Exhibit 10.1

 

December 12, 2005

 

The Rowe Companies and its subsidiaries

1650 Tysons Boulevard, Suite 710

McLean, Virginia 22102

 

Ladies and Gentlemen:

 

Reference is made to that certain Loan and Security Agreement dated May 15, 2002
(as at any time amended, the “Loan Agreement”), among The Rowe Companies, a
Nevada corporation, Rowe Diversified, Inc., a Delaware corporation, Rowe
Furniture Wood Products, Inc., a California corporation, Rowe Properties, Inc.,
a California corporation, Storehouse, Inc., a Georgia corporation, and Rowe
Furniture, Inc., a Virginia corporation (hereinafter referred to collectively as
“Borrowers” and individually as a “Borrower”), the various financial
institutions (collectively, “Lenders”) named in the Loan Agreement, and Bank of
America, N.A. (as successor-in-interest to Fleet Capital Corporation), in its
capacity as collateral and administrative agent for the Lenders (together with
its successors in such capacity, “Agent”). Capitalized terms used herein and not
otherwise defined herein shall have the meaning ascribed to such terms in the
Loan Agreement.

 

The parties hereto agree that the Loan Agreement is hereby amended by deleting
the definition of “Inventory Formula Amount” in Appendix A to the Loan;
Agreement and by substituting in lieu thereof the following:

 

Inventory Formula Amount - on any date of determination thereof, an amount equal
to the lesser of (i) the lesser of (a) (1) $24,000,000 during the period
commencing on September 9, 2005 and ending on October 31, 2005, (2) $22,000,000
during the period commencing on November 1, 2005 and ending on December 12,
2005, (3) $24,000,000 during the period commencing on December 13, 2005 and
ending on December 31, 2005, and (4) $22,000,000 at all times thereafter or
(b) 90% (or such lesser percentage as Agent may in its reasonable credit
judgment determine from time to time) of the net liquidation value of Eligible
Inventory (as determined from time to time based upon appraisals conducted by
Ozer Valuation Services or such other independent appraisers acceptable to
Agent) or (ii) the sum of (a) 16% (or such lesser percentage as Agent may in its
reasonable credit judgment determine from time to time) of the Value of Eligible
Inventory on such date consisting of raw materials plus (b) the lesser of
(1) $2,000,000 or (2) 45% (or such lesser percentage as Agent may in its
reasonable credit judgment determine from time to time) of the Value of Eligible
Inventory on such date consisting of work-in-process plus (c) 71% (or such
lesser percentage as Agent may in its reasonable credit judgment determine from
time to time) of the Value of Eligible Inventory on such date consisting of
retail and manufactured finished goods.

--------------------------------------------------------------------------------

In consideration of Agent’s and Lenders’ willingness to enter into this letter
amendment, Borrowers agree to pay to Agent, for the Pro Rata benefit of Lenders,
an amendment fee in the amount of up to $50,000, $25,000 of which shall be due
and payable in immediately available funds on the date hereof. The remaining
$25,000 of the amendment fee shall be due and payable in immediately available
funds on December 21, 2005 if Borrowers have not terminated the Loan Agreement
and the Commitments and satisfied in full all Obligations on or before such
date.

 

As of August 1, 2005, Fleet Capital Corporation (“FCC”) sold and assigned to
Bank of America, N.A. (“BofA”), and BofA purchased and assumed from FCC, an
interest in and to all of FCC’s rights and obligations as a Lender under the
Loan Agreement. In connection therewith, Fleet Capital Corporation resigned as
Agent under the Loan Agreement. By their signatures below, Lenders hereby
confirm the appointment of BofA as the successor Agent for the Lenders,
effective as of August 1, 2005, and Borrowers hereby confirm their
acknowledgment and agreement to the foregoing.

 

Each Borrower hereby: (i) ratifies and reaffirms the Obligations, each of the
Loan Documents and all of such Borrower’s covenants, duties, indebtedness and
liabilities under the Loan Documents; (ii) acknowledges and stipulates that
(a) the Loan Agreement and the other Loan Documents executed by such Borrower
are legal, valid and binding obligations of such Borrower that are enforceable
against such Borrower in accordance with the terms thereof, (b) all of the
Obligations are owing and payable without defense, offset or counterclaim (and
to the extent there exists any such defense, offset or counterclaim on the date
hereof, the same is hereby waived by such Borrower), (c) the security interests
and Liens granted by such Borrower in favor of Agent are duly perfected, first
priority security interests and Liens (except as otherwise specifically provided
in the Loan Documents) and (d) nothing contained herein shall be deemed to
constitute a waiver of any Defaults or Events of Default in existence on the
date of this letter agreement, including the Stipulated Defaults (as defined
below); (iii) represents and warrants to Agent and Lenders, to induce Agent and
Lenders to enter into this letter agreement, that (a) no Default or Event of
Default exists on the date hereof, except for Borrowers’ failure to achieve
Consolidated EBITDA of not less than $500,000 for the 3-month period ending
August 28, 2005, Borrowers’ failure to achieve Consolidated EBITDA of not less
than $1,800,000 for the 4-month period ending September 25, 2005 and Borrower’s
failure to achieve Consolidated EBITDA of not less than $2,700,000 for the
five-month period ending October 31, 2005 (the “Stipulated Defaults”), (b) the
execution, delivery and performance of this letter agreement have been duly
authorized by all requisite corporate action on the part of such Borrower,
(c) this letter agreement has been duly executed and delivered by such Borrower
and (d) all of the representations and warranties made by such Borrower in the
Loan Agreement are true and correct on and as of the date hereof; (iv) agrees
that, upon the effectiveness of this letter agreement, each reference in the
Loan Agreement to “this Agreement,” “hereunder,” or words of like import shall
mean and be a reference to the Loan Agreement, as amended by this letter
agreement; (v) agrees that this letter agreement shall be part of the Loan
Agreement and a breach of any representation, warranty or covenant herein shall
constitute an Event of Default; (vi) agrees that this letter agreement shall be
governed by and construed in accordance with the internal laws of the State of
Georgia; (vii) agrees that this letter agreement shall be binding upon and inure
to the benefit of the parties hereto and their respective successors and
assigns; (viii) agrees that, except as otherwise expressly provided in this
letter agreement, nothing herein shall be deemed to amend or

 

2

--------------------------------------------------------------------------------

modify any provision of the Loan Agreement or any of the other Loan Documents,
each of which shall remain in full force and effect; (ix) agrees that this
letter agreement is not intended to be, nor shall it be construed to create, a
novation or accord and satisfaction, and the Loan Agreement as herein modified
shall continue in full force and effect; (x) agrees that this letter agreement
may be executed in any number of counterparts and by different parties to this
letter agreement on separate counterparts, each of which, when so executed,
shall be deemed an original, but all such counterparts shall constitute one and
the same agreement; (xi) agrees that any signature delivered by a party by
facsimile transmission shall be deemed to be an original signature hereto;
(xii) agrees to take such further actions as Agent and Lenders shall reasonably
request from time to time in connection herewith to evidence or give effect to
the amendments set forth herein or any of the transactions contemplated hereby;
and (xiii) agrees that section titles and references used in this letter
agreement shall be without substantive meaning or content of any kind whatsoever
and are not a part of the agreements among the parties hereto. To the fullest
extent permitted by Applicable Law, the parties hereto each hereby waives the
right to trial by jury in any action, suit, counterclaim or proceeding arising
out of or related to this letter agreement.

 

The parties hereto have caused this letter agreement to be duly executed under
seal and delivered by their respective duly authorized officers on the date
first written above.

 

AGENT: BANK OF AMERICA, N.A. (as successor-in-interest to FLEET CAPITAL
CORPORATION)

By:

  /S/    DOUGLAS COWAN        

Title:

  Vice President LENDERS: BANK OF AMERICA, N.A. (as successor-in-interest to
FLEET CAPITAL CORPORATION)

By:

  /S/    DOUGLAS COWAN        

Title:

  Vice President

 

[Signatures continued on following page]

 

3

--------------------------------------------------------------------------------

        THE CIT GROUP/COMMERCIAL SERVICES, INC.             By:   /S/    JEFFREY
LEW                    

Title:

  Vice President         BORROWERS:

ATTEST:

      THE ROWE COMPANIES /s/    GARRY W. ANGLE               By:   /S/    GERALD
M. BIRNBACH         Garry W. Angle, Assistant Secretary           Gerald M.
Birnbach,

[CORPORATE SEAL]

          Chairman of the Board and President

ATTEST:

      ROWE DIVERSIFIED, INC. /s/    DEBBIE JACKS               By:  
/S/    GERALD M. BIRNBACH         Debbie Jacks, Secretary           Gerald M.
Birnbach,

[CORPORATE SEAL]

          Chairman of the Board and President

ATTEST:

      ROWE FURNITURE WOOD PRODUCTS, INC. /s/    GARRY W. ANGLE               By:
  /S/    GERALD M. BIRNBACH         Garry W. Angle, Assistant Secretary        
  Gerald M. Birnbach,

[CORPORATE SEAL]

          Chairman of the Board and President

 

[Signatures continued on following page]

 

4

--------------------------------------------------------------------------------

ATTEST:

      ROWE PROPERTIES, INC. /s/    GARRY W. ANGLE               By:  
/s/    GERALD M. BIRNBACH         Garry W. Angle, Assistant Secretary          
Gerald M. Birnbach,

[CORPORATE SEAL]

          Chairman of the Board and President

ATTEST:

      STOREHOUSE, INC. /s/    GARRY W. ANGLE               By:   /s/    GERALD
M. BIRNBACH         Garry W. Angle, Assistant Secretary           Gerald M.
Birnbach,

[CORPORATE SEAL]

          Chairman of the Board

ATTEST:

      ROWE FURNITURE, INC. /s/    GARRY W. ANGLE               By:  
/s/    GERALD M. BIRNBACH         Garry W. Angle, Assistant Secretary          
Gerald M. Birnbach,

[CORPORATE SEAL]

          Chairman of the Board

 

5