Document:

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                                                                    EXHIBIT 10.1

                                COST PLUS, INC.
                            1995 STOCK OPTION PLAN
                          (Adopted November 1, 1995)
                            (Amended July 23, 1996)
                          (Amended October 15, 1996)
                           (Amended April 21, 1997)
                          (Amended February 12, 1998)
                            (Amended June 18, 1998)
                            (Amended June 15, 1999)
                            (Amended June 22, 2000)
                            (Amended June 26, 2001)

     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 connection with the
performance of duties to the Company or any of its Subsidiaries thereof which
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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.

          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.

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          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 that 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 sales 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.

          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

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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.

          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.

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          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 Bylaws, 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.

                    (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.

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          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.

     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 5,068,006 Shares, 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

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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, 5,068,006 Shares, 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 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:

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               (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 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.

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                    (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.  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

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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 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

                                      -10-
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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 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

                                      -11-
<PAGE>

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.

     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

                                      -12-
<PAGE>

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 arrangements may be either applicable
generally or only in specific cases.

     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.

                                      -13-
<PAGE>

          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 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 may be necessary to ensure that
the Tax Elections will be exempt

                                      -14-
<PAGE>

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.

                                      -15-<PAGE>

                                                                    EXHIBIT 10.2

                        EMPLOYMENT SEVERANCE AGREEMENT

     This Employment Severance Agreement (the "Agreement") is made and entered
into effective as of August 29, 2001 (the "Effective Date"), by and between John
Luttrell (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 Chief Financial 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 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, 2002 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, 2002 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 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.

               (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).

                                      -2-
<PAGE>

               (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;

                    (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);

                                      -3-
<PAGE>

                    (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.

               (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.
               ------

                                      -4-
<PAGE>

               (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 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.

                                      -5-
<PAGE>

               (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.

                                             /s/ Murray Dashe
                                             -----------------------
                                             By

                                             CEO
                                             -----------------------
                                             Title

     EXECUTIVE:                              /s/ John Luttrell
                                             -----------------------
                                             JOHN LUTTRELL

                                      -6-

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