Document:

<PAGE>

                                                                 EXHIBIT (10.11)
                               MASTER AGREEMENT

                          Dated as of August 27, 1999

                                     among

                           ROWE FURNITURE, INC. AND
               CERTAIN OTHER SUBSIDIARIES OF THE ROWE COMPANIES
                    THAT MAY HEREAFTER BECOME PARTY HERETO,
                                  as Lessees,

                              THE ROWE COMPANIES,
                            THE MITCHELL GOLD CO.,
                            ROWE PROPERTIES, INC.,
                               STOREHOUSE, INC.,
                             HOME ELEMENTS, INC.,
                            ROWE DIVERSIFIED, INC.
                                      AND
                         WEXFORD COLLECTION, INC. AND
               CERTAIN OTHER SUBSIDIARIES OF THE ROWE COMPANIES
                    THAT MAY HEREAFTER BECOME PARTY HERETO,
                                as Guarantors,

                  ATLANTIC FINANCIAL GROUP, LTD., as Lessor,

                               CRESTAR BANK AND
                CERTAIN FINANCIAL INSTITUTIONS PARTIES HERETO,
                                  as Lenders

                                      and

                            CRESTAR BANK, as Agent
<PAGE>

                               Table of Contents
                               -----------------
<TABLE>
<CAPTION>
                                                                                                              Page
                                                                                                              ----
 <S>......................................................................................................     <C>
ARTICLE I.     DEFINITIONS; INTERPRETATION................................................................      2

ARTICLE II.    ACQUISITION, CONSTRUCTION AND LEASE; FUNDINGS;
               NATURE OF TRANSACTION......................................................................      2
     SECTION 2.1      Agreement to Acquire, Construct,
                      Fund and Lease......................................................................      2
         (a)   Land.......................................................................................      2
         (b)   Building...................................................................................      2
     SECTION 2.2      Fundings of Purchase Price, Development
                      Costs and Construction Costs........................................................      3
         (a)   Initial Funding and Payment of Purchase Price
               for Land and Development Costs on Closing Date.............................................      3
         (b)   Subsequent Fundings and Payments of Construction
               Costs during Construction Term.............................................................      3
         (c)   Aggregate Limits on Funded Amounts.........................................................      4
         (d)   Notice, Time and Place of Fundings.........................................................      4
         (e)   Lessee's Deemed Representation for Each Funding............................................      5
         (f)   Not Joint Obligations......................................................................      5
         (g)   Non-Pro Rata Fundings......................................................................      6
     SECTION 2.3      Funded Amounts and Interest and Yield
                      Thereon; Facility Fee...............................................................      6
     SECTION 2.4      Lessee Owner for Tax Purposes.......................................................      7
     SECTION 2.5      Amounts Due Under Lease.............................................................      8

ARTICLE III.   CONDITIONS PRECEDENT; DOCUMENTS............................................................      9
     SECTION 3.1       Conditions to the Obligations of the
                       Funding Parties on each Closing Date...............................................      9
         (a)   Documents..................................................................................      9
         (b)   Litigation.................................................................................     14
         (c)   Legality...................................................................................     14
         (d)   No Events..................................................................................     14
         (e)   Representations............................................................................     15
         (f)   Cutoff Date................................................................................     15
         (g)   Transaction Expenses.......................................................................     15
     SECTION 3.2      Additional Conditions for the
                      Closing Date........................................................................     15
               (a)    Loan Agreement; Guaranty Agreement..................................................     15
               (b)    Master Agreement....................................................................     15
               (c)    Construction Agency Agreement.......................................................     15
               (d)    Lease...............................................................................     15
               (e)    Lease Supplement....................................................................     16
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               (f)    Obligor's Resolutions and Incumbency
                      Certificate, etc....................................................................     16
               (g)    Opinions of Counsel.................................................................     16
               (h)    Good Standing Certificate...........................................................     16
               (i)    Lessor's Consents and Incumbency
                      Certificate, etc....................................................................     16
               (j)    Funding Request.....................................................................     17
     SECTION 3.3      Conditions to the Obligations
                      of Lessee...........................................................................     17
         (a)   General Conditions.........................................................................     17
         (b)   Legality...................................................................................     17
         (c)   Purchase Agreement.........................................................................     17
     SECTION 3.4      Conditions to the Obligations of the
                      Funding Parties on each Funding Date................................................     17
         (a)   Funding Request............................................................................     18
         (b)   Condition Fulfilled........................................................................     18
         (c)   Representations............................................................................     18
         (d)   No Bonded Stop Notice or Filed Mechanics Lien..............................................     18
     SECTION 3.5      Completion Date Conditions..........................................................     18
         (a)   Title Policy Endorsements; Architect's
               Certificate................................................................................     18
         (b)   Construction Completion....................................................................     19
         (c)   Construction Agent Certification...........................................................     19
     SECTION 3.6      Addition of Lessees.................................................................     20

ARTICLE IV.    REPRESENTATIONS............................................................................     21
     SECTION 4.1      Representations of Obligors.........................................................     21
         (a)   Financial Condition........................................................................     21
         (b)   No Change..................................................................................     22
         (c)   Corporate Existence; Compliance with Law...................................................     22
         (d)   Corporate Power; Authorization; Enforceable
               Obligations................................................................................     22
         (e)   No Legal Bar...............................................................................     23
         (f)   No Material Litigation.....................................................................     23
         (g)   No Default.................................................................................     23
         (h)   Taxes......................................................................................     23
         (i)   Federal Regulations........................................................................     24
         (j)   ERISA......................................................................................     24
         (k)   Investment Company Act; Other Regulations..................................................     24
         (l)   Purpose of Fundings........................................................................     24
         (m)   Disclosure.................................................................................     25
         (n)   Hazardous Materials - Leased Properties....................................................     25
         (o)   Leased Property............................................................................     26
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<CAPTION>
                                                                                                              Page
                                                                                                              ----
<S>.......................................................................................................    <C>
     SECTION 4.2      Survival of Representations and Effect
                      of Fundings.........................................................................     27
         (a)   Survival of Representations and Warranties.................................................     27
         (b)   Each Funding a Representation..............................................................     27
     SECTION 4.3      Representations of the Lessor.......................................................     27
         (a)   Securities Act.............................................................................     27
         (b)   Due Organization, etc......................................................................     27
         (c)   Due Authorization; Enforceability, etc.....................................................     28
         (d)   No Conflict................................................................................     28
         (e)   Litigation.................................................................................     28
         (f)   Lessor Liens...............................................................................     28
         (g)   Employee Benefit Plans.....................................................................     29
         (h)   General Partner............................................................................     29
         (i)   Financial Information......................................................................     29
         (j)   No Offering................................................................................     29
     SECTION 4.4      Representations of each Lender......................................................     29
         (a)   Securities Act.............................................................................     30
         (b)   Employee Benefit Plans.....................................................................     30

ARTICLE V.     COVENANTS OF OBLIGORS AND THE LESSOR.......................................................     30
     SECTION 5.1      Affirmative Covenants...............................................................     30
         (a)   Financial Statements.......................................................................     30
         (b)   Certificates; Other Information............................................................     31
         (c)   Conduct of Business and Maintenance of
               Existence..................................................................................     32
         (d)   Inspection of Property; Books, Records and
               Discussions................................................................................     32
         (e)   Notices....................................................................................     32
         (f)   Taxes......................................................................................     32
         (g)   Maintenance of Property....................................................................     33
         (h)   Insurance..................................................................................     33
         (i)   Environmental Matters......................................................................     33
         (j)   Year 2000 Compliance.......................................................................     33
         (k)   Financial Positions........................................................................     34
         (l)   Qualified Swap Agreement...................................................................     34
         (m)   Most Favored Lender Status.................................................................     35
     SECTION 5.2        Negative Covenants................................................................     35
         (a)   Negative Pledge............................................................................     35
         (b)   Notice of Merger, Consolidation, Disposition of
               Assets.....................................................................................     35
         (c)   Contingent Liabilities.....................................................................     36
     SECTION 5.3        Further Assurances................................................................     36
     SECTION 5.4        Additional Required Appraisals....................................................     36
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<S>.......................................................................................................    <C>

     SECTION 5.5        Lessor's Covenants................................................................     36

ARTICLE VI.    TRANSFERS BY LESSOR AND LENDERS............................................................     38
     SECTION 6.1        Lessor Transfers..................................................................     38
     SECTION 6.2        Lender Transfers..................................................................     38

ARTICLE VII.   INDEMNIFICATION............................................................................     40
     SECTION 7.1        General Indemnification...........................................................     40
     SECTION 7.2        Environmental Indemnity...........................................................     43
     SECTION 7.3        Proceedings in Respect of Claims..................................................     45
     SECTION 7.4        General Tax Indemnity.............................................................     47
         (a)   Tax Indemnity..............................................................................     47
         (b)   Exclusions from General Tax Indemnity......................................................     48
         (c)   Contests...................................................................................     51
         (d)   Reimbursement for Tax Savings..............................................................     53
         (e)   Payments...................................................................................     54
         (f)   Reports....................................................................................     54
         (g)   Verification...............................................................................     54
     SECTION 7.5      Increased Costs, etc................................................................     55
         (a)   Illegality.................................................................................     55
         (b)   Requirements of Law........................................................................     55
         (c)   Capital Adequacy...........................................................................     56
         (d)   Taxes......................................................................................     57
         (e)   Tax Forms..................................................................................     58
         (f)   Indemnity..................................................................................     59
         (g)   Action of Affected Funding Parties.........................................................     59
     SECTION 7.6      End of Term Indemnity...............................................................     60

ARTICLE VIII.  MISCELLANEOUS..............................................................................     61
     SECTION 8.1        Survival of Agreements............................................................     61
     SECTION 8.2        Notices...........................................................................     61
     SECTION 8.3        Counterparts......................................................................     62
     SECTION 8.4        Amendments........................................................................     62
     SECTION 8.5        Headings, etc.....................................................................     63
     SECTION 8.6        Parties in Interest...............................................................     63
     SECTION 8.7        GOVERNING LAW.....................................................................     64
     SECTION 8.8        Expenses..........................................................................     64
     SECTION 8.9        Severability......................................................................     64
     SECTION 8.10       Liabilities of the Funding Parties................................................     64
     SECTION 8.11       Submission to Jurisdiction; Waivers...............................................     65
     SECTION 8.12       Liabilities of the Agent..........................................................     65

     SECTION 8.13       Agent to Communicate with Funding
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<TABLE>
<S>                                                                                                           <C>
                        Parties..........................................................................      66
     SECTION 8.14       Seniority of Lease...............................................................     S-1
 </TABLE>

APPENDIX A     Definitions and Interpretation

                                   SCHEDULES

SCHEDULE 2.2   Commitments
SCHEDULE 8.2   Notice Information

                                    EXHIBITS

EXHIBIT A      Form of Funding Request
EXHIBIT B      Form of Assignment of Lease and Rents
EXHIBIT C      Form of Security Agreement and Assignment
EXHIBIT D-1    Form of Mortgage
EXHIBIT D-2    Form of Deed of Trust
EXHIBIT E      [Reserved]
EXHIBIT F      Form of Assignment and Acceptance Agreement
EXHIBIT G      Forms of Opinions of Counsel
EXHIBIT H      Form of Certification of Construction Completion
EXHIBIT I      Form of Payment Date Notice
EXHIBIT J      Form of Joinder Agreement

                                      -v-
<PAGE>

                               MASTER AGREEMENT

     THIS MASTER AGREEMENT, dated as of August 27, 1999 (as it may be amended or
modified from time to time in accordance with the provisions hereof, this

"Master Agreement"), is among ROWE FURNITURE, INC., a Virginia corporation
-----------------
("Rowe Furniture"), and certain Subsidiaries of Rowe Companies that may
----------------
hereafter become parties hereto as lessees pursuant to Section 3.6
                                                       -----------
(individually, a "Lessee" and collectively "Lessees"), THE ROWE COMPANIES, a
                  ------                    -------
Nevada corporation ("Rowe Companies"), THE MITCHELL GOLD CO., a North Carolina
                     --------------
corporation, ROWE PROPERTIES, INC., a California corporation, STOREHOUSE, INC.,
a Georgia corporation, HOME ELEMENTS, INC., a Virginia corporation, ROWE
DIVERSIFIED, INC., a Delaware corporation and WEXFORD COLLECTION, INC., a
California corporation and certain other Subsidiaries of Rowe Companies that may
hereafter become party hereto,(individually, a "Guarantor" and collectively
                                                ---------
"Guarantors"), ATLANTIC FINANCIAL GROUP, LTD., a Texas limited partnership (the
-----------
"Lessor"), CRESTAR BANK, a Virginia banking corporation, and certain financial
 ------
institutions parties hereto as lenders (together with any other financial
institution that becomes a party hereto as a lender, collectively referred to as
"Lenders" and individually as a "Lender"), and CRESTAR BANK, a Virginia banking
 -------                         ------
corporation, as agent for the Lenders (in such capacity, the "Agent").
                                                              -----

                             PRELIMINARY STATEMENT

     In accordance with the terms and provisions of the Bridge Agreement, (i)
the Lessor has acquired Land identified by Rowe Furniture, and contemplates
leasing such Land and any Buildings thereon to a Lessee, (ii) Rowe Furniture, as
Construction Agent for the Lessor, wishes, in certain instances, to construct
Buildings on Land for the Lessor and, when completed, the related Lessee wishes
to lease such Buildings from the Lessor as part of the Leased Properties under
the Lease, (iii) the Lessor has provided Funding for the acquisition of the
Land, with, in part, loan proceeds from Agent, and (iv) Rowe Furniture as
Construction Agent wishes to obtain, and the Lessor is willing to provide,
funding for the construction of Buildings, and (v) the Lessor wishes to obtain,
and Lenders are willing to provide, from time to time, financing of a portion of
the funding of the acquisition of the Land and Building and, if applicable, the
construction of the Buildings.

                                       1
<PAGE>

     In consideration of the mutual agreements contained in this Master
Agreement and other good and valuable consideration, the receipt and sufficiency
of which are hereby acknowledged, the parties hereto agree as follows:

                                  ARTICLE I.
                          DEFINITIONS; INTERPRETATION

     Unless the context shall otherwise require, capitalized terms used and not
defined herein shall have the meanings assigned thereto in Appendix A hereto for
                                                           ----------
all purposes hereof; and the rules of interpretation set forth in Appendix A
                                                                  ----------
hereto shall apply to this Master Agreement.

                                  ARTICLE II.
                ACQUISITION, CONSTRUCTION AND LEASE; FUNDINGS;
                             NATURE OF TRANSACTION

      SECTION 2.1 Agreement to Acquire, Construct, Fund and Lease.
                  -----------------------------------------------

          (a) Land.  Subject to the terms and conditions of this Master
              ----
Agreement (i) pursuant to the Bridge Agreement, the Lessor has acquired such
interest in the Land and any Building thereon, from the applicable Seller
pursuant to the applicable Purchase Agreement, (ii) the Lessor hereby agrees to
lease such Land and any Building thereon to the related Lessee pursuant to the
Lease, and (iii) the related Lessee hereby agrees to lease such Land, and any
Building thereon, from the Lessor pursuant to the Lease.

          (b) Building.  With respect to each parcel of Land on which a Building
              --------
is to be constructed, subject to the terms and conditions of this Master
Agreement, from and after the Closing Date relating to such Land (i) the
Construction Agent agrees, pursuant to the terms of the Construction Agency
Agreement, to construct and install the Building on such Land for the Lessor
prior to the Scheduled Construction Termination Date, (ii) the Lenders and the
Lessor agree to fund the costs of such construction and installation (and
interest and yield thereon), (iii) the Lessor shall lease such Building as part
of such Leased Property to the related Lessee pursuant to the Lease, and (iv)
the related Lessee shall lease such Building from the Lessor pursuant to the
Lease.  Each Lender hereby consents to the appointment of Rowe Furniture as
Construction Agent.

                                       2
<PAGE>

      SECTION 2.2 Fundings of Purchase Price, Development Costs and Construction
                  --------------------------------------------------------------
Costs.
-----

          (a) Initial Funding and Payment of Purchase Price for Land and
              ----------------------------------------------------------
Development Costs on Closing Date.  Subject to the terms and conditions of this
---------------------------------
Master Agreement, on the Closing Date, each Lender shall make available to the
Lessor its initial Loan with respect to such Land, and any Building thereon, in
an amount equal to the product of such Lender's Commitment Percentage times the
purchase price for the Land, and any Building thereon, and the development,
transaction and closing costs incurred by the Construction Agent, as agent,
through such Closing Date, which funds the Lessor shall use, together with the
Lessor's own funds in an amount equal to the product of the Lessor's Commitment
Percentage times the purchase price for the related Land and any Building
thereon, and the development, transaction and closing costs incurred by the
Construction Agent, as agent, through such Closing Date, to purchase the Land,
and any Building thereon, from the applicable Seller pursuant to the applicable
Purchase Agreement, and to pay to the Construction Agent the amount of such
development, transaction and closing costs, and the Lessor shall lease such Land
to the related Lessee pursuant to the Lease.  It is expressly acknowledged that
buildings existing on the closing date of the acquisition of the Land will be
demolished as part of the development contemplated by the parties and that such
is permissible, and funding therefor shall be advanced along with funding of the
development of the Land.

          (b) Subsequent Fundings and Payments of Construction Costs during
              -------------------------------------------------------------
Construction Term.  Subject to the terms and conditions of this Master
-----------------
Agreement, if a Building is to be constructed on Land, on each Funding Date
following the Closing Date for each such parcel of Land until the related
Construction Term Expiration Date, (i) each Lender shall make available to the
Lessor a Loan in an amount equal to the product of such Lender's Commitment
Percentage times the amount of Funding requested by the Construction Agent for
such Funding Date, which funds the Lessor hereby directs each Lender to pay over
to the Construction Agent as set forth in paragraph (d), and (ii) the Lessor
                                          -------------
shall pay over to the Construction Agent its own funds (which shall constitute a
part of, and an increase in, the Lessor's Invested Amount with respect to such
Leased Property) in an amount equal to the product of the Lessor's Commitment
Percentage times the amount of Funding requested by the Construction Agent for
such Funding Date.

                                       3
<PAGE>

          (c) Aggregate Limits on Funded Amounts.  The aggregate amount that the
              ----------------------------------
Funding Parties shall be committed to provide as Funded Amounts under this
Master Agreement and the Loan Agreement shall not exceed (x) with respect to
each Leased Property the costs of purchase and construction of such Leased
Property and the related development, transaction, closing and financing costs,
or (y) $25,000,000 in the aggregate for all Leased Properties.  The aggregate
amount that any Funding Party shall be committed to fund under this Master
Agreement and the Loan Agreement shall not exceed the lesser of (i) such Funding
Party's Commitment and (ii) such Funding Party's Commitment Percentage of the
aggregate Fundings requested under this Master Agreement.

          (d) Notice, Time and Place of Fundings.  With respect to each Funding,
              ----------------------------------
a Lessee or the Construction Agent, as the case may be, shall give the Lessor
and the Agent an irrevocable prior written notice not later than 11:00 a.m.,
Roanoke, Virginia time, at least three Business Days prior to the proposed
Closing Date or other Funding Date, as the case may be, pursuant, in each case,
to a Funding Request in the form of Exhibit A (a "Funding Request"), specifying
                                    ---------     ---------------
the Closing Date or subsequent Funding Date, as the case may be, the amount of
Funding requested, whether such Funding shall be a LIBOR Advance or a Prime Rate
Advance or a combination thereof and the Rent Period(s) therefor. All documents
and instruments required to be delivered on such Closing Date pursuant to this
Master Agreement shall be delivered at the offices of Mayer, Brown & Platt, 350
South Grand Avenue, 25th Floor, Los Angeles, California 90071-1503, or at such
other location as may be determined by the Lessor, the Construction Agent and
the Agent.  Each Funding shall occur on a Business Day and (other than the final
Funding) shall be in an amount equal to $1,000,000 or an integral multiple of
$100,000 in excess thereof. All remittances made by any Lender and the Lessor
for any Funding shall be made in immediately available funds by wire transfer to
or, as is directed by, the Construction Agent, with receipt by the Construction
Agent not later than 12:00 noon, Roanoke, Virginia time, on the applicable
Funding Date, upon satisfaction or waiver of the conditions precedent to such
Funding set forth in Section 3; such funds shall (1) in the case of the initial
                     ---------
Funding on the Closing Date, be used to pay the purchase price to the applicable
Seller (or to reimburse Lessor) for the related Land and pay development,
transaction and closing costs related to such Land, and (2) in the case of each
subsequent Funding be paid to the Construction Agent, for the payment or
reimbursement of Construction costs incurred through such Funding Date and not
previously paid or reimbursed.  Except as otherwise expressly provided below,
any request for Funding shall be made solely by

                                       4
<PAGE>

the Construction Agent in accordance with the Construction Agency Agreement of
even date herewith. No other Funding may occur without the Lessee's (and if a
different party, the Construction Agent's) consent except for automatic payments
and accruals under Section 2.3(c).

          (e) Lessee's Deemed Representation for Each Funding. Each Funding
              -----------------------------------------------
Request by a Lessee or the Construction Agent shall be deemed a reaffirmation of
each Lessee's indemnity obligations in favor of the Indemnitees under the
Operative Documents and a representation and warranty to the Lessor, the Agent
and the Lenders that on the Closing Date or Funding Date, as the case may be,
(i) the amount of Funding requested represents amounts owing in respect of the
purchase price of the related Land, and any Building thereon, and development,
transaction and closing costs in respect of the Leased Property (in the case of
the initial Funding on a Closing Date) or amounts that are then due (or that the
Lessee expects to become due within the next thirty days) to third parties in
respect of the Construction, or development and/or transaction costs, or amounts
paid by the Construction Agent to third parties in respect of the Construction
for which the Construction Agent has not previously been reimbursed by a Funding
(in the case of any Funding), (ii) no Event of Default or Potential Event of
Default exists, and (iii) the representations and warranties of each Obligor set
forth in Section 4.1 are true and correct in all material respects as though
         -----------
made on and as of such Funding Date, except to the extent such representations
or warranties relate solely to an earlier date, in which case such
representations and warranties shall have been true and correct in all material
respects on and as of such earlier date.

          (f) Not Joint Obligations.  Notwithstanding anything to the contrary
              ---------------------
set forth herein or in the other Operative Documents, each Lender's and the
Lessor's commitments shall be several, and not joint.  In no event shall any
Funding Party be obligated to fund an amount in excess of such Funding Party's
Commitment Percentage of any Funding, or to fund amounts in the aggregate in
excess of such Funding Party's Commitment.  However, in the case of a Loan Event
of Default or a Potential Loan Event of Default by Lessor (not resulting from an
Event of Default by the Lessee), Fundings shall be made directly to the
Construction Agent or, if deemed advisable by the Lenders and the Lessees, the
Lenders and Lessees shall cooperate in good faith to find a replacement Lessor;

provided that the Lenders, the Lessees and the Lessor shall negotiate in good
--------
faith, execute and deliver appropriate amendments to the Operative Documents to
effect such direct Fundings or the replacement of the Lessor, as applicable.

                                       5
<PAGE>

          (g) Non-Pro Rata Fundings.  Notwithstanding anything to the contrary
              ---------------------
set forth in this Master Agreement, Lessor shall satisfy its Funding obligations
on the Closing Date.  The Lessor's Commitment is fully funded, the Lenders will
fund, on a pro rata basis as among themselves, 100% of the amount of the
Fundings thereafter.  In no event shall any Funding Party have any obligation to
fund any amount hereunder in excess of the amount of such Funding Party's
Commitment.

      SECTION 2.3 Funded Amounts and Interest and Yield Thereon; Facility Fee.
                  -----------------------------------------------------------

          (a) The Lessor's Invested Amount for any Leased Property outstanding
from time to time shall accrue yield ("Yield") at the Lessor Rate, computed
                                       -----
using the actual number of days elapsed and a 360 day year.  If all or a portion
of the principal amount of or yield on the Lessor's Invested Amounts shall not
be paid when due (whether at the stated maturity, by acceleration or otherwise),
such overdue amount shall, without limiting the rights of the Lessor under the
Lease, to the maximum extent permitted by law, accrue yield at the Overdue Rate,
from the date of nonpayment until paid in full (both before and after judgment).

          (b) Each Lender's Funded Amount for any Leased Property outstanding
from time to time shall accrue interest as provided in the Loan Agreement.

          (c) Unless otherwise agreed by the Lessee and the Agent, during the
Construction Term, in lieu of the payment of accrued interest, on each Payment
Date, each Lender's Funded Amount shall automatically be increased by the amount
of interest accrued and unpaid on the related Loans pursuant to the Loan
Agreement during the Rent Period ending immediately prior to such Payment Date
(except to the extent that at any time such increase would cause such Lender's
Funded Amount to exceed such Lender's Commitment, in which event the related
Lessee shall pay such excess amount to such Lender in immediately available
funds on such Payment Date).  Similarly, in lieu of the payment of accrued
Yield, on each Payment Date, the Lessor's Invested Amount shall automatically be
increased by the amount of Yield accrued on the Lessor's Invested Amount in
respect of such Leased Property during the Rent Period ending immediately prior
to such Payment Date (except to the extent that at any time such increase would
cause the Lessor's Invested Amount to exceed the Lessor's Commitment, in which
event the related Lessee shall pay such excess amount to the Lessor in
immediately available funds on

                                       6
<PAGE>

such Payment Date). Such increases in Funded Amounts shall occur without any
disbursement of funds by the Funding Parties.

          (d) Three Business Days prior to the last day of each Rent Period,
Rowe Furniture shall deliver to the Lessor and the Agent a notice substantially
in the form of Exhibit I (each, a "Payment Date Notice"), appropriately
               ---------           -------------------
completed, specifying the allocation of the Funded Amounts related to such Rent
Period to LIBOR Advances and Prime Rate Advances and the Rent Periods therefor,

provided that no such allocation shall be in an amount less than $1,000,000.
--------
Each such Payment Date Notice shall be irrevocable.  If no such notice is given,
the Funded Amounts shall be allocated to a LIBOR Advance with a Rent Period of
one (1) month.

          (e) the Lessee hereby agrees to pay to each Funding Party a facility
fee for each day from August 27, 2000 until the Lease Termination Date equal to
(i) the applicable percentage set forth below for the corresponding Funded Debt
to Cash Flow Ratio as most recently determined based on Rowe Companies' most
recent audited annual or unaudited quarterly consolidated financial statements,
as applicable, per annum times (ii) the unused amount of such Funding Party's
               --- ----- -----
Commitment on such day, times (iii) 1/360.  Such facility fee shall be payable
                        -----
in arrears on each Quarterly Payment Date.

                            Facility Fee Percentages
                            ------------------------

Funded Debt to Cash Flow Ratio          Facility Fee Percentages
------------------------------          ------------------------
        greater than 2.25:1.00                   0.35%
  lesser or equal to 2.25:1.00                   0.25%
  lesser or equal to 2.00:1.00                   0.18%
  lesser or equal to 1.75:1.00                   0.15%
  lesser or equal to 1.25:1.00                   0.12%
  lesser or equal to 0.50:1.00                   0.10%

      SECTION 2.4 Lessee Owner for Tax Purposes.  With respect to each Leased
                  -----------------------------
Property, it is the intent of the Lessees and the Funding Parties that the Lease
be treated as an operating lease for financial accounting purposes but for
federal, state and local tax and commercial law purposes the Lease shall be
treated as the repayment and security provisions of a loan by the Lessor to the
Lessees, and that the related Lessee shall be treated as the legal and
beneficial owner entitled to any and all benefits of ownership of such Leased
Property and all payments of Basic Rent during the Lease Term shall be treated
as payments of interest and principal.  Each Lessee and each Funding Party agree

                                       7
<PAGE>

to file tax returns consistent with such intent.  Nevertheless, each Lessee
acknowledges and agrees that no Funding Party or any other Person has made any
representations or warranties concerning the tax, financial, accounting or legal
characteristics or treatment of the Operative Documents and that each Lessee has
obtained and relied solely upon the advice of its own tax, accounting and legal
advisors concerning the Operative Documents and the accounting, tax, financial
and legal consequences of the transactions contemplated therein.

      SECTION 2.5 Amounts Due Under Lease.  With respect to each Leased
                  -----------------------
Property, anything else herein or elsewhere to the contrary notwithstanding, it
is the intention of the Lessees and the Funding Parties that:  (i) subject to

clauses (ii) and (iii) below, the amount and timing of Basic Rent due and
------- ----     -----
payable from time to time from the related Lessee under the Lease shall be equal
to the aggregate payments due and payable with respect to interest on the Loans
in respect of such Leased Property and Yield on the Lessor's Invested Amounts in
respect of such Leased Property on each Payment Date; (ii) if the related Lessee
elects the Purchase Option with respect to a Leased Property or becomes
obligated to purchase such Leased Property under the Lease, the Funded Amounts
in respect of such Leased Property, all interest and Yield thereon and all other
obligations of the related Lessee owing to the Funding Parties in respect of
such Leased Property shall be paid in full by Lessee, (iii) if the Lessees
properly elect the Remarketing Option, the principal amount of, and accrued
interest on, the A Loans in respect of the Leased Properties, will be paid out
of the Recourse Deficiency Amount, and the Lessees shall only be required to pay
to the Lenders in respect of the principal amount of the B Loans and to the
Lessor in respect of the Lessor's Invested Amounts, the proceeds of the sale of
the Leased Properties in accordance with Section 14.6 of the Lease; and (iv)
upon an Event of Default resulting in an acceleration of the Lessees' obligation
to purchase the Leased Properties under the Lease, the amounts then due and
payable by the Lessee under the Lease shall include all amounts necessary to pay
in full the Loans, and accrued interest thereon, the Lessor's Invested Amounts
and accrued Yield thereon and all other obligations of the Lessees owing to the
Funding Parties pursuant to the Operative Documents.

                                       8
<PAGE>

                                  ARTICLE III
                        CONDITIONS PRECEDENT; DOCUMENTS

      SECTION 3.1 Conditions to the Obligations of the Funding Parties on the
                  -----------------------------------------------------------
Closing Date.  The obligations of the Lessor and each Lender to carry out their
------------
respective obligations under Section 2 of this Master Agreement to be performed
                             ---------
on the Closing Date with respect to any Leased Property shall be subject to the
fulfillment to the satisfaction of, or waiver by, each such party hereto (acting
directly or through its counsel) on or prior to such Closing Date of the
following conditions precedent, provided that the obligations of any Funding
                                --------
Party shall not be subject to any conditions contained in this Section 3.1 which
                                                               -----------
are required to be performed by such Funding Party:

           (a) Documents.  The following documents shall have been executed and
               ---------
delivered by the respective parties thereto:

                (i) Deed and Purchase Agreement.  The related original Deed duly
                    ---------------------------
          executed by the applicable Seller and in recordable form, and copies
          of the related Purchase Agreement, assigned to the Lessor, shall each
          have been delivered to the Agent by Rowe Furniture, with copies
          thereof to each other Funding Party with copies thereof to each other
          Funding Party, as applicable (it being understood, that each Purchase
                                        -- ----- ----------
          Agreement shall be satisfactory in form and substance to the Lessor
          and the Lenders).

                (ii)  Lease Supplement.  The original of the related Lease
                      ----------------
          Supplement, duly executed by the related Lessee and the Lessor and in
          recordable form, shall have been delivered to the Agent by such
          Lessee.

                (iii)  Mortgage or Deed of Trust and Assignment of Lease and
                       -----------------------------------------------------
          Rents.  Counterparts of the Mortgage or Deed of Trust, as the case may
          be, (substantially in the form of Exhibit D-1 or D-2, as the case may
                                            -----------    ---
          be, attached hereto), duly executed by the Lessor and in recordable
          form, shall have been delivered to the Agent (which Mortgage or Deed
          of Trust, as the case may be, shall secure all of the debt to the
          Agent unless such mortgage is subject to a tax based on the amount of
          indebtedness secured thereby, in which case the amount secured will be
          limited to debt in an amount equal to 100% of the projected cost of
          acquisition and construction of such Leased Property); and the

                                       9
<PAGE>

          Assignment of Lease and Rents (substantially in the form of Exhibit B
                                                                      ---------
          attached hereto) in recordable form, duly executed by the Lessor,
          shall have been delivered to the Agent by the Lessor.

                (iv)  Security Agreement and Assignment.  If Buildings are to be
                      ---------------------------------
          constructed on the Land, counterparts of the Security Agreement and
          Assignment (substantially in the form of Exhibit C attached hereto),
                                                   ---------
          duly executed by the Construction Agent, with an acknowledgment and
          consent thereto satisfactory to the Lessor and the Agent duly executed
          by the related General Contractor and the related Architect, as
          applicable, and complete copies of the related Construction Contract
          and the related Architect's Agreement certified by the Construction
          Agent, shall have been delivered to the Lessor and the Agent (it being
          understood and agreed that if no related Construction Contract or
          Architect's Agreement exists on such Closing Date, such delivery shall
          not be a condition precedent to the Funding on such Closing Date, and
          in lieu thereof the Construction Agent shall deliver complete copies
          of such Security Agreement and Assignment and consents concurrently
          with the Construction Agent's entering into such contracts).

                (v) Survey.  The related Lessee shall have delivered, or shall
                    ------
          have caused to be delivered, to the Lessor and the Agent, at such
          Lessee's expense, an accurate survey certified to the Lessor and the
          Agent in a form reasonably satisfactory to the Lessor and the Agent
          and showing no state of facts unsatisfactory to the Lessor or the
          Agent and prepared within ninety (90) days of such Closing Date (or
          such other time period agreed to by the Lessor and the Agent) by a
          Person reasonably satisfactory to the Lessor and the Agent. Such
          survey shall (1) be acceptable to the Title Insurance Company for the
          purpose of providing extended coverage to the Lessor and a lender's
          comprehensive endorsement to the Agent, (2) show no encroachments on
          such Land by structures owned by others, and no encroachments from any
          part of such Leased Property onto any land owned by others, and (3)
          disclose no state of facts reasonably objectionable to the Lessor, the
          Agent or the Title Insurance Company, and be reasonably acceptable to
          each such Person.

                                       10
<PAGE>

                (vi)  Title and Title Insurance.  On such Closing Date, the
                      -------------------------
          Lessor shall receive from a title insurance company acceptable to the
          Lessor and the Agent an ALTA Owner's Policy of Title Insurance issued
          by such title insurance company and the Agent shall receive from such
          title insurance company an ALTA Mortgagee's Policy of Title Insurance
          issued by such title insurance company, in each case, in the amount of
          the projected cost of acquisition and construction of such Leased
          Property, reasonably acceptable in form and substance to the Lessor
          and the Agent, respectively (collectively, the "Title Policy"), which
                                                          ------------
          may be subject to mechanic's liens arising during the course of
          Construction.  The Title Policy shall be dated as of such Closing
          Date, and, to the extent permitted under Applicable Law, shall include
          such affirmative endorsements as the Lessor or the Agent shall
          reasonably request.

                (vii)  Appraisal.  Each Funding Party shall have received a
                       ---------
          report of the Appraiser (an "Appraisal"), paid for by Rowe Furniture
                                       ---------
          or the related Lessee, which shall meet the requirements of the
          Financial Institutions Reform, Recovery and Enforcement Act of 1989,
          shall be satisfactory to such Funding Party and shall state in a
          manner satisfactory to such Funding Party the estimated "as vacant"
          value of such Land and existing Buildings or any Building to be
          constructed thereon. Such Appraisal must show that the "as vacant"
          value of such Leased Property (if a Building is to be constructed on
          the Land, determined as if the Building had already been completed in
          accordance with the related Plans and Specifications and by excluding
          from such value the amount of assessments on such Leased Property) is
          at least 43% of the total cost of such Leased Property, including the
          trade fixtures, equipment and personal property (excluding Lessee's
          Property) utilized in connection with the Leased Property and to be
          funded by the Funding Parties. In the case of Land without any
          Building thereon or any Plans and Specifications for a Building on the
          related Closing Date, an Appraisal meeting the foregoing requirements
          need not be delivered on or prior to the Closing Date but shall be
          delivered on or before the 45th day following the development of Plans
          and Specifications for a Building thereon; if the "as vacant" value
          shown in the Appraisal so obtained by the

                                       11
<PAGE>

          Funding Parties fails to
          meet the requirement of the preceding sentence, such failure shall
          constitute an Event of Default.

                (viii)  Environmental Audit and related Reliance Letter.  The
                        -----------------------------------------------
          Lessor and the Agent shall have received an Environmental Audit for
          such Leased Property, which shall be conducted in accordance with ASTM
          standards and shall not include a recommendation for further
          investigation and is otherwise satisfactory to the Lessor and the
          Agent; and the firm that prepared the Environmental Audit for such
          Leased Property shall have delivered to the Lessor and the Agent a
          letter stating that the Lessor, the Agent and the Lenders may rely
          upon such firm's Environmental Audit of such Land, it being understood
                                                             -------------------
          that the Lessor's and the Agent's acceptance of any such Environmental
          Audit shall not release or impair Lessee's obligations under the
          Operative Documents with respect to any environmental liabilities
          relating to such Leased Property.  Lessor and/or Lenders shall have
          the right to require an update of the Environmental Audit following
          completion of development of the Leased Property, as a condition of
          further Funding.

                (ix)  Evidence of Insurance. The Lessor and the Agent shall have
                      ---------------------
          received from the related Lessee certificates of insurance evidencing
          compliance with the provisions of Article VIII of the Lease (including
          the naming of the Lessor, the Agent and the Lenders as additional
          insured or loss payee with respect to such insurance, as their
          interests may appear), in form and substance reasonably satisfactory
          to the Lessor and the Agent.

                (x) Officer's Certificate.  Each of the Agent and the Lessor
                    ---------------------
          shall have received an Officer's Certificate of Rowe Furniture stating
          that, to the best of such officer's knowledge, (A) each and every
          representation and warranty of Rowe Furniture contained in the
          Operative Documents is true and correct in all material respects on
          and as of such Closing Date as though made on and as of such Closing
          Date, except to the extent such representations or warranties relate
          solely to an earlier date, in which case such representations and
          warranties were true and correct in all material respects on and as of
          such earlier date;

                                       12
<PAGE>

          (B) no Event of Default, Potential Event of Default or Construction
          Force Majeure Event has occurred and is continuing; (C) each Operative
          Document to which any Lessee is a party is in full force and effect
          with respect to it; and (D) no event that could reasonably be expected
          to have a Material Adverse Effect has occurred since May 30, 1999.

                (xi)  UCC Financing Statement; Recording Fees; Transfer Taxes.
                      -------------------------------------------------------
          Each Funding Party shall have received satisfactory evidence of (i)
          the execution and delivery to Agent of a UCC-1 and, if required by
          applicable law, UCC-2 financing statement to be filed with the
          Secretary of State of the applicable State (or other appropriate
          filing office) and the county where the related Land is located,
          respectively, and such other Uniform Commercial Code financing
          statements as any Funding Party deems necessary or desirable in order
          to perfect such Funding Party's interests and (ii) the payment of all
          recording and filing fees and taxes with respect to any recordings or
          filings made of the related Deed, the Lease, the related Lease
          Supplement, the related Mortgage and the related Assignment of Lease
          and Rents.

                (xii)  Opinions.  An opinion of local counsel for the related
                       --------
          Lessee qualified in the jurisdiction in which such Leased Property is
          located, in a form reasonably satisfactory to Agent, shall have been
          delivered and addressed to each of the Lessor, the Agent and the
          Lenders.  To the extent requested by the Agent, opinions supplemental
          to those delivered under Section 3.2(vi) and reasonably satisfactory
                                   ---------------
          to the Agent shall have been delivered and addressed to each of the
          Lessor, the Agent and the Lenders.

                (xiii)  Officer's Certificate.  The Agent shall have received an
                        ---------------------
          Officer's Certificate of the Lessor stating that, to the best of such
          officer's knowledge, (A) each and every representation and warranty of
          the Lessor contained in the Operative Documents is true and correct in
          all material respects on and as of such Closing Date as though made on
          and as of such Closing Date, except to the extent such representations
          or warranties relate solely to an earlier date, in which case such
          representations and warranties shall have been true and correct in all
          material respects on and

                                       13
<PAGE>

          as of such earlier date; (B) no Event of Default or Potential Event of
          Default has occurred and is continuing; (C) each Operative Document to
          which the Lessor is a party is in full force and effect with respect
          to it; and (D) no event that could have a Material Adverse Effect has
          occurred since the date of the most recent financial statements of the
          Lessor delivered or required to be delivered to the Agent.

                (xiv)  Good Standing Certificates. The Agent shall have received
                       --------------------------
          good standing certificates for the Lessor and the related Lessee from
          the appropriate offices of the state where the related Land is
          located.

          (b) Litigation.  No action or proceeding shall have been instituted
              ----------
or, to the knowledge of any Funding Party, threatened nor shall any governmental
action, suit, proceeding or investigation be instituted or threatened before any
Governmental Authority, nor shall any order, judgment or decree have been issued
or proposed to be issued by any Governmental Authority, to set aside, restrain,
enjoin or prevent the performance of this Master Agreement or any transaction
contemplated hereby or by any other Operative Document or which is reasonably
likely to materially adversely affect any Leased Property or any transaction
contemplated by the Operative Documents or which could reasonably be expected to
result in a Material Adverse Effect.

          (c) Legality.  In the opinion of such Funding Party or its counsel,
              --------
the transactions contemplated by the Operative Documents shall not violate any
Applicable Law, and no change shall have occurred or been proposed in Applicable
Law that would make it illegal for such Funding Party to participate in any of
the transactions contemplated by the Operative Documents.

          (d) No Events. (i) No Event of Default, Potential Event of Default,
              ---------
Event of Loss or Event of Taking relating to such Leased Property shall have
occurred and be continuing, (ii) no action shall be pending or threatened by a
Governmental Authority to initiate a Condemnation or an Event of Taking, and
(iii) there shall not have occurred any event that could reasonably be expected
to have a Material Adverse Effect since May 30, 1999.

                                       14
<PAGE>

          (e) Representations.  Each representation and warranty of the parties
              ---------------
hereto or to any other Operative Document contained herein or in any other
Operative Document shall be true and correct in all material respects as though
made on and as of such Closing Date, except to the extent such representations
or warranties relate solely to an earlier date, in which case such
representations and warranties shall have been true and correct in all material
respects on and as of such earlier date.

           (f) Cutoff Date.  No Closing Date shall occur after the Funding
               -----------
Termination Date.

          (g) Transaction Expenses.  The related Lessee shall have paid the
              --------------------
transaction costs then accrued and invoiced which the Lessees have agreed to pay
pursuant to Section 8.8 or will be paid in accordance with its terms.
            -----------

      SECTION 3.2 Additional Conditions for the Closing Date. The obligations of
                  ------------------------------------------
the Lessor and each Lender to carry out their respective obligations under

Section 2 of this Master Agreement to be performed on the Closing Date shall be
---------
subject to the satisfaction of, or waiver by, each such party hereto (acting
directly or through its counsel) on or prior to the Closing Date of the
following conditions precedent in addition to those set forth in Section 3.1,
                                                                 -----------
provided that the obligations of any Funding Party shall not be subject to any
--------
conditions contained in this Section 3.2 which are required to be performed by
                             -----------
such Funding Party:

          (a) Loan Agreement; Guaranty Agreement.  Counterparts of the Loan
              ----------------------------------
Agreement, duly executed by the Lessor, the Agent and each Lender shall have
been delivered to each of the Lessor and the Agent.  An A Note and a B Note,
duly executed by the Lessor, shall have been delivered to the Agent.  The
Guaranty Agreement, duly executed by each Guarantor, shall have been delivered
to the Agent.

          (b) Master Agreement.  Counterparts of this Master Agreement, duly
              ----------------
executed by the parties hereto, shall have been delivered to each of the parties
hereto.

          (c) Construction Agency Agreement.  Counterparts of the Construction
              -----------------------------
Agency Agreement, duly executed by the parties thereto shall have been delivered
to each of the parties hereto.

          (d) Lease.  Counterparts of the Lease, duly executed by the Lessees
              -----
party to this Master Agreement on the Closing

                                       15
<PAGE>

Date, and the Lessor, shall have been delivered to each Funding Party and the
original, chattel paper copy of the Lease shall have been delivered to the
Agent.

          (e) Lease Supplement.  The original of the Lease Supplement, duly
              ----------------
executed by the related Lessee and the Lessor and in recordable form, shall have
been delivered to the Agent.

          (f) Obligor's Resolutions and Incumbency Certificate, etc.  Each of
              -----------------------------------------------------
the Agent and the Lessor shall have received (x) a certificate of the Secretary
or an Assistant Secretary of each Obligor on the Closing Date, attaching and
certifying as to (i) the Board of Directors' (or appropriate committee's)
resolution duly authorizing the execution, delivery and performance by it of
each Operative Document to which it is or will be a party, (ii) the incumbency
and signatures of persons authorized to execute and deliver such documents on
its behalf, (iii) its articles or certificate of incorporation, certified as of
a recent date by the Secretary of State of the state of its incorporation and
(iv) its by-laws, and (y) good standing certificates for such Obligor on the
Closing Date from the appropriate offices of the States of such Obligor's
incorporation and principal place of business.

          (g) Opinions of Counsel.  The opinion of Silver, Freedman & Taff,
              -------------------
L.L.P., dated as of the Closing Date, substantially in the form set forth in

Exhibit G-1 attached hereto, and containing such other matters as the parties to
-----------
whom it is addressed shall reasonably request, shall have been delivered and
addressed to each of the Lessor, the Agent and the Lenders.  The opinion of
Brown McCarroll & Oaks Hartline, LLP, dated as of the Closing Date,
substantially in the form set forth in Exhibit G-2 attached hereto, and
                                       -----------
containing such other matters as the parties to whom it is addressed shall
reasonably request, shall have been delivered to each of the Agent, the Lessee
and the Lenders.

          (h) Good Standing Certificate.  The Agent and Rowe Furniture shall
              -------------------------
have received a good standing certificate for the Lessor from the appropriate
office of the State of Texas.

          (i) Lessor's Consents and Incumbency Certificate, etc. The Agent and
              -------------------------------------------------
Rowe Furniture shall have received a certificate of the Secretary or an
Assistant Secretary of the General Partner of the Lessor attaching and
certifying as to (i) the consents of the partners of the Lessor duly authorizing
the execution, delivery and performance by it of each Operative Document to
which it is

                                       16
<PAGE>

or will be a party, (ii) the incumbency and signatures of persons authorized to
execute and deliver such documents on its behalf, and (iii) the Partnership
Agreement.

          (j) Funding Request.  The Lessor and the Agent shall have received
              ---------------
from the Construction Agent or a Lessee the Funding Request therefor pursuant to
Section 2.2(d).

      SECTION 3.3 Conditions to the Obligations of Lessee.  The obligations of
                  ---------------------------------------
any Lessee to lease a Leased Property from the Lessor are subject to the
fulfillment on the Closing Date to the satisfaction of, or waiver by, such
Lessee, of the following conditions precedent:

          (a) General Conditions.  The conditions set forth in Sections 3.1 and
              ------------------                               ------------
3.2 that require fulfillment by the Lessor, the Agent or the Lenders shall have
---
been satisfied, including the delivery of good standing certificates by the
Lessor pursuant to Sections 3.1(a)(xiv) and 3.2(vii) and the delivery of an
                   --------------------     --------
opinion of counsel for the Lessor pursuant to Section 3.2(vi) and the execution
                                              ---------------
and delivery of the Operative Documents to be executed by the Lessor, the Agent
or the Lenders in connection with such Leased Property.

          (b) Legality.  In the opinion of such Lessee or its counsel, the
              --------
transactions contemplated by the Operative Documents shall not violate any
Applicable Law, and no change shall have occurred or been proposed in Applicable
Law that would make it illegal for such Lessee to participate in any of the
transactions contemplated by the Operative Documents.

          (c) Purchase Agreement.  The Purchase Agreement and all documents to
              ------------------
be delivered under the Purchase Agreement, including title insurance, survey and
environmental audit, shall be reasonably satisfactory to such Lessee.

      SECTION 3.4 Conditions to the Obligations of the Funding Parties on each
                  ------------------------------------------------------------
Funding Date.  The obligations of the Lessor and each Lender to carry out their
------------
respective obligations under Section 2 of this Master Agreement to be performed
                             ---------
on each Funding Date shall be subject to the fulfillment to the satisfaction of,
or waiver by, each such party hereto (acting directly or through their
respective counsel) on or prior to each such Funding Date of the following
conditions precedent, provided that the obligations of any Funding Party shall
                      --------
not be subject to any conditions contained in this Section 3.4 which are
                                                   -----------
required to be performed by such Funding Party:

                                       17
<PAGE>

          (a) Funding Request.  The Lessor and the Agent shall have received
              ---------------
from the Construction Agent or a Lessee the Funding Request therefor pursuant to

Section 2.2(d).
--------------

          (b) Condition Fulfilled.  As of such Funding Date, the condition set
              -------------------
forth in Section 3.1(d)(i) shall have been satisfied.
         -----------------

          (c) Representations.  As of such Funding Date, both before and after
              ---------------
giving effect to the Funding requested by the Construction Agent or a Lessee on
such date, the representations and warranties that the Construction Agent or any
Obligor is deemed to make pursuant to Section 2.2(e) shall be true and correct
                                      --------------
in all material respects on and as of such Funding Date as though made on and as
of such Funding Date, except to the extent such representations or warranties
relate solely to an earlier date, in which case such representations and
warranties shall have been true and correct in all material respects on and as
of such earlier date.

          (d) No Bonded Stop Notice or Filed Mechanics Lien.  As of such Funding
              ---------------------------------------------
Date, and as to any Funded Amount requested for any Leased Property on such
Funding Date, (i) none of the Lessor, the Agent or any Lender has received (with
respect to such Leased Property) a bonded notice to withhold Loan funds that has
not been discharged by the related Lessee or the Construction Agent, and (ii) no
mechanic's liens or materialman's liens have been filed against such Leased
Property that have not been discharged by the related Lessee, bonded over in a
manner reasonably satisfactory to the Agent or insured over by the Title
Insurance Company.

          (e) Paydown of Revolver.  The Agent shall have received from the
              -------------------
Lessee a deposit in an amount equal to fifty percent (50%) of the amount of the
Funding requested as payment of principal borrowed under the Revolver pursuant
to Section 2(b) of the Agreement as to Synthetic Lease Fundings, dated as of
August 27, 1999, by and between the Lessee, the Guarantors, the Agent and Bank
of America, N.A., a national banking association d/b/a Nationsbank, N.A.

      SECTION 3.5 Completion Date Conditions.  The occurrence of the Completion
                  --------------------------
Date with respect to any Leased Property shall be subject to the fulfillment to
the satisfaction of, or waiver by, each party hereto (acting directly or through
its counsel) of the following conditions precedent:

                                       18
<PAGE>

          (a) Title Policy Endorsements; Architect's Certificate.  The
              --------------------------------------------------
Construction Agent shall have furnished to each Funding Party (1) the following
endorsements to the related Title Policy (each of which shall be subject to no
exceptions other than those reasonably acceptable to the Agent):  a date-down
endorsement (redating and confirming the coverage provided under the Title
Policy and each endorsement thereto) and a "Form 9" endorsement (if available in
the applicable jurisdiction), in each case, effective as of a date not earlier
than the date of completion of the Construction, and (2) a certificate of the
Architect dated at or about the Completion Date, in form and substance
reasonably satisfactory to the Agent, the Lessor and the Lenders, and stating
that (i) the related Building has been completed substantially in accordance
with the Plans and Specifications therefor, and such Leased Property is ready
for occupancy, (ii) such Plans and Specifications comply in all material
respects with all Applicable Laws in effect at such time, and (iii) to the best
of the Architect's knowledge, such Leased Property, as so completed, complies in
all material respects with all Applicable Laws in effect at such time.  The
Construction Agent shall also deliver to the Agent true and complete copies of:
(A) an "as built" or "record" set of the Plans and Specifications, (B) a plat of
survey of such Leased Property "as built" to a standard reasonably acceptable to
the Agent showing all easements, paving, driveways, fences and exterior
improvements, and (C) copies of a certificate or certificates of occupancy for
such Leased Property or other legally equivalent permission to occupy such
Leased Property.

          (b) Construction Completion.  Any related Construction shall have been
              -----------------------
completed substantially in accordance with the related Plans and Specifications,
the related Deed and all Applicable Laws, and such Leased Property shall be
ready for occupancy and operation.  All fixtures, equipment and other property
which are owned by Lessor and paid for by Fundings hereunder and which were
contemplated under the Plans and Specifications to be incorporated into or
installed in such Leased Property shall have been substantially incorporated or
installed, free and clear of all Liens except for Permitted Encumbrances.

          (c) Construction Agent Certification.  The Construction Agent shall
              --------------------------------
have furnished the Lessor, the Agent and each Lender with a certification of the
Construction Agent (substantially in the form of Exhibit H) that:
                                                 ---------

                                       19
<PAGE>

               (i) all amounts owing to third parties for the related
     Construction have been paid in full (other than contingent obligations for
     which the Construction Agent has made adequate reserves or obligations to
     be paid from the final Funding), and no litigation or proceedings are
     pending, or to the best of the Construction Agent's knowledge, are
     threatened, against such Leased Property or the Construction Agent or the
     related Lessee which could reasonably be expected to have a Material
     Adverse Effect;

               (ii)  all material consents, licenses and permits and other
     governmental authorizations or approvals required for such Construction and
     operation of such Leased Property have been obtained and are in full force
     and effect;

               (iii)  such Leased Property has available all services of public
     facilities and other utilities necessary for the related Lessee's use and
     operation of such Leased Property for its intended purposes including,
     without limitation, adequate water, gas and electrical supply, storm and
     sanitary sewerage facilities, telephone, other required public utilities
     and means of access between the related Building and public highways for
     pedestrians and motor vehicles;

               (iv)  all agreements, easements and other rights, public or
     private, which are necessary to permit the lawful use and operation of such
     Leased Property as the related Lessee intends to use such Leased Property
     under the Lease and which are necessary to permit the lawful intended use
     and operation by the related Lessee of all then intended utilities,
     driveways, roads and other means of egress and ingress to and from the same
     have been obtained and are in full force and effect and neither the
     Construction Agent nor the related Lessee has any knowledge of any pending
     modification or cancellation of any of the same that would result in a
     Material Adverse Effect; and the use of such Leased Property by the related
     Lessee does not depend on any variance, special exception or other
     municipal approval, permit or consent that has not been obtained and is in
     full force and effect for its continuing legal use;

               (v) all of the requirements and conditions set forth in Section
                                                                       -------
     3.5(b) hereof have been completed and fulfilled with respect to such Leased
     ------
     Property and the related Construction; and

                                       20
<PAGE>

               (vi)  to the best of the Construction Agent's knowledge, such
     Leased Property is in compliance in all material respects with all
     applicable zoning laws and regulations.

      SECTION 3.6 Addition of Lessees.  After the date hereof, additional
                  -------------------
Subsidiaries of Rowe Companies may become Lessees hereunder and under the other
Operative Documents upon satisfaction of the following conditions precedent:

          (a) such Subsidiary and the Guarantor shall have executed and
     delivered to the Agent and the Lessor a Joinder Agreement, substantially in
     the form of Exhibit J;
                 ---------

          (b) such Subsidiary shall have delivered to each of the Agent and the
     Lessor (x) a certificate of the Secretary or an Assistant Secretary of such
     Subsidiary, attaching and certifying as to (i) the Board of Directors'
     resolution duly authorizing the execution, delivery and performance by it
     of each Operative Document to which it is or will be a party, (ii) the
     incumbency and signatures of persons authorized to execute and deliver such
     documents on its behalf, (iii) its certificate of incorporation, certified
     as of a recent date by the Secretary of State of its incorporation and (iv)
     its by-laws, and (y) good standing certificates from the appropriate
     offices of the States of such Subsidiary's incorporation and principal
     place of business;

          (c) such Subsidiary shall have delivered an opinion of Silver,
     Freedman & Taff, L.L.P., addressed to each of the Lessor, the Agent and the
     Lenders, substantially in the form set forth in Exhibit G-1; and
                                                     -----------

          (d) the Agent, the Lessor and the Lenders shall have received such
     other documents, certificates and information as any of them shall have
     reasonably requested.

                                  ARTICLE IV.
                                REPRESENTATIONS

      SECTION 4.1 Representations of Obligors.  Effective as of the date of
                  ---------------------------
execution hereof, as of the Closing Date and as of each Funding Date, each
Obligor represents and warrants to each of the other parties hereto as follows:

                                       21
<PAGE>

          (a) Financial Condition.  The consolidated balance sheets of Rowe
              -------------------
Companies and its Subsidiaries as at November 29, 1998 and May 30, 1999 and the
related consolidated statements of income, stockholder's equity and cash flows
for the fiscal year ended on each such date, reported on (in the case of the
November 29, 1998 balance sheet and statements) by BDO Seidman, LLP, copies of
which have heretofore been furnished to each Funding Party, are complete and
correct in all material respects and present fairly the consolidated financial
condition of the Lessees and Rowe Companies as at such dates, and the
consolidated results of their operations and their consolidated cash flows for
the fiscal year then ended.   All such financial statements, including the
related schedules and notes thereto, have been prepared in accordance with GAAP
applied consistently throughout the periods involved (except as approved by such
accountants and as disclosed therein).  To the best knowledge of any Lessee or
Rowe Companies, there are no material liabilities, direct or indirect, fixed or
contingent, of any such Lessee or Rowe Companies, as of the date hereof, that
are not reflected in the above financial statements, other than those incurred
in the ordinary course of business since May 30, 1999, or which have been
reflected in a Form 8-K filing with the SEC.

          (b) No Change.  To the best knowledge of any Lessee or Rowe Companies,
              ---------
there has been no material adverse change in the financial condition or
operations of any such Lessee or Rowe Companies since May 30, 1999, except as
disclosed in writing to the Agent and except as reflected in Form 8-K filings
with the SEC, provided however, that the foregoing representation is made solely
as of the Closing Date.

          (c) Corporate Existence; Compliance with Law.  Each Obligor and each
              ----------------------------------------
of Rowe Companies' Significant Subsidiaries (a) is duly organized, validly
existing and in good standing under the laws of the jurisdiction of its
organization, except to the extent that, in the aggregate, the failure of any
such Subsidiaries to be duly organized, validly existing or in good standing
would not have a Material Adverse Effect, (b) has the corporate power and
authority, and the legal right, to own and operate its property, to lease the
property it operates as lessee and to conduct the business in which it is
currently engaged, except to the extent that, in the aggregate, the failure of
any such Subsidiaries to have any such power, authority or legal right would not
have a Material Adverse Effect, (c) is duly qualified and in good standing under
the laws of each jurisdiction where its ownership, lease or operation of
property or the conduct of its business requires such qualification except

                                       22
<PAGE>

to the extent that, in the aggregate, the failure to so qualify or be in good
standing would not have a Material Adverse Effect, and (d) is, to the best of
its knowledge, in compliance with all Requirements of Law except to the extent
that, in the aggregate, the failure to comply therewith would not have a
Material Adverse Effect.

          (d) Corporate Power; Authorization; Enforceable Obligations.  Each
              -------------------------------------------------------
Obligor has the corporate power and authority, and the legal right, to make,
deliver and perform this Master Agreement and the other Operative Documents to
which it is a party and has taken all necessary corporate action to authorize
the Transaction on the terms and conditions of this Master Agreement and to
authorize the execution, delivery and performance of this Master Agreement and
the other Operative Documents to which it is a party.  No consent or
authorization of, filing with or other act by or in respect of, any Governmental
Authority or any other Person is required in connection with the Transaction or
with the execution, delivery, performance, validity or enforceability of this
Master Agreement or the other Operative Documents to which it is a party.  This
Master Agreement has been, and each other Operative Document to which it is a
party will be, duly executed and delivered on behalf of each Obligor.  This
Master Agreement constitutes, and each other Operative Documents to which it is
a party when executed and delivered will constitute, a legal, valid and binding
obligation of each Obligor enforceable against such Obligor in accordance with
its terms, except as enforceability may be limited by applicable bankruptcy,
insolvency, reorganization, moratorium or similar laws affecting the enforcement
of creditors' rights generally and by general equitable principles (whether
enforcement is sought by proceedings in equity or at law).

          (e) No Legal Bar.  The execution, delivery and performance of this
              ------------
Master Agreement and the other Operative Documents to which it is a party, the
Transaction and the use of the proceeds thereof will not, to the best of such
Obligor's knowledge, violate any Requirement of Law or Contractual Obligation of
Rowe Companies or of any of its Subsidiaries and will not result in, or require,
the creation or imposition of any Lien on any of its or their respective
properties or revenues pursuant to any such Requirement of Law or Contractual
Obligation, other than the Operative Documents and other than any Permitted
Encumbrances with respect to Leased Properties.

                                       23
<PAGE>

          (f) No Material Litigation.  No litigation, investigation or
              ----------------------
proceeding of or before any arbitrator or Governmental Authority is pending or,
to the knowledge of any Obligor, threatened by or against any Obligor or any of
their Subsidiaries or against any of its or their respective properties or
revenues which would have a Material Adverse Effect.

           (g) No Default.  No Potential Event of Default or Event of Default
               ----------
has occurred and is continuing.

          (h) Taxes.  All tax returns now required to be filed by the Obligors
              -----
have been filed (or appropriate extensions of such filings have been obtained)
and all taxes, assessments and other governmental charges (other than those
presently payable without penalty or interest and those being contested in good
faith by appropriate proceedings due from the Obligors have been paid.  The
Obligors have established on their books reserves adequate for the payment of
all federal, state and other tax liabilities.

          (i) Federal Regulations.  No part of the proceeds of any Funding will
              -------------------
be used for "purchasing" or "carrying" any "margin stock" within the respective
meanings of each of the quoted terms under Regulation U or Regulation X of the
Board of Governors of the Federal Reserve System as now and from time to time
hereafter in effect if such use would violate, or cause the Fundings or the
Commitments to be in violation of, the provisions of the Regulations of such
Board of Governors.  If requested by any Funding Party or the Agent at any time,
each Obligor will furnish to the Agent and each Funding Party a statement to the
foregoing effect in conformity with the requirements of FR Form U-1 referred to
in said Regulation U.

          (j) ERISA. To the best of such Obligors' knowledge, each Plan is in
              -----
compliance in all material respects with all applicable provisions of ERISA and
the Code, and no liability or obligation has been incurred with respect to any
Plan pursuant to Title IV of ERISA.  No Prohibited Transaction has occurred or
exists in connection with any Plan.  Neither the Obligors nor any ERISA
Affiliate is now or will be at any time from the Closing Date through the Lease
Term a sponsor or contributing employer of (1) any plan which is subject to the
minimum funding requirements under Section 412 of the Code or Section 302 of
ERISA, (2) any "single-employer plan," as defined in Section 4001(a)(15) of
ERISA, or (3) any "multiemployer plan," as defined in Section 4001(a)(3) of
ERISA.

                                       24
<PAGE>

          (k) Investment Company Act; Other Regulations.  None of the Obligors
              -----------------------------------------
is subject to registration as an "investment company" or is "controlled" by such
a company, within the meaning of the Investment Company Act of 1940, as amended.

          (l) Purpose of Fundings.  The proceeds of the Fundings shall be used
              -------------------
by the related Lessee or the Construction Agent to purchase the Land from the
applicable Seller and for Construction costs, including hard and soft costs,
plans and specifications, attorney fees, costs associated with development and
construction of the Building and any trade fixtures or equipment purchased for
use on or in connection with the Leased Property with Funding provided by the
Funding Parties.

          (m) Disclosure.  This Master Agreement, taken as a whole, does not
              ----------
contain any untrue statement of a material fact or omit to state a material fact
necessary in order to make the statements contained herein in light of the
circumstances in which they were made, not materially misleading.

           (n) Hazardous Materials - Leased Properties.
               ---------------------------------------

               (i) To the best knowledge of the related Lessee, except as
     described in the related Environmental Audit, on the Closing Date for each
     Leased Property, there are no Hazardous Materials present at, upon, under
     or within such Leased Property or released or transported to or from such
     Leased Property (except in compliance in all material respects with all
     Applicable Law).

               (ii)  To the best knowledge of the related Lessee, on the related
     Closing Date, no Governmental Actions have been taken or, to the best
     knowledge of the related Lessee, are in process or have been threatened,
     which could reasonably be expected to subject such Leased Property, any
     Lender or the Lessor to any Claims or Liens with respect to such Leased
     Property under any Environmental Law which would have a Material Adverse
     Effect, or would have a material adverse effect on the Lessor or any
     Lender.

               (iii)  The related Lessee has obtained, or will obtain on or
     before the date required by Applicable Law, all Environmental Permits to
     the extent required by Applicable Law to operate each Leased Property, if
     any, in accordance with Environmental Laws and is complying with and has at
     all times complied with all such Environmental Permits, except to the
     extent the failure to obtain such Environmental

                                       25
<PAGE>

     Permits or to so comply would not have a Material Adverse Effect.

               (iv)  To the best knowledge of the related Lessee, except as set
     forth in the related Environmental Audit or in any notice subsequently
     furnished by the related Lessee to the Agent and approved by the Agent in
     writing prior to the respective times that the representations and
     warranties contained herein are made or deemed made hereunder, no notice,
     notification, demand, request for information, citations, summons,
     complaint or order has been issued or filed to or with respect to the
     related Lessee, no penalty has been assessed on the related Lessee and no
     investigation or review is pending or threatened by any Governmental
     Authority or other Person in each case relating to any Leased Property with
     respect to any alleged material violation or liability of the related
     Lessee under any Environmental Law.  To the best knowledge of the related
     Lessee, no material notice, notification, demand, request for information,
     citations, summons, complaint or order has been issued or filed to or with
     respect to any other Person, no material penalty has been assessed on any
     other Person and no investigation or review is pending or threatened by any
     Governmental Authority or other Person relating to any Leased Property with
     respect to any alleged material violation or liability under any
     Environmental Law by any other Person.

               (v) To the best knowledge of the related Lessee, each Leased
     Property and each portion thereof are presently in compliance in all
     material respects with all Environmental Laws, and, to the best knowledge
     of the related Lessee, there are no present or past facts, circumstances,
     activities, events, conditions or occurrences regarding such Leased
     Property (including without limitation the release or presence of Hazardous
     Materials) that could reasonably be anticipated to (A) form the basis of a
     material Claim against such Leased Property, any Funding Party or the
     related Lessee, (B) cause such Leased Property to be subject to any
     material restrictions on ownership, occupancy, use or transferability under
     any Environmental Law, (C) require the filing or recording of any notice or
     restriction relating to the presence of Hazardous Materials in the real
     estate records in the county or other appropriate municipality in which
     such Leased Property is located, or (D) prevent or materially interfere
     with the

                                       26
<PAGE>

     continued operation and maintenance of such Leased Property as contemplated
     by the Operative Documents.

          (o) Leased Property.  To the best knowledge of the related Lessee, the
              ---------------
present condition of each Leased Property conforms in all material respects with
all conditions or requirements of all existing material permits and approvals
issued with respect to such Leased Property, and the related Lessee's future
intended use of such Leased Property under the Lease does not, in any material
respect, violate any Applicable Law.  To the best knowledge of the related
Lessee, no material notices, complaints or orders of violation or non-compliance
have been issued or threatened or contemplated by any Governmental Authority
with respect to any Leased Property or any present or intended future use
thereof.  All material agreements, easements and other rights, public or
private, which are necessary to permit the lawful use and operation of each
Leased Property as the related Lessee intends to use such Leased Property under
the Lease and which are necessary to permit the lawful intended use and
operation of all presently intended utilities, driveways, roads and other means
of egress and ingress to and from the same have been, or to the related Lessee's
best knowledge will be, obtained and are or will be in full force and effect,
and the related Lessee has no knowledge of any pending material modification or
cancellation of any of the same.

      SECTION 4.2 Survival of Representations and Effect of Fundings.
                  --------------------------------------------------

          (a) Survival of Representations and Warranties.  All representations
              ------------------------------------------
and warranties made in Section 4.1 shall survive delivery of the Operative
                       -----------
Documents and every Funding, and shall remain in effect until all of the
Obligations are fully and irrevocably paid.

          (b) Each Funding a Representation.  Each Funding accepted by a Lessee
              -----------------------------
or the Construction Agent shall be deemed to constitute a representation and
warranty by each Obligor to the effect of Section 4.1.
                                          -----------

      SECTION 4.3 Representations of the Lessor.  Effective as of the date of
                  -----------------------------
execution hereof, as of the Closing Date and as of each Funding Date, in each
case, with respect to each of the Leased Properties, the Lessor represents and
warrants to the Agent, the Lenders, the Lessees, Rowe Companies and the
Guarantors, as follows:

                                       27
<PAGE>

          (a) Securities Act.  The interest being acquired or to be acquired by
              --------------
the Lessor in such Leased Property is being acquired for its own account,
without any view to the distribution thereof or any interest therein, provided
                                                                      --------
that the Lessor shall be entitled to assign, convey or transfer its interest in
accordance with Section 6.1.
                -----------

          (b) Due Organization, etc.  The Lessor is a limited partnership duly
              ---------------------
organized and validly existing in good standing under the laws of Texas and each
state in which a Leased Property is located and has full power, authority and
legal right to execute, deliver and perform its obligations under the Lease,
this Master Agreement and each other Operative Document to which it is or will
be a party.

          (c) Due Authorization; Enforceability, etc.  This Master Agreement and
              --------------------------------------
each other Operative Document to which the Lessor is or will be a party have
been or will be duly authorized, executed and delivered by or on behalf of the
Lessor and are, or upon execution and delivery will be, legal, valid and binding
obligations of the Lessor enforceable against it in accordance with their
respective terms, except as such enforceability may be limited by applicable
bankruptcy, insolvency, or similar laws affecting creditors' rights generally
and by general equitable principles.

          (d) No Conflict.  The execution and delivery by the Lessor of the
              -----------
Lease, this Master Agreement and each other Operative Document to which the
Lessor is or will be a party, are not or will not be, and the performance by the
Lessor of its obligations under each will not be, inconsistent with its
Partnership Agreement, do not and will not contravene any Applicable Law
applicable generally to parties providing financing and do not and will not
contravene any provision of, or constitute a default under, any Contractual
Obligation of Lessor, do not and will not require the consent or approval of,
the giving of notice to, the registration with or taking of any action in
respect of or by, any Governmental Authority applicable generally to parties
providing financing, except such as have been obtained, given or accomplished,
and the Lessor possesses all requisite regulatory authority to undertake and
perform its obligations under the Operative Documents.

          (e) Litigation.  There are no pending or, to the knowledge of the
              ----------
Lessor, threatened actions or proceedings against the Lessor before any court,
arbitrator or administrative agency with respect to any Operative Document or
that would have

                                       28
<PAGE>

a material adverse effect upon the ability of the Lessor to perform its
obligations under this Master Agreement or any other Operative Documents to
which it is or will be a party.

          (f) Lessor Liens.  No Lessor Liens (other than those created by the
              ------------
Operative Documents) exist on any Closing Date on the Leased Property, or any
portion thereof, and the execution, delivery and performance by the Lessor of
this Master Agreement or any other Operative Document to which it is or will be
a party will not subject any Leased Property, or any portion thereof, to any
Lessor Liens (other than those created by the Operative Documents).

          (g) Employee Benefit Plans.  The Lessor is not and will not be making
              ----------------------
its investment hereunder, and is not performing its obligations under the
Operative Documents, with the assets of an "employee benefit plan" (as defined
in Section 3(3) of ERISA) which is subject to Title I of ERISA, or "plan" (as
defined in Section 4975(e)(1)) of the Code.

           (h) General Partner.  The sole general partner of the Lessor is
               ---------------
Atlantic Financial Managers, Inc.

          (i) Financial Information.  (A) The unaudited balance sheet of the
              ---------------------
Lessor as of December 31, 1998 and the related statements of income, partners'
capital and cash flows for the year then ended, copies of which have been
delivered to the Agent and Rowe Companies, fairly present, in conformity with
sound accounting principles, the financial condition of the Lessor as of such
date and the results of operations and cash flows for such period.

          (B) Since December 31, 1998, there has been no event, act, condition
or occurrence having a material adverse effect upon the financial condition,
operations, performance or properties of the Lessor, or the ability of the
Lessor to perform in any material respect its obligations under the Operative
Documents.

          (C) The Lessor has no recourse indebtedness, and the Lessor has not
entered into any other transactions, purchases, leases or other agreements,
other than immaterial transactions, purchases, leases and other agreements
entered into by the Lessor in the ordinary course of its business, in which the
Lessor has any liability to the other parties to such transactions, purchases,
leases or other agreements that is in excess of the Lessor's ownership or other
interest in the property subject to

                                       29
<PAGE>

such transactions, purchases, leases or other agreements other than liability
for required fundings, breach of contract, misrepresentation, gross negligence,
willful misconduct, fraud, failure to turn over funds and similar exceptions to
limitations on recourse.

          (j) No Offering.  The Lessor has not offered the Notes to any Person
              -----------
in any manner that would subject the issuance thereof to registration under the
Securities Act or any applicable state securities laws.

      SECTION 4.4 Representations of each Lender.  Effective as of the date of
                  ------------------------------
execution hereof, as of the Closing Date and as of each Funding Date, each
Lender represents and warrants to the Lessor and to the Lessees as follows:

          (a) Securities Act.  The interest being acquired or to be acquired by
              --------------
such Lender in the Funded Amounts is being acquired for its own account, without
any view to the distribution thereof or any interest therein, provided that such
                                                              --------
Lender shall be entitled to assign, convey or transfer its interest in
accordance with Section 6.2.
                -----------

          (b) Employee Benefit Plans.  Such Lender is not and will not be making
              ----------------------
its investment hereunder, and is not performing its obligations under the
Operative Documents, with the assets of an "employee benefit plan" (as defined
in Section 3(3) of ERISA) which is subject to Title I of ERISA, or "plan" (as
defined in Section 4975(e)(1)) of the Code.

                                  ARTICLE V.
                     COVENANTS OF OBLIGORS AND THE LESSOR

      SECTION 5.1  Affirmative Covenants.  Each Obligor covenants and agrees
                   ---------------------
that, it shall do, or cause to be done, the following:

           (a) Financial Statements.  Furnish to each Funding Party:
               --------------------

               (i)  as soon as available, but in any event within 90 days after
          the end of each fiscal year of each Obligor, a copy of the
          consolidated balance sheet of Rowe Companies and its consolidated
          Subsidiaries as at the end of such year and the related consolidated
          statements of income and retained earnings and of cash flows for such
          year, setting forth in each case in

                                       30
<PAGE>

          comparative form the figures for the previous year, reported on
          without a "going concern" or like qualification or exception, or
          qualification arising out of the scope of the audit, by BDO Seidman,
          LLP, by a "Big 5" accounting firm, or by another nationally recognized
          accounting firm designated by Rowe Companies and reasonably acceptable
          to the Required Funding Parties. Alternatively, such Obligor may
          furnish its annual report on Form 10-K filed with the SEC if such
          annual report contains financial statements that satisfy the
          requirements set forth above; and

               (ii)  as soon as available, but in any event not later than 45
          days after the end of each of the first three quarterly periods of
          each fiscal year of each Obligor, the unaudited consolidated balance
          sheet of Rowe Companies and its consolidated Subsidiaries as at the
          end of such quarter and the related unaudited consolidated statements
          of income and retained earnings and of cash flows of Rowe Companies
          and its consolidated Subsidiaries for such quarter and the portion of
          the fiscal year through the end of such quarter, setting forth in each
          case in comparative form the figures for the previous year, certified
          by a Responsible Officer as being fairly stated in all material
          respects (subject to normal year-end audit adjustments).
          Alternatively, such Obligor may furnish its quarterly report on Form
          10-Q filed with the SEC if such quarterly report contains financial
          statements that satisfy the requirements set forth above;

all such financial statements shall be complete and correct in all material
respects and shall be prepared in reasonable detail and in accordance with GAAP
applied consistently throughout the periods reflected therein and with prior
periods (except as approved by such accountants or officer, as the case may be,
and disclosed therein).

           (b) Certificates; Other Information.  Furnish to each Funding Party:
               -------------------------------

          (i)  concurrently with the delivery of the financial statements
referred to in Section 5.1(a)(i), a certificate of the independent certified
               -----------------
public accountants reporting on such financial statements stating that in making
the examination necessary therefor no knowledge was obtained of any

                                       31
<PAGE>

Potential Event of Default or Event of Default, except as specified in such
certificate;

          (ii)  concurrently with the delivery of the financial statements
referred to in Sections 5.1(a)(i) and (ii), a certificate of a Responsible
               ------------------     ----
Officer stating that such officer has obtained no knowledge of any Potential
Event of Default or Event of Default that has occurred and is continuing except
as specified in such certificate, and including calculations demonstrating
compliance with Section 5.2;
                -----------

          (iii)  within five Business Days after the same are sent, copies of
all regular and periodic reports which Rowe Companies sends to its stockholders
generally, and within five Business Days after the same are filed, copies of all
regular and periodic reports which Rowe Companies may make to, or file with, the
SEC or any successor or analogous Governmental Authority; and

          (iv)  promptly, such additional financial and other information as any
Funding Party may from time to time reasonably request.

          (c) Conduct of Business and Maintenance of Existence. Continue to
              ------------------------------------------------
engage in business of substantially the same general type as now conducted by
it, taken as a whole, and preserve, renew and, with respect to Rowe Companies
and Rowe Furniture only, keep in full force and effect its corporate existence
and take such reasonable action to maintain all rights, privileges and
franchises necessary or desirable in the normal conduct of its business except
as otherwise permitted pursuant to Section 5.2(e); comply with all Contractual
                                   --------------
Obligations and Requirements of Law except to the extent that failure to comply
therewith would not, in the aggregate, have a Material Adverse Effect.

           (d) Inspection of Property; Books, Records and Discussions.
               ------------------------------------------------------

          (i)  Keep proper books of records and account in which full, true and
     correct entries in conformity with GAAP and all Requirements of Law shall
     be made of all dealings and transactions in relation to its business and
     activities.

          (ii)  Permit representatives of Funding Parties to visit it any of its
     properties and have access to any of its financial books and records at
     reasonable times during normal business hours and to make inspections
     thereof and

                                       32
<PAGE>

     such excerpts from such records as such representatives deem
     necessary.

          (e) Notices.  Give notice to the Agent and each Funding Party within
              -------
10 days after Rowe Companies knows or has reason to know thereof of (i) any
Potential Event of Default or Event of Default or (ii) any change order over
$100,000 under any Construction Contract.

          (f) Taxes.  Duly pay and discharge all taxes, assessments and
              -----
governmental charges upon it or against its properties prior to the date on
which penalties attach unless and to the extent only that such taxes,
assessments and governmental charges shall be contested in good faith and by
appropriate proceedings by the Lessee or each Guarantor, as the case may be, and
the Lessee or each Guarantor, as the case may be, shall have set aside on its
books such reserves as are required by GAAP with respect to any such tax,
assessment or charge so contested.

          (g) Maintenance of Property.  Maintain all of its Properties and
              -----------------------
assets in good condition, repair and working order, ordinary wear and tear
excepted.

          (h) Insurance.  Continuously maintain or cause to be maintained
              ---------
insurance with responsible carriers, or through self-insurance, against such
risks as are customarily insured against and in such amounts as are customarily
carried by entities similar to such Obligor, paying or causing to be paid as the
same become due all premiums in respect thereto, as applicable.

           (i) Environmental Matters.
               ---------------------

               (i) Conduct the Lessee's business operations in full compliance
     with Environmental Laws and refrain from, and prevent any other party from,
     using any Hazardous Materials on or in connections with the Properties
     except such material as are incidental to the Lessee's normal course of
     business, maintenance and repairs. Notwithstanding the foregoing, the
     Lessee's or Rowe Companies' failure to comply with the foregoing provision
     shall not constitute an Event of Default unless such failure causes a
     Material Adverse Effect.

               (ii) Immediately notify the Agent in writing of (A) any and all
     enforcement, clean-up, remedial, removal, or other governmental or
     regulatory actions instituted, completed or threatened pursuant to any
     Environmental Law

                                       33
<PAGE>

     affecting or pertaining to the Properties or the Lessee's business
     operations, (B) all claims made or threatened by any third party against
     the Lessee relating to damages, contribution, cost recovery compensation,
     loss or injury resulting from any Hazardous Materials; and (C) any remedial
     action taken by the Lessee with respect to the Properties or the Lessee's
     business operations.

          (j) Year 2000 Compliance.  Take all action necessary to insure that
              --------------------
all material date affected technology used in the Lessee's business operations
is able to correctly and effectively process date data form, into and between
the twentieth and twenty-first centuries.

          (k) Financial Positions.  At the end of Rowe Companies' fiscal
              -------------------
quarters, tested on a rolling fiscal four quarter basis (unless otherwise
indicated), Rowe Companies will have and maintain the following financial
positions all as defined or determined in accordance with GAAP.

               (i) Maximum Funded Debt to Cash Flow.  Have and maintain a
                   --------------------------------
     consolidated maximum Funded Debt to Cash Flow Ratio (based on the four
     previous consecutive quarters at the effective date of determination) of
     not more than 2.75 to 1.0 at each testing time.

               (ii) Maximum Funded Debt to Total Capitalization. Have and
                    -------------------------------------------
     maintain a consolidated maximum Funded Debt to Total Capitalization ratio
     of not more than the following:

               Ratio                         As of
               -----                         -----

          .60 to 1.00             as of the end of each fiscal quarter to and
                                  including the end of the fiscal quarter ending
                                  on or about August 31, 2000.

          .55 to 1.00             as of the end of the fiscal quarter ending on
                                  or about November 30, 2000, to and including
                                  the end of the fiscal quarter ending on or
                                  about August 31, 2001.

          .50 to 1.00             from and after August 31, 2001.

                                       34
<PAGE>

          (ii) Minimum Interest Coverage.  Have and maintain a consolidated
               -------------------------
     Minimum Interest Coverage Ratio (based on the four previous consecutive
     quarters at the effective date of determination) at least equal to 5.00 to
     1.00 at each testing time.

          (l) Qualified Swap Agreement. Rowe Companies or Rowe Furniture (as
              ------------------------
agreed between Lessee and Agent) shall enter into a Qualified Swap Agreement by
November 30, 2000 and, thereafter, have and maintain a Qualified Swap Agreement
during the Base Term and, if the Base Term is renewed pursuant to Section 14.9
of the Lease, then during the balance of the Lease Term.

          (m) Most Favored Lender Status.  If Rowe Companies enters into a
              --------------------------
subsequent financing where it grants to the lender more favorable covenants
(from the standpoint of the lender) or additional covenants (whether affirmative
covenants or negative covenants), except those respecting Permitted Encumbrances
both as defined in Appendix A and as defined in the Revolver, not granted under
this Master Agreement, then Rowe Companies shall notify Agent of such and, upon
request of Agent, shall execute an amendment to include such covenants in
Section 5.1 or Section 5.2, as applicable.

      SECTION 5.2 Negative Covenants.
                  ------------------

     Each Obligor covenants and agrees that, so long as any of the Commitments
remain in effect or any Obligation is owing to the Funding Parties by any
Lessee, each Obligor will not, directly or indirectly, without the prior written
permission of Agent as directed by the Required Funding Parties:

          (a) Negative Pledge.  Without the prior express written consent of the
              ---------------
Agent, given or withheld in the Agent's sole discretion, create, assume, or
suffer to exist, any mortgage, deed of trust, pledge, lien, security interest,
assignment, deposit arrangement or other preferential arrangement, charge or
encumbrance (including without limitation any conditional sale, or other title
retention agreement or finance lease) of any nature, upon or with respect to any
of the Properties, now owned or hereafter acquired, or sign or file under the
Uniform Commercial Code of any jurisdiction a financing statement which names
any Obligor as a debtor, or sign any security agreement authorizing any secured
party thereunder to file such financing statement, except for Permitted
Encumbrances (as defined in Appendix A and as defined in the Revolver). Except
as provided in this section, it is not intended that the

                                       35
<PAGE>

Operative Documents prohibit any Lien other than against the Leased Property
(subject to Permitted Encumbrances).

          (b) Notice of Merger, Consolidation, Disposition of Assets. In the
              ------------------------------------------------------
event that any Obligor shall (i) merge or consolidate with any Person or (ii)
sell, assign, lease or otherwise dispose of (whether in one transaction or in a
series of transactions) assets with an aggregate value greater than $1 million
to any Person, except with respect to inventory in the ordinary course of
business, then within ten (10) days of any of the foregoing, such Obligor shall
(1) forward to the Agent written notice of such transaction, specifying the
details thereof, and (2) forward a certificate of the chief financial officer of
such Obligor setting forth a reasonably detailed calculation of the financial
position of such Obligor subsequent to any such transaction and certifying that
consummation of such transaction has not and will not cause an Event of Default.

          (c) Contingent Liabilities.  Except as otherwise provided in the
              ----------------------
Operative Documents, assume, guarantee, endorse or otherwise become surety for
or upon the obligation of any Person, except by the endorsement of negotiable
instruments for deposit or collection in the ordinary course of business.

      SECTION 5.3  Further Assurances.  Upon the written request of the Lessor
                   ------------------
or the Agent, each Lessee, at its own cost and expense, will cause all financing
statements (including precautionary financing statements), fixture filings and
other similar documents, to be recorded or filed at such places and times in
such manner, as may be necessary to preserve, protect and perfect the interest
of the Lessor, the Agent and the Lenders in the Leased Properties as
contemplated by the Operative Documents.

      SECTION 5.4  Additional Required Appraisals.  If, as a result of any
                   ------------------------------
change in Applicable Law after the date hereof, an appraisal of all or any of
the Leased Properties is required during the Lease Term under Applicable Law
with respect to any Funding Party's interest therein, such Funding Party's
Funded Amount with respect thereto or the Operative Documents, then the related
Lessee shall pay the reasonable cost of such appraisal.

      SECTION 5.5  Lessor's Covenants.  The Lessor covenants and agrees that,
                   ------------------
unless the Agent, Rowe Furniture, and the Lenders shall have otherwise consented
in writing:

          (a) the proceeds of the Loans received from the

                                       36
<PAGE>

Lenders will be used by the Lessor solely to acquire the related Leased Property
and to pay the Construction Agent or the related Lessee for certain closing,
development and transaction costs associated therewith and, for the costs of
Construction, including hard and soft costs, Plans and Specifications, attorney
fees, costs associated with construction of the Building and any fixtures or
equipment purchased for use on or in connection with the Leased Property with
Funding provided by the Funding Parties. No portion of the proceeds of the Loans
will be used by the Lessor (i) in connection with, whether directly or
indirectly, any tender offer for, or other acquisition of, stock of any
corporation with a view towards obtaining control of such other corporation or
(ii) directly or indirectly, for the purpose, whether immediate, incidental or
ultimate, of purchasing or carrying any Margin Stock;

          (b) it shall not engage in any business or activity, or invest in any
Person, except for activities similar to its activities conducted on the date
hereof, the Transaction and lease transactions similar to the Transaction;

          (c) it will maintain tangible net worth in an amount no less than the
sum of (i) $100,000 plus (ii) 3% of its total assets (calculated assuming no
                    ----
reduction in the value of any leased property from its original cost to the
Lessor);

          (d) it will deliver to the Agent and Rowe Furniture, as soon as
available and in any event within 90 days after the end of each fiscal year, a
balance sheet of the Lessor as of the end of such fiscal year and the related
statements of income, partners' capital and cash flows for such fiscal year,
setting forth in each case in comparative form the figures for the previous
fiscal year, together with copies of its tax returns, all certified by an
officer of the General Partner (and if the Lessor ever prepares audited
financial statements, it shall deliver copies thereof to the Agent and Rowe
Furniture);

          (e) it will permit the Agent, Rowe Furniture and their respective
representatives to examine, and make copies from, the Lessor's books and
records, and to visit the offices and properties of the Lessor for the purpose
of examining such materials, and to discuss the Lessor's performance hereunder
with any of its, or its general partner's, officers and employees;

          (f) it shall not consent to the creation of any easement or other
restriction against any Leased Property other than as permitted pursuant to
Article VI of the Lease;

                                       37
<PAGE>

          (g) it shall promptly discharge each Lessor Lien and shall indemnify
the Lenders and the Lessees for any diminution in value of any Leased Property
resulting from such Lessor Liens;

          (h) it shall not enter into any other transactions, leases, purchases
or other agreements, other than immaterial transactions, purchases, leases and
other agreements entered into by the Lessor in the ordinary course of its
business, in which the other parties to said transactions, leases, purchases or
other agreements will have any recourse against Lessor which is in addition to
Lessor's ownership or other interest in the property subject to such
transactions, purchases, leases or other agreements, other than liability for
required fundings, breach of contract, misrepresentation, gross negligence,
willful misconduct, fraud, failure to turn over funds and similar exceptions to
limitations on recourse;

          (i) it shall not guaranty the liabilities of any other Person;

          (j) it shall pay its debts as such debts become due unless such debts
are the subject of a bona fide dispute and are being contested in good faith and
by appropriate proceedings; and

          (k) except for the Operative Documents, it shall not pledge, authorize
or grant any Lien against the Leased Property nor any fixtures or equipment
located therein or attached thereto.

                                  ARTICLE VI.
                        TRANSFERS BY LESSOR AND LENDERS

      SECTION 6.1 Lessor Transfers.  The Lessor shall not assign, convey or
                  ----------------
otherwise transfer all or any portion of its right, title or interest in, to or
under any Leased Property or any of the Operative Documents without the prior
written consent of the Lenders and Rowe Furniture which consent may be withheld
in such parties' sole discretion.  Any proposed transferee of the Lessor
consented to in writing as provided for above shall make the representations set
forth in Section 4.3 to the other parties hereto and shall execute an agreement
         -----------
acknowledging the same and agreeing to assume and be bound by all of the terms,
conditions and covenants set forth in the Operative Documents.

                                       38
<PAGE>

      SECTION 6.2 Lender Transfers.
                  ----------------

          (a)  Any Lender may make, carry or transfer Loans at, to or for the
account of, any of its branch offices or the office of an Affiliate of such
Lender.

          (b) Following the Construction Term Expiration Date, each Lender may
assign all or a portion of its interests, rights and obligations under this
Master Agreement and the Loan Agreement (including all or a portion of its
Commitment and the Loans at the time owing to it) to any Eligible Assignee;
provided, however, that (i) the Agent and, except during the continuance of a
--------  -------
Potential Event of Default or Event of Default, Rowe Furniture must give its
prior written consent to such assignment (which consent shall not be
unreasonably withheld or delayed) unless such assignment is to an Affiliate of
the assigning Lender, (ii) unless such Lender is assigning all of its
Commitment, after giving effect to such assignment, the Commitment of both the
assignor and the assignee is at least $5,000,000 and there are no more than four
Lenders and (iii) the parties to each such assignment shall execute and deliver
to the Agent an Assignment and Acceptance, and, unless such assignment is to an
Affiliate of such Lender, a processing and recordation fee of $3,000 payable to
the Agent.  Any such assignment of the Loans shall include both the A Loans and
the B Loans, on a pro rata basis. No Lessee shall be responsible for such
processing and recordation fee or any costs or expenses incurred by any Lender
or the Agent in connection with such assignment. From and after the effective
date specified in each Assignment and Acceptance, which effective date shall be
at least five (5) Business Days after the execution thereof, the assignee there
under shall be a party hereto and to the extent of the interest assigned by such
Assignment and Acceptance, have the rights and obligations of a Lender under
this Master Agreement and the Loan Agreement.

          (c) Each Lender may, without the consent of any Obligor, sell
participations to one or more banks or other entities in all or a portion of its
rights and obligations under this Master Agreement and the Loan Agreement
(including all or a portion of its Commitments in the Loans owing to it),
provided, however, that (i) such Lender's obligations under this Master
--------  -------
Agreement and the Loan Agreement shall remain unchanged, (ii) such Lender shall
remain solely responsible to the other parties hereto for the performance of
such obligations, (iii) the participating bank or other entity shall not be
entitled to any greater benefit than its selling Lender under the cost
protection

                                       39
<PAGE>

provisions contained in Section 7.5 of this Master Agreement, and (iv) each
                        -----------
Obligor, the Agent and the other Lenders shall continue to deal solely and
directly with each Lender in connection with such Lender's rights and
obligations under this Master Agreement and the other Operative Documents, and
such Lender shall retain the sole right to enforce the obligations of Lessor
relating to the Loans and to approve any amendment, modification or waiver of
any provisions of this Master Agreement and the Loan Agreement (except that such
Lender may permit the participant to approve any amendment, modification or
waiver which would reduce the principal of or the interest rate on its Loan,
extend the term of such Lender's Commitment, reduce the amount of any fees to
which such participant is entitled or extend the final scheduled payment date of
any Loan), (v) no such transfer shall be effective unless the participant
establishes to the satisfaction of the Agent its entitlement to a complete
exemption from withholding tax, and (vi) the participant designates the Agent as
its representative for dealing with the Lessees and the Agent accepts such
appointment and agrees to be responsible for obtaining the consent of or giving
notice to any Funding Party as required under the provisions of the Operative
Documents. Any Lender selling a participation hereunder shall provide prompt
written notice to the Agent of the name of such participant.

          (d) Any Lender or participant may, in connection with the assignment
or participation or proposed assignment or participation, pursuant to this
Section, disclose to the assignee or participant or proposed assignee or
participant any information relating to Rowe Companies or its Subsidiaries
furnished to such Lender by or on behalf of Rowe Companies.  With respect to any
disclosure of confidential, non-public, proprietary information, such proposed
assignee or participant shall agree to use the information only for the purpose
of making any necessary credit judgments with respect to this facility and not
to use the information in any manner prohibited by any law, including without
limitation, the securities laws of the United States. The proposed participant
or assignee shall agree not to disclose any of such information except as
permitted by this Master Agreement. The proposed participant or assignee shall
further agree to return all documents or other written material and copies
thereof received from any Lender, the Agent or any Lessee relating to such
confidential information unless otherwise properly disposed of by such entity.

          (e) Any Lender may at any time assign all or any portion of its rights
under this Master Agreement and the Notes to a Federal Reserve Bank; provided
                                                                     --------
that no such assignment shall

                                       40
<PAGE>

release such Lender from any of its obligations hereunder.

                                  ARTICLE VII.
                                INDEMNIFICATION

      SECTION 7.1 General Indemnification. Each Obligor, jointly and severally,
                  -----------------------
agrees, whether or not any of the transactions contemplated hereby shall be
consummated, to assume liability for, and to indemnify, protect, defend, save
and hold harmless each Indemnitee, on an After-Tax Basis, from and against, any
and all Claims that may be imposed on, incurred by or asserted, or threatened to
be asserted, against such Indemnitee, whether or not such Indemnitee shall also
be indemnified as to any such Claim by any other Person and whether or not such
Claim arises or accrues prior to any Closing Date or after the Lease Termination
Date, or results from such Indemnitee's negligence, in any way relating to or
arising out of:

          (a) any of the Operative Documents or any of the transactions
contemplated thereby, and any amendment, modification or waiver in respect
thereof; or

          (b) any Land, any Building or any part thereof or interest therein;

          (c) the purchase, design, construction, preparation, installation,
inspection, delivery, non-delivery, acceptance, rejection, ownership,
management, possession, operation, rental, lease, sublease, repossession,
maintenance, repair, alteration, modification, addition, substitution, storage,
transfer of title, redelivery, use, financing, refinancing, disposition,
operation, condition, sale (including, without limitation, any sale pursuant to
the Lease), return or other disposition of all or any part of any interest in
any Leased Property or the imposition of any Lien, other than a Lessor Lien (or
incurring of any liability to refund or pay over any amount as a result of any
Lien, other than a Lessor Lien) thereon, including, without limitation: (i)
Claims or penalties arising from any violation or alleged violation of law or in
tort (strict liability or otherwise), (ii) latent or other defects, whether or
not discoverable, (iii) any Claim based upon a violation or alleged violation of
the terms of any restriction, easement, condition or covenant or other matter
affecting title to any Leased Property or any part thereof, (iv) the making of
any Alterations in violation of any standards imposed by any insurance policies
required to be maintained by any Lessee pursuant to the Lease which are in

                                       41
<PAGE>

effect at any time with respect to any Leased Property or any part thereof, (v)
any Claim for patent, trademark or copyright infringement, (vi) Claims arising
from any public improvements with respect to any Leased Property resulting in
any charge or special assessments being levied against any Leased Property or
any Claim for utility "tap-in" fees, and (vii) Claims for personal injury or
real or personal property damage occurring, or allegedly occurring, on any Land,
Building or Leased Property;

          (d) the breach or alleged breach by any Obligor of any representation
or warranty made by it or deemed made by it in any Operative Document or any
certificate required to be delivered by any Operative Document;

          (e) the retaining or employment of any broker, finder or financial
advisor by any Obligor to act on its behalf in connection with this Master
Agreement, or the incurring of any fees or commissions to which the Lessor, the
Agent or any Lender might be subjected by virtue of their entering into the
transactions contemplated by this Master Agreement (other than fees or
commissions due to any broker, finder or financial advisor retained by the
Lessor, the Agent or any Lender);

          (f) the existence of any Lien on or with respect to any Leased
Property, the Construction, any Basic Rent or Supplemental Rent, title thereto,
or any interest therein, including any Liens which arise out of the possession,
use, occupancy, construction, repair or rebuilding of any Leased Property or by
reason of labor or materials furnished or claimed to have been furnished to the
Construction Agent, any Lessee, or any of its contractors or agents or by reason
of the financing of any personalty or equipment purchased or leased by any
Lessee or Alterations constructed by any Lessee, except Lessor Liens and Liens
in favor of Agent, Lessor and/or Lenders;

          (g) subject to the accuracy of any Funding Party's representation set
forth in Section 4.3(g) and in Section 4.4(b), the transactions contemplated
hereby or by any other Operative Document, in respect of the application of
Parts 4 and 5 of Subtitle B of Title I of ERISA and any prohibited transaction
described in Section 4975(c) of the Code; or

          (h) any act or omission by any Obligor under any Purchase Agreement or
any other Operative Document, and any breach of any requirement, condition,
restriction or limitation in any Deed or Purchase Agreement;

                                       42
<PAGE>

provided, however, no Lessee shall be required to indemnify any Indemnitee under
--------  -------
this Section 7.1 for any of the following: (1) any Claim to the extent that such
     -----------
Claim results from the willful misconduct (including willful failure to act
where such Indemnitee had a duty to act), gross negligence, breach of contract
or misrepresentation of such Indemnitee; (2) any Claim resulting from Lessor
Liens which the Lessor or the Lenders are responsible for discharging under the
Operative Documents, (3) any Claim arising from a breach or alleged breach by
the Lenders of any agreement entered into in connection with the assignment or
participation of any Loan or Lessor Amount, (4) the failure on the part of the
Agent to distribute in accordance with this Agreement any amounts received and
distributable by it hereunder, (5) a Claim arising from the offer, sale or
delivery of a Note or an interest in a Note or a violation of any Requirements
of Law by any Indemnitee, and (6) the transfer by any Indemnitee of the Leased
Property other than pursuant to the Lease or in connection with the exercise of
rights or remedies under the Operative Documents; provided, further, that with
                                                  --------  -------
respect to each Construction Land Interest, each Lessee's indemnity obligations
with respect to such Leased Property shall be governed by Section 3.3 of the
Construction Agency Agreement during the Construction Term therefor.  It is
expressly understood and agreed that the indemnity provided for herein shall
survive the expiration or termination of, and shall be separate and independent
from any other remedy under this Master Agreement or any other Operative
Document.

      SECTION 7.2 Environmental Indemnity.  In addition to and without
                  -----------------------
limitation of Section 7.1 or Section 3.3 of the Construction Agency Agreement,
              -----------
each Obligor, jointly and severally, agrees to indemnify, hold harmless and
defend each Indemnitee from and against any and all claims (including without
limitation third party claims for personal injury or real or personal property
damage), losses (including but not limited to any loss of value of any Leased
Property), damages, liabilities, fines, penalties, charges, suits, settlements,
demands, administrative and judicial proceedings (including informal proceedings
and investigations) and orders, judgments, remedial action, requirements,
enforcement actions of any kind, and all reasonable costs and expenses actually
incurred in connection therewith (including, but not limited to, reasonable
attorneys' and/or paralegals' fees and expenses), including, but not limited to,
all costs incurred in connection with any investigation or monitoring of site
conditions or any clean-up, remedial, removal or restoration work by any
federal, state or local government agency, arising directly or indirectly, in
whole or in part, out

                                       43
<PAGE>

of

          (i)   the presence on or under any Land of any Hazardous Materials, or
     any releases or discharges of any Hazardous Materials on, under, from or
     onto any Land,

          (ii)  any activity, including, without limitation, construction,
     carried on or undertaken on or off any Land, and whether by a Lessee or any
     predecessor in title or any employees, agents, contractors or
     subcontractors of a Lessee or any predecessor in title, or any other
     Person, in connection with the handling, treatment, removal, storage,
     decontamination, clean-up, transport or disposal of any Hazardous Materials
     that at any time are located or present on or under or that at any time
     migrate, flow, percolate, diffuse or in any way move onto or under any
     Land,

          (iii) loss of or damage to any property or the environment (including,
     without limitation, clean-up costs, response costs, remediation and removal
     costs, cost of corrective action, costs of financial assurance, fines and
     penalties and natural resource damages), or death or injury to any Person,
     and all expenses associated with the protection of wildlife, aquatic
     species, vegetation, flora and fauna, and any mitigative action required by
     or under Environmental Laws, in each case to the extent related to any
     Leased Property,

          (iv)  any claim concerning any Leased Property's lack of compliance
     with Environmental Laws, or any act or omission causing an environmental
     condition on or with respect to any Leased Property that requires
     remediation or would allow any governmental agency to record a lien or
     encumbrance on the land records, or

          (v)   any residual contamination on or under any Land, or affecting
     any natural resources on any Land, and to any contamination of any property
     or natural resources arising in connection with the generation, use,
     handling, storage, transport or disposal of any such Hazardous Materials on
     or from any Leased Property; in each case irrespective of whether any of
     such activities were or will be undertaken in accordance with applicable
     laws, regulations, codes and ordinances;

                                       44
<PAGE>

in any case with respect to the matters described in the foregoing clauses (i)
                                                                   -----------
through (v) that arise or occur
        ---

          (w) prior to or during the Lease Term,

          (x) at any time during which a Lessee or any Affiliate thereof owns
     any interest in or otherwise occupies or possesses any Leased Property or
     any portion thereof, or

          (y) during any period after and during the continuance of any Event of
     Default;

provided, however, no Lessee shall be required to indemnify any Indemnitee under
--------  -------
this Section 7.2 for any Claim to the extent that such Claim results from the
     -----------
willful misconduct (including willful failure to act where such Indemnitee had a
duty to act) or gross negligence of such Indemnitee. It is expressly understood
and agreed that the indemnity provided for herein shall be separate and
independent from any other remedy under this Master Agreement, the Lease or any
other Operative Document, and shall survive for a period of three (3) years
after the termination of the Lease if the environmental report delivered
pursuant to Section 14.10 of the Lease indicates that no remedial action is
required under Applicable Law or recommended by the environmental consultant
preparing such report; provided, that there shall be no time limit with respect
                       --------
to any indemnity for Claims related to any violations, releases or discharges of
Hazardous Materials, presence of Hazardous Materials or other event or
circumstance described in any environmental report delivered pursuant to Section
14.10 of the Lease, unless Rowe Furniture delivers to the Lessor and the Agent a
subsequent environmental report, from a firm, and in a form, satisfactory to the
Lessor and the Agent, showing that all such violations, releases and discharges
have been cured, and all contamination related thereto has been cleaned up, all
such Hazardous Materials have been removed, all other events and circumstances
described in such original report have been cured and that all remedial action
required by Applicable Laws or recommended pursuant to the original report has
been satisfactorily completed, in which case the indemnity provided in this
Section 7.2 shall survive for a period of three (3) years after the delivery of
-----------
such subsequent report.

      SECTION 7.3 Proceedings in Respect of Claims.  With respect to any amount
                  --------------------------------
that a Lessee is requested by an Indemnitee to pay by reason of Section 7.1 or
                                                                -----------
7.2, such Indemnitee shall, if so requested by such Lessee and prior to any
---
payment, submit such

                                       45
<PAGE>

additional information to such Lessee as such Lessee may reasonably request and
which is in the possession of, or under the control of, such Indemnitee to
substantiate properly the requested payment. In case any action, suit or
proceeding shall be brought against any Indemnitee, such Indemnitee promptly
shall notify Rowe Companies of the commencement thereof (provided that the
                                                         --------
failure of such Indemnitee to promptly notify Rowe Companies shall not affect
any Obligor's obligation to indemnify hereunder except to the extent that a
Lessee's ability to contest is materially prejudiced by such failure), and such
Lessee shall be entitled, at its expense, to participate in, and, to the extent
that such Lessee desires to, assume and control the defense thereof with counsel
reasonably satisfactory to such Indemnitee; provided, however, that such
                                            --------  -------
Indemnitee may pursue a motion to dismiss such Indemnitee from such action, suit
or proceeding with counsel of such Indemnitee's choice at the Lessees' expense;
and provided further that a Lessee may assume and control the defense of
    -------- -------
such proceeding only if Rowe Companies shall have acknowledged in writing its
and each Lessee's obligations to fully indemnify such Indemnitee in respect of
such action, suit or proceeding, Lessees shall pay all reasonable costs and
expenses related to such action, suit or proceeding as and when incurred and the
related Lessee shall keep such Indemnitee fully apprised of the status of such
action suit or proceeding and shall provide such Indemnitee with all information
with respect to such action suit or proceeding as such Indemnitee shall
reasonably request; and, provided further, that no Lessee shall be entitled
                         -------- -------
to assume and control the defense of any such action, suit or proceeding if and
to the extent that, (A) in the reasonable opinion of such Indemnitee, (x) such
action, suit or proceeding involves any possibility of imposition of criminal
liability or any material risk of material civil liability on such Indemnitee or
(y) such action, suit or proceeding will involve a material risk of the sale,
forfeiture or loss of, or the creation of any Lien (other than a Permitted
Encumbrance) on any Leased Property or any part thereof unless the related
Lessee or Rowe Companies shall have posted a bond or other security satisfactory
to the relevant Indemnitees in respect to such risk if reasonably requested by
the Agent or (z) the control of such action, suit or proceeding would involve an
actual or potential material conflict of interest, (B) such proceeding involves
Claims not fully indemnified by the Lessees which the related Lessee and the
Indemnitee have been unable to sever from the indemnified claim(s), or (C) an
Event of Default has occurred and is continuing. The Indemnitee may participate
in a reasonable manner at its own expense and with its own counsel in any
proceeding conducted by a Lessee in accordance with the

                                       46
<PAGE>

foregoing.

     If a Lessee fails to fulfill the conditions to such Lessee's assuming the
defense of any claim after receiving notice thereof on or prior to the date that
is ten (10) days prior to the date that an answer or response is required, the
Indemnitee may undertake such defense, at the Lessees' expense.  No Lessee shall
enter into any settlement or other compromise with respect to any Claim in
excess of $1,000,000 which is entitled to be indemnified under Section 7.1 or
                                                               -----------
7.2 without the prior written consent of the related Indemnitee, which consent
---
shall not be unreasonably withheld or delayed.  Unless an Event of Default shall
have occurred and be continuing, no Indemnitee shall enter into any settlement
or other compromise with respect to any claim which is entitled to be
indemnified under Section 7.1 or 7.2 without the prior written consent of Rowe
                  -----------    ---
Companies, which consent shall not be unreasonably withheld, unless such
Indemnitee waives its right to be indemnified under Section 7.1 or 7.2 with
                                                    -----------    ---
respect to such Claim.

     Upon payment in full of any Claim by the Lessees pursuant to Section 7.1 or
                                                                  -----------
7.2 to or on behalf of an Indemnitee, the Lessees, without any further action,
---
shall be subrogated to any and all claims that such Indemnitee may have relating
thereto (other than claims in respect of insurance policies maintained by such
Indemnitee at its own expense), and such Indemnitee shall execute such
instruments of assignment and conveyance, evidence of claims and payment and
such other documents, instruments and agreements as may be reasonably necessary
to preserve any such claims and otherwise cooperate with the Lessees and give
such further assurances as are reasonably necessary or advisable to enable the
Lessees vigorously to pursue such claims.

     Any amount payable to an Indemnitee pursuant to Section 7.1 or 7.2 shall be
                                                     -----------    ---
paid to such Indemnitee promptly upon, but in no event later than thirty (30)
days after, receipt of a written demand therefor from such Indemnitee,
accompanied by a written statement describing in reasonable detail the basis for
such indemnity and the computation of the amount so payable.

     If for any reason the indemnification provided for in Section 7.1 or 7.2 is
                                                           -----------    ---
unavailable to an Indemnitee or is insufficient to hold an Indemnitee harmless,
then each Obligor and each Lessee agrees to contribute to the amount paid or
payable by such Indemnitee as a result of such loss, claim, damage or liability
in such proportion as is appropriate to reflect not only the relative benefits
received by such

                                       47
<PAGE>

Indemnitee on the one hand and by Rowe Companies and the Lessees on the other
hand but also the relative fault of such Indemnitee as well as any other
relevant equitable considerations. It is expressly understood and agreed that
the right to contribution provided for herein shall survive the expiration or
termination of and shall be separate and independent from any other remedy under
this Master Agreement, the Lease or any other Operative Document.

     Notwithstanding anything to the contrary set forth herein, the amount of
any Claim payable by any Obligor or Lessee to any Indemnitee under this Section
7.3 shall be reduced by the net amount of any insurance proceeds received by
such Indemnitee in respect of such Claim pursuant to any insurance policy
maintained by such Indemnitee at its own expense; provided, however, that no
                                                  --------
Indemnitee shall be required to maintain such insurance or, if such insurance is
maintained, to submit a claim under such insurance.

      SECTION 7.4 General Tax Indemnity.    (a)  Tax Indemnity. Except as
                  ---------------------          -------------
otherwise provided in this Section 7.4, each Obligor, jointly and severally,
                           -----------
shall pay on an After-Tax Basis, and on written demand shall indemnify and hold
each Tax Indemnitee harmless from and against, any and all fees (including,
without limitation, documentation, recording, license and registration fees),
taxes (including, without limitation, income, gross receipts, sales, rental,
use, turnover, value-added, property, excise and stamp taxes), levies, imposts,
duties, charges, assessments or withholdings of any nature whatsoever, together
with any penalties, fines or interest thereon or additions thereto (any of the
foregoing being referred to herein as "Taxes" and individually as a "Tax" (for
                                       -----                         ---
the purposes of this Section 7.4, the definition of "Taxes" includes amounts
                     -----------
imposed on, incurred by, or asserted against each Tax Indemnitee as the result
of any prohibited transaction, within the meaning of Section 406 or 407 of ERISA
or Section 4975(c) of the Code, arising out of the transactions contemplated
hereby or by any other Operative Document)) imposed on or with respect to any
Tax Indemnitee, any Obligor, any Leased Property or any portion thereof or any
Land, or any sublessee or user thereof, by the United States or by any state or
local government or other taxing authority in the United States in connection
with or in any way relating to (i) the acquisition, financing, mortgaging,
construction, preparation, installation, inspection, delivery, non-delivery,
acceptance, rejection, purchase, ownership, possession, rental, lease, sublease,
maintenance, repair, storage, transfer of title, redelivery, use, operation,

                                       48
<PAGE>

condition, sale, return or other application or disposition of all or any part
of any Leased Property or the imposition of any Lien (or incurrence of any
liability to refund or pay over any amount as a result of any Lien) thereon,
(ii) Basic Rent or Supplemental Rent or the receipts or earnings arising from or
received with respect to any Leased Property or any part thereof, or any
interest therein or any applications or dispositions thereof, (iii) any other
amount paid or payable pursuant to the Notes or any other Operative Documents,
(iv) any Leased Property, any Land or any part thereof or any interest therein
(including, without limitation, all assessments payable in respect thereof,
including, without limitation, all assessments noted on the related Title
Policy), (v) all or any of the Operative Documents, any other documents
contemplated thereby, any amendments and supplements thereto, and (vi) otherwise
with respect to or in connection with the transactions contemplated by the
Operative Documents.

           (b) Exclusions from General Tax Indemnity.  Section 7.4(a) shall not
               -------------------------------------   --------------
apply to:

               (i)   Taxes on, based on, or measured by or with respect to net
     income of the Lessor, the Agent and the Lenders (including, without
     limitation, minimum Taxes, capital gains Taxes, Taxes on or measured by
     items of tax preference or alternative minimum Taxes);

               (ii)  Withholding Taxes, other than withholding Taxes imposed by
     the United States or any state in which Leased Property is located (i) on
     payments with respect to the Notes, to the extent imposed by reason of a
     change in Applicable Law occurring after the date on which the holder of
     such Note became the holder of such Note or (ii) on Rent, to the extent the
     net payment of Rent after deduction of such withholding Taxes would be less
     than amounts currently payable with respect to the Funded Amounts;

               (iii) Taxes on, based on, or in the nature of or measured by
     Taxes on doing business, business privilege, franchise, capital, capital
     stock, net worth, or mercantile license or similar taxes other than (A) any
     increase in such Taxes imposed on such Tax Indemnitee by any state in which
     Leased Property is located, net of any decrease in such taxes realized by
     such Tax Indemnitee, to the extent that such tax increase would not have
     occurred if on each Funding Date the Lessor and the Lenders had advanced
     funds to a Lessee or the Construction Agent in the form of loans

                                       49
<PAGE>

     secured by the Leased Property in an amount equal to the Funded Amounts
     funded on such Funding Date, with debt service for such loans equal to the
     Basic Rent payable on each Payment Date and a principal balance at the
     maturity of such loans in a total amount equal to the Funded Amounts at the
     end of the Lease Term, or (B) any Taxes that are or are in the nature of
     sales, use, rental, license or property Taxes relating to any Leased
     Property;

               (iv)  Taxes that are based on, or measured by, the fees or other
     compensation received by a Person acting as Agent (in its individual
     capacities) or any Affiliate of any thereof for acting as trustee under the
     Loan Agreement;

               (v)   Taxes that result from any act, event or omission, or are
     attributable to any period of time, that occurs after the earlier of (A)
     the expiration of the Lease Term with respect to any Leased Property and,
     if such Leased Property is required to be returned to the Lessor in
     accordance with the Lease, such return and (B) the discharge in full of the
     Lessees' obligations to pay the Lease Balance, or any amount determined by
     reference thereto, with respect to any Leased Property and all other
     amounts due under the Lease, unless such Taxes relate to acts, events or
     matters occurring prior to the earlier of such times or are imposed on or
     with respect to any payments due under the Operative Documents after such
     expiration or discharge;

               (vi)  Taxes imposed on a Tax Indemnitee that result from any
     voluntary sale, assignment, transfer or other disposition or bankruptcy by
     such Tax Indemnitee or any related Tax Indemnitee of any interest in any
     Leased Property or any part thereof, or any interest therein or any
     interest or obligation arising under the Operative Documents, or from any
     sale, assignment, transfer or other disposition of any interest in such Tax
     Indemnitee or any related Tax Indemnitee, it being understood that each of
     the following shall not be considered a voluntary sale:  (A) any
     substitution, replacement or removal of any of the Leased Property by any
     Lessee, (B) any sale or transfer resulting from the exercise by any Lessee
     of any termination option, any purchase option or sale option, (C) any sale
     or transfer while an Event of Default shall have occurred and be continuing
     under the Lease, and (D) any sale or transfer resulting from the Lessor's
     exercise of remedies under the Lease;

                                       50
<PAGE>

               (vii)  any Tax which is being contested in accordance with the
     provisions of Section 7.4(c), during the pendency of such contest;
                   --------------

               (viii) any Tax that is imposed on a Tax Indemnitee as a result of
     such Tax Indemnitee's gross negligence or willful misconduct (including
     willful failure to act where such Tax Indemnitee had a duty to act) (other
     than gross negligence or willful misconduct imputed to such Tax Indemnitee
     solely by reason of its interest in any Leased Property) or as a result of
     such Tax, Indemnitee's failure to comply with Section 2.4;

               (ix)    any Tax that results from a Tax Indemnitee engaging, with
     respect to any Leased Property, in transactions other than those permitted
     by the Operative Documents;

               (x)     to the extent any tax, interest, penalties or additions
     to tax result in whole or in part from the failure of a Tax Indemnitee to
     file a return or pay a Tax that it is required to file or pay in a proper
     and timely manner, unless such failure (A) results from the transactions
     contemplated by the Operative Documents in circumstances where Lessee did
     not give timely notice to such Tax Indemnitee of such filing or payment
     requirement that would have permitted a proper and timely filing of such
     return or payment of such Tax, as the case may be, or (B) results from the
     failure of Lessee to supply information necessary for the proper and timely
     filing of such return or payment of such Tax, as the case may be, that was
     not in the possession of such Tax Indemnitee; and

               (xi)    as to Lessor, any Tax that results from the breach by the
     Lessor of its representation and warranty made in Section 4.3(g) or as to
                                                       --------------
     any Lender the breach of such Lender of its representation and warranty
     made in Section 4.4(b).
             --------------

          (c) Contests.  If any claim shall be made against any Tax Indemnitee
              --------
or if any proceeding shall be commenced against any Tax Indemnitee (including a
written notice of such proceeding) for any Taxes as to which the Obligors may
have an indemnity obligation pursuant to Section 7.4, or if any Tax Indemnitee
                                         -----------
shall determine that any Taxes as to which the Obligors may have an indemnity
obligation pursuant to Section 7.4 may be payable, such Tax Indemnitee shall
                       -----------
promptly notify Rowe

                                       51
<PAGE>

Companies. Rowe Companies shall be entitled, at its expense, to participate in,
and, to the extent that Rowe Companies desires to, assume and control the
defense thereof; provided, however, that Rowe Companies shall have acknowledged
                 --------  -------
in writing its and each Obligor's obligation to fully indemnify such Tax
Indemnitee in respect of such action, suit or proceeding if the contest is
unsuccessful; and, provided further, that Rowe Companies shall not be
                   -------- -------
entitled to assume and control the defense of any such action, suit or
proceeding (but the Tax Indemnitee shall then contest, at the sole cost and
expense of Rowe Companies and the Lessees, on behalf of Rowe Companies with
representatives reasonably satisfactory to Rowe Companies or a Lessee) if and to
the extent that, (A) in the reasonable opinion of such Tax Indemnitee, such
action, suit or proceeding (x) involves any meaningful risk of imposition of
criminal liability or any material risk of material civil liability on such Tax
Indemnitee or (y) will involve a material risk of the sale, forfeiture or loss
of, or the creation of any Lien (other than a Permitted Encumbrance) on any
Leased Property or any part thereof unless Rowe Companies or a Lessee shall have
posted a bond or other security satisfactory to the relevant Tax Indemnitees in
respect to such risk if reasonably requested by the Agent, (B) such proceeding
involves Claims not fully indemnified by the Obligors which Rowe Companies and
the Tax Indemnitee have been unable to sever from the indemnified claim(s), (C)
an Event of Default has occurred and is continuing, (D) such action, suit or
proceeding involves matters which extend beyond or are unrelated to the
Transaction and if determined adversely could be materially detrimental to the
interests of such Tax Indemnitee notwithstanding indemnification by the Lessees
or (E) such action, suit or proceeding involves the federal or any state income
tax liability of the Tax Indemnitee.  With respect to any contests controlled by
a Tax Indemnitee, (i) if such contest relates to the federal or any state income
tax liability of such Tax Indemnitee, such Tax Indemnitee shall be required to
conduct such contest only if Rowe Companies shall have provided to such Tax
Indemnitee an opinion of independent tax counsel selected by the Tax Indemnitee
and reasonably satisfactory to Rowe Companies stating that a reasonable basis
exists to contest such claim or (ii) in the case of an appeal of an adverse
determination of any contest relating to any Taxes, an opinion of such counsel
to the effect that such appeal is more likely than not to be successful,
provided, however, such Tax Indemnitee shall in no event be required to appeal
--------  -------
an adverse determination to the United States Supreme Court.  The Tax Indemnitee
may participate in a reasonable manner at its own expense and with its own
counsel in any proceeding conducted by Rowe Companies in accordance with the

                                       52
<PAGE>

foregoing.

     Each Tax Indemnitee shall at Rowe Companies' and the Lessees' expense
supply Rowe Companies with such information and documents in such Tax
Indemnitee's possession reasonably requested by Rowe Companies as are necessary
or advisable for Rowe Companies to participate in any action, suit or proceeding
to the extent permitted by this Section 7.4.  Unless an Event of Default shall
                                -----------
have occurred and be continuing, no Tax Indemnitee shall enter into any
settlement or other compromise with respect to any Claim which is entitled to be
indemnified under this Section 7.4 without the prior written consent of Rowe
                       -----------
Companies, which consent shall not be unreasonably withheld, unless such Tax
Indemnitee waives its right to be indemnified under this Section 7.4 with
                                                         -----------
respect to such Claim.

     Notwithstanding anything contained herein to the contrary, (a) a Tax
Indemnitee will not be required to contest (and Rowe Companies shall not be
permitted to contest except on its own behalf if it is subject thereto) a claim
with respect to the imposition of any Tax if such Tax Indemnitee shall waive its
right to indemnification under this Section 7.4 with respect to such claim (and
                                    -----------
any related claim with respect to other taxable years the contest of which is
precluded as a result of such waiver) and (b) no Tax Indemnitee shall be
required to contest any claim if the subject matter thereof shall be of a
continuing nature and shall have previously been the subject of a judicial
decision adverse to such Tax Indemnitee, unless there has been a change in law
which in the opinion of Tax Indemnitee's counsel creates substantial authority
for the success of such contest. Each Tax Indemnitee and Rowe Companies shall
consult in good faith with each other regarding the conduct of such contest
controlled by either.

          (d) Reimbursement for Tax Savings.  If (x) a Tax Indemnitee shall
              -----------------------------
obtain a credit or refund of any Taxes paid by any Obligor pursuant to this

Section 7.4 or (y) by reason of the incurrence or imposition of any Tax for
-----------
which a Tax Indemnitee is indemnified hereunder or any payment made to or for
the account of such Tax Indemnitee by any Obligor pursuant to this Section 7.4,
                                                                   -----------
such Tax Indemnitee at any time realizes a reduction in any Taxes for which the
Obligors are not required to indemnify such Tax Indemnitee pursuant to this

Section 7.4, which reduction in Taxes was not taken into account in computing
-----------
such payment by any Obligor to or for the account of such Tax Indemnitee, then
such Tax Indemnitee shall promptly pay to Rowe Companies (xx) the amount of such
credit or refund, together with the amount of any

                                       53
<PAGE>

interest received by such Tax Indemnitee on account of such credit or refund or
(yy) an amount equal to such reduction in Taxes, as the case may be; provided
                                                                     --------
that no such payment shall be made so long as an Event of Default shall have
occurred and be continuing (but shall be paid promptly after all Events of
Default have been cured) and, provided, further, that the amount payable to Rowe
                              --------  -------
Companies by any Tax Indemnitee pursuant to this Section 7.4(d) shall not at any
                                                 --------------
time exceed the aggregate amount of (i)(A) all indemnity payments made by the
Obligors under this Section 7.4 to such Tax Indemnitee with respect to the Taxes
                    -----------
which gave rise to the credit or refund or with respect to the Tax which gave
rise to the reduction in Taxes, plus (B) the amount of interest, if any, paid to
such Tax Indemnitee with respect to such refund or credit by taxing authority
less (ii) the amount of all prior payments made to Rowe Companies by such Tax
Indemnitee under this Section 7.4(d). Each Tax Indemnitee agrees to act in good
                      --------------
faith to claim such refunds and other available Tax benefits, and take such
other actions as may be reasonable to minimize any payment due from the Obligors
pursuant to this Section 7.4. The disallowance or reduction of any credit,
                 -----------
refund or other tax savings with respect to which a Tax Indemnitee has made a
payment to Rowe Companies and the Lessees under this Section 7.4(d) shall be
                                                     --------------
treated as a Tax for which any Obligor is obligated to indemnify such Tax
Indemnitee hereunder without regard to Section 7.4(b) hereof.
                                       --------------

          (e) Payments.  Any Tax indemnifiable under this Section 7.4 shall be
              --------                                    -----------
paid by Rowe Companies or a Lessee directly when due to the applicable taxing
authority if direct payment is practicable and permitted.  If direct payment to
the applicable taxing authority is not permitted or is otherwise not made, any
amount payable to a Tax Indemnitee pursuant to Section 7.4 shall be paid within
                                               -----------
thirty (30) days after receipt of a written demand therefor from such Tax
Indemnitee accompanied by a written statement describing in reasonable detail
the amount so payable, but not before the date that the relevant Taxes are due.
Any payments made pursuant to Section 7.4 shall be made to the Tax Indemnitee
                              -----------
entitled thereto or Rowe Companies, as the case may be, in immediately available
funds at such bank or to such account as specified by the payee in written
directions to the payor, or, if no such direction shall have been given, by
check of the payor payable to the order of the payee by certified mail, postage
prepaid at its address as set forth in this Master Agreement.  Upon the request
of any Tax Indemnitee with respect to a Tax that Rowe Companies and the Lessees
are required to pay, Rowe Companies shall furnish to such Tax Indemnitee the
original or a certified copy of a receipt for Rowe Companies or a Lessee's

                                       54
<PAGE>

payment of such Tax or such other evidence of payment as is reasonably
acceptable to such Tax Indemnitee.

          (f) Reports.  If any Obligor knows of any report, return or statement
              -------
required to be filed with respect to any Taxes that are subject to
indemnification under this Section 7.4, such Obligor shall, if such Obligor is
                           -----------
permitted by Applicable Law, timely file such report, return or statement (and,
to the extent permitted by law, show ownership of the applicable Leased Property
in such Lessee); provided, however, that if such Obligor is not permitted by
                 --------  -------
Applicable Law or does not have access to the information required to file any
such report, return or statement, such Obligor will promptly so notify the
appropriate Tax Indemnitee, in which case Tax Indemnitee will file such report.
In any case in which the Tax Indemnitee will file any such report, return or
statement, the related Lessee shall, upon written request of such Tax
Indemnitee, prepare such report, return or statement for filing by such Tax
Indemnitee or, if such Tax Indemnitee so requests, provide such Tax Indemnitee
with such information as is reasonably available to such Lessee.

          (g) Verification.  At Rowe Companies' request, the amount of any
              ------------
indemnity payment by an Obligor or any payment by a Tax Indemnitee to Rowe
Companies pursuant to this Section 7.4 shall be verified and certified by an
                           -----------
independent public accounting firm selected by Rowe Companies and reasonably
acceptable to the Tax Indemnitee.  Unless such verification shall disclose an
error in Rowe Companies' favor of 2% or more of the related indemnity payment,
the costs of such verification shall be borne by Rowe Companies.  In no event
shall Rowe Companies or any Lessee have the right to review the Tax Indemnitee's
tax returns or receive any other confidential information from the Tax
Indemnitee in connection with such verification.  The Tax Indemnitee agrees to
cooperate with the independent public accounting firm performing the
verification and to supply such firm with all information reasonably necessary
to permit it to accomplish such verification, provided that the information
                                              --------
provided to such firm by such Tax Indemnitee shall be for its confidential use.
The parties agree that the sole responsibility of the independent public
accounting firm shall be to verify the amount of a payment pursuant to this
Master Agreement and that matters of interpretation of this Master Agreement are
not within the scope of the independent accounting firm's responsibilities.

      SECTION 7.5 Increased Costs, etc.
                  --------------------

          (a) Illegality.  Notwithstanding any other provision
              ----------

                                       55
<PAGE>

herein, if any change in any Requirement of Law or in the interpretation or
application thereof shall make it unlawful for any Funding Party to make or
maintain LIBOR Advances as contemplated by this Master Agreement, (a) the
commitment of such Funding Party hereunder to continue LIBOR Advance as such and
convert Funded Amounts to LIBOR Advance shall forthwith be canceled and (b) such
Funding Party's Funded Amounts then outstanding as LIBOR Advance, if any, shall
be converted automatically to Prime Rate Advances on the respective last days of
the then current Rent Periods with respect to such Funded Amounts or within such
earlier period as required by law. If any such conversion of a LIBOR Advance
occurs on a day which is not the last day of the then current Rent Period with
respect thereto, each Obligor, jointly and severally, shall pay to such Funding
Party such amounts, if any, as may be required pursuant to Section 7.5(f).
                                                           --------------

          (b) Requirements of Law.  In the event that Eurocurrency Reserve
              -------------------
Requirements or any change in any Requirement of Law or in the interpretation or
application thereof or compliance by any Funding Party with any request or
directive (whether or not having the force of law) from any central bank or
other Governmental Authority made subsequent to the date hereof:

               (i)   shall subject any Funding Party to any tax of any kind
          whatsoever with respect to this Master Agreement, any Note or any
          LIBOR Advance made by it, or change the basis of taxation of payments
          to such Funding Party in respect thereof (except for taxes covered by
          Section 7.5(d) and changes in franchise taxes or the rate of tax on
          --------------
          the overall net income of such Funding Party);

               (ii)  shall impose, modify or hold applicable any reserve,
          special deposit, compulsory loan or similar requirement against assets
          held by, deposits or other liabilities in or for the account of,
          advances, loans or other extensions of credit by, or any other
          acquisition of funds by, any office of such Funding Party which is not
          otherwise included in the determination of the LIBOR Rate; or

               (iii) shall impose on such Funding Party any other condition;

and the result of any of the foregoing is to increase the cost to

                                       56
<PAGE>

such Funding Party, by an amount which such Funding Party reasonably deems to be
material, of making, converting into, continuing or maintaining LIBOR Advances
or to reduce any amount receivable hereunder in respect thereof then, in any
such case, each Obligor, jointly and severally, shall promptly pay such Funding
Party, upon its demand, any additional amounts necessary to compensate such
Funding Party for such increased cost or reduced amount receivable. If any
Funding Party becomes entitled to claim any additional amounts pursuant to this
subsection, it shall promptly notify Rowe Furniture, through the Agent, of the
event by reason of which it has become so entitled. A certificate as to any
additional amounts payable pursuant to this subsection submitted by such Funding
Party, through the Agent, to Rowe Furniture in good faith and setting forth in
reasonable detail (and a reasonable basis for such claimed additional amounts)
the calculation of such amounts shall be conclusive in the absence of manifest
error. This covenant shall survive the termination of this Master Agreement and
the payment of the Notes and all other amounts payable under the Operative
Documents until the second anniversary of such payment and termination.

          (c)  Capital Adequacy.  In the event that any Funding Party or
               ----------------
corporation controlling such Funding Party shall have determined that any change
in any Requirement of Law regarding capital adequacy or in the interpretation or
application thereof or compliance by such Funding Party or such corporation with
any request or directive regarding capital adequacy (whether or not having the
force of law) from any Governmental Authority made subsequent to the date hereof
does or shall have the effect of reducing the rate of return on such Funding
Party's capital as a consequence of its obligations hereunder to a level below
that which such Funding Party could have achieved but for such change or
compliance (taking into consideration such Funding Party's policies with respect
to capital adequacy) by an amount reasonably deemed by such Funding Party to be
material, then from time to time, after submission by such Funding Party in good
faith (and setting forth a reasonable basis for additional amounts claimed) to
Rowe Furniture (with a copy to the Agent) of a written request therefor setting
forth in reasonable detail the calculation of such amount (which request shall
be conclusive in the absence of manifest error), each Obligor, jointly and
severally, shall pay to such Funding Party such additional amount or amounts as
will compensate such Funding Party for such reduction.  This covenant shall
survive the termination of this Master Agreement and the payment of the Notes
and all other amounts payable under the Operative Documents until the second
anniversary of such payment and termination.

                                       57
<PAGE>

          (d) Taxes.  Subject to Section 7.5(e), all payments made by a Lessee
              -----              --------------
under the Lease and the other Operative Documents shall be made free and clear
of, and without deduction or withholding for or on account of, any present or
future income, stamp or other taxes, levies, imposts, duties, charges, fees,
deductions or withholdings, now or hereafter imposed, levied, collected,
withheld or assessed by any Governmental Authority, excluding, in the case of
the Agent and each Funding Party, net income taxes and franchise taxes (imposed
in lieu of net income taxes) imposed on the Agent or such Funding Party, as the
case may be, as a result of a present or former connection between the
jurisdiction of the government or taxing authority imposing such tax and the
Agent or such Funding Party (excluding a connection arising solely from the
Agent or such Funding Party having executed, delivered or performed its
obligations or received a payment under, or enforced, this Master Agreement or
any other Operative Document) or any political subdivision or taxing authority
thereof or therein (all such non-excluded taxes, levies, imposts, duties,
charges, fees, deductions and withholdings being hereinafter called "Withholding
                                                                     -----------
Taxes").  If any Withholding Taxes are required to be withheld from any amounts
-----
payable to the Agent or any Funding Party hereunder or under any other Operative
Document, the amounts so payable to the Agent or such Funding Party (so long as
such Funding Party has provided all applicable forms described in Section
7.5(e), unless the failure to provide such forms is attributable to a change in
Applicable Law occurring after the date such Funding Party becomes a party to
this Master Agreement, the Lease or any Operative Document) shall be increased
to the extent necessary to yield to the Agent or such Funding Party (after
payment of all Withholding Taxes) interest or any such other amounts payable
hereunder at the rates or in the amounts specified in the Operative Documents.
Whenever any Withholding Taxes are payable by a Lessee, as promptly as possible
thereafter such Lessee shall send to the Agent for its own account or for the
account of such Funding Party, as the case may be, a certified copy of an
original official receipt received by such Lessee showing payment thereof.  If a
Lessee fails to pay any Withholding Taxes when due to the appropriate taxing
authority or fails to remit to the Agent the required receipts or other required
documentary evidence, each Obligor, jointly and severally, shall indemnify the
Agent and the Funding Parties for any incremental taxes, interest or penalties
that may become payable by the Agent or any Funding Party as a result of any
such failure.  The agreements in this subsection shall survive the termination
of this Master Agreement and the payment of the Notes and all other amounts
payable under the Operative Documents.

                                       58
<PAGE>

          (e) Tax Forms.  Each Funding Party to this Master Agreement on the
              ---------
Closing Date that is not incorporated under the laws of the United States of
America or a state thereof agrees that, on or prior to the Initial Closing Date,
it will deliver to Rowe Furniture and the Agent (i) two duly completed signed
originals of United States Internal Revenue Service Form W-8BEN or W-8ECI or
successor applicable form, as the case may be, and (ii) an Internal Revenue
Service Form W-8 or W-9 or successor applicable form.  Each such Funding Party
also agrees to deliver to Rowe Furniture and the Agent two further signed
originals of the said Form W-8BEN or W-8ECI and Form W-8 or W-9, or successor
applicable forms or other manner of certification, as the case may be, on or
before the date that any such form expires or becomes obsolete or after the
occurrence of any event requiring a change in the most recent form previously
delivered by it to Rowe Furniture, and such extensions or renewals thereof as
may reasonably be requested by Rowe Furniture or the Agent, unless in any such
case an event (including, without limitation, any change in Applicable Law has
occurred prior to the date on which any such delivery would otherwise be
required which renders all such forms inapplicable or which would prevent such
Funding Party from duly completing and delivering any such form with respect to
it and such Funding Party so advises Rowe Furniture and the Agent. Such Funding
Party shall certify (i) in the case of a Form W-8BEN or W-8ECI, that it is
entitled to receive payments under the Operative Documents without deduction or
withholding of any United States federal income taxes and (ii) in the case of a
Form W-8 or W-9, that it is entitled to an exemption from United States backup
withholding tax.

          (f) Indemnity.  Each Obligor, jointly and severally, agrees to
              ---------
indemnify each Funding Party and to hold each Funding Party harmless from any
loss or expense which such Funding Party may sustain or incur as a consequence
of (a) default by a Lessee in payment when due of the principal amount of or
interest on any LIBOR Advance, (b) default by a Lessee in making a borrowing or
conversion after such Lessee or the Construction Agent has given (or is deemed
to have given) a notice in accordance with this Master Agreement, (c) default by
a Lessee in making a borrowing of, conversion into or continuation of LIBOR
Advances after a or the Construction Agent Lessee has given a notice requesting
the same in accordance with the provisions of this Master Agreement, (d) default
by a Lessee in making any prepayment of LIBOR Advances after such Lessee has
given a notice thereof in accordance with the provisions of the Operative
Documents or (e) the making of a prepayment, payment or conversion, of LIBOR

                                       59
<PAGE>

Advances on a day which is not the last day of a Rent Period with respect
thereto, including, without limitation, in each case, any such loss (other than
non-receipt of the Applicable Margin or, without duplication, anticipated
profits) or expense arising from the reemployment of funds obtained by it or
from fees payable to terminate the deposits from which such funds were obtained
(it being understood that any such calculation will be made on notional amounts
as the Funding Parties are not required to show that they matched deposits
specifically).  A certificate as to any additional amounts payable pursuant to
this subsection submitted by such Funding Party, through the Agent, to Rowe
Furniture in good faith shall be conclusive in the absence of manifest error.
This covenant shall survive the termination of this Agreement and the payment of
the Notes and all other amounts payable under the Operative Documents.

          (g) Action of Affected Funding Parties.  Each Funding Party agrees to
              ----------------------------------
use reasonable efforts (including reasonable efforts to change the booking
office for its Loans) to avoid or minimize any illegality pursuant to Section
                                                                      -------
7.5(a) or any amounts which might otherwise be payable pursuant to Section
------                                                             -------
7.5(c) or (d); provided, however, that such efforts shall not cause the
------    ---  --------  -------
imposition on such Funding Party of any additional costs or legal or regulatory
burdens reasonably deemed by such Funding Party to be material and shall not be
reasonably deemed by such Funding Party to be otherwise contrary to its
policies.  In the event that such reasonable efforts are insufficient to avoid
all such illegality or all amounts that might be payable pursuant to Section
                                                                     -------
7.5(c) or (d), then such Funding Party (the "Affected Funding Party") shall use
------    ---                                ----------------------
its reasonable efforts to transfer to any other Funding Party (which itself is
not then an Affected Funding Party) its Loans and Commitment, subject to the
provisions of Section 6.2; provided, however, that such transfer shall not be
              -----------  --------  -------
reasonably deemed by such Affected Funding Party, in its sole discretion, to be
disadvantageous to it or contrary to its policies.  In the event that the
Affected Funding Party is unable, or otherwise is unwilling, so to transfer its
Loans and Commitment, Rowe Furniture may designate an alternate lender
(reasonably acceptable to the Agent) to purchase the Affected Funding Party's
Loans and Commitment, at par and including accrued interest, and, subject to the
provisions of Section 6.2, the Affected Funding Party shall transfer its
              -----------
Commitment to such alternate lender and such alternate lender shall become a
Funding Party hereunder.  Any fee payable to the Agent pursuant to Section 6.2
                                                                   -----------
in connection with such transfer shall be for the account of Rowe Companies and
the Lessees.

                                       60
<PAGE>

      SECTION 7.6 End of Term Indemnity.  In the event that at the end of the
                  ---------------------
Lease Term for the Leased Properties:  (i) the related Lessee elects the option
set forth in Section 14.6 of the Lease, and (ii) after the Lessor receives the
sales proceeds from the Leased Properties under Section 14.6 or 14.7 of the
Lease, together with Lessees' payment of the Recourse Deficiency Amount, the
Lessor shall not have received the entire Lease Balance, then, within 90 days
after the end of the Lease Term, the Lessor or the Agent may obtain, at Lessees'
sole cost and expense, a report from the Appraiser (or, if the Appraiser is not
available, another appraiser reasonably satisfactory to the Lessor or the Agent,
as the case may be, and approved by Rowe Furniture, such approval not to be
unreasonably withheld) in form and substance satisfactory to the Lessor and the
Agent (the "Report") to establish the reason for any decline in value of the
            ------
Leased Properties from the Lease Balance.  The Lessees, jointly and severally,
shall promptly reimburse the Lessor for the amount equal to such decline in
value to the extent that the Report indicates that such decline was due to

          (w)  extraordinary use, failure to maintain, to repair, to restore, to
     rebuild or to replace, failure to comply with all Applicable Laws, failure
     to use, workmanship, method of installation or removal or maintenance,
     repair, rebuilding or replacement, or any other cause or condition within
     the power of a Lessee to control or effect resulting in the Building
     failing to be of the type and quality contemplated by the Appraisal
     (excepting in each case ordinary wear and tear), or

          (x)  any Alteration made to, or any rebuilding of, any Leased Property
     or any part thereof by any Lessee, or

          (y)  any restoration or rebuilding carried out by any Lessee or any
     condemnation of any portion of any Leased Property pursuant to Article X of
     the Lease, or

          (z)  any use of any Leased Property or any part thereof by any Lessee
     other than as permitted by the Lease, or any act or omission constituting a
     breach of any requirement, condition, restriction or limitation set forth
     in the related Deed or the related Purchase Agreement.

                                       61
<PAGE>

                                  ARTICLE VII.
                                 MISCELLANEOUS

      SECTION 8.1 Survival of Agreements.  Subject to limitations contained in
                  ----------------------
the Operative Documents, the representations, warranties, covenants, indemnities
and agreements of the parties provided for in the Operative Documents, and the
parties' obligations under any and all thereof, shall survive the execution and
delivery of this Master Agreement and any of the Operative Documents, the
transfer of any Land to the Lessor as provided herein (and shall not be merged
into any Deed), any disposition of any interest of the Lessor in any Leased
Property, the purchase and sale of the Notes, payment therefor and any
disposition thereof, in each case in accordance with the Operative Documents,
and shall be and continue in effect notwithstanding any investigation made by
any party hereto or to any of the other Operative Documents.  Except as
expressly set forth in the Operative Documents, including, without limitation,
as set forth in Article VII hereof and in Section 17.17 of the Lease, the
representations, warranties, covenants and agreements of the parties provided
for in the Operative Documents shall terminate upon the termination or
expiration of the Operative Documents.

      SECTION 8.2 Notices.  Unless otherwise specified herein, all notices,
                  -------
requests, demands or other communications to or upon the respective parties
hereto shall be addressed to such parties at the addresses therefor as set forth
in Schedule 8.2, or such other address as any such party shall specify to the
   ------------
other parties hereto, and shall be deemed to have been given (i) the Business
Day after being sent, if sent by overnight courier service; (ii) the Business
Day received, if sent by messenger; (iii) the day sent, if sent by facsimile and
confirmed electronically or otherwise during business hours of a Business Day
(or on the next Business Day if otherwise sent by facsimile and confirmed
electronically or otherwise); or (iv) when received or refused, if sent by
registered or certified mail, postage prepaid; provided, however, that if any
                                               --------
party shall refuse to accept delivery of any notice sent by messenger, such
notice shall be deemed given when tendered for delivery.

      SECTION 8.3 Counterparts.  This Master Agreement may be executed by the
                  ------------
parties hereto in separate counterparts (including by facsimile), each of which
when so executed and delivered shall be an original, but all such counterparts
shall together constitute but one and the same instrument.

                                       62
<PAGE>

      SECTION 8.4 Amendments.  No Operative Document nor any of the terms
                  ----------
thereof may be terminated, amended, supplemented, waived or modified with
respect to any Obligor or any Funding Party, except (a) in the case of a
termination, amendment, supplement, waiver or modification to be binding on the
Lessees, with the written agreement or consent of Rowe Furniture, and (b) in the
case of a termination, amendment, supplement, waiver or modification to be
binding on the Funding Parties, with the written agreement or consent of the
Required Funding Parties; provided, however, that
                          --------  -------

          (x) notwithstanding the foregoing provisions of this Section 8.4 or
                                                               -----------
clause (y) below, the consent of each Funding Party affected thereby shall be
----------
required for any amendment, modification or waiver directly:

          (i)    modifying any of the provisions of this Section 8.4, changing
                                                         -----------
     the definition of "Required Funding Parties" or "Required Lenders", or
                        ------------------------      ----------------
     increasing the Commitment of such Funding Party;

          (ii)   amending, modifying, waiving or supplementing any of the
     provisions of Section 3 of the Loan Agreement or the representations of
     such Funding Party in Section 4.2 or 4.3 or the covenants of such Funding
                           -----------    ---
     Party in Section 6 of this Master Agreement;
              ---------

          (iii)  reducing any amount payable to such Funding Party under the
     Operative Documents or extending the time for payment of any such amount,
     including, without limitation, any Rent, any Funded Amount, any fees, any
     indemnity, any Leased Property Balance, the Lease Balance, any Funding
     Party Balance, the Recourse Deficiency Amount, interest or Yield; or

          (iv)  consenting to any assignment of the Lease not in compliance with
     Article IX of the Lease or the extension of the Lease Term, releasing any
     of the collateral assigned to the Agent and the Lenders pursuant to any
     Mortgage and any Assignment of Lease and Rents (but excluding a release of
     any rights that the Lenders may have in any Leased Property, or the
     proceeds thereof as contemplated in the definition of "Release Date"),
     releasing any Lessee from its obligations in respect of the payments of
     Rent and the Lease Balance, releasing any Obligor from its obligations
     under the Operative Documents or changing the absolute and unconditional
     character of any such obligation; and

                                       63
<PAGE>

          (y) no such termination, amendment, supplement, waiver or modification
shall, without the written agreement or consent of the Lessor, the Agent and the
Required Lenders, be made to the Lease or any Security Agreement and Assignment;
and

          (z) subject to the foregoing clauses (x) and (y), so long as no Event
                                       -----------     ---
of Default has occurred and is continuing, the Lessor, the Agent and the Lenders
may not amend, supplement, waive or modify any terms of the Loan Agreement, the
Notes, the Mortgages and the Assignments of Lease and Rents without the consent
of the related Lessee and Rowe Companies (such consent not to be unreasonably
withheld or delayed); provided that in no event may any Operative Document be
                      --------
amended so as to increase the obligations of any Obligor, or deprive any Obligor
of any rights thereunder, without the written consent of the related Lessee and
Rowe Companies.

      SECTION 8.5 Headings, etc.  The Table of Contents and headings of the
                  --------------
various Articles and Sections of this Master Agreement are for convenience of
reference only and shall not modify, define, expand or limit any of the terms or
provisions hereof.

      SECTION 8.6 Parties in Interest.  Except as expressly provided herein,
                  -------------------
none of the provisions of this Master Agreement is intended for the benefit of
any Person except the parties hereto and their respective successors and
permitted assigns.

      SECTION 8.7 GOVERNING LAW.  THIS MASTER AGREEMENT HAS BEEN DELIVERED IN,
                  -------------
AND SHALL IN ALL RESPECTS BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE
LAWS OF THE COMMONWEALTH OF VIRGINIA APPLICABLE TO AGREEMENTS MADE AND TO BE
PERFORMED ENTIRELY WITHIN SUCH STATE, INCLUDING ALL MATTERS OF CONSTRUCTION,
VALIDITY AND PERFORMANCE.

      SECTION 8.8 Expenses.  Whether or not the transactions herein contemplated
                  --------
are consummated, each Obligor, jointly and severally, agrees to pay, as
Supplemental Rent, all actual, reasonable and documented out-of-pocket costs and
expenses of the Lessor, the Agent and the Lenders in connection with the
preparation, execution and delivery of the Operative Documents and the documents
and instruments referred to therein and any amendment, waiver or consent
relating thereto (including, without limitation, the reasonable fees and
disbursements of Mayer, Brown & Platt, but not including any fees and
disbursements for any other outside counsel representing any Lender) and of the
Lessor,

                                       64
<PAGE>

the Agent and the Lenders in connection with endeavoring to enforce the
Operative Documents and the documents and instruments referred to therein
(including, without limitation, the reasonable fees actually incurred and
disbursements reasonably incurred of counsel for the Lessor and the Agent for
itself and on behalf of other Lenders.

      SECTION 8.9 Severability.  Any provision of this Master Agreement that is
                  ------------
prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction,
be ineffective to the extent of such prohibition or unenforceability without
invalidating the remaining provisions hereof, and any such prohibition or
unenforceability in any jurisdiction shall not invalidate or render
unenforceable such provision in any other jurisdiction.

      SECTION 8.10 Liabilities of the Funding Parties.  No Funding Party shall
                   ----------------------------------
have any obligation to any other Funding Party or to Lessee with respect to the
transactions contemplated by the Operative Documents except those obligations of
such Funding Party expressly set forth in the Operative Documents or except as
set forth in the instruments delivered in connection therewith, and no Funding
Party shall be liable for performance by any other party hereto of such other
party's obligations under the Operative Documents except as otherwise so set
forth.  No Lender shall have any obligation or duty to any Obligor, any other
Funding Parties or any other Person with respect to the transactions
contemplated hereby except to the extent of the obligations and duties expressly
set forth in the Operative Documents.

      SECTION 8.11 Submission to Jurisdiction; Waivers.  Each party hereto
                   -----------------------------------
hereby irrevocably and unconditionally:

          (i)   submits for itself and its property in any legal action or
     proceeding relating to this Master Agreement or any other Operative
     Document, or for recognition and enforcement of any judgment in respect
     thereof, to the non-exclusive general jurisdiction of the Courts of the
     Commonwealth of Virginia sitting in Montgomery County, the courts of the
     United States of America for the Western District of Virginia, and
     appellate courts from any thereof;

          (ii)  consents that any such action or proceedings may be brought to
     such courts, and waives any objection that it may now or hereafter have to
     the venue of any such action or proceeding in any court or that such action
     or proceeding was brought in an inconvenient court and agrees not to plead

                                       65
<PAGE>

     or claim the same;

          (iii) agrees that service of process in any such action or proceeding
     may be effected by mailing a copy thereof by registered or certified mail
     (or any substantially similar form of mail), postage prepaid, to such party
     at its address set forth in Schedule 8.2 or at such other address of which
                                 ------------
     the other parties hereto shall have been notified pursuant to Section 8.2;
                                                                   -----------
     and

          (iv)  agrees that nothing herein shall affect the right to effect
     service of process in any other manner permitted by law.

      SECTION 8.12 Liabilities of the Agent.  The Agent shall have no duty,
                   ------------------------
liability or obligation to any party to this Master Agreement with respect to
the transactions contemplated hereby except those duties, liabilities or
obligations expressly set forth in this Master Agreement or the Loan Agreement,
and any such duty, liability or obligations of the Agent shall be as expressly
limited by this Master Agreement or the Loan Agreement, as the case may be.  All
parties to this Master Agreement acknowledge that the Agent is not, and will not
be, performing any due diligence with respect to documents and information
received pursuant to this Master Agreement or any other Operative Agreement
including, without limitation, any Environmental Audit, Title Policy or survey.
The acceptance by the Agent of any such document or information shall not
constitute a waiver by any Funding Party of any representation or warranty of
any Obligor even if such document or information indicates that any such
representation or warranty is untrue.

      SECTION 8.13 Agent to Communicate with Funding Parties. Notwithstanding
                   -----------------------------------------
any provision to the contrary contained in any Operative Document, wherever in
any Operative Document the consent of, or notice to, any Funding Party is
required, each Obligor shall be entitled to request such consent directly from,
or give such notice directly to, the Agent on behalf of the applicable Funding
Parties, and the Agent shall thereupon be responsible for presenting such
request or forwarding such notice to the applicable Funding Parties, and for
communicating any response back to the initiating Obligor. An Obligor shall be
deemed to have complied with any requirement of requesting consent from or
providing notice to any Funding Party upon its delivery of such request or
notice to Agent in compliance with the notice provisions of the applicable
Operative Document, and such Obligor may rely on any response properly delivered
by the

                                       66
<PAGE>

Agent on behalf of such Funding Party to such Obligor. Nothing in this Section
shall diminish or negate the right of any Funding Party to receive notice or
provide consent under any Operative Document, but Lessee's obligation to provide
any required consent or notice shall be satisfied by providing such consent or
notice to Agent.

     SECTION 8.14  Seniority of Lease.  Anything contained in this Agreement or
                   ------------------
any other Operative Document to the contrary notwithstanding, the rights of the
Lessee under the Lease are, provided that no Event of Default shall have
occurred and be continuing, prior and senior to this Agreement and the other
Operative Documents and the rights of the Agent, the Lenders and the Lessor
hereunder and thereunder whether or not the Lease (or a memorandum thereof) is
recorded prior to the recordation of any of the other Operative Documents.

                                       67
<PAGE>

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

                                ROWE FURNITURE, INC., as Lessee

                                By: /s/ Garry W. Angle
                                   ------------------------------
                                Name Printed: Garry W. Angle
                                             --------------------
                                Title:   Treasurer
                                      ---------------------------

                                     S-1
<PAGE>

                                THE ROWE COMPANIES, as Guarantor

                                By:  /s/ Garry W. Angle
                                   ------------------------------
                                Name Printed:  Garry W. Angle
                                             --------------------
                                Title:  Assistant Treasurer
                                      ---------------------------

                                THE MITCHELL GOLD CO., as
                                Guarantor

                                By:  /s/ Garry W. Angle
                                   ------------------------------
                                Name Printed:   Garry W. Angle
                                             --------------------
                                Title:   Treasurer
                                      ---------------------------

                                ROWE PROPERTIES, INC., as
                                Guarantor

                                By:  /s/ Garry W. Angle
                                   ------------------------------
                                Name Printed:   Garry W. Angle
                                             --------------------
                                Title:   Treasurer
                                      ---------------------------

                                STOREHOUSE, INC., as Guarantor

                                By:  /s/ Garry W. Angle
                                   ------------------------------
                                Name Printed:  Garry W. Angle
                                             --------------------
                                Title:   Treasurer
                                      ---------------------------

                                HOME ELEMENTS, INC., as Guarantor

                                By:  /s/ Garry W. Angle
                                   ------------------------------
                                Name Printed:  Garry w. Angle
                                             --------------------
                                Title:   Treasurer
                                      ---------------------------

                                      S-2
<PAGE>

                                ROWE DIVERSIFIED, INC., as Guarantor

                                By:
                                Name Printed:
                                Title:

                                WEXFORD COLLECTION, INC., as
                                Guarantor

                                By:
                                Name Printed:
                                Title:

                                      S-3
<PAGE>

                                ATLANTIC FINANCIAL GROUP, LTD.,
                                as Lessor

                                By: Atlantic Financial Managers,
                                Inc., its General Partner

                                By:  /s/ Stephen Brookshire
                                   ----------------------------
                                Name: Stephen Brookshire
                                Title: President

                                      S-4
<PAGE>

                                CRESTAR BANK, as Lender

                                By:  /s/ Martha D. Shifflett
                                   ------------------------------
                                Name Printed: Martha D. Shifflett
                                             --------------------
                                Title:   Sr. Vice President
                                      ---------------------------

                                      S-5
<PAGE>

                                CRESTAR BANK, as Agent

                                By:  /s/ Martha D. Shifflett
                                   ------------------------------
                                Name Printed: Martha D. Shifflett
                                             --------------------
                                Title:   Sr. Vice President
                                      ---------------------------

                                      S-6
<PAGE>

                                 SCHEDULE 2.2

                           PAYMENT INSTRUCTIONS AND
                   AMOUNT OF EACH FUNDING PARTY'S COMMITMENT

Lessor Commitment Percentage:       3.5%

Lessor Commitment:                  $875,000

Lender Commitment Percentages:

     Crestar Bank                   96.5%

Lender Commitments:                 $24,125,000
<PAGE>

                                 SCHEDULE 8.2

                             ADDRESSES FOR NOTICES

Rowe Companies/
Rowe Furniture:               The Rowe Companies
                              239 Rowan Street
                              Salem, Virginia 24153
                              Attn: Garry W. Angle

Lessor:                       Atlantic Financial Group, Ltd.
                              c/o Grogan & Brawner
                              2311 Cedar Springs Road
                              Suite 150
                              Dallas, Texas 75201
                              Attn:  Stephen Brookshire

Agent or Lender:              Crestar Bank
                              510 South Jefferson Street
                              Roanoke, Virginia  24011
                              Attn:  Martha Shifflett<PAGE>

                                                                 EXHIBIT (10.12)
===============================================================================
                             MASTER LEASE AGREEMENT

                          Dated as of August 27, 1999

                                    between

                  ATLANTIC FINANCIAL GROUP, LTD., as Lessor,

                                      and

                           ROWE FURNITURE, INC. AND
                          CERTAIN OTHER SUBSIDIARIES
                             OF THE ROWE COMPANIES
                    THAT MAY HEREAFTER BECOME PARTY HERETO,
                                  as Lessees

                  ___________________________________________

================================================================================
<PAGE>

                               TABLE OF CONTENTS
                               (Lease Agreement)
<TABLE>
<CAPTION>
                                                                                  Page
<S>                                                                              <C>
ARTICLE I.         DEFINITIONS.............................................         1

ARTICLE II.        LEASE OF LEASED PROPERTY................................         2
  2.1              Acceptance and Lease of Property........................         2
  2.2              Acceptance Procedure....................................         2

ARTICLE III.       RENT....................................................         2
  3.1              Basic Rent..............................................         2
  3.2              Supplemental Rent.......................................         2
  3.3              Method of Payment.......................................         3
  3.4              Late Payment............................................         3
  3.5              Net Lease; No Setoff, Etc...............................         3
  3.6              Certain Taxes...........................................         5
  3.7              Utility Charges.........................................         6

ARTICLE IV.        WAIVERS.................................................         6

ARTICLE V.         LIENS; EASEMENTS; PARTIAL CONVEYANCES...................         7

ARTICLE VI.        MAINTENANCE AND REPAIR;
                   ALTERATIONS, MODIFICATIONS AND ADDITIONS................         9
  6.1              Maintenance and Repair; Compliance With Law.............         9
  6.2              Alterations.............................................         9
  6.3              Title to Alterations....................................        10

ARTICLE VII.       USE.....................................................        10

ARTICLE VIII.      INSURANCE...............................................        10

ARTICLE IX.        ASSIGNMENT AND SUBLEASING...............................        12

ARTICLE X.         LOSS, DESTRUCTION, CONDEMNATION OR DAMAGE...............        12
  10.1             Event of Loss...........................................        12
  10.2             Event of Taking.........................................        14
  10.3             Casualty................................................        16
  10.4             Condemnation............................................        16
  10.5             Verification of Restoration and Rebuilding..............        17
  10.6             Application of Payments.................................        17
  10.7             Prosecution of Awards...................................        18
  10.8             Application of Certain Payments Not Relating
                   to an Event of Taking...................................        19
  10.9             Other Dispositions......................................        19
  10.10            No Rent Abatement.......................................        19

ARTICLE XI.        INTEREST CONVEYED TO LESSEES............................        19
</TABLE>

                                      -i-
<PAGE>

<TABLE>
<S>                                                                                <C>
ARTICLE XII.       EVENTS OF DEFAULT.......................................        20

ARTICLE XIII.      ENFORCEMENT.............................................        23
  13.1             Remedies................................................        23
  13.2             Remedies Cumulative; No Waiver; Consents................        26
  13.3             Purchase Upon an Event of Default.......................        26

ARTICLE XIV.       SALE, RETURN OR PURCHASE OF LEASED PROPERTY;
  RENEWAL..................................................................        27
  14.1             Lessee's Option to Purchase.............................        27
  14.2             Conveyance to Lessee....................................        27
  14.3             Acceleration of Purchase Obligation.....................        28
  14.4             Determination of Purchase Price.........................        28
  14.5             Purchase Procedure......................................        28
  14.6             Option to Remarket......................................        29
  14.7             Rejection of Sale.......................................        32
  14.8             Return of Leased Property...............................        33
  14.9             Renewal.................................................        33
  14.10            Environmental Report....................................        34

ARTICLE XV.        LESSEE'S EQUIPMENT......................................        34

ARTICLE XVI.       RIGHT TO PERFORM FOR LESSEE.............................        35

ARTICLE XVII.      MISCELLANEOUS...........................................        35
  17.1             Reports.................................................        35
  17.2             Binding Effect; Successors and Assigns;
                   Survival................................................        35
  17.3             Quiet Enjoyment.........................................        36
  17.4             Notices.................................................        36
  17.5             Severability............................................        37
  17.6             Amendment; Complete Agreements..........................        37
  17.7             Construction............................................        37
  17.8             Headings................................................        37
  17.9             Counterparts............................................        38
  17.10            Governing Law...........................................        38
  17.11            Discharge of Lessee's Obligations by its
                   Subsidiaries or Affiliates..............................        38
  17.12            Liability of Lessor Limited.............................        38
  17.13            Estoppel Certificates...................................        39
  17.14            No Joint Venture........................................        39
  17.15            No Accord and Satisfaction..............................        39
  17.16            No Merger...............................................        39
  17.17            Survival................................................        40
  17.18            Chattel Paper...........................................        40
  17.19            Time of Essence.........................................        40
  17.20            Recordation of Lease....................................        40
  17.21            Investment of Security Funds............................        40
</TABLE>

                                      -ii-
<PAGE>

<TABLE>
<S>                                                                                <C>
  17.22            [Reserved.].............................................        41
  17.23            Land and Building.......................................        41
  17.24            Joint and Several.......................................        41
</TABLE>

APPENDICES AND EXHIBITS
-----------------------

APPENDIX A     Defined Terms

EXHIBIT A      Lease Supplement

                                     -iii-
<PAGE>

     THIS MASTER LEASE AGREEMENT (as from time to time amended or supplemented,
this "Lease"), dated as of August 27, 1999, is among ATLANTIC FINANCIAL GROUP,
      -----
LTD., a Texas limited partnership (together with its successors and assigns
hereunder, the "Lessor"), as Lessor, and ROWE FURNITURE, INC., a Virginia
                ------
corporation ("Rowe Furniture"), and certain other Subsidiaries of The Rowe
              --------------
Companies hereafter parties hereto (individually, with its successors and
permitted assigns hereunder, each a "Lessee" and collectively, the "Lessees"),
                                     ------                         -------
as Lessees.

                             PRELIMINARY STATEMENT

     A.   Lessor has acquired certain parcels of real property specified by
Construction Agent, including the improvements thereon (the "Land", such land
                                                             ----
being more particularly described in the related Lease Supplement).

     B.   Lessor desires to lease to each Lessee, and each Lessee desires to
lease from Lessor, the Land as described in the Lease Supplement(s) to which
such Lessee is a party.

     C.   The Construction Agent will construct, or cause to be constructed,
certain improvements on the Land which as constructed will be the property of
Lessor and will become part of such property subject to the terms of this Lease.

     D.   With respect to each Leased Property, it is the intent of the Lessees
and the Funding Parties that the Lease be treated as an operating lease for
financial accounting purposes but for federal, state and local tax and
commercial law purposes the Lease shall be treated as the repayment and security
provisions of a loan by the Lessor to the Lessee, and that the related Lessee
shall be treated as the legal and beneficial owner entitled to any and all
benefits of ownership of such Leased Property and all payments of Basic Rent
during the Lease Term shall be treated as payments of interest and principal.
Each Lessee and each Funding Party agree to file tax returns consistent with
such intent.

     In consideration of the mutual agreements herein contained and other good
and valuable consideration, receipt of which is hereby acknowledged, Lessor and
Lessees hereby agree as follows:

                                   ARTICLE I.
                                  DEFINITIONS
                                  -----------

     Terms used herein and not otherwise defined shall have the meanings
assigned thereto in Appendix A hereto for all purposes hereof.
                    ----------

                                       1
<PAGE>

                                  ARTICLE II.
                            LEASE OF LEASED PROPERTY
                            ------------------------

     Section  2.1   Acceptance and Lease of Property. Lessor does hereby lease,
                    --------------------------------
to the related Lessee hereunder for the Lease Term, the Land and Appurtenances
thereto, together with any Building which thereafter may be constructed thereon
pursuant to the Construction Agency Agreement, but excluding Lessee's Property
(the "Leased Property," as more particularly defined in Appendix A to the Master
Agreement) and such related Lessee does hereby lease, expressly for the direct
benefit of Lessor, commencing on such Closing Date for the Lease Term, the
Leased Property.

     Section  2.2   Acceptance Procedure. The Leased Property shall be deemed to
                    --------------------
be included in the leasehold estate of this Lease and shall be subject to the
terms and conditions of this Lease as of such Closing Date.  The demise and
lease of each Leased Property pursuant to this Section 2.2 shall include any
                                               -----------
additional right, title or interest in such Leased Property which may at any
time be acquired by Lessor, the intent being that all right, title and interest
of Lessor in and to such Leased Property shall at all times be demised and
leased to the related Lessee hereunder.

                                  ARTICLE III
                                      RENT
                                      ----

     Section  3.1   Basic Rent.  Subject to Section 2.3(c) of the Master
                    ----------
Agreement, beginning with and including the first Payment Date occurring after
the Closing Date, each Lessee shall pay to the Agent the Basic Rent for the
Leased Properties subject to a Lease Supplement to which such Lessee is a party,
in installments, payable in arrears on each Payment Date during the Lease Term.

     Section  3.2   Supplemental Rent.  Each Lessee shall pay to the Agent, or
                    -----------------
to whomever shall be entitled thereto, any and all Supplemental Rent on the date
the same shall become due and payable, but subject to notice and cure periods as
hereinafter provided, and in the event of any failure on the part of such Lessee
to pay any Supplemental Rent payable to the Agent or any Funding Party within
applicable notice and cure periods, the Agent shall have all rights, powers and
remedies provided for herein or by law or in equity or otherwise in the case of
nonpayment of Basic Rent.  All Supplemental Rent to be paid to the Agent or any
Funding Party pursuant to this Section 3.2 shall be payable in the type of funds
                               -----------
and in the manner set forth in Section 3.3.
                               -----------

                                       2
<PAGE>

     Section  3.3   Method of Payment.  Basic Rent shall be paid to the Agent,
                    -----------------
and Supplemental Rent payable to the Agent, any Funding Party or any Indemnitee
(including amounts due under Article XIV hereof) shall be paid to the Agent (or
                             -----------
to such Funding Party or Indemnitee as may be entitled thereto) or, in each
case, to such Person as the Agent (or such Funding Party or Indemnitee) shall
specify in writing to the related Lessee, and at such place as the Agent (or
such Funding Party or Indemnitee) shall specify in writing to the related
Lessee, which specifications by the Agent shall be given by the Agent at least
five (5) Business Days prior to the due date therefor.  Each payment of Basic
Rent (including payments under Article XIV hereof) shall be made by the Lessees
                               -----------
prior to 12:00 p.m. (noon) Roanoke, Virginia time at the place of payment in
funds consisting of lawful currency of the United States of America which shall
be immediately available on the scheduled date when such payment shall be due,
unless such scheduled date shall not be a Business Day, in which case such
payment shall be made on the next succeeding Business Day, unless paying on the
next succeeding Business Day puts payment into a different LIBOR period, in
which case payment will be credited to or made on the next preceding Business
Day to avoid LIBOR breakage costs.  The foregoing practice of crediting payments
to avoid LIBOR breakage costs shall apply to any payments due Agent or any
Funding Parties under the Operative Documents, whether or not specifically
stated.  Anything contained in the Operative Documents to the contrary
notwithstanding, any and all payment obligations of Lessees and Guarantors shall
be deemed satisfied by payment to Agent, notwithstanding participation and
claims of other Funding Parties.

     Section  3.4   Late Payment.  If any Basic Rent shall not be paid on the
                    ------------
date when due (but subject to notice and cure periods as hereinafter provided
and as may be provided in the Operative Documents), the related Lessee shall pay
to the Agent, as Supplemental Rent, interest (to the maximum extent permitted by
law) on such overdue amount from and including the due date thereof to but
excluding the Business Day of payment thereof at the Overdue Rate.

     Section  3.5   Net Lease; No Setoff, Etc.  This Lease is a net lease and
                    -------------------------
notwithstanding any other provision of this Lease, each Lessee shall pay all
Basic Rent and Supplemental Rent, and all costs, charges, taxes (other than
taxes covered by the exclusion described in Section 7.4(b) of the Master
Agreement), assessments and other expenses foreseen or unforeseen, for which
such Lessee or any Indemnitee is or shall become liable by reason of such
Lessee's or such Indemnitee's estate, right, title or interest in the Leased
Properties, or that are connected with or arise out of the acquisition (except
the initial costs of

                                       3
<PAGE>

purchase by Lessor of its interest in any Leased Property, which costs, subject
to the terms of the Master Agreement, shall be funded by the Funding Parties
pursuant to the Master Agreement), construction (except costs to be funded under
the Construction Agency Agreement), installation, possession, use, occupancy,
maintenance, ownership, leasing, repairs and rebuilding of, or addition to, the
Leased Properties or any portion thereof, and any other amounts payable
hereunder and under the other Operative Documents without (except as otherwise
provided herein or under the Operative Documents) counterclaim, setoff,
deduction or defense and without abatement, suspension, deferment, diminution or
reduction, and each Lessee's obligation to pay all such amounts throughout the
Lease Term, including the Construction Term, is absolute and unconditional. The
obligations and liabilities of each Lessee hereunder shall in no way be
released, discharged or otherwise affected for any reason, including without
limitation: (a) any defect in the condition, merchantability, design, quality or
fitness for use of any Leased Property or any part thereof, or the failure of
any Leased Property to comply with all Applicable Law, including any inability
to occupy or use any Leased Property by reason of such non-compliance; (b) any
damage to, removal, abandonment, salvage, loss, contamination of or Release
from, scrapping or destruction of or any requisition or taking of any Leased
Property or any part thereof; (c) any restriction, prevention or curtailment of
or interference with any use of any Leased Property or any part thereof
including eviction; (d) any defect in title to or rights to any Leased Property
or any Lien on such title or rights or on any Leased Property; (e) any change,
waiver, extension, indulgence or other action or omission or breach in respect
of any obligation or liability of or by Lessor, the Agent or any Lender; (f) any
bankruptcy, insolvency, reorganization, composition, adjustment, dissolution,
liquidation or other like proceedings relating to any Lessee, Lessor, any
Lender, the Agent or any other Person, or any action taken with respect to this
Lease by any trustee or receiver of any Lessee, Lessor, any Lender, the Agent,
or any other Person, or by any court, in any such proceeding; (g) any claim that
any Lessee has or might have against any Person, including without limitation,
Lessor, any vendor, manufacturer, contractor of or for any Leased Property or
any part thereof, the Agent, any Governmental Authority, or any Lender; (h) any
failure on the part of Lessor to perform or comply with any of the terms of this
Lease, any other Operative Document or of any other agreement; (i) any
invalidity or unenforceability or illegality or disaffirmance of this Lease
against or by any Lessee or any provision hereof or any of the other Operative
Documents or any provision of any thereof whether or not related to the
Transaction; (j) the impossibility or illegality of performance by any Lessee,
Lessor or both; (k) any action by any court, administrative agency or other
Governmental

                                       4
<PAGE>

Authority; (l) any restriction, prevention or  curtailment of or interference
with the Construction or any use of any Leased Property or any part thereof; or
(m) any other occurrence whatsoever, whether similar or dissimilar to the
foregoing, whether or not any Lessee shall have notice or knowledge of any of
the foregoing. Except as specifically set forth in Articles XIV or X of
                                                   -------- ---    -
this Lease or elsewhere in this Lease or in other Operative Documents, this
Lease shall be noncancellable by each Lessee in any circumstance whatsoever and
each Lessee, to the extent permitted by Applicable Law, waives all rights now or
hereafter conferred by statute or otherwise to quit, terminate or surrender this
Lease, or to any diminution, abatement or reduction of Rent payable by such
Lessee hereunder. Each payment of Basic Rent, and each payment of Supplemental
Rent payable to the Agent, any Funding Party or any Indemnitee, made by a Lessee
hereunder shall be final and such Lessee shall not seek or have any right to
recover all or any part of such payment from Lessor, the Agent, any Lender or
any party to any agreements related thereto for any reason whatsoever subject
only to the final sentence of this paragraph. Each Lessee assumes the sole
responsibility for the condition, use, operation, maintenance, and management of
the Leased Properties leased by it and Lessor shall have no responsibility in
respect thereof and shall have no liability for damage to the property of either
any Lessee or any subtenant of any Lessee on any account or for any reason
whatsoever, other than solely by reason of Lessor's willful misconduct or gross
negligence. The Lessee agreements in this Section shall not affect any claim,
action or right the Lessee may have against the Lessor, the Agent or any other
Person.

     Section  3.6   Certain Taxes.  Without limiting the generality of Section
                    -------------                                      -------
3.5, each Lessee agrees to pay when due all real estate taxes, personal property
---
taxes, gross sales taxes, including any sales or lease tax imposed upon the
rental payments hereunder or under a sublease, occupational license taxes, water
charges, sewer charges, assessments of any nature and all other governmental
impositions and charges of every kind and nature whatsoever (the "tax(es)"),
                                                                  -------
when the same shall be due and payable without penalty or interest; provided,
                                                                    --------
however, that this Section shall not apply to any of the taxes covered by the
-------
exclusion described in Section 7.4(b) of the Master Agreement. It is the
intention of the parties hereto that, insofar as the same may lawfully be done,
Lessor shall be, except as specifically provided for herein, free from all
expenses in any way related to the Leased Properties and the use and occupancy
thereof.  Any tax relating to a fiscal period of any taxing authority falling
partially within and partially outside the Lease Term, shall be apportioned and
adjusted between Lessor and the related Lessee.  Each Lessee covenants to
furnish Lessor and the Agent, upon the Agent's written request, within forty-
five

                                       5
<PAGE>

(45) days after the last date when any tax must be paid by such Lessee as
provided in this Section 3.6, official receipts of the appropriate taxing,
                 -----------
authority or other proof satisfactory to Lessor, evidencing the payment thereof.

     So long as no Event of Default has occurred and is continuing, the related
Lessee may defer payment of a tax so long as the validity or the amount thereof
is contested by such Lessee with diligence and in good faith; provided, however,
                                                              --------  -------
that such Lessee shall settle such contest, post sufficient bond or pay the tax
in sufficient time to prevent delivery of a tax deed.  Such contest shall be at
the related Lessee's sole cost and expense. Each Lessee covenants to indemnify
and save harmless Lessor, which indemnification shall survive the termination of
this Lease, the Agent and each Lender from any actual and reasonable costs or
expenses incurred by Lessor, the Agent or any Lender as a result of such
contest.

     Section  3.7   Utility Charges.  Each Lessee agrees to pay or cause to be
                    ---------------
paid as and when the same are due and payable all charges for gas, water, sewer,
electricity, lights, heat, power, telephone or other communication service and
all other utility services used, rendered or supplied to, upon or in connection
with the Leased Properties leased by it.

                                  ARTICLE IV.
                                    WAIVERS
                                    -------

     During the Lease Term, Lessor's interest in the Leased Properties,
including the Building(s) (whether or not completed) and the Land, is demised
and let by Lessor "AS IS" subject to (a) the rights of any parties in possession
thereof, (b) the state of the title thereto existing at the time Lessor acquired
its interest in the Leased Properties, (c) any state of facts which an accurate
survey or physical inspection might show (including the survey delivered on the
related Closing Date), (d) all Applicable Law, and (e) any violations of
Applicable Law which may exist upon or subsequent to the commencement of the
Lease Term.  EACH LESSEE ACKNOWLEDGES THAT, ALTHOUGH LESSOR WILL OWN AND HOLD
TITLE TO THE LEASED PROPERTIES, LESSOR IS NOT RESPONSIBLE FOR THE DESIGN,
DEVELOPMENT, BUDGETING AND CONSTRUCTION OF THE BUILDING(S) OR ANY ALTERATIONS.
NEITHER LESSOR, THE AGENT NOR ANY LENDER HAS MADE OR SHALL BE DEEMED TO HAVE
MADE ANY REPRESENTATION OR WARRANTY, EXPRESS OR IMPLIED, OR SHALL BE DEEMED TO
HAVE ANY LIABILITY WHATSOEVER AS TO THE VALUE, MERCHANTABILITY, TITLE,
HABITABILITY, CONDITION, DESIGN, OPERATION, OR FITNESS FOR USE OF THE LEASED
PROPERTIES (OR ANY PART THEREOF), OR ANY OTHER REPRESENTATION OR WARRANTY
WHATSOEVER, EXPRESS OR IMPLIED, WITH RESPECT TO THE LEASED

                                       6
<PAGE>

PROPERTIES (OR ANY PART THEREOF), ALL SUCH WARRANTIES BEING HEREBY DISCLAIMED,
AND NEITHER LESSOR, THE AGENT NOR ANY LENDER SHALL BE LIABLE FOR ANY LATENT,
HIDDEN, OR PATENT DEFECT THEREIN OR THE FAILURE OF ANY LEASED PROPERTY, OR ANY
PART THEREOF, TO COMPLY WITH ANY APPLICABLE LAW, except that Lessor hereby
represents and warrants that each Leased Property is and shall be free of Lessor
Liens. As between Lessor and the Lessees, each related Lessee has been afforded
full opportunity to inspect each Leased Property, is satisfied with the results
of its inspections of such Leased Property and is entering into this Lease
solely on the basis of the results of its own inspections and all risks incident
to the matters discussed in the two preceding sentences, as between Lessor, the
Agent or the Lenders on the one hand, and the Lessees, on the other, are to be
borne by the Lessees. The provisions of this Article IV have been negotiated,
                                             ----------
and, except to the extent otherwise expressly stated, the foregoing provisions
are intended to be a complete exclusion and negation of any representations or
warranties by Lessor, the Agent or the Lenders, express or implied, with respect
to the Leased Properties, that may arise pursuant to any law now or hereafter in
effect, or otherwise.

                                   ARTICLE V.
                     LIENS; EASEMENTS; PARTIAL CONVEYANCES
                     -------------------------------------

     No Lessee shall directly or indirectly create, incur or assume, any Lien on
or with respect to any Leased Property, the title thereto, or any interest
therein, including any Liens which arise out of the possession, use, occupancy,
construction, repair or rebuilding of any Leased Property or by reason of labor
or materials furnished or claimed to have been furnished to a Lessee, or any of
its contractors or agents or Alterations constructed by a Lessee, except, in all
cases, Permitted Encumbrances and except as otherwise consented to by the Lessor
and the Agent.

     Notwithstanding the foregoing paragraph, at the request of a Lessee, Lessor
shall, from time to time during the Lease Term and upon reasonable advance
written notice from such Lessee, and receipt of the materials specified in the
next succeeding sentence, consent to and join in any (i) grant of easements,
licenses, rights of way and other rights in the nature of easements, including,
without limitation, utility easements to facilitate Lessees' use, development
and construction of the Leased Properties, (ii) release or termination of
easements, licenses, rights of way or other rights in the nature of easements
which are for the benefit of the Land or the Building(s) or any portion thereof,
(iii) dedication or transfer of portions of the Land, not improved with a
Building, for road,

                                       7
<PAGE>

highway or other public purposes, (iv) execution of agreements for ingress and
egress and amendments to any covenants and restrictions affecting the Land or
the Building(s) or any portion thereof, (v) request to any Governmental
Authority for platting or subdivision or replatting or resubdivision approval
with respect to the Land or any portion thereof or any parcel of land of which
the Land or any portion thereof forms a part or a request for rezoning or any
variance from zoning or other governmental requirements, and (vi) other matters
as Lessee may reasonably request associated with possession, use, occupancy,
development, construction, Alterations, renovations, expansion, remodeling,
repair, conveyance or rebuilding of or affecting the Leased Property. Lessor's
obligations pursuant to the preceding sentence shall be subject to the
requirements that:

          (a) any such action shall be at the sole cost and expense of the
requesting Lessee and such Lessee shall pay all actual and reasonable out-of-
pocket costs of Lessor and the Agent in connection therewith (including, without
limitation, the reasonable fees of attorneys, architects, engineers, planners,
appraisers and other professionals reasonably retained by Lessor or the Agent in
connection with any such action, it being expressly understood that such parties
may be approved in advance by Lessor and retained by Lessee as Construction
Agent so that duplicate charges may be avoided);

          (b) the requesting Lessee shall have delivered to Lessor and Agent a
certificate of a Responsible Officer of such Lessee stating that

               (i) such action will not cause any Leased Property, the Land or
     any Building or any portion thereof to fail to comply in any material
     respect with the provisions of this Lease or any other Operative Documents,
     or in any material respect with Applicable Law; and

               (ii)  such action will not materially reduce the Fair Market
     Sales Value, utility or useful life of any Leased Property, the Land or any
     Building nor Lessor's interest therein; and

          (c) in the case of any release or conveyance, if Lessor, the Agent or
any Lender so reasonably requests, the requesting Lessee will cause to be issued
and delivered to Lessor and the Agent by the Title Insurance Company an
endorsement to the Title Policy confirming that such release or reconveyance
does not impair the validity, enforceability or priority of this Lease or the
Lessor's interest in the Leased Property.

                                       8
<PAGE>

                                  ARTICLE VI.
                            MAINTENANCE AND REPAIR;
                    ALTERATIONS, MODIFICATIONS AND ADDITIONS
                    ----------------------------------------

     Section  6.1   Maintenance and Repair; Compliance With Law. Each Lessee, at
                    -------------------------------------------
its own expense, shall at all times (a) maintain each Leased Property leased by
it in good repair and condition (subject to ordinary wear and tear), in
accordance with prudent industry standards and, in any event, in no less a
manner as other similar property owned or leased by such Lessee or its
Affiliates, (b) make all Alterations in accordance with, and maintain (whether
or not such maintenance requires structural modifications or Alterations) and
operate and otherwise keep each Leased Property in compliance in all material
respects with, all Applicable Laws and insurance requirements, subject to
Lessee's right to contest as hereafter provided, and (c) make all material
repairs, replacements and renewals of each Leased Property or any part thereof
which may be required to keep such Leased Property in the condition required by
the preceding clauses (a) and (b). Each Lessee shall perform the foregoing
              -----------     ---
maintenance obligations regardless of whether any Leased Property is occupied or
unoccupied, and nothing herein shall require any Lessee to continuously operate
the Leased Property.  Each Lessee waives any right that it may now have or
hereafter acquire to (i) require Lessor, the Agent or any Lender to maintain,
repair, replace, alter, remove or rebuild all or any part of any Leased Property
or (ii) make repairs at the expense of Lessor, the Agent or any Lender pursuant
to any Applicable Law or other agreements or otherwise.  NEITHER LESSOR, THE
AGENT NOR ANY LENDER SHALL BE LIABLE TO ANY LESSEE OR TO ANY CONTRACTORS,
SUBCONTRACTORS, LABORERS, MATERIALMEN, SUPPLIERS OR VENDORS FOR SERVICES
PERFORMED OR MATERIAL PROVIDED ON OR IN CONNECTION WITH ANY LEASED PROPERTY OR
ANY PART THEREOF.  Neither Lessor, the Agent nor any Lender shall be required to
maintain, alter, repair, rebuild or replace any Leased Property in any way.
Anything contained in this Lease to the contrary notwithstanding, whenever any
obligation, order, rule or requirement, including those claimed to arise under
Applicable Law, whether asserted by Governmental Authority or any other Person
(other than the Agent, a Funding Party or an Indemnitee), is in fact, asserted,
and the same would require the performance or payment by Lessee, and Lessee in
good faith believes the same ought to be contested, Lessee shall, subject to
indemnification obligations of this Lease, have the right to so contest and to
defer performance and payment until the matter is finally resolved; provided,
however, that this sentence shall not be deemed to modify or extend the cure
period for any Event of Default.

     Section  6.2   Alterations.  Each Lessee may, without the consent of Lessor
                    -----------
(which will not be unreasonably withheld),

                                       9
<PAGE>

delayed or conditioned), at such Lessee's own cost and expense, make Alterations
which do not diminish the value, utility or useful life of any Leased Property.

     Section  6.3   Title to Alterations.  Title to all Alterations shall
                    --------------------
without further act vest in Lessor (subject to each Lessee's right to remove
Lessee's Property, provided that such removal shall not materially diminish the
value of the Leased Property) and shall be deemed to constitute a part of the
Leased Properties and be subject to this Lease.  Notwithstanding the foregoing,
Lessee may from time to time remove and convey as Lessor's Agent, such
Alterations so long as the proceeds are used to acquire and/or make other
Alterations, improvements or installations (including replacement of Equipment
financed through funds advanced by Lessor or Lender to the Leased Property) and
such removal does not materially diminish the value of the Leased Property.
Lessor further acknowledges and does hereby waive any rights or claims of lien
(including statutory liens) against Lessee's Property.

                                  ARTICLE VII
                                      USE
                                      ---

     Each Lessee may use each Leased Property leased by it or any part thereof
for any lawful purpose, and in a manner consistent with the standards applicable
to properties of a similar nature in the geographic area in which such Leased
Property is located, provided that such use does not materially adversely affect
                     --------
the Fair Market Sales Value, utility, remaining useful life or residual value of
such Leased Property, and does not materially violate or conflict with, or
constitute or result in a material default under, any Applicable Law or any
insurance policy required hereunder. No Lessee shall commit or permit any waste
of any Leased Property or any material part thereof if such waste would
materially adversely affect the value or useful life of the Leased Property.

                                  ARTICLE VII
                                   INSURANCE
                                   ---------

          (a) At any time during which any part of any Building or any
Alteration is under construction and as to any part of any Building or any
Alteration under construction, the related Lessee shall maintain, or cause to be
maintained, at its sole cost and expense, as a part of its blanket policies or
otherwise, "all risks" non-reporting completed value form of builder's risk
insurance.

                                       10
<PAGE>

          (b) During the Lease Term, each Lessee shall maintain, at its sole
cost and expense, as a part of its blanket policies or otherwise, insurance
against loss or damage to any Building by fire and other risks, including
comprehensive boiler and machinery coverage, on terms and in amounts no less
favorable than insurance covering other similar properties owned or leased by a
Lessee and that are in accordance with prudent industry practice, but in no
event less than the replacement cost of such Building from time to time.

          (c) During the Lease Term, each Lessee shall maintain, at its sole
cost and expense, commercial general liability insurance with respect to the
Leased Properties, as is ordinarily procured by prudent Persons who own or
operate similar properties in the same geographic area.  Such insurance shall be
on terms and in amounts that are no less favorable than insurance maintained by
a Lessee or its Affiliates with respect to similar properties that it owns or
leases and that are in accordance with prudent industry practice.  Such
insurance policies shall also provide that each Lessee's insurance shall be
considered primary insurance.  Nothing in this Article VIII shall prohibit
                                               ------------
Lessor, the Agent or any Lender from carrying at its own expense other insurance
on or with respect to the Leased Properties, provided that any insurance carried
                                             --------
by Lessor, the Agent or any Lender shall not prevent any Lessee from carrying
the insurance required hereby.

          (d) Each policy of insurance maintained by a Lessee pursuant to
clauses (a) and (b) of this Article VIII shall provide that all insurance
-----------     ---         ------------
proceeds in respect of any loss or occurrence shall be adjusted by such Lessee,
except if, and for so long as an Event of Default exists, all losses shall be
adjusted solely by, and all insurance proceeds shall be paid solely to, the
Agent (or Lessor if the Loans have been fully paid) for application pursuant to
this Lease. For so long as no Event of Default exists, insurance proceeds in an
aggregate amount not exceeding $10,000,000 may be paid directly to the
applicable Lessee, and insurance proceeds exceeding $10,000,000 shall be paid to
the Agent, in each case for application pursuant to this Lease.

          (e) On the Closing Date for each Leased Property, on the Completion
Date for each Leased Property and on each anniversary of the Initial Closing
Date, each Lessee shall furnish Lessor with certificates showing the insurance
required under this Article VIII to be in effect and naming Lessor, the Agent
                    ------------
and the Lenders as additional insureds.  Such certificates shall include a
provision for thirty (30) days' advance written notice by the insurer to Lessor
and the Agent in the event of cancellation or expiration or nonpayment of
premium with respect

                                       11
<PAGE>

to such insurance. Each Lessee shall provide evidence to Lessor and the Agent
that each insurance policy required by this Article VIII has been renewed or
                                            ------------
replaced prior to the scheduled expiration date therefor.

          (f) Each policy of insurance maintained by a Lessee pursuant to this
Article VIII shall (i) contain the waiver of any right of subrogation of the
------------
insurer against Lessor, the Agent on behalf of the Lenders, and (ii) provide
that in respect of the interests of Lessor, the Agent and the Lenders, such
policies shall not be invalidated by any fraud, action, inaction or
misrepresentation of any Lessee or any other Person acting on behalf of any
Lessee.

          (g) All insurance policies carried in accordance with this Article
                                                                     -------
VIII shall be maintained with insurers rated at least A by A.M. Best & Company,
----
and in all cases the insurer shall be qualified to insure risks in the State
where each Leased Property is located.

                                  ARTICLE IX.
                           ASSIGNMENT AND SUBLEASING
                           -------------------------

     No Lessee may assign or sublease any of its right, title or interest in, to
or under this Lease, except as set forth below. Each Lessee may assign its right
under this Lease of all or any portion of any Leased Property, provided that (a)
                                                               --------
all obligations of such Lessee shall continue in full effect as obligations of a
principal and not of a guarantor or surety, as though no assignment had been
made.  Each Lessee may sublet all or any portion of its interest in, to or under
this Lease and all or any portion of the Leased Property provided (i) each such
sublease shall be expressly subject and subordinate to this Lease, the Loan
Agreement and the other Operative Documents; and (ii) each such sublease shall
terminate on or before the Lease Termination Date.  Each Lessee shall give the
Agent and Lessor prompt written notice of any such assignment or sublease.

     Except pursuant to an Operative Document, this Lease shall not be mortgaged
or pledged by any Lessee, nor shall any Lessee mortgage or pledge any interest
in any Leased Property or any portion thereof.  Any such mortgage or pledge
shall be void.

                                   ARTICLE X.
                   LOSS, DESTRUCTION, CONDEMNATION OR DAMAGE
                   -----------------------------------------

     Section  10.1  Event of Loss.  (a) Any event (i) which would otherwise
                    -------------
constitute a Casualty during the Base Term, and (ii) which, in the good-faith
judgment of the related Lessee,

                                       12
<PAGE>

renders repair and restoration of a Leased Property impossible or impractical,
or requires repairs to a Leased Property that would cost in excess of 50% of the
original cost of such Leased Property, and (iii) as to which such Lessee, within
sixty (60) days after the occurrence of such event, delivers to Lessor an
Officer's Certificate notifying Lessor of such event and of such judgment, shall
constitute an "Event of Loss". In the case of any other event which constitutes
               -------------
a Casualty, the related Lessee shall restore such Leased Property pursuant to
Section 10.3. In the case of an Event of Loss where such Leased Property is
------------
susceptible of repair or restoration, the Officer's Certificate delivered
pursuant to clause (iii) above shall further specify whether such Lessee elects
either (x) to repair and restore the Leased Property, or (y) pay to Lessor the
Leased Property Balance in accordance with subsection (c) below; provided, that
the Lessee shall not have the right to elect to repair and restore the Leased
Property if, on the date of such Officer's Certificate, a Potential Event of
Default or an Event of Default shall have occurred and be continuing.

     (b) Any election by a Lessee to repair and restore the Leased Property
pursuant to clause (x) above shall be accompanied by (i) a Construction
Contract, in form for execution, for the repair or restoration of the Leased
Property together with the related Plan and Specifications, each of which shall
be reasonably satisfactory in form and substance to the Agent; and (ii) such
other evidence and assurances as may be necessary to demonstrate to the Agent's
reasonable satisfaction that the insurance proceeds expected to be received in
connection with such Event of Loss, together with any remaining Fundings
available under the Master Agreement plus Lessee's other sources of funds
(whether borrowed or otherwise), but in any case subject to compliance with
Article V of the Master Agreement, will be sufficient to complete the repair or
restoration of the Leased Property.  Upon the Agent's confirmation that the
Lessee has satisfied the conditions for the repair or restoration of the Leased
Property as set forth above, (x) the Lessee shall rebuild the Leased Property as
provided in Section 10.3, and (y) the Lessee shall turn over to the Agent all
            ------------
insurance proceeds received in connection with such Event of Loss, and the Agent
shall disburse such proceeds, together with any insurance proceeds received by
the Agent or Lessor in connection with such Event of Loss and remaining Fundings
available under the Master Agreement, in accordance with the Master Agreement in
the same manner as if the Building were being originally constructed, provided
that the Lessee complies with all conditions to Fundings (including without
limitation delivery of all assignments, consents, security agreements and title
insurance policies) as required under the Master Agreement for such original
construction.

                                       13
<PAGE>

     (c) If an Event of Loss other than an Event of Taking shall occur, and the
related Lessee does not elect to repair or restore the Leased Property as
provided in subsection (b) above (and satisfy the conditions set forth therein)
or the Leased Property is otherwise not susceptible of repair or restoration,
the related Lessee shall pay to Lessor on the later of (A) ten (10) days
following related Lessee's receipt of insurance proceeds under policies carried
pursuant to Article XIII, (B) the thirtieth day after delivery of the Officer's
Certificate of an Event of Loss or (C) the next Payment Date following delivery
of the Officer's Certificate pursuant to clause (iii) above an amount equal to
                                         ------------
the related Leased Property Balance unless such date is less than thirty (30)
days after receipt by Lessor and Agent of an Officer's Certificate pursuant to
clause (C) above or Lessee's receipt of insurance proceeds (whichever if later),
in which case, such payment shall be made on the second Payment Date following
delivery of the Officer's Certificate pursuant to clause (iii) above.  Upon
                                                  ------------
Lessor's receipt of such Leased Property Balance on such date, Lessor shall
cause Lessor's interest in such Leased Property to be conveyed to the related
Lessee in accordance with and subject to the provisions of Section 14.5 hereof;
                                                           ------------
upon completion of such purchase, but not prior thereto, this Lease with respect
to such Leased Property and all obligations hereunder with respect to such
Leased Property shall terminate, except with respect to obligations and
liabilities hereunder, actual or contingent, that have arisen or relate to
events occurring on or prior to such date of purchase, or which are expressly
stated herein to survive termination of this Lease.  Notwithstanding anything to
the contrary herein, Lessee's obligation to pay Basic Rent on each Payment Date
shall continue until the payment in full of the Lease Property Balance as set
forth above.

     Upon the consummation of the purchase of any Leased Property pursuant to
this Section 10.1(c), any proceeds derived from insurance required to be
     ---------------
maintained by the related Lessee pursuant to this Lease for any Leased Property
remaining after payment of such purchase price shall be paid over to, or
retained by, such Lessee or as it may direct, and Lessor and its assigns
(including the Agent and any other Funding Party) shall assign to such Lessee,
without warranty, all of its rights to and interest (if any) in such insurance
required to be maintained by such Lessee pursuant to this Lease.

     Section  10.2  Event of Taking.  (a) Any event (i) which constitutes a
                    ---------------
Condemnation of all of, or substantially all of, a Leased Property, or (ii) (A)
which would otherwise constitute a Condemnation, (B) which, in the good-faith
judgment of the related Lessee, renders restoration and rebuilding of a Leased
Property impossible or impractical, or requires repairs to a

                                       14
<PAGE>

Leased Property that would cost in excess of 50% of the original cost of such
Leased Property, and (C) as to which such Lessee, within sixty (60) days after
the occurrence of such event, delivers to Lessor an Officer's Certificate
notifying Lessor of such event and of such judgment, shall constitute an "Event
                                                                          -----
of Taking". In the case of any other event which constitutes a Condemnation, the
---------
related Lessee shall restore and rebuild such Leased Property pursuant to
Section 10.4. In the case of an Event of Taking where such Leased Property is
------------
susceptible of repair or restoration, the Officer's Certificate delivered
pursuant to clause (ii) above shall further specify whether such Lessee elects
either (x) to repair and restore the Leased Property, or (y) pay to Lessor the
Leased Property Balance in accordance with subsection (c) below; provided, that
the Lessee shall not have the right to elect to repair and restore the Leased
Property if, on the date of such Officer's Certificate, a Potential Event of
Default or an Event of Default shall have occurred and be continuing.

     (b) Any election by a Lessee to repair and restore the Leased Property
pursuant to clause (x) above shall be accompanied by (i) a Construction
Contract, in form for execution, for the repair or restoration of the Leased
Property together with the related Plan and Specifications, each of which shall
be reasonably satisfactory in form and substance to the Agent; and (ii) such
other evidence and assurances as may be necessary to demonstrate to the Agent's
reasonable satisfaction that the Awards proceeds expected to be received in
connection with such Event of Taking, together with any remaining Fundings
available under the Master Agreement plus Lessee's other sources of funds
(whether borrowed or otherwise), but in any case subject to compliance with
Article V of the Master Agreement, will be sufficient to complete the repair or
restoration of the Leased Property.  Upon the Agent's confirmation that the
Lessee has satisfied the conditions for the repair or restoration of the Leased
Property as set forth above, (x) the Lessee shall rebuild the Leased Property as
provided in Section 10.4, and (y) the Lessee shall turn over to the Agent all
            ------------
Award proceeds received in connection with such Event of Taking, and the Agent
shall disburse such Award proceeds, together with any Award proceeds received by
the Agent or Lessor in connection with such Event of Taking and remaining
Fundings available under the Master Agreement, in accordance with the Master
Agreement in the same manner as if the Building were being originally
constructed, provided that the Lessee complies with all conditions to Fundings
(including without limitation delivery of all assignments, consents, security
agreements and title insurance policies) as required under the Master Agreement
for such original construction.

                                       15
<PAGE>

     (c) If an Event of Taking shall occur, and the related Lessee does not
elect to repair or restore the Leased Property as provided in subsection (b)
above (and satisfy the conditions set forth therein) or the Leased Property is
otherwise not susceptible of repair or restoration, the related Lessee shall pay
to Lessor (1) on the later of (A) ten (10) days following receipt of Award
proceeds, (B) the thirtieth day after delivery of the Officer's Certificate
notifying Lessor of such Event of Taking, or (C) the next Payment Date following
the occurrence of such Event of Taking, an amount equal to the related Leased
Property Balance, provided however, if such date is less than thirty (30) days
after receipt by Lessor and Agent of an Officer's Certificate or receipt of
Award proceeds described above, such payment shall be postponed to the second
Payment Date following delivery of the Officer's Certificate.  Upon Lessor's
receipt of such Leased Property Balance on such date, Lessor shall cause
Lessor's interest in such Leased Property to be conveyed to the related Lessee
in accordance with and subject to the provisions of Section 14.5 hereof
                                                    ------------
(provided that such conveyance shall be subject to all rights of the condemning
authority); upon completion of such purchase, but not prior thereto, this Lease
with respect to such Leased Property and all obligations hereunder with respect
to such Leased Property shall terminate, except with respect to obligations and
liabilities hereunder, actual or contingent, that have arisen or relate to
events occurring on or prior to such date of purchase, or which are expressly
stated herein to survive termination of this Lease.  Notwithstanding anything to
the contrary herein, Lessee's obligation to pay Basic Rent on each Payment Date
shall continue until the payment in full of the Lease Property Balance as set
forth above.

     Upon the consummation of the purchase of such Leased Property pursuant to
this Section 10.2(c), all Awards received by Lessor and its assigns (including
     ---------------
the Agent and any other Funding Party), after deducting any reasonable costs
incurred by such recipient in collecting such Awards, received or payable on
account of an Event of Taking with respect to such Leased Property during the
related Lease Term shall be paid to the related Lessee, and all rights of such
recipient in Awards not then received shall be assigned to Lessee by such
recipient.

     Section  10.3  Casualty.  If a Casualty shall occur which is not an Event
                    --------
of Loss as to which the Lessee is required to pay the related Leased Property
Balance pursuant to Section 10.1(a), the related Lessee shall rebuild and
                    ---------------
restore the affected Leased Property, will complete the same prior to the Lease
Termination Date (unless at such time Lessee has exercised the purchase option),
and will cause the condition set forth in Section 3.5(c) of the Master Agreement
                                          --------------
to be fulfilled with respect to such

                                       16
<PAGE>

restoration and rebuilding prior to the Lease Termination Date, regardless of
whether insurance proceeds received as a result of such Casualty are sufficient
for such purpose.

     Section  10.4  Condemnation.  If a Condemnation shall occur which is not an
                    ------------
Event of Taking as to which the Lessee is required to pay the related Leased
Property Balance pursuant to Section 10.2(a), the related Lessee shall rebuild
                             ---------------
and restore the affected Leased Property, will complete the same prior to the
Lease Termination Date, and will cause the condition set forth in Section 3.5(c)
                                                                  --------------
of the Master Agreement to be fulfilled with respect to such restoration and
rebuilding prior to the Lease Termination Date.

     Section  10.5  Verification of Restoration and Rebuilding. In the event of
                    ------------------------------------------
Casualty or Condemnation, to verify the related Lessee's compliance with the
foregoing Section 10.3 or 10.4, as appropriate, Lessor, the Agent, the Lenders
          ------------    ----
and their respective authorized representatives may, upon five (5) Business
Days' notice to such Lessee, make inspections of the affected Leased Property
with respect to (i) the extent of the Casualty or Condemnation and (ii) the
restoration and rebuilding of the related Building and the Land.  All actual and
reasonable out-of-pocket costs of such inspections incurred by Lessor, the Agent
or any Lender will be paid by the related Lessee promptly after written request.
No such inspection shall unreasonably interfere with the related Lessee's
operations or the operations of any other occupant of such Leased Property.
None of the inspecting parties shall have any duty to make any such inspection
or inquiry and none of the inspecting parties shall incur any liability or
obligation by reason of making or not making any such inspection or inquiry.

     Section  10.6  Application of Payments.  All proceeds (except for payments
                    -----------------------
under insurance policies maintained other than pursuant to Article VIII of this
                                                           ------------
Lease) received at any time by Lessor, any Lessee or the Agent from any
Governmental Authority or other Person with respect to any Condemnation or
Casualty to any Leased Property or any part thereof or with respect to an Event
of Loss or an Event of Taking, plus the amount of any payment that would have
                               ----
been due from an insurer but for a Lessee's self-insurance or deductibles ("Loss
                                                                            ----
Proceeds"), shall (except to the extent Section 10.9 applies) be applied as
--------                                ------------
follows:

          (a) In the event the related Lessee purchases such Leased Property
     pursuant to Section 10.1 or Section 10.2, such Loss Proceeds shall be
                 ------------    ------------
     applied as set forth in Section 10.1 or Section 10.2, as the case may be;
                             ------------    ------------

                                       17
<PAGE>

          (b) In the event of a Casualty at such time when no Event of Default
     has occurred and is continuing and the related Lessee is obligated to
     repair and rebuild such Leased Property pursuant to Section 10.3, such
                                                         ------------
     Lessee may, in good faith and subsequent to the date of such Casualty,
     certify to Lessor and to the applicable insurer that no Event of Default
     has occurred and is continuing, in which event the applicable insurer shall
     pay the Loss Proceeds to such Lessee;

          (c) In the event of a Condemnation at such time when no Event of
     Default has occurred and is continuing and the related Lessee is obligated
     to repair and rebuild such Leased Property pursuant to Section 10.4, such
                                                            ------------
     Lessee may, in good faith and subsequent to the date of such Condemnation,
     certify to Lessor and the Agent that no Event of Default has occurred and
     is continuing, in which event the applicable Award shall be paid over to
     such Lessee; and

          (d) As provided in Sections 10.8 and 10.9, if such sections are
                             ----------------------
     applicable.

     During any period of repair or rebuilding pursuant to this Article X, this
                                                                ---------
Lease will remain in full force and effect and Basic Rent shall continue to
accrue and be payable without abatement or reduction.  Each Lessee shall
maintain records setting forth information relating to the receipt and
application of payments in accordance with this Section 10.6.  Such records
                                                ------------
shall be kept on file by each Lessee at its offices and shall be made available
to Lessor, the Lenders and the Agent upon request.

     Section  10.7  Prosecution of Awards.
                    ---------------------

          (a) If any Condemnation shall occur, the party receiving the notice of
     such Condemnation shall give to the other party and the Agent promptly, but
     in any event within thirty (30) days after the occurrence thereof, written
     notice of such occurrence and the date thereof, generally describing the
     nature and extent of such Condemnation.  With respect to any Event of
     Taking or any Condemnation, the related Lessee shall control the
     negotiations with the relevant Governmental Authority as to any proceeding
     in respect of which Awards are or may be required, under Section 10.6, to
                                                              ------------
     be assigned or released to such Lessee, unless an Event of Default shall
     have occurred and be continuing, in which case (i) the Agent (or Lessor if
     the Loans have been fully paid) shall control such negotiations; and (ii)
     such Lessee hereby irrevocably assigns, transfers and sets over to Lessor
     all rights of such Lessee to any Award on account of any Event of Taking or
     any Condemnation

                                       18
<PAGE>

     and, if there will not be separate Awards to Lessor and such Lessee on
     account of such Event of Taking or Condemnation, irrevocably authorizes and
     empowers the Agent (or Lessor if the Loans have been fully paid) during the
     continuance of an Event of Default, with full power of substitution, in the
     name of such Lessee or otherwise (but without limiting the obligations of
     such Lessee under this Article X), to file and prosecute what would
                            ---------
     otherwise be such Lessee's claim for any such Award and to collect, receipt
     for and retain the same. In any event Lessor and the Agent may participate
     in such negotiations, and no settlement will be made without the prior
     consent of the Agent (or Lessor if the Loans have been fully paid), not to
     be unreasonably withheld.

          (b) Notwithstanding the foregoing, each Lessee may prosecute, and
     Lessor shall have no interest in, any claim with respect to Lessee's
     Property and such Lessee's other personal property and equipment not
     financed by or otherwise property of Lessor, business interruption or
     similar award and such Lessee's relocation expenses.

     Section  10.8  Application of Certain Payments Not Relating to an Event of
                    -----------------------------------------------------------
Taking.  In case of a requisition for temporary use of all or a portion of any
------
Leased Property which is not an Event of Taking, this Lease shall remain in full
force and effect with respect to such Leased Property, without any abatement or
reduction of Basic Rent, and the Awards for such Leased Property shall, unless
an Event of Default has occurred and is continuing, be paid to the related
Lessee.

     Section  10.9  Other Dispositions.  Notwithstanding the foregoing
                    ------------------
provisions of this Article X, so long as an Event of Default shall have occurred
                   ---------
and be continuing, any amount that would otherwise be payable to or for the
account of, or that would otherwise be retained by, Lessee pursuant to this
Article X shall be paid to the Agent (or Lessor if the Loans have been fully
---------
paid) as security for the obligations of the Lessees under this Lease and, at
such time thereafter as no Event of Default shall be continuing, such amount
shall be paid promptly to the related Lessee to the extent not previously
applied by Lessor or the Agent in accordance with the terms of this Lease or the
other Operative Documents.

     Section  10.10 No Rent Abatement.  Unless and until Lessee or its designee
                    -----------------
shall have purchased the Leased Property as contemplated by Section 10.1 or
Section 10.2, Rent shall not abate hereunder by reason of any Casualty, any
Event of Loss, any Event of Taking or any Condemnation of any Leased Property,
and each Lessee shall continue to perform and fulfill all of such Lessee's
obligations, covenants and agreements hereunder

                                       19
<PAGE>

notwithstanding such Casualty, Event of Loss, Event of Taking or Condemnation
until the Lease Termination Date.

                                  ARTICLE XI.
                         INTEREST CONVEYED TO LESSEES
                         ----------------------------

     Each Lessee and Lessor intend that this Lease be treated, for accounting
purposes, as an operating lease.  For all other purposes, each Lessee and Lessor
intend that the transaction represented by this Lease be treated as a financing
transaction; for such purposes, as provided in the Lease Supplements, it is the
intention of the parties hereto (i) that this Lease, as supplemented by the
Lease Supplements, be treated as a mortgage or deed of trust (whichever is
applicable in the jurisdictions in which the Leased Properties are located) and
security agreement, encumbering the Leased Properties, and that, pursuant to the
Lease Supplements, each Lessee, as grantor, grant to Lessor, as mortgagee or
beneficiary and secured party, or any successor thereto, a first and paramount
Lien on each Leased Property in which such Lessee has an interest, (ii) that
Lessor shall have, pursuant to the Lease Supplements, all of the rights, powers
and remedies of a mortgagee, deed of trust beneficiary or secured party
available under Applicable Law to take possession of and sell (whether by
foreclosure or otherwise as provided in the Lease Supplements) any Leased
Property, (iii) that the effective date of such mortgage, security deed or deed
of trust shall be the effective date of this Lease, or the related Lease
Supplement, if later, (iv) that the recording of this Lease or a Lease
Supplement shall be deemed to be the recording of such mortgage, security deed
or deed of trust, and (v) that the obligations secured by such mortgage,
security deed or deed of trust shall include the Funded Amounts and all Basic
Rent and Supplemental Rent hereunder and all other obligations of and amounts
due from each Lessee hereunder and under the Operative Documents.

                                  ARTICLE XII
                               EVENTS OF DEFAULT
                               -----------------

     The following events shall constitute Events of Default (whether any such
event shall be voluntary or involuntary or come about or be effected by
operation of law or pursuant to or in compliance with any judgment, decree or
order of any court or any order, rule or regulation of any administrative or
governmental body):

                                       20
<PAGE>

          (a) any Lessee shall fail to make any payment of Basic Rent when due,
and such failure shall continue for ten (10) days after written notice thereof
from Lessor or the Agent;

          (b) any Lessee shall fail to make any payment of Rent (other than
Basic Rent and other than as set forth in clause (c) or any other amount payable
                                          ----------
hereunder or under any of the other Operative Documents (other than Basic Rent
and other than as set forth in clause (c)) when due (unless such amount is due
                               ----------
to a third party other than the Agent, a Funding Party or an Indemnitee, and
such amount is being contested in good faith by such Lessee), and such failure
shall continue for a period of ten (10) days after written notice thereof from
Lessor or the Agent;

          (c) any Lessee shall fail to pay the Funded Amount or Lease Balance
when due pursuant to Sections 10.1, 10.2, 14.1 or 14.2, or any Lessee shall fail
                     -------------  ----  ----    ----
to pay the Recourse Deficiency Amount when required pursuant to Article XIV or
                                                                -----------
the Construction Agent shall fail to make any undisputed payment when due under
the Construction Agency Agreement;

          (d) any Lessee shall fail to maintain insurance as required by Article
                                                                         -------
VIII hereof, and such failure shall continue until the earlier of (i) fifteen
----
(15) days after written notice thereof from Lessor and (ii) the day immediately
preceding the date on which any applicable insurance coverage would otherwise
lapse or terminate;

          (e) Rowe Companies or Rowe Furniture shall (i) default in any payment
of principal of or interest on any Indebtedness or in the payment of any
Guarantee Obligation, beyond the period of grace (not to exceed 30 days), if
any, provided in the instrument or agreement under which such Indebtedness or
Guarantee Obligation was created, and such default shall be continuing and shall
result in a Material Adverse Effect; or (ii) default in the observance or
performance of any other agreement or condition relating to any such
Indebtedness or Guarantee Obligation or contained in any instrument or agreement
evidencing, securing or relating thereto, and such default shall be continuing,
or any other event shall occur or condition exist and be continuing, the effect
of which default or other event or condition is to cause, such Indebtedness to
become due or required to be purchased, redeemed or otherwise defeased prior to
its stated maturity or such Guarantee Obligation to become payable and such
default shall result in a Material Adverse Effect;

          (f) (i)  Rowe Companies or Rowe Furniture shall commence any case,
proceeding or other action (A) under any existing or future law of any
jurisdiction, domestic or foreign, relating to bankruptcy, insolvency,
reorganization or relief of

                                       21
<PAGE>

debtors, seeking to have an order for relief entered with respect to it, or
seeking to adjudicate it a bankrupt or insolvent, or seeking reorganization,
arrangement, adjustment, winding-up, liquidation, dissolution, composition or
other relief with respect to it or its debts, or (B) seeking appointment of a
receiver, trustee, custodian or other similar official for it or for all or any
substantial part of its assets, or Rowe Companies or Rowe Furniture shall make a
general assignment for the benefit of its creditors; or (ii) there shall be
commenced against Rowe Companies or Rowe Furniture any case, proceeding or other
action of a nature referred to in clause (i) above which (A) results in the
                                  ----------
entry of an order for relief or any such adjudication or appointment or (B)
remains undismissed, undischarged or unbonded for a period of 60 days; or (iii)
there shall be commenced against Rowe Companies or Rowe Furniture any case,
proceeding or other action seeking issuance of a warrant of attachment,
execution, distraint or similar process against all or any substantial part of
its assets which results in the entry of an order for any such relief which
shall not have been vacated, discharged, or stayed or bonded pending appeal
within 60 days from the entry thereof; or (iv) Rowe Companies or Rowe Furniture
shall take any action in furtherance of, or indicating its consent to, approval
of, or acquiescence in, any of the acts set forth in clause (i), (ii), or (iii)
                                                     ----------   ---     -----
above; or (v) Rowe Companies or Rowe Furniture shall generally not, or shall be
unable to, or shall admit in writing its inability to, pay its debts as they
become due;

          (g) the occurrence of any Prohibited Transaction involving any Plan,
or other event or circumstance which is not promptly cured and which might
constitute grounds for termination of any Plan or grounds for the appointment by
the appropriate United States District Court of a trustee to administer any such
Plan, the filing of a notice of intent to terminate any Plan or the termination
of any Plan, and in each case above, such event or condition, together with all
other events or conditions, if any, could in the opinion of the Agent subject
any Obligor or any of its Significant Subsidiaries to any tax, penalty or other
liability to a Plan, or otherwise which would, in the reasonable opinion of the
Agent, have a Material Adverse Effect;

          (h) any Operative Document ceases to be in full force and effect or
shall be declared null and void or the validity or enforceability thereof shall
be contested by any Obligor, or any Obligor shall deny it has any further
liability or obligation under the Operative Documents;

          (i) one or more judgments, decrees, or orders for the payment of money
which in the aggregate causes a material adverse change in any Obligor's ability
to meet its obligations under the

                                       22
<PAGE>

Operative Documents shall be rendered against any Obligor, and such judgments,
decrees, or orders shall continue unsatisfied and in effect for a period of
thirty (30) days after entry thereof without being vacated, discharged,
satisfied, stayed or bonded pending appeal;

          (j) any representation or warranty by Rowe Furniture or any Lessee in
any Operative Document or in any certificate or document delivered to Lessor,
the Agent or any Lender pursuant to any Operative Document shall have been
incorrect in any material respect when made;

          (k) any Lessee or Rowe Furniture shall fail in any material respect to
timely, perform or observe any covenant, condition or agreement (not included in
clause (a), (b), (c), (d), (e), (f), (g), (h) or (i) of this Article XII) to be
----------  ---  ---  ---  ---  ---  --   ---    ---         -----------
performed or observed by it hereunder or under any other Operative Document and
such failure shall continue for a period of thirty (30) days after such Lessee's
receipt of written notice thereof from Lessor, the Agent or any Lender;

          (l) any Guarantor shall repudiate or terminate the Guaranty, or the
Guaranty shall at any time cease to be in full force and effect or cease to be
the legal, valid and binding obligation of the Guarantors; or

          (m) Rowe Companies or Rowe Furniture (as agreed between Lessee and
Agent) shall fail to enter into a Qualified Swap Agreement by November 30, 2000
or, thereafter, fail to have and maintain a Qualified Swap Agreement due to an
early termination of such agreement or if for any other reason the Qualified
Swap Agreement shall cease to be in full force and effect or cease to be the
legal, valid and binding obligation of the other counterparty thereunder.

                                  ARTICLE XII
                                  ENFORCEMENT
                                  -----------

     Section  13.   Remedies.  Upon the occurrence and during the continuance of
                    --------
any Event of Default, Lessor may do one or more of the following as Lessor in
its sole discretion shall determine, without limiting any other right or remedy
Lessor may have on account of such Event of Default (including, without
limitation, the obligation of the Lessees to purchase the Leased Properties as
set forth in Section 14.3):
             ------------

          (a) Lessor may, by notice to Rowe Furniture, rescind or terminate this
     Lease as of the date specified in such notice; provided, however, (A) no
                                                    --------  -------
     reletting, reentry or

                                       23
<PAGE>

     taking of possession of any Leased Property by Lessor will be construed as
     an election on Lessor's part to terminate this Lease unless a written
     notice of such intention is given to Rowe Furniture, (B) notwithstanding
     any reletting, reentry or taking of possession, Lessor may at any time
     thereafter elect to terminate this Lease for a continuing Event of
     Default,(C) no act or thing done by Lessor or any of its agents,
     representatives or employees and no agreement accepting a surrender of any
     Leased Property shall be valid unless the same be made in writing and
     executed by Lessor and (d) Lessor hereby waives any right it may otherwise
     have as a landlord under Applicable Law, prior to its rescission or
     termination of this Lease as provided above, to take possession of the
     Leased Property without affording the related Lessee an opportunity for a
     hearing or the merits and due process prior to such taking of possession;

          (b) Lessor may (i) demand that the Lessees, and the Lessees shall upon
     the written demand of Lessor, return the Leased Properties promptly to
     Lessor in the manner and condition required by, and otherwise in accordance
     with all of the provisions of, Articles VI and XIV hereof as if the Leased
                                    -----------     ---
     Properties were being returned at the end of the Lease Term, and Lessor
     shall not be liable for the reimbursement of any Lessee for any costs and
     expenses incurred by such Lessee in connection therewith and (ii) without
     prejudice to any other remedy which Lessor may have for possession of the
     Leased Properties, and to the extent and in the manner permitted by
     Applicable Law, enter upon any Leased Property and take immediate
     possession of (to the exclusion of the related Lessee) any Leased Property
     or any part thereof and expel or remove the related Lessee and any other
     person who may be occupying such Leased Property, by summary proceedings or
     otherwise, all without liability to any Lessee for or by reason of such
     entry or taking of possession, whether for the restoration of damage to
     property caused by such taking or otherwise and, in addition to Lessor's
     other damages, the Lessees shall be responsible for the actual and
     reasonable costs and expenses of reletting, including brokers' fees and the
     reasonable costs of any alterations or repairs made by Lessor;

          (c) Lessor may, at its option, not terminate this Lease, and continue
     to collect all Basic Rent, Supplemental Rent, and all other amounts
     (including, without limitation, the Funded Amount) due Lessor (together
     with all costs of collection) and enforce the Lessees' obligations under
     this Lease as and when the same become due, or are to be performed, and at
     the option of Lessor, upon any abandonment of any Leased Property by Lessee
     or re-entry of same by

                                       24
<PAGE>

     Lessor, Lessor may, in its sole and absolute discretion, elect not to
     terminate this Lease with respect thereto and may make such reasonable
     alterations and necessary repairs in order to relet such Leased Property,
     and relet such Leased Property or any part thereof for such term or terms
     (which may be for a term extending beyond the term of this Lease) and at
     such rental or rentals and upon such other terms and conditions as Lessor
     in its reasonable discretion may deem advisable; and upon each such
     reletting all rentals actually received by Lessor from such reletting shall
     be applied to the Lessees' obligations hereunder. If such rentals received
     from such reletting during any Rent Period are less than the Rent to be
     paid during that Rent Period by the Lessees hereunder, the Lessees shall
     pay any deficiency, as calculated by Lessor, to Lessor on the Payment Date
     for such Rent Period;

          (d) If any Leased Property has not been sold, Lessor may, whether or
     not Lessor shall have exercised or shall thereafter at any time exercise
     any of its rights under paragraph (b) or (c) of this Article XIII with
                             -------------                ------------
     respect to such Leased Property, demand, by written notice to the related
     Lessee specifying a date (the "Final Rent Payment Date") not earlier than
                                    -----------------------
     30 days after the date of such notice, that such Lessee purchase, on the
     Final Rent Payment Date, such Leased Property in accordance with the
     provisions of Sections 14.2, 14.4 and 14.5; provided, however, that (1)
                   -------------  ----     ----  --------  -------
     such purchase shall occur on the date set forth in such notice,
     notwithstanding the provision in Section 14.2 calling for such purchase to
                                      ------------
     occur on the Lease Termination Date; and (2) Lessor's obligations under
     Section 14.5(a) shall be limited to delivery of a special warranty deed and
     ---------------
     quit claim bill of sale of such Leased Property, without recourse or
     warranty, but free and clear of Lessor Liens;

          (e) Lessor may exercise any other right or remedy that may be
     available to it under Applicable Law, or proceed by appropriate court
     action (legal or equitable) to enforce the terms hereof or to recover
     damages for the breach hereof. Separate suits may be brought to collect any
     such damages for any Rent Period(s), and such suits shall not in any manner
     prejudice Lessor's right to collect any such damages for any subsequent
     Rent Period(s), or Lessor may defer any such suit until after the
     expiration of the Lease Term, in which event such suit shall be deemed not
     to have accrued until the expiration of the Lease Term; or

          (f) Lessor may retain and apply against Lessor's damages all sums
     which Lessor would, absent such Event of

                                       25
<PAGE>

     Default, be required to pay to, or turn over to, a Lessee pursuant to the
     terms of this Lease.

          (g) Anything contained in this Section 13.1 or elsewhere in this Lease
     or the other Operative Documents to the contrary notwithstanding, any
     payments of Basic Rent made to Lessor hereunder shall be first applied
     against and deemed payments made to Funding Parties in full or partial
     satisfaction of the Notes, whether or not such payments are actually
     remitted by Lessor to Lenders.

     Section  13.2   Remedies Cumulative; No Waiver; Consents. To the extent
                     ----------------------------------------
permitted by, and subject to the mandatory requirements of, Applicable Law, each
and every right, power and remedy herein specifically given to Lessor or
otherwise in this Lease shall be cumulative and shall be in addition to every
other right, power and remedy herein specifically given or now or hereafter
existing at law, in equity or by statute, and each and every right, power and
remedy whether specifically herein given or otherwise existing may be exercised
from time to time and as often and in such order as may be deemed expedient by
Lessor, and the exercise or the beginning of the exercise of any power or remedy
shall not be construed to be a waiver of the right to exercise at the same time
or thereafter any right, power or remedy.  No delay or omission by Lessor in the
exercise of any right, power or remedy or in the pursuit of any remedy shall
impair any such right, power or remedy or be construed to be a waiver of any
default on the part of any Lessee or to be an acquiescence therein.  Lessor's
consent to any request made by any Lessee shall not be deemed to constitute or
preclude the necessity for obtaining Lessor's consent, in the future, to all
similar requests.  No express or implied waiver by Lessor of any Event of
Default shall in any way be, or be construed to be, a waiver of any future or
subsequent Potential Event of Default or Event of Default.  Lessor hereby waives
any right to distrain Lessee's Property and any landlord lien or similar lien
upon Lessee's Property, regardless of whether such lien is created by statute or
otherwise.  Lessor agrees, at the request of the Lessee, to execute an
acknowledgment of its waiver of any landlord's or similar lien for the benefit
of any present or future holder of a security interest in, or lessor of any
Lessee's Property, subject to the approval of the form and substance of such
waiver by Lessor, which approval shall not be unreasonably withheld or delayed.
Lessor acknowledges, and agrees to acknowledge in the future (in a written form
reasonably satisfactory to the Lessee and Lessor), to such persons, at such
times and for such purposes as the Lessee may reasonably request, that Lessee's
Property is the Lessee's property and not fixtures or a part of the Leased
Property or any portion thereof (regardless of whether or not or to what extent
such Lessee's

                                       26
<PAGE>

Property is affixed to the Leased Property or any portion thereof), or otherwise
subject to the terms of this Lease, and that Lessor has no right, title or
interest in any of Lessee's Property. The Lessee agrees that, upon termination
of this Lease, and unless the Lessee has purchased the Leased Property, it will
promptly remove all Lessee's Property from the Leased Property and repair any
damage to the Leased Property caused by such removal.

     Section  13.   Purchase Upon an Event of Default. Upon the occurrence of an
                    ---------------------------------
Event of Default, until the later of (i) the date that is sixty (60) days after
Rowe Furniture or a Lessee receives written notice of such Event of Default and
(ii) such time as Lessor notifies Rowe Furniture or the applicable Lessee that
it has commenced material preparations for the sale or release of the Leased
Properties, the Lessees may purchase all, but not less than all, of the Leased
Properties for the Lease Balance, plus any amounts due pursuant to Section 7.5
of the Master Agreement.  Such purchase shall be made in accordance with Section
                                                                         -------
14.5, upon not less than five (5) Business Days' written notice (which shall be
----
irrevocable) to Lessor, which notice shall set forth the date of purchase (which
shall be a date no later than 10 Business Days from the date of such notice).

                                  ARTICLE XIV
              SALE, RETURN OR PURCHASE OF LEASED PROPERTY; RENEWAL
              ----------------------------------------------------

     Section  14.   Lessee's Option to Purchase.  Subject to the terms,
                    ---------------------------
conditions and provisions set forth in this Article XIV, each Lessee shall have
                                            -----------
the option (the "Purchase Option"), at any time during the term of this Lease
                 ---------------
(but subject to the provisions of Section 3.3 respecting deferment of payment to
fall on a Payment Date to avoid breakage costs), to be exercised as set forth
below, to purchase from Lessor, Lessor's interest in all of the Leased
Properties.  Such option shall be exercised by written notice to Lessor, which
notice shall be irrevocable; such notice shall specify the date that such
purchase shall take place, which date shall be a date occurring not less than
thirty (30) days after such notice or the Lease Termination Date (whichever is
earlier).  If the Purchase Option is exercised pursuant to the foregoing, then,
subject to the provisions set forth in this Article XIV, on the applicable
                                            -----------
purchase date or the Lease Termination Date, as the case may be, Lessor shall
convey to each Lessee, without recourse or warranty (other than as to the
absence of Lessor Liens) and each Lessee shall purchase from Lessor, Lessor's
interest in the Leased Properties leased by such Lessee.

                                       27
<PAGE>

     Section  14.2    Conveyance to Lessee.  Unless (a) the Lessees shall have
                      --------------------
properly exercised the Purchase Option and purchased the Leased Properties
pursuant to Section 14.1, or (b) the Lessees shall have properly exercised the
            ------------
Remarketing Option and shall have fulfilled all of the conditions of Section
                                                                     -------
14.6 hereof, then, subject to the terms, conditions and provisions set forth in
----
this Article XIV, the applicable Lessee shall purchase from Lessor, and Lessor
     -----------
shall convey to such Lessee, on the Lease Termination Date all of Lessor's
interest in the Leased Properties leased to such Lessee.  Any Lessee may
designate, in a notice given to Lessor not less than ten (10) days prior to the
closing of such purchase, or any purchase pursuant to Section 14.1,(time being
                                                      ------------
of the essence), the transferee to whom the conveyance shall be made (if other
than to such Lessee), in which case such conveyance shall (subject to the terms
and conditions set forth herein) be made to such designee; provided, however,
                                                           --------  -------
that such designation of a transferee shall not cause any Lessee to be released,
fully or partially, from any of its obligations under this Lease.

     Section  14.3   Acceleration of Purchase Obligation.  The Lessees shall be
                     -----------------------------------
obligated to purchase Lessor's interest in the Leased Properties immediately,
automatically and without notice upon the occurrence of any Event of Default
specified in clause (f) of Article XII, for the purchase price set forth in
             ----------    -----------
Section 14.4.  Upon the occurrence and during the continuance of any other Event
------------
of Default, the Lessees shall be obligated to purchase Lessor's interest in the
Leased Properties for the purchase price set forth in Section 14.4 upon notice
                                                      ------------
of such obligation from Lessor.

     Section  14.4   Determination of Purchase Price.  Upon the purchase by the
                     -------------------------------
Lessees of Lessor's interest in the Leased Properties upon the exercise of the
Purchase Option or pursuant to Section 14.2 or 14.3, the aggregate purchase
                               --------------------
price for all of the Leased Properties shall be an amount equal to the Lease
Balance as of the closing date for such purchase, plus any amount due pursuant
                                                  ----
to Section 7.5(f) of the Master Agreement as a result of such purchase.

     Section  14.5   Purchase Procedure.
                     ------------------

          (a) If a Lessee shall purchase Lessor's interest in a Leased Property
     pursuant to any provision of this Lease, (i) such Lessee shall accept from
     Lessor and Lessor shall convey such Leased Property by a duly executed and
     acknowledged special warranty deed and quit claim bill of sale
     substantially in the form of the instruments by which the Land was conveyed
     to Lessor of such a Leased Property in recordable form, (ii) upon the date
     fixed for any purchase

                                       28
<PAGE>

     of Lessor's interest in Leased Property hereunder, the related Lessee(s) or
     its designee shall pay to the order of the Agent (or Lessor if the Loans
     have been paid in full) the Lease Balance or Leased Property Balance, as
     applicable, plus any amount due pursuant to Section 7.5 of the Master
     Agreement as a result of such purchase by wire transfer of immediately
     available funds, and (iii) Lessor and the Funding Parties will execute and
     deliver to the related Lessee such other documents, including releases,
     affidavits, termination agreements and termination statements, as may be
     legally required or as may be reasonably requested by Lessee in order to
     effect such conveyance, free and clear of Lessor Liens and the Liens of the
     Operative Documents.

          (b) Each Lessee or its designee shall, at such Lessee's or such
     designee's sole cost and expense, obtain all required governmental and
     regulatory approval and consents and in connection therewith shall make
     such filings as required by Applicable Law; in the event that Lessor is
     required by Applicable Law to take any action in connection with such
     purchase and sale, the Lessees shall pay prior to transfer all costs
     incurred by Lessor in connection therewith.  Without limiting the
     foregoing, all actual and reasonable costs incident to such conveyance,
     including, without limitation, each Lessee's attorneys' fees, Lessor's
     attorneys' fees, commissions, each Lessee's and Lessor's escrow fees,
     recording fees, title insurance premiums and all applicable documentary
     transfer or other transfer taxes and other taxes required to be paid in
     order to record the transfer documents that might be imposed by reason of
     such conveyance and the delivery of such deed shall be borne entirely by
     and paid by the Lessees.

          (c) Upon expiration or termination of this Lease resulting in
     conveyance of Lessor's interest in the title to the Leased Properties to
     the Lessees, there shall be no apportionment of rents (including, without
     limitation, water rents and sewer rents), taxes, insurance, utility charges
     or other charges payable with respect to the Leased Properties, all of such
     rents, taxes, insurance, utility or other charges due and payable with
     respect to the Leased Properties prior to termination being payable by the
     Lessees hereunder and all due after such time being payable by the Lessees
     as the then owners of the Leased Properties.

     Section  14.6   Option to Remarket.  Subject to the fulfillment of each of
                     ------------------
the conditions set forth in this Section 14.6, the Lessees shall have the option
                                 ------------
to market all of, but not less than all of, the Leased Properties for Lessor
(the "Remarketing Option").
      ------------------

                                       29
<PAGE>

     The Lessees' effective exercise and consummation of the Remarketing Option
shall be subject to the due and timely fulfillment of each of the following
provisions, the failure of any of which, unless waived in writing by Lessor and
the Lenders, shall render the Remarketing Option and the Lessees' exercise
thereof null and void, in which event, each Lessee shall be obligated to perform
its obligations under Section 14.2.
                      ------------

          (a) Not later than twelve months prior to the Lease Termination Date,
     Rowe Furniture shall give to Lessor and the Agent written notice of the
     Lessees' exercise of the Remarketing Option.

          (b) Not later than ten (10) Business Days prior to the Lease
     Termination Date, each Lessee shall deliver to Lessor and the Agent an
     environmental assessment of each Leased Property leased by it dated not
     later than forty-five (45) days prior to the Lease Termination Date.  Such
     environmental assessment shall be prepared by an environmental consultant
     selected by Lessees and reasonably acceptable to the Agent, shall be in
     form, detail and substance reasonably satisfactory to the Agent, and shall
     otherwise indicate no material adverse change in the environmental
     condition of each Leased Property from that described in the related
     Environmental Audit.

          (c) On the date of Rowe Furniture's notice to Lessor and the Agent of
     the Lessees' exercise of the Remarketing Option, each of the Construction
     Conditions shall have been timely satisfied and no Event of Default or
     Potential Event of Default shall exist, and thereafter, no Event of Default
     or Potential Event of Default shall exist under this Lease.

          (d) Each Lessee shall have completed all Alterations, restoration and
     rebuilding of the Leased Properties leased by it pursuant to Sections 6.1,
                                                                  ------------
     6.2, 10.3 and 10.4 (as the case may be) or shall provide reasonable
     ---  ----     ----
     assurances acceptable to Lessor that such Alterations will be completed
     within a reasonable period of time and shall have provided or shall provide
     reasonable assurances acceptable to Lessor that it will fulfill all of the
     conditions and requirements in connection therewith pursuant to said
     Sections, in each case within a reasonable period of time.
     --------

          (e) Each Lessee shall promptly provide any maintenance records
     relating to each Leased Property leased by it to Lessor, the Agent and any
     potential purchaser upon request, and shall otherwise do all things
     reasonably necessary to deliver possession of such Leased Property to the
     potential purchaser.  After reasonable prior notice, each Lessee shall

                                       30
<PAGE>

     allow Lessor, the Agent and any potential purchaser access to any Leased
     Property for the purpose of inspecting the same, provided that Lessor,
     Agent and such potential purchaser shall use best efforts not to disrupt
     Lessee's business.

          (f) On the Lease Termination Date, each Lessee shall surrender the
     Leased Properties leased by it in accordance with Section 14.8 hereof,
                                                       ------------
     unless the Lease has been renewed pursuant to Section 14.9 or the Leased
                                                   ------------
     Properties have been purchased pursuant to Section 14.1 (it being
                                                ------------
     understood that Lessee may change its position and exercise its option to
     purchase at any time prior to sale by Lessor to a third party).

          (g) In connection with any such sale of the Leased Properties, each
     Lessee will provide to the purchaser all customary "seller's" indemnities
     in favor of the purchaser (taking into account the location and nature of
     the Leased Properties and negotiations between Lessee, Lessor and the
     potential purchaser), representations and warranties regarding title,
     absence of Liens (except Lessor Liens) and the condition of the Leased
     Properties, including, without limitation, an environmental indemnity,
     which shall not extend beyond two years after the closing of such sale.
     Each Lessee shall fulfill all of the requirements set forth in clause (b)
                                                                    ----------
     of Section 14.5, and such requirements are incorporated herein by
        ------------
     reference.  As to Lessor, any such sale shall be made on an "as is, with
     all faults" basis without representation or warranty by Lessor, other than
     the absence of Lessor Liens.

          (h) In connection with any such sale of Leased Properties, each Lessee
     shall pay directly, and not from the sale proceeds, all prorations,
     credits, costs and expenses of the sale of the Leased Properties leased by
     it, whether incurred by Lessor, any Lender, the Agent or such Lessee,
     including without limitation, the cost of all title insurance, surveys,
     environmental reports, appraisals, transfer taxes, Lessor's and the Agent's
     attorneys' fees, such Lessee's attorneys' fees, commissions, escrow fees,
     recording fees, and all applicable documentary and other transfer taxes.
     To the extent the sum of gross sales proceeds, less the Recourse Deficiency
     Amount plus costs and expenses of sale, exceed the Lease Balance as of the
     date of sale, such sums shall be paid over to Lessee.

          (i) The Lessees, jointly and severally, shall pay to the Agent on the
     Lease Termination Date (or to such other Person as Agent shall notify
     Lessee in writing, or in the

                                       31
<PAGE>

     case of Supplemental Rent, to the Person entitled thereto) an amount equal
     to the Recourse Deficiency Amount, plus all accrued and unpaid Basic Rent
                                        ----
     and Supplemental Rent, and all other amounts hereunder which have accrued
     prior to or as of such date, in the type of funds specified in Section 3.3
                                                                    -----------
     hereof.

If the Lessees have exercised the Remarketing Option, the following additional
provisions shall apply:  During the period commencing on the date twelve months
prior to the scheduled expiration of the Lease Term, one or more of the Lessees
shall, as nonexclusive agent for Lessor, use commercially reasonable efforts to
sell Lessor's interest in the Leased Properties and will attempt to obtain the
highest purchase price therefor.  All such marketing of the Leased Properties
shall be at the Lessees' sole expense.  Lessee promptly shall submit all bids to
Lessor and the Agent and Lessor and the Agent will have the right to review the
same and the right to submit any one or more bids. All bids shall be on an all-
cash basis.  In no event shall such bidder be Lessee or any Subsidiary or
Affiliate of Lessee.  The written offer must specify the Lease Termination Date
as the closing date.  If, and only if, the aggregate selling price (net of
closing costs and prorations, as reasonably estimated by the Agent) is less than
the difference between the Lease Balance at such time minus the Recourse
Deficiency Amount, then Lessor or the Agent may, in its sole and absolute
discretion, by notice to Rowe Furniture, reject such offer to purchase, in which
event the parties will proceed according to the provisions of Section 14.7
                                                              ------------
hereof.  If neither Lessor nor the Agent rejects such purchase offer as provided
above, the closing of such purchase of the Leased Properties by such purchaser
shall occur on the Lease Termination Date, contemporaneously with the Lessees'
surrender of the Leased Properties in accordance with Section 14.8 hereof, and
                                                      ------------
the gross proceeds of the sale (i.e., without deduction for any marketing,
closing or other costs, prorations or commissions) shall be paid directly to the
Agent (or Lessor if the Funded Amounts have been fully paid); provided, however,
                                                              --------  -------
that if the sum of the gross proceeds from such sale plus the Recourse
Deficiency Amount paid by the Lessees on the Lease Termination Date pursuant to
Section 14.6(i), minus any and all costs and expenses (including broker fees,
---------------
appraisal costs, legal fees and transfer taxes) actually and reasonably incurred
by the Agent or Lessor in connection with the marketing of the Leased Properties
or the sale thereof exceeds the Lease Balance as of such date, then the excess
shall be paid to Rowe Furniture on the Lease Termination Date.  No Lessee shall
have the right, power or authority to bind Lessor in connection with any
proposed sale of the Leased Properties.

                                       32
<PAGE>

     Section  14.7   Rejection of Sale.  Notwithstanding anything contained
                     -----------------
herein to the contrary, if Lessor or the Agent rejects the purchase offer for
the Leased Properties as provided in Section 14.6, then (a) the Lessees, jointly
                                     ------------
and severally, shall pay to the Agent the Recourse Deficiency Amount pursuant to
Section 14.6(i), (b) Lessor shall retain title to the Leased Properties, and (c)
---------------
in addition to each Lessee's other obligations hereunder, the Lessees, jointly
and severally, will reimburse Lessor and the Agent, within ten (10) Business
Days after written request, for all reasonable costs and expenses incurred by
Lessor or Agent during the period ending on the first anniversary of the Lease
Termination Date in connection with the marketing, sale, closing or transfer of
the Leased Properties, which obligation shall survive the Lease Termination Date
and the termination or expiration of this Lease.

     Section  14.8   Return of Leased Property.  If Lessor retains title to any
                     -------------------------
Leased Property pursuant to Section 14.7 hereof, then each Lessee shall, on the
                            ------------
Lease Termination Date, and at its own expense, return possession of the Leased
Properties leased by it to Lessor for retention by Lessor or, if the Lessees
properly exercise the Remarketing Option and fulfill all of the conditions of
Section 14.6 hereof and neither Lessor nor the Agent rejects such purchase offer
------------
pursuant to Section 14.6, then each Lessee shall, on such Lease Termination
            ------------
Date, and at its own cost, transfer possession of the Leased Properties leased
by it to the independent purchaser thereof, in each case by surrendering the
same into the possession of Lessor or such purchaser, as the case may be, free
and clear of all Liens other than Lessor Liens, in as good condition as it was
on the Completion Date therefor in the case of new Construction, or the Funding
Date (as modified by Alterations permitted by this Lease), ordinary wear and
tear excepted, and in compliance in all material respects with Applicable Law.
Each Lessee shall, on and within a reasonable time before and after the Lease
Termination Date, cooperate with Lessor and the independent purchaser of any
Leased Property leased by such Lessee in order to facilitate the ownership and
operation by such purchaser of such Leased Property after the Lease Termination
Date, which cooperation shall include the following, all of which such Lessee
shall do on or before the Lease Termination Date or as soon thereafter as is
reasonably practicable:  providing all books and records regarding the
maintenance and ownership of such Leased Property and all know-how, data and
technical information relating thereto, providing a copy of the Plans and
Specifications, granting or assigning all licenses (to the extent assignable)
necessary for the operation and maintenance of such Leased Property, and
cooperating in seeking and obtaining all necessary Governmental Action.  Each
Lessee shall have also paid the cost of all Alterations commenced prior to the
Lease Termination Date.  The obligations of such

                                       33
<PAGE>

Lessee under this Article XIV shall survive the expiration or termination of
                  -----------
this Lease.

     Section  14.9   Renewal.  Subject to the conditions set forth herein, Rowe
                     -------
Furniture may, by written notice to Lessor and the Agent given not later than
six months prior to the then scheduled Lease Termination Date, request the
renewal of this Lease, for five years in the case of the first renewal term and
five years in the case of the second renewal term, in each case commencing on
the date following such Lease Termination Date.  No later than the date that is
45 days after the date the request to renew has been delivered to each of Lessor
and the Agent, the Agent will notify Rowe Furniture whether or not Lessor and
the Lenders consent to such renewal request (which consent, in the case of
Lessor and the Lenders, may be granted or denied in their sole discretion, and
may be conditioned on such conditions precedent as may be specified by Lessor
and the Lenders).  If the Agent fails to respond within such time frame, such
failure shall be deemed to be a rejection of such request.  If the Agent
notifies Rowe Furniture of Lessor's and the Lenders' consent to such renewal,
such renewal shall be effective.

     Section  14.10   Environmental Report.  Upon termination of this Lease,
                      --------------------
unless the Lessees have exercised the Remarketing Option and complied with
Section 14.6, each Lessee shall deliver, at the Lessees' expense, to Lessor and
------------
the Agent an environmental assessment of each Leased Property leased by it at
any time during the Lease Term.  Such environmental assessment shall be prepared
by an environmental consultant, selected by Lessee and reasonably acceptable to
Lessor and Agent, and shall be in a form, reasonably satisfactory to Lessor and
the Agent.

                                  ARTICLE XV.
                              LESSEE'S EQUIPMENT
                              ------------------

     After any repossession of any Leased Property (whether or not this Lease
has been terminated), the related Lessee, at its expense and so long as such
removal of such trade fixture, personal property or equipment shall not result
in a violation of Applicable Law, shall, within a reasonable time after such
repossession or within sixty (60) days after such Lessee's receipt of Lessor's
written request (whichever shall first occur), remove all of Lessee's Property
(to the extent that the same can be readily removed from such Leased Property
without causing material damage to such Leased Property); provided, however,
                                                          --------  -------
that such Lessee shall not remove any such trade fixtures, personal property or
equipment that has been financed by Lessor under the Operative Documents or
otherwise constituting Leased Property (or that constitutes a replacement of
such

                                       34
<PAGE>

property).  Any of a Lessee's trade fixtures, personal property and
equipment not so removed by such Lessee within such period shall be considered
abandoned by such Lessee, and title thereto shall without further act vest in
Lessor, and may be appropriated, sold, destroyed or otherwise disposed of by
Lessor without notice to any Lessee and without obligation to account therefor
and the related Lessee will pay Lessor, upon written demand, all reasonable
costs and expenses incurred by Lessor in removing, storing or disposing of the
same and all costs and expenses incurred by Lessor to repair any damage to such
Leased Property caused by such removal.  Each Lessee will immediately repair at
its expense all damage to such Leased Property caused by any such removal
(unless such removal is effected by Lessor, in which event such Lessee shall pay
all reasonable costs and expenses incurred by Lessor for such repairs).  Lessor
shall have no liability in exercising Lessor's rights in good faith and using
reasonable care under this Article XV, nor shall Lessor be responsible for any
                           ----------
loss of or damage to any Lessee's personal property and equipment.

                                  ARTICLE XVI
                          RIGHT TO PERFORM FOR LESSEE
                          ---------------------------

     If any Lessee shall fail to perform or comply with any of its agreements
contained herein, Lessor, upon notice to Rowe Furniture or such Lessee, and
failure of such party to thereafter perform or comply within reasonable time
frames, may perform or comply with such agreement, and Lessor shall not thereby
be deemed to have waived any default caused by such failure, and the amount of
such payment and the amount of the actual and reasonable expenses of Lessor
(including actual and reasonable attorneys' fees and expenses) incurred in
connection with such payment or the performance of or compliance with such
agreement, as the case may be, shall be deemed Supplemental Rent, payable by the
related Lessee to Lessor within thirty (30) days after written demand therefor.

                                  ARTICLE XVII
                                 MISCELLANEOUS
                                 -------------

     Section  17.1   Reports.  To the extent required under Applicable Law and
                     -------
to the extent it is reasonably practical for a Lessee to do so, such Lessee
shall prepare and file in timely fashion, or, where such filing is required to
be made by Lessor or it is otherwise not reasonably practical for a Lessee to
make such filing, Lessee shall prepare and deliver to Lessor (with a copy to the
Agent) within a reasonable time prior to the date for filing and Lessor shall
file, any material reports with respect

                                       35
<PAGE>

to the condition or operation of such Leased Property that shall be required to
be filed with any Governmental Authority.

     Section  17.2   Binding Effect; Successors and Assigns; Survival. The terms
                     ------------------------------------------------
and provisions of this Lease, and the respective rights and obligations
hereunder of Lessor and the Lessees, shall be binding upon their respective
successors, legal representatives and assigns (including, in the case of Lessor,
any Person to whom Lessor may transfer any Leased Property or any interest
therein in accordance with the provisions of the Operative Documents), and inure
to the benefit of their respective permitted successors and assigns, and the
rights granted hereunder to the Agent and the Lenders shall inure (subject to
such conditions as are contained herein) to the benefit of their respective
permitted successors and assigns. Each Lessee hereby acknowledges that Lessor
has assigned all of its right, title and interest to, in and under this Lease to
the Agent and the Lenders pursuant to the Loan Agreement and related Operative
Documents, and that all of Lessor's rights hereunder may be exercised by the
Agent.

     Section  17.3   Quiet Enjoyment.  Lessor covenants that it will not
                     ---------------
interfere in the related Lessee's or any of its permitted sublessees' quiet
enjoyment of the Leased Properties in accordance with this Lease during the
Lease Term, so long as no Event of Default has occurred and is continuing.  Such
right of quiet enjoyment is independent of, and shall not affect, Lessor's
rights otherwise to initiate legal action to enforce the obligations of the
Lessees under this Lease.

     Section  17.4   Notices.  Unless otherwise specified herein, all notices,
                     -------
offers, acceptances, rejections, consents, requests, demands or other
communications to or upon the respective parties hereto shall be in writing and
shall be deemed to have been given as set forth in Section 8.2 of the Master
Agreement.  All such notices, offers, acceptances, rejections, consents,
requests, demands or other communications shall be addressed as follows or to
such other address as any of the parties hereto may designate by written notice:

     If to Lessor:            Atlantic Financial Group, Ltd.
                              c/o Grogan & Brawner
                              2311 Cedar Springs Road, Suite 150
                              Dallas, Texas  75201
                              Attn:  Stephen Brookshire

     If to Rowe Furniture:  The Rowe Companies
                              239 Rowan Street
                              Salem, VA 24153
                              Attn:  Garry W. Angle

                                       36
<PAGE>

     With a copy to:          Sidney J. Silver, Esq.
                              Silver, Freedman & Taff, L.L.P.
                              1100 New York Avenue, N.W., 7th Fl.
                              Washington, D.C. 20005

     If to Agent:             Crestar Bank
                              510 South Jefferson Street
                              Roanoke, Virginia 24011
                              Attn:  Martha Shifflett

     If to a Lender, to the address provided in the Master Agreement.

     Section  17.5   Severability.  Any provision of this Lease that shall be
                     ------------
prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction,
be ineffective to the extent of such prohibition or unenforceability without
invalidating the remaining provisions hereof and any such prohibition or
unenforceability in any jurisdiction shall not invalidate or render
unenforceable such provision in any other jurisdiction, and Lessee shall remain
liable to perform its obligations hereunder except to the extent of such
unenforceability.  To the extent permitted by Applicable Law, each Lessee hereby
waives any provision of law that renders any provision hereof prohibited or
unenforceable in any respect.

     Section  17.6   Amendment; Complete Agreements.  Neither this Lease nor any
                     ------------------------------
of the terms hereof may be terminated, amended, supplemented, waived or modified
orally, except by an instrument in writing signed by Lessor and Rowe Furniture
in accordance with the provisions of Section 8.4 of the Master Agreement.  This
Lease, together with the applicable Lease Supplement and the other Operative
Documents, is intended by the parties as a final expression of their lease
agreement and as a complete and exclusive statement of the terms thereof, all
negotiations, considerations and representations between the parties having been
incorporated herein and therein.  No course of prior dealings between the
parties or their officers, employees, agents or Affiliates shall be relevant or
admissible to supplement, explain, or vary any of the terms of this Lease or any
other Operative Document.  Acceptance of, or acquiescence in, a course of
performance rendered under this or any prior agreement between the parties or
their Affiliates shall not be relevant or admissible to determine the meaning of
any of the terms of this Lease or any other Operative Document.  No
representations, undertakings, or agreements have been made or relied upon in
the making of this Lease other than those specifically set forth in the
Operative Documents.

                                       37
<PAGE>

     Section  17.7   Construction.  This Lease shall not be construed more
                     ------------
strictly against any one party, it being recognized that both of the parties
hereto have contributed substantially and materially to the preparation and
negotiation of this Lease.

     Section  17.8   Headings.  The Table of Contents and headings of the
                     --------
various Articles and Sections of this Lease are for convenience of reference
only and shall not modify, define or limit any of the terms or provisions
hereof.

     Section  17.9   Counterparts.  This Lease may be executed by the parties
                     ------------
hereto in separate counterparts, each of which when so executed and delivered
shall be an original, but all such counterparts shall together constitute but
one and the same instrument.

     Section  17.10   GOVERNING LAW.  THIS LEASE SHALL IN ALL RESPECTS BE
                      -------------
GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE COMMONWEALTH OF
VIRGINIA APPLICABLE TO AGREEMENTS MADE AND TO BE PERFORMED ENTIRELY WITHIN SUCH
STATE, EXCEPT AS TO MATTERS RELATING TO THE CREATION OF THE LEASEHOLD OR
MORTGAGE ESTATES HEREUNDER, AND THE EXERCISE OF RIGHTS AND REMEDIES WITH RESPECT
THERETO, WHICH SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAW OF
THE STATES IN WHICH SUCH ESTATES ARE LOCATED.

     Section  17.11   Discharge of Lessee's Obligations by its Subsidiaries or
                      --------------------------------------------------------
Affiliates.  Lessor agrees that performance of any of any Lessee's obligations
----------
hereunder by one or more of such Lessee's Subsidiaries or Affiliates shall
constitute performance by Lessee of such obligations to the same extent and with
the same effect hereunder as if such obligations were performed by such Lessee,
but no such performance shall excuse any Lessee from any obligation not
performed by it or on its behalf under the Operative Documents.

     Section  17.12   Liability of Lessor Limited. Except as otherwise expressly
                      ---------------------------
provided below in this Section 17.12, it is expressly understood and agreed by
                       -------------
and between each Lessee, Lessor and their respective successors and assigns that
nothing herein contained shall be construed as creating any liability of Lessor
or any of its Affiliates or any of their respective officers, directors,
employees or agents, individually or personally, for any failure to perform any
covenant, either express or implied, contained herein, all such liability (other
than that resulting from Lessor's gross negligence or willful misconduct
(including willful failure to act where Lessor had a duty to act), except to the
extent imputed to Lessor by virtue of any Lessee's action or failure to act), if
any, being expressly

                                       38
<PAGE>

waived by each Lessee and by each and every Person now or hereafter claiming by,
through or under any Lessee, and that, so far as Lessor or any of its Affiliates
or any of their respective officers, directors, employees or agents,
individually or personally, is concerned, each Lessee and any Person claiming
by, through or under any Lessee shall look solely to the right, title and
interest of Lessor in and to the Leased Properties and any proceeds from
Lessor's sale or encumbrance thereof (provided, however, that no party shall be
                                      --------  -------
entitled to any double recovery) for the performance of any obligation under
this Lease and under the Operative Documents and the satisfaction of any
liability arising therefrom (other than that resulting from Lessor's gross
negligence or willful misconduct (including willful failure to act where Lessor
had a duty to act), except to the extent imputed to Lessor by virtue of any
Lessee's action or failure to act).

     Section  17.13   Estoppel Certificates. Each party hereto agrees that at
                      ---------------------
any time and from time to time during the Lease Term, it will promptly, but in
no event later than thirty (30) days after request by the other party hereto,
execute, acknowledge and deliver to such other party or to any prospective
purchaser (if such prospective purchaser has signed a commitment or letter of
intent to purchase any Leased Property or any part thereof or any Note),
assignee or mortgagee or third party designated by such other party, a
certificate stating (a) that this Lease is unmodified and in force and effect
(or if there have been modifications, that this Lease is in force and effect as
modified, and identifying the modification agreements); (b) the date to which
Basic Rent has been paid; (c) whether or not there is any existing default by
any Lessee in the payment of Basic Rent or any other sum of money hereunder, and
whether or not there is any other existing default by either party with respect
to which a notice of default has been served, and, if there is any such default,
specifying the nature and extent thereof; (d) whether or not, to the knowledge
of the signer after due inquiry and investigation, there are any setoffs,
defenses or counterclaims against enforcement of the obligations to be performed
hereunder existing in favor of the party executing such certificate and (e)
other items that may be reasonably requested; provided that no such certificate
                                              --------
may be requested unless the requesting party has a good faith reason for such
request.

     Section  17.14   No Joint Venture. Any intention to create a joint venture,
                      ----------------
partnership or other fiduciary relationship between Lessor and any Lessee is
hereby expressly disclaimed.

     Section  17.   No Accord and Satisfaction.  The acceptance by Lessor of any
                    --------------------------
sums from any Lessee (whether as Basic Rent or otherwise) in amounts which are
less than the amounts due and payable by the Lessees hereunder is not intended,
nor shall be

                                       39
<PAGE>

construed, to constitute an accord and satisfaction of any dispute between
Lessor and any Lessee regarding sums due and payable by any Lessee hereunder,
unless Lessor specifically deems it as such in writing.

     Section  17.16   No Merger.  In no event shall the leasehold interests,
                      ---------
estates or rights of any Lessee hereunder, or of the holder of any Notes secured
by a security interest in this Lease, merge with any interests, estates or
rights of Lessor in or to the Leased Properties, it being understood that such
leasehold interests, estates and rights of each Lessee hereunder, and of the
holder of any Notes secured by a security interest in this Lease, shall be
deemed to be separate and distinct from Lessor's interests, estates and rights
in or to the Leased Properties, notwithstanding that any such interests, estates
or rights shall at any time or times be held by or vested in the same person,
corporation or other entity.

     Section  17.17   Survival.  The obligations of each Lessee to be performed
                      --------
under this Lease prior to the Lease Termination Date and the obligations of
Lessee pursuant to Articles III, X, XI, XIII, Sections 14.2, 14.3, 14.4, 14.5,
                   -------- ---  -  --  ----  -------------  ----  ----  ----
14.7, 14.8, Articles XV, and XVI, and Sections 17.2, 17.10 and 17.12 shall
----  ----  -------- --      ---      --------------------     -----
survive the expiration or termination of this Lease.  The extension of any
applicable statute of limitations by Lessor, any Lessee, the Agent or any
Indemnitee shall not affect such survival.

     Section  17.18   Chattel Paper.  To the extent that this Lease constitutes
                      -------------
chattel paper (as such term is defined in the Uniform Commercial Code in any
applicable jurisdiction), no security interest in this Lease may be created
through the transfer or possession of any counterpart other than the sole
original counterpart, which shall be identified as the original counterpart by
the receipt of the Agent.

     Section  17.19   Time of Essence.  Time is of the essence of this Lease.
                      ---------------

     Section  17.20   Recordation of Lease.  Each Lessee will, at its expense,
                      --------------------
cause this Lease or a memorandum of lease in form and substance reasonably
satisfactory to Lessor and such Lessee (if permitted by Applicable Law) to be
recorded in the proper office or offices in the States and the municipalities in
which the Land is located.

     Section  17.21   Investment of Security Funds. The parties hereto agree
                      ---------------------------
that any amounts not payable to a Lessee pursuant to any provision of Article
                                                                      -------
VIII, X or XIV or this Section 17.21 shall be held by the Agent (or Lessor if
----  -    ---         -------------
the Loans have been fully paid) as security for the obligations of the Lessees
under

                                       40
<PAGE>

this Lease and the Master Agreement and of Lessor under the Loan Agreement. At
such time as such amounts are payable to the Lessee, such amounts, net of any
amounts previously applied to the Lessees' obligations hereunder or under the
Master Agreement (which application is hereby agreed to by Lessee), shall be
paid to the related Lessee. Any such amounts which are held by the Agent (or
Lessor if the Loans have been fully paid) pending payment to a Lessee shall
until paid to such Lessee, as provided hereunder or until applied against the
Lessees' obligations herein and under the Master Agreement and distributed as
provided in the Loan Agreement or herein (after the Loan Agreement is no longer
in effect) in connection with any exercise of remedies hereunder, be invested by
the Agent or Lessor, as the case may be, as directed from time to time in
writing by Lessee (provided, however, if an Event of Default has occurred and is
                   --------  -------
continuing it will be directed by the Agent or, if the Loans have been fully
paid, Lessor) and at the expense and risk of the Lessees, in Permitted
Investments. Any gain (including interest received) realized as the result of
any such investment (net of any fees, commissions and other expenses, if any,
incurred in connection with such investment) shall be applied in the same manner
as the principal invested. Lessee upon demand shall pay to the Agent or Lessor,
as appropriate, the amount of any loss incurred in connection with all such
investments and the liquidation thereof.

     Section  17.22   [Reserved.]
                       --------

     Section  17.23   Land and Building.  If any Building and the Land on which
                      -----------------
such Building is located are subject to separate Lease Supplements, at any time
that the related Lessee exercises an option to purchase such Building or such
Land, or to renew this Lease with respect to such Building or such Land, or is
obligated to purchase such Building or such Land as a result of an Event of
Loss, an Event of Taking or an Event of Default, such purchase or renewal shall
be made simultaneously with respect to all of such Building and such Land.

     Section  17.24   Joint and Several. Each obligation of each Lessee
                      -----------------
hereunder shall be a joint and several obligation of all of the Lessees.

     Section 17.25    Lease Senior.  Anything contained in the Operative
                      ------------
Documents to the contrary notwithstanding, in event of any conflict between the
terms of this Master Lease Agreement and the other Operative Documents regarding
provisions of the Master Lease Agreement, the terms of this Master Lease shall
govern.

     Section 17.26    Agent to Communicate with Funding Parties. Notwithstanding
                      -----------------------------------------
any provision to the contrary contained in any Operative Document, wherever in
any Operative Document the

                                       41
<PAGE>

consent of, or notice to, any Funding Party is required, each Obligor shall be
entitled to request such consent directly from, or give such notice directly to,
the Agent on behalf of the applicable Funding Parties, and the Agent shall
thereupon be responsible for presenting such request or forwarding such notice
to the applicable Funding Parties, and for communicating any response back to
the initiating Obligor. An Obligor shall be deemed to have complied with any
requirement of requesting consent from or providing notice to any Funding Party
upon its delivery of such request or notice to Agent in compliance with the
notice provisions of the applicable Operative Document, and such Obligor may
rely on any response properly delivered by the Agent on behalf of such Funding
Party to such Obligor. Nothing in this Section shall diminish or negate the
right of any Funding Party to receive notice or provide consent under any
Operative Document but Lessee's obligation to provide any required consent or
notice shall be satisfied by providing such consent or notice to Agent.

                            [Signature page follows]

                                       42
<PAGE>

   IN WITNESS WHEREOF, the undersigned have each caused this Lease Agreement to
be duly executed and delivered and attested by their respective officers
thereunto duly authorized as of the day and year first above written.

                                    ROWE FURNITURE, INC.,
                                    as Lessee

                                    By:   /s/ Garry W. Angle
                                       ----------------------
                                       Name:  Garry W. Angle
                                       Title: Treasurer

                                      S-1
<PAGE>

                                    ATLANTIC FINANCIAL GROUP, LTD.,
                                    as Lessor

                                    By:  Atlantic Financial Managers,
                                         Inc., its General Partner

                                         By:    /s/ Stephen Brookshire
                                            --------------------------
                                             Name:  Stephen Brookshire
                                             Title: President

                                      S-2
<PAGE>

                                                        EXHIBIT A

                      THIS IS A CREDIT LINE DEED OF TRUST
                      -----------------------------------

     [THE SECURED PARTY DESIRES THIS FINANCING STATEMENT TO BE INDEXED AGAINST
THE RECORD OWNER OF THE REAL ESTATE.]

This Instrument was prepared by
and when recorded return to:

Rex A. Palmer, Esq.
Mayer, Brown & Platt
190 South LaSalle Street
Chicago, Illinois 60603

                VIRGINIA LEASE SUPPLEMENT, MEMORANDUM OF LEASE
                   AND DEED OF TRUST AND SECURITY AGREEMENT

     THIS VIRGINIA LEASE SUPPLEMENT, MEMORANDUM OF LEASE AND DEED OF TRUST AND
SECURITY AGREEMENT (this "Lease Supplement") dated as of August ___, 1999
                          ----------------
between ATLANTIC FINANCIAL GROUP, LTD., a Texas limited partnership, having an
address of 2311 Cedar Springs Road, Suite 150, Dallas, Texas 75201 as the lessor
(the "Lessor") [The Lessor being referred to as a "Grantor" and a "Grantee" for
      ------
indexing purposes], and ROWE FURNITURE, INC., a Virginia corporation, having an
address of 239 Rowan Street, Salem, Virginia 24153, as lessee (the "Lessee")
                                                                    ------
[The Lessee being referred to as a "Grantor" and a "Grantee" for indexing
purposes] and _________________, as trustee (the "Trustee"), a resident of the
                                                  -------
_________________, Virginia and having an address at
___________________________________________________ [The Trustee being referred
to as a "Grantee" under this Lease Supplement for indexing purposes] as Grantee
under this Deed of Trust for indexing purposes.

     WHEREAS Lessor is the owner of the land described on Exhibit A hereto (the
                                                          ---------
"Land") and wishes to lease the Land and any Building and other improvements now
 ----
on the Land or which hereafter may be constructed on the Land pursuant to the
Lease to Lessee excluding, however, Lessee's Property;

THIS IS A CREDIT LINE DEED OF TRUST securing future advances from the Lessor to
the Lessee.  The name of the Lessor is Atlantic Financial Group, Ltd., a Texas
limited partnership having an address of 2311 Cedar Springs Road, Suite 150,
Dallas, Texas 75201.  The maximum aggregate
<PAGE>

amount of principal to be secured by the property described herein at any one
time shall not exceed $________________________.

     NOW, THEREFORE, in consideration of the premises and the mutual agreements
herein contained and other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties hereto agree as
follows:

     SECTION 1.  Definitions; Interpretation.  For purposes of this Lease
                 ---------------------------
Supplement, capitalized terms used herein and not otherwise defined herein shall
have the meanings assigned to them in Appendix A attached hereto and
incorporated by reference, dated as of August ___, 1999, between Lessee and
Lessor; and the rules of interpretation set forth in Appendix A attached hereto
are also incorporated herein by reference.

     SECTION 2.  The Properties.  Effective upon the execution and delivery of
                 --------------
this Lease Supplement by Lessor and Lessee, the Land and all Buildings and other
improvements on the Land or which hereafter may be constructed on the Land
pursuant to the Lease but excluding Lessee's Property (the "Subject Property")
                                                            ----------------
shall be subject to the terms and provisions of the Lease and Lessor hereby
leases the Subject Property to Lessee and hereby grants, conveys, transfers and
assigns to Lessee those interests, rights, titles, estates, powers and
privileges provided for in the Lease with respect to the Subject Property
(collectively, the "Appurtenant Rights") and Lessee hereby hires and leases the
                    ------------------
Subject Property together with the Appurtenant Rights from the Lessor.  The term
of the Lease with respect to the Subject Property begins on the date hereof and
ends on ________, 2004 subject to the right of the Lessee to extend the Lease
for two five-year periods subject to the conditions set forth in the Lease.  The
Lease contains certain purchase rights and options during the term of the Lease
pursuant to which the Lessee may acquire the Subject Property, all as more fully
set forth in the Lease.  A copy of the Lease is on file in the office of the
Lessor.

     SECTION 3.  Interest Conveyed to Lessee; Deed of Trust.  Lessor and Lessee
                 ------------------------------------------
intend that the Lease and this Lease Supplement be treated, for accounting
purposes, as an operating lease.  For all other purposes, Lessee and Lessor
intend that the transaction represented by the Lease and this Lease Supplement
be treated as a financing transaction; for such purposes, it is the intention of
the parties hereto (i) that the Lease and this Lease Supplement be treated as a
deed of trust and security agreement, encumbering the Subject Property, and that
Lessee, as grantor, hereby grants to the Trustee, as trustee for the benefit of
Lessor, as beneficiary and secured party, or any successor thereto, the Subject
Property and a first and paramount Lien thereon, (ii) that Lessor shall have, as
a result of such determination, all of the rights, powers and remedies of a deed
of trust beneficiary or secured party available under Applicable Law to take
possession of and sell (whether by foreclosure or otherwise) any Subject
Property, (iii) the Trustee shall have the customary powers of a trustee under a
deed of trust on real property, (iv) that the effective date of such deed of
trust shall be the effective date of this Lease Supplement, (v) that the
recording of this Lease Supplement shall be deemed to be the recording of such
deed of trust, and (vi) that the obligations secured by such deed of trust shall
include the Lessor's Funded Amounts and all Basic Rent and Supplemental Rent

                                      A-2
<PAGE>

hereunder and all other obligations of and amounts due from Lessee to Lessor
hereunder and under the Operative Documents.  In furtherance of the foregoing,
Lessor (for the remainder of this Section called "Agent"), and Lessee (for the
                                                  -----
remainder of this Section called "Grantor") agree as follows:
                                  -------

          A.  This instrument shall constitute a Deed of Trust and Security
     Agreement dated as of August __, 1999 (this "Deed of Trust"), made by
                                                  -------------
     Lessee (the "Grantor") having an address at 239 Rowan Street, Salem,
                  -------
     Virginia 24153 to _________________________, a resident of ____________,
     Virginia, trustee ("Trustee") having an address at
                         -------
     ___________________________________________________________________________
     ____________________________________________, and grantee for indexing
     purposes, for the benefit of Atlantic Financial Group, Ltd., a Texas
     limited partnership, doing business in Virginia as Atlantic Financial
     Group, L.P., having an address at 2311 Cedar Springs Road, Suite 150,
     Dallas, Texas 75201 ("Loan Party").
                           ----------

          B.  TO SECURE PAYMENT OF ALL AMOUNTS OWING BY GRANTOR UNDER THE LEASE
     AND THE OTHER OPERATIVE DOCUMENTS, THE GRANTOR HEREBY CONVEYS ALL OF THE
     GRANTOR'S THE SUBJECT PROPERTY AND ALL RENTS, LEASES, ISSUES AND PROCEEDS
     THEREOF (INCLUDING AWARDS AND LOSS PROCEEDS) TO THE TRUSTEE AND HEREBY
     GRANTS, ASSIGNS, TRANSFERS, WARRANTS AND SETS OVER, EXCEPT AS HEREINAFTER
     SET FORTH, WITH GENERAL WARRANTY OF TITLE TO THE TRUSTEE, IN TRUST FOR THE
     USE AND BENEFIT OF THE LOAN PARTY, AND GRANTS THE LOAN PARTY AND THE
     TRUSTEE A SECURITY INTEREST IN THE SUBJECT PROPERTY AND ALL RENTS, LEASES,
     ISSUES AND PROCEEDS THEREOF (INCLUDING INSURANCE AND CONDEMNATION
     PROCEEDS), TO HAVE AND TO HOLD the Subject Property and the rights and
     privileges hereby granted unto the Trustee, its successors and assigns for
     the uses and purposes set forth, until all amounts due from Grantor under
     the Lease are paid, subject, however, to easements, conditions and
     restrictions of record to the extent the same lawfully affect the Subject
     Property.

          C.  If an Event of Default has occurred and is continuing under the
     Lease, at the direction of the Loan Party:

          (i) the Trustee or its agents may enter and take possession of the
     Subject Property by actual physical possession or by written notice served
     personally upon or sent by registered or certified mail, postage prepaid,
     to Grantor, and Grantor shall surrender possession upon request and Trustee
     may take possession without further authorization required, and may let the
     Trust Property and receive the rents, issues and profits thereof, make
     repairs and

                                      A-3
<PAGE>

     apply said rentals and profits, after payment of all necessary or proper
     charges and expenses, on account of the amounts hereby secured.

          (ii) the Trustee, shall, as a matter of right, at the option of the
     Loan Party, be entitled to the appointment of a receiver for the Subject
     Property, and the Grantor hereby consents to such appointment and waives
     notice of any application therefor.

          (iii) Trustee may proceed to sell the Subject Property at public
     auction, as a whole or in such parcels, for cash or credit and, in addition
     to the requirements imposed by state law, upon any terms as the Trustee
     deems appropriate.  Before such sale at public auction is made, there shall
     first be advertisement of the time, place and terms of sale at least once a
     week for four (4) successive weeks in a newspaper published or having a
     general circulation in the City or County of Virginia, as applicable, in
     which the Land is located. At least fourteen (14) days prior to such sale,
     or in the event that such sale is postponed, any subsequent sale, written
     notice of the time, place and terms of sale shall be given by certified or
     registered mail to the Grantor at its address for notice as provided above.
     In the event the sale is postponed, the Trustee shall advertise the
     postponed subsequent sale in the same manner as the original advertisement
     of sale provided for above.  Loan Party may become the purchaser of the
     Subject Property so sold, and no purchaser shall be required to see to the
     proper application of the purchase money.  The proceeds of any such sale
     shall be applied as required by Section 55-59.4 of the Code of Virginia of
     1950, as amended and in effect on the date hereof (the "Code").
                                                             ----

          D.  The Grantor hereby waives the benefit of all appraisement,
     valuation, stay, extension, reinstatement and redemption laws now or
     hereafter in force and all rights of marshaling in the event of any sale of
     the Subject Property or any interest therein.

          E.  The Trustee shall be entitled to enforce payment of the
     indebtedness and performance of the Lessee's obligations and to exercise
     all rights and powers under this instrument or under any of the other
     Operative Documents or other agreement or any laws now or hereafter in
     force, notwithstanding some or all of the Lessee's obligations may now or
     hereafter be otherwise secured, whether by deed of trust, mortgage,
     security agreement, pledge, lien, assignment or otherwise.  Neither the
     acceptance of this instrument nor its enforcement, shall prejudice or in
     any manner affect the Trustee's right to realize upon or enforce any other
     security now or hereafter held by the Trustee, it being agreed that the
     Trustee shall be entitled to enforce this instrument and any other security
     now or hereafter held by the Trustee in such order and manner as the
     Trustee or the Loan Party may determine in its

                                      A-4
<PAGE>

     absolute discretion. No remedy herein conferred upon or reserved to the
     Trustee or the Loan Party is intended to be exclusive of any other remedy
     herein or by law provided or permitted, but each shall be cumulative and
     shall be in addition to every other remedy given hereunder or now or
     hereafter existing at law or in equity or by statute. Every power or remedy
     given by any of the Operative Documents to the Trustee or the Loan Party or
     to which they may otherwise be entitled, may be exercised, concurrently or
     independently, from time to time and as often as may be deemed expedient by
     the Loan Party. In no event shall the Trustee, in the exercise of the
     remedies provided in this instrument (including, without limitation, the
     appointment of a receiver and the entry of such receiver on to all or any
     part of the Subject Property), be deemed a "mortgagee in possession," and
     the Trustee shall not in any way be made liable for any act, either of
     commission or omission, in connection with the exercise of such remedies.

          F.  The Trustee's sole duty with respect to the custody, safekeeping
     and physical preservation of any Subject Property in its possession, under
     Section 9-207 of the Uniform Commercial Code or otherwise, shall be to deal
     with it in the same manner as the Trustee deals with similar property for
     its own account.  Neither the Trustee, the Loan Party nor any of their
     respective directors, officers, employees or agents shall be liable for
     failure to demand, collect or realize upon any of the Subject Property or
     for any delay in doing so or shall be under any obligation to sell or
     otherwise dispose of any Subject Property upon the request of the Grantor
     or any other Person or to take any other action whatsoever with regard to
     the Subject Property or any part thereof.

          G.  All powers, authorizations and agencies contained in this Deed of
     Trust are coupled with an interest and are irrevocable until this
     instrument is terminated and the lien created hereby is released.

          H.  Pursuant to Section 9-402 of the Uniform Commercial Code, the
     Grantor authorizes the Trustee or the Loan Party to file financing
     statements with respect to the Subject Property with the signature of the
     Grantor in such form and in such filing offices as the Trustee or the Loan
     Party reasonably determines appropriate to perfect the security interests
     of the Trustee and the Loan Party under this Deed of Trust.  A carbon,
     photographic or other reproduction of this Deed of Trust shall be
     sufficient as a financing statement for filing in any jurisdiction.

          I.  It is the intention of the parties hereto that this instrument
     shall constitute a Security Agreement within the meaning of the Uniform
     Commercial Code of the State in which the Subject Property is located (the
     "Uniform Commercial Code").  If an Event of Default shall occur and be
      -----------------------

                                      A-5
<PAGE>

     continuing, then in addition to having any other right or remedy available
     at law or in equity, the Trustee, at the direction of the Loan Party, shall
     have the option of either (i) proceeding under the Uniform Commercial Code
     and exercising such rights and remedies as may be provided to a secured
     party by the Uniform Commercial Code with respect to all or any portion of
     the Subject Property which is personal property (including, without
     limitation, taking possession of and selling such property) or (ii)
     treating such property as real property and proceeding with respect to both
     the real and personal property constituting the Subject Property in
     accordance with the Trustee's rights, powers and remedies with respect to
     the real property (in which event the default provisions of the Uniform
     Commercial Code shall not apply).  If the Trustee, at the direction of the
     Loan Party, shall elect to proceed under the Uniform Commercial Code, then
     five days' notice of sale of the personal property shall be deemed
     reasonable notice and the reasonable expenses of retaking, holding,
     preparing for sale, selling and the like incurred by the Trustee or the
     Loan Party shall include, but not be limited to, reasonable attorneys' fees
     and legal expenses.  At the Trustee's request, the Grantor shall assemble
     the personal property and make it available to the Trustee and the Loan
     Party at a place designated by the Trustee or the Loan Party which is
     reasonably convenient to both parties.

          The Grantor, the Trustee and the Loan Party further agree, to the
     extent permitted by law, that this instrument upon recording or
     registration in the real estate records of the proper office shall
     constitute a financing statement filed as a "fixture filing" within the
     meaning of Sections 9-313 and 9-402 of the Uniform Commercial Code.

          The Grantor, upon request by the Trustee or the Loan Party from time
     to time, shall execute, acknowledge and deliver to the Trustee or the Loan
     Party one or more separate security agreements, in form reasonably
     satisfactory to the Trustee and the Loan Party, covering all or any part of
     the Subject Property and will further execute, acknowledge and deliver, or
     cause to be executed, acknowledged and delivered, any financing statement,
     affidavit, continuation statement or certificate or other document as the
     Trustee or the Loan Party may reasonably request in order to perfect,
     preserve, maintain, continue or extend the security interest under and the
     priority of this instrument.  The Grantor further agrees to pay to the
     Trustee and the Loan Party on demand all costs and expenses actually and
     reasonably incurred by the Trustee or the Loan Party in connection with the
     preparation, execution, recording, filing and re-filing of any such
     document and all reasonable costs and expenses of any record searches for
     financing statements the Trustee or the Loan Party shall reasonably
     require.  If the Grantor shall fail to furnish any financing or
     continuation statement within 10 days after request by the Trustee

                                      A-6
<PAGE>

     or the Loan Party, then pursuant to the provisions of the Uniform
     Commercial Code, the Grantor hereby authorizes the Trustee and the Loan
     Party, without the signature of the Grantor, to execute and file any such
     financing and continuation statements. The filing of any financing or
     continuation statements in the records relating to personal property or
     chattels shall not be construed as in any way impairing the right of the
     Trustee to proceed against any personal property encumbered by this Deed of
     Trust as real property, as set forth above.

          J.  The Grantor acknowledges that in connection with the rights and
     responsibilities of the Trustee under this instrument with respect to any
     action taken by the Trustee or the exercise or non-exercise by the Trustee
     of any option, voting right, request, judgment or other right or remedy
     provided for herein or resulting or arising out of this instrument, as
     between the Grantor and the Loan Party, the Trustee shall be conclusively
     presumed to be acting as agent for the Loan Party with full and valid
     authority so to act or refrain from acting, and the Grantor shall be under
     no obligation, or entitlement, to make any inquiry respecting such
     authority.

          K.  Except as otherwise set forth herein, to the fullest extent
     permitted by law, the Grantor waives the benefit of all laws now existing
     or that may subsequently be enacted providing for (i) any appraisement
     before sale of any portion of the Subject Property, (ii) any extension of
     the time for the enforcement of the collection of the indebtedness or the
     creation or extension of a period of redemption from any sale made in
     collecting such debt and (iii) exemption of the Subject Property from
     attachment, levy or sale under execution or exemption from civil process.
     Except as otherwise set forth herein, to the full extent the Grantor may do
     so, the Grantor agrees that the Grantor will not at any time insist upon,
     plead, claim or take the benefit or advantage of any law now or hereafter
     in force providing for any appraisement, valuation, stay, exemption,
     extension, reinstatement or redemption, or requiring foreclosure of this
     instrument before exercising any other remedy granted hereunder and the
     Grantor, for the Grantor and its successors and assigns, and for any and
     all Persons ever claiming any interest in the Subject Property, to the
     extent permitted by law, hereby waives and releases all rights of
     reinstatement, redemption, valuation, appraisement stay of execution,
     notice of election to mature or declare due the whole of the secured
     indebtedness and marshaling in the event of foreclosure of the liens hereby
     created.

          L.   Neither the commencement nor continuation of proceedings to
     foreclose this instrument nor the exercise of any other rights hereunder
     nor the recovery of any judgment by the Trustee and the Loan Party in any
     such proceedings shall prejudice, limit or preclude the Trustee's and the
     Loan Party's rights to commence or continue one or more foreclosure or
     other

                                      A-7
<PAGE>

     proceedings or obtain a judgment against any other collateral (either
     in or outside the State in which the Subject Property is located) which
     directly or indirectly secures the obligations secured hereby, and the
     Grantor expressly waives any objections to the commencement of,
     continuation of, or entry of a judgment in such other proceedings or
     exercise of any remedies in such proceedings based upon any action or
     judgment connected to this instrument, and the Grantor also waives any
     right to seek to dismiss, stay, remove, transfer or consolidate either such
     other proceedings or any action under this instrument on such basis.  It is
     expressly understood and agreed that to the fullest extent permitted by
     law, the Trustee may, at its election, cause the sale of all collateral
     which is the subject of a single foreclosure action at either a single sale
     or at multiple sales conducted simultaneously and take such other measures
     as are appropriate in order to effect the agreement of the parties to
     dispose of and administer all collateral securing the obligations secured
     hereby (directly or indirectly) in the most economical and least time-
     consuming manner.

          M.  Except as provided in the Operative Documents, the Trustee and the
     Loan Party, with the express written consent of the Grantor, may at any
     time or from time to time renew or extend this instrument, or alter or
     modify the same in any way, or the Trustee may waive any of the terms,
     covenants or conditions hereof in whole or in part and may release any
     portion of the Subject Property or any other security, and grant such
     extensions and indulgences in relation to the obligations secured hereby as
     the Loan Party may determine without the consent of any other person and
     without any obligation to give notice of any kind thereto and without in
     any manner affecting the priority of the lien hereof on any part of the
     Subject Property.

          N.  If Trustee shall be made a party to or shall intervene in any
     action or proceeding, whether in court or before any governmental agency,
     affecting the Subject Property or the title thereto or the interest of
     Trustee under this instrument, including, without limitation, any form of
     condemnation or eminent domain proceeding, Trustee shall be reimbursed by
     Grantor upon demand for all actual and reasonable costs, charges and
     reasonable attorneys' fees incurred by it in any such case.  All such sums
     shall be secured hereby, are due and payable within ten (10) days after
     demand, and if not paid within ten (10) days after demand, shall bear
     interest at the default rate set forth in the Operative Documents.

          Trustee shall be under no duty to take any action hereunder except as
     expressly required, to perform any act which would involve it in expense or
     liability, or to institute or defend any suit in respect hereof, unless
     properly indemnified to its satisfaction.  All reasonable expenses,
     charges, counsel fees and other disbursements incurred by Trustee from and
     after the occurrence of

                                      A-8
<PAGE>

     an Event of Default in and about the administration and execution of the
     trust created hereby, and the performance of its duties and powers
     hereunder shall be secured by this instrument prior to the indebtedness
     represented by the Lease, and shall bear interest at the default rate set
     forth in the Operative Documents. Loan Party, with or without cause, is
     hereby authorized and empowered to substitute and appoint, from time to
     time, by an instrument recorded wherever this instrument is recorded, a
     trustee in the place of any Trustee hereunder.

          Except as otherwise herein expressly provided, this instrument shall
     be construed to impose and confer upon the parties hereto, including the
     Loan Party, all duties, rights and obligations as set forth in Sections 55-
     59, 55-59.1, 55-59.2, 55-59.3, 55-59.4 and 55-60 of the Code as now in
     force and further to incorporate herein the following provisions by short
     form reference below, of Sections 55-59.4 and 55-60 of the Code: Renewal,
     extension or reinstatement permitted. Bidder's deposit of not more than 10%
     of the sale price may be required.

          Grantor agrees to indemnify, defend and hold Trustee harmless from and
     against any and all liability, loss, damage and expense, including
     reasonable attorneys' fees, which it may incur by reason of this instrument
     or by reason of any action taken by Trustee hereunder, and from and against
     any and all claims and demands whatsoever which may be asserted against
     Trustee by reason of any alleged obligation or undertaking on its part to
     perform or discharge any of the terms, covenants or conditions contained
     herein, unless caused by the gross negligence or willful misconduct of the
     Trustee.  Should Trustee incur any such liability, loss, damage or expense,
     the amount thereof, together with interest thereon at the default rate set
     forth in the Operative Documents, shall be secured by this instrument and
     shall be payable by Grantor to Trustee within ten (10) days after demand
     therefor.

          O.  This instrument shall not operate to place upon Loan Party any
     responsibility for the operation, control, care, management or repair of
     the Subject Property prior to Loan Party taking possession thereof, and the
     execution of this Deed of Trust by Grantor shall constitute conclusive
     evidence that all responsibility for the operation, control, care,
     management and repair of the Subject Property prior to Loan Party taking
     possession thereof is and shall be that of Grantor.

          P.  This instrument is given to secure not only existing indebtedness,
     but also future advances made pursuant to or as provided in the Operative
     Documents, whether such advances are obligatory or to be made at the option
     of the Loan Party, or otherwise, to the same extent as if such future
     advances were made on the date of execution of this instrument, although
     there

                                      A-9
<PAGE>

     may be no advance made at the time of execution hereof, and although
     there may be no indebtedness outstanding at the time any advance is made.
     To the fullest extent permitted by law, the lien of this instrument shall
     be valid as to all such indebtedness, including all revolving credit and
     future advances, from the time this instrument is recorded.
     Notwithstanding anything in this instrument to the contrary, although the
     amount of indebtedness secured by this instrument may increase or decrease
     from time to time, the maximum principal amount of indebtedness secured by
     this instrument at any one time shall not exceed _______________________
     _________________ AND NO/100 DOLLARS ($_______________) plus all costs of
     enforcement and collection of this instrument and the other Operative
     Documents, plus the total amount of any advances made pursuant to the
     Operative Documents to protect the collateral and the security interest and
     lien created hereby; together with interest on all of the foregoing as
     provided in the Operative Documents.

     SECTION 4.  Ratification; Incorporation.  Except as specifically modified
                 ---------------------------
hereby, the terms and provisions of the Lease are hereby ratified and confirmed
and remain in full force and effect. The terms of the Lease (as amended by this
Lease Supplement) are by this reference incorporated herein and made a part
hereof.

     SECTION 5.  Original Lease Supplement.  The single executed original of
                 -------------------------
this Lease Supplement marked "THIS COUNTERPART IS THE ORIGINAL EXECUTED
COUNTERPART" on the signature page thereof and containing the receipt of the
Agent therefor on or following the signature page thereof shall be the original
executed counterpart of this Lease Supplement (the "Original Executed
                                                    -----------------
Counterpart").  To the extent that this Lease Supplement constitutes chattel
-----------
paper, as such term is defined in the Uniform Commercial Code as in effect in
any applicable jurisdiction, no security interest in this Lease Supplement may
be created through the transfer or possession of any counterpart other than the
Original Executed Counterpart.

     SECTION 6.  GOVERNING LAW.  THIS LEASE SUPPLEMENT SHALL BE GOVERNED BY AND
                 -------------
CONSTRUED IN ACCORDANCE WITH THE LAW OF THE STATE OF VIRGINIA, BUT EXCLUDING ALL
OTHER CHOICE OF LAW AND CONFLICTS OF LAW RULES OF SUCH STATE.

     SECTION 7.  Counterpart Execution.  This Lease Supplement may be executed
                 ---------------------
in any number of counterparts and by each of the parties hereto in separate
counterparts, all such counterparts together constituting but one and the same
instrument.

                                     A-10
<PAGE>

     IN WITNESS WHEREOF, each of the parties hereto has caused this Lease
Supplement to be duly executed by an officer thereunto duly authorized as of the
date and year first above written.

                              ATLANTIC FINANCIAL GROUP, LTD., doing
                              business in Virginia as ATLANTIC FINANCIAL
                              GROUP, L.P., as the Lessor

                          By:   Atlantic Financial Managers, Inc., its General
                                Partner

                                By: /s/ Stephen S. Brookshire
                                    -------------------------
                                Name:   Stephen S. Brookshire
                                Title: President

                                      S-1
<PAGE>

                               ROWE FURNITURE, INC., as the Lessee

                               By:
                                  ------------------------------------
                                  Name:
                                  Title:

                                      S-2
<PAGE>

STATE OF _________________    )
                              )  ss.:
COUNTY OF ________________    )

     The foregoing Lease Supplement was acknowledged before me, the undersigned
Notary Public, in the [City] [County] of ______________, this _____ day of
__________, 1999, by ________________________, as ________________ of ROWE
FURNITURE, INC., a Virginia corporation, on behalf of the corporation.

[Notary Seal]                   ____________________________
                                Notary Public

My Commission Expires:_____________________

                                      N-1
<PAGE>

STATE OF TEXAS                )
                              )  ss.:
COUNTY OF ________________    )

     The foregoing Lease Supplement was acknowledged before me, the undersigned
Notary Public, in the County of ______________, this _____ day of ____________,
1999, by Stephen S. Brookshire, as President of ATLANTIC FINANCIAL MANAGERS,
INC, a Texas corporation, which is the general partner of ATLANTIC FINANCIAL
GROUP, LTD., a Texas limited partnership, doing business in Virginia as ATLANTIC
FINANCIAL GROUP, L.P., on behalf of such corporation as general partner of such
partnership.

[Notarial Seal]                         ___________________________
                                        Notary Public

My Commission Expires:_____________________

                                      N-2
<PAGE>

Receipt of this original counterpart of the foregoing Lease Supplement is hereby
acknowledged as of the date hereof.

                              CRESTAR BANK, as the Agent

                              By:__________________________
                              Name:___________________________________
                              Title:____________________________________

                                      S-3
<PAGE>

                                   Exhibit A
                                   ---------

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