Exhibit 10.1
EMPLOYMENT
AGREEMENT
THIS EMPLOYMENT AGREEMENT is dated
as of the 24th day of October, 2005, by and between Cost Plus,
Inc., a California corporation (“Cost Plus”), and Barry
J. Feld, the undersigned Executive (“Mr. Feld”)
and is effective as of October 24, 2005.
Recitals
Cost Plus desires to retain the
services of Mr. Feld, and Mr. Feld desires to be employed
by Cost Plus, on the terms and subject to the conditions set forth
in this Agreement. This Agreement amends and supersedes the
employment agreement entered into between Cost Plus and
Mr. Feld dated October 24, 2005;
NOW, THEREFORE, in consideration of
the foregoing recital and the respective undertakings of Cost Plus
and Mr. Feld set forth below, Cost Plus and Mr. Feld
agree as follows:
1. Employment .
(a) Duties . Cost Plus agrees
to employ Mr. Feld as Chief Executive Officer and President.
Mr. Feld agrees to perform such reasonable responsibilities
and duties as may be required of him by Cost Plus provided,
however, that the Board of Directors of Cost Plus (the
“Board”) shall have the right to revise such
responsibilities from time to time as the Board may deem
appropriate. Mr. Feld shall carry out his duties and
responsibilities hereunder in a diligent and competent manner and
shall devote his full business time, attention, and energy thereto.
Mr. Feld shall report directly to the Board and shall continue
to serve as a member of the Board, subject to any required
stockholder approval. Mr. Feld understands that Fredric M.
Roberts has been appointed to a two-year term ending March 8,
2007 as non-executive Chairman of the Board and shall continue to
serve as non-executive Chairman of the Board until the Board shall
designate a successor. Mr. Feld hereby resigns his positions
as a member of the Audit, Compensation, Nominating and Real Estate
Committees of the Board.
(b) Term of Employment .
Subject to the right of Cost Plus to terminate
Mr. Feld’s employment earlier, in which case
Mr. Feld shall be entitled to the benefits provided for in
Section 3 of this Agreement, Cost Plus shall employ
Mr. Feld for a term of four (4) years commencing on the
date of this Agreement (the “Employment
Term”).
2. Compensation and Benefits
.
(a) Base Compensation . Cost
Plus shall pay Mr. Feld as compensation for his services a
base salary at the annualized rate of Six Hundred Seventy-Five
Thousand Dollars ($675,000) for the first year of this Agreement.
The Board shall review Mr. Feld’s base salary then in
effect at least annually and make such increases as
the Board may approve in its sole
discretion. Such base salary shall be subject to applicable tax
withholding and shall be paid periodically in accordance with
normal Cost Plus payroll practices. The annual compensation
specified in this Section 2(a), together with any increases in
such compensation, is referred to in this Agreement as “Base
Compensation.” The fees that Mr. Feld has been receiving
for his services as a director shall terminate upon the
commencement of the Employment Term, and he shall receive no
separate fees for his services as a director during the Employment
Term. Mr. Feld acknowledges that he has been paid all fees and
expenses owing to him for his services as a director prior to the
Employment Term.
(b) Bonus .
(i) Commencing with the 2006 fiscal
year, Mr. Feld shall be eligible for an annual bonus target of
no less than seventy percent (70%) of his Base Compensation
upon achievement of financial and other goals under the Cost Plus
Cash Plus Bonus Plan or any successor plan, as determined by the
Board or the Compensation Committee of the Board (the
“Compensation Committee”). In accordance with standard
Cost Plus policies, Mr. Feld shall be eligible for an annual
bonus payout above the target percentage upon exceptional
achievement in exceeding the financial goals established by the
Board or Compensation Committee. The Board or the Compensation
Committee may increase the target bonus in any subsequent year or
years in its sole discretion.
(ii) The bonus period shall begin
with Cost Plus’s 2006 fiscal year. Each fiscal year’s
bonus shall be based on Mr. Feld’s salary for that
fiscal year, and will be payable promptly after the close of that
fiscal year, but no later than the fifteenth day of the third month
of Cost Plus’s following taxable year.
(c) Executive Benefits .
Mr. Feld shall be eligible to participate in the employee
benefit plans that are available or that become available, in the
discretion of Cost Plus, to other executives of Cost Plus, subject
in each case to the generally applicable terms and conditions of
the plan or program in question and to the determination of any
committee administering such plan or program.
(d) Vacation . Mr. Feld
shall be entitled to four (4) weeks of vacation per
year.
(e) Stock Options . Not later
than the close of business on the second day of the Employment
Term, Cost Plus shall grant Mr. Feld an option (the
“Option”) to purchase 200,000 shares of the
Company’s Common Stock under the Company’s 2004 Stock
Plan. The per share exercise price for the Option shall be equal to
the closing price of the Common Stock on the Nasdaq Stock Market on
the date of grant. The term of the Option shall be seven
(7) years and the Option shall vest at a rate of twenty-five
percent (25%) per year on the anniversary of the grant date.
Mr. Feld shall be eligible in the future for options to purchase
Cost Plus’s Common Stock or other stock incentives as may be
granted by the Board or the Compensation Committee in its sole
discretion. The terms and conditions of any options granted to
Mr. Feld shall be established by the Board
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or the Compensation Committee in its
sole discretion, subject to Section 3(a)(iv) of this Agreement
and the terms of the applicable stock option plan under which the
options are granted. All options granted to Mr. Feld in his
capacity as a director before the date of this Agreement shall
continue in accordance with the original terms of those
options.
(f) Relocation Expenses
.
(i) Cost Plus shall promptly
reimburse Mr. Feld for the following costs to relocate himself
and his family to the San Francisco Bay Area:
(A) Reasonable cost of temporary
housing for up to eighteen (18) months from the date of this
Agreement;
(B) Reasonable expenses of his
travel to and from his present residence in North Carolina up to
two times each month while his family is still resident in North
Carolina and the reasonable expenses of “house hunting”
trips to the San Francisco Bay Area for his wife and family;
and
(C) Reasonable costs associated with
moving household furnishings, automobiles and personal
effects.
(D) The Company shall also pay to
Mr. Feld a full gross-up amount sufficient to cover the
additional federal, state and municipal income and employment taxes
imposed upon Mr. Feld by virtue of the payments provided for
in this Section 2(f)(i) and the gross-up payments on such
amounts, so that Mr. Feld is in the same economic position as
if the provision of such benefits did not result in imputed income.
Mr. Feld agrees to provide the Company or its agents, upon
written request, with sufficient information to accurately
calculate the amount of the full gross-up payments due.
(ii) In order to compensate him for
the higher cost of housing in the San Francisco Bay Area, Cost Plus
shall pay Mr. Feld upon the commencement of the Employment
Term a one-time payment of $750,000, subject to deductions for
applicable withholding and other taxes. In the event Mr. Feld
voluntarily resigns from his employment with Cost Plus prior to the
end of the Employment Term, he shall promptly repay to Cost Plus a
pro rata portion of the $750,000 payment computed by multiplying
$750,000 by a fraction the numerator of which shall be the number
of days remaining in the Employment Term and the denominator of
which shall be the total number of days in the full Employment
Term.
3. Severance Payments
.
(a) Involuntary Termination .
If Mr. Feld’s employment terminates as a result of an
Involuntary Termination other than for Cause during the Employment
Term, Cost Plus shall pay or provide Mr. Feld with the
following in full satisfaction of its obligations to Mr. Feld
under this Agreement (subject to Mr. Feld executing and not
revoking a Release of Claims):
(i) the balance of his then current
Base Compensation for the remainder of the four-year Employment
Term, payable in substantially equal installments in accordance
with Cost Plus’s standard payroll practice;
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(ii) a lump-sum amount equal to one
hundred percent (100%) of Mr. Feld’s target bonus
for the year of termination multiplied by a fraction where the
numerator is the number of days in the applicable bonus period
prior to Mr. Feld’s termination and the denominator is
the number of days in the bonus period, payable within thirty
(30) days after termination of employment, except as provided
below;
(iii) to the extent eligible on the
date of termination, a lump-sum amount equal to the reasonable cost
of providing Mr. Feld and his covered dependents, at no
additional after-tax cost to Mr. Feld than Mr. Feld would
have as an employee of Cost Plus, health, life insurance and
disability insurance plans for the balance of the four-year
Employment Term, as determined by Cost Plus in its sole
discretion;
(iv) all stock options granted to
Mr. Feld during the Employment Term shall vest in full so as
to become fully exercisable as of the date of the termination to
the extent such stock options are outstanding and unexercisable at
the time of such termination; and
(v) any unpaid base salary due for
periods prior to the date of termination, all accrued and unused
vacation through the date of termination, and following submission
of proper expense reports, reimbursement for all expenses
Mr. Feld reasonably and necessarily incurred in connection
with the business of Cost Plus prior to termination (the
“Accrued Benefits”).
To the extent required by Code
Section 409A, the payments described in Sections
(i) through (iii) above shall be paid no earlier than six
(6) months and one (1) day following the date of
Mr. Feld’s termination.
(b) Termination in the Event of
Disability . If Mr. Feld’s employment terminates as
a result of his Disability during the Employment Term, Cost Plus
shall pay or provide Mr. Feld with the following:
(i) the balance of his then current
Base Compensation for the remainder of the four-year Employment
Term, payable in substantially equal installments in accordance
with Cost Plus’s standard payroll practice;
(ii) a lump-sum amount equal to one
hundred percent (100%) of Mr. Feld’s target bonus
for the year of termination multiplied by a fraction where the
numerator is the number of days in the applicable bonus period
prior to Mr. Feld’s termination and the denominator is
the number of days in the bonus period, payable within thirty
(30) days after termination of employment, except as provided
below;
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(iii) to the extent eligible on the
date of termination, a lump-sum amount equal to the reasonable cost
of providing Mr. Feld and his covered dependents, at no
additional after-tax cost to Mr. Feld than Mr. Feld would
have as an employee of Cost Plus, health and life insurance plans
for the balance of the four-year Employment Term, as determined by
Cost Plus in its sole discretion; and
(iv) any Accrued
Benefits.
Notwithstanding any contrary provision of this
Agreement, Mr. Feld shall continue to receive the payments and
benefits described in Section 2 of this Agreement or otherwise
payable in connection with his employment with Cost Plus during the
term of any Disability Period (as defined in Section 7(c));
provided, however, to the extent required by Code
Section 409A, the payments described in Section 2 of this
Agreement and Sections (i) through (iii) above shall be
paid no earlier than six (6) months and one (1) day
following the date of Mr. Feld’s termination. The
payments described in Sections (i) through (iv) above
shall be in addition to any benefits available to Mr. Feld
under disability or other insurance provided by Cost
Plus.
(c) Termination in the Event of
Death . If Mr. Feld’s employment terminates as a
result of his death during the Employment Term, Cost Plus shall pay
or provide Mr. Feld’s beneficiary(ies) or estate with
the following:
(i) the balance of his then current
Base Compensation for the remainder of the four-year Employment
Term, payable in substantially equal installments in accordance
with Cost Plus’s standard payroll practice;
(ii) a lump-sum amount equal to one
hundred percent (100%) of Mr. Feld’s target bonus
for the year of death multiplied by a fraction where the numerator
is the number of days in the bonus period prior to
Mr. Feld’s death and the denominator is the number of
days in the bonus period, payable within thirty (30) days
after death, except as provided below;
(iii) to the extent eligible on the
date of death, a lump-sum amount equal to the reasonable cost of
providing Mr. Feld’s covered dependents, at no
additional after-tax cost to Mr. Feld than Mr. Feld would
have as an employee of Cost Plus, health plans for the balance of
the four-year Employment Term, as determined by Cost Plus in its
sole discretion; and
(iv) any Accrued
Benefits.
To the extent required by Code
Section 409A, the payments described in Sections
(i) through (iii) above shall be paid no earlier than six
(6) months and one (1) day following the date of
Mr. Feld’s termination. The payments described in
Sections (i) through (iv) above shall be in addition to
any benefits available to Mr. Feld’s beneficiaries or
estate under life or other insurance provided by Cost
Plus.
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(d) Death After Termination of
Employment . In the event that Mr. Feld should die after
termination of his employment, his beneficiary(ies) or estate shall
receive all severance pay, transition payments, employee benefits,
bonuses, and stock options to which Mr. Feld would be entitled
under this Agreement and under the terms of the applicable stock
option plans and agreements governing Mr. Feld’s stock
options.
(e) Voluntary Termination or
Termination for Cause . If Mr. Feld voluntarily terminates
employment with Cost Plus at any time during the Employment Term or
if Mr. Feld’s employment with Cost Plus is terminated at
any time for Cause, Mr. Feld shall not be entitled to any
additional payments or benefits hereunder, other than any Accrued
Benefits.
(f) Limitation on Severance
Payments and Benefits . Notwithstanding anything to the
contrary in this Agreement, the severance payments and benefits
provided in this Section 3 shall cease if Mr. Feld, on
his own behalf, or as owner, manager, advisor, principal, agent,
partner, consultant, director, officer, stockholder or employee of
any business entity, participates in the development or provision
of goods or services that are directly or indirectly competitive
with goods or services provided (or proposed to be provided) by
Cost Plus without the express written authorization of Cost Plus;
provided, however, that it will not be a violation of this
Section 3(f) for Mr. Feld to acquire an investment not
more than one percent of the capital stock of a competing business,
whose stock is traded on a national securities exchange or through
the automated quotation system of a registered securities
association.
4. Golden Parachute Excise Tax
Gross-Up . In the event that the severance payments and other
benefits provided for in this Agreement or otherwise payable to
Mr. Feld constitute “parachute payments” within
the meaning of Section 280G of the Internal Revenue Code of
1986, as amended (the “Code”) and will be subject to
the excise tax imposed by Section 4999 of the Code, then
Mr. Feld shall receive (i) a payment from Cost Plus
sufficient to pay such excise tax, and (ii) an additional
payment from Cost Plus sufficient to pay the excise tax and federal
and state income taxes arising from the payments made by Cost Plus
to Mr. Feld pursuant to this sentence. Unless Cost Plus and
Mr. Feld otherwise agree in writing, the determination of
Mr. Feld’s excise tax liability and the amount required
to be paid under this Section shall be made in writing by the
accounting firm that prepares Cost Plus’s tax returns (the
“Accountants”). In the event that the excise tax
incurred by Mr. Feld is determined by the Internal Revenue
Service to be greater or lesser than the amount so determined by
the Accountants, Cost Plus and Mr. Feld agree to make such
additional payment, including interest and any tax penalties, to
the other party as the Accountants reasonably determine is
appropriate to ensure that the net economic effect to Mr. Feld
under this Section 4, on an after-tax basis, is as if the Code
Section 4999 excise tax did not apply to Mr. Feld. Any
such additional payments will be made by no later than the
fifteenth day of the third month of Cost Plus’s taxable year
following the taxable year during which the IRS makes such
determination. For purposes of making the calculations required by
this Section 4, the Accountants may make reasonable
assumptions and approximations concerning applicable taxes and
may
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rely on interpretations of the Code for which
there is a “substantial authority” tax reporting
position. Cost Plus and Mr. Feld shall furnish to the
Accountants such information and documents as the Accountants may
reasonably request in order to make a determination under this
Section. Cost Plus shall bear all costs the Accountants may
reasonably incur in connection with any calculations contemplated
by this Section 4.
5. Covenant Not to Solicit
.
(a) Until the later of (i) five
(5) years after the date of this Agreement, or (ii) one
year after termination of Mr. Feld’s employment,
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