Exhibit 4.01





Exhibit 4.01




FOURTH AMENDMENT TO NOTE PURCHASE

AND PRIVATE SHELF AGREEMENT




THIS FOURTH AMENDMENT TO NOTE PURCHASE AND PRIVATE SHELF AGREEMENT (this “Amendment”), is made
and entered into as of December 18, 2009, by and among Stanley Furniture Company, Inc. (the
“Company”), The Prudential Insurance Company of America (“Prudential”) and the other holders of
Notes (as defined in the Note Agreement defined below) that are signatories hereto (Prudential and
such holders of Notes, together with their successors and assigns, the “Noteholders”).



W I T N E S S E T H:




WHEREAS, the Company and the Noteholders are parties to that certain Amended and Restated Note
Purchase and Private Shelf Agreement dated January 26, 2007, as amended by that certain Amendment
to Note Purchase and Private Shelf Agreement, dated as of October 12, 2007, and as amended by that
certain Second Amendment to Note Purchase and Private Shelf Agreement, dated as of December 30,
2008, and as amended by that certain Third Amendment to Note Purchase and Private Shelf Agreement,
dated as of January 23, 2009 (as amended, restated, supplemented or otherwise modified from time
to time the “Note Agreement”); capitalized terms used herein and not otherwise defined shall have
the meanings assigned to such terms in the Note Agreement; and



WHEREAS, the Company has requested that the Noteholders amend certain provisions of the Note
Agreement, 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, the Company and the Noteholders agree that the Note Agreement is amended as
follows:




1. Amendments.




(a) Section 2 of the Note Agreement is hereby amended by adding the following as Section 2C:




2C. Increase in Interest Rate. The per annum stated interest rate on
the outstanding Series AA Notes shall automatically be increased to 8.23%
per annum, and the per annum stated interest rate on the outstanding 2001
Notes
shall automatically be increased to 8.44% per annum, in each case
commencing on January 1, 2010 and continuing thereafter until the date on
which Company has delivered to the holders of the Notes an Officer’s
Certificate for any fiscal quarter of the Company ending after January 1,
2010 (i) demonstrating that the ratio of Consolidated Debt as of the last
day of such fiscal quarter to Consolidated EBITDA for the four fiscal
quarter period ending on such day does not exceed 2.75:1.00 and (ii)
certifying that no Default or Event of Default has occurred, at which time
the per annum stated interest rate on the outstanding Notes of each Series
of Notes shall automatically decrease to the interest rate in effect on
December 31, 2009.



(b) Section 5 of the Note Agreement is hereby amended by adding the following section
5K:




5K. Cash Balance. The Company covenants that at all times during the
period commencing December 18, 2009 through and including April 3, 2011, it
shall maintain unrestricted cash on hand of at least $25,000,000.



(c) Subsection 6A(i) of the Note Agreement is hereby amended by replacing such subsection in
its entirety with the following:




(i) Consolidated Operating Income to be less than 200% of Consolidated
Fixed Charges; provided, however, that this subsection 6A(i)
shall not apply at any time during fiscal years 2009 and 2010; or



(d) Subsection 6A(iv) of the Note Agreement is hereby amended by replacing such subsection in
its entirety with the following:




(iv) the ratio of Consolidated Debt to Consolidated EBITDA to exceed
2.75:1.00; provided, however, that this subsection 6A(iv)
shall not apply at any time during fiscal years 2009 and 2010.



(e) Section 6B of the Note Agreement is hereby amended by replacing such section in its
entirety with the following:




6B. Minimum Earnings. The Company covenants that it will not permit
Consolidated EBIT (i) for the fiscal quarter period ending April 3, 2010
multiplied by 4, (ii) for the two fiscal quarter period ending on July 3,
2010, multiplied by 2, (iii) for the three fiscal quarter period ending on
October 2, 2010, multiplied by 4/3 or (iv) for the
four
fiscal quarter period ending on December 31, 2010, in each case to be
less than ($15,000,000).


 


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(f) Section 6C(2) of the Note Agreement is hereby amended by replacing such section in its
entirety with the following:




6C(2). Debt. Create, incur, assume or suffer to exist any Debt, except:




(i) Debt of any Subsidiary to the Company or any Wholly-Owned Subsidiary;




(ii) other Debt of Subsidiaries permitted under paragraph 6A; and




(iii) other Debt of the Company (other than Debt owed to a Subsidiary) if
after giving effect thereto, the Company is in compliance with the provisions of
paragraph 6A.



Provided, however, that from and after December 18, 2009, until the Company has
delivered to the holders of the Notes an Officer’s Certificate for any fiscal
quarter of the Company ending after January 1, 2010 (x) demonstrating that the
ratio of Consolidated Debt as of the last day of such fiscal quarter to
Consolidated EBITDA for the four fiscal quarter period ending on such day does
not exceed 2.75:1.00 and (y) certifying that no Default or Event of Default has
occurred, neither the Company nor any of its Subsidiaries shall incur or permit
to exist any Debt under clause (ii) or (iii) above (other than letters of credit
issued in the ordinary course of business of the Company under its line of
credit with Branch Banking & Trust in an aggregate amount not to exceed
$4,000,000).



(g) Section 10A of the Note Agreement is amended by replacing the definitions “Remaining
Scheduled Payments” and of “Yield-Maintenance Amount” in their entirety with the following:




“Remaining Scheduled Payments” shall mean, with respect to the Called
Principal of any Note, all payments of such Called Principal and interest
thereon that would be due on or after the Settlement Date with respect to such
Called Principal if no payment of such Called Principal were made prior to its
scheduled due date, but assuming for purposes of this definition of Remaining
Scheduled Payments that the stated interest rate on the outstanding Series AA
Notes is 6.73%, and that the stated interest rate on the outstanding 2001 Notes
is 6.94%.


 


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“Yield-Maintenance Amount” shall mean, with respect to any Note, an amount
equal to the excess, if any, of the Discounted Value of the Called Principal of
such Note over the sum of (i) such Called Principal plus (ii)
interest accrued thereon as of (including interest due on) the Settlement
Date with respect to such Called Principal, but assuming for purposes of this
definition of Yield-Maintenance Amount that the stated interest rate on the
outstanding Series AA Notes is 6.73% and that the stated interest rate on the
outstanding 2001 Notes is 6.94%. The Yield-Maintenance Amount shall in no event
be less than zero.



(h) Section 10B of the Note Agreement is hereby amended by replacing the definitions of
“Consolidated EBIT” and “Consolidated Interest Charges” in their entirety with the following:




“Consolidated EBIT” shall mean, for any applicable period, for the Company
and its Subsidiaries on a Consolidated basis, 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 and the Consolidated Interest Charges.




“Consolidated Interest Charges” shall mean, for any applicable period, for
the Company and its Subsidiaries on a Consolidated basis, all interest expense
(as determined in accordance with generally accepted accounting principles) on
all Debt (including Capitalized Lease Obligations) net of interest income.



(i) Section 10C of the Note Agreement is hereby amended by adding the following sentence at
the end of such Section:




For purposes of determining compliance with the financial covenants
contained in this Agreement, including without limitation those set forth in
Paragraph 6, any election by the Company to measure an item of Debt using
fair value (as permitted by Statement of Financial Accounting Standards No.
159 or any similar accounting standard) shall be disregarded and such
determination shall be made as if such election had not been made.



(j) Each of Exhibit A and Exhibit B to the Note Agreement is amended by adding the following
sentence at the end of the first paragraph of each such Exhibit:




Additional interest hereon may also be required pursuant to Paragraph 2(C) of the
Agreement (as defined below).


 


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(k) Each of the Notes is hereby, without further action required on the part of any other
Person, deemed to be automatically amended as of the date hereof by adding the following sentence
at the end of the first paragraph of each Note:



Additional interest hereon may also be required pursuant to Paragraph 2(C) of the
Agreement (as defined below).



The Company agrees to execute replacement Notes evidencing the foregoing amendment promptly on
request of the Noteholders.



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) this Amendment shall have been duly executed and delivered by the Company and each Noteholder
and (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.



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
Agreement, 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 the Note Agreement, nor constitute a
waiver of any provision of the Note Agreement.


 


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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 the 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 negotiations or
agreements, whether written or oral, with respect thereto.



[Signature Pages To Follow]




 


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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:  	Executive Vice President —

Finance and Administration 	 



[SIGNATURE PAGE TO FOURTH AMENDMENT

TO NOTE PURCHASE AND PRIVATE SHELF AGREEMENT]




 


 









 





	 	 	 	 	 
	 	2001 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 	 
	 	 	 	 	 
	 	2007 NOTEHOLDERS:



THE PRUDENTIAL INSURANCE COMPANY

OF AMERICA
	 
	 
	 	By:  	/s/ Jay S. White
 	 
	 	 	Vice President 	 


 












 





	 	 	 	 	 
	 	MUTUAL OF OMAHA 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 	 
	 	 	 	 	 
	 	PRUCO LIFE INSURANCE COMPANY OF

NEW JERSEY
	 
	 
	 	By:  	/s/ Jay S. White
 	 
	 	 	Assistant Vice President 	 
	 
	 	PRUDENTIAL RETIREMENT INSURANCE

AND ANNUITY COMPANY

 	 
	 	By:  	Prudential Investment Management, Inc.,
 	 
	 	 	as investment manager 	 
	 	 	 	 	 
	 	 	By: 	     /s/ Jay S. White
 	 
	 	 	 	Vice President