Exhibit 10.1
 
[FORM OF PERFORMANCE GRANT AGREEMENT]

Hooker Furniture Corporation
[20##] Performance Grant Agreement

THIS AGREEMENT, dated as of ______ (“Date of Grant”), between HOOKER FURNITURE
CORPORATION, a Virginia corporation (the "Company") and _____________
("Participant"), is made pursuant and subject to the provisions of the Hooker
Furniture Corporation 2005 Stock Incentive Plan (the "Plan") to the extent
provided below.

All capitalized terms used herein that are defined in the Plan have the same
meaning given them in the Plan.  The Performance Grant will be administered by
the Committee.

1.  
Performance Grant.  The Participant is awarded a Performance Grant based on the
terms of this Agreement.  The Performance Grant entitles the Participant to
payment of an amount (the “Payment Amount”) based on the achievement by the
Company of certain Performance Goals (described below and in the “Performance
Matrix” as defined in paragraph 3(c)) as measured over the [three] fiscal-year
period commencing _________ and ending on __________ (the “Performance
Period”).  To be entitled to any payment under the Performance Grant, the
Participant must execute this Agreement and return a fully executed copy of this
Agreement to the Company within thirty (30) days of the Date of Grant, and all
terms and conditions of this Performance Grant must have been satisfied.

 
2.  
Determination of Payment Amount.  A Participant’s Payment Amount under this
Performance Grant shall be calculated according to the following formula:

 
Payment Amount = Target Amount x Actual Performance Goal Attainment Percentage
 
(a)           “Target Amount” means an amount equal to ___% of the Participant’s
Base Salary (as defined in paragraph 3(d)).
 
(b)           “Actual Performance Goal Attainment Percentage” means the
applicable percentage multiplier determined under the Performance Matrix based
on the Company’s Cumulative EPS and Average Annual ROE for the Performance
Period, as such terms are defined in paragraph 3 below.
 
No amount shall be payable unless the Cumulative EPS and Average Annual ROE for
the Performance Period are each no less than the threshold targets set forth in
the Performance Matrix (the “Threshold Targets”).  If the Cumulative EPS or the
Average Annual ROE for the Performance Period exceed the maximum Performance
Goals specified in the Performance Matrix, the Participant’s Payment Amount
shall be determined based on the attainment of the maximum Performance Goal
specified in the Performance Matrix.
 
 
3.  
Performance Goals.  The Company must achieve certain Performance Goals regarding
Cumulative EPS and Average Annual ROE that are set forth in the Performance
Matrix.

(a)           “Cumulative EPS” means the sum of the Company’s fully diluted
aggregated operating earnings per share from continuing operations for each
fiscal year that falls within the Performance Period.  Cumulative EPS shall be
calculated according to Generally Accepted Accounting Principles and shall
exclude the dilutive effects of any Performance Grants that are issued and
outstanding.  Cumulative EPS shall be adjusted to eliminate the impact of
significant share repurchase activity or significant acquisitions and
divestitures of businesses that occur during the Performance Period.

(b)           “Average ROE” means the Company’s average annual return on
shareholders’ equity from operating results for continuing operations for each
fiscal year that falls within the Performance Period.  Average ROE shall be
adjusted in the same manner as Cumulative EPS, as described above.
 
(c)           “Performance Matrix” means the matrix set forth in Appendix A to
this Agreement, and shall be used to calculate the Participant’s Payment Amount
following the conclusion of the Performance Period.
 
(d)           “Base Salary” means the annual salary payable to the Participant
for the calendar year beginning _____________ without regard to any reductions
for contributions to any Company benefit plans.
 
4.  
Certification.  Subject to the other terms and conditions of this Agreement, the
Payment Amount will be paid only if the Committee certifies in writing following
the close of the Performance Period that (i) the Company has met or exceeded the
Threshold Targets on the last day of the Performance Period (the “Maturity
Date”); (ii) the level of performance so certified has been achieved; and (iii)
any other material terms of the Agreement have been satisfied.  The date on
which such certification occurs shall be known as the Certification Date.

 
5.  
Payment Limitation.  The Payment Amount payable under this Performance Grant
shall be subject to any limit on payment imposed under the terms of the Plan,
and the Committee shall reduce the Payment Amount to the extent necessary to
comply with any such limit.

 
6.  
Time and Form of Payment.  Except as otherwise provided in paragraph 7 or
paragraph 8 below, the Payment Amount will be paid in a single lump-sum within
ninety (90) days following the Maturity Date.  Payment shall be made in cash,
Company Stock or any combination thereof, as determined by the Committee in its
sole discretion.  If the Committee determines that all or a portion of the
Payment amount will be paid in the form of shares of Company Stock, the number
of shares of Company Stock to be paid to a Participant will be determined by the
following formula:

 
(Payment Amount – Portion of Payment Amount to be paid in cash)
_____________________________________________________
 
Fair Market Value of one share of Company Stock
on the Certification Date
 
7.  
Death and Termination of Employment on Account of Disability.  If the
Participant (i) dies, or (ii) is terminated by the Company on account of
Disability, the Participant shall be deemed to continue in employment with the
Company to the Maturity Date.  The Participant, or the Participant’s Beneficiary
in the event of the Participant’s death, shall be entitled to receive a lump sum
cash payment equal to the product of (a) and (b) where:

(a)           is the Payment Amount determined in accordance with the procedures
set forth in paragraph 2 of this Performance Grant, and

(b)           is the fraction, the numerator of which is the number of complete
calendar months from the Date of Grant to the date of death or termination due
to Disability (as applicable), and the denominator of which is the number of
complete calendar months in the Performance Period.

Payment under this paragraph 7 shall be made to the Participant or the
Participant’s Beneficiary in the event of the Participant’s death, following the
conclusion of the Performance Period at the time prescribed in paragraph 6 of
this Performance Grant.

8.  
Change in Control.  If a Change in Control occurs during the Performance Period
and during the Post-Change Period (a) the Participant’s employment is terminated
by the Company for any reason other than for Cause, or (b) the Participant
terminates employment with the Company for Good Reason, the Participant shall
receive a lump sum cash payment equal to the Target Amount within 45 days of the
date of the Participant’s termination of employment.

For purposes of this Performance Grant, the “Post-Change Period” is the period
that begins on the date of the Change in Control and which ends on the earlier
of (x) the Maturity Date or (y) the first anniversary of the date of the Change
in Control.

“Good Reason” means termination of employment by the Participant after the
occurrence of any of the following events without his or her consent, unless
such occurrence has not resulted in a material negative change (within the
meaning of Section 1.409A-1(n)(2)(i) of the Treasury Regulations or any
successor provision) to the Participant in his or her service relationship with
the Company:

I.  
a material diminution in the Participant’s base compensation;

II.  
a material diminution in the Participant’s authority, duties, or
responsibilities;

III.  
a material diminution in the authority, duties, or responsibilities of the
supervisor to whom the Participant is required to report, including a
requirement that a Participant report to a corporate officer or employee instead
of reporting directly to the Board;

IV.  
a material diminution in the budget over which the Participant retains
authority;

V.  
a material change in the geographic location at which the Participant must
perform his or her duties; and

VI.  
any other action or inaction that constitutes a material breach by the Company
under the Participant’s employment agreement with the Company, if any.

Additionally, Good Reason shall not exist unless the Participant provides notice
to the Company of the existence of the condition described in clauses (I)
through (VI) above within 90 days of the initial existence of the condition and
such condition is not remedied within 30 days following receipt of such notice.

“Cause” means (i) the willful and continued failure of the Participant to
perform substantially the Participant’s duties with the Company (other than any
such failure resulting from incapacity due to physical or mental illness), after
a written demand for substantial performance is delivered to the Participant by
the Board or the Chief Executive Officer of the Company which specifically
identifies the manner in which the Board or Chief Executive Officer believes
that the Participant has not substantially performed the Participant’s duties,
or (ii) the willful engaging by the Participant in illegal conduct or gross
misconduct which is materially and demonstrably injurious to the Company.

For purposes of this paragraph 8, the term “Company” shall mean the Company as
defined above and any successor to all or substantially all of the business
and/or assets of the Company (whether direct or indirect, by purchase, merger,
consolidation or otherwise).

9.  
Terms and Conditions.

a.  
Forfeiture.  Except as provided in paragraphs 7 or 8 of this Agreement, the
Participant's rights in the Performance Grant shall be forfeited if the
Participant’s employment with the Company (or a subsidiary or affiliate)
terminates before the end of the Performance Period.

b.  
Nontransferability.  No rights in the Performance Grant are transferable.

 
c.  
No Right to Continued Employment.  This Performance Grant does not confer upon
the Participant any right with respect to continuance of employment by the
Company or any of its subsidiaries or affiliates, nor shall it interfere in any
way with the right of the Company or any of its subsidiaries or affiliates to
terminate the Participant's employment at any time.  The Committee reserves the
right to reduce the amount paid to a Participant below the calculated amount
earned under this Performance Grant or pay no amount at all to the
Participant.  Under no circumstance shall the Committee take any action that has
the effect of increasing the amount paid to a Participant above the calculated
amount earned under this Performance Grant.

d.  
Tax Withholding.  The Company will withhold from any payment the aggregate
amount of federal, state and local income and payroll taxes that the Company is
required to withhold on the payment.

e.  
Payment Delay for Specified Employees.  Notwithstanding anything in the Plan or
Performance Grant to the contrary, if the Participant is a “specified employee”
within the meaning of Section 409A(a)(2)(B)(i) of the Code and Treasury
Regulations and other guidance thereunder, no payment may be made by reason of
the Participant’s termination of employment before the date which is 6 months
after the date of such Participant’s termination of employment (or, if earlier,
the date of the Participant’s death). Upon the expiration of the six-month
deferral period referred to in the preceding sentence or the Participant’s
death, all payments deferred pursuant to this paragraph shall be paid to the
Participant (or the Participant’s Beneficiary in the event of the Participant’s
death) in a lump sum.  No interest shall be paid on the amounts for which
payment is delayed pursuant to this provision. The determination of whether a
Participant is a “specified employee” for this purpose shall be made by the
Committee in accordance with Section 409A of the Code and Treasury Regulations
thereunder and shall be conclusive and binding.

f.  
Compliance with Section 409A of the Code.  It is intended that this Performance
Grant comply with Section 409A of the Code and Treasury Regulations thereunder,
and other guidance and transition rules issued thereunder, and this Performance
Grant shall be interpreted and operated consistently with that intent. If the
Committee shall determine that any provisions of this Performance Grant do not
comply with the requirements of Section 409A of the Code, the Committee shall
have the authority to amend this Performance Grant to the extent necessary
(including retroactively) in order to preserve compliance with said Section
409A. The Committee shall also have the express discretionary authority to take
such other actions as may be permissible to correct any failures to comply in
operation with the requirements of Section 409A.  No Participant shall be
permitted, and the Committee shall not have any discretion, to accelerate the
timing or schedule of any benefit payment under this Performance Grant, except
as specifically provided herein or as may be permitted pursuant Code Section
409A and the Treasury Regulations thereunder. A Participant shall be deemed to
have terminated from employment for purposes of this Performance Grant if, and
only if, the Participant has experienced a “separation from service” within the
meaning of Section 409A of the Code and Treasury Regulations thereunder.

g.  
Application of Code Section 162(m). It is intended that any payments under this
Performance Grant to a Participant who is a “covered employee” constitute
“qualified performance-based compensation” within the meaning of Code Section
162(m) and the rulings and regulations promulgated thereunder.  To the maximum
extent possible, this Performance Grant and the Plan shall be interpreted and
construed consistent with this paragraph 9(g).

h.  
Governing Law.  This Agreement shall be governed by the laws of the Commonwealth
of Virginia.

i.  
Conflicts.  In the event of any conflict between the provisions of the Plan as
in effect on the date of the Performance Grant and the provisions of this
Agreement, the provisions of the Plan shall govern.  All references herein to
the Plan shall mean the Plan as in effect on the date of the Performance Grant,
as it may be amended from time to time.

j.  
Participant Bound by Plan. The Participant hereby acknowledges receipt of a copy
of the Plan and agrees to be bound by all the terms and provisions thereof.

k.  
Binding Effect.  Subject to the limitations stated above and in the Plan, this
Agreement shall be binding upon and inure to the benefit of the legatees,
distributees, and personal representatives of the Participant and the successors
of the Company.

l.  
Death Beneficiary.  The Participant’s “Beneficiary” for purposes of this
Agreement shall be the Participant’s spouse at the time of the Participant’s
death, or such other person or entity as the Participant may designate in
writing on a form acceptable to the Committee.

 
ACCEPTED AND AGREED,

PARTICIPANT

_____________________________
[NAME]
 

--------------------------------------------------------------------------------

APPENDIX A

Performance Matrix

Cumulative EPS and Average Annual ROE for the Performance Period Commencing
[DATE] and Ending [DATE]

Cumulative EPS
Performance Goal Attainment Percentage
 
Column 1
Column 2
Column 3
Column 4
Column 5
 
≥ $#.##
100%
110%
130%
140%
150%
 
≥ $#.##
85%
95%
115%
125%
135%
 
≥ $#.##
70%
80%
100%
110%
120%
 
≥ $#.##
60%
70%
90%
100%
110%
 
≥ $#.##
50%
60%
80%
90%
100%
   
≥ ##.#%
≥ ##.#%
≥ ##.#%
≥ ##.#%
≥ ##.#%
Avg.
Annual ROE

This Performance Matrix will be used to calculate the Actual Performance Goal
Attainment Percentage as described in the Interpolation Procedures set forth
below.

Interpolation Procedure

A Participant’s Performance Goal Attainment Percentage shall be calculated
according to the procedure set forth herein.

Step 1: Calculate the Actual Average ROE Amount and Actual Cumulative EPS
Amount.

Step 2: Using the Actual Average ROE Amount, determine the column (i.e. column 1
through 5) in which to interpolate the Participant’s Performance Goal Attainment
Percentage.

Step 3: Interpolate the Participant’s Performance Goal Attainment Percentage
according the formula below.

Lower Cumulative EPS Threshold Performance Goal Attainment Percentage

+

(((Actual EPS Amount – Lower EPS Amount) / (Upper EPS Threshold – Lower EPS
Threshold)) x Difference in the corresponding Performance Goal Attainment
Percentages)

Step 4: The result of the formula set forth in Step 3 above will equal the
Participant’s Actual Performance Goal Attainment Percentage.

Definitions

For purposes of calculating the Actual Performance Goal Attainment Percentage,
the following terms have the meanings ascribed to them below

·  
“Actual Average ROE Amount” means the actual Average Annual ROE achieved by the
Company for the Performance Period set forth at the top of this Appendix A.

·  
“Actual Cumulative EPS Amount” means the actual cumulative EPS achieved by the
Company during the Performance Period set forth at the top of this Appendix A.

·  
“Lower EPS Threshold” means the closest cumulative EPS threshold on the y-axis
of the Performance Matrix that is less than the Actual Cumulative EPS Amount.

·  
“Upper EPS Threshold” means the closest EPS threshold on the y-axis of the
Performance Matrix that is greater than the Actual Cumulative EPS Amount.

Example

The following example demonstrates the methodology in which to implement the
Interpolation Procedure described above.

Step 1:
·  
Actual Average ROE Amount = ##.#%

·  
Actual Cumulative EPS Amount = $#.##

Step2: Column 3 will be used to interpolate the Actual Performance Goal
Attainment Percentage.

Step 3:  #.##% + (((#.## – #.##) / (#.## – #.##)) x (###% – ###%))

Step 4: Actual Performance Goal Attainment Percentage = ###.##%