<PAGE>
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(Mark One)
X QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE
- -----
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended July 31, 1999
OR
_____ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE
EXCHANGE ACT OF 1934
For the transition period from ______ to _______
Commission file number 0-14970
COST PLUS, INC.
(Exact name of registrant as specified in its charter)
California 94-1067973
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
200 4th Street, Oakland, California 94607
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (510) 893-7300
Former name, former address and former fiscal year,
if changed since last report.
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
Yes X No___
-----
The number of shares of Common Stock, $0.01 par value, outstanding on September
3, 1999 was 13,611,831.
<PAGE>
COST PLUS, INC.
FORM 10-Q
For the Quarter Ended July 31, 1999
INDEX
<TABLE>
<CAPTION>
PART I. FINANCIAL INFORMATION Page
<S> <C>
ITEM 1. Condensed Consolidated Financial Statements
Balance Sheets (unaudited) as of July 31, 1999,
January 30, 1999 and August 1, 1998 3
Statements of Operations (unaudited)
for the three and six months ended
July 31, 1999 and August 1, 1998 4
Statements of Cash Flows (unaudited)
for the six months ended July 31, 1999
and August 1, 1998 5
Notes to Condensed Consolidated Financial Statements 6-7
ITEM 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 8-11
PART II. OTHER INFORMATION
ITEM 4. Submission of Matters to a Vote of Security Holders 12
ITEM 5. Other Information 13
ITEM 6. Exhibits and Reports on Form 8-K 13
SIGNATURE PAGE 14
</TABLE>
2
<PAGE>
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
COST PLUS, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands except share and per share amounts, unaudited)
<TABLE>
<CAPTION>
July 31, January 30, August 1,
1999 1999 1998
----------------- ----------------- ----------------
<S> <C> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 19,960 $ 28,600 $ 11,998
Merchandise inventories 72,746 70,680 61,330
Other current assets 5,017 4,553 4,431
----------------- ----------------- ----------------
Total current assets 97,723 103,833 77,759
Property and equipment, net 61,271 59,034 54,023
Other assets 9,652 10,274 11,085
----------------- ----------------- ----------------
Total assets $ 168,646 $ 173,141 $ 142,867
================= ================= ================
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 15,626 $ 17,568 $ 12,024
Income taxes payable -- 8,180 --
Accrued compensation 6,321 7,421 5,454
Other current liabilities 10,531 9,633 8,685
----------------- ----------------- ----------------
Total current liabilities 32,478 42,802 26,163
Capital lease obligations 14,773 15,110 15,401
Deferred income taxes 173 173 1,969
Other long-term obligations 6,398 5,653 4,953
Shareholders' equity:
Preferred stock, $.01 par value: 5,000,000 shares
authorized; none issued and outstanding -- -- --
Common stock, $.01 par value: 45,000,000 shares
authorized; issued and outstanding 13,593,975
13,291,010 and 13,177,107 shares 136 133 132
Additional paid-in capital 107,668 104,065 101,883
Retained earnings (deficit) 7,020 5,205 (7,634)
----------------- ----------------- ----------------
Total shareholders' equity 114,824 109,403 94,381
----------------- ----------------- ----------------
Total liabilities and shareholders' equity $ 168,646 $ 173,141 $ 142,867
================= ================= ================
</TABLE>
See notes to condensed consolidated financial statements.
3
<PAGE>
COST PLUS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands except per share amounts, unaudited)
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
---------------------------- ----------------------------
July 31, August 1, July 31, August 1,
1999 1998 1999 1998
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
Net sales $ 76,556 $ 58,168 $ 151,945 $ 115,007
Cost of sales and occupancy 50,016 38,079 99,541 75,851
----------- ----------- ------------ -----------
Gross profit 26,540 20,089 52,404 39,156
Selling, general and administrative
expenses 23,729 19,066 47,272 37,396
Store preopening expenses 786 598 1,780 678
----------- ----------- ------------ -----------
Income from operations 2,025 425 3,352 1,082
Net interest expense 209 254 376 432
----------- ----------- ------------ -----------
Income before income taxes 1,816 171 2,976 650
Income taxes 708 66 1,161 253
----------- ----------- ------------ -----------
Net income $ 1,108 105 $ 1,815 $ 397
=========== =========== ============ ===========
Net income per share
Basic $ 0.08 0.01 $ 0.13 $ 0.03
Diluted $ 0.08 0.01 $ 0.13 $ 0.03
Weighted average shares outstanding
Basic 13,537 13,143 13,454 13,080
Diluted 14,111 13,593 14,007 13,568
</TABLE>
See notes to condensed consolidated financial statements.
4
<PAGE>
COST PLUS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands, unaudited)
<TABLE>
<CAPTION>
Six Months Ended
----------------------------------------------
July 31, August 1,
1999 1998
-------------------- --------------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 1,815 $ 397
Adjustments to reconcile net income to net cash provided
by (used in) operating activities:
Depreciation and amortization 5,444 4,402
Change in assets and liabilities:
Merchandise inventories (2,066) (4,724)
Other assets (185) (1,407)
Accounts payable (1,465) (1,066)
Income taxes payable (8,180) (6,282)
Other liabilities 476 307
-------------------- --------------------
Net cash used in operating activities (4,161) (8,373)
-------------------- --------------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of property and equipment (7,815) (5,191)
-------------------- --------------------
Net cash used in investing activities (7,815) (5,191)
-------------------- --------------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Principal payments on capital lease obligations (270) (247)
Proceeds from the issuance of common stock 3,606 2,125
Cash used for common stock repurchase -- (3,750)
-------------------- --------------------
Net cash provided by (used in) financing
activities 3,336 (1,872)
-------------------- --------------------
Net decrease in cash and cash equivalents (8,640) (15,436)
Cash and cash equivalents:
Beginning of period 28,600 27,434
-------------------- --------------------
End of period $ 19,960 $ 11,998
==================== ====================
SUPPLEMENTAL DISCLOSURES OF
CASH FLOW INFORMATION:
Cash paid for interest $ 380 $ 453
==================== ====================
Cash paid for taxes $ 9,615 $ 7,195
==================== ====================
</TABLE>
See notes to condensed consolidated financial statements.
5
<PAGE>
COST PLUS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Three and Six Months Ended July 31, 1999 and August 1, 1998
(Unaudited)
1. BASIS OF PRESENTATION
The accompanying unaudited condensed consolidated financial statements have been
prepared from the records of the Company without audit and, in the opinion of
management, include all adjustments (consisting of only normal recurring
accruals) necessary to present fairly the financial position at July 31, 1999
and August 1, 1998; the interim results of operations for the three and six
months ended July 31, 1999 and August 1, 1998; and changes in cash flows for the
six months then ended. The balance sheet at January 30, 1999, presented herein,
has been derived from the audited financial statements of the Company for the
fiscal year then ended.
Accounting policies followed by the Company are described in Note 1 to the
audited consolidated financial statements for the fiscal year ended January 30,
1999. Certain information and footnote disclosures normally included in
financial statements prepared in accordance with generally accepted accounting
principles have been condensed or omitted for purposes of the interim condensed
consolidated financial statements. The condensed consolidated financial
statements should be read in conjunction with the audited consolidated financial
statements, including notes thereto, for the fiscal year ended January 30, 1999.
The results of operations for the three and six month periods herein presented
are not necessarily indicative of the results to be expected for the full year.
2. REVOLVING LINE OF CREDIT AGREEMENT
On October 12, 1998, the Company entered into a new revolving line of credit
agreement with a bank, which was amended on June 15, 1999 and expires June 1,
2000. The amended agreement allows for cash borrowing and letters of credit up
to $20.0 million from January 1 through June 30 and up to $40.0 million from
July 1 through December 31 of each year. Interest is paid monthly at the bank's
reference rate minus 0.5% (7.25% at July 31, 1999) or IBOR plus 1.125%,
depending on the nature of the borrowings. The agreement is secured by the
Company's inventory and receivables. The Company is subject to certain
financial covenants customary with such agreements. At July 31, 1999, the
Company had no outstanding borrowings under the line of credit and $2.6 million
outstanding under letters of credit. Interest expense under borrowing
arrangements was $14,000 and $19,000 for the six months ended July 31, 1999 and
August 1, 1998, respectively.
3. STOCK SPLIT
On February 16, 1999, the Company's Board of Directors authorized a three-for-
two split of its common stock effective March 11, 1999 for shareholders of
record at the close of business on March 1, 1999. All share and per share data
in the accompanying condensed consolidated financial statements and notes has
been restated to reflect the stock split.
4. STOCK OPTION PLANS
In June 1999, the Company amended its 1995 Stock Option Plan to increase the
number of shares available for grant by 400,000 to a total of 2,912,004 shares,
less the aggregate number of shares issued or subject to options outstanding
under the 1994 Stock Option Plan.
6
<PAGE>
COST PLUS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
5. RECONCILIATION OF BASIC SHARES TO DILUTED SHARES
The following is a reconciliation of the weighted average number of shares (in
thousands) used in the Company's basic and diluted per share computations.
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
------------------------------------ ------------------------------------
July 31, August 1, July 31, August 1,
1999 1998 1999 1998
--------------- --------------- --------------- ---------------
<S> <C> <C> <C> <C>
Basic shares 13,537 13,143 13,454 13,080
Effect of dilutive stock options 574 450 553 488
--------------- --------------- --------------- ---------------
Diluted shares 14,111 13,593 14,007 13,568
=============== =============== =============== ===============
</TABLE>
7
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
AN ASTERISK "*" DENOTES A FORWARD-LOOKING STATEMENT REFLECTING CURRENT
EXPECTATIONS THAT INVOLVE RISKS AND UNCERTAINTIES. ACTUAL RESULTS MAY DIFFER
FROM THOSE DISCUSSED IN SUCH FORWARD-LOOKING STATEMENTS, AND SHAREHOLDERS OF
COST PLUS, INC. (THE "COMPANY" OR "COST PLUS") SHOULD CAREFULLY REVIEW THE
CAUTIONARY STATEMENTS SET FORTH IN THIS FORM 10-Q, INCLUDING, "FACTORS THAT MAY
AFFECT FUTURE RESULTS" BEGINNING ON PAGE 9 HEREOF. THE COMPANY MAY FROM TIME TO
TIME MAKE ADDITIONAL WRITTEN AND ORAL FORWARD-LOOKING STATEMENTS, INCLUDING
STATEMENTS CONTAINED IN THE COMPANY'S FILINGS WITH THE SECURITIES AND EXCHANGE
COMMISSION AND IN ITS REPORTS TO SHAREHOLDERS. THE COMPANY DOES NOT UNDERTAKE TO
UPDATE ANY FORWARD-LOOKING STATEMENT THAT MAY BE MADE FROM TIME TO TIME BY OR ON
BEHALF OF THE COMPANY.
Results of Operations
The three months (second quarter) and six months (year-to-date) ended July 31,
1999 as compared to the three months (second quarter) and six months (year-to-
date) ended August 1, 1998.
Net Sales. Net sales increased $18.4 million, or 31.6%, to $76.6 million in the
second quarter of fiscal 1999 from $58.2 million in the second quarter of fiscal
1998. Year-to-date, net sales were $151.9 million compared to $115.0 million
for the same period of fiscal 1998, an increase of $36.9 million, or 32.1%. The
increase in net sales, for the three and six months of fiscal 1999, was
attributable to new stores and an increase in comparable store sales.
Comparable store sales rose 8.6% in the second quarter and 9.4% in the six
months as a result of a larger average transaction size and an increase in
customer count. At July 31, 1999, the Company operated 94 stores compared to 74
stores as of August 1, 1998. New and non-comparable stores contributed
approximately $13.5 million of the second quarter increase and $26.3 million of
the year-to-date increase in net sales.
Gross Profit. As a percentage of net sales, second quarter gross profit was
34.7% in fiscal 1999 compared to 34.5% in fiscal 1998. Year-to-date, gross
profit, as a percentage of net sales, was 34.5% this year compared to 34.0% last
year. The increase in gross profit resulted from an improvement in merchandise
margin percentage, partially offset by higher occupancy costs in new stores.
New stores generally have higher occupancy costs, as a percentage of net sales,
until they reach maturity. The merchandise margin improvement resulted
primarily from a sales mix more heavily weighted towards higher margin goods, an
improvement in initial markon and slightly lower inventory shrinkage.
Selling, General and Administrative ("SG&A") Expenses. As a percentage of net
sales, SG&A expenses decreased to 31.0% in the second quarter of fiscal 1999
from 32.8% in the second quarter of the prior fiscal year. Year-to-date, SG&A
expenses decreased to 31.1% in the current fiscal year from 32.5% last year.
The decrease in the SG&A rates resulted primarily from leveraging store payroll,
corporate overhead expenses and advertising against higher net sales and an
expanding base of stores.
Store Preopening Expenses. Store preopening expenses, which include grand
opening advertising and preopening merchandise setup expenses, were $786,000 in
the second quarter of fiscal 1999 and $598,000 in the second quarter of the
prior year. Expenses vary depending on the particular store site and whether it
is located in a new or existing market. The Company opened four stores in the
second quarter of fiscal 1999 compared to three stores in the prior year's
second quarter. Year-to-date, store preopening expenses were $1.8 million in
fiscal 1999 and $678,000 fiscal 1998, primarily as a result of opening nine
stores in fiscal 1999 compared to four stores in fiscal 1998.
Net Interest Expense. Net interest expense for the second quarter, which
includes interest on capital leases net of interest income, was $209,000 for
fiscal 1999 and $254,000 for fiscal 1998. For the six months, interest expense
was $376,000 in fiscal 1999 compared to $432,000 in fiscal 1998.
Income Taxes. The Company's effective tax rate was 39.0% in fiscal 1999 and
fiscal 1998.
8
<PAGE>
Factors That May Affect Future Results
The Company's business is highly seasonal, reflecting the general pattern
associated with the retail industry of peak sales and earnings during the
Christmas season. Due to the importance of the Christmas selling season, the
fourth quarter of each fiscal year has historically contributed, and the Company
expects it will continue to contribute, a significant percentage of the
Company's net sales and most of its net income for the fiscal year. Any factors
negatively affecting the Company during the Christmas selling season in any
year, including unfavorable economic conditions, could have a material adverse
effect on the Company's financial condition and results of operations. The
Company generally experiences lower sales and earnings during the first three
quarters and, as is typical in the retail industry, has incurred and may
continue to incur losses in these quarters. The results of operations for these
interim periods are not necessarily indicative of the results for the full
fiscal year. In addition, the Company makes decisions regarding merchandise well
in advance of the season in which it will be sold, particularly for the
Christmas selling season. Significant deviations from projected demand for
products could have a material adverse effect on the Company's financial
condition and results of operations, either by lost sales due to insufficient
inventory or lost margin due to the need to mark down excess inventory.
The Company's quarterly results of operations may also fluctuate based upon such
factors as the number and timing of store openings and related store preopening
expenses, the amount of net sales contributed by new and existing stores, the
mix of products sold, the timing and level of markdowns, store closings,
refurbishments or relocations, competitive factors and general economic
conditions.
Liquidity and Capital Resources
The Company's primary uses for cash are to fund operating expenses, inventory
requirements and new store expansion. Historically, the Company has financed
its operations primarily from borrowings under the Company's credit facilities
and internally generated funds. The Company believes that its cash and cash
equivalents, internally generated funds and available borrowings under its
revolving line of credit will be sufficient to finance its working capital and
capital expenditures requirements for the next 12 months.*
Net cash used in operating activities in the first half of fiscal 1999 totaled
$4.2 million, a decrease of $4.2 million from the comparable period of the prior
fiscal year. This decrease resulted primarily from improved profitability and
more efficient inventory utilization, partially offset by higher income tax
payments on the prior year's increased taxable income.
Net cash used in investing activities, primarily for new stores, totaled $7.8
million for the first half of fiscal 1999 compared to $5.2 million in the
comparable period of the prior fiscal year. The Company estimates that capital
expenditures will approximate $17.0 million in fiscal 1999.*
Net cash provided by financing activities was $3.3 million in the first half of
fiscal 1999, which was primarily proceeds from the issuance of common stock in
connection with the Company's stock option and stock purchase plans. Net cash
used in financing activities was $1.9 million in fiscal 1998, primarily as a
result of the repurchase of 225,002 shares of common stock for $3.8 million from
the Company's former Chief Executive Officer, which was partially offset by
proceeds from common stock issued under the Company's stock option and stock
purchase plans.
On October 12, 1998, the Company entered into a new revolving line of credit
agreement with a bank, which was amended on June 15, 1999 and expires June 1,
2000. The amended agreement allows for cash borrowing and letters of credit up
to $20.0 million from January 1 through June 30 and up to $40.0 million from
July 1 through December 31 of each year. Interest is paid monthly at the bank's
reference rate minus 0.5% (7.25% at July 31, 1999) or IBOR plus 1.125%,
depending on the nature of the borrowings. The agreement is secured by the
Company's inventory and receivables. The Company is subject to certain
financial covenants customary with such agreements. At July 31, 1999, the
Company had no outstanding borrowings under the line of credit and $2.6 million
outstanding under letters of credit. Interest expense under borrowing
arrangements was $14,000 and $19,000 for the six months ended July 31, 1999 and
August 1, 1998, respectively.
9
<PAGE>
Year 2000 Readiness Disclosure
State of readiness
The Year 2000 issue is primarily the result of certain computer systems using a
two-digit format rather than four-digits to indicate the year. Such computer
systems will, unless modified, be unable to interpret dates beyond the year
1999, potentially causing errors and failures which may disrupt operations of
such systems. To address this issue, the Company has developed a comprehensive
plan (the "Plan") intended to ensure that all critical systems, devices and
applications, as well as data exchanged with customers, trade suppliers and
other third parties, have been evaluated and will be suitable for continued use
into and beyond the year 2000. In addition to areas normally associated with
information technology ("IT"), the Plan also includes areas normally considered
outside of IT, but which may utilize embedded microprocessors with potential
Year 2000 problems.
The Company's Year 2000 Project (the "Project") has been divided into four
phases: i)assessment, ii) remediation, iii) testing and certification; and iv)
contingency planning. An assessment of all IT systems has been completed. The
remediation of in-house systems was completed during the first quarter of fiscal
1999. Key hardware and software systems were tested and determined to be
compliant by the end of the second quarter of fiscal 1999. Any remaining work
on minor systems and end-to-end testing is scheduled for completion in the third
quarter of fiscal 1999*. Hardware upgrades which were planned for growth, some
of which also assist in Year 2000 compliance, have been accelerated into fiscal
1999.
The Company continues to update its surveys of key vendors, suppliers and
service providers for their readiness. Assessment of the risks associated with
vendors and third party service providers' failure to remediate their own Year
2000 issues will continue throughout the duration of the Project.
Costs to address Year 2000 issues
In addressing the Year 2000 Project, the Company has relied and continues to
rely primarily on internal resources, with supervised support from consultants
and contractors. Internal costs, which are principally payroll for its
information systems personnel, are not separately tracked. The costs for the
Year 2000 Project have not been and are not expected to be material.* Costs are
consistent with and included in the Company's operating budgets and, based on
information gathered to date, future Project costs are not expected to have a
material adverse effect on the results of operations in any period, on
liquidity, financial position or other information technology project
schedules.*
Risks of the Year 2000 issues
The Company believes that its structured approach toward modifications of
existing software and conversions to new software for certain applications, as
discussed above, should mitigate significant disruption of its operations due to
potential Year 2000 problems.* The Company has also identified areas of
potential third party risk, which include communications systems, utilities and
elements of the merchandise supply chain, including procurement , transportation
and import activities. The disruption of communications systems and utilities
could impact the Company's ability to operate its stores. The inability of
principal suppliers to be Year 2000 compliant could result in delays in product
deliveries from such suppliers and disruption of the Company's distribution
channel. There can be no assurance that other entities will achieve Year 2000
compliance or that the Company can timely compensate for its risks should such
entities fail to do so. If the Company's internal systems are not adequately
remediated, or if necessary modifications and conversions by other companies on
whose systems some of the Company's business processes depend are not completed
on time, the Year 2000 issue could have a material adverse effect on the
Company's operations. The Company's plans for expenditures to achieve Year 2000
compliance and the dates by which Year 2000 compliance will be achieved are
based on management's best estimates. These estimates include certain
assumptions about future events, including the continued availability of certain
resources. However, there can be no assurance that these estimates will be
achieved, and because of the complex interdependencies involved with Year 2000
issues, actual results could differ materially from these estimates. Because of
the range of possible issues and the large number of variables involved, it is
impossible to quantify the potential financial impact of problems if the
Company's remediation efforts or the efforts of those with whom it does business
are not successful.
10
<PAGE>
Contingency plans
The Company is developing contingency plans for critical business processes in
the event of compliance failure on the part of the Company or its business
partners which include communications systems, utilities, suppliers and other
service providers. Contingency plans were completed by the end of the second
quarter of fiscal 1999 and will continue to be evaluated and updated throughout
the year as new information becomes available. However, there can be no
assurance that such contingency plans will address all of the Year 2000 issues
which the Company might ultimately encounter.
Impact of New Accounting Standard
In June 1998, the Financial Accounting Standards Board ("FASB") issued Statement
of Financial Accounting Standards ("SFAS") No. 133, "Accounting for Derivative
Instruments and Hedging Activities." This statement establishes accounting and
reporting standards for derivative instruments, including certain derivative
instruments embedded in either assets or liabilities. As amended in June 1999
by SFAS No. 137, this statement is effective for all fiscal quarters of all
fiscal years beginning after June 15, 2000. Since the Company does not engage
in derivative or hedging activities, application of the standard would not have
a material effect on the Company's consolidated financial position, results of
operations or cash flows.
11
<PAGE>
PART II. OTHER INFORMATION
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
At the Company's 1999 Annual Meeting of Shareholders held on June 15, 1999, the
shareholders voted on the following proposals:
Proposal 1. To elect five directors for the ensuing year and until their
successors are elected.
Proposal 2. To approve an amendment to the Company's 1995 Stock Option Plan
to increase the shares reserved for issuance thereunder by 400,000
shares.
Proposal 3. To approve an amendment to the Company's 1996 Director Option Plan
to terminate the automatic option grant mechanism in response to
proposed changes in accounting rules relating to stock options and
to grant the Board of Directors flexibility in establishing the
terms of options granted under the Director Option Plan.
Proposal 4. To ratify and approve the appointment of Deloitte & Touche LLP
as independent auditors of the Company for the fiscal year ending
January 29, 2000.
1999 ANNUAL MEETING ELECTION RESULTS
Proposal 1 - Election of Directors
<TABLE>
<CAPTION>
Name For Withheld
---- --- --------
<S> <C> <C>
Murray H. Dashe 11,707,712 404,637
Joseph H. Coulombe 11,707,712 404,637
Danny W. Gurr 11,692,712 419,637
Olivier L. Trouveroy 11,692,562 419,787
Thomas D. Willardson 11,707,412 404,937
</TABLE>
Proposal 2, 3 and 4
<TABLE>
<CAPTION>
Broker
Proposal For Against Abstain Non-Votes
-------- --- ------- ------- -----------
<S> <C> <C> <C> <C>
Amendment to the 1995 9,216,150 2,885,896 756 9,547
Stock Option Plan
Amendment to the 1996 11,091,518 1,009,372 1,912 9,547
Director Option Plan
Appointment of Deloitte & 12,110,985 1,275 89 0
Touche LLP
</TABLE>
12
<PAGE>
ITEM 5. OTHER INFORMATION
Paul Coletta joined the Company as Vice President, Merchandising, effective July
19, 1999. Previously, Mr. Coletta was Vice President, Product Development and
Design, with Viacom.
Ron Rouse joined the Company effective July 19, 1999, as Vice President,
Merchandise Planning and Allocation. Most recently, he was Vice President,
Merchandise Planning and Allocation at Natural Wonders.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
10.1 Amendment Number 1 to Business Loan Agreement, dated March 12,
1999, between the Company and Bank of America National Trust and
Savings Association.
10.2 Amendment Number 2 to the Business Loan Agreement dated June 15,
1999, between the Company and Bank of America National Trust and
Savings Association.
10.3 1996 Director Option Plan, as amended.
10.4 Form of Stock Option Agreement, 1996 Director Option Plan.
10.5 1995 Stock Option Plan, as amended.
10.6 Amendment to Employment Agreement, dated July 22, 1999, between
the Company and Murray H. Dashe.
10.7 Amendment to Employment Agreement, dated July 22, 1999, between
the Company and John F. Hoffner.
10.8 Employment Severance Agreement, as amended, dated July 22, 1999,
between the Company and Kathi P. Lentzsch.
10.9 Employment Severance Agreement, as amended, dated July 22, 1999,
between the Company and Gary D. Weatherford.
10.10 Employment Severance Agreement, as amended, dated July 22, 1999
between the Company and Joan S. Fujii.
27 Financial Data Schedule (submitted for SEC only).
(b) Reports on Form 8-K
No reports on Form 8-K were filed by the Company during the period
covered by this report.
13
<PAGE>
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
COST PLUS, INC.
---------------------------------------------
Registrant
/s/ John F. Hoffner
---------------------------------------------
Date: September 13, 1999 By: John F. Hoffner
Executive Vice President, Administration
Chief Financial Officer
14
<PAGE>
[LOGO] Bank of America EXHIBIT 10.1
================================================================================
Amendment to Documents
AMENDMENT NO. 1 TO BUSINESS LOAN AGREEMENT
This Amendment No. 1 (the "Amendment") dated as of March 12, 1999 is between
Bank of America National Trust and Savings Association (the "Bank") and Cost
Plus, Inc. (the "Borrower").
RECITALS
--------
A. The Bank and the Borrower entered into a certain Business Loan Agreement
dated as of October 12, 1998 (the "Agreement").
B. The Bank and the Borrower desire to amend the Agreement.
AGREEMENT
---------
1. Definitions. Capitalized terms used but not defined in this Amendment
-----------
shall have the meaning given to them in the Agreement.
2. Amendments. The Agreement is hereby amended as follows:
----------
2.1 Paragraph 5.4 of the Agreement is amended to read in its entirety as
follows:
5.4 Direct Debit (Pre-Billing).
(a) The Borrower agrees that the Bank will debit the Borrower's
deposit account number or such other of the Borrower's accounts
with the Bank as designated in writing by the Borrower (the
"Designated Account")on the date each payment of interest and any
fees from the Borrower becomes due (the "Due Date"). If the Due
Date is not a banking day, the Designated Account will be debited
on the next banking day.
(b) Approximately 5 days prior to each Due Date, the Bank will mail
to the Borrower a statement of the amounts that will be due on
that Due Date (the "Billed Amount"). The calculation will be made
on the assumption that no new extensions of credit or payments
will be made between the date of the billing statement and the
Due Date, and that there will be no changes in the applicable
interest rate.
(c) The Bank will debit the Designated Account for the Billed Amount,
regardless of the actual amount due on that date (the "Accrued
Amount"). If the Billed Amount debited to the Designated Account
differs from the Accrued Amount, the discrepancy will be treated
as follows:
(i) If the Billed Amount is less than the Accrued Amount, the
Billed Amount for the following Due Date will be increased
by the amount of the discrepancy. The Borrower will not be
in default by reason of any such discrepancy.
(ii) If the Billed Amount is more than the Accrued Amount, the
Billed Amount for the following Due Date will be decreased
by the amount of the discrepancy.
Regardless of any such discrepancy, interest will continue to
accrue based on the actual amount of principal outstanding
without compounding. The Bank will not pay the Borrower interest
on any overpayment.
(d) The Borrower will maintain sufficient funds in the Designated
Account to cover each debit. If there are insufficient funds in
the Designated Account on the date the Bank enters any debit
authorized by this Agreement, the debit will be reversed.
3. Representations and Warranties. When the Borrower signs this Amendment,
------------------------------
the Borrower represents and warrants to the Bank that: (a) there is no event
which is, or with notice or lapse of time or both would be, a default under the
Agreement except those events, if any, that have been disclosed in writing to
the Bank or waived in writing by the Bank, (b) the representations and
warranties in the Agreement are true as of the date of this Amendment as if made
on the date of this Amendment, (c) this Amendment is within the Borrower's
powers, has been duly authorized, and does not conflict with any of the
Borrower's organizational papers, and (d) this Amendment does not conflict with
any law, agreement, or obligation by which the Borrower is bound.
-1-
<PAGE>
4. Effect of Amendment. Except as provided in this Amendment, all of the
-------------------
terms and conditions of the Agreement shall remain in full force and effect.
5. Counterparts. This Amendment may be executed in counterparts, each of
------------
which when so executed shall be deemed an original, but all such counterparts
together shall constitute but one and the same instrument.
This Amendment is executed as of the date stated at the beginning of this
Amendment.
Bank of America Cost Plus, Inc.
National Trust and Savings Association
X /s/ M. R. Carden
--------------------
X /s/ Peter M. Gould By: Malcolm R. Carden
- ----------------------
By: Peter M. Gould, Vice President Treasurer
-2-
<PAGE>
[LOGO] Bank of America EXHIBIT 10.2
================================================================================
Amendment to Documents
AMENDMENT NO. 2 TO BUSINESS LOAN AGREEMENT
This Amendment No. 2 (the "Amendment") dated as of June 15, 1999, is
between Bank of America National Trust and Savings Association (the "Bank") and
Cost Plus, Inc. (the "Borrower").
RECITALS
--------
A. The Bank and the Borrower entered into a certain Business Loan
Agreement dated as of October 12, 1998, as previously amended (the "Agreement").
B. The Bank and the Borrower desire to further amend the Agreement.
AGREEMENT
---------
1. Definitions. Capitalized terms used but not defined in this Amendment
-----------
shall have the meaning given to them in the Agreement.
2. Amendments. The Agreement is hereby amended as follows:
----------
2.1 In subparagraph (b)of paragraph 8.7 of the Agreement, the amount
Twenty Million Dollars ($20,000,000)is substituted for the amount
Eighteen Million DoIlars ($18,000,000).
2.2 Subparagraphs (a)and (b)of paragraph 8.2 of the Agreement are
amended as follows:
"(a)The words "120 days" is substituted for the words "90 days".
"(b)The words "45 days" is substituted for the words "30 days".
3. Representations and Warranties. When the Borrower signs this
------------------------------
Amendment, the Borrower represents and warrants to the Bank that: (a)there is no
event which is, or with notice or lapse of time or both would be, a default
under the Agreement except those events, if any, that have been disclosed in
writing to the Bank or waived in writing by the Bank, (b)the representations and
warranties in the Agreement are true as of the date of this Amendment as if made
on the date of this Amendment, (c)this Amendment is within the Borrower's
powers, has been duly authorized, and does not conflict with any of the
Borrower's organizational papers, and (d)this Amendment does not conflict with
any law, agreement, or obligation by which the Borrower is bound.
4. Effect of Amendment. Except as provided in this Amendment, all of the
-------------------
terms and conditions of the Agreement shall remain in full force and effect.
This Amendment is executed as of the date stated at the beginning of this
Amendment.
Bank of America Cost Plus, Inc.
NationalTrust and Savings Association
/s/ Peter M. Gould /s/ John F. Hoffner
-------------------------------- -------------------------------
By: Peter M. Gould, Vice President By: John F. Hoffner
-1-
<PAGE>
EXHIBIT 10.3
COST PLUS, INC.
1996 DIRECTOR OPTION PLAN /1/
1. Purposes of the Plan. The purposes of this 1996 Director Option Plan
--------------------
are to attract and retain the best available personnel for service as Outside
Directors (as defined herein) of the Company, to provide additional incentive to
the Outside Directors of the Company to serve as Directors, and to encourage
their continued service on the Board.
All options granted hereunder shall be nonstatutory stock options.
2. Definitions. As used herein, the following definitions shall apply:
-----------
(a) "Board" means the Board of Directors of the Company.
-----
(b) "Code" means the Internal Revenue Code of 1986, as amended.
----
(c) "Common Stock" means the Common Stock of the Company.
------------
(d) "Committee" means a committee appointed by the Board to administer
---------
the Plan and to perform the functions set forth herein, or, if no such committee
is appointed, the Board.
(e) "Company" means Cost Plus, Inc., a California corporation.
-------
(f) "Director" means a member of the Board.
--------
(g) "Employee" means any person, including officers and Directors,
--------
employed by the Company or any Parent or Subsidiary of the Company. The payment
of a Director's fee by the Company shall not be sufficient in and of itself to
constitute "employment" by the Company.
(h) "Exchange Act" means the Securities Exchange Act of 1934, as
------------
amended.
(i) "Fair Market Value" means, as of any date, the value of Common
-----------------
Stock determined as follows:
(i) If the Common Stock is listed on any established stock
exchange or a national market system, including without limitation the Nasdaq
National Market or The Nasdaq SmallCap Market of The Nasdaq Stock Market, its
Fair Market Value shall be the closing sales price for such stock (or the
closing bid, if no sales were reported) as quoted on such exchange or system for
the day of determination, as reported in The Wall Street Journal or such other
source as the Administrator deems reliable;
_________________
/1/ Includes amendment by the board of directors on April 21, 1997 and approval
by the shareholders on June 19, 1997; adjustments for the March 1999 3-for-2
stock split; and amendment by the board of directors on May 13, 1999 and
approval by the shareholders on June 15, 1999.
<PAGE>
(ii) If the Common Stock is regularly quoted by a recognized
securities dealer but selling prices are not reported, the Fair Market Value of
a Share of Common Stock shall be the mean between the high bid and low asked
prices for the Common Stock on the date of determination, as reported in The
Wall Street Journal or such other source as the Board deems reliable, or;
(iii) In the absence of an established market for the Common
Stock, the Fair Market Value thereof shall be determined in good faith by the
Board.
(j) "Inside Director" means a Director who is an Employee.
---------------
(k) "Option" means a stock option granted pursuant to the Plan.
------
(l) "Optioned Stock" means the Common Stock subject to an Option.
--------------
(m) "Optionee" means a Director or an entity that holds an Option.
--------
(n) "Outside Director" means a Director who is not an Employee.
----------------
(o) "Parent" means a "parent corporation," whether now or hereafter
------
existing, as defined in Section 424(e) of the Code.
(p) "Plan" means this 1996 Director Option Plan.
----
(q) "Representative Director" means a Director who is a member of the
-----------------------
Board as the representative for an entity that employs such Director. The
determination of whether an Outside Director is a Representative Director shall
be determined by the representations of such Director and such determination may
be changed at any time by such Director.
(r) "Share" means a share of the Common Stock, as adjusted in
-----
accordance with Section 10 of the Plan.
(s) "Subsidiary" means a "subsidiary corporation," whether now or
----------
hereafter existing, as defined in Section 424(f) of the Internal Revenue Code of
1986.
3. Stock Subject to the Plan. Subject to the provisions of Section 10 of
-------------------------
the Plan, the maximum aggregate number of Shares which may be optioned and sold
under the Plan is 102,450 Shares of Common Stock. The Shares may be
authorized, but unissued, or reacquired Common Stock.
If an Option expires or becomes unexercisable without having been
exercised in full, the unpurchased Shares which were subject thereto shall
become available for future grant or sale under the Plan (unless the Plan has
terminated). Shares that have actually been issued under the Plan shall not be
returned to the Plan and shall not become available for future distribution
under the Plan.
4. Administration and Grants of Options under the Plan.
---------------------------------------------------
-2-
<PAGE>
(a) The Plan shall be administered by the Committee which shall hold
meetings at such times as may be necessary for the proper administration of the
Plan. The Committee shall keep minutes of its meetings. Except as otherwise
provided in the Company's Articles of Incorporation or By-Laws, a quorum shall
consist of a majority of the members of the Committee and a majority of a quorum
may authorize any action. Except as otherwise provided in the Company's
Articles of Incorporation or Bylaws, any decision or determination reduced to
writing and signed by the requisite number of the members of the Committee shall
be as fully effective as if made by the vote of the requisite number of members
at a meeting duly called and held.
(b) The Committee shall be composed of the Board of Directors or a
committee appointed by the Board.
(c) Subject to the express terms and conditions set forth herein, the
Committee shall have the power from time to time:
(i) to determine those individuals to whom Options shall be
granted under the Plan and the number of Shares subject to each Option to be
granted, to prescribe the terms and conditions (which need not be identical) of
each such Option, including the Fair Market Value on any date, and to make any
amendment or modification to any option agreement, including the acceleration of
vesting, consistent with the terms of the Plan;
(ii) to construe and interpret the Plan and the Options granted
hereunder and to establish, amend and revoke rules and regulations for the
administration of the Plan, including, but not limited to, correcting any defect
or supplying any omission, or reconciling any inconsistency in the Plan or in
any Agreement, in the manner and to the extent it shall deem necessary or
advisable so that the Plan complies with applicable law, and otherwise to make
the Plan fully effective. All decisions and determinations by the Committee in
the exercise of this power shall be final, binding and conclusive upon the
Company, its Subsidiaries, the Optionees, and all other persons having any
interest therein;
(iii) to exercise its discretion with respect to the powers and
rights granted to it as set forth in the Plan; and
(iv) generally, to exercise such powers and to perform such acts
as are deemed necessary or advisable to promote the best interests of the
Company with respect to the Plan.
(d) Procedure for Grants. The terms of an Option granted hereunder
--------------------
shall be as follows:
(i) the term of the Option shall be up to ten (10) years.
(ii) subject to Sections 8 and 10 hereof, the Option shall be
exercisable:
(A) in the event of an Option held directly by an Outside
Director, only while the Outside Director remains a Director of the Company.
-3-
<PAGE>
(B) in the event of an Option held by an entity pursuant to
Section 5(b) hereof, only while the Representative Director remains a Director
of the Company.
(iii) the exercise price per Share shall be 100% of the Fair
Market Value per Share on the date of grant of the Option. In the event that the
date of grant of the Option is not a trading day, the exercise price per Share
shall be the Fair Market Value on the next trading day immediately following the
date of grant of the Option.
(iv) subject to Section 10 hereof, the Option shall become
exercisable as determined by the Committee at the time of grant of the Option.
5. Eligibility.
-----------
(a) Except as provided in Section 5(b) hereof, Options may be granted
only to Outside Directors.
(b) In the event an Outside Director is a Representative Director,
Options shall be granted in the name of the entity employing such Representative
Director and such Representative Director shall not personally receive any
option grants in the Representative Director's own name.
(c) The Plan shall not confer upon any Outside Director any right with
respect to continuation of service as a Director or nomination to serve as a
Director, nor shall it interfere in any way with any rights which the Director
or the Company may have to terminate the Director's relationship with the
Company at any time.
6. Term of Plan. The Plan shall become effective upon the earlier to
------------
occur of its adoption by the Board or its approval by the shareholders of the
Company as described in Section 16 of the Plan. It shall continue in effect for
a term of ten (10) years unless sooner terminated under Section 11 of the Plan.
7. Form of Consideration. The consideration to be paid for the Shares to
---------------------
be issued upon exercise of an Option, including the method of payment, shall
consist of (i) cash, (ii) check, (iii) other shares which (x) in the case of
Shares acquired upon exercise of an Option, have been owned by the Optionee for
more than six (6) months on the date of surrender, and (y) have a Fair Market
Value on the date of surrender equal to the aggregate exercise price of the
Shares as to which said Option shall be exercised, (iv) delivery of a properly
executed exercise notice together with such other documentation as the Company
and the broker, if applicable, shall require to effect an exercise of the Option
and delivery to the Company of the sale or loan proceeds required to pay the
exercise price, or (v) any combination of the foregoing methods of payment.
8. Exercise of Option.
------------------
(a) Procedure for Exercise; Rights as a Shareholder. Any Option
-----------------------------------------------
granted hereunder shall be exercisable at such times as are set forth in Section
4 hereof.
-4-
<PAGE>
An Option may not be exercised for a fraction of a Share.
An Option shall be deemed to be exercised when written notice of such
exercise has been given to the Company in accordance with the terms of the
Option by the person entitled to exercise the Option and full payment for the
Shares with respect to which the Option is exercised has been received by the
Company. Full payment may consist of any consideration and method of payment
allowable under Section 7 of the Plan. Until the issuance (as evidenced by the
appropriate entry on the books of the Company or of a duly authorized transfer
agent of the Company) of the stock certificate evidencing such Shares, no right
to vote or receive dividends or any other rights as a shareholder shall exist
with respect to the Optioned Stock, notwithstanding the exercise of the Option.
A share certificate for the number of Shares so acquired shall be issued to the
Optionee as soon as practicable after exercise of the Option. No adjustment
shall be made for a dividend or other right for which the record date is prior
to the date the stock certificate is issued, except as provided in Section 10 of
the Plan.
Exercise of an Option in any manner shall result in a decrease in the
number of Shares which thereafter may be available, both for purposes of the
Plan and for sale under the Option, by the number of Shares as to which the
Option is exercised.
(b) Termination of Continuous Status as a Director. Subject to
----------------------------------------------
Section 10 hereof, in the event an Optionee's status as a Director terminates
(other than the Optionee's death or total and permanent disability (as defined
in Section 22(e)(3) of the Code)), the Optionee may exercise his or her Option,
but only within six (6) months following the date of such termination, and only
to the extent that the Optionee was entitled to exercise it on the date of such
termination (but in no event later than the expiration of its ten (10) year
term). To the extent that the Optionee was not entitled to exercise an Option
on the date of such termination, and to the extent that the Optionee does not
exercise such Option (to the extent otherwise so entitled) within the time
specified herein, the Option shall terminate.
(c) Disability of Optionee. In the event an Optionee's status as a
----------------------
Director terminates as a result of total and permanent disability (as defined in
Section 22(e)(3) of the Code), the Optionee may exercise his or her Option, but
only within twelve (12) months following the date of such termination, and only
to the extent that the Optionee was entitled to exercise it on the date of such
termination (but in no event later than the expiration of its ten (10) year
term). To the extent that the Optionee was not entitled to exercise an Option
on the date of termination, or if the Optionee does not exercise such Option (to
the extent otherwise so entitled) within the time specified herein, the Option
shall terminate.
(d) Death of Optionee. In the event of an Optionee's death, the
-----------------
Optionee's estate or a person who acquired the right to exercise the Option by
bequest or inheritance may exercise the Option, but only within twelve (12)
months following the date of death, and only to the extent that the Optionee was
entitled to exercise it on the date of death (but in no event later than the
expiration of its ten (10) year term). To the extent that the Optionee was not
entitled to exercise an Option on the date of death, and to the extent that the
Optionee's estate or a person who acquired the right to exercise such Option
does not exercise such Option (to the extent otherwise so entitled) within the
time specified herein, the Option shall terminate.
-5-
<PAGE>
9. Non-Transferability of Options. The Option may not be sold, pledged,
------------------------------
assigned, hypothecated, transferred, or disposed of in any manner other than by
will or by the laws of descent or distribution and may be exercised, during the
lifetime of the Optionee, only by the Optionee.
10. Adjustments Upon Changes in Capitalization, Dissolution, Merger or
------------------------------------------------------------------
Asset Sale.
----------
(a) Changes in Capitalization. Subject to any required action by the
-------------------------
shareholders of the Company, the number of Shares covered by each outstanding
Option, the number of Shares which have been authorized for issuance under the
Plan but as to which no Options have yet been granted or which have been
returned to the Plan upon cancellation or expiration of an Option, as well as
the price per Share covered by each such outstanding Option shall be
proportionately adjusted for any increase or decrease in the number of issued
Shares resulting from a stock split, reverse stock split, stock dividend,
combination or reclassification of the Common Stock, or any other increase or
decrease in the number of issued Shares effected without receipt of
consideration by the Company; provided, however, that conversion of any
convertible securities of the Company shall not be deemed to have been "effected
without receipt of consideration." Except as expressly provided herein, no
issuance by the Company of shares of stock of any class, or securities
convertible into shares of stock of any class, shall affect, and no adjustment
by reason thereof shall be made with respect to, the number or price of Shares
subject to an Option.
(b) Dissolution or Liquidation. In the event of the proposed
--------------------------
dissolution or liquidation of the Company, to the extent that an Option has not
been previously exercised, it shall terminate immediately prior to the
consummation of such proposed action.
(c) Merger or Asset Sale. In the event of a merger of the Company
--------------------
with or into another corporation or the sale of substantially all of the assets
of the Company, outstanding Options may be assumed or equivalent options may be
substituted by the successor corporation or a Parent or Subsidiary thereof (the
"Successor Corporation"). If an Option is assumed or substituted for, the
Option or equivalent option shall continue to be exercisable as provided in
Section 4 hereof for so long as the Optionee (or, in the case of an entity
Optionee, such Optionee's Representative Director) serves as a Director or a
director of the Successor Corporation. Following such assumption or
substitution, if the Optionee's (or, in the case of an entity Optionee, such
Optionee's Representative Director's) status as a Director or director of the
Successor Corporation, as applicable, is terminated other than upon a voluntary
resignation by the Optionee (or, in the case of an entity Optionee, such
Optionee's Representative Director), the Option or option shall become fully
exercisable, including as to Shares for which it would not otherwise be
exercisable. Thereafter, the Option or option shall remain exercisable in
accordance with Sections 8(b) through (d) above.
If the Successor Corporation does not assume an outstanding Option or
substitute for it an equivalent option, the Option shall become fully vested and
exercisable, including as to Shares for which it would not otherwise be
exercisable. In such event the Board shall notify the Optionee that the Option
shall be fully exercisable for a period of thirty (30) days from the date of
such notice, and upon the expiration of such period the Option shall terminate.
-6-
<PAGE>
For the purposes of this Section 10(c), an Option shall be considered
assumed if, following the merger or sale of assets, the Option confers the right
to purchase or receive, for each Share of Optioned Stock subject to the Option
immediately prior to the merger or sale of assets, the consideration (whether
stock, cash, or other securities or property) received in the merger or sale of
assets by holders of Common Stock for each Share held on the effective date of
the transaction (and if holders were offered a choice of consideration, the type
of consideration chosen by the holders of a majority of the outstanding Shares).
11. Amendment and Termination of the Plan.
-------------------------------------
(a) Amendment and Termination. Except as set forth in Section 4, the
-------------------------
Board may at any time amend, alter, suspend, or discontinue the Plan, but no
amendment, alteration, suspension, or discontinuation shall be made which would
impair the rights of any Optionee under any grant theretofore made, without such
Optionee's consent. In addition, to the extent necessary and desirable to
comply with any other applicable law or regulation (including any rule of a
stock exchange or automated stock quotation system upon which the shares are
traded), the Company shall obtain shareholder approval of any Plan amendment in
such a manner and to such a degree as required.
(b) Effect of Amendment or Termination. Any such amendment or
----------------------------------
termination of the Plan shall not affect Options already granted and such
Options shall remain in full force and effect as if this Plan had not been
amended or terminated.
12. Time of Granting Options. The date of grant of an Option shall, for
------------------------
all purposes, be the date determined in accordance with Section 4 hereof.
13. Conditions Upon Issuance of Shares. Shares shall not be issued
----------------------------------
pursuant to the exercise of an Option unless the exercise of such Option and the
issuance and delivery of such Shares pursuant thereto shall comply with all
relevant provisions of law, including, without limitation, the Securities Act of
1933, as amended, the Exchange Act, the rules and regulations promulgated
thereunder, state securities laws, and the requirements of any stock exchange
upon which the Shares may then be listed, and shall be further subject to the
approval of counsel for the Company with respect to such compliance.
As a condition to the exercise of an Option, the Company may require
the person exercising such Option to represent and warrant at the time of any
such exercise that the Shares are being purchased only for investment and
without any present intention to sell or distribute such Shares, if, in the
opinion of counsel for the Company, such a representation is required by any of
the aforementioned relevant provisions of law.
Inability of the Company to obtain authority from any regulatory body
having jurisdiction, which authority is deemed by the Company's counsel to be
necessary to the lawful issuance and sale of any Shares hereunder, shall relieve
the Company of any liability in respect of the failure to issue or sell such
Shares as to which such requisite authority shall not have been obtained.
-7-
<PAGE>
14. Reservation of Shares. The Company, during the term of this Plan,
---------------------
will at all times reserve and keep available such number of Shares as shall be
sufficient to satisfy the requirements of the Plan.
15. Option Agreement. Options shall be evidenced by written option
----------------
agreements in such form as the Board shall approve.
-8-
<PAGE>
EXHIBIT 10.4
COST PLUS, INC.
DIRECTOR OPTION AGREEMENT
Cost Plus, Inc., a California corporation (the "Company"), has granted to
((Directors)) (the " Optionee"), an option to purchase a total of ((Shares))
shares of the Company's Common Stock (the "Optioned Stock"), at the price
determined as provided herein, and in all respects subject to the terms,
definitions and provisions of the Company's 1996 Director Option Plan (the
"Plan") adopted by the Company which is incorporated herein by reference. The
terms defined in the Plan shall have the same defined meanings herein.
1. Nature of the Option. This Option is a nonstatutory option and is not
--------------------
intended to qualify for any special tax benefits to the Optionee.
2. Exercise Price. The exercise price is $((Price)) for each share of
--------------
Common Stock.
3. Exercise of Option. This Option shall be exercisable during its
------------------
term in accordance with the provisions of Section 8 of the Plan as follows:
(i) Right to Exercise.
-----------------
(a) This Option may be exercised, in whole or in part, at any
time or from time-to-time during its term.
(b) This Option may not be exercised for a fraction of a share.
(c) In the event of Optionee's death, disability or other
termination of service as a Director, the exercisability of the Option is
governed by Section 8 of the Plan.
(ii) Method of Exercise. This Option shall be exercisable by
------------------
written notice which shall state the election to exercise the Option and the
number of Shares in respect of which the Option is being exercised. Such written
notice, in the form attached hereto as Exhibit A, shall be signed by the
Optionee and shall be delivered in person or by certified mail to the Secretary
of the Company. The written notice shall be accompanied by payment of the
exercise price.
<PAGE>
4. Method of Payment. Payment of the exercise price shall be by any of
-----------------
the following, or a combination thereof, at the election of the Optionee:
(i) cash;
(ii) check;
(iii) surrender of other shares which (x) in the case of Shares
acquired upon exercise of an Option, have been owned by the Optionee for more
than six (6) months on the date of surrender, and (y) have a Fair Market Value
on the date of surrender equal to the aggregate exercise price of the Shares as
to which said Option shall be exercised; or
(iv) delivery of a properly executed exercise notice together with
such other documentation as the Company and the broker, if applicable, shall
require to effect an exercise of the Option and delivery to the Company of the
sale or loan proceeds required to pay the exercise price.
5. Restrictions on Exercise. This Option may not be exercised if the
------------------------
issuance of such Shares upon such exercise or the method of payment of
consideration for such shares would constitute a violation of any applicable
federal or state securities or other law or regulations, or if such issuance
would not comply with the requirements of any stock exchange upon which the
Shares may then be listed. As a condition to the exercise of this Option, the
Company may require Optionee to make any representation and warranty to the
Company as may be required by any applicable law or regulation.
6. Non-Transferability of Option. This Option may not be transferred
-----------------------------
in any manner otherwise than by will or by the laws of descent or distribution
and may be exercised during the lifetime of Optionee only by the Optionee. The
terms of this Option shall be binding upon the executors, administrators, heirs,
successors and assigns of the Optionee.
7. Term of Option. This Option may not be exercised more than ten (10)
--------------
years from the date of grant of this Option, and may be exercised during such
period only in accordance with the Plan and the terms of this Option.
8. Taxation Upon Exercise of Option. Optionee understands that, upon
--------------------------------
exercise of this Option, he or she will recognize income for tax purposes in an
amount equal to the excess of the then Fair Market Value of the Shares purchased
over the exercise price paid for such Shares. Since the Optionee is subject to
Section 16(b) of the Securities Exchange Act of 1934, as amended, under certain
limited circumstances the measurement and timing of such income (and the
commencement of any capital gain holding period) may be deferred, and the
Optionee is advised to contact a tax advisor concerning the application of
Section 83 in general and the availability a Section 83(b) election in
particular in connection with the exercise of the Option. Upon a resale of such
Shares by the Optionee, any difference between the sale price and the Fair
Market Value of the Shares on the date of exercise of the Option, to the extent
not included in income as described above, will be treated as capital gain or
loss.
-2-
<PAGE>
DATE OF GRANT: _________________
COST PLUS, INC.,
a California corporation
By:____________________________
Optionee acknowledges receipt of a copy of the Plan, a copy of which is
attached hereto, and represents that he or she is familiar with the terms and
provisions thereof, and hereby accepts this Option subject to all of the terms
and provisions thereof. Optionee hereby agrees to accept as binding, conclusive
and final all decisions or interpretations of the Board upon any questions
arising under the Plan.
Dated: ___________________
____________________________
Optionee
-3-
<PAGE>
EXHIBIT A
COST PLUS, INC.
DIRECTOR OPTION EXERCISE NOTICE
Cost Plus, Inc.
200 4th Street
Oakland, CA 94607
Attention: Corporate Secretary
1. Exercise of Option. The undersigned ("Optionee") hereby elects to
------------------
exercise Optionee's option to purchase ______ shares of the Common Stock (the
"Shares") of Cost Plus, Inc. (the "Company") under and pursuant to the Company's
1996 Director Option Plan and the Director Option Agreement dated _____________
(the "Agreement").
2. Representations of Optionee. Optionee acknowledges that Optionee has
---------------------------
received, read and understood the Agreement.
3. Tax Consequences. Optionee understands that Optionee may suffer
----------------
adverse tax consequences as a result of Optionee's purchase or disposition of
the Shares. Optionee represents that Optionee has consulted with any tax
consultant(s) Optionee deems advisable in connection with the purchase or
disposition of the Shares and that Optionee is not relying on the Company for
any tax advice.
4. Delivery of Payment. Optionee herewith delivers to the Company the
-------------------
aggregate purchase price for the Shares that Optionee has elected to purchase
and has made provision for the payment of any federal or state withholding taxes
required to be paid or withheld by the Company.
5. Entire Agreement. The Agreement is incorporated herein by reference.
----------------
This Exercise Notice and the Agreement constitute the entire agreement of the
parties and supersede in their entirety all prior undertakings and agreements of
the Company and Optionee with respect to the
<PAGE>
subject matter hereof. This Exercise Notice and the Agreement are governed by
California law except for that body of law pertaining to conflict of laws.
Submitted by:Accepted by:
OPTIONEE: COST PLUS, INC.
________________________________ By:______________________________
Its:_____________________________
Address:
________________________________
________________________________
Dated:__________________________ Dated:___________________________
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<PAGE>
EXHIBIT 10.5
COST PLUS, INC.
1995 STOCK OPTION PLAN
(Adopted November 1, 1995)
(Amended October 15, 1996)
(Amended July 23, 1996)
(Amended April 21, 1997)
(Amended February 12, 1998)
(Amended June 18, 1998)
(Amended June 15, 1999)
1. Purpose.
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The purpose of this Plan is to strengthen Cost Plus, Inc., a
California corporation (the "Company"), by providing an incentive to selected
officers and other key employees and thereby encouraging them to devote their
abilities and industry to the success of the Company's business enterprise. It
is intended that this purpose be achieved by extending to selected officers and
other key employees of the Company and its subsidiaries an added long-term
incentive for high levels of performance and unusual efforts through the grant
of options to purchase Common Stock of the Company.
2. Definitions.
-----------
For purposes of the Plan:
2.1 "Affiliate" means (i) with respect to any Person which is not a
natural person, any other Person that directly or indirectly through one or more
intermediaries controls, or is controlled by or under common control with, such
Person; and (ii) with respect to any Person who is a natural person, any of the
following: (x) any spouse, parent, child, brother or sister of such Person or
any issue of the foregoing (as used in this definition, issue shall include
persons legally adopted into the line of descent), (y) a trust solely for the
benefit of such Person or any spouse, parent, child, brother or sister of such
Person or for the benefit of any issue of the foregoing or (z) any corporation
or partnership which is controlled by such Person, or by any spouse, parent,
child, brother or sister of such Person or by any issue of the foregoing.
2.2 "Agreement" means the written agreement between the Company and
an Optionee evidencing the grant of an Option and setting forth the terms and
conditions thereof.
2.3 "Board" means the Board of Directors of the Company.
2.4 "Cause," unless otherwise defined in the Agreement evidencing a
particular Option, means an Eligible Individual's (i) intentional failure to
perform reasonably assigned duties, (ii) dishonesty or willful misconduct in the
performance of duties, (iii) engaging in a transaction in
<PAGE>
connection with the performance of duties to the Company or any of its
Subsidiaries thereof which transaction is adverse to the interests of the
Company or any of its Subsidiaries and which is engaged in for personal profit
or (iv) willful violation of any law, rule or regulation in connection with the
performance of duties (other than traffic violations or similar offenses).
2.5 "Change in Capitalization" means any change in the Shares or
exchange of Shares for a different number or kind of shares or other securities
of the Company, by reason of a reclassification, recapitalization, merger,
consolidation, reorganization, spin-off, stock dividend, stock split or reverse
stock split.
2.6 "Change of Control" means the occurrence of any of the following
events:
(i) The acquisition by any "person" (as such term is used in
Sections 13(d) and 14(d) of the Exchange Act) (other than the Company or a
person that directly or indirectly controls, is controlled by, or is under
common control with, the Company) of the "beneficial ownership" (as defined in
Rule 13d-3 under the Exchange Act), directly or indirectly, of securities of the
Company representing fifty percent (50%) or more of the total voting power
represented by the Company's then outstanding voting securities;
(ii) A change in the composition of the Board of Directors of
the Company occurring within a two-year period, as a result of which fewer than
a majority of the directors are Incumbent Directors. "Incumbent Directors" shall
mean directors who either (A) are directors of the Company as of the date
hereof, or (B) are elected, or nominated for election, to the Board of Directors
of the Company with the affirmative votes of at least a majority of the
Incumbent Directors at the time of such election or nomination (but shall not
include an individual not otherwise an Incumbent Director whose election or
nomination is in connection with an actual or threatened proxy contest relating
to the election of directors to the Company);
(iii) A merger or consolidation of the Company with any other
corporation, other than a merger or consolidation which would result in the
voting securities of the Company outstanding immediately prior thereto
continuing to represent (either by remaining outstanding or by being converted
into voting securities of the surviving entity) at least fifty percent (50%) of
the total voting power represented by the voting securities of the Company or
such surviving entity outstanding immediately after such merger or
consolidation, or the approval by the stockholders of the Company of a plan of
complete liquidation of the Company or of an agreement for the sale or
disposition by the Company of all or substantially all the Company's assets;
(iv) The sale of all or substantially all of the assets of the
Company determined on a consolidated basis; or
(v) The complete liquidation or dissolution of the Company.
2.7 "Code" means the Internal Revenue Code of 1986, as amended.
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<PAGE>
2.8 "Committee" means a committee, as described in Section 3.1,
appointed by the Board to administer the Plan and to perform the functions set
forth herein.
2.9 "Company" means Cost Plus, Inc., a California corporation.
2.10 "Controlling Shareholders" means Internationale Nederlanden
(U.S.) Capital Corporation and Pearl Street L.P., collectively.
2.11 "Disability" means a physical or mental infirmity which impairs
the Optionee's ability to perform substantially his or her duties for a period
of one hundred eighty (180) consecutive days.
2.12 "Eligible Individual" means any director, officer or employee of
the Company or a Subsidiary, or any consultant or advisor.
2.13 "Exchange Act" means the Securities Exchange Act of 1934, as
amended.
2.14 "Fair Market Value" means on any date, (i) with respect to any
stock or other security (including, without limitation, the Shares) (a) if such
security is listed or admitted to trading on a national securities exchange or
the Nasdaq National Market of the National Association of Securities Dealers
Automated Quotation System, the closing price of such security (or the closing
bid, if no shares were reported, as quoted on such system or exchange or the
exchange with the greatest volume of trading in such security for the last
market trading day prior to the time of determination) as reported in the Wall
Street Journal or such other source as the Committee deems reliable, (b) if such
securities are not listed or admitted to trading, the arithmetic mean of the
closing bid price and the closing asked price on such date as quoted on such
other market in which such prices are regularly quoted, or (c) if there have
been no published bid or asked quotations with respect to such security on such
date, the Fair Market Value shall be the value established by the Committee in
good faith and, in the case of securities relating to an Incentive Stock Option,
in accordance with Section 422 of the Code, and (ii) with respect to all other
property and consideration, the value conclusively determined in good faith by
the Committee in its sole discretion. Any determination made by the Committee
hereunder shall be final, binding and non-appealable.
2.15 "First Vesting Date" means, (i) as to Options granted prior to
June 30, 1996, the earlier to occur of June 30, 1997 and the first anniversary
of the Company's Initial Public Offering, and (ii) as to each Option granted on
or after June 30, 1996, the first anniversary of the Grant Date for such Option.
2.16 "Grant Date" means with respect to each Option, the Grant Date as
defined in the applicable Agreement.
2.17 "Incentive Stock Option" means an Option satisfying the
requirements of Section 422 of the Code and designated by the Committee as an
Incentive Stock Option.
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<PAGE>
2.18 "Independent Third Party" means any Person who, immediately prior
to the contemplated transaction, does not own in excess of 5% of the Shares on a
fully diluted basis (a "5% Owner"), and any Person who is not an Affiliate of a
5% Owner.
2.19 "Initial Public Offering" means the consummation of the first
public offering of Shares pursuant to one or more effective registration
statements under the Securities Act (other than registrations on Form S-8 or
Form S-4 or any other registration statement used for a business combination or
any successor form to any such Forms) ("Registration Statements").
2.20 "Nonqualified Stock Option" means an Option which is not an
Incentive Stock Option.
2.21 "Option" means an option to purchase Shares granted pursuant to
the Plan.
2.22 "Optionee" means a person to whom an Option has been granted
under the Plan.
2.23 "Outside Director" means a director of the Company who is an
"outside director" within the meaning of Section 162(m) of the Code and the
regulations promulgated thereunder.
2.24 "Own" or any derivation thereof means beneficial ownership as
defined in Rule 13d-3 promulgated under the Exchange Act.
2.25 "Parent" means any corporation which is a parent corporation
(within the meaning of Section 424(e) of the Code) with respect to the Company.
2.26 "Per Share Option Price" means, with respect to each Option, the
per share exercise price with respect to such Option.
2.27 "Person" means any natural person, corporation, partnership,
firm, association, trust, government, governmental agency or any other entity,
whether acting in an individual, fiduciary or other capacity.
2.28 "Plan" means this Cost Plus, Inc. 1995 Stock Option Plan.
2.29 "Pooling Period" means, with respect to a Pooling Transaction,
the period ending on the first date on which the combined entity resulting from
such Pooling Transaction publishes combined operating results for at least
thirty (30) days.
2.30 "Pooling Transaction" means an acquisition of the Company in a
transaction which is treated as a "pooling of interests" under generally
accepted accounting principles.
-4-
<PAGE>
2.31 "Securities Act" means the Securities Act of 1933, as amended.
2.32 "Shares" means the common stock, par value $.01 per share, of the
Company.
2.33 "Subsidiary" means any corporation which is a subsidiary
corporation (within the meaning of Section 424(f) of the Code) with respect to
the Company.
2.34 "Successor Corporation" means a corporation, or a parent or
subsidiary thereof within the meaning of Section 424(a) of the Code, which
issues or assumes a stock option in a transaction to which Section 424(a) of the
Code applies.
2.35 "Ten-Percent Shareholder" means an Eligible Individual, who, at
the time an Incentive Stock Option is to be granted to him or her, owns (within
the meaning of Section 422(b)(6) of the Code) stock possessing more than ten
percent (10%) of the total combined voting power of all classes of stock of the
Company, or of a Parent or a Subsidiary.
3. Administration.
--------------
3.1 The Plan shall be administered as follows:
(a) The Plan shall be administered by the Committee which shall
hold meetings at such times as may be necessary for the proper administration of
the Plan. The Committee shall keep minutes of its meetings. Except as otherwise
provided in the Company's Articles of Incorporation or By-Laws, a quorum shall
consist of not less than two members of the Committee and a majority of a quorum
may authorize any action. Except as otherwise provided in the Company's Articles
of Incorporation or Bylaws, any decision or determination reduced to writing and
signed by the requisite number of the members of the Committee shall be as fully
effective as if made by the vote of the requisite number of members at a meeting
duly called and held.
(b) Procedure.
---------
(i) Multiple Administrative Bodies. The Committee shall
------------------------------
be composed of the Board or a committee of the Board. The Plan may be
administered by different Committees with respect to different Optionees.
(ii) Section 162(m). To the extent that the Board
--------------
determines it to be desirable to qualify Options granted hereunder as
"performance-based compensation" within the meaning of Section 162(m) of the
Code, the Plan shall be administered by a Committee of two or more Outside
Directors.
(iii) Rule 16b-3. To the extent desirable to qualify
----------
transactions hereunder as exempt under Rule 16b-3, the transactions contemplated
hereunder shall be structured to satisfy the requirements for exemption under
Rule 16b-3.
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<PAGE>
(iv) Other Administration. Other than as provided above,
--------------------
the Plan shall be administered by (A) the Board or (B) a Committee, which
committee shall be constituted to satisfy Applicable Laws.
(c) No member of the Committee shall be liable for any action,
failure to act, determination or interpretation made in good faith with respect
to this Plan or any transaction hereunder, except for liability arising from his
or her own willful misfeasance, gross negligence or reckless disregard of his or
her duties. The Company hereby agrees to indemnify each member of the Committee
for all costs and expenses and, to the extent permitted by applicable law, any
liability incurred in connection with defending against, responding to,
negotiation for the settlement of or otherwise dealing with any claim, cause of
action or dispute of any kind arising in connection with any action in
administering this Plan or in authorizing or denying authorization to any
transaction hereunder.
3.2 Subject to the express terms and conditions set forth herein, the
Committee shall have the power from time to time:
(a) to determine those Eligible Individuals to whom Options shall
be granted under the Plan and, subject to Section 5.2, the number of Shares
subject to each Option to be granted, to prescribe the terms and conditions
(which need not be identical) of each such Option, including the Fair Market
Value on any date, the Per Share Option Price for the Shares subject to each
Option in accordance with Section 5.3, and to make any amendment or modification
to any Agreement, including the acceleration of vesting, consistent with the
terms of the Plan;
(b) to construe and interpret the Plan and the Options granted
hereunder and to establish, amend and revoke rules and regulations for the
administration of the Plan, including, but not limited to, correcting any defect
or supplying any omission, or reconciling any inconsistency in the Plan or in
any Agreement, in the manner and to the extent it shall deem necessary or
advisable so that the Plan complies with applicable law, including Rule 16b-3
under the Exchange Act and the Code to the extent applicable, and otherwise to
make the Plan fully effective. All decisions and determinations by the
Committee in the exercise of this power shall be final, binding and conclusive
upon the Company, its Subsidiaries, the Optionees, and all other persons having
any interest therein;
(c) to determine the duration and purposes for leaves of absence
which may be granted to an Optionee on an individual basis without constituting
a termination of employment or service for purposes of the Plan;
(d) to exercise its discretion with respect to the powers and
rights granted to it as set forth in the Plan; and
(e) generally, to exercise such powers and to perform such acts
as are deemed necessary or advisable to promote the best interests of the
Company with respect to the Plan.
-6-
<PAGE>
4. Stock Subject to the Plan.
-------------------------
(a) The maximum number of Shares that may be made the subject of
Options granted under the Plan shall be 2,912,004 Shares (post split), less the
aggregate number of Shares from time to time (i) subject to options outstanding
under the Cost Plus, Inc. 1994 Stock Option Plan (the "1994 Option Plan") or
(ii) issued upon exercise of options granted under the 1994 Option Plan. Options
to be granted under the Plan shall be granted under the Form of Cost Plus, Inc.
1995 Stock Option Plan Incentive Stock Option Agreement attached as Exhibit A-1
-----------
or Nonqualified Stock Option Agreement attached as Exhibit A-2, which forms of
-----------
agreement may be modified or amended by the Committee from time to time so long
as any such modified or amended agreement is not inconsistent with any provision
of the Plan.
(b) Upon a Change in Capitalization, the number of Shares set forth in
this Section 4 and in Section 5 shall be adjusted in number and kind pursuant to
Section 6.
(c) Upon the granting of an Option, the number of Shares available for
the granting of further Options shall be reduced by the number of Shares in
respect of which the Option is granted. Whenever any outstanding Option or
portion thereof expires, is canceled or is otherwise terminated for any reason
without having been exercised or payment having been made in respect thereof,
the Shares allocable to the expired, canceled or otherwise terminated portion of
the Option shall again be available for the granting of Options by the Committee
under the terms of the Plan.
(d) The Board shall reserve for the purpose of the Plan, out of its
authorized but unissued Shares, 2,912,004 Shares (post split), less the
aggregate number of Shares from time to time (i) subject to options outstanding
under the 1994 Option Plan or (ii) issued upon exercise of options granted under
the 1994 Option Plan.
5. Option Grants for Eligible Individuals.
--------------------------------------
5.1 Authority of Committee. Except as otherwise expressly provided
----------------------
in this Plan, the Committee shall have full and final authority to select those
Eligible Individuals who will receive Options, the terms and conditions of which
shall be set forth in an Agreement; provided, however, that no person shall
-----------------
receive any Incentive Stock Options unless he or she is an employee of the
Company, a Parent or a Subsidiary at the time the Incentive Stock Option is
granted.
5.2 Eligibility.
-----------
(a) No Eligible Individual may be granted, in any fiscal year of the
Company, Options to purchase more than 397,983 Shares; provided that the
limitation set forth in this Section 5.2(a) shall only apply to Options granted
after the Company's Initial Public Offering. If an Option is cancelled (other
than in connection with a Change of Control), the cancelled Option will be
counted against the limit set forth in this Section 5.2(a). For this purpose,
if the exercise price of
-7-
<PAGE>
an Option is reduced, the transaction will be treated as a cancellation of the
Option and the grant of a new Option.
(b) Each Option shall be designated in the Agreement as either
an Incentive Stock Option or a Nonqualified Stock Option. However,
notwithstanding such designations, to the extent that the aggregate Fair Market
Value:
(i) of Shares subject to an Optionee's Incentive Stock
Options granted by the Company, any Parent or Subsidiary, which
(ii) become exercisable for the first time during any
calendar year (under all plans of the Company or any Parent or Subsidiary)
exceeds $100,000, such excess Options shall be treated as Nonqualified Stock
Options. For purposes of this Section 5.2(b), Incentive Stock Options shall be
taken into account in the order in which they were granted, and the Fair Market
Value of the Shares shall be determined as of the time the Option with respect
to such Shares is granted.
5.3 Option Exercise Price. The Per Share Option Price for the Shares
---------------------
to be issued pursuant to exercise of an Option shall be such price as is
determined by the Committee, but shall be subject to the following:
(a) In the case of an Incentive Stock Option granted to an
Eligible Individual who, at the time of the grant of such Incentive Stock
Option, is a Ten-Percent Shareholder, the Per Share Option Price shall be no
less than 110% of the Fair Market Value per Share on the Grant Date.
(b) In the case of an Incentive Stock Option granted to any
Eligible Individual other than a Ten-Percent Shareholder, the Per Share Option
Price shall be no less than 100% of the Fair Market Value per Share on the Grant
Date.
5.4 Duration of Options.
-------------------
(a) Maximum Duration. Each Option granted hereunder shall be for
----------------
a term of not more than ten (10) years from the date it is granted (five (5)
years in the case of an Incentive Stock Option granted to a Ten-Percent
Shareholder). The Committee may, subsequent to the granting of any Option,
extend the term thereof but in no event shall the term as so extended exceed the
maximum term provided for in the preceding sentence.
(b) Termination of Employment.
-------------------------
(i) Death, Disability or Retirement. In the event the
-------------------------------
Optionee's employment with or service as a consultant to or director of the
Company is terminated as a result of Disability or death or the voluntary
retirement of the Optionee at or after age 65 (or age 55
-8-
<PAGE>
with Company consent) ("Retirement") or the Optionee dies within the thirty (30)
day period described in Section 5.4(b)(iii) below, the Optionee or, in the case
of the Optionee's death, Optionee's legal representatives, may at any time
within one (1) year after his or her termination, exercise any Options then held
by the Optionee to the extent, but only to the extent, that such Options or
portions thereof are exercisable on the date of such termination, after which
time such Options shall terminate in full; provided, however, that if the
employment of an Optionee is terminated as a result of Disability that does not
qualify as a "permanent and total disability" as defined in Code Section
22(e)(3) and the regulations thereunder, Incentive Stock Options held by the
Optionee shall be treated as Nonqualified Stock Options as of the date that is
three (3) months and one (1) day following such termination of employment. Any
portion of an Incentive Stock Option granted to an Optionee which is not
exercised within the three (3) month period following the Optionee's Retirement
shall thereafter cease to be an Incentive Stock Option and shall be treated as a
Nonqualified Stock Option. In the event of an Optionee's termination of
employment due to death as described in this Section, all Options held by the
Optionee shall be exercisable, even as to Shares previously unvested, by the
legatee or legatees under the Optionee's will, or by the Optionee's personal
representatives or distributees and such person or persons shall be substituted
for the Optionee each time the Optionee is referred to herein. Notwithstanding
anything else in this Section, the Committee may, in its discretion, provide in
the Agreement that any Options held by Optionee on the date Optionee's
employment with or service as a consultant or director of the Company terminates
as a result of Disability or Retirement shall become fully vested and
exercisable as of such termination date.
(ii) Cause. In the event Optionee's employment with or
-----
service as a consultant to or director of the Company is terminated for Cause,
all Options held by the Optionee shall terminate on the date of the Optionee's
termination whether or not exercisable.
(iii) Other Termination. If Optionee's employment with or
-----------------
service as a consultant to or director of the Company is terminated for any
reason other than Disability, death, Retirement or Cause (including the
Optionee's ceasing to be employed by or a consultant to or director of a
Subsidiary or division of the Company or any Subsidiary as a result of the sale
of such Subsidiary or division or an interest in such Subsidiary or division),
the Optionee may at any time within thirty (30) days after such termination,
exercise any Options held by the Optionee to the extent, but only to the extent,
that such Options or portions thereof are exercisable on the date of the
termination, after which time such Options shall terminate in full.
5.5 Vesting. Unless otherwise provided for by the Committee in an
-------
Agreement and subject to Section 5.10, each Option shall become vested and
exercisable as to 25% of the aggregate number of Shares covered by the Option on
the First Vesting Date, and as to an additional 25% of the aggregate number of
Shares covered by the Option on each of the first, second and third
anniversaries of the First Vesting Date. Any fractional number of Shares
resulting from the application of the vesting percentage shall be rounded to the
next higher whole number of Shares. To the extent not exercised, installments
shall accumulate and be exercisable, in whole or in part, at any time after
becoming exercisable, but not later than the date an Option expires or
terminates.
-9-
<PAGE>
Notwithstanding the foregoing (or any other provision to the contrary contained
in the Plan or any Agreement) all outstanding Options shall immediately become
fully (100%) vested and exercisable upon a Change of Control. In addition, the
Committee may accelerate the exercisability of any Option or portion thereof at
any time.
5.6 Modification. No modification of an Option shall adversely alter
------------
or impair any rights or obligations under the Option without the Optionee's
consent.
5.7 Nontransferability. Unless otherwise provided by the Committee
------------------
in an Agreement, no Option granted hereunder shall be transferable by the
Optionee to whom granted otherwise than by will or the laws of descent and
distribution or pursuant to a qualified domestic relations order as defined in
the Code. An Option may be exercised during the lifetime of such Optionee only
by the Optionee or his or her guardian or legal representative. The terms of
such Option shall be final, binding and conclusive upon the beneficiaries,
executors, administrators, heirs and successors of the Optionee.
5.8 Method of Exercise. The exercise of an Option shall be made only
------------------
by a written notice delivered in person or by mail to the Secretary of the
Company at the Company's principal executive office, specifying the number of
Shares to be purchased and accompanied by payment therefor and otherwise in
accordance with the Agreement pursuant to which the Option was granted. The
purchase price for any Shares purchased pursuant to the exercise of an Option
shall be paid in full upon such exercise by any one or a combination of the
following: (i) cash, (ii) check, (iii) transferring Shares to the Company upon
such terms and conditions as determined by the Committee or (iv) pursuant to a
cashless exercise providing for the exercise of the Option and sale of the
underlying Shares by a designated broker and delivery of the Shares by the
Company to such broker. Cashless exercises shall be subject to such procedures
as may be established from time to time by the Committee in its sole discretion.
The Committee shall have discretion to determine at the time of grant of each
Option or at any later date (up to and including the date of exercise) the form
of payment acceptable in respect of the exercise of such Option. With respect
to the transfer of Shares to the Company as payment, in part or in whole, of the
exercise price (i) any Shares transferred to the Company as payment of the
purchase price under an Option shall be valued at their Fair Market Value on the
day preceding the date of exercise of such Option; and (ii) any Shares acquired
upon the exercise of an option must have been owned by the Optionee for more
than six months prior to such transfer. If requested by the Committee, the
Optionee shall deliver the Agreement evidencing the Option to the Secretary of
the Company who shall endorse thereon a notation of such exercise and return
such Agreement to the Optionee. No fractional Shares (or cash in lieu thereof)
shall be issued upon exercise of an Option and the number of Shares that may be
purchased upon exercise shall be rounded to the nearest whole number of Shares.
5.9 Rights of Optionees. No Optionee shall be deemed for any purpose
-------------------
to be the owner of any Shares subject to any Option unless and until (i) the
Option shall have been exercised pursuant to the terms thereof, (ii) the Company
shall have issued and delivered the Shares to the Optionee, and (iii) the
Optionee's name shall have been entered as a shareholder of record on the
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<PAGE>
books of the Company. Thereupon, the Optionee shall have full voting, dividend
and other ownership rights with respect to such Shares, subject to such terms
and conditions as may be set forth in the applicable Agreement.
5.10 Change of Control.
-----------------
(a) In the event of a Change of Control, each outstanding Option
shall become fully (100%) vested and exercisable. In addition, at the election
of the Company the following shall occur:
(A) (i) each Option shall be deemed to have been exercised
to the extent it had not been exercised prior to that date, (ii) the Shares
issuable in connection with the deemed exercise of each Option shall be issued
to and in the name of the acquiror of the Company, if any, and (iii) in respect
of each Share issued in connection with the deemed exercise of an Option, the
Optionee shall receive a per Share payment equal to the number (or amount) and
kind of stock, securities, cash, property or other consideration that each
holder of a Share was entitled to receive in connection with the Change of
Control, reduced by the Per Share Option Price, or
(B) immediately after each outstanding Option has become
fully (100%) vested it shall be terminated in exchange for a per share payment
for each Share then subject to such Option equal to the number (or amount) and
kind of stock, securities, cash, property or other consideration that each
holder of a Share was entitled to receive in connection with the Change of
Control, reduced by the Per Share Option Price, or
(C) in the event of a Change of Control that is consummated
pursuant to a merger, consolidation or reorganization (a "Transaction"), each
outstanding Option shall become fully (100%) vested and exercisable, and the
Plan and the outstanding Options shall continue in effect in accordance with
their respective terms and each Optionee shall be entitled to receive in respect
of each Share subject to any outstanding Option, upon exercise of such Option,
the same number (or amount) and kind of stock, securities, cash, property or
other consideration that each holder of a Share was entitled to receive in
connection with the Transaction in respect of a Share.
(b) Any sale of Shares by any Optionee in any Change of Control
shall be for the same consideration per share, on the same terms and subject to
the same conditions as the sale by the shareholders of the Company.
(c) For all purposes of the Plan, the value of stock, securities,
property or other consideration shall be the Fair Market Value of such stock,
securities, property or other consideration as determined in accordance with
Section 2.13.
(d) With respect to Incentive Stock Options granted prior to
February 12, 1998, in the event of a Change of Control as described in Sections
2.6 (iii), (iv) and (v), the Optionee
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<PAGE>
shall sell his or her Shares and, if shareholder approval of the transaction is
required and if the Company receives an opinion of an independent, nationally
recognized investment banking firm retained by the Board to the effect that the
consideration to be received in such Sale of the Company, as the case may be, is
fair to the shareholders of the Company, shall vote his or her Shares in favor
thereof, and waive any dissenters' rights, preemptive rights, appraisal rights
or similar rights, as the case may be. (The fees and expenses incurred in
obtaining such opinion shall be borne by the Company.)
(e) With respect to Incentive Stock Options granted prior to
February 12, 1998, in any case, in the event of a Change of Control as described
in Sections 2.6(iii), (iv) and (v) (a "Sale of the Company"), the payment made
to each Optionee shall be further reduced by an amount equal to the Optionee's
proportionate share of the expenses of sale incurred by the Controlling
Shareholders in connection with the Sale of the Company. In any Sale of the
Company, at the request of the Controlling Shareholders or the Company, each
Optionee shall execute and deliver a counterpart of an agreement pursuant to
which such Optionee agrees to sell its Shares in the Sale of the Company,
provided that such Optionee shall not be required to make, in connection with
- --------
such Sale of the Company, any representations and warranties with respect to the
Company or its business or with respect to any other Optionee or selling
shareholder. In addition, each Optionee shall be responsible for such
Optionee's proportionate share of the expenses of sale incurred by the selling
shareholders in connection with the Sale of the Company and the obligations and
liabilities (including obligations and liabilities for indemnification
(including indemnification obligations and liabilities for (x) breaches of
representations and warranties made by the Company or any other Optionee or
selling shareholder with respect to the Company or its business, (y) breaches of
covenants and (z) other matters), amounts paid into escrow and post-closing
purchase price adjustments) incurred by the selling shareholders in connection
with the Sale of the Company; provided that (i) without the written consent of
--------
such Optionee, the amount of such obligations and liabilities shall not exceed
the gross proceeds received by such Optionee in such Sale of the Company
(provided that to the extent the proceeds received by the Optionee in such Sale
--------
of the Company are reduced by the Per Share Option Price, the "gross proceeds
received by such Optionee" shall be deemed to mean the sum of such proceeds plus
the Per Share Option Price for purposes of this Plan) and (ii) such Optionee
shall not be responsible for the fraud of any other Optionee or selling
shareholder or any indemnification obligations and liabilities for breaches of
representations and warranties made by any other Optionee or selling shareholder
with respect to such other Optionee's or selling shareholder's ownership of and
title to shares of capital stock of the Company, organization and authority. In
connection with a Sale of the Company, and subject to Section 5.10(b) and
Section 5.10(c) hereof, each Optionee shall do and perform or cause to be done
and performed all further acts and things and shall execute and deliver all
other agreements, certificates, instruments and documents as the Company or the
Controlling Shareholders reasonably may request in connection with such Sale of
the Company.
-12-
<PAGE>
6. Adjustment Upon Changes in Capitalization.
-----------------------------------------
(a) In the event of a Change in Capitalization, the Committee shall
conclusively determine the appropriate adjustments, if any, to (i) the maximum
number and class of Shares or other stock or securities with respect to which
Options may be granted under the Plan, (ii) the maximum number of Shares with
respect to which Options may be granted to any Eligible Individual during the
term of the Plan, and (iii) the number and class of Shares or other stock or
securities which are subject to outstanding Options granted under the Plan, and
the purchase price therefor, if applicable.
(b) Any such adjustment in the Shares or other stock or securities
subject to outstanding Incentive Stock Options (including any adjustments in the
purchase price) shall be made in such manner as not to constitute a modification
as defined by Section 424(h)(3) of the Code and only to the extent otherwise
permitted by Sections 422 and 424 of the Code.
(c) If, by reason of a Change in Capitalization, an Optionee shall be
entitled to exercise an Option with respect to, new, additional or different
shares of stock or securities, such new, additional or different shares shall
thereupon be subject to all of the conditions, restrictions and performance
criteria which were applicable to the Shares subject to the Option prior to such
Change in Capitalization.
7. Termination and Amendment of the Plan.
-------------------------------------
The Plan shall terminate on the day preceding the tenth anniversary of
the date of its adoption by the Board and no Option may be granted thereafter.
The Board may sooner terminate the Plan and the Board may at any time and from
time to time amend, modify or suspend the Plan; provided, however, that, except
-----------------
with the consent of the Optionee, no such amendment, modification, suspension or
termination shall impair or adversely alter any Options theretofore granted
under the Plan, nor shall any amendment, modification, suspension or termination
deprive any Optionee of any Shares which he or she may have acquired through or
as a result of the Plan. To the extent necessary and desirable to comply with
the Code or any other applicable laws, the Company shall obtain shareholder
approval of any amendment to the Plan.
8. Non-Exclusivity of the Plan.
---------------------------
The adoption of the Plan by the Board shall not be construed as
amending, modifying or rescinding any previously approved incentive arrangement
or as creating any limitations on the power of the Board to adopt such other
incentive arrangements as it may deem desirable, including, without limitation,
the granting of stock options otherwise than under the Plan, and such arrange
ments may be either applicable generally or only in specific cases.
-13-
<PAGE>
9. Limitation of Liability.
-----------------------
As illustrative of the limitations of liability of the Company, but
not intended to be exhaustive thereof, nothing in the Plan shall be construed
to:
(i) give any person any right to be granted an Option other than at
the sole discretion of the Committee;
(ii) give any person any rights whatsoever with respect to Shares
except as specifically provided in the Plan;
(iii) limit in any way the right of the Company to terminate the
employment of any person at any time; or
(iv) be evidence of any agreement or understanding, expressed or
implied, that the Company will employ any person at any particular rate of
compensation or for any particular period of time.
10. Regulations and Other Approvals: Governing Law.
----------------------------------------------
10.1 Except as to matters of federal law, this Plan and the rights of
all persons claiming hereunder shall be construed and determined in accordance
with the laws of the State of California without giving effect to conflicts of
law principles.
10.2 The obligation of the Company to sell or deliver Shares with
respect to Options granted under the Plan shall be subject to all applicable
laws, rules, and regulations, including all applicable federal and state
securities laws and all applicable stock exchange rules, and the obtaining of
all such approvals by governmental agencies as may be deemed necessary or
appropriate by the Committee.
10.3 It is intended that from and after the date that any class of
equity securities of the Company are registered under Section 12 of the Exchange
Act, the Plan shall be administered in compliance with Rule 16b-3 promulgated
under the Exchange Act and the Committee shall interpret and administer the
provisions of the Plan or any Agreement in a manner consistent therewith. Any
provisions inconsistent with such Rule shall be inoperative and shall not affect
the validity of the Plan.
10.4 The Board may make such changes as may be necessary or
appropriate to comply with the rules and regulations of any government
authority, or to obtain for Eligible Individuals granted Incentive Stock
Options the tax benefits under the applicable provisions of the Code and
regulations promulgated thereunder.
10.5 Each Option is subject to the requirement that, if at any time
the Committee determines, in its discretion, that the listing, registration or
qualification of Shares issuable pursuant to
-14-
<PAGE>
the Plan is required by any securities exchange or under any state or federal
law, or the consent or approval of any governmental regulatory body is necessary
or desirable as a condition of, or in connection with, the grant of an Option or
the issuance of Shares, no such Options shall be granted or payment made or
Shares issued, in whole or in part, unless listing, registration, qualification,
consent or approval has been effected or obtained free of any conditions other
than as acceptable to the Committee.
10.6 Notwithstanding anything contained in the Plan or any Agreement
to the contrary, in the event that the disposition of Shares acquired pursuant
to the Plan is not covered by a then current registration statement under the
Securities Act of 1933, as amended, and is not otherwise exempt from such
registration, such Shares shall be restricted against transfer to the extent
required by the Securities Act of 1933, as amended, and Rule 144 or other
regulations thereunder. The Committee may require any individual receiving
Shares pursuant to an Option granted under the Plan, as a condition precedent to
receipt of such Shares, to represent and warrant to the Company in writing that
the Shares acquired by such individual are acquired without a view to any
distribution thereof and will not be sold or transferred other than pursuant to
an effective registration thereof under said Act or pursuant to an exemption
applicable under the Securities Act of 1933, as amended, or the rules and
regulations promulgated thereunder and to the effect set forth in Section 14 of
the Agreement. The certificates evidencing any of such Shares shall bear an
appropriate legend to reflect their status as restricted securities as
aforesaid.
11. Miscellaneous.
-------------
11.1 Multiple Agreements. The terms of each Option may differ from
-------------------
other Options granted under the Plan at the same time, or at some other time.
The Committee may also grant more than one Option to a given Eligible Individual
during the term of the Plan, either in addition to, or in substitution for, one
or more Options previously granted to that Eligible Individual.
11.2 Withholding of Taxes.
--------------------
(a) At such times as an Optionee recognizes taxable income in
connection with the receipt of Shares, cash or other consideration hereunder (a
"Taxable Event"), the Optionee shall pay to the Company an amount equal to the
federal, state and local income taxes and other amounts as may be required by
law to be withheld by the Company in connection with the Taxable Event (the
"Withholding Taxes") prior to the issuance or the payment of such Shares, cash
or other consideration. The Company shall have the right to deduct from any
payment of cash to an Optionee an amount equal to the Withholding Taxes in
satisfaction of the obligation to pay Withholding Taxes. In satisfaction of the
obligation to pay Withholding Taxes to the Company, the Optionee may make a
written election (the "Tax Election"), which may be accepted or rejected in the
sole discretion of the Committee, to have withheld a portion of the Shares then
issuable to him or her having an aggregate Fair Market Value, on the date
preceding the date of such issuance, equal to the Withholding Taxes.
Notwithstanding the foregoing, the Committee may, by the adoption of rules or
otherwise, (i) modify the provisions of this Section 11.2 or impose such other
restrictions or limitations on Tax Elections as
-15-
<PAGE>
may be necessary to ensure that the Tax Elections will be exempt transactions
under Section 16(b) of the Exchange Act, and (ii) permit Tax Elections to be
made at such other times and subject to such other conditions as the Committee
determines will constitute exempt transactions under Section 16(b) of the
Exchange Act.
(b) If an Optionee makes a disposition, within the meaning of
Section 424(c) of the Code and regulations promulgated thereunder, of any Share
or Shares issued to such Optionee pursuant to the exercise of an Incentive Stock
Option within the two-year period commencing on the day after the date of the
grant or within the one-year period commencing on the day after the date of
transfer of such Share or Shares to the Optionee pursuant to such exercise, the
Optionee shall, within ten (10) days of such disposition, notify the Company
thereof, by delivery of written notice to the Company at its principal executive
office.
12. Effective Date.
--------------
The Plan shall become effective upon its adoption by the Board of
Directors of the Company; provided that continuance of the Plan shall be subject
to approval by the shareholders of the Company within twelve (12) months after
the date the Plan is so adopted. Such shareholder approval shall be obtained in
the degree and manner required under applicable state and federal law and the
rules of any stock exchange upon which the Shares are listed.
13. Termination of Existing Option Plan.
-----------------------------------
At such time as this Plan shall become effective and shall have been
approved by the shareholders as required by Section 12, the 1994 Stock Option
Plan shall terminate and the Shares allotted for stock option grants under the
1994 Option Plan, other than Shares that are the subject of outstanding options
granted under the 1994 Option Plan, and any Shares which become available due to
the forfeiture, expiration or other termination of any option, or portion
thereof, outstanding under the 1994 Option Plan, shall not be available for the
granting of any further options or other awards under the 1994 Option Plan or
any other option or stock incentive plan or arrangement of the Company. Each
option outstanding under the 1994 Option Plan shall remain outstanding and shall
continue to be subject to the terms of the applicable agreement evidencing the
grant of such option and the terms of the 1994 Option Plan.
-16-
<PAGE>
EXHIBIT 10.6
AMENDMENT TO EMPLOYMENT AGREEMENT
THIS SECOND AMENDMENT, dated as of July 22, 1999 (the "Amendment"), to
the Executive Employment Agreement, dated January 13, 1999 between Cost Plus,
Inc., a California corporation, and Murray Dashe (the "Employee") (the
"Employment Agreement").
W I T N E S S E T H :
- - - - - - - - - -
WHEREAS, the parties hereto desire to amend certain provisions of the
Employment Agreement as provided herein;
NOW, THEREFORE, in consideration of the premises and mutual agreements
contained herein, and for other valuable consideration the receipt of which is
hereby acknowledged, the parties hereto hereby agree as follows:
1. Amendment of Section 2(f). Section 2(f) of the Employment Agreement is
hereby amended in its entirety and a new Section 2(f) shall be added to read as
follows:
(f) Relocation Expenses. The Company shall reimburse Executive for
-------------------
Executive's relocation expenses in accordance with the Company's "Director
and Above Relocation Policy." The Company acknowledges that Executive will
not relocate immediately due to personal circumstances, therefore, the
Company shall reimburse Executive's relocation expenses if Executive
relocates prior to September 30, 2000. Notwithstanding the foregoing, in
the event Executive voluntarily resigns from his employment with the
Company prior to the later of (i) six (6) months after relocating or (ii)
the second anniversary of this Agreement, Executive shall repay to the
Company all reimbursed relocation costs.
2. Amendment of Section. Section 3(a), 3(b) and 3(d) of the Employment
--------------------
Agreement (as renumbered by the first amendment to the Employment Agreement) are
hereby amended in their entirety to read as follows:
3. Severance Benefits.
------------------
(a) Benefits upon Termination. Except as provided in Section
-------------------------
3(b), if the Executive's employment terminates as a result of
Involuntary Termination prior to June 15, 2002 and the Executive signs
a Release of Claims, then the Company shall pay Executive's Base
Compensation to the Executive for twelve (12) months from the
Termination Date with each monthly installment payable on the last day
of such month. Executive shall not be entitled to receive any
payments if Executive voluntarily terminates employment other than as
a result of an Involuntary Termination.
<PAGE>
(b) Benefits upon Termination After a Change of Control. If,
---------------------------------------------------
after a Change of Control, the Executive's employment terminates as a
result of Involuntary Termination prior to June 15, 2002 and the
Executive signs a Release of Claims, then the Company shall pay
Executive's Base Compensation to the Executive for eighteen (18)
months from the Termination Date with each monthly installment payable
on the last day of such month. Executive shall not be entitled to
receive any payments if Executive voluntarily terminates employment
other than as a result of an Involuntary Termination.
(d) Stock Options; Bonus. Except as otherwise provided in the
--------------------
Company's 1995 Stock Option Plan or in Executive's stock option
agreements, Executive shall not be entitled to receive any unvested
stock options or partial bonus payments for an incomplete bonus plan
year.
3. Counterparts. This Amendment may be signed in any number of
------------
counterparts, all of which counterparts, taken together, shall constitute one
and the same instrument.
4. Governing Law. This Amendment and the rights and obligations of the
-------------
parties hereto shall be governed by, and constructed and interpreted in
accordance with, the law of the State of California.
IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be
duly executed and delivered by their proper and duly authorized officers as of
the day and year first above written.
COST PLUS, INC.
By: /s/ John F. Hoffner
-----------------------------------
Name:
Title:
MURRAY DASHE
/s/ Murray Dashe
--------------------------------------
SIGNATURE PAGE OF AMENDMENT TO THE EMPLOYMENT AGREEMENT
2
<PAGE>
EXHIBIT 10.7
AMENDMENT TO EMPLOYMENT AGREEMENT
THIS SECOND AMENDMENT, dated as of July 22, 1999 (the "Amendment"), to
the Executive Employment Agreement, dated January 13, 1999, between Cost Plus,
Inc., a California corporation, and John Hoffner (the "Employee") (the
"Employment Agreement").
W I T N E S S E T H :
- - - - - - - - - -
WHEREAS, the parties hereto desire to amend certain provisions of the
Employment Agreement as provided herein;
NOW, THEREFORE, in consideration of the premises and mutual agreements
contained herein, and for other valuable consideration the receipt of which is
hereby acknowledged, the parties hereto hereby agree as follows:
1. Amendment of Section 3. Section 3(a), 3(b) and 3(d) of the Employment
----------------------
Agreement (as renumbered by the first amendment to the Employment Agreement) are
hereby amended in their entirety to read as follows:
3. Severance Benefits.
------------------
(a) Benefits upon Termination. Except as provided in Section
-------------------------
3(b), if the Executive's employment terminates as a result of
Involuntary Termination prior to June 15, 2001 and the Executive signs
a Release of Claims, then the Company shall pay Executive's Base
Compensation to the Executive for twelve (12) months from the
Termination Date with each monthly installment payable on the last day
of such month. Executive shall not be entitled to receive any
payments if Executive voluntarily terminates employment other than as
a result of an Involuntary Termination.
(b) Benefits upon Termination After a Change of Control. If
---------------------------------------------------
after a Change of Control the Executive's employment terminates as a
result of Involuntary Termination prior to June 15, 2001 and the
Executive signs a Release of Claims, then the Company shall pay
Executive's Base Compensation to the Executive for eighteen (18)
months from the Termination Date with each monthly installment payable
on the last day of such month. Executive shall not be entitled to
receive any payments if Executive voluntarily terminates employment
other than as a result of an Involuntary Termination.
(d) Stock Options; Bonus. Except as otherwise provided for in the
--------------------
Company's 1995 Stock Option Plan or in Executive's stock option
agreements,
<PAGE>
Executive shall not be entitled to receive any unvested stock options
or partial bonus payments for an incomplete bonus plan year.
2. Counterparts. This Amendment may be signed in any number of
------------
counterparts, all of which counterparts, taken together, shall constitute one
and the same instrument.
3. Governing Law. This Amendment and the rights and obligations of the
-------------
parties hereto shall be governed by, and construed and interpreted in accordance
with, the law of the State of California.
IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be
duly executed and delivered by their proper and duly authorized officers as of
the day and year first above written.
COST PLUS, INC.
By: /s/ Murray Dashe
----------------------------------
Name: MURRAY DASHE
Title: Chairman, CEO, & President
JOHN HOFFNER
/s/ John F. Hoffner
-------------------------------------
SIGNATURE PAGE OF AMENDMENT TO THE EMPLOYMENT AGREEMENT
-2-
<PAGE>
EXHIBIT 10.8
EMPLOYMENT SEVERANCE AGREEMENT
This Severance Agreement (the "Agreement") is made and entered into
effective as of July 22, 1999 (the "Effective Date"), by and between Kathi
Lentzsch (the "Executive") and Cost Plus, Inc. (the "Company").
R E C I T A L S
---------------
A. The Board believes the Company should provide the Executive with
certain severance benefits should the Executive's employment with the Company
terminate under certain circumstances, such benefits to provide the Executive
with enhanced financial security and sufficient incentive and encouragement to
remain with the Company.
B. Certain capitalized terms used in the Agreement are defined in Section
5 below.
AGREEMENT
In consideration of the mutual covenants herein contained, and in
consideration of the continuing employment of Executive by the Company, the
parties agree as follows:
1. Duties and Scope of Employment. The Company shall employ the Executive
------------------------------
in the position of Executive Vice President, Merchandising/Marketing with such
duties, responsibilities and compensation as in effect as of the Effective Date.
The Board and the Chief Executive Officer of the Company (the "CEO") shall have
the right to revise such responsibilities and compensation from time to time as
the Board or the CEO may deem necessary or appropriate. If any such revision
constitutes "Involuntary Termination" as defined in Section 5(c) of this
Agreement, the Executive shall be entitled to benefits upon such Involuntary
Termination as provided under this Agreement.
2. At-Will Employment. The Company and the Executive acknowledge that the
------------------
Executive's employment is and shall continue to be at-will, as defined under
applicable law. If the Executive's employment terminates for any reason, the
Executive shall not be entitled to any payments, benefits, damages, awards or
compensation other than as provided by this Agreement, or as may otherwise be
available in accordance with the Company's established employee plans and
practices or in accordance with other agreements between the Company and the
Executive. This Agreement shall remain in effect until the earlier of (i) the
date that all obligations of the parties hereunder have been satisfied or (ii)
the date upon which this Agreement terminates by consent of the parties hereto.
<PAGE>
3. Severance Benefits.
------------------
(a) Benefits upon Termination. Except as provided in Section 3(b), if
-------------------------
the Executive's employment terminates as a result of Involuntary Termination
prior to June 15, 2001 and the Executive signs a Release of Claims, then the
Company shall pay Executive's Base Compensation to the Executive for twelve (12)
months from the Termination Date with each monthly installment payable on the
last day of such month. Executive shall not be entitled to receive any payments
if Executive voluntarily terminates employment other than as a result of an
Involuntary Termination.
(b) Benefits upon Termination After a Change of Control. If after a
---------------------------------------------------
Change of Control the Executive's employment terminates as a result of
Involuntary Termination prior to June 15, 2001 and the Executive signs a Release
of Claims, then the Company shall pay Executive's Base Compensation to the
Executive for eighteen (18) months from the Termination Date with each monthly
installment payable on the last day of such month. Executive shall not be
entitled to receive any payments if Executive voluntarily terminates employment
other than as a result of an Involuntary Termination.
(c) Stock Options; Bonus. Except as otherwise provided for in the
--------------------
Company's 1995 Stock Option Plan or in Executive's stock option agreements,
Executive shall not be entitled to receive any unvested stock options or partial
bonus payments for an incomplete bonus plan year.
(d) Miscellaneous. In addition, (i) the Company shall pay the
-------------
Executive any unpaid base salary due for periods prior to the Termination Date;
(ii) the Company shall pay the Executive all of the Executive's accrued and
unused vacation through the Termination Date; and (iii) following submission of
proper expense reports by the Executive, the Company shall reimburse the
Executive for all expenses reasonably and necessarily incurred by the Executive
in connection with the business of the Company prior to termination. These
payments shall be made promptly upon termination and within the period of time
mandated by applicable law.
4. Non-Solicitation. In consideration for the mutual agreements as set
----------------
forth herein, Executive agrees that Executive shall not, at any time, within
twelve (12) months following termination of Executive's employment with the
Company for any reason, directly or indirectly solicit the employment or other
services of any individual who at that time shall be or within the prior twelve
(12) months shall have been an employee of the Company.
5. Definition of Terms. The following terms referred to in this
-------------------
Agreement shall have the following meanings:
(a) Base Compensation. "Base Compensation" shall mean Executive's
-----------------
monthly base salary for services performed based on the average base salary for
the six (6) months prior to the Termination Date.
-2-
<PAGE>
(b) Cause. "Cause," unless otherwise defined in the Agreement
-----
evidencing a particular Option, means an Eligible Individual's (i) intentional
failure to perform reasonably assigned duties, (ii) dishonesty or willful
misconduct in the performance of duties, (iii) engaging in a transaction in
connection with the performance of duties to the Company or any of its
Subsidiaries thereof which transaction is adverse to the interests of the
Company or any of its Subsidiaries and which is engaged in for personal profit
or (iv) willful violation of any law, rule or regulation in connection with the
performance of duties (other than traffic violations or similar offenses).
(c) "Change of Control" means the occurrence of any of the following
events:
(i) The acquisition by any "person" (as such term is used in
Sections 13(d) and 14(d) of the Exchange Act) (other than the Company or a
person that directly or indirectly controls, is controlled by, or is under
common control with, the Company) of the "beneficial ownership" (as defined in
Rule 13d-3 under the Exchange Act), directly or indirectly, of securities of the
Company representing fifty percent (50%) or more of the total voting power
represented by the Company's then outstanding voting securities;
(ii) A change in the composition of the Board of Directors of
the Company occurring within a two-year period, as a result of which fewer than
a majority of the directors are Incumbent Directors. "Incumbent Directors" shall
mean directors who either (A) are directors of the Company as of the date
hereof, or (B) are elected, or nominated for election, to the Board of Directors
of the Company with the affirmative votes of at least a majority of the
Incumbent Directors at the time of such election or nomination (but shall not
include an individual not otherwise an Incumbent Director whose election or
nomination is in connection with an actual or threatened proxy contest relating
to the election of directors to the Company);
(iii) A merger or consolidation of the Company with any other
corporation, other than a merger or consolidation which would result in the
voting securities of the Company outstanding immediately prior thereto
continuing to represent (either by remaining outstanding or by being converted
into voting securities of the surviving entity) at least fifty percent (50%) of
the total voting power represented by the voting securities of the Company or
such surviving entity outstanding immediately after such merger or
consolidation, or the approval by the stockholders of the Company of a plan of
complete liquidation of the Company or of an agreement for the sale or
disposition by the Company of all or substantially all the Company's assets;
(iv) The sale of all or substantially all of the assets of the
Company determined on a consolidated basis; or
(v) The complete liquidation or dissolution of the Company.
(d) Involuntary Termination. "Involuntary Termination" shall mean:
-----------------------
-3-
<PAGE>
(i) termination of Executive's employment by the Company for
any reason other than Cause;
(ii) a material reduction in Executive's salary, other than any
such reduction which is part of, and generally consistent with, a general
reduction of officer salaries;
(iii) a material reduction by the Company in the kind or level
of employee benefits (other than salary and bonus) to which Executive is
entitled immediately prior to such reduction with the result that Executive's
overall benefits package (other than salary and bonus) is substantially reduced
(other than any such reduction applicable to officers of the Company generally);
(iv) any material breach by the Company of any material
provision of this Agreement which continues uncured for 30 days following notice
thereof;
provided that none of the foregoing shall constitute Involuntary Termination to
the extent Executive has agreed thereto.
(e) Release of Claims. "Release of Claims" shall mean a waiver by
-----------------
Executive, in a form satisfactory to the Company, of all employment related
obligations of and claims and causes of action against the Company.
(f) Termination Date. "Termination Date" shall mean the date on which
----------------
an event which would constitute Involuntary Termination occurs, or the later of
(i) the date on which a notice of termination is given, or (ii) the date (which
shall not be more than thirty (30) days after the giving of such notice)
specified in such notice.
6. Confidentiality. Executive acknowledges that during the course of
---------------
Executive's employment, Executive will have produced and/or have access to
confidential information, records, notebooks, data, formula, specifications,
trade secrets, customer lists and secret inventions, and processes of the
Company and its affiliated companies. Therefore, during or subsequent to
Executive's employment by the Company, Executive agrees to hold in confidence
and not directly or indirectly to disclose or use or copy or make lists of any
such information, except to the extent authorized by the Company in writing. All
records, files, drawings, documents, equipment, and the like, or copies thereof,
relating to the Company's business, or the business of an affiliated company,
which Executive shall prepare, or use, or come into contact with, shall be and
remain the sole property of the Company, or of an affiliated company, and shall
not be removed from the Company's or the affiliated company's premises without
its written consent, and shall be promptly returned to the Company upon
termination of employment with the Company.
-4-
<PAGE>
7. Successors.
----------
(a) Company's Successors. Any successor to the Company (whether
--------------------
direct or indirect and whether by purchase, lease, merger, consolidation,
liquidation or otherwise) to all or substantially all of the Company's business
and/or assets shall assume the obligations under this Agreement and agree
expressly to perform the obligations under this Agreement in the same manner and
to the same extent as the Company would be required to perform such obligations
in the absence of a succession. For all purposes under this Agreement, the term
"Company" shall include any successor to the Company's business and/or assets
which executes and delivers the assumption agreement pursuant to this subsection
(a) or which becomes bound by the terms of this Agreement by operation of law.
(b) Executive's Successors. The terms of this Agreement and all
----------------------
rights of the Executive hereunder shall inure to the benefit of, and be
enforceable by, the Executive's personal or legal representatives, executors,
administrators, successors, heirs, distributees, devisees and legatees.
8. Notice.
------
(a) General. Notices and all other communications contemplated by
-------
this Agreement shall be in writing and shall be deemed to have been duly given
when personally delivered or when mailed by U.S. registered or certified mail,
return receipt requested and postage prepaid. In the case of the Executive,
mailed notices shall be addressed to Executive at the home address which
Executive most recently communicated to the Company in writing. In the case of
the Company, mailed notices shall be addressed to its corporate headquarters,
and all notices shall be directed to the attention of its CEO.
(b) Notice of Termination. Any termination by the Company for Cause
---------------------
or by the Executive as a result of a voluntary resignation or an Involuntary
Termination shall be communicated by a notice of termination to the other party
hereto given in accordance with Section 8(a) of this Agreement. Such notice
shall indicate the specific termination provision in this Agreement relied upon,
shall set forth in reasonable detail the facts and circumstances claimed to
provide a basis for termination under the provision so indicated, and shall
specify the termination date (which shall be not more than 30 days after the
giving of such notice). The failure by the Executive to include in the notice
any fact or circumstance which contributes to a showing of Involuntary
Termination shall not waive any right of the Executive hereunder or preclude the
Executive from asserting such fact or circumstance in enforcing Executive's
rights hereunder.
9. Miscellaneous Provisions.
------------------------
(a) No Duty to Mitigate. The Executive shall not be required to
-------------------
mitigate the amount of any payment contemplated by this Agreement, nor shall any
such payment be reduced by any earnings that the Executive may receive from any
other source.
-5-
<PAGE>
(b) Waiver. No provision of this Agreement shall be modified, waived
------
or discharged unless the modification, waiver or discharge is agreed to in
writing and signed by the Executive and by an authorized officer of the Company
(other than the Executive). No waiver by either party of any breach of, or of
compliance with, any condition or provision of this Agreement by the other party
shall be considered a waiver of any other condition or provision or of the same
condition or provision at another time.
(c) Whole Agreement. No agreements, representations or understandings
---------------
(whether oral or written and whether express or implied) which are not expressly
set forth in this Agreement have been made or entered into by either party with
respect to the subject matter hereof.
(d) Severance Provisions in Other Agreements. The Executive
----------------------------------------
acknowledges and agrees that the severance provisions set forth in this
Agreement shall supersede any such provisions in any employment agreement
entered into between the Executive and the Company.
(e) Choice of Law. The validity, interpretation, construction and
-------------
performance of this Agreement shall be governed by the laws of the State of
California.
(f) Severability. The invalidity or unenforceability of any provision
------------
or provisions of this Agreement shall not affect the validity or enforceability
of any other provision hereof, which shall remain in full force and effect.
(g) No Assignment of Benefits. The rights of any person to payments
-------------------------
or benefits under this Agreement shall not be made subject to option or
assignment, either by voluntary or involuntary assignment or by operation of
law, including (without limitation) bankruptcy, garnishment, attachment or other
creditor's process, and any action in violation of this subsection shall be
void.
(h) Employment Taxes. All payments made pursuant to this Agreement
----------------
will be subject to withholding of applicable income and employment taxes.
(i) Assignment by Company. The Company may assign its rights under
---------------------
this Agreement to an affiliate, and an affiliate may assign its rights under
this Agreement to another affiliate of the Company or to the Company; provided,
however, that no assignment shall be made if the net worth of the assignee is
less than the net worth of the Company at the time of assignment. In the case
of any such assignment, the term "Company" when used in a section of this
Agreement shall mean the corporation that actually employs the Executive.
(j) Counterparts. This Agreement may be executed in counterparts,
------------
each of which shall be deemed an original, but all of which together will
constitute one and the same instrument.
-6-
<PAGE>
IN WITNESS WHEREOF, each of the parties has executed this Agreement, in the
case of the Company by its duly authorized officer, as of the day and year first
above written.
COMPANY: COST PLUS, INC.
/s/ Murray Dashe
--------------------------
By
CEO
--------------------------
Title
Executive: /s/ Kathi Lentzsch
--------------------------
KATHI LENTZSCH
-7-
<PAGE>
EXHIBIT 10.9
EMPLOYMENT SEVERANCE AGREEMENT
This Severance Agreement (the "Agreement") is made and entered into
effective as of July 22, 1999 (the "Effective Date"), by and between Gary
Weatherford (the "Executive") and Cost Plus, Inc. (the "Company").
R E C I T A L S
---------------
A. The Board believes the Company should provide the Executive with
certain severance benefits should the Executive's employment with the Company
terminate under certain circumstances, such benefits to provide the Executive
with enhanced financial security and sufficient incentive and encouragement to
remain with the Company.
B. Certain capitalized terms used in the Agreement are defined in Section
5 below.
AGREEMENT
In consideration of the mutual covenants herein contained, and in
consideration of the continuing employment of Executive by the Company, the
parties agree as follows:
1. Duties and Scope of Employment. The Company shall employ the
------------------------------
Executive in the position of Senior Vice President in charge of Stores with such
duties, responsibilities and compensation as in effect as of the Effective Date.
The Board and the Chief Executive Officer of the Company (the "CEO") shall have
the right to revise such responsibilities and compensation from time to time as
the Board or the CEO may deem necessary or appropriate. If any such revision
constitutes "Involuntary Termination" as defined in Section 5(c) of this
Agreement, the Executive shall be entitled to benefits upon such Involuntary
Termination as provided under this Agreement.
2. At-Will Employment. The Company and the Executive acknowledge
------------------
that the Executive's employment is and shall continue to be at-will, as defined
under applicable law. If the Executive's employment terminates for any reason,
the Executive shall not be entitled to any payments, benefits, damages, awards
or compensation other than as provided by this Agreement, or as may otherwise be
available in accordance with the Company's established employee plans and
practices or in accordance with other agreements between the Company and the
Executive. This Agreement shall remain in effect until the earlier of (i) the
date that all obligations of the parties hereunder have been satisfied or (ii)
the date upon which this Agreement terminates by consent of the parties hereto.
3. Severance Benefits.
------------------
(a) Benefits upon Termination. Except as provided in Section
-------------------------
3(b), if the Executive's employment terminates as a result of Involuntary
Termination prior to June 15, 2001 and the Executive signs a Release of Claims,
then the Company shall pay Executive's Base Compensation to the Executive for
six (6) months from the Termination Date with each monthly
<PAGE>
installment payable on the last day of such month. Executive shall not be
entitled to receive any payments if Executive voluntarily terminates employment
other than as a result of an Involuntary Termination.
(b) Benefits upon Termination After a Change of Control. If
---------------------------------------------------
after a Change of Control the Executive's employment terminates as a result of
Involuntary Termination prior to June 15, 2001 and the Executive signs a Release
of Claims, then the Company shall pay Executive's Base Compensation to the
Executive for nine (9) months from the Termination Date with each monthly
installment payable on the last day of such month. Executive shall not be
entitled to receive any payments if Executive voluntarily terminates employment
other than as a result of an Involuntary Termination.
(c) Stock Options; Bonus. Except as otherwise provided in the
--------------------
Company's 1995 Stock Option Plan or in Executive's stock option agreements,
Executive shall not be entitled to receive any unvested stock options or partial
bonus payments for an incomplete bonus plan year.
(d) Miscellaneous. In addition, (i) the Company shall pay the
-------------
Executive any unpaid base salary due for periods prior to the Termination Date;
(ii) the Company shall pay the Executive all of the Executive's accrued and
unused vacation through the Termination Date; and (iii) following submission of
proper expense reports by the Executive, the Company shall reimburse the
Executive for all expenses reasonably and necessarily incurred by the Executive
in connection with the business of the Company prior to termination. These
payments shall be made promptly upon termination and within the period of time
mandated by applicable law.
4. Non-Solicitation. In consideration for the mutual agreements as
----------------
set forth herein, Executive agrees that Executive shall not, at any time, within
twelve (12) months following termination of Executive's employment with the
Company for any reason, directly or indirectly solicit the employment or other
services of any individual who at that time shall be or within the prior twelve
(12) months shall have been an employee of the Company.
5. Definition of Terms. The following terms referred to in this
-------------------
Agreement shall have the following meanings:
(a) Base Compensation. "Base Compensation" shall mean
-----------------
Executive's monthly base salary for services performed based on the average base
salary for the six (6) months prior to the Termination Date.
(b) Cause. "Cause," unless otherwise defined in the Agreement
-----
evidencing a particular Option, means an Eligible Individual's (i) intentional
failure to perform reasonably assigned duties, (ii) dishonesty or willful
misconduct in the performance of duties, (iii) engaging in a transaction in
connection with the performance of duties to the Company or any of its
Subsidiaries thereof which transaction is adverse to the interests of the
Company or any of its Subsidiaries and which is engaged in for personal profit
or (iv) willful violation of any law, rule or
-2-
<PAGE>
regulation in connection with the performance of duties (other than traffic
violations or similar offenses).
(c) "Change of Control" means the occurrence of any of the
following events:
(i) The acquisition by any "person" (as such term is used
in Sections 13(d) and 14(d) of the Exchange Act) (other than the Company or a
person that directly or indirectly controls, is controlled by, or is under
common control with, the Company) of the "beneficial ownership" (as defined in
Rule 13d-3 under the Exchange Act), directly or indirectly, of securities of the
Company representing fifty percent (50%) or more of the total voting power
represented by the Company's then outstanding voting securities;
(ii) A change in the composition of the Board of Directors
of the Company occurring within a two-year period, as a result of which fewer
than a majority of the directors are Incumbent Directors. "Incumbent Directors"
shall mean directors who either (A) are directors of the Company as of the date
hereof, or (B) are elected, or nominated for election, to the Board of Directors
of the Company with the affirmative votes of at least a majority of the
Incumbent Directors at the time of such election or nomination (but shall not
include an individual not otherwise an Incumbent Director whose election or
nomination is in connection with an actual or threatened proxy contest relating
to the election of directors to the Company);
(iii) A merger or consolidation of the Company with any
other corporation, other than a merger or consolidation which would result in
the voting securities of the Company outstanding immediately prior thereto
continuing to represent (either by remaining outstanding or by being converted
into voting securities of the surviving entity) at least fifty percent (50%) of
the total voting power represented by the voting securities of the Company or
such surviving entity outstanding immediately after such merger or
consolidation, or the approval by the stockholders of the Company of a plan of
complete liquidation of the Company or of an agreement for the sale or
disposition by the Company of all or substantially all the Company's assets;
(iv) The sale of all or substantially all of the assets of
the Company determined on a consolidated basis; or
(v) The complete liquidation or dissolution of the
Company.
(d) Involuntary Termination. "Involuntary Termination" shall
-----------------------
mean:
(i) termination of Executive's employment by the Company
for any reason other than Cause ;
(ii) a material reduction in Executive's salary, other
than any such reduction which is part of, and generally consistent with, a
general reduction of officer salaries;
-3-
<PAGE>
(iii) a material reduction by the Company in the kind or
level of employee benefits (other than salary and bonus) to which Executive is
entitled immediately prior to such reduction with the result that Executive's
overall benefits package (other than salary and bonus) is substantially reduced
(other than any such reduction applicable to officers of the Company generally);
(iv) any material breach by the Company of any material
provision of this Agreement which continues uncured for 30 days following notice
thereof;
provided that none of the foregoing shall constitute Involuntary
Termination to the extent Executive has agreed thereto.
(e) Release of Claims. "Release of Claims" shall mean a waiver
-----------------
by Executive, in a form satisfactory to the Company, of all employment related
obligations of and claims and causes of action against the Company.
(f) Termination Date. "Termination Date" shall mean the date on
----------------
which an event which would constitute Involuntary Termination occurs, or the
later of (i) the date on which a notice of termination is given, or (ii) the
date (which shall not be more than thirty (30) days after the giving of such
notice) specified in such notice.
6. Confidentiality. Executive acknowledges that during the course of
---------------
Executive's employment, Executive will have produced and/or have access to
confidential information, records, notebooks, data, formula, specifications,
trade secrets, customer lists and secret inventions, and processes of the
Company and its affiliated companies. Therefore, during or subsequent to
Executive's employment by the Company, Executive agrees to hold in confidence
and not directly or indirectly to disclose or use or copy or make lists of any
such information, except to the extent authorized by the Company in writing. All
records, files, drawings, documents, equipment, and the like, or copies thereof,
relating to the Company's business, or the business of an affiliated company,
which Executive shall prepare, or use, or come into contact with, shall be and
remain the sole property of the Company, or of an affiliated company, and shall
not be removed from the Company's or the affiliated company's premises without
its written consent, and shall be promptly returned to the Company upon
termination of employment with the Company.
7. Successors.
----------
(a) Company's Successors. Any successor to the Company (whether
--------------------
direct or indirect and whether by purchase, lease, merger, consolidation,
liquidation or otherwise) to all or substantially all of the Company's business
and/or assets shall assume the obligations under this Agreement and agree
expressly to perform the obligations under this Agreement in the same manner and
to the same extent as the Company would be required to perform such obligations
in the absence of a succession. For all purposes under this Agreement, the term
"Company" shall include any successor to the Company's business and/or assets
which executes and delivers the assumption agreement pursuant to this subsection
(a) or which becomes bound by the terms of this Agreement by operation of law.
-4-
<PAGE>
(b) Executive's Successors. The terms of this Agreement and all
----------------------
rights of the Executive hereunder shall inure to the benefit of, and be
enforceable by, the Executive's personal or legal representatives, executors,
administrators, successors, heirs, distributees, devisees and legatees.
8. Notice.
------
(a) General. Notices and all other communications contemplated
-------
by this Agreement shall be in writing and shall be deemed to have been duly
given when personally delivered or when mailed by U.S. registered or certified
mail, return receipt requested and postage prepaid. In the case of the
Executive, mailed notices shall be addressed to Executive at the home address
which Executive most recently communicated to the Company in writing. In the
case of the Company, mailed notices shall be addressed to its corporate
headquarters, and all notices shall be directed to the attention of its CEO.
(b) Notice of Termination. Any termination by the Company for
---------------------
Cause or by the Executive as a result of a voluntary resignation or an
Involuntary Termination shall be communicated by a notice of termination to the
other party hereto given in accordance with Section 8(a) of this Agreement. Such
notice shall indicate the specific termination provision in this Agreement
relied upon, shall set forth in reasonable detail the facts and circumstances
claimed to provide a basis for termination under the provision so indicated, and
shall specify the termination date (which shall be not more than 30 days after
the giving of such notice). The failure by the Executive to include in the
notice any fact or circumstance which contributes to a showing of Involuntary
Termination shall not waive any right of the Executive hereunder or preclude the
Executive from asserting such fact or circumstance in enforcing Executive's
rights hereunder.
9. Miscellaneous Provisions.
------------------------
(a) No Duty to Mitigate. The Executive shall not be required to
-------------------
mitigate the amount of any payment contemplated by this Agreement, nor shall any
such payment be reduced by any earnings that the Executive may receive from any
other source.
(b) Waiver. No provision of this Agreement shall be modified,
------
waived or discharged unless the modification, waiver or discharge is agreed to
in writing and signed by the Executive and by an authorized officer of the
Company (other than the Executive). No waiver by either party of any breach of,
or of compliance with, any condition or provision of this Agreement by the other
party shall be considered a waiver of any other condition or provision or of the
same condition or provision at another time.
(c) Whole Agreement. No agreements, representations or
---------------
understandings (whether oral or written and whether express or implied) which
are not expressly set forth in this Agreement have been made or entered into by
either party with respect to the subject matter hereof.
(d) Severance Provisions in Other Agreements. The Executive
----------------------------------------
acknowledges and agrees that the severance provisions set forth in this
Agreement shall supersede
-5-
<PAGE>
any such provisions in any employment agreement entered into between the
Executive and the Company.
(e) Choice of Law. The validity, interpretation, construction and
-------------
performance of this Agreement shall be governed by the laws of the State of
California.
(f) Severability. The invalidity or unenforceability of any
------------
provision or provisions of this Agreement shall not affect the validity or
enforceability of any other provision hereof, which shall remain in full force
and effect.
(g) No Assignment of Benefits. The rights of any person to
-------------------------
payments or benefits under this Agreement shall not be made subject to option or
assignment, either by voluntary or involuntary assignment or by operation of
law, including (without limitation) bankruptcy, garnishment, attachment or other
creditor's process, and any action in violation of this subsection shall be
void.
(h) Employment Taxes. All payments made pursuant to this
----------------
Agreement will be subject to withholding of applicable income and employment
taxes.
(i) Assignment by Company. The Company may assign its rights
---------------------
under this Agreement to an affiliate, and an affiliate may assign its rights
under this Agreement to another affiliate of the Company or to the Company;
provided, however, that no assignment shall be made if the net worth of the
assignee is less than the net worth of the Company at the time of assignment. In
the case of any such assignment, the term "Company" when used in a section of
this Agreement shall mean the corporation that actually employs the Executive.
(j) Counterparts. This Agreement may be executed in counterparts,
------------
each of which shall be deemed an original, but all of which together will
constitute one and the same instrument.
IN WITNESS WHEREOF, each of the parties has executed this Agreement, in the
case of the Company by its duly authorized officer, as of the day and year first
above written.
COMPANY: COST PLUS, INC.
_______________________________
By
_______________________________
Title
Executive: _______________________________
GARY WEATHERFORD
-6-
<PAGE>
EXHIBIT 10.10
EMPLOYMENT SEVERANCE AGREEMENT
This Severance Agreement (the "Agreement") is made and entered into
effective as of July 22, 1999 (the "Effective Date"), by and between Joan Fujii
(the "Executive") and Cost Plus, Inc. (the "Company").
R E C I T A L S
---------------
A. The Board believes the Company should provide the Executive with
certain severance benefits should the Executive's employment with the Company
terminate under certain circumstances, such benefits to provide the Executive
with enhanced financial security and sufficient incentive and encouragement to
remain with the Company.
B. Certain capitalized terms used in the Agreement are defined in Section
5 below.
AGREEMENT
In consideration of the mutual covenants herein contained, and in
consideration of the continuing employment of Executive by the Company, the
parties agree as follows:
1. Duties and Scope of Employment. The Company shall employ the
------------------------------
Executive in the position of Senior Vice President in charge of Human Resources
with such duties, responsibilities and compensation as in effect as of the
Effective Date. The Board and the Chief Executive Officer of the Company (the
"CEO") shall have the right to revise such responsibilities and compensation
from time to time as the Board or the CEO may deem necessary or appropriate. If
any such revision constitutes "Involuntary Termination" as defined in Section
5(c) of this Agreement, the Executive shall be entitled to benefits upon such
Involuntary Termination as provided under this Agreement.
2. At-Will Employment. The Company and the Executive acknowledge
------------------
that the Executive's employment is and shall continue to be at-will, as defined
under applicable law. If the Executive's employment terminates for any reason,
the Executive shall not be entitled to any payments, benefits, damages, awards
or compensation other than as provided by this Agreement, or as may otherwise be
available in accordance with the Company's established employee plans and
practices or in accordance with other agreements between the Company and the
Executive. This Agreement shall remain in effect until the earlier of (i) the
date that all obligations of the parties hereunder have been satisfied or (ii)
the date upon which this Agreement terminates by consent of the parties hereto.
<PAGE>
3. Severance Benefits.
------------------
(a) Benefits upon Termination. Except as provided in Section 3(b), if
-------------------------
the Executive's employment terminates as a result of Involuntary Termination
prior to June 15, 2001 and the Executive signs a Release of Claims, then the
Company shall pay Executive's Base Compensation to the Executive for six (6)
months from the Termination Date with each monthly installment payable on the
last day of such month. Executive shall not be entitled to receive any payments
if Executive voluntarily terminates employment other than as a result of an
Involuntary Termination.
(b) Benefits upon Termination After a Change of Control. If after a
---------------------------------------------------
Change of Control the Executive's employment terminates as a result of
Involuntary Termination prior to June 15, 2001 and the Executive signs a Release
of Claims, then the Company shall pay Executive's Base Compensation to the
Executive for nine (9) months from the Termination Date with each monthly
installment payable on the last day of such month. Executive shall not be
entitled to receive any payments if Executive voluntarily terminates employment
other than as a result of an Involuntary Termination.
(c) Stock Options; Bonus. Except as otherwise provided in the
--------------------
Company's 1995 Stock Option Plan and Executive's respective stock option
agreements, executive shall not be entitled to receive any unvested stock
options or partial bonus payments for an incomplete bonus plan year.
(d) Miscellaneous. In addition, (i) the Company shall pay the
-------------
Executive any unpaid base salary due for periods prior to the Termination Date;
(ii) the Company shall pay the Executive all of the Executive's accrued and
unused vacation through the Termination Date; and (iii) following submission of
proper expense reports by the Executive, the Company shall reimburse the
Executive for all expenses reasonably and necessarily incurred by the Executive
in connection with the business of the Company prior to termination. These
payments shall be made promptly upon termination and within the period of time
mandated by applicable law.
4. Non-Solicitation. In consideration for the mutual agreements as
----------------
set forth herein, Executive agrees that Executive shall not, at any time, within
twelve (12) months following termination of Executive's employment with the
Company for any reason, directly or indirectly solicit the employment or other
services of any individual who at that time shall be or within the prior twelve
(12) months shall have been an employee of the Company.
5. Definition of Terms. The following terms referred to in this
-------------------
Agreement shall have the following meanings:
(a) Base Compensation. "Base Compensation" shall mean Executive's
-----------------
monthly base salary for services performed based on the average base salary for
the six (6) months prior to the Termination Date.
-2-
<PAGE>
(b) Cause. "Cause," unless otherwise defined in the Agreement
-----
evidencing a particular Option, means an Eligible Individual's (i) intentional
failure to perform reasonably assigned duties, (ii) dishonesty or willful
misconduct in the performance of duties, (iii) engaging in a transaction in
connection with the performance of duties to the Company or any of its
Subsidiaries thereof which transaction is adverse to the interests of the
Company or any of its Subsidiaries and which is engaged in for personal profit
or (iv) willful violation of any law, rule or regulation in connection with the
performance of duties (other than traffic violations or similar offenses).
(c) "Change of Control" means the occurrence of any of the following
events:
(i) The acquisition by any "person" (as such term is used in
Sections 13(d) and 14(d) of the Exchange Act) (other than the Company or a
person that directly or indirectly controls, is controlled by, or is under
common control with, the Company) of the "beneficial ownership" (as defined in
Rule 13d-3 under the Exchange Act), directly or indirectly, of securities of the
Company representing fifty percent (50%) or more of the total voting power
represented by the Company's then outstanding voting securities;
(ii) A change in the composition of the Board of Directors of
the Company occurring within a two-year period, as a result of which fewer than
a majority of the directors are Incumbent Directors. "Incumbent Directors" shall
mean directors who either (A) are directors of the Company as of the date
hereof, or (B) are elected, or nominated for election, to the Board of Directors
of the Company with the affirmative votes of at least a majority of the
Incumbent Directors at the time of such election or nomination (but shall not
include an individual not otherwise an Incumbent Director whose election or
nomination is in connection with an actual or threatened proxy contest relating
to the election of directors to the Company);
(iii) A merger or consolidation of the Company with any other
corporation, other than a merger or consolidation which would result in the
voting securities of the Company outstanding immediately prior thereto
continuing to represent (either by remaining outstanding or by being converted
into voting securities of the surviving entity) at least fifty percent (50%) of
the total voting power represented by the voting securities of the Company or
such surviving entity outstanding immediately after such merger or
consolidation, or the approval by the stockholders of the Company of a plan of
complete liquidation of the Company or of an agreement for the sale or
disposition by the Company of all or substantially all the Company's assets;
(iv) The sale of all or substantially all of the assets of the
Company determined on a consolidated basis; or
(v) The complete liquidation or dissolution of the Company.
(d) Involuntary Termination. "Involuntary Termination" shall
-----------------------
mean:
-3-
<PAGE>
(i) termination of Executive's employment by the Company for
any reason other than Cause;
(ii) a material reduction in Executive's salary, other than any
such reduction which is part of, and generally consistent with, a general
reduction of officer salaries;
(iii) a material reduction by the Company in the kind or
level of employee benefits (other than salary and bonus) to which Executive is
entitled immediately prior to such reduction with the result that Executive's
overall benefits package (other than salary and bonus) is substantially reduced
(other than any such reduction applicable to officers of the Company generally);
(iv) any material breach by the Company of any material
provision of this Agreement which continues uncured for 30 days following notice
thereof;
provided that none of the foregoing shall constitute Involuntary Termination to
the extent Executive has agreed thereto.
(e) Release of Claims. "Release of Claims" shall mean a waiver by
-----------------
Executive, in a form satisfactory to the Company, of all employment related
obligations of and claims and causes of action against the Company.
(f) Termination Date. "Termination Date" shall mean the date on which
----------------
an event which would constitute Involuntary Termination occurs, or the later of
(i) the date on which a notice of termination is given, or (ii) the date (which
shall not be more than thirty (30) days after the giving of such notice)
specified in such notice.
6. Confidentiality. Executive acknowledges that during the course of
---------------
Executive's employment, Executive will have produced and/or have
access to confidential information, records, notebooks, data, formula,
specifications, trade secrets, customer lists and secret inventions, and
processes of the Company and its affiliated companies. Therefore, during or
subsequent to Executive's employment by the Company, Executive agrees to hold in
confidence and not directly or indirectly to disclose or use or copy or make
lists of any such information, except to the extent authorized by the Company in
writing. All records, files, drawings, documents, equipment, and the like, or
copies thereof, relating to the Company's business, or the business of an
affiliated company, which Executive shall prepare, or use, or come into contact
with, shall be and remain the sole property of the Company, or of an affiliated
company, and shall not be removed from the Company's or the affiliated company's
premises without its written consent, and shall be promptly returned to the
Company upon termination of employment with the Company.
-4-
<PAGE>
7. Successors.
----------
(a) Company's Successors. Any successor to the Company (whether
--------------------
direct or indirect and whether by purchase, lease, merger, consolidation,
liquidation or otherwise) to all or substantially all of the Company's business
and/or assets shall assume the obligations under this Agreement and agree
expressly to perform the obligations under this Agreement in the same manner and
to the same extent as the Company would be required to perform such obligations
in the absence of a succession. For all purposes under this Agreement, the term
"Company" shall include any successor to the Company's business and/or assets
which executes and delivers the assumption agreement pursuant to this subsection
(a) or which becomes bound by the terms of this Agreement by operation of law.
(b) Executive's Successors. The terms of this Agreement and all
----------------------
rights of the Executive hereunder shall inure to the benefit of, and be
enforceable by, the Executive's personal or legal representatives, executors,
administrators, successors, heirs, distributees, devisees and legatees.
8. Notice.
------
(a) General. Notices and all other communications contemplated by
-------
this Agreement shall be in writing and shall be deemed to have been duly given
when personally delivered or when mailed by U.S. registered or certified mail,
return receipt requested and postage prepaid. In the case of the Executive,
mailed notices shall be addressed to Executive at the home address which
Executive most recently communicated to the Company in writing. In the case of
the Company, mailed notices shall be addressed to its corporate headquarters,
and all notices shall be directed to the attention of its CEO.
(b) Notice of Termination. Any termination by the Company for Cause
---------------------
or by the Executive as a result of a voluntary resignation or an Involuntary
Termination shall be communicated by a notice of termination to the other party
hereto given in accordance with Section 8(a) of this Agreement. Such notice
shall indicate the specific termination provision in this Agreement relied upon,
shall set forth in reasonable detail the facts and circumstances claimed to
provide a basis for termination under the provision so indicated, and shall
specify the termination date (which shall be not more than 30 days after the
giving of such notice). The failure by the Executive to include in the notice
any fact or circumstance which contributes to a showing of Involuntary
Termination shall not waive any right of the Executive hereunder or preclude the
Executive from asserting such fact or circumstance in enforcing Executive's
rights hereunder.
9. Miscellaneous Provisions.
------------------------
(a) No Duty to Mitigate. The Executive shall not be required to
-------------------
mitigate the amount of any payment contemplated by this Agreement, nor shall any
such payment be reduced by any earnings that the Executive may receive from any
other source.
-5-
<PAGE>
(b) Waiver. No provision of this Agreement shall be modified, waived
------
or discharged unless the modification, waiver or discharge is agreed to in
writing and signed by the Executive and by an authorized officer of the Company
(other than the Executive). No waiver by either party of any breach of, or of
compliance with, any condition or provision of this Agreement by the other party
shall be considered a waiver of any other condition or provision or of the same
condition or provision at another time.
(c) Whole Agreement. No agreements, representations or understandings
---------------
(whether oral or written and whether express or implied) which are not expressly
set forth in this Agreement have been made or entered into by either party with
respect to the subject matter hereof.
(d) Severance Provisions in Other Agreements. The Executive
----------------------------------------
acknowledges and agrees that the severance provisions set forth in this
Agreement shall supersede any such provisions in any employment agreement
entered into between the Executive and the Company.
(e) Choice of Law. The validity, interpretation, construction and
-------------
performance of this Agreement shall be governed by the laws of the State of
California.
(f) Severability. The invalidity or unenforceability of any provision
------------
or provisions of this Agreement shall not affect the validity or enforceability
of any other provision hereof, which shall remain in full force and effect.
(g) No Assignment of Benefits. The rights of any person to payments
-------------------------
or benefits under this Agreement shall not be made subject to option or
assignment, either by voluntary or involuntary assignment or by operation of
law, including (without limitation) bankruptcy, garnishment, attachment or other
creditor's process, and any action in violation of this subsection shall be
void.
(h) Employment Taxes. All payments made pursuant to this Agreement
----------------
will be subject to withholding of applicable income and employment taxes.
(i) Assignment by Company. The Company may assign its rights under
---------------------
this Agreement to an affiliate, and an affiliate may assign its rights under
this Agreement to another affiliate of the Company or to the Company; provided,
however, that no assignment shall be made if the net worth of the assignee is
less than the net worth of the Company at the time of assignment. In the case
of any such assignment, the term "Company" when used in a section of this
Agreement shall mean the corporation that actually employs the Executive.
(j) Counterparts. This Agreement may be executed in counterparts,
------------
each of which shall be deemed an original, but all of which together will
constitute one and the same instrument.
-6-
<PAGE>
IN WITNESS WHEREOF, each of the parties has executed this Agreement, in the
case of the Company by its duly authorized officer, as of the day and year first
above written.
COMPANY: COST PLUS, INC.
/s/ Murray Dashe
--------------------------
By
CEO
--------------------------
Title
Executive: /s/ Joan Fujii
--------------------------
JOAN FUJII
-7-
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM FINANCIAL
STATEMENTS OF COST PLUS, INC. FOR THE SIX MONTHS ENDED JULY 31, 1999. AND IS
QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> JAN-29-2000
<PERIOD-START> JAN-31-1999
<PERIOD-END> JUL-31-1999
<CASH> 19,960
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 72,746
<CURRENT-ASSETS> 97,723
<PP&E> 107,491
<DEPRECIATION> 46,220
<TOTAL-ASSETS> 168,646
<CURRENT-LIABILITIES> 32,478
<BONDS> 0
0
0
<COMMON> 136
<OTHER-SE> 114,688
<TOTAL-LIABILITY-AND-EQUITY> 168,646
<SALES> 151,945
<TOTAL-REVENUES> 151,945
<CGS> 99,541
<TOTAL-COSTS> 148,593
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 376
<INCOME-PRETAX> 2,976
<INCOME-TAX> 1,161
<INCOME-CONTINUING> 1,815
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,815
<EPS-BASIC> 0.13
<EPS-DILUTED> 0.13
</TABLE>
