Document:

EXHIBIT 10.2
                                                                    ------------

                      REAFFIRMATION OF CONTINUING GUARANTY
                      ------------------------------------

         The undersigned,

                  (a) THE CORNER PROPERTIES, INC., an Oklahoma corporation,

                  (b) HAROLD'S DBO, INC., a Texas corporation,

                  (c) HAROLD'S LIMITED PARTNERS, INC., an Oklahoma corporation,

                  (d) HAROLD'S OF WHITE FLINT, INC., a Maryland corporation,

                  (e) HSGA, INC., a Georgia corporation, and

                  (f) HSTX, INC., a Texas corporation,

have executed that certain Continuing Guaranty and Security Agreement, dated as
of February 5, 2003 (the "Guaranty"), in favor of Wells Fargo Retail Finance II,
LLC, a Delaware limited liability company formerly known as Wells Fargo Retail
Finance, LLC, as collateral agent and administrative agent ("Agent"), under and
in accordance with that certain Loan and Security Agreement (as amended from
time to time, the "Loan Agreement"), dated as of February 5, 2003, by and among
Agent, the lenders that are signatories thereto ("Lenders"), and each of the
following Persons: (a) HAROLD'S STORES, INC., (b) HAROLD'S FINANCIAL
CORPORATION, (c) HAROLD'S DIRECT, INC., (d) HAROLD'S OF TEXAS, L.P., (e)
HAROLD'S OF GEORGIA, L.P., and (f) HAROLD'S OF JACKSON, INC. (Capitalized terms
used herein, not otherwise defined herein, shall have the meanings assigned to
such terms in the Loan Agreement).

         The undersigned hereby (i) consent and agree to the terms and
provisions of Amendment No. 5 to Loan and Security Agreement (the "Amendment"),
dated as of August 31, 2006, and (ii) agree that the Guaranty remains in full
force and effect and continues to be the legal, valid and binding obligation of
each of the undersigned enforceable against each of the undersigned in
accordance with its terms.

         Furthermore, the undersigned hereby agree and acknowledge that (a) the
Guaranty is not subject to any claims, defenses or offsets, (b) nothing
contained in the Amendment shall adversely affect any right or remedy of Agent
or Lenders under the Guaranty or any agreement executed by the undersigned in
connection therewith, (c) the execution and delivery of the Amendment or any
agreement entered into by Agent in connection therewith shall in no way reduce,
impair or discharge any obligations of the undersigned pursuant to the Guaranty
and shall not constitute a waiver by Agent or Lenders of any of Agent's or
Lenders' rights against the undersigned under the Guaranty, (d) the consent of
the undersigned is not required to the effectiveness of the Amendment and (e) no
consent by the undersigned is required for the effectiveness of any future
amendment, modification, forbearance or other action with respect to the Loan
Agreement or any present or future Loan Document (other than the Guaranty). In
addition to the foregoing, each of the undersigned hereby reaffirms and
continues all liens, assignments, pledges and security interests granted or made
by the undersigned pursuant to the Guaranty. Each of the undersigned Guarantors
hereby consents and agrees to the release

<PAGE>

provided by Borrowers at Section 6.10 of the Amendment, and such release is
hereby incorporated into this Reaffirmation and provided by each of the
undersigned Guarantors for the benefit of Agent and Lenders as though set forth
in its entirety herein.

<PAGE>

         Executed on August 31, 2006.

                                       THE CORNER PROPERTIES, INC., an Oklahoma
                                       corporation

                                       By: /s/Leonard M. Snyder
                                           --------------------------------
                                       Name:  Leonard M. Snyder
                                       Title: Interim CEO

                                       HAROLD'S DBO, INC., a Texas corporation

                                       By: /s/ Leonard M. Snyder
                                           --------------------------------
                                       Name:  Leonard M. Snyder
                                       Title: Interim CEO

                                       HAROLD'S LIMITED PARTNERS, INC., an
                                       Oklahoma corporation

                                       By: /s/ Leonard M. Snyder
                                           --------------------------------
                                       Name:  Leonard M. Snyder
                                       Title: Interim CEO

                                       HAROLD'S OF WHITE FLINT, INC., a Maryland
                                       corporation

                                       By: /s/ Leonard M. Snyder
                                           --------------------------------
                                       Name:  Leonard M. Snyder
                                       Title: Interim CEO

                                       HSGA, INC., a Georgia corporation

                                       By: /s/ Leonard M. Snyder
                                           --------------------------------
                                       Name:  Leonard M. Snyder
                                       Title: Interim CEO

                                       HSTX, INC., a Texas corporation

                                       By: /s/ Leonard M. Snyder
                                           --------------------------------
                                       Name:  Leonard M. Snyder
                                       Title: Interim CEOExhibit 10.3

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(S) 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

<PAGE>

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

                                        2
<PAGE>

         Subordination and Intercreditor Agreement, dated as of even date
         herewith, entered into by and among Lender, Borrower, Guarantors and
         Wells Fargo Retail Finance II, LLC, as Agent for the lenders under the
         Senior Loan Agreement (the "Intercreditor Agreement"). Capitalized
         terms used and not otherwise defined in this Agreement shall have the
         meanings assigned to them in the Intercreditor Agreement.

1.6      Security. The Loan shall be secured by (i) a Subordinated Guaranty,
         dated as of even date herewith, made by each of the entities listed on
         Exhibit A to this Agreement (each, a "Guarantor" and collectively, the
         "Guarantors") and (ii) the grant by Borrower and each of the Guarantors
         of a subordinated security title, lien or security interest in all of
         the "Collateral" now owned or hereafter acquired by Borrower and each
         Guarantor as such term is defined in the Senior Loan Agreement and the
         Senior Guaranty. As soon as reasonably practicable after the date
         hereof, Borrower shall, and shall cause each of the Guarantors, to
         make, execute, endorse, acknowledge and deliver any and all documents
         and instruments reasonably requested by Lender to effectuate and
         evidence the grant by Borrower and the Guarantors of such subordinated
         security title, lien or security interest in such "Collateral" and to
         perfect and maintain the validity and priority of such security title,
         liens and security interests, including, without limitation such stock
         pledge, copyright, trademark and other security agreements, collateral
         access agreements bailee acknowledgements, processor agreements and
         landlord consents as Lender shall reasonably request, all on such terms
         and conditions as are reasonably satisfactory to Lender and consistent
         with the terms of the Intercreditor Agreement.

                                    ARTICLE 2
                         REPRESENTATIONS AND WARRANTIES

2.1      Borrower's Representations. Borrower hereby represents and warrants to
         Lender as follows:

                  (a) Corporate Status. Borrower is a corporation duly
         organized, validly existing and in good standing under the laws of the
         State of Oklahoma; and has the corporate power to own and operate its
         properties, to carry on its business as now conducted and to enter into
         and to perform its obligations under this Agreement and the other Loan
         Documents to which it is a party. Borrower is duly qualified to do
         business and in good standing in each state in which a failure to be so
         qualified would have a material adverse effect on Borrower's financial
         condition or its ability to conduct its business in the manner now
         conducted.

                  (b) Subsidiaries. Schedule 2.1(b) hereto is a complete list of
         each corporation, partnership, joint venture or other business
         organization (the "Subsidiary" or, with respect to all such
         organizations, the "Subsidiaries ") in which Borrower or any Subsidiary
         owns, directly or indirectly, any capital stock or other equity
         interest, or with respect to which Borrower or any Subsidiary, alone or
         in combination with others, is in a control position, which list shows
         the jurisdiction of incorporation or other organization and the
         percentage of stock or other equity interest of each Subsidiary owned
         by Borrower. Each

                                        3
<PAGE>

         Subsidiary which is a corporation is duly organized, validly existing
         and in good standing under the laws of the jurisdiction of its
         incorporation. Each Subsidiary which is not a corporation is, duly
         organized and validly existing under the laws of the jurisdiction of
         its organization. The outstanding capital stock of each Subsidiary
         which is a corporation is validly issued, fully paid and nonassessable.
         Borrower and the Subsidiaries have good and valid title to the equity
         interests in the Subsidiaries shown as owned by each of them on
         Schedule 2.1(b), free and clear of all liens, claims, charges,
         restrictions, security interests, equities, proxies, pledges or
         encumbrances of any kind, other than under the Senior Loan Documents.
         Except where otherwise indicated herein or unless the context otherwise
         requires, any reference to Borrower herein shall include Borrower and
         all of its Subsidiaries.

                  (c) Authorization. Borrower has full legal right, power and
         authority to conduct its business and affairs. Borrower has full legal
         right, power and authority to enter into and perform its obligations
         under the Loan Documents, without the consent or approval of any other
         person, firm, governmental agency or other legal entity. The execution
         and delivery of this Agreement, the borrowing hereunder, the execution
         and delivery of each Loan Document to which Borrower is a party, and
         the performance by Borrower of its obligations thereunder are within
         the corporate powers of Borrower and have been duly authorized by all
         necessary corporate action properly taken and Borrower has received all
         necessary governmental approvals, if any, that are required. The
         officer(s) executing this Agreement, the Note and all of the other Loan
         Documents to which Borrower is a party are duly authorized to act on
         behalf of Borrower.

                  (d) Validity and Binding Effect. This Agreement and the other
         Loan Documents are the legal, valid and binding obligations of the
         Borrower, enforceable in accordance with their respective terms,
         subject to limitations imposed by bankruptcy, insolvency, moratorium or
         other similar laws affecting the rights of creditors generally or the
         application of general equitable principles.

                  (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 share 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") and 25,000 shares of which are presently
         designated as Series 2006-B Preferred Stock (the "Series 2006-B
         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. 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

                                        4
<PAGE>

         granted to RonHow, LLC to convert certain loan participations into such
         shares. 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) No Conflicts. Consummation of the transactions
         contemplated hereby and the performance of the obligations of Borrower
         under and by virtue of the Loan Documents do not conflict with, and
         will not result in any breach of, or constitute a default or trigger a
         lien under, any mortgage, security deed or agreement, deed of trust,
         lease, bank loan or credit agreement, corporate charter or bylaws,
         agreement or certificate of limited partnership, partnership agreement,
         license, franchise or any other instrument or agreement to which
         Borrower is a party or by which Borrower or its respective properties
         may be bound or affected or to which Borrower has not obtained an
         effective waiver.

                  (g) Litigation. There are no actions, suits, arbitrations,
         administrative hearings or other proceedings pending, or, to the
         knowledge of Borrower threatened, against or affecting Borrower or any
         of Borrower's property, which individually or in the aggregate, if
         adversely determined would have a material adverse effect on Borrower's
         financial condition or its ability to conduct its business in the
         manner now conducted, or involving the validity or enforceability of
         any of the Loan Documents at law or in equity, or before any
         governmental or administrative agency.

                  (h) Financial Statements. The most recent financial statements
         of Borrower filed with the Securities Exchange Commission are true and
         correct in all material respects, have been prepared on the basis of
         generally accepted accounting principles consistently applied, and
         fairly present the financial condition of Borrower as of the date(s)
         thereof. No material adverse change has occurred in the financial
         condition of Borrower since the date(s) thereof, and no additional
         borrowings have been made by Borrower since the date(s) thereof other
         than advances under the Senior Loan.

                  (i) Other Agreements, No Defaults. Borrower is not in default
         in any respect in the performance, observance or fulfillment of any of
         the obligations, covenants or conditions contained in any agreement or
         instrument material to its business to which it is a party, including
         but not limited to this Agreement and the other Loan Documents, and no
         other default or event has occurred and is continuing that with notice
         or the passage of time or both would constitute a default or event of
         default under any of same.

                  (j) Debt. Schedule 2.1(j) is a complete and correct list of
         all credit agreements, indentures, purchase agreements, promissory
         notes and other evidences of indebtedness, guaranties, capital leases
         and other instruments, agreements and arrangements presently in effect
         providing for or relating to extensions of credit

                                        5
<PAGE>

         (including agreements and arrangements for the issuance of letters of
         credit or for acceptance financing) in respect of which the Borrower or
         any of its properties is in any manner directly or contingently
         obligated and the maximum principal or face amounts of the credit in
         question that are outstanding and that can be outstanding are correctly
         stated, and all liens of any nature given or agreed to be given as
         security therefor are correctly described or indicated in Schedule
         2.1(j).

                  (k) Taxes. Borrower has filed or caused to be filed all tax
         returns that are required to be filed (except for returns that have
         been appropriately extended), and has paid, or will pay when due, all
         taxes shown to be due and payable on said returns and all other taxes,
         impositions, assessments, fees or other charges imposed on it by any
         governmental authority, agency or instrumentality, prior to any
         delinquency with respect thereto (other than taxes, impositions,
         assessments, fees and charges currently being contested in good faith
         by appropriate proceedings, for which appropriate amounts have been
         reserved). No tax liens have been filed against Borrower or any of its
         property.

                                    ARTICLE 3
                            COVENANTS AND AGREEMENTS

         Borrower covenants and agrees that during the term of this Agreement:

3.1      Payment of Obligations. Borrower shall pay the indebtedness evidenced
         by the Note according to the terms thereof, and shall timely pay or
         perform, as the case may be, all of the other obligations of Borrower
         to Lender under the Loan Documents and any extensions, modifications,
         consolidations and/or renewals thereof.

3.2      Financial Statements and Reports.  Borrower shall furnish to Lender

                  (a) as soon as practicable and in any event within ninety (90)
         days after the end of each fiscal year of Borrower, an audited balance
         sheet of Borrower as of the close of such fiscal year, an audited
         statement of operations of Borrower as of the close of such fiscal year
         and an audited statement of cash flows for Borrower for such fiscal
         year, prepared in accordance with generally accepted accounting
         principles consistently applied and accompanied by an unqualified audit
         report prepared by an independent certified public accountant
         acceptable to Lender showing the financial condition of Borrower at the
         close of such fiscal year and the results of its operations during such
         fiscal year and accompanied by a certificate of the President of
         Borrower, stating that to the best of the knowledge of such officer,
         Borrower has kept, observed, performed and fulfilled each covenant,
         term and condition of this Agreement and the other Loan Documents
         during the preceding fiscal year and that no Event of Default has
         occurred and is continuing (or if an Event of Default has occurred and
         is continuing, specifying the nature of same, the period of existence
         of same and the action Borrower proposes to take in connection
         therewith),

                  (b) within forty-five (45) days of the end of each quarter, a
         balance sheet of Borrower as of

                                        6
<PAGE>

         the close of such quarter and a statement of operations of Borrower as
         of the close of such quarter, all in reasonable detail, and prepared
         substantially in accordance with generally accepted accounting
         principles consistently applied (except for the absence of footnotes
         and subject to year-end adjustments), and

                  (c) with reasonable promptness, such other financial data,
         including without limitation, accounts receivable agings, as Lender may
         reasonably request.

3.3      Maintenance of Books and Records; Inspection. Borrower shall maintain
         its books, accounts and records in accordance with generally accepted
         accounting principles consistently applied, and after reasonable notice
         from Lender permit Lender, its officers and employees and any
         professionals designated by Lender in writing, at Borrower's expense,
         to visit and inspect any of its properties, corporate books and
         financial records, and to discuss its accounts, affairs and finances
         with Borrower or the principal officers of Borrower during reasonable
         business hours, all at such times as Lender may reasonably request;
         provided that no such inspection shall materially interfere with the
         conduct of Borrower's business.

3.4      Taxes and Assessments. Borrower shall (a) file all tax returns and
         appropriate schedules thereto that are required to be filed under
         applicable law, prior to the date of delinquency, (b) pay and discharge
         all taxes, assessments and governmental charges or levies imposed upon
         Borrower upon its income and profits or upon any properties belonging
         to it, prior to the date on which penalties attach thereto, and (c) pay
         all taxes, assessments and governmental charges or levies that, if
         unpaid, might become a lien or charge upon any of its properties;
         provided, however, that Borrower in good faith may contest any such
         tax, assessment, governmental charge or levy described in the foregoing
         clauses (b) and (c) so long as appropriate reserves in accordance with
         generally accepted accounting principles are maintained with respect
         thereto.

3.5      Corporate Existence. Borrower shall maintain its corporate existence
         and good standing in the state of its incorporation, and its
         qualification and good standing as a foreign corporation in each
         jurisdiction in which such qualification is necessary pursuant to
         applicable law.

3.6      Compliance with Law and Other Agreements. Except where the failure to
         do so would not materially adversely affect Borrower's operations,
         properties, financial condition or its ability to fulfill its
         obligations under the Loan Documents, Borrower shall maintain its
         business operations and property owned or used in connection therewith
         in compliance with (a) all applicable federal, state and local laws,
         regulations and ordinances governing such business operations and the
         use and ownership of such property, and (b) all agreements, licenses,
         franchises, indentures and mortgages to which Borrower is a party or by
         which Borrower or any of its properties is bound. Without limiting the
         foregoing, Borrower shall pay all of its indebtedness promptly in
         accordance with the terms thereof.

3.7      Notice of Default: Perceived Breach. Borrower shall give written notice
         to Lender of the occurrence of any default, event of default or Event
         of Default under this Agreement or any other Loan Document promptly
         upon the occurrence thereof.

                                        7
<PAGE>

3.8      Notice of Litigation. Borrower shall give notice, in writing, to Lender
         of (a) any actions, suits or proceedings, instituted by any persons
         whomsoever against Borrower or affecting any of the assets of Borrower
         wherein the amount at issue is in excess of Fifty Thousand Dollars
         ($50,000) and (b) any dispute, not resolved within sixty (60) days of
         the commencement thereof, between Borrower on the one hand and any
         governmental regulatory body on the other hand, which dispute might
         materially interfere with the normal operations of Borrower.

3.9      Conduct of Business. Borrower will continue to engage in a business of
         the same general type and manner as conducted by it on the date of this
         Agreement.

3.10     Guaranties; Loans. Without the prior written consent of Lender,
         Borrower shall not guarantee nor be liable in any manner, whether
         directly or indirectly, or become contingently liable after the date of
         this Agreement in connection with the obligations or indebtedness of
         any person or entity whatsoever, except for the endorsement of
         negotiable instruments payable to Borrower for deposit or collection in
         the ordinary course of business. Without the prior written consent of
         Lender, Borrower shall not make any loan, advance or extension of
         credit to any person other than in the normal course of its business.

3.11     Debt. Without the prior written consent of Lender, Borrower shall not
         create, incur, assume or suffer to exist indebtedness of any
         description whatsoever, excluding:

                  (a) the indebtedness evidenced by the Note;

                  (b) the endorsement of negotiable instruments payable to
         Borrower for deposit or collection in the ordinary course of business;

                  (c) trade payables incurred in the ordinary course of
         business;

                  (d) the indebtedness listed on Schedule 2.1(j) hereto;

                  (e) purchase money indebtedness and any refinancings, renewals
         or extensions thereof or of indebtedness permitted under clause (d), in
         each case to the extent permitted under the Senor Loan Agreement; and

                  (f) any refinancing, renewal or extension of the Senior Loan
         as contemplated by the Intercreditor Agreement.

3.12     No Liens. Without prior the written consent of Lender, Borrower shall
         not create, incur, assume or suffer to exist any lien, security
         interest, security title, mortgage, deed of trust or other encumbrance
         upon or with respect to any of its assets, now owned or hereafter
         acquired, except the following permitted liens (the "Permitted Liens"):

                  (a) liens in favor of Lender;

                  (b) liens permitted under the Senior Debt Documents.

                                        8
<PAGE>

3.13     Mergers, Consolidations, Acquisitions and Sales. Without the prior
         written consent of Lender, except for any Qualified De-registration
         Transaction (as defined in the Senior Loan Agreement), Borrower shall
         not (a) be a party to any merger, consolidation or corporate
         reorganization, nor (b) purchase or otherwise acquire all or
         substantially all of the assets or stock of, or any partnership or
         joint venture interest in, any other person, firm or entity, nor (c)
         sell, transfer, convey, or lease all or any substantial part of its
         assets, nor (d) create any Subsidiaries nor convey any of its assets to
         any Subsidiary.

                                    ARTICLE 4
                              CONDITIONS TO CLOSING

4.1      Closing of the Loan. The obligation of Lender to fund the Initial
         Advance under the Loan on the date hereof (the "Closing Date") is
         subject to the fulfillment, on or prior to the Closing Date, of each of
         the following conditions:

                  (a) Borrower shall have performed and complied in all material
         respects with all of the covenants, agreements, obligations and
         conditions required by this Agreement.

                  (b) Borrower shall have delivered to Lender a Note executed by
         Borrower, in form and substance satisfactory to Lender.

                  (c) Borrower shall have delivered to Lender a Stock Purchase
         Warrant executed by Borrower, in form and substance satisfactory to
         Lender.

                  (d) Borrower shall have delivered to Lender an Option
         Agreement, executed by Borrower, in form and substance satisfactory to
         Lender, granting to Lender an option to purchase shares of Borrower's
         Series 2006-B Preferred Stock in exchange for forgiveness of principal
         and accrued and unpaid interest under the Loan, on terms and conditions
         satisfactory to Lender.

                  (e) Borrower shall have delivered to Lender a Subordinated
         Guaranty executed by Guarantors, in form and substance satisfactory to
         Lender.

                  (f) Borrower shall have delivered to Lender a Subordinated
         Security Agreement executed by Borrower and Guarantors, in form and
         substance satisfactory to Lender.

                  (g) Borrower shall have delivered to Lender copies of the
         corporate charter and other publicly filed organizational documents of
         Borrower and each Guarantor, certified by the Secretary of State or
         other appropriate public official in the jurisdiction in which Borrower
         or such Guarantor is incorporated.

                  (h) Borrower shall have delivered to Lender certified copies
         of all corporate action taken by Borrower and each Guarantor, including
         resolutions of its Board of Directors, authorizing the execution,
         delivery and performance of the Loan Documents.

                                        9
<PAGE>

                  (i) Borrower shall have delivered to Lender a certificate as
         to the legal existence and good standing of the Borrower and each
         Guarantor, issued by the Secretary of State or other appropriate public
         official in the jurisdiction in which the Borrower or such Guarantor is
         incorporated.

                                    ARTICLE 5
                              DEFAULT AND REMEDIES

5.1      Events of Default. The occurrence of any of the following shall
         constitute an Event of Default hereunder:

                  (a) Default in the payment of the principal of or interest on
         the indebtedness evidenced by the Note in accordance with the terms of
         the Note, which default is not cured within five (5) days;

                  (b) Any misrepresentation by Borrower or any Guarantor as to
         any material matter hereunder or under any of the other Loan Documents,
         or delivery by Borrower or any Guarantor of any schedule, statement,
         resolution, report, certificate, notice or writing to Lender that is
         untrue in any material respect on the date as of which the facts set
         forth therein are stated or certified;

                  (c) Failure of Borrower or any Guarantor to perform any of its
         obligations, covenants or agreements under this Agreement, the Note or
         any of the other Loan Documents;

                  (d) Borrower or any Guarantor (i) shall generally not pay or
         shall be unable to pay its debts as such debts become due, or (ii)
         shall make an assignment for the benefit of creditors or petition or
         apply to any tribunal for the appointment of a custodian, receiver or
         trustee for it or a substantial part of its assets, or (iii) shall
         commence any proceeding under any bankruptcy, reorganization,
         arrangement, readjustment of debt, dissolution or liquidation law or
         statute of any jurisdiction, whether now or hereafter in effect, or
         (iv) shall have had any such petition or application filed or any such
         proceeding commenced against it that is not dismissed within thirty
         (30) days, or (v) shall indicate, by any act or intentional and
         purposeful omission, its consent to, approval of or acquiescence in any
         such petition, application, proceeding or order for relief or the
         appointment of a custodian, receiver or trustee for it or a substantial
         part of its assets, or (vi) shall suffer any such custodianship,
         receivership or trusteeship to continue undischarged for a period of
         sixty (60) days or more;

                  (e) An Event of Default (as defined in the Senior Debt
         Documents) shall occur under any of the Senior Debt Documents;

                  (f) Borrower or any Guarantor shall default in the timely
         payment or performance of any obligation now or hereafter owed to
         Lender in connection with any other indebtedness of Borrower or any
         Guarantor now or hereafter owed to Lender; or

                                       10
<PAGE>

                  (g) Borrower or any Guarantor shall have defaulted and
         continue to be in default in the timely payment of or performance of
         any covenant relating to any other indebtedness or obligation, which in
         the aggregate exceeds two hundred fifty thousand Dollars ($250,000) or
         materially adversely affects Borrower's or such Guarantor's operations,
         properties or financial condition.

         With respect to any Event of Default described above that is capable of
being cured and that does not already provide its own cure procedure (a "Curable
Default"), the occurrence of such Curable Default shall not constitute an Event
of Default hereunder if such Curable Default is fully cured and/or corrected
within thirty (30) days (ten (10) days, if such Curable Default may be cured by
payment of a sum of money) of notice thereof to Borrower given in accordance
with the provisions hereof, provided, however, that this provision shall not
require notice to Borrower and an opportunity to cure any Curable Default of
which Borrower has had actual knowledge for the requisite number of days set
forth.

5.2      Acceleration of Maturity; Remedies. Upon the occurrence of any Event of
         Default described in subsection 5.1(d), the indebtedness evidenced by
         the Note as well as any and all other indebtedness of Borrower to
         Lender shall be immediately due and payable in full; and upon the
         occurrence of any other Event of Default described above, Lender at any
         time thereafter may at its option accelerate the maturity of the
         indebtedness evidenced by the Note as well as any and all other
         indebtedness of Borrower to Lender; all without notice of any kind.
         Upon the occurrence of any such Event of Default and the acceleration
         of the maturity of the indebtedness evidenced by the Note:

                  (a) Lender shall be immediately entitled to exercise any and
         all rights and remedies possessed by Lender pursuant to the terms of
         the Note and all of the other Loan Documents; and

                  (b) Lender shall have any and all other rights and remedies
         that Lender may now or hereafter possess at law, in equity or by
         statute.

5.3      Remedies Cumulative; No Waiver. No right, power or remedy conferred
         upon or reserved to Lender by this Agreement or any of the other Loan
         Documents is intended to be exclusive of any other right, power or
         remedy, but each and every such right, power and remedy shall be
         cumulative and concurrent and shall be in addition to any other right,
         power and remedy given hereunder, under any of the other Loan Documents
         or now or hereafter existing at law, in equity or by statute. No delay
         or omission by Lender to exercise any right, power or remedy accruing
         upon the occurrence of any Event of Default shall exhaust or impair any
         such right, power or remedy or shall be construed to be a waiver of any
         such Event of Default or an acquiescence therein, and every right,
         power and remedy given by this Agreement and the other Loan Documents
         to Lender may be exercised from time to time and as often as may be
         deemed expedient by Lender.

5.4      Proceeds of Remedies. Any or all proceeds resulting from the exercise
         of any or all of the foregoing remedies shall be applied as set forth
         in the Loan Document(s) providing the

                                       11
<PAGE>

         remedy or remedies exercised, if none is specified, or if the remedy is
         provided by this Agreement, then as follows:

                  First, to the costs and expenses, including without limitation
         reasonable attorneys' fees and disbursements, incurred by Lender in
         connection with the exercise of its remedies;

                  Second, to the expenses of curing the default that has
         occurred, in the event that Lender elects, in its sole discretion, to
         cure the default that has occurred;

                  Third, to the payment of the Obligations of Borrower,
         including but not limited to the payment of the principal of and
         interest on the indebtedness evidenced by the Note, in such order of
         priority as Lender shall determine in its sole discretion; and

                  Fourth, the remainder, if any, to Borrower or to any other
         person lawfully thereunto entitled.

                                    ARTICLE 6
                                   TERMINATION

6.1      Termination of this Agreement. This Agreement shall remain in full
         force and effect until the payment in full by Borrower of the
         Obligations, at which time Lender shall cancel the Note and deliver it
         to Borrower; provided, however, that the indemnities provided in
         Section 7.17 shall survive the termination of this Agreement.

                                    ARTICLE 7
                                  MISCELLANEOUS

7.1      Performance By Lender. If Borrower shall default in the payment,
         performance or observance of any covenant, term or condition of this
         Agreement, which default is not cured within the applicable cure
         period, then Lender may, at its option, pay, perform or observe the
         same, and all payments made or costs or expenses incurred by Lender in
         connection therewith (including but not limited to reasonable
         attorneys' fees), with interest thereon at the highest default rate
         provided in the Note, shall be immediately repaid to Lender by Borrower
         and shall constitute a part of the Obligations. Lender shall be the
         sole judge of the necessity for any such actions and of the amounts to
         be paid.

7.2      Successors and Assigns Included in Parties. Whenever in this Agreement
         one of the parties hereto is named or referred to, the heirs, legal
         representatives, successors, successors-in-title and assigns of such
         parties shall be included, and all covenants and agreements contained
         in this Agreement by or on behalf of Borrower or by or on behalf of
         Lender shall bind and inure to the benefit of their respective heirs,
         legal representatives, successors-in-title and assigns, whether so
         expressed or not.

7.3      Costs and Expenses. Borrower agrees to pay all reasonable costs and
         expenses incurred by Lender in connection with the making of the Loan,
         including but not limited to filing

                                       12
<PAGE>

         fees, recording taxes and reasonable attorneys' fees, promptly upon
         demand of Lender. Borrower further agrees to pay all of the
         out-of-pocket costs and expenses incurred by Lender in connection with
         the collection of the Loan, amendment to the Loan Documents, or
         prepayment of the Loan, including but not limited to reasonable
         attorneys' fees, promptly upon demand of Lender.

7.4      Assignment. The Note, this Agreement and the other Loan Documents may
         be endorsed, assigned and/or transferred in whole or in part by Lender,
         and any such holder and/or assignee of the same shall succeed to and be
         possessed of the rights and powers of Lender under all of the same to
         the extent transferred and assigned. Borrower shall not assign any of
         its rights nor delegate any of its duties hereunder or under any of the
         other Loan Documents without the prior written consent of Lender.

7.5      Time of the Essence. Time is of the essence with respect to each and
         every covenant, agreement and obligation of Borrower hereunder and
         under all of the other Loan Documents.

7.6      Severability. If any provision(s) of this Agreement or the application
         thereof to any person or circumstance shall be invalid or unenforceable
         to any extent, the remainder of this Agreement and the application of
         such provisions to other persons or circumstances shall not be affected
         thereby and shall be enforced to the greatest extent permitted by law.

7.7      Interest and Loan Charges Not to Exceed Maximum Allowed by Law.
         Anything in this Agreement, the Note or any of the other Loan Documents
         to the contrary notwithstanding, in no event whatsoever, whether by
         reason of advancement of proceeds of the Loan, acceleration of the
         maturity of the unpaid balance of the Loan or otherwise, shall the
         interest and other charges agreed to be paid to Lender for the use of
         the money advanced or to be advanced hereunder exceed the maximum
         amounts collectible under applicable laws in effect from time to time.
         It is understood and agreed by the parties that, if for any reason
         whatsoever the interest or loan charges paid or contracted to be paid
         by Borrower in respect of the indebtedness evidenced by the Note shall
         exceed the maximum amounts collectible under applicable laws in effect
         from time to time, then ipso facto, the obligation to pay such interest
         and/or loan charges shall be reduced to the maximum amounts collectible
         under applicable laws in effect from time to time, and any amounts
         collected by Lender that exceed such maximum amounts shall be applied
         to the reduction of the principal balance of the indebtedness evidenced
         by the Note and/or refunded to Borrower so that at no time shall the
         interest or loan charges paid or payable in respect of the indebtedness
         evidenced by the Note exceed the maximum amounts permitted from time to
         time by applicable law.

7.8      Article and Section Headings; Defined Terms. Numbered and titled
         article and section headings and defined terms are for convenience only
         and shall not be construed as amplifying or limiting any of the
         provisions of this Agreement.

7.9      Notices. Any and all notices, elections or demands permitted or
         required to be made under this Agreement shall be in writing, signed by
         the party giving such notice, election

                                       13
<PAGE>

         or demand and shall be delivered personally, telecopied, or sent by
         certified mail or overnight via nationally recognized courier service
         (such as Federal Express), to the other party at the address set forth
         below, or at such other address as may be supplied in writing and of
         which receipt has been acknowledged in writing. The date of personal
         delivery or telecopy or two (2) business days after the date of mailing
         (or the next business day after delivery to such courier service), as
         the case may be, shall be the date of such notice, election or demand.
         For the purposes of this Agreement:

The Address of Lender is:        RonHow, LLC
                                 3290 Northside Parkway, Suite 250
                                 Atlanta, Georgia 30302
                                 Attention:  Bob Anderson
                                 Telecopy No.:  678-553-3911

with a copy to:                  Sutherland Asbill & Brennan LLP
                                 999 Peachtree Street, N.E.
                                 Atlanta, Georgia 30309-3996
                                 Attention:  Robert Pile
                                 Telecopy No.:  404-853-8806

The Address of Borrower is:      Harold's Stores, Inc.
                                 765 Asp Avenue
                                 Norman, Oklahoma 73069
                                 Attention: Jodi Taylor, Chief Financial Officer
                                 Telecopy No.: 405-366-2538

with a copy to:                  Crowe & Dunlevy
                                 2500 South McGee Street, Suite 140
                                 Norman, Oklahoma 73072-6705
                                 Attention: Gary C. Rawlinson
                                 Telecopy No.: 405-360-4002

7.10     Entire Agreement. This Agreement and the other Loan Documents between
         Borrower and Lender represent the entire agreement between the parties
         concerning the subject matter hereof, and all oral discussions and
         prior agreements are merged herein; provided, if there is a conflict
         between this Agreement and any other document executed
         contemporaneously herewith with respect to the Obligations, the
         provision of this Agreement shall control. The execution and delivery
         of this Agreement and the other Loan Documents by Borrower were not
         based upon any fact or material provided by Lender, nor was Borrower
         induced or influenced to enter into this Agreement or the other Loan
         Documents by any representation, statement, analysis or promise by
         Lender.

7.11     Governing Law and Amendments. This Agreement shall be construed and
         enforced under the laws of the State of Georgia applicable to contracts
         to be wholly performed in such State. No amendment or modification
         hereof shall be effective except in a writing executed by each of the
         parties hereto.

                                       14
<PAGE>

7.12     Survival of Representations and Warranties. All representations and
         warranties contained herein or in any of the Loan Documents or made by
         or furnished on behalf of Borrower in connection herewith or in any
         Loan Documents shall survive the execution and delivery of this
         Agreement and the other Loan Documents.

7.13     Counterparts. This Agreement may be executed in any number of
         counterparts and by different parties to this Agreement in separate
         counterparts, each of which when so executed shall be deemed to be an
         original and all of which taken together shall constitute one and the
         same Agreement.

7.14     Construction and Interpretation. Should any provision of this Agreement
         require judicial interpretation, the parties hereto agree that the
         court interpreting or construing the same shall not apply a presumption
         that the terms hereof shall be more strictly construed against one
         party by reason of the rule of construction that a document is to be
         more strictly construed against the party that itself or through its
         agent prepared the same, it being agreed that Borrower, Lender and
         their respective agents have participated in the preparation hereof.

7.15     General Indemnification. Borrower agrees to indemnify Lender, its
         officers, directors, employees and agents (individually, an
         "Indemnified Party" and collectively, the "Indemnified Parties") and
         each of them and agrees to hold each of them harmless from and against
         any and all losses, liabilities, damages, costs, expenses and claims of
         any and every kind whatsoever (except those arising solely by reason of
         the gross negligence or willful misconduct of an Indemnified Party)
         which may be imposed on, incurred by, or asserted against the
         Indemnified Parties or any of them arising by reason of any action or
         inaction or omission to any act legally required of Borrower (including
         as required pursuant hereto or pursuant to any other Loan Document).

7.16     Standard of Care; Limitation of Damage. Lender shall be liable to
         Borrower only for matters arising from this Agreement or otherwise
         related to the Obligations resulting from Lender's gross negligence or
         willful misconduct, and liability for all other matters is hereby
         waived. Lender shall not in any event be liable to Borrower for special
         or consequential damages arising from this Agreement or otherwise
         related to the Obligations.

7.17     Consent to Jurisdiction, Exclusive Venue. Borrower hereby irrevocably
         consents to the jurisdiction of the United States District Court for
         the Northern District of Georgia and of all Georgia state courts
         sitting in Fulton County, Georgia, for the purpose of any litigation to
         which Lender may be a party and which concerns this Agreement or the
         Obligations. It is further agreed that venue for any such action shall
         lie exclusively with courts sitting in Fulton County, Georgia, unless
         Lender agrees to the contrary in writing.

7.18     Waiver of Trial by Jury. LENDER AND BORROWER HEREBY KNOWINGLY AND
         VOLUNTARILY WITH THE BENEFIT OF COUNSEL WAIVE TRIAL BY JURY IN ANY
         ACTIONS, PROCEEDINGS, CLAIMS OR COUNTER-CLAIMS, WHETHER IN CONTRACT OR
         TORT OR OTHERWISE, AT LAW OR IN EQUITY, ARISING OUT

                                       15
<PAGE>

         OF OR IN ANY WAY RELATING TO THIS AGREEMENT OR THE LOAN DOCUMENTS.

         IN WITNESS WHEREOF, the parties hereto have executed this Agreement, or
have caused this Agreement to be executed by their duly authorized officers, as
of the day and year first above written.

                                       16
<PAGE>

                                LENDER:

                                RONHOW, LLC, a Georgia limited liability company

                                By: Ronus, Inc., a Georgia corporation,
                                Managing Member

                                By: /s/ Robert L. Anderson
                                    -------------------------------
                                    Robert L. Anderson, President

                                BORROWER:

                                HAROLD'S STORES, INC.,
                                an Oklahoma corporation

                                By: /s/ Leonard M. Snyder
                                    -------------------------------
                                Title: Interim CEO
                                       ----------------------------

                 [Signature Page to Subordinated Loan Agreement]

<PAGE>

                               INDEX OF SCHEDULES
                               ------------------

Schedule 2.1(b) - Subsidiaries
Schedule 2.1(j) - Debt and Liens

<PAGE>

                                    EXHIBIT A
                                    ---------

                                   Guarantors

Harold's Financial Corporation
Harold's Direct, Inc.
Harold's Stores of Texas, L.P.
Harold's of Jackson, Inc.
The Corner Properties, Inc.
Harold's Limited Partners, Inc.
Harold's DBO, Inc.
HSTX, Inc.

<PAGE>

                                 SCHEDULE 2.1(B)
                                       TO
                           SUBORDINATED LOAN AGREEMENT

                                  SUBSIDIARIES

Direct Subsidiaries:
--------------------

Harold's Financial Corporation

Harold's Direct, Inc.

Harold's Limited Partners, Inc.

Harold's DBO, Inc.

HSTX, Inc.

Harold's of Jackson, Inc.

The Corner Properties, Inc.

Indirect Subsidiary:
--------------------

Harold's Stores of Texas, L.P.(1)

-------------
(1)  HSTX, Inc. is a 1% General Partner and Harold's Limited Partners, Inc. is a
     99% Limited Partner.
<PAGE>

                                 SCHEDULE 2.1(J)
                                       TO
                           SUBORDINATED LOAN AGREEMENT

                                 DEBT AND LIENS

Debt:
-----

Borrowings under a line of credit from Wells Fargo Retail Finance with a maximum
availability equal to the lesser of $28,000,000 or of $22,000,000, plus
outstanding participant advances, bearing interest at a weighted-average
variable rate (7.54% at July 29, 2006) payable monthly, due February 2010, with
a balance due at July 29, 2006 of approximately $24,219,000, secured by
substantially all of the assets of Borrower.

Note payable to American Bank of Texas, secured by building and land, bearing
interest at a fixed rate of 6.85%, due in monthly installments of principal and
interest of approximately $12,000, with the final payment due February 2012 and
with a balance due at July 29, 2006 of approximately $1,225,640.

Capital lease obligation, secured by computer equipment, bearing interest at a
fixed rate of 4.00%, due in quarterly installments of principal and interest or
approximately $11,000, with final payment due October 2006 and with a balance
due at July 29, 2006, of approximately $7,254.

Capital lease obligations aggregating $450,000 with IBM for point of sale
computer equipment, secured by equipment, commencing October 1, 2005 and runs 24
months through September 2008.

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