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Exhibit
10.3
EMPLOYMENT SEVERANCE
AGREEMENT
This Employment Severance
Agreement (the “Agreement”) is made and entered into
effective as of September 28, 2007 (the “Effective
Date”), by and between Jeffrey Turner (the
“Executive”) and Cost Plus, Inc. (the
“Company”).
R E C I T A L
S
A. Cost Plus desires to
retain the services of the Executive, and the Executive desires to
be employed by Cost Plus, on the terms and subject to the
conditions set forth in this Agreement.
B. The Board of Directors of
the Company (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.
C. Certain capitalized terms
used in the Agreement are defined in Section 6
below.
AGREEMENT
In consideration of the
mutual covenants herein contained, the parties agree as
follows:
1. Duties and Scope of
Employment . The Company shall employ the Executive in the
position of Senior Vice President, Chief Information Officer, 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 6(d) 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 . Unless the Executive is entitled to benefits
under Section 3(b) of this Agreement, if the Executive’s
employment terminates as a result of Involuntary Termination prior
to June 15, 2008 and the Executive signs and does not revoke a
Release of Claims, then the Company shall pay the Executive’s
Base Compensation on a salary continuation basis in accordance with
the Company’s normal payroll practices to the Executive for
six (6) months from the Termination Date. The Executive shall
not be entitled to receive any payments if the 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, 2008 and the
Executive signs and does not revoke a Release of Claims, then the
Company shall pay the Executive’s Base Compensation on a
salary continuation basis in accordance with the Company’s
normal payroll practices to the Executive for nine (9) months
from the Termination Date. The Executive shall not be entitled to
receive any payments if the Executive voluntarily terminates
employment other than as a result of an Involuntary
Termination.
(c) Stock Options .
Unless otherwise provided in the Company’s stock option plans
or in the Executive’s stock option agreements, the Executive
shall not be entitled to acceleration of any unvested stock options
upon the termination of the Executive’s employment for any
reason, including an Involuntary Termination.
(d) Miscellaneous . In
addition to the benefits described in Section 3(a) or
Section 3(b) of this Agreement, upon the termination of the
Executive’s employment, (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; (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
the Termination Date; and (iv) if benefits will be paid under
Section 3(a) or Section 3(b) of this Agreement, the
Company shall pay the Executive a pro-rata portion of the
Executive’s fiscal year bonus, if any, under the
Company’s Management Incentive Plan in effect for the fiscal
year in which the Termination Date occurs. Such amount shall be
paid at the time bonuses for the completed fiscal year are paid to
other executives (but no later than the period of time required to
fit within the short-term deferral rule of Section 409A of the
Internal Revenue Code of 1986, as amended (the
“Code”)), shall be pro-rated for the period of time
during the fiscal year that the Executive was an employee of the
Company and shall only be paid if, and to the extent, that the
relevant performance targets have been achieved by the Company.
Except for any bonus payment under clause (iv) of the
preceding sentence, these payments shall be made promptly upon
termination and within the period of time mandated by applicable
law.
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4. Limitation on
Payments .
(a) Code
Section 409A . Notwithstanding anything to the contrary in
this Agreement, if Executive is a “specified employee”
within the meaning of Section 409A of the Code and the final
regulations and any other guidance promulgated thereunder
(“Section 409A”) at the time of the Executive’s
termination, and the severance payable to Executive, if any,
pursuant to this Agreement, when considered together with any other
severance payments or separation benefits which may be considered
deferred compensation under Section 409A (together, the
“Deferred Compensation Separation Benefits”) will not
and could not under any circumstances, regardless of when such
termination occurs, be paid in full by the fifteenth day of the
third month of the Company’s fiscal year following
Executive’s termination, then only that portion of the
Deferred Compensation Separation Benefits which do not exceed the
Section 409A Limit (as defined below) may be made within the
first six (6) months following Executive’s termination
of employment in accordance with the payment schedule applicable to
each such payment or benefit. For these purposes, each severance
payment is hereby designated as a separate payment and will not
collectively be treated as a single payment. Any portion of the
Deferred Compensation Separation Benefits in excess of the
Section 409A Limit shall accrue and, to the extent such
portion of the Deferred Compensation Separation Benefits would
otherwise have been payable within the first six (6) months
following Executive’s termination of employment, will become
payable on the first payroll date that occurs on or after the date
six (6) months and one (1) day following the date of
Executive’s termination of employment. All subsequent
Deferred Compensation Separation Benefits, if any, will be payable
in accordance with the payment schedule applicable to each payment
or benefit.
This provision is intended to
comply with the requirements of Section 409A so that none of
the severance payments and benefits to be provided hereunder will
be subject to the additional tax imposed under Section 409A,
and any ambiguities herein will be interpreted to so comply. The
Company and Executive agree to work together in good faith to
consider amendments to this Agreement and to take such reasonable
actions which are necessary, appropriate or desirable to avoid
imposition of any additional tax or income recognition prior to
actual payment to Executive under Section 409A.
For purposes of this
Agreement, “Section 409A Limit” shall mean the lesser
of two (2) times: (i) Executive’s annualized
compensation based upon the annual rate of pay paid to Executive
during the Company’s taxable year preceding the
Company’s taxable year of Executive’s termination of
employment as determined under Treasury Regulation
1.409A-1(b)(9)(iii)(A)(1) and any Internal Revenue Service guidance
issued with respect thereto; or (ii) the maximum amount that
may be taken into account under a qualified plan pursuant to
Section 401(a)(17) of the Code for the year in which
Executive’s employment is terminated.
(b) Code
Section 280G . In the event that the severance and other
benefits provided for in this Agreement or otherwise payable to the
Executive (i) constitute “parachute payments”
within the meaning of Section 280G of the Code and
(ii) but for this Section 4, would be subject to the
excise tax imposed by Section 4999 of the Code, then the
Executive’s severance benefits under Section 3(b) of
this Agreement shall be either:
(i) delivered in full,
or
(ii) delivered as to such
lesser extent which would result in no portion of such severance
benefits being subject to excise tax under Section 4999 of the
Code,
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whichever of the foregoing amounts,
taking into account the applicable federal, state and local income
taxes and the excise tax imposed by Section 4999 of the Code,
results in the receipt by the Executive on an after-tax basis, of
the greatest amount of severance benefits, notwithstanding that all
or some portion of such severance benefits may be taxable under
Section 4999 of the Code. Unless the Company and the Executive
otherwise agree in writing, any determination required under this
Section 4 shall
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