VOLUNTARY SEPARATION AGREEMENT AND GENERAL RELEASE

This Voluntary Separation Agreement and General Release (the “Agreement and Release”) is made and entered into this 23 ^rd day of September 2008, by and between Jeffrey R. Scheffer (“Scheffer”) and STANLEY FURNITURE COMPANY, INC., a Delaware corporation (the “Company”).  The Company and Scheffer previously entered into an Employment Agreement (the “Employment Agreement”), attached hereto as Exhibit A, on or about April 9, 2001.  Except as specifically provided herein, this Agreement and Release supersedes the Employment Agreement.  The Company and Scheffer have now mutually agreed that it is in the best interest of both parties that Scheffer terminate his employment in accordance with the terms of this Agreement and Release.  To assist Scheffer following his separation from employment, the Company has offered to provide certain benefits to Scheffer, over and above that to which he is presently entitled, in exchange for his promises and general release contained in this Agreement and Release.  Scheffer has voluntarily accepted this offer and Scheffer and the Company now desire to effect an amicable separation of Scheffer’s employment.

THEREFORE, IN CONSIDERATION of the mutual promises and releases contained in this Agreement and Release, IT IS AGREED THAT:

1.   Termination Date .  Scheffer hereby resigns as President and Chief Executive Officer of the Company, and acknowledges his termination as a Company employee, effective as of September 23, 2008 (the “Termination Date”).

2.   Resignation as Director .  Scheffer agrees to submit his resignation as a Director of the Company, its affiliates, and/or its subsidiaries, effective as of Effective Date of this Agreement and Release.

3.   Acknowledgement of Adequate Consideration .  Scheffer agrees and acknowledges that the compensation and benefits provided under this Agreement and Release are adequate and sufficient and in excess of what he would otherwise be entitled to receive from the Company as a result of termination of his employment.

4.   Payment to Scheffer .  The Company shall pay Scheffer (or his estate) the gross sum of $1,000,000 (the “Payment”) in one lump sum on the first day of the seventh month following Scheffer’s “separation from service” with the Company within the meaning of Treasury Regulation Section 1.409A-1(h).  The Payment shall be treated as wages for purposes of federal and state taxation and withholding but shall not be considered as compensation for purposes of any employee benefit plans sponsored by the Company.

5.   COBRA .  Eligibility for health care continuation coverage under the Consolidated Budget Reconciliation Act of 1985, as amended (“COBRA”), will not be altered by this Agreement and Release.

6.   Confidential Information .  Scheffer agrees and acknowledges that the Confidential Information provision of the Employment Agreement (Exhibit A, § 6c) shall remain in full force and effect.  The Company agrees and acknowledges that the remaining provisions of the Employment Agreement, including the Non-competition Restriction provision of the Employment Agreement (Exhibit A, § 6a), do not remain in effect.

7.   Non-Solicitation .  Scheffer agrees and acknowledges that, except with the prior consent in writing of the Company, for twenty-four (24) months following the Effective Date of this Agreement and Release, Scheffer shall not directly or indirectly hire or employ in any capacity or solicit the employment of or offer employment to or entice away or in any other manner persuade or attempt to persuade any person (i) employed by the Company or any of its subsidiaries to leave the employ of any of them, or (ii) who is an independent sales representative for the Company to terminate such person's status as an independent sales representative.

8.   Releases .  In exchange and in consideration for the promises, obligations, and agreements of the Company contained herein, which Scheffer agrees and acknowledges are adequate and sufficient consideration, Scheffer, on behalf of his agents, representatives, attorneys, assigns, heirs, executors, and administrators, hereby releases and forever discharges the Company, and all its past and present parent companies, affiliates, subsidiaries, divisions, officers, members, employees, partners, directors, shareholders, agents, attorneys, representatives, predecessors, successors, transferees, and assigns, as well as all of their past and present directors, shareholders, partners, employees, members, agents, representatives, and attorneys (collectively referred to as the “ Company Releasees”) from any and all causes of action, remedies, or claims of any type Scheffer now has, or ever has had, as of any day hereof, or at any time prior to the date hereof, arising out of his employment with the Company or otherwise, including, but not limited to: (a) all claims for employment discrimination or retaliation under the Virginia Human Rights Act, Va. Code § 2.2-3900 et seq. , Title VII of the Civil Rights Act of 1964, the Civil Rights Act of 1991, the Rehabilitation Act of 1973, the Civil Rights Act of 1866, the Americans With Disabilities Act, the Family Medical Leave Act, the Age Discrimination in Employment Act, ERISA Virginia Equal Pay Irrespective of Sex Act, Va. Code § 40.1-28.6 et seq. , the Federal Equal Pay Act and the Fair Labor Standards Act (or any other federal or state statute relating to employment, discrimination, retaliation or wages); (b) all claims for wages, compensation, vacation pay, sick pay, compensatory time, commissions, or benefits including but not limited to those arising under any state or federal wage and hour law, ERISA, ERISA benefit plan or policy, Virginia wage payment laws, Va. Code § 40.1-29; and (c) all claims arising under the common law