EXHIBIT NO. 10.1

AGREEMENT

This AGREEMENT (this “Agreement”) is entered into as of this 10th day of April
2008, by and among Costa Brava Partnership III, L.P., a Delaware limited
partnership, and the persons and entities affiliated with it and listed on the
signature pages hereof (“Costa Brava”), and Basset Furniture Industries, Inc., a
Virginia corporation (“Bassett” or the “Company”).

WHEREAS, Costa Brava is the beneficial owner of approximately 5% of the
outstanding shares of Common Stock of Bassett;

WHEREAS, as further detailed in the Company’s Proxy Statement and Costa Brava’s
Proxy Statement each in connection with the Company’s Annual Meeting on
April 15, 2008 (the “Annual Meeting”), the Company and Costa Brava have engaged
in a proxy contest with respect to (i) the election of directors to Bassett’s
Board of Directors (the “Stockholder Nomination”); and (ii) proposals for the
Annual Meeting made by Costa Brava (the “Proposals”);

WHEREAS, Bassett has filed an action against Costa Brava in Henry County,
Virginia on January 29, 2008, captioned Bassett Furnities Industries, Inc. v.
Costa Brava Partnership III L.P. et al., Case No. CL09-028 (the “Virginia
Action”), which sought a declaratory judgment that Costa Brava’s purported
nominations of directors to Bassett’s Board were ineffective; and

WHEREAS, the Company and Costa Brava desire to enter into a global settlement to
resolve all proceedings, controversies and disputes pertaining or relating to
the Annual Meeting and the election of Bassett directors.

NOW, THEREFORE, in consideration of the foregoing, the parties hereto agree as
follows:

1. 2008 Annual Meeting; Nominees. Costa Brava and the Company acknowledge the
withdrawal of David S. Brody, Neil Chelo, Eugene Davis, Seth W. Hamot, Kent F.
Heyman, Peter Hirsch and Andrew R. Siegel as nominees to the Board of Directors.
Each member of Costa Brava agrees to vote all the Shares which he or it
currently owned as of the record date either beneficially or as of record for
the Annual Meeting in favor of each of those individuals nominated as directors
by the Company’s board of directors.

2. Settlement Amount. The Company shall remit to Costa Brava $250,000 in
consideration of certain of its costs in connection with the proxy contest and
the litigation identified in Paragraph 3 below. The Company will pay such amount
by wire transfer of immediately available funds to an account designated in
writing by Costa Brava no later than 12 p.m. (Eastern Time) on April 10, 2008.

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3. Withdrawal of Litigation; Release of Claims. On the first business day after
the execution of this Agreement, Bassett shall withdraw the Virginia Action.
Costa Brava and the Company hereby release and forever discharge each other, and
their respective directors, officers, partners, principals, employees and
agents, from all claims and demands, rights and causes of action of any kind
arising out of the Stockholder Nomination, the Proposals, the Annual Meeting,
the proxy contest in connection with the Annual Meeting, and the Virginia Action
and all other actions commenced, or any claims, whether asserted or unasserted,
known or unknown as of the date hereof by or against the Company or Costa Brava.
Notwithstanding anything to the contrary in this paragraph, Costa Brava and the
Company do not release any obligations or claims related to the enforcement of
the terms and provisions of this Agreement.

4. Company Representations and Warranties. The Company represents and warrants
to Costa Brava as follows:

(a) The Company is a corporation duly organized, validly existing and in good
standing under the laws of the Commonwealth of Virginia. The Company has the
full power and authority to execute, deliver and carry out the terms and
provisions of this Agreement, and has taken all necessary action to authorize
the execution, delivery and performance of this Agreement; and

(b) This Agreement has been duly and validly authorized by the Board of
Directors, and executed and delivered by the Company and constitutes a valid and
binding obligation of the Company, enforceable in accordance with its terms, and
no other proceeding on the part of the Company is necessary to authorize the
execution, delivery and performance of this Agreement.

5. Costa Brava Representations and Warranties. Each member of Costa Brava
represents and warrants to the Company as follows:

(a) To the extent that Costa Brava is an entity, it is duly organized, validly
existing and in good standing under the laws of the state in which it was
incorporated or organized. It has the full power and authority to execute,
deliver and carry out the terms and provisions of this Agreement, and has taken
all necessary action to authorize the execution, delivery and performance of
this Agreement; and

(b) This Agreement has been duly and validly authorized by Costa Brava’s
governing bodies, and executed and delivered by Costa Brava and constitutes its
valid and binding obligation, enforceable against Costa Brava in accordance with
its terms, and no other proceeding on its part is necessary to authorize the
execution, delivery and performance of this Agreement.

6. Publicity. The Company and Costa Brava will issue a joint press release
before the financial markets in New York open on April 10, 2008 in the form
attached hereto as Exhibit A (the “Press Release”). Until the Press Release is
issued, the Company and Costa Brava shall keep the contents of this Agreement
confidential other than as required by law.

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7. Observer Rights. The Company agrees to grant observer rights to a
representative of a large shareholder of the Company until the Company has paid
the $1.25 per share special dividend and bought back stock for, or otherwise
distributed to the Company’s shareholders, $20 million, as recently announced.
During such period, such observer will: (1) receive copies of all notices and
written information furnished to the full Board at substantially the same time
they are so furnished, and (2) be permitted to be present at all future meetings
of the Board of Directors (and all committees thereof to the extent such
committee meetings are open to non-committee members and to the extent that such
observer’s participation shall not have an impact on any independence
requirements applicable to such committees). Notwithstanding the foregoing,
(i) the Company shall be entitled to withhold any information and exclude such
observer from any meeting, or any portion thereof, as is reasonably determined
by the Company to be necessary to protect the Company’s attorney-client
privilege, work product or other applicable privileges or to allow the directors
to exercise their fiduciary obligations, and (ii) such observer shall execute a
confidentiality agreement in form and substance reasonably acceptable to the
Company with respect to the information and discussions to which such observer
will have access. Costa Brava agrees, that the Company shall have the right, in
its sole discretion, to appoint such observer to be a member of the Board, in
which case such appointment shall satisfy all of the Company’s obligations under
this paragraph 7.

Such observer shall initially be Mr. Scott Barbee of Aegis Investments, if
Mr. Barbee agrees to perform such role. In the event that Mr. Barbee does not
accept the role, or in the event that Aegis Investments ceases to hold at least
5% of the Company’s Common Stock, the Company and Costa Brava shall mutually
agree upon a replacement, who shall be a representative of a significant
shareholder of the Company which has held Company shares for longer than one
year.

8. Standstill Agreement. Each member of Costa Brava agrees that, until the date
that is thirty (30) days prior to the advance notice deadline for submitting
proposals for the 2013 annual meeting of shareholders of the Company (the
“Standstill Period”), neither it nor any of its Affiliates or Associates shall:

(a) nominate any candidates for the Board of Directors of the Company;

(b) submit a shareholder proposal under Rule 14a-8 of the Securities Exchange
Act of 1934, directly or indirectly, to the Company;

(c) file a proxy statement in opposition to the Company or otherwise solicit
proxies or consents from any shareholders of the Company;

(d) enter into any contract, arrangement or understanding with any person with
respect to any securities of Bassett, including but not limited to any
acquisition of any securities (or beneficial ownership thereof), joint venture,
loan or option

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agreement, put or call, guarantee of loans, guarantee of profits or division of
losses or profits (provided, however, that nothing in this Section 8(d) shall
prohibit any member of Costa Brava from trading securities of Bassett for its
own account and provided further, that Costa Brava members’ aggregate holdings
in Bassett’s securities shall not exceed 5.13% of the issued and outstanding
stock of the company);

(e) commence or enter into any tender offer or exchange offer, merger,
acquisition or other business combination involving the Company or any of its
subsidiaries;

(f) form, join or in any way participate in a “group” (as defined under the
Exchange Act) with respect to the Company;

(g) otherwise act, alone or in concert with others, to seek to influence the
management, Board of Directors or policies of Bassett or take any action to
obtain representation on the board of directors of the Company;

(h) disclose any intention, plan or arrangement inconsistent with the foregoing;

(i) effect or seek (including, without limitation, entering into any
discussions, negotiations, agreements or understandings with any third person),
offer or propose (whether publicly or otherwise) to effect, or cause or
participate in, or in any way, advise, assist or encourage any other persons in
connection with any of the foregoing;

(j) take any action which would, or would reasonably be expected to, force the
Company to make a public announcement regarding any of the types of the
foregoing matters; or

(k) request, directly or indirectly, any amendment or waiver of any provision of
this paragraph 8 (including this sentence) by the Company or any of its agents
or representatives.

9. Specific Performance. Each of the parties acknowledges and agrees that the
other party would be damaged irreparably in the event any of the provisions of
this Agreement are not performed in accordance with their specific terms or
otherwise are breached. Accordingly, each party agrees that, without posting
bond or other undertaking, the other party shall be entitled to an injunction or
injunctions to prevent breaches of the provisions of this Agreement and to
enforce specifically this Agreement and the terms and provisions hereof in any
claim, action, cause of action or suit, whether in contract or tort or
otherwise, whether at law or in equity instituted in accordance with Paragraph
14 below . Each party further agrees that, in the event of an action for
specific performance in respect of such breach, it shall not assert the defense
that a remedy at law would be adequate.

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10. Amendments and Waivers. No amendment or waiver of any provision of this
Agreement will be valid and binding unless it is in writing and signed, in the
case of an amendment, by the Company and the Costa Brava, or in the case of a
waiver, by the party against whom the waiver is to be effective. No waiver by
any party of any breach or violation or, default under or inaccuracy in any
representation, warranty or covenant hereunder, whether intentional or not, will
be deemed to extend to any prior or subsequent breach, violation, default of, or
inaccuracy in, any such representation, warranty or covenant hereunder or affect
in any way any rights arising by virtue of any prior or subsequent such
occurrence. No delay or omission on the part of any party in exercising any
right, power or remedy under this Agreement will operate as a waiver thereof.

11. Successors and Assigns. Except as otherwise provided herein, the terms and
conditions of this Agreement shall inure to the benefit of and be binding upon
the respective successors and permitted assigns of the parties. Nothing in this
Agreement, express or implied, is intended to confer upon any party other than
the parties hereto or their respective successors and assigns any rights,
remedies, obligations, or liabilities under or by reason of this Agreement,
except as expressly provided in this Agreement.

12. Counterparts. This Agreement may be executed in any number of counterparts,
which may be exchanged by PDF or facsimile each of which will be deemed an
original, but all of which together will constitute but one and the same
instrument. This Agreement will become effective when duly executed by each
party hereto.

13. Severability. Any term or provision of this Agreement that is invalid or
unenforceable in any situation in any jurisdiction will not affect the validity
or enforceability of the remaining terms and provisions hereof or the validity
or enforceability of the offending term or provision in any other situation or
in any other jurisdiction. In the event that any provision hereof would, under
applicable law, be invalid or unenforceable in any respect, each party hereto
intends that such provision will be construed by modifying or limiting it so as
to be valid and enforceable to the maximum extent compatible with, and possible
under, applicable law.

14. Governing Law. This Agreement, the rights of the parties and all Actions
arising in whole or in part under or in connection herewith, will be governed by
and construed in all respects, including validity, interpretation and effect, in
accordance with the laws of Virginia, applicable to contracts executed and to be
performed wholly within such State without giving effect to any choice or
conflict of law provision or rule that would cause the application of the laws
of any other jurisdiction. Each of the parties hereto (a) consents to submit
itself to the personal jurisdiction of the state courts in Richmond, Virginia in
the event any dispute arises out of this Agreement or the transactions
contemplated by this Agreement, (b) agrees that it shall not attempt to deny or
defeat such personal jurisdiction by motion or other request for leave from any
such court, (c) agrees that it shall not bring any action relating to this
Agreement or the transactions contemplated by this Agreement in any

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court other than the state courts in Richmond, Virginia (d) agrees to waive any
bonding requirement under any applicable law, in the case any other party seeks
to enforce the terms by way of equitable relief and (e) each of the parties
irrevocably consents to service of process by first class certified mail, return
receipt requested, postage prepaid, to the address of such parties’ principal
place of business or as otherwise provided by applicable law.

15. Waiver of Jury Trial. To the extent not prohibited by applicable law that
cannot be waived, the parties hereby waive, and covenant that they will not
assert (whether as plaintiff, defendant or otherwise), any right to trial by
jury in any action arising in whole or in part under or in connection with this
agreement or any of the contemplated transactions, whether now existing or
hereafter arising, and whether sounding in contract, tort or otherwise. The
parties agree that any of them may file a copy of this paragraph with any court
as written evidence of the knowing, voluntary and bargained-for agreement among
the parties irrevocably to waive its right to trial by jury in any proceeding
whatsoever between them relating to this agreement or any of the contemplated
transactions will instead be tried in a court of competent jurisdiction by a
judge sitting without a jury.

[Next page is the signature page.]

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IN WITNESS WHEREOF, the undersigned parties have duly executed this Agreement as
of the date first written above.

 

  COSTA BRAVA PARTNERSHIP III L.P. By:   Roark, Rearden & Hamot LLC,   its
general partner By:  

/s/ Seth W. Hamot

  Seth W. Hamot   President   ROARK, REARDEN & HAMOT CAPITAL   MANAGEMENT, LLC
By:  

/s/ Seth W. Hamot

Name:   Seth W. Hamot Title:   President   ROARK, REARDEN & HAMOT, LLC By:  

/s/ Seth W. Hamot

Name:   Seth W. Hamot Title:   President   SETH W. HAMOT  

/s/ Seth W. Hamot

  BASSETT FURNITURE INDUSTRIES, INC. By:  

/s/ Robert H. Spilman

  Robert H. Spilman   Chief Executive Officer and President