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 XXXXX 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 Xxxxx 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
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
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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
Creditor's agreements with applicable third-parties, including, without
limitation, any deposit account control agreements to the extent for
the benefit of Senior Creditor and relating solely to the deposit
accounts of Parent or Guarantors and (ii) any landlord waiver or
agreement, third-party processor agreement, mortgagee waiver or
agreement, warehouseman agreement or freight forwarder agreement in
each instance to the extent permitted under applicable law and Senior
Creditor's agreements with applicable third-parties. None of the
foregoing provisions shall limit the ability of Senior Creditor to
transfer (including pursuant to a Permitted Refinancing), release,
adjust, foreclose,
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compromise or terminate its rights under or with respect to the Senior
Debt, the Senior Debt Documents or any collateral related thereto or
provided thereunder at the sole option of Senior Creditor. 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 and until such
time as the Subordinated Debt has been indefeasibly paid in full in
cash and all lending commitments under the Subordinated Debt Documents
have been terminated, any Distribution or other asset of the Parent or
any of the Guarantors received by Senior Creditor pursuant to the
Senior Security Documents shall be held by the Senior Creditor in trust
for the benefit of the Subordinated Creditor, and shall be promptly
paid over to the Subordinated Creditor. Any provision to the contrary
contained elsewhere in this Agreement notwithstanding, Senior Creditor
shall not have any duties or responsibilities to act for or in the
interest of Subordinated Creditor, nor shall Senior Creditor have or be
deemed to have any fiduciary relationship with Subordinated Creditor,
and no implied covenants, functions, responsibilities, duties,
obligations or liabilities shall be read into this Agreement or
otherwise exist against Senior Creditor; it being expressly understood
and agreed that the use of the word "agent" is for convenience only,
that Senior Creditor is merely providing an accommodation to
Subordinated Creditor for purposes of assisting in the perfection of
certain liens and security interests in the Controlled Collateral and
certain other assets granted to Subordinated Creditor pursuant to the
Subordinated Debt Documents. Senior Creditor shall have no obligation
to obtain or maintain possession or dominion over all or any portion of
the Controlled Collateral or to maintain any control agreement, access
arrangement or other agreement, and Senior Creditor may elect at any
time to forego such possession or dominion or release its claims or
interests in such Controlled Collateral or terminate any related
agreements providing access to or control over the assets of Parent or
any Guarantor. The Subordinated Creditor will indemnify, defend and
hold harmless (to the fullest extent permitted by law) the Senior
Creditor for any claims, suites, actions, investigations, proceedings,
damages and reasonable costs or expenses, in each including without
limitation reasonable attorneys fees, incurred by Senior Creditor
pursuant to this Section 2.6(b).
D. The last sentence of Section 3.2 of the Subordination Agreement is
hereby amended by amending and restating such sentence in its entirety as
follows:
Subordinated Creditor will, or will cause Parent to,
notify Senior Creditor of additional advances pursuant to the
Subordinated Debt Documents as required pursuant to the Senior Loan
Agreement (provided however prior notice shall not be required in the
event an advance of Subordinated Debt is made to pay interest then due
and payable in respect of the Subordinated Debt as permitted pursuant
to Section 2.3(d) above), and Subordinated Creditor covenants and
agrees to limit the principal amount of the Subordinated Debt to not
more than $12,000,000 plus the amount of any accrued but unpaid
interest that is added to the principal balance outstanding under the
Subordinated Note in accordance with the terms thereof (but any
increase above such amount shall continue to be subordinated under the
terms hereof.)
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E. The first sentence of Section 15 of the Subordination Agreement is
hereby amended by amending and restating such sentence in its entirety as
follows:
This Agreement shall remain in full force and effect
until the indefeasible payment in full in cash of the Senior Debt and
the termination of all lending commitments under the Senior Debt
Documents after which this Agreement shall terminate without further
action on the part of the parties hereto; provided however, the
obligations of the Senior Creditor and the liability of the
Subordinated Creditor under Section 2.6(b) shall survive the
termination of this Agreement.
SECTION 3. REFERENCES TO SUBORDINATION AGREEMENT. All references to the
Subordination Agreement therein or in any of the Senior Loan Documents or
Subordinated Loan Documents shall be deemed a reference to the Subordination
Agreement as amended by this First Amendment. Except as expressly provided in
this First Amendment, the execution and delivery of this First 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
Subordination Agreement or any of the Senior Loan Documents or Subordinated Loan
Documents executed in connection therewith. To the extent not inconsistent
herewith, the Subordination Agreement and all of the Senior Loan Documents and
Subordinated Loan Documents executed by Senior Creditor, Subordinated Creditor,
Parent, and Guarantors in connection therewith shall remain in full force and
effect and are hereby ratified and confirmed by the parties thereto.
SECTION 4. EFFECTIVE DATE. This First Amendment shall become effective
as of its date and shall bind all parties only upon the execution and delivery
to the Senior Creditor and Subordinated Creditor by the Senior Creditor,
Subordinated Creditor, Parent and Guarantors, as applicable.
SECTION 5. REPRESENTATIONS AND WARRANTIES OF PARENT AND GUARANTORS.
Each of the Parent and Guarantors hereby represents and warrants to the Senior
Creditor and the Subordinated Creditor 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 First
Amendment in accordance with its terms. This First 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 First
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
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(iii) result in or require the creation or imposition of any
lien (except as permitted by the Senior Loan Documents and Subordinated
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 First Amendment, the representations and warranties of such party set forth
in the Subordination Agreement, the Senior Loan Documents, and the Subordinated
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 Senior Loan Documents or Subordinated
Loan Documents, other than as specifically waived herein, has occurred and is
continuing as of this date.
SECTION 6. REPRESENTATIONS AND WARRANTIES OF SENIOR AND SUBORDINATED
CREDITORS. Each of the Senior Creditor and the Subordinated Creditor hereby
represents and warrants to the other 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 First
Amendment in accordance with its terms. This First 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 First
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; or
(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.
C. That, after giving affect to the amendments set forth in
this First Amendment, the representations and warranties of such party set forth
in the Subordination Agreement are true and correct as of the date hereof as if
made on the date hereof.
SECTION 7. NO NOVATION. It is the intention of the parties hereto that
this First Amendment shall not constitute a novation of the Subordination
Agreement and shall in no way adversely affect or impair the validity of the
Senior Loan Documents or the Subordinated Loan Documents, it being the intention
of the parties hereto merely to amend the Subordination Agreement as expressly
set forth herein.
SECTION 8. WRITTEN CONSENT OF SENIOR CREDITOR. Senior Creditor hereby
gives its prior written consent to the amendments, modifications, and
supplements to the Subordinated Debt Documents set forth in that certain Amended
and Restated Subordinated Secured
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Promissory Note described in Section 2(A) above and the Global Amendment to
certain Subordinated Debt Documents, dated as of the date hereof.
SECTION 9. COUNTERPARTS. This First 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 10. GOVERNING LAW. THIS FIRST 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 NEW YORK.
SECTION 11. THIS FIRST AMENDMENT. This First Amendment is executed
pursuant to the Subordination Agreement and shall be construed, administered and
applied in accordance with all of the terms and provisions of the Subordination
Agreement.
[SIGNATURE PAGES FOLLOW]
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IN WITNESS WHEREOF, the undersigned Subordinated Lender has executed
this First Amendment as of the date first above written.
SUBORDINATED 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
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Title: President
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IN WITNESS WHEREOF, the undersigned Senior Creditor has executed this
First Amendment as of the date first above written.
SENIOR CREDITOR:
XXXXX FARGO RETAIL FINANCE II, LLC, a
Delaware limited liability company
By: /s/ Xxxx X. Xxxxxxxx
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Name: Xxxx X. Xxxxxxxx
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Title: Senior Vice President
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IN WITNESS WHEREOF, the undersigned Parent and Guarantors have executed this
First Amendment as of the date first above written.
PARENT:
HAROLD'S STORES, INC.
By: /s/ Xxx Xxxxxxxxx
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Name: Xxx Xxxxxxxxx
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Title: CEO
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GUARANTORS:
HAROLD'S FINANCIAL CORPORATION
By: /s/ Xxx Xxxxxxxxx
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Name: Xxx Xxxxxxxxx
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Title: CEO
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HAROLD'S DIRECT, INC.
By: /s/ Xxx Xxxxxxxxx
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Name: Xxx Xxxxxxxxx
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Title: CEO
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HAROLD'S STORES OF TEXAS, L.P.
By: HSTX, Inc., General Partner
By: /s/ Xxx Xxxxxxxxx
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Name: Xxx Xxxxxxxxx
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Title: CEO
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HAROLD'S OF XXXXXXX, INC.
By: /s/ Xxx Xxxxxxxxx
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Name: Xxx Xxxxxxxxx
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Title: CEO
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THE CORNER PROPERTIES, INC.
By: /s/ Xxx Xxxxxxxxx
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Name: Xxx Xxxxxxxxx
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Title: CEO
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HAROLD'S DBO, INC.
By: /s/ Xxx Xxxxxxxxx
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Name: Xxx Xxxxxxxxx
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Title: CEO
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HAROLD'S LIMITED PARTNERS, INC.
By: /s/ Xxx Xxxxxxxxx
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Name: Xxx Xxxxxxxxx
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Title: CEO
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HSTX, INC.
By: /s/ Xxx Xxxxxxxxx
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Name: Xxx Xxxxxxxxx
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Title: CEO
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