Subordinated Loan Agreement (2006)Full Document 

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THIS LOAN AGREEMENT AND THE RIGHTS AND OBLIGATIONS EVIDENCED HEREBY, INCLUDING
THE RIGHT TO DEMAND PAYMENT HEREUNDER AND TO ENFORCE ANY INSTRUMENTS SECURING
THIS LOAN AGREEMENT, ARE MADE EXPRESSLY SUBJECT AND SUBORDINATE TO CERTAIN
RIGHTS OF THE HOLDER OF THE INDEBTEDNESS AND OTHER OBLIGATIONS OWING FROM
TIME TO TIME BY HAROLD'S STORES, INC. AND CERTAIN OF ITS SUBSIDIARIES PURSUANT
TO A LOAN AND SECURITY AGREEMENT ENTERED INTO AS OF FEBRUARY 5, 2003, BETWEEN
HAROLD'S STORES, INC. AND CERTAIN OF ITS SUBSIDIARIES AND WELLS FARGO RETAIL
FINANCE II, LLC, AS THE SAME MAY BE AMENDED, MODIFIED, RESTATED AND SUPPLEMENTED
FROM TIME TO TIME, ALL AS MORE PARTICULARLY PROVIDED PURSUANT TO THE TERMS OF
THE SUBORDINATION AND INTERCREDITOR AGREEMENT ENTERED INTO IN AUGUST 2006, AMONG
HAROLD'S STORES, INC. AND CERTAIN OF ITS SUBSIDIARIES, RONHOW, LLC AND WELLS
FARGO RETAIL FINANCE II, LLC, AS THE SAME MAY BE AMENDED, MODIFIED, RESTATED AND
SUPPLEMENTED FROM TIME TO TIME, THE TERMS OF WHICH SUBORDINATION AND
INTERCREDITOR AGREEMENT BY THIS REFERENCE ARE MADE A PART OF THIS LOAN
AGREEMENT. PAYEE AND EACH OTHER HOLDER, ASSIGNEE OR TRANSFEREE OF THIS LOAN
AGREEMENT, BY ACCEPTANCE HEREOF, AGREE TO BE BOUND BY SUCH SUBORDINATION AND
INTERCREDITOR AGREEMENT.

                           SUBORDINATED LOAN AGREEMENT

         THIS SUBORDINATED LOAN AGREEMENT ("Agreement"), dated as of August 31,
2006, is made and entered into on the terms and conditions hereinafter set
forth, by and between HAROLD'S STORES, INC., an Oklahoma corporation
("Borrower"), and RONHOW, LLC, a Georgia limited liability company ("Lender").

                                    RECITALS:

         WHEREAS, Borrower has requested that Lender make available to Borrower
a term loan in the original principal amount of up to Ten Million Dollars
($10,000,000) (the "Loan") on the terms and conditions hereinafter set forth,
and for the purpose(s) hereinafter set forth; and

         WHEREAS, in order to induce Lender to make the Loan to Borrower,
Borrower has made certain representations to Lender; and

         WHEREAS, Lender, in reliance upon the representations and inducements
of Borrower, has agreed to make the Loan upon the terms and conditions
hereinafter set forth.

                                   AGREEMENT:

         NOW, THEREFORE, in consideration of the agreement of Lender to make the
Loan, the mutual covenants and agreements hereinafter set forth, and other good
and valuable



consideration, the receipt and sufficiency of which are hereby acknowledged,
Borrower and Lender hereby agree as follows:

                                    ARTICLE 1
                                    THE LOAN

1.1      Evidence of Loan Indebtedness and Repayment. Subject to the terms and
         conditions contained herein, the Lender shall make advances under the
         Loan to Borrower by wire transfer in immediately available funds. The
         Loan shall be evidenced by a Subordinated Secured Promissory Note in
         the original principal amount of Ten Million Dollars ($10,000,000),
         dated of even date herewith, executed by Borrower in favor of Lender
         (the "Note"). The Loan shall be payable in accordance with the terms of
         the Note. The Note, this Agreement and any other instruments and
         documents executed by Borrower or any guarantor of Borrower now or
         hereafter evidencing, securing or in any way related to the
         indebtedness evidenced by the Note are herein individually referred to
         as a "Loan Document" and collectively referred to as the "Loan
         Documents." The term "Obligations" as used herein shall refer to (a)
         all obligations of Borrower under this Agreement and the Note and (b)
         all future advances made by Lender for taxes, levies, insurance and
         preservation of the collateral securing Borrower's obligations under
         the Loan Documents and all attorneys' fees, court costs and expenses of
         whatever kind incident to the collection of any of such obligations and
         the enforcement and protection of the security interest created by the
         other Loan Documents.

1.2      Advances under the Loan. Subject to satisfaction of the conditions
         specified in Section 4.1 of this Agreement and the provisions of
         Section 1.4, Lender shall make an initial advance under the Loan of
         $4,700,000, and upon Borrower's request, shall make an additional
         advance of $300,000. Thereafter, Lender shall not be obligated to make
         any further advance to Borrower under the Loan. Any such further
         advance shall be made at Lender's sole discretion and subject to such
         conditions as Lender shall specify.

1.3      Prepayment. Borrower may prepay the indebtedness evidenced by the Note
         in whole or in part at any time and from time to time, without penalty
         or premium.

1.4      Use of Proceeds. Borrower shall use the proceeds of the initial advance
         under the Loan to pay principal and interest due under the Senior Loan.
         The additional advance of $300,000 will be deposited in a deposit
         account maintained by Borrower that is not swept by the Senior Lender
         and may be used for analysis and funding of Borrower's deregistration
         under the Securities Exchange Act of 1934 in a manner approved by
         Borrower'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.

1.5      Subordinated Loan. The obligations of Borrower under this Loan
         Agreement and the obligations of the Guarantors under the Subordinated
         Guaranty are subordinated to certain obligations of Borrower and the
         Guarantors pursuant to the terms of a


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