousand Dollars ($1,000.00), up to 3,000
shares, plus such additional shares as may be purchased in
exchange for forgiveness of accrued but unpaid interest, or
interest converted to principal, pursuant to the Initial
Advance (the "2006-B Shares"), of authorized but unissued
shares of its Series 2006-B Preferred Stock which may be
exercised at any time prior to the repayment in full of the
Tranche A Term Loan under the Subordinated Loan Agreement, as
amended. RonHow may purchase from the Company such number of
2006-B Shares as is equal to the principal amount of the
Initial Advance outstanding, plus any accrued but unpaid
interest thereon or any interest converted to principal, at
the date of Closing divided by the Purchase Price Per Share.
RonHow may exercise the Option in whole or in part at any time
after the date hereof and prior to the repayment in full by
the Company of amounts deemed due under the Initial Advance by
giving written notice of exercise to the Company. If the
Company intends to repay all or any part of the principal
balance deemed due under the Initial Advance, it shall give at
least ten (10) days' written notice to RonHow and during such
ten (10) day period, RonHow may exercise the Option in whole
or in part. Payment of the Purchase Price for the 2006-B
Shares which RonHow purchases by any exercise of the Option
will be paid by RonHow by forgiving such portion of the
Initial Advance principal amount and accrued but unpaid
interest deemed to be due pursuant to such Initial Advance
equal to the purchase price of the 2006-B Shares
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purchased. RonHow will execute and deliver such documents and
instruments to evidence such forgiveness as the Company may
request.
3. INVESTOR RIGHTS AGREEMENT. The following sections of each of the
Option Agreements are amended and restated in their entirety as follows:
1.3 CLOSING. The closing of the purchase and sale of
the 2006-B Shares (the "CLOSING") upon any exercise of the
Option shall occur within ten (10) business days after the
date of the Option exercise date. At the Closing, the Company
shall deliver to RonHow certificates representing the 2006-B
Shares that RonHow is purchasing against payment of the
Purchase Price therefor as provided above. The obligation of
the Company to close the sale of the 2006-B Shares shall be
subject to the satisfaction or waiver of any conditions for
such sale under the Subordinated Loan Agreement.
2.4 AUTHORIZATION. All corporate action on the part
of the Company necessary for the authorization, execution,
delivery and performance of this Agreement by the Company, the
authorization, sale, issuance (or reservation of issuance) and
delivery of the 2006-B Shares and Dividend Stock and the
Underlying Common Stock with respect thereto and the
performance of all of the Company's obligations hereunder have
been taken prior to the date hereof. This Agreement
constitutes a valid and legally binding obligation of the
Company, enforceable in accordance with its terms, subject to
the laws of general application relating to bankruptcy,
insolvency and the relief of debtors and the rules of law
governing specific performance, injunctive relief or other
equitable remedies.
3.5 AUTHORIZATION. RonHow has all requisite legal
power and authority to execute and deliver this Agreement and
to carry out and perform its obligations under the terms of
this Agreement and the transactions contemplated hereby. This
Agreement constitutes a valid and legally binding obligation
of RonHow, enforceable in accordance with its terms, subject
to laws of general application relating to bankruptcy,
insolvency and the relief of debtors and rules of law
governing specific performance, injunctive relief or other
equitable remedies.
4. NO OTHER AMENDMENTS. Except as provided in this First Amendment, all
other provisions of each of the Option Agreements shall continue in full force
and effect unless and until respectively amended pursuant to the terms of
Section 5.8 thereof.
SIGNATURE PAGE FOLLOWS THIS PAGE.
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This Amendment No. 1 to Option Agreements is executed and delivered as
of the date previously set forth.
"COMPANY" HAROLD'S STORES, INC., an Oklahoma corporation
By: /s/ Xxxx X. Xxxxxx
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Xxxx X. Xxxxxx, Chief Financial Officer
"RONHOW" RONHOW, LLC, a Georgia limited liability company
By: Ronus, Inc., a Georgia corporation, its
Managing Member
By: /s/ Xxxxxx X. Xxxxxxxx
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Xxxxxx X. Xxxxxxxx, President
