Prudential Amendment 7-14--06


                                                                            EXHIBIT
      4.01

     

     

    
 

    AMENDMENT
      TO NOTE PURCHASE 

    AND
      PRIVATE SHELF AGREEMENTS

    


    


    THIS
      AMENDMENT TO NOTE PURCHASE AND PRIVATE SHELF AGREEMENTS (this
“Amendment”),
      is made and
      entered into as of July 14, 2006, by and among Stanley Furniture Company, Inc.
      (the “Company”),
      The Prudential
      Insurance Company of America (together with its successors and assigns,
“PICA”),
      Hartford Life
      Insurance Company (“Hartford”),
      and Medica
      Health Plans (“Medica”
and,
      together
      with PICA, Hartford and Medica, the “Noteholders”).

    


    W I T N E S S E T H:

    


    WHEREAS,
      (i) the
      Company and PICA are parties to that certain Note Purchase and Private Shelf
      Agreement, dated as of June 29, 1995 (as amended, restated, supplemented or
      otherwise modified from time to time, the “1995
      Note Agreement”)
      and (ii) the
      Company, PICA, Hartford and Medica are parties to that certain Private Shelf
      Facility, dated as of September 8, 1999 (as amended, restated, supplemented
      or
      otherwise modified from time to time the “1999
      Note Agreement”
and,
      together
      with the 1995 Note Agreement, the “Note
      Agreements”);
      capitalized
      terms used herein and not otherwise defined shall have the meanings assigned
      to
      such terms in the Note Agreements; and

     

    WHEREAS,
      the
      Company has requested that the Noteholders amend certain provisions of the
      Note
      Agreements, and subject to the terms and conditions hereof, the Noteholders
      are
      willing to do so; 

     

    NOW,
      THEREFORE, for
      good and valuable consideration, the sufficiency and receipt of all of which
      are
      acknowledged, (i) the Company, and PICA agree that the 1995 Note Agreement
      is
      amended as follows and (ii) the Company, PICA, Hartford and Medica agree that
      the 1999 Note Agreement is amended as follows:

    


    1.  Amendments.


     

    (a)
      Section 6A of
      such Note Agreement (Fixed Charge Coverage and Debt Limits) is hereby amended
      by
      replacing the “.” at the end of such Section with “; or” and adding the
      following as a new subsection (iv):

     

    (iv) the
      ratio of
      Consolidated Debt to Consolidated EBITDA to exceed 2.75:1.00.

     

    (b)
      Section 6B of
      such Note Agreement (Dividend Limitation) is hereby amended by removing such
      covenant in its entirety and replacing such Section in its entirety with
“Intentionally
      Omitted”.


     

    (c)
      Section 6C(7)
      of such Note Agreement (Investments) is hereby amended by replacing clause
      (vi)
      of such Section in its entirety with the following:

     

    (vi) any
      other
      Investment of the Company or any of its Subsidiaries so long as the amount
      of
      all such Investments, other than investments specified in clauses (i) through
      (v) above shall not exceed an amount equal to 10% of Consolidated Assets.


     

    (d)
      Section 10B of
      such Note Agreement (Definitions: Other Terms) is hereby amended by adding
      the
      following definition of “Consolidated
      EBITDA”
in
      proper
      alphabetical order:

     

    “Consolidated
      EBITDA”
      shall mean, for
      the Company and its Subsidiaries on a Consolidated basis for the four fiscal
      quarters most recently ended, Consolidated Net Earnings, or Consolidated Net
      Loss, as the case may be, for such period, plus
      to
      the extent
      deducted in calculating such Consolidated Net Earnings or Consolidated Net
      Loss,
      taxes, depreciation, amortization and Consolidated Interest
      Charges.

     

    2.  Conditions
      to Effectiveness of this Amendment.
      Notwithstanding
      any
      other provision of this Amendment, it is understood and agreed that this
      Amendment shall not become effective until (i) PICA shall have received executed
      counterparts to this Amendment from the Company and each Noteholder, (ii) the
      Noteholders have received reimbursement of, or evidence of the direct payment
      of, the reasonable fees, charges and disbursements of King & Spalding LLP,
      counsel to the Noteholders incurred in connection with this Amendment, and
      (iii)
      PICA shall have received copies of an amendment to the Company’s credit
      facility, amending such credit facility in a manner similar to the amendments
      to
      Section 6B of the Note Agreements contained herein.

    


    3.  Representations
      and Warranties.
      To induce the
      Noteholders to enter into this Amendment, the Company hereby represents and
      warrants to the Noteholders that: 

    


    (a) The
      execution,
      delivery and performance by the Company of this Amendment (i) are within
      the Company’s power and authority; (ii) have been duly authorized by all
      necessary corporate and shareholder action; (iii) are not in contravention
      of any provision of the Company’s certificate of incorporation or bylaws or
      other organizational documents; (iv) do not violate any law or regulation,
      or any order or decree of any governmental authority; (v) do not conflict
      with or result in the breach or termination of, constitute a default under
      or
      accelerate any performance required by, any indenture, mortgage, deed of trust,
      lease, agreement or other instrument to which the Company or any of its
      Subsidiaries is a party or by which the Company or any such Subsidiary or any
      of
      their respective property is bound; (vi) do not result in the creation or
      imposition of any Lien upon any of the property of the Company or any of its
      Subsidiaries; and (vii) do not require the consent or approval of any
      governmental authority or any other person;

    


    (b) This
      Amendment has
      been duly executed and delivered for the benefit of or on behalf of the Company
      and constitutes a legal, valid and binding obligation of the Company,
      enforceable against the Company in accordance with its terms; and

    


    (c) After
      giving effect
      to this Amendment, no Default or Event of Default has occurred and is continuing
      as of the date hereof.

    


    4.  Effect
      of Amendment.
Except
      as set forth
      expressly herein, all terms of the Note Agreements, as amended hereby, shall
      be
      and remain in full force and effect and shall constitute the legal, valid,
      binding and enforceable obligations of the Company to the Noteholders.
The
      execution, delivery and effectiveness of this Amendment shall not, except as
      expressly provided herein, operate as a waiver of any right, power or remedy
      of
      the Noteholders under either Note Agreement, nor constitute a waiver of any
      provision of either Note Agreement. 

    


    5.  Governing
      Law.
      This
      Amendment
      shall be governed by, and construed in accordance with, the internal laws of
      the
      State of New York and all applicable federal laws of the United States of
      America.

    


    6.  No
      Novation.
      This Amendment is
      not intended by the parties to be, and shall not be construed to be, a novation
      of either Note Agreement or an accord and satisfaction in regard
      thereto.

    


    7.  Costs
      and Expenses.
      The Company
      agrees to pay on demand all costs and expenses of the Noteholders in connection
      with the preparation, execution and delivery of this Amendment, including,
      without limitation, the reasonable fees and out-of-pocket expenses of outside
      counsel for the Noteholders with respect thereto.

    


    8.  Counterparts. This
      Amendment may
      be executed by one or more of the parties hereto in any number of separate
      counterparts, each of which shall be deemed an original and all of which, taken
      together, shall be deemed to constitute one and the same instrument. Delivery
      of
      an executed counterpart of this Amendment by facsimile transmission or by
      electronic mail in pdf form shall be as effective as delivery of a manually
      executed counterpart hereof.

    


    9.  Binding
      Nature.
      This Amendment
      shall be binding upon and inure to the benefit of the parties hereto, their
      respective successors, successors-in-titles, and assigns.

    


    10.  Entire
      Understanding.
      This Amendment
      sets forth the entire understanding of the parties with respect to the matters
      set forth herein, and shall supersede any prior negotia-tions or agreements,
      whether written or oral, with respect thereto.

    


    [Signature
      Pages
      To Follow]

    


     

    
      
      

    

    
    

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

    


    COMPANY:

    


    STANLEY
      FURNITURE COMPANY, INC.

    


     

    By:     /s/
      Douglas
      I. Payne

    Name:   Douglas
      I.
      Payne

    Title:        Exective
      Vice-President -
      Finance & Adminstration

    


    


     

    




                                NOTEHOLDERS:

    


    THE
      PRUDENTIAL INSURANCE COMPANY

    OF
      AMERICA

    


    


    By:
/s/
      Jay S.
      White

      Vice
      President

    


    


    


    


    


    HARTFORD
      LIFE INSURANCE COMPANY

    


    By: Prudential
      Private
      Placement Investors,

    L.P.
      (as Investment
      Advisor)

    


    By: Prudential
      Private
      Placement Investors, Inc.

    (as
      its General
      Partner)

     

     

    By:
/s/
      Jay
      S.White    

        
      Vice President


     

    


    


    


    


    MEDICA
      HEALTH PLANS

    


    By: Prudential
      Private
      Placement Investors,

    L.P.
      (as Investment
      Advisor)

    


    By: Prudential
      Private
      Placement Investors, Inc.

    (as
      its General
      Partner)

     

     

    By:
/s/
      Jay S.
      White   

        
Vice
      President