FORM OF PERFORMANCE GRANT AGREEMENT] Hooker Furniture Corporation [20##] Performance Grant Agreement
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.
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1.
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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.
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2.
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Determination of
Payment Amount. A Participant’s Payment Amount under
this Performance Grant shall be calculated according to the following
formula:
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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 ▇▇▇ 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 ▇▇▇ 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 ▇▇▇ 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.
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3.
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Performance
Goals. The Company must achieve certain Performance
Goals regarding Cumulative EPS and Average Annual ▇▇▇ that are set forth
in the Performance Matrix.
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(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
▇▇▇” 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 ▇▇▇ 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.
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4.
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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.
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5.
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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.
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6.
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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:
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(Payment
Amount – Portion of Payment Amount to be paid in cash)
_____________________________________________________
Fair Market
Value of one share of Company Stock
on the
Certification Date
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7.
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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:
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(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.
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8.
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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.
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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:
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I.
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a
material diminution in the Participant’s base
compensation;
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II.
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a
material diminution in the Participant’s authority, duties, or
responsibilities;
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III.
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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;
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IV.
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a
material diminution in the budget over which the Participant retains
authority;
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V.
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a
material change in the geographic location at which the Participant must
perform his or her duties; and
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VI.
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any
other action or inaction that constitutes a material breach by the Company
under the Participant’s employment agreement with the Company, if
any.
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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).
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9.
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Terms and
Conditions.
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a.
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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.
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b.
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Nontransferability. No
rights in the Performance Grant are
transferable.
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c.
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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.
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d.
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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.
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e.
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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.
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f.
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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.
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g.
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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).
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h.
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Governing
Law. This Agreement shall be governed by the laws of the
Commonwealth of Virginia.
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i.
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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.
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j.
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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.
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k.
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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.
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l.
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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.
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ACCEPTED AND AGREED,
PARTICIPANT
_____________________________
[NAME]
APPENDIX
A
Performance
Matrix
Cumulative
EPS and Average Annual ▇▇▇ for the Performance Period Commencing [DATE] and
Ending [DATE]
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Cumulative
EPS
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Performance
Goal Attainment Percentage
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Column
1
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Column
2
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Column
3
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Column
4
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Column
5
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≥
$#.##
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100%
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110%
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130%
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140%
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150%
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≥
$#.##
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85%
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95%
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115%
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125%
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135%
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≥
$#.##
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70%
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80%
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100%
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110%
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120%
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≥
$#.##
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60%
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70%
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90%
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100%
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110%
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≥
$#.##
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50%
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60%
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80%
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90%
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100%
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≥
##.#%
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≥
##.#%
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≥
##.#%
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≥
##.#%
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≥
##.#%
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Avg.
Annual
▇▇▇
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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 ▇▇▇ Amount and Actual Cumulative EPS Amount.
Step 2: Using the
Actual Average ▇▇▇ 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
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·
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“Actual Average ▇▇▇
Amount” means the actual Average Annual ▇▇▇ achieved by the Company
for the Performance Period set forth at the top of this Appendix
A.
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·
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“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.
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·
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“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.
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·
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“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.
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Example
The following
example demonstrates the methodology in which to implement the Interpolation
Procedure described above.
Step 1:
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·
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Actual
Average ▇▇▇ Amount = ##.#%
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·
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Actual
Cumulative EPS Amount = $#.##
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Step2: Column 3 will
be used to interpolate the Actual Performance Goal Attainment
Percentage.
Step
3: #.##% + (((#.## – #.##) / (#.## –
#.##)) x (###% – ###%))
Step 4: Actual
Performance Goal Attainment Percentage = ###.##%