<PAGE>
 
                                  EXHIBIT 10.9

                  EMPLOYMENT AGREEMENT DATED FEBRUARY 2, 1998
                            BETWEEN THE COMPANY AND
                               GERALD M. BIRNBACH
<PAGE>
 
                                                                  EXHIBIT (10.9)


                              EMPLOYMENT AGREEMENT

     This EMPLOYMENT AGREEMENT (the "Agreement") entered into this 2nd day of
February, 1998, but effective as of December 1, 1997, between ROWE FURNITURE
CORPORATION, a Nevada corporation and its successor and assigns (hereinafter
referred to as "Employer"), and GERALD M. BIRNBACH (hereinafter referred to as
"Birnbach").

                                  WITNESSETH:
                                  -----------
     WHEREAS, Birnbach has served as an employee of Employer for forty-one (41) 
years:
     WHEREAS, Birnbach and Employer entered into a written agreement, effective
as of December 1, 1993 as amended by a First Amendment dated August 28, 1995
(the "Prior Agreement");

     WHEREAS, in recognition of Birnbach's value to Employer and his past
services to Employer, and as an inducement to secure his future services and to
assure continuity of management, Employer wishes to continue to employ Birnbach
as its Chairman of the Board, President, and Chief Executive Officer until his
retirement and to provide Birnbach with certain benefits in connection with such
employment;

     WHEREAS, Birnbach wishes to continue in the employ of Employer until his
retirement: and

     WHEREAS, the parties, by this writing, have agreed to amend the Prior
Agreement, in full, in accordance with the terms and provisions contained
herein;

     NOW, THEREFORE, in consideration of the foregoing and the mutual covenants
contained herein, the parties hereby agree as follows:

     1.   Employment Conditions.
          ----------------------

          (a)   Employer hereby agrees to continue to employ Birnbach as its
    Chairman of the Board, President and Chief Executive Officer, and Birnbach
    hereby accepts such employment, upon the terms and conditions hereinafter
    set forth.

          (b)    During the term of his employment, Birnbach shall devote his
    best efforts and entire working time and attention to his employment and
    shall perform such duties consistent with his positions as Chairman of the
    Board, President
<PAGE>
 
          and Chief Executive Officer of Employer as are from time to time
          assigned or delegated to him by Employer's Board of Directors and as
          are set forth in Employer's By-Laws. Except for the normal travel
          requirements of his position, Birnbach shall not be required to
          perform his duties outside a twenty mile radius of Bethesda, Maryland.
          Employer shall provide adequate and appropriate working facilities for
          Birnbach, including any necessary secretarial and office personnel.

         2.      Term. The initial term of this Agreement shall be a period of 
                 ----
Five years commencing on December 1, 1997. On each anniversary of this
Agreement, the term shall automatically be extended for an additional year
unless at least 90 days prior to such anniversary the Board of Directors of
Employer, by the affirmative vote of at least two-thirds of its membership,
elects not to extend the term and written notice of such action is delivered to
Birnbach. The initial term plus any extension period is sometimes hereinafter
referred to as the "Term". Birnbach's employment is subject to termination as
provided in Paragraph 10 hereof.

         3.      Compensation. For all services to be rendered by Birnbach 
                 ------------
pursuant to this Agreement (other than as a Director), Birnbach shall receive
from Employer the following:

                 (a) during the Term, a base salary (exclusive of any bonus
         payments, fringe benefits, or expense allowances or reimbursements) at
         the annual rate of $791,850.00 (the "Base Salary"), at such payment
         intervals as are the usual custom of Employer, but in not less than
         equal monthly installments;

                 (b) during the Term, a cumulative annual increase in addition
         to the Base Salary, to be paid in the same manner as the Base Salary,
         which annual increase for any year during the Term shall be determined,
         as of the anniversary date of this Agreement, in the manner set forth
         in Paragraph 4 hereof; and

                 (c) such bonus, if any, as Birnbach may be awarded from time
         to time by Employer's Board of Directors in recognition of any unusual
         efforts made by Birnbach on behalf of Employer, the payment and amount
         of any such bonus being in the sole discretion of Employer's Board of
         Directors.

         4.      Cost of Living Expenses.
                 -----------------------
<PAGE>
 
                 (a) As promptly as practicable after November 30th of each year
         during the Term, Employer shall compute the increase, if any, in the
         cost of living, using as the basis of such computation the "Consumer
         Price Index." Urban Wage Earners and Clerical Workers. Washington, 
         D.C.-Maryland-Virginia. All Items (1967 = 100) or any successor index
         published by the Bureau of Labor Statistics of the United States
         Department of Labor (hereinafter referred to as the "Index").

                  (b) The Index number entitled "All Items" for the month of
         December 1997 shall be the "Base Index Number" and the corresponding
         Index number for the month of December on each anniversary of this
         Agreement thereafter shall be the "Current Index Number." The
         percentage increase in the cost of living on each such anniversary of
         this Agreement shall be determined by dividing the Current Index Number
         (CIN) by the Base Index Number (BIN), and subtracting the integer I
         from the quotient, all in accordance with the following formula:

         Percentage of increase in cost of living .=   (CIN) - I.(BIN)
                                                        ---

         The percentage of increase in the cost of living multiplied by the Base
         Salary for the previous year, as adjusted pursuant to Subparagraph 3(b)
         hereof, shall be additional compensation payable to Birnbach for the
         employment year commencing on December 1st in the particular year for
         which the then Current Index Number is used in determining the
         percentage increase in the cost of living.

                  (c) Appropriate adjustments shall be made promptly in the
         event there is a published amendment of the Index figures upon which
         the computation set forth in this Paragraph 4 is based.

                  (d) If the publication of the above-designated Index is
         discontinued, the parties agree to accept comparable statistics on the
         cost of living for the same geographic region, as computed and
         published by an agency of the United States or by a responsible
         financial periodical of recognized authority. 

         5.       Deferral of Compensation Not Deductible by Employer. In the
                  ---------------------------------------------------
event that Birnbach's aggregate compensation (including compensatory benefits
which are deemed remuneration for purposes of (S)162(m) of the Internal Revenue
Code of 1986, as amended) from Employer and its subsidiaries for any calendar
year exceeds the
<PAGE>
 
greater of: (a) One Million Dollars ($1,000,000); or (b) the maximum amount of
compensation deductible by Employer in any calendar year under (S)162(m) of the
Internal Revenue Code of 1986, as amended (the "maximum allowable amount"), then
any such amount in excess of the maximum allowable amount shall be mandatorily
deferred with interest thereon at 8% per annum to a calendar year such that the
amount to be paid to Birnbach in such calendar year, including deferred amounts
and interest thereon, does not exceed the maximum allowable amount. Subject to
the foregoing, deferred amounts including interest thereon shall be payable at
the earliest time permissible. Notwithstanding the foregoing, upon any
termination of Birnbach's employment for any reason whatsoever all deferred
amounts plus accrued interest thereon shall be paid to Birnbach (or his estate,
if he is not then living) not later than the January 3rd next following the date
of termination. If the date of such payment would take place more than sixty
days after the date of termination, then within five days after receipt by
Employer of a written election from Birnbach or his estate, Employer shall
transfer to the Trust established pursuant to the Trust Agreement for the Rowe
Furniture Corporation Employment Agreement and SERP Waiver with Gerald M.
Birnbach dated September 29, 1995 (the "Trust Agreement") cash in amount equal
to the then accumulated deferred amounts plus accrued interest thereon and the
Trustee of the Trust will invest the funds received as directed by Employer with
Employer being responsible for the earnings shortfall (below 8% per annum) and
realizing the benefit of excess earnings (above 8% per annum) from and after the
date of receipt of such funds by the Trustee of the Trust through the day next
preceding the January 3rd distribution date. Any earnings shortfall shall be
paid by Employer to the Trust on the day next preceding the January 3rd
distribution date. Any excess earnings shall be returned by the Trust to
Employer on the January 3rd distribution date. On each date that funds are
tendered by Employer to the Trust pursuant to the provisions of this Paragraph
5, Employer shall deliver to the Trustee of the Trust a Payment Schedule (as
defined in the Trust Agreement) consistent with the provisions hereof. Employer
agrees to cause the Trust Agreement to be amended at the earliest practicable
time to provide for substitution of this Agreement for the Prior Agreement and
for such other changes that are necessary or appropriate to implement the terms
and provisions of this Agreement as they apply to the Trust Agreement and the
Trust established thereby.
<PAGE>
 
     6.   Vacation and Other Benefits. Birnbach shall be entitled to a 
          ----------------------------                                
reasonable paid vacation each year of his employment with Employer, as well as
to any other employment benefits given to Employer's officers or other
executives. The benefits to which Birnbach shall be entitled shall include, but
not be limited to, the following:

     (a)  Beginning December 1, 1997, and at the beginning of every second year
of the Term thereafter, Employer shall provide Birnbach a new luxury automobile,
comparable to the automobile last furnished to Birnbach by Employer, for use in
the performance by Birnbach of his responsibilities for Employer and his
promotion of Employer's business. Employer shall pay for, or reimburse Birnbach
for, the gasoline, maintenance, insurance, and any other expenses incurred in
the business use of any automobile furnished by Employer to Birnbach.

     (b)  Employer shall reimburse Birnbach for all reasonable expenses incurred
by Birnbach in the performance of his responsibilities for Employer and his
promotion of Employer's business. Birnbach shall submit to Employer periodic
statements of all expenses so incurred. Subject to such audits as Employer may
deem appropriate, Employer shall promptly reimburse Birnbach for the full amount
of any such expenses advanced by Birnbach in the ordinary course of his duties.

     (c)  Unless otherwise agreed to by the parties, Birnbach shall be entitled
to participate in "any employee benefit plan" (as defined in Section 3(3) of the
Employee Retirement Income Security Act of 1974, as amended) maintained by
Employer.

     (d)  Upon the termination of Birnbach's employment for any reason
whatsoever other than a Termination for Cause pursuant to Subparagraph 10(b)
hereof, Employer shall provide to Birnbach and his spouse for their respective
lifetimes, at the sole cost of Employer, health insurance and health coverage
reimbursement equivalent to whatever is in effect for the benefit of Birnbach
and his spouse immediately prior to the date of Birnbach's employment
termination or a Change in Control (as hereinafter defined), whichever benefits
would be more beneficial to Birnbach and/or his spouse as determined by Birnbach
(or if he is not then living, by his spouse), including but not limited to,
major medical health plan benefits and supplemental executive medical plan
benefits ("Post-Separation Health Benefits"). The Post-Separation Health
Benefits shall be primary coverage and not secondary to medicare or medicaid
coverage or benefits. 
<PAGE>
 
The Post-Separation Health Benefits are vested rights and Birnbach's spouse
shall be a third beneficiary thereof.

     7.   Disability Insurance.  So long as Birnbach is employed by Employer, he
          ---------------------                                              
shall be entitled to participate in Employer's group disability insurance
program. Birnbach shall pay the premiums for the coverage provided him under
such program. In the event of Birnbach's total disability, as defined in
Subparagraph 10(a) hereof, such insurance shall provide Birnbach monthly
disability benefits of not less than $20,000.00 until the expiration of the Term
or the termination of Birnbach's employment in connection or following a Change
in Control, whichever shall First occur.

     8.   Termination of Rights under SERP. The parties agree that any and all 
          ---------------------------------                                   
of Birnbach's rights under the Amended and Restated Supplemental Executive
Retirement Plan entered into between Birnbach and Employer on April 2, 1990,
(the "SERP") have been terminated as of November 27, 1993, pursuant to the terms
of a Waiver Agreement dated December 1, 1993.

     9.   Noncompetition and Confidentiality Agreement.
          ---------------------------------------------

          (a)   Provided that Employer is not in material default to Birnbach on
any of its obligations under this Agreement, Birnbach agrees, during the period
of his employment with Employer and for a period of two (2) years after the date
of termination of Birnbach's employment with Employer (but in the event of a
Change in Control only during the period after employment termination that
Birnbach is receiving liquidated damages pursuant to Section 10(f)(ii) below),
not to, directly or indirectly do any of the following:

          (i)   induce or attempt to influence any employee of Employer to
     terminate his employment with Employer;

          (ii)  engage in (as principal, partner, director, officer, agent,
     employee, consultant, or otherwise) or be financially interested in or
     associated with any Competing Business, as defined below in this
     Subparagraph 9(a); provided, however, that the foregoing restriction shall
     not prohibit Birnbach from purchasing or holding stock or other securities
     of any corporation, trust, or partnership (regardless of the business of
     such entity) that shall have securities listed upon 
<PAGE>
 
     any recognized securities exchange or traded on a recognized market in the
     United States or Canada: or

          (iii)  at any time disclose to any one not legally entitled thereto
     any information of a confidential nature relative to any facet of the
     business of Employer, specifically including but not limited to customer
     lists, furniture designs, and wood cutting patterns.

The term "Competing Business" means any business conducted in the continental
United States that is or subsequently becomes engaged in competition with the
principal business activity of Employer. The term "principal business activity"
means the trade in which Employer is substantially engaged (i.e.. to the extent
of more than fifty percent (50%) of its total sales) (a "Suspect Trade"),
reduced to the principal product lines (i.e., those product lines accounting for
more than twenty percent (20% of Employer's total sales) within such Suspect
Trade, as of the date of Birnbach's termination of employment. Total sales shall
include the sales made by Employer and all of its subsidiaries, if any, as of
the November 30th nearest date of Birnbach's termination of employment.

          (b)    Birnbach specifically acknowledges that Employer's remedy at
law for any breach by Birnbach of the restrictions contained in Subparagraph
9(a) hereof may not be adequate and that Employer shall be entitled to pursue
all remedies as set forth in Subparagraph 9(c) hereof.

          (c)    Birnbach acknowledges that, in view of the nature of the
business in which Employer is engaged, the restrictions contained in
Subparagraph 9(a) hereof are reasonable and necessary in order to protect the
legitimate interests of Employer and that any violation thereof could result in
irreparable and substantial harm to Employer for which Employer may not have an
adequate remedy at law, and Birnbach therefore acknowledges that, in the event
of his violation of any of these restrictions. Employer shall be entitled to
seek from any court of competent jurisdiction temporary, preliminary, and
permanent injunctive relief, as well as damages and an equitable accounting of
all earnings, profits, and other benefits arising from such violation, which
rights shall be cumulative and in addition to any other rights or remedies to
which Employer may be entitled.
<PAGE>
 
          (d)  If the period of time or the area specified in Subparagraph 9(a)
hereof, or both, should be adjudged unreasonable in any proceeding, then the
period of time shall be reduced by such number of months or the area shall be
reduced by the elimination of such portion thereof, or both, so that such
restrictions may be enforced in such area and for such time as is adjudged to be
reasonable.

     10.  Termination, Severance, Liquidated Damages, etc.
          ------------------------------------------------

          (a)  The employment of Birnbach under this Agreement may be terminated
at any time prior to a Change in Control by action of Employer's Board of
Directors on thirty days' written notice in the event of Birnbach's "total
disability" (which shall be defined in the manner provided under the group
disability insurance contract maintained by Employer), and Birnbach shall be
paid the relevant portion of his Base Salary, as adjusted pursuant to
Subparagraph 3(b) hereof, for any period subsequent to the date of termination
that precedes the date on which the First payment is due to him pursuant to the
disability insurance referred to in Paragraph 7 hereof. Further, if the amount
of the monthly disability insurance benefits payable to Birnbach pursuant to
Paragraph 7 herein is less than sixty percent (60%) of Birnbach's monthly Base
Salary, as adjusted pursuant to Subparagraph 3(b) hereof, net of Federal income
taxes, in effect for the period immediately preceding his termination due to his
total disability. Employer shall pay to Birnbach an additional monthly amount
such that the payments to be received by Birnbach each month under Paragraph 7
and this Subparagraph 10(a) shall equal one-twelfth (1/12) of sixty percent
(60%) of such Base Salary, as adjusted pursuant to Subparagraph 3(b) hereof, net
of Federal income taxes, for the remainder of the Term. In addition, any
benefits provided to Birnbach under any employee benefit plan referred to in
Subparagraph 6(c) hereof shall immediately vest, and Birnbach and his spouse
shall be entitled to the Post-Separation Health Benefits.

          (b)  The employment of Birnbach under this Agreement may be terminated
at any time prior to a Change in Control by action of the affirmative vote of at
least two-thirds of Employer's Board of Directors based upon Birnbach's fraud,
dishonesty or other deliberate injury to Employer in the performance of his
duties ("Termination for Cause" or "Terminated for Cause"). Notwithstanding the
foregoing, Birnbach shall not be deemed to have been Terminated for Cause unless
and until there shall have been delivered to him a copy of a resolution, duly
adopted by the 
<PAGE>
 
affirmative vote of not less than two-thirds of the entire membership of
Employer's Board of Directors at a meeting duly called and held for such purpose
(after reasonable notice to Birnbach and an opportunity for Birnbach, together
with his counsel, to be heard before Employer's Board of Directors), stating
that in the good faith opinion of Employer's Board of Directors, Birnbach has
engaged in conduct constituting cause as described in the preceding sentence and
specifying the particulars thereof in detail. In the event of a Termination for
Cause pursuant to this Subparagraph 10(b). Birnbach shall receive his Base
Salary, as adjusted pursuant to Subparagraph 3(b) hereof, and other benefits
under this Agreement through the date of termination.

          (c)  In the event of the death of Birnbach while employed but not in
connection with or following a Change in Control, his estate shall be entitled
to receive a single lump sum payment, within thirty days following the date of
his death, in an amount equal to his Base Salary as adjusted pursuant to
Subparagraph 3(b) hereof that Birnbach would have been entitled to receive had
he continued to be employed during the lesser of (x) 18 months after the date of
death or (y) the balance of the Term, plus his Base Salary, as adjusted pursuant
to Subparagraph 3(b) hereof, and other benefits under this Agreement through the
date of termination. In addition, any benefits provided to Birnbach under any
employee benefit plan referred to in Subparagraph 6(c) shall immediately vest
and his spouse shall be entitled to the Post Separation Health Benefits.
Notwithstanding the foregoing, in the event that Birnbach shall die while
employed but after Employer's Board of Directors approves a proposed transaction
(subject to shareholder approval) pursuant to which Employer will cease to be an
independent publicly-owned company or for a sale or other disposition of all or
substantially all of the assets of Employer, then his death shall be deemed to
have occurred in connection with a Change in Control if the proposed transaction
is completed within eight months after his death and his estate shall be
entitled to receive the benefits described in Subparagraph 10(f)(i) below at the
time of the consummation of such transaction instead of the benefits described
in this Subparagraph 10(c). If the proposed transaction is not consummated
within said eight month period, then the entitlement of his estate shall be
governed by this Subparagraph 10(c) as opposed to Subparagraph 10(f)(i) below.
<PAGE>
 
          (d)    In the event of voluntary termination by Birnbach of this
employment with Employer without Good Reason (as hereinafter defined) prior to a
Change in Control, he shall be paid his Base Salary, as adjusted pursuant to
Subparagraph 3(b) hereof, and other benefits under this Agreement through the
date of termination. He and his spouse shall also be entitled to the Post-
Separation Health Benefits.

          (e)    In the event of the involuntary termination of Birnbach's
employment (but specifically excluding termination pursuant to Subparagraph
10(a), (b) or (c) hereof) or Birnbach terminates his employment for Good Reason,
in either case not in connection with or following a Change in Control, then
Birnbach, or if he is not then living his estate, shall be entitled to receive
from Employer the full amount of compensation which he would have otherwise been
paid under Subparagraphs 3(a) and 3(b) for remainder of the Term in installments
consistent with prior practice. In addition, any benefits provided to Birnbach
under any employee benefit plan referred to in Subparagraph 6(c) shall
immediately vest, and he and his spouse shall be entitled to the Post-Separation
Health Benefits. The term "Good Reason" means the occurrence, without Birnbach's
express written consent, of a diminution of or interference with his duties,
responsibilities or benefits, including (without limitation) any of the
following circumstances:

          (i)    a requirement that Birnbach be based at any location not within
     twenty miles of Bethesda, Maryland, or that he substantially increase his
     travel on Employer business;

          (ii)   the failure to elect Birnbach as the Chairman of the Board,
     President and Chief Executive of Employer, and in the case of a Change in
     Control described in Subparagraph 10(g)(iii) hereof, the failure to elect
     Birnbach to the same positions at the ultimate parent company of the
     Employer.

          (iii)  a reduction in the number or seniority of personnel reporting
     to Birnbach or a material reduction in the frequency with which, or in the
     nature of the matters with respect to which such personnel are to report to
     Birnbach, other than as part of an Employer-wide reduction in staff:

          (iv)   a reduction in Birnbach's Base Salary, as adjusted pursuant to
     Subparagraph 3(b) hereof, or an adverse change in Birnbach's perquisites,
     benefits, contingent benefits or vacation, other than as part of an overall
     program 
<PAGE>
 
     applied uniformly and with equitable effect to all members of the senior
     management of Employer and the senior management of any ultimate parent
     company following a Change in Control described in Subparagraph 10(g)(iii)
     hereof, or

          (v)   a material increase in the required hours of work or the
     workload of Birnbach; Birnbach's continued employment shall not constitute
     consent to, or a waiver of rights with respect to, any circumstance
     constituting Good Reason herein.

     (f)  In the event of the termination of Birnbach's employment for any
reason whatsoever in connection with or following a Change in Control he shall
be entitled to the following:

          (i)   his Base Salary, as adjusted pursuant to Subparagraph 3(b)
     hereof and other benefits under this Agreement through the date of
     termination; any benefits provided to Birnbach under any employee benefit
     plan referred to in Subparagraph 6(c) hereof shall immediately vest; he and
     his spouse shall be entitled to the Post-Separation Health Benefits; and on
     the date of termination an amount equal to 299% of Birnbach's "base amount"
     as determined under 280G of the Internal Revenue Code of 1986, as amended,
     payable by Employer in a single cash lump sum; and

          (ii)  if such termination is an involuntary termination (excluding
     death or total disability of Birnbach) or a termination by Birnbach for
     Good Reason and Birnbach offers to continue to provide services as
     contemplated by this Agreement (with Employer and its ultimate parent
     company, if applicable, curing all grounds for termination by Birnbach for
     Good Reason) and such offer is declined, then, subject to provisions of
     Subparagraph 10(f)(iii) immediately below, Employer shall, during the
     lesser period of the date of termination through the remaining Term or two
     years following the date of termination, as liquidated damages, pay to
     Birnbach monthly 1/12 of his Base Salary, as adjusted pursuant to
     Subparagraph 3(b) hereof plus 1/12 of the average annual amount of cash
     bonus and cash incentive compensation of Birnbach based on the average
     amounts of such bonus and incentive compensation earned by Birnbach for the
     two full Fiscal years preceding the Change in Control; provided
<PAGE>
 
          (iii)  if Birnbach becomes entitled to liquidated damages pursuant to
     Subparagraph 10(f)(ii) above, Employer's obligation thereunder with respect
     to cash damages shall be reduced by the amount of Birnbach's income, if
     any, earned from providing personal services other than to Employer or its
     corporate affiliates during the period of the lesser of the date of
     termination through the remaining Term or two years following the date of
     termination.

     (g)  For purposes of this Agreement, each of the events specified in the
following clauses (i) through (iii) of this Subparagraph 10(g) shall be deemed a
"Change in Control":

          (i)    any third person, including a "group" as defined in Section
     13(d)(3) of the Securities Exchange Act of 1934, becomes the beneficial
     owner of shares of Employer with respect to which twenty-five percent (25%)
     or more of the total number of votes for the election of the Board of
     Directors of Employer is eligible to be cast;

          (ii)   as a result of, or in connection with, any cash tender offer,
     merger, or other business combination, sale of assets, or contested
     election, or combination of the foregoing, the persons who were Directors
     of Employer immediately prior to such event cease to constitute a majority
     of the Board of Directors of Employer; or

          (iii)  the shareholders of Employer approve an agreement providing
     either for a transaction in which Employer will cease to be an independent
     publicly-owned company or for a sale or other disposition of all or
     substantially all of the assets of Employer.

     (h)  In the event of the termination of Birnbach's employment for any
reason whatsoever, Employer shall make payments to the Trust under the Trust
Agreement in strict compliance with the provisions of Paragraph 5 hereof.
Moreover, in the event of the termination of Birnbach's employment pursuant to
Subparagraph 10(c), (e) or (f) hereof.

Employer shall within 14 days after such termination of employment transfer to
the Trust under the Trust Agreement sufficient cash to fully fund Employer's
obligations under this Agreement which have not theretofore been paid to
Birnbach, his spouse or estate.
<PAGE>
 
     11.  Severability. The provisions of this Agreement are severable and if
          -------------                                                      
any one or more provisions may be determined to be illegal or otherwise
unenforceable, in whole or in part, the remaining provisions and any partially
unenforceable provisions to the extent enforceable in any jurisdiction shall
nevertheless be binding and enforceable.

     12.  Binding Agreement. The rights and obligations of Employer under this
          ------------------                                                  
Agreement shall inure to the benefit of, and shall be binding upon, Employer and
its successors and assigns and the rights and obligations of Birnbach under this
Agreement shall inure to the benefit of, and shall be binding upon, Birnbach and
his heirs and estate.

     13.  Arbitration. Any dispute or controversy arising under or in connection
          ------------                                               
with this Agreement, or the breach thereof, shall be settled by arbitration in
accordance with the Rules of the American Arbitration Association and judgment
upon the award rendered by the arbitrator or arbitrators shall be deemed to
possess the powers to issue mandatory orders and restraining orders in
connection with such arbitration; provided, however, that nothing in this
Paragraph 13 shall be construed so as to (a) deny Employer the right and power
to seek and obtain injunctive relief in a court of equity for any breach or
threatened breach by Birnbach of any of his covenants contained in Subparagraph
9(a) hereof or (b) deny Birnbach the right to seek specific performance of
Employer's obligations under this Agreement during the pendancy of any dispute
or controversy. Any arbitration to be undertaken pursuant to this Paragraph 13
shall take place in Fairfax, Virginia.

     14.  Reimbursement of Expenses. In the event any dispute or controversy
          --------------------------                                        
shall arise between Birnbach, his spouse or estate and Employer as to the terms
or interpretation of this Agreement, including but not limited to, any action
taken by Birnbach, his spouse or estate under Paragraph 13 or this Paragraph 14
or in defending against any action taken by Employer, Employer shall reimburse
Birnbach, his spouse or estate for all costs and expenses incurred by any of
them, including actual attorney's fees, as and when such costs and expenses are
incurred, in an amount not to exceed $75,000. Reimbursement of expenses shall be
paid within ten days of Birnbach, his spouse or estate furnishing to Employer
written evidence, which may be in the form, among other things, of a canceled
check or receipt, of any costs or expenses incurred by any of them.
<PAGE>
 
     15.  Notices. Any notice to be given under this Agreement shall be 
          --------                                                     
personally delivered in writing, or shall be deemed to have been duly given when
received, after it is posted in the United States mails, postage prepaid,
registered or certified, return receipt requested. If mailed to Employer, it
shall be addressed to Employer at its principal place of business, Attention:
Secretary, and if mailed to Birnbach, it shall be addressed to him at his home
address last known on the records of Employer, or at such other address or
addresses as either Employer or Birnbach may hereafter designate in writing to
the other.

     16.  Survival. The obligations of Employer under this Agreement to 
          ---------                                                    
Birnbach, his spouse and estate shall survive any termination of Birnbach's
employment and the expiration of the Term hereof.

     17.  Waiver. The failure of either party to enforce any provision or
          -------                                                        
provisions of this Agreement shall not in any way be construed as a waiver of
such provision or provisions as to any future violations thereof nor prevent
that party thereafter from enforcing each and every other provision of this
Agreement. The rights granted the parties herein are cumulative and the waiver
of any single remedy shall not constitute a waiver of such party's right to
assert any other legal remedies available to it or him under the circumstances.

     18.  Miscellaneous. This Agreement supersedes all prior agreements and
          --------------                                                   
understandings between the parties with respect to the subject matter hereof and
may not be modified or terminated orally. No modification, termination, or
attempted waiver of this Agreement shall be valid unless made in writing and
signed by the party against whom the same is sought to be enforced. This
Agreement may be executed in multiple counterparts, each of which shall be an
original and all of which, when taken together, shall constitute one and the
same document. This Agreement shall be governed by and construed according to
the laws of the Commonwealth of Virginia.

     19.  Captions and Paragraph Headings. Captions and paragraph headings used 
          --------------------------------                                
herein are for convenience only, are not a part of this Agreement, and shall not
be used in construing it.

     IN WITNESS WHEREOF, the parties have duly executed this Agreement on the
day and year First set forth above.
<PAGE>
 
                                        /s/ Gerald M. Birnbach
                                        -------------------------------------
                                        Gerald M. Birnbach


                                        ROWE FURNITURE CORPORATION
                                        a Nevada Corporation


     ATTEST:




     /s/ Deborah C. Jacks               By: /s/ Arthur H. Dunkin
     --------------------                   --------------------
                                            SECRETARY