Michael J. Potter

                              EMPLOYMENT AGREEMENT

                              --------------------

 

         THIS EMPLOYMENT AGREEMENT is entered into as of the 26th day of June,

2000, by and among CONSOLIDATED STORES CORPORATION, a Delaware corporation

("CSC"), CONSOLIDATED STORES CORPORATION, an Ohio corporation ("Consolidated")

(CSC and Consolidated are hereinafter jointly referred to as "Employer"), and

Michael J. Potter, an individual residing in Ohio ("Executive").

 

                              W I T N E S S E T H:

 

         WHEREAS, Employer and Executive desire to enter into this Employment

Agreement to insure to Employer and Employer's direct and indirect subsidiaries

the services of Executive and to set forth the rights and duties of the parties

thereto; and

 

         WHEREAS, Executive is a director of each of CSC and Consolidated; and

 

         WHEREAS, the Board of Directors of CSC and Consolidated have elected

Executive as Chief Executive Officer of each of CSC and Consolidated, and shall

elect Executive as Chairman of the Board of Directors of CSC on August 15, 2000.

 

         NOW, THEREFORE, in consideration of the mutual promises herein

contained, the parties agree as follows:

 

         1.       EMPLOYMENT; DUTIES.

                  ------------------

 

                  (a) EMPLOYMENT. Employer employs Executive as the senior

officer of each of CSC and Consolidated, with such duties as may from time to

time be prescribed by the Board of Directors of CSC and Consolidated and as the

Chairman of the Board of Directors and Chief Executive Officer of each of CSC

and Consolidated, and Executive hereby accepts such employment, on the terms and

conditions hereinafter set forth.

 

 

                  (b) DUTIES. During the term of this Employment Agreement,

Executive shall devote his entire business time and attention to his employment

and perform diligently such

 

 

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duties as are customarily performed by the Chairman of the Board of Directors

and Chief Executive Officer of a company the size and structure of CSC and its

subsidiaries, together with, as of the date hereof, such other duties as may be

reasonably requested from time to time by the Board of Directors of CSC or

Consolidated, which duties shall be consistent with his position as set forth

above and in Paragraph 2 of this Employment Agreement. Executive shall cooperate

and work with all committees formed by the Board of Directors of CSC or

Consolidated. As Chief Executive Officer, Executive shall have the authority to

implement the policies and decisions of the Board of Directors and to direct

Employer's business strategy, development and operations. So long as Executive

shall serve as Chief Executive Officer, Executive shall report only to the Board

of Directors of each of CSC and Consolidated and shall not be subject to the

authority, direction or discretion of any officer, whether in a position now

existing or hereafter created or appointed. All employees of CSC and

Consolidated shall, directly or indirectly, report to Executive.

 

         Any material adverse modification or diminution of Executive's duties

or diminution in Executive's authority, title or office shall be considered to

be a Change in Control of Employer and shall entitle Executive, in addition to

any other rights he may have, to the rights and remedies provided in Paragraph

7(d) hereof; PROVIDED, HOWEVER, that Executive shall notify Employer of any

alleged such modification or diminution, specifying the same, and Employer shall

have a period of fifteen (15) days after such notice to cure such alleged

modification or diminution before Executive shall be entitled to exercise any

such rights and remedies. The right of Employer to cure any modification or

diminution in Executive's authority, title or office set forth in the

immediately preceding sentence shall be applicable only in the event that a

"Change in Control" shall have occurred solely by reason of such modification or

diminution of duties or authority and shall not be applicable following the

occurrence of any change in Control as defined in Paragraph 7(f) below.

 

 

 

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                  (c) FULL TIME AND ATTENTION. Except as expressly permitted

herein, Executive shall not, without the prior written consent of Employer,

directly or indirectly during the term of this Employment Agreement, render

services of a business, professional or commercial nature to any other person or

firm, whether for compensation or otherwise. So long as it does not interfere

with his full time employment hereunder, Executive may (i) attend to outside

investments and serve as a director, trustee or officer of or otherwise

participate in educational, welfare, social, religious and civic organizations

and (ii) serve as a director of not more than two (2) public corporations that

are not engaged in the Company Business (as defined in Paragraph 9(a) hereof).

 

                  (d) BUSINESS DECISIONS. Executive shall have no liability to

Employer for any act or omission undertaken during the term of this Employment

Agreement in his good faith business judgment in furtherance of his duties as

prescribed in or under this Employment Agreement.

 

         2. TERM AND POSITIONS.

 

                  (a) TERM. Subject to the provisions for termination as

hereinafter provided, the term of this Employment Agreement shall begin on June

26, 2000 and shall continue thereafter until Executive's employment is

terminated as provided in Paragraph 7. This Employment Agreement supersedes and

replaces the May 19, 1998 Senior Executive Severance Agreement between Employer

and Executive.

 

                  (b) POSITIONS. Executive shall, without any compensation in

addition to that which is specifically provided in this Employment Agreement,

serve as an officer of CSC and of Consolidated and in such substitute or further

offices or positions with Employer or any subsidiary of Employer as shall from

time to time be reasonably requested by the Board of Directors of CSC. Each

office and position with Employer or any subsidiary of Employer in which

Executive may serve or to which he may be appointed shall be consistent in title

and duties with Executive's position as Chief Executive Officer of Employer. For

service as a

 

 

 

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director or officer of CSC, Consolidated or any subsidiary of either of them,

which service shall in each instance be deemed to be at the request of CSC and

its Board of Directors, Executive shall be entitled to the protection of the

applicable indemnification provisions of the charter and by-laws of CSC,

Consolidated and any such subsidiary and Employer agrees to indemnify and hold

harmless Executive from and against any claims, liabilities, damages or expenses

incurred by Executive in or arising out of the status, capacities and activities

as an officer or director of CSC, Consolidated and any subsidiary of either to

the maximum extent permitted by law. For purposes of this Employment Agreement,

all references herein to subsidiaries of CSC and/or Consolidated shall be deemed

to include references to subsidiaries now or hereafter existing.

 

         3. COMPENSATION.

 

                  (a) SALARY. For all services he may render to CSC and

Consolidated (and any subsidiary of either of them) during the term of this

Employment Agreement, as determined by the Compensation Committee of the CSC

Board of Directors, Employer shall pay to Executive, commencing on June 26,

2000, a minimum salary at the rate (the "Salary Rate") of Six Hundred Fifty

Thousand Dollars ($650,000.00) per annum, payable in those installments

customarily used in payment of salaries to Employer's executives (but in no

event less frequently than monthly). At least annually, the Compensation

Committee of the CSC Board of Directors shall review Executive's performance and

determine whether an increase in the Executive's Salary Rate is merited.

 

                  (b) BONUS. In addition to the salary compensation as above

stated, Employer shall pay to Executive bonus compensation during the term of

this Employment Agreement in amounts to be determined and paid as follows:

 

                           (i)      Beginning January 30, 2000 for each fiscal

                                    year of Employer completed during the term

                                    of this Employment Agreement, an amount

                                    equal to the Salary Rate at the end of such

                                    fiscal year

 

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                                    multiplied by the Bonus Payout percentage as

                                    determined by the Bonus Program set each

                                    fiscal year by the Compensation Committee of

                                    the CSC Board of Directors. The Bonus

                                    Program is based upon the achievement of

                                    Employer's annual financial plan. The Target

                                    Bonus for Executive is 100% of base salary

                                    and the Stretch Bonus for Executive is 200%

                                    of base salary, both of which are defined in

                                    the Bonus Program and are subject to

                                    adjustment by the Board of Directors of CSC;

                                    provided however, Executive's Target Bonus

                                    shall never fall below 100% of base salary

                                    and Executive's Stretch Bonus shall never

                                    fall below 200% of base salary.

 

                           (ii)     Any bonus paid for a fiscal year under

                                    Paragraph 3(b)(i) shall be paid within

                                    forty-five (45) days after Employer's

                                    independent auditor has delivered its

                                    opinion with respect to the financial

                                    statements of Employer for such fiscal year

                                    (whether or not Executive is then in the

                                    employ of Employer). Employer shall use all

                                    reasonable efforts to cause such auditor to

                                    deliver such opinion within forty-five (45)

                                    days after the close of such fiscal year.

 

                           (iii)    For purposes of this Employment Agreement,

                                    the term "fiscal year" shall mean with

                                    respect to any year, the period commencing

                                    on the Sunday next following the Saturday

                                    closest to January 31 in a calendar year and

                                    ending in the next following calendar year

                                    on the Saturday closest to January 31.

 

 

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         4. DISABILITY IN THE EVENT OF DEATH OR PERMANENT DISABILITY. In the

event of a termination of employment as a consequence of Employee's death or

"permanent disability" (as defined below) during the term of this Employment

Agreement:

 

                  (a) Executive or his estate, as the case may be, shall be

entitled to receive a prorata portion of the bonus applicable to the fiscal year

in which such death or permanent disability occurs, as such bonus is determined

under Paragraph 3(b) of this Employment Agreement. Such prorata portion shall be

determined by multiplying a fraction, the numerator of which shall be the number

of days in the applicable fiscal year elapsed prior to the date of death or

permanent disability, as the case may be, and the denominator of which shall be

365, by the amount of bonus that would have been payable, if any, pursuant to

such Paragraph 3(b), if Executive had remained employed under this Employment

Agreement for the entire applicable fiscal year. The bonus shall be paid when

and as provided in Paragraph 3(b)(ii) of this Employment Agreement.

 

                  (b) Upon permanent disability Executive shall be entitled to

six (6) months of short term disability at his then current Salary Rate. At the

end of the six month period Executive shall be entitled to long term disability

at a minimum rate of twenty five thousand dollars ($25,000.00) per month, tax

free, until age sixty-five (65).

 

                  (c) Except as otherwise provided in Paragraphs 5, 6 and 8 of

this Employment Agreement, Executive shall be entitled to no further

compensation or other benefits under this Employment Agreement, except as to

that portion of any unpaid salary and other benefits accrued and earned by him

hereunder up to and including the date of such death or permanent disability, as

the case may be.

 

                  (d) For the purposes of this Employment Agreement, except as

modified in paragraph 4(b) above, Executive's "permanent disability" occurrence

and benefits shall be

 

 

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determined in the same manner as are other such occurrences and benefits under

Employer's Disability Policy in effect at the date of the occurrence.

 

         5. TRANSPORTATION. During the term of this Employment Agreement,

Employer shall provide Executive with a current luxury model automobile

purchased or leased by Employer, in accordance with applicable policies of

Employer. Employer shall pay all maintenance and repair expenses with respect to

the automobile, procure and maintain in force at Employer's expense collision,

comprehensive, and liability insurance coverage with respect to the automobile,

and pay operating expenses with respect to the automobile to the extent such

operating expenses are incurred in the conduct of Employer's business.

Commencing June 26, 2000, Executive shall be entitled to a similar vehicle every

three years or 36,000 miles, whichever occurs first.

 

         6. LIFE INSURANCE AND OTHER BENEFITS.

 

                  (a) VACATION AND SICK LEAVE. Executive shall be entitled to

such periods of vacation and sick leave allowance each year which shall not be

less than as provided under Employer's Vacation and Sick Leave Policy for

executive officers.

 

                  (b) GROUP PLANS, ETC. Executive shall be entitled to

participate in any group life, hospitalization, or disability insurance plan,

health program, or other executive benefit plan (other than bonus compensation

or performance plans to the extent that such plans, in the case of Executive,

are in lieu of the bonus plan set forth in Paragraph 3(b) above) that is

generally available to senior executive officers, as distinguished from general

management, of Employer. Executive's participation in and benefits under any

such plan shall be on the terms and subject to the conditions specified in the

governing document of the particular plan. Up to the applicable maximum,

executive shall be entitled to 100% reimbursement of his medical and dental

expenses incurred during the term of this Employment Agreement.

 

 

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         7. TERMINATION AND FURTHER COMPENSATION.

 

                  (a) The employment of Executive under this Employment

Agreement and the term hereof may be terminated:

 

                           (i)      by Employer or Executive at any time upon

                                    thirty (30) days notice to the other party

                                    of such termination, or

 

                           (ii)     by Employer on death or permanent disability

                                    of Executive, or

 

                           (iii)    By Employer for cause at any time. For

                                    purposes hereof, the term "cause" shall

                                    mean:

 

                                    (A)      Executive's conviction of fraud or

                                             a felony or any crime involving

                                             moral turpitude or Executive's

                                             commission of acts of embezzlement

                                             or theft in connection with his

                                             duties or in the course of his

                                             employment with Employer or any

                                             subsidiary;

 

                                    (B)      Executive's willful breach of any

                                             material provision of this

                                             Employment Agreement which failure

                                             has not been cured in all

                                             substantial respects within ten

                                             (10) days after Employer gives

                                             notice thereof to Executive; or

 

                                    (C)      Executive's willful, wrongful

                                             engagement in any Competitive

                                             Activity (as that term is

                                             hereinafter defined).

 

                  Any termination of Executive for "cause" shall not be

effective until all the following shall have taken place:

 

                           (i)      The Secretary of CSC pursuant to resolution

                                    of the Board of Directors of CSC, shall have

                                    given written notice to Executive that, in

                                    the opinion of the Board of Directors,

                                    Executive may be terminated for cause,

                                    specifying the details;

 

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                           (ii)     Executive shall have been given a reasonable

                                    opportunity to appear before the Board of

                                    Directors prior to the determination of the

                                    Board evidenced by such resolution;

 

                           (iii)    With respect to any matters other than

                                    Executive's conviction of fraud or a felony

                                    or a crime involving moral turpitude,

                                    Executive shall neither have ceased to

                                    engage in the activity giving rise to the

                                    proposed determination for cause within

                                    thirty (30) days after his receipt of such

                                    notice nor diligently taken all reasonable

                                    steps to that end during such thirty (30)

                                    day period and thereafter;

 

                           (iv)     After complying with the procedures set

                                    forth in subparagraphs (i) through (iii)

                                    above, Executive shall have been delivered a

                                    certified copy of a resolution of the Board

                                    of Directors of CSC adopted by the

                                    affirmative vote of not less than

                                    three-fourths (3/4) of the entire membership

                                    of the Board of Directors finding that

                                    Executive was guilty of the conduct giving

                                    rise to the termination for cause.

 

                  Any termination by reason of the foregoing shall not be in

limitation of any other right or remedy Employer may have under this Employment

Agreement, at law, in equity or otherwise. On any termination of this Employment

Agreement, Executive shall be deemed to have resigned from all offices and

directorships held by Executive in Employer and any subsidiaries of CSC.

 

                  The term "Competitive Activity" shall mean Executive's

participation, without the written consent of the Board of Directors of CSC, in

the management of any business operation of any enterprise if such operation (a

"Competitive Operation") engages in substantial and direct competition with

Employer or any subsidiary. For purposes of this Employment Agreement, a

business enterprise shall be considered in substantial and direct competition

with Employer or

 

 

 

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any subsidiary, if such business operation's sales, related to any activity then

engaged in by Employer, amount to ten percent (10%) or more of such business

operation's total sales. At the date hereof, Employer is engaged in the sale of

closeout merchandise, toy merchandise and furniture. "Competitive Activity"

shall not include (i) the mere ownership of securities in any publicly traded

enterprise and the exercise of rights appurtenant thereto or (ii) participation

in management of any publicly traded enterprise or business operation thereof

other than in connection with the Competitive Operation of such enterprise.

 

                  (b) In the event of termination for any of the reasons set

forth in subparagraph (a)(iii) of this Paragraph 7, except as otherwise provided

in Paragraph 8 of this Employment Agreement, Executive shall be entitled to no

further compensation or other benefits under this Employment Agreement (other

than as provided by law), except as to that portion of any unpaid salary and

other benefits accrued and earned by him hereunder up to and including the

effective date of such termination, and Executive shall not be entitled to

receive any bonus determined under Paragraph 3 of this Employment Agreement or

otherwise, except for and in respect of completed fiscal years for which

Executive has not then been paid.

 

                  (c) In the event of the termination of Executive's employment

by Employer pursuant to subparagraph (a)(i) above, Executive shall be entitled

to severance compensation as follows: (x) the continuation of his compensation

for a period of 2 years, including bonus compensation (as provided below), and

(y) all other benefits and perquisites to which he is entitled hereunder for a

period of 2 years following the date of such termination of employment, except

that (i) the benefits and perquisites referred to in clause (y) shall be sooner

reduced and/or terminated (other than as provided by law) when and to the extent

that the Executive is entitled to receive the same from another employer during

such period (but no obligation of Executive to attempt to mitigate damages under

this subparagraph (c) shall be implied) and (ii) any bonus compensation to be

paid to Executive in respect of such period shall be limited solely to the

 

 

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prorata portion thereof earned in the fiscal year of Employer (determined in the

manner provided in Paragraph 3) in which such termination occurs, except for and

in respect of completed fiscal years for which Executive has not then been paid.

In addition should Executive's employment be terminated by Employer pursuant to

subparagraph (a)(i) above, Executive's stock option grant dated June 26, 2000,

will immediately fully vest to the extent not already vested.

 

                  (d) If there is a Change in Control (as defined in Section

7(f) hereof) and Executive's employment is thereupon terminated or terminated

within twenty four (24) months after the effective date thereof, Executive shall

be entitled to the termination benefits set forth in Section 7(e) hereof. For

purposes of this Employment Agreement, Executive's employment shall be deemed to

have been terminated only if Employer terminates such employment other than for

cause (as defined in Section 7(a)(iii) hereof) or if a Constructive Termination

occurs. "Constructive Termination" shall mean a resignation by Executive because

of any material adverse change or material diminution in Executive's then

current reporting relationships, job description, duties, responsibilities,

compensation, perquisites, office or location of employment (as reasonably

determined by Executive in his good faith discretion).

 

                  (e) The benefits payable to Executive pursuant to Section 7(d)

hereof are as follows:

 

                           (i)      Consolidated shall pay to Executive a lump

                                    sum cash payment, net of any applicable

                                    withholding taxes in an amount equal to two

                                    times the annual salary paid or payable to

                                    Executive immediately prior to the effective

                                    date of such Change in Control (the "Lump

                                    Sum Payment"); provided, that if there are

                                    fewer than twenty four (24) months remaining

                                    from the date of Executive's termination to

                                    Executive's normal retirement date at age

                                    65, Consolidated shall instead pay Executive

                                    the amount obtained by multiplying the

 

 

 

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                                    Lump Sum Payment by a fraction, the

                                    numerator of which is the number of months

                                    so remaining and the denominator of which is

                                    24. The applicable amount shall be paid on

                                    the later of (x) the next business day after

                                    the day Executive's employment is

                                    terminated, or (y) the next business day

                                    after the effective date of such Change in

                                    Control.

 

                           (ii)     In addition to the payment described in

                                    Subsection 7(e)(i) above, Consolidated shall

                                    pay to Executive a lump sum cash payment,

                                    net of any applicable withholding taxes, in

                                    an amount equal to two times the Executive's

                                    then current annual Stretch Bonus, as

                                    defined in the Bonus Program described in

                                    Subsection 3(b)(i) above (the "Lump Sum

                                    Bonus Payment"); provided, that (A) in the

                                    event the Executive's then current Stretch

                                    Bonus is undefined or is not subject to a

                                    maximum payout, the Executive's annual

                                    Stretch Bonus shall be deemed to be 200% of

                                    the Executive's then current base salary and

                                    (B) if there are fewer than twenty four (24)

                                    months remaining from the date of

                                    Executive's termination to Executive's

                                    normal retirement date at age 65,

                                    Consolidated shall instead pay Executive the

                                    amount obtained by multiplying the Lump Sum

                                    Bonus Payment by a fraction, the numerator

                                    of which is the number of months so

                                    remaining and the denominator of which is

                                    24. Executive shall receive the Lump Sum

                                    Bonus Payment at the same time Executive

                                    receives the Lump Sum Payment described in

                                    Subsection 7(e)(i) above.

 

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                           (iii)    For a period of two years, Executive (and

                                    his family, if their participation is

                                    permitted under the terms of the subject

                                    plan) shall be entitled to participate in

                                    any group life, hospitalization, or

                                    disability insurance plan, health program,

                                    or other executive benefit plan (other than

                                    bonus compensation or performance plans to

                                    the extent that such plans, in the case of

                                    Executive, are in lieu of the bonus plan set

                                    forth in Subsection 7(e)(ii) above) that is

                                    generally available to similarly titled

                                    executive officers of Consolidated;

                                    provided, that Executive's participation in

                                    the plans referred to in this Subsection

                                    7(e)(iii) shall be terminated (other than as

                                    provided by law) when and to the extent that

                                    Executive is entitled to receive the same

                                    from another employer during such period.

                                    Executive's participation in and benefits

                                    under any such plan shall be on the terms

                                    and subject to the conditions specified in

                                    the governing document of the particular

                                    plan, including, but not limited to,

                                    reimbursement of 100% of all medical and

                                    dental expenses incurred during the period

                                    of participation in the plans referred to

                                    above.

 

                           (iv)     If all or any portion of the amount payable

                                    to Executive under this Employment

                                    Agreement, either alone or together with

                                    other amounts that Executive is entitled to

                                    receive in connection with a Change in

                                    Control, constitutes "excess parachute

                                    payments," within the meaning of Section

                                    280G of the Internal Revenue Code of 1986,

                                    as amended (the "Code"), or successor

                                    provision, that are subject to the excise

                                    tax imposed by Section 4999 of the Code (or

 

 

 

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                                    any similar tax or assessment), the amounts

                                    payable hereunder shall be increased to the

                                    extent necessary to place Executive in the

                                    same after-tax position as Executive would

                                    have been in had no such excise tax or

                                    assessment been imposed on any such payment

                                    paid or payable to Executive under this

                                    Employment Agreement or any other payment

                                    that Executive may receive as a result of

                                    such Change in Control. The determination of

                                    the amount of any such tax or assessment and

                                    the resulting amount of incremental payment

                                    required hereby in connection therewith

                                    shall be made by the independent accounting

                                    firm employed by Consolidated immediately

                                    prior to the applicable Change in Control,

                                    within thirty (30) calendar days after the

                                    payment of the amount payable pursuant to

                                    Subsections (e)(i), (e)(ii) and (e)(iii)

                                    hereof, and said incremental payment shall

                                    be made within five (5) business days after

                                    said determination has been made.

 

                           (v)      If, after the date upon which any payment

                                    required under this Employment Agreement has

                                    been made, it is determined (pursuant to

                                    final judgment of a court of competent

                                    jurisdiction, or an agreed upon tax

                                    assessment) that the amount of excise or

                                    other similar taxes or assessments payable

                                    by Executive is greater than the amount

                                    initially so determined, then Consolidated

                                    shall pay Executive an amount equal to the

                                    sum of (i) such additional excise or other

                                    similar taxes, plus (ii) any interest, fines

                                    and penalties resulting from such

                                    underpayment, plus (iii) an amount necessary

                                    to reimburse Executive for any income,

                                    excise or other tax or

 

 

 

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                                    assessment payable by Executive with respect

                                    to the amounts specified in (i) and (ii)

                                    above, and the reimbursement provided by

                                    this clause (iii). Payment thereof shall be

                                    made within five (5) business days after the

                                    date upon which such subsequent

                                    determination is made.

 

                           (vi)     In addition to the benefits described above,

                                    Executive shall be entitled to all rights

                                    derived under the Consolidated Stores

                                    Corporation Executive Stock Option and Stock

                                    Appreciation Rights Plan in the event of a

                                    Change in Effective Control (as defined in

                                    that plan) and all rights derived under the

                                    Consolidated Stores Corporation 1996

                                    Performance Incentive Plan in the event of a

                                    Change in Control (as defined in that plan).

 

                  (f) As used herein, "Change in Control" means any of the

following events: (i) any person or group (as defined for purposes of Section

13(d) of the Securities Exchange Act of 1934) becomes the beneficial owner of,

or has the right to acquire (by contract, option, warrant, conversion of

convertible securities or otherwise), 20% or more of the outstanding equity

securities of CSC entitled to vote for the election of directors; (ii) a

majority of the Board of Directors of CSC is replaced within any period of two

years or less by directors not nominated and approved by a majority of the

directors of CSC in office at the beginning of such period (or their successors

so nominated and approved), or a majority of the Board of Directors of CSC at

any date consists of persons not so nominated and approved; (iii) the

stockholders of CSC approve an agreement to reorganize, merge or consolidate

with another corporation (other than Consolidated or an affiliate); or (iv) the

stockholders of CSC adopt a plan or approve an agreement to sell or otherwise

dispose of all or substantially all of CSC's assets (including without

limitation, a plan of liquidation or dissolution), in a single transaction or

series of related

 

 

 

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transactions. The effective date of any such Change in Control shall be the date

upon which the last event occurs or last action taken such that the definition

of such Change in Control (as set forth above) has been met. For purposes of

this Employment Agreement, the term "affiliate" shall mean: (i) any person or

entity qualified as part of an affiliated group which includes Consolidated and

CSC pursuant to Section 1504 of the Code; or (ii) any person or entity qualified

as part of a parent-subsidiary group of trades and businesses under common

control within the meaning of Treasury Regulation Section 1.414(c)(2)(b).

Determination of affiliate shall be tested as of the date immediately prior to

any event constituting a Change in Control. The other provisions of this

Paragraph 7(f) notwithstanding, the term "Change in Control" shall not mean any

transaction, merger, consolidation, or reorganization in which CSC exchanges or

offers to exchange newly issued or treasury shares in an amount less than 50% of

the then outstanding equity securities of CSC entitled to vote for the election

of directors, for 51% or more of the outstanding equity securities entitled to

vote for the election of at least the majority of the directors of a corporation

other than Employer or an affiliate thereof (the "Acquired Corporation"), or for

all or substantially all of the assets of the Acquired Corporation.

 

                  (g) Executive shall provide Consolidated with at least forty

five (45) days notice of any election by Executive to terminate his employment,

which shall set forth in detail the grounds upon which any Constructive

Termination of Executive's employment is based, and shall not be entitled to the

benefits available hereunder in connection therewith unless such notice is

timely given.

 

                  (h) If Executive hires legal counsel with respect to any

alleged failure by Consolidated or CSC to comply with any of the terms of this

Employment Agreement, or institutes any negotiation or institutes or responds to

any legal action to assert or defend the validity of or to enforce Executive's

rights under, or to recover damages for breach of, this Employment Agreement,

Consolidated shall pay Executive's actual expenses for attorneys' fees

 

 

 

                                       16

<PAGE>   17

 

and disbursements, together with such additional payments, if any, as may be

necessary so that the net after-tax payments so made to Executive equal such

fees and disbursements; provided, that Executive shall be responsible for his

own fees and expenses with respect to any lawsuit between Executive and Employer

to enforce rights or obligations under this Employment Agreement in which

Employer is the prevailing party. The fees and expenses incurred by Executive in

instituting or responding to any such negotiation or legal action shall be paid

by Consolidated as they are incurred, in advance of the final disposition of the

action or proceeding, upon receipt of an undertaking by Executive to repay such

amounts if Employer is ultimately determined to be the prevailing party.

 

                  (i) If any amount due Executive hereunder is not paid when

due, then Consolidated shall pay interest on said amount at an annual rate equal

to the base lending rate of National City Bank, Cleveland, Ohio, or successor,

as in effect from time to time, for the period between the date on which such

payment is due and the date said amount is paid.

 

                  (j) Consolidated's obligation to pay Executive the

compensation and to make the arrangements required hereunder shall be absolute

and unconditional and shall not be affected by any circumstance, including,

without limitation, any setoff, counterclaim, recoupment, defense or other right

that Consolidated may have against Executive or otherwise. All amounts payable

by Consolidated hereunder shall be paid without notice or demand. Subject to the

proviso in Section 7(h) above, each and every payment made hereunder by

Consolidated shall be final and Consolidated shall not seek to recover all or

any part of such payment from Executive or from whosoever may be entitled

thereto, for any reason whatsoever. Executive shall not be obligated to seek

other employment or compensation or insurance in mitigation of any amount

payable or arrangement made under any provision of this Employment Agreement.

 

                  (k) From and after any termination of Executive's employment,

Executive shall retain in confidence and not use for his own benefit or on

behalf of any other person or

 

 

 

                                       17

<PAGE>   18

 

entity any confidential information known to him concerning CSC, Consolidated,

their respective subsidiaries or their respective businesses so long as such

information is not publicly disclosed by someone other than Executive.

 

                  (l) In partial consideration of the benefits granted to

Executive herein, Executive agrees that during the six-month period immediately

following Executive's termination, if Executive shall have received benefits

under Section 7(e) above, Executive shall not engage in any Competitive

Activity, as defined in Section 7(a).

 

                  (m) Any provision in this Employment Agreement which is

prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction,

be ineffective only to the extent of such prohibition or unenforceability

without invalidating or affecting the remaining provision hereof, and any such

prohibition or unenforceability in any jurisdiction shall not invalidate or

render unenforceable such provision in any other jurisdiction.

 

                  (n) Except as specifically set forth herein, this Employment

Agreement shall not be deemed to negate, supersede or alter any other agreement

or arrangement between Executive and Consolidated or CSC or any other rights to

which Executive may be entitled, and shall be and remain in effect in addition

to any such other agreement or rights, whether now existing or later created.

 

         8. EXPENSES. Employer shall reimburse Executive during the term of this

Employment Agreement for travel, entertainment and other expenses reasonably

incurred by Executive in the promotion of Employer's business. Executive shall

furnish such documentation with respect to reimbursement to be paid under this

Paragraph 8 as Employer shall reasonably request.

 

         9. COVENANTS OF EXECUTIVE.

 

                  (a) COVENANT AGAINST COMPETITION. Executive acknowledges that

at the date hereof (i) the principal businesses of Employer include the

operation of its "Odd Lots", "Big

 

 

 

                                       18

<PAGE>   19

 

Lots", "MacFrugal's" and "Pic N' Save" discount general merchandise consumer

goods retail outlets, the inventories of which are acquired primarily through

special purchase situations such as overstocks, closeouts, liquidations,

bankruptcies, wholesale distribution of overstock, distress, liquidation and

other volume inventories, the operation of its K-B Toy, K-B Toys Works, and K-B

Toy Liquidator toy stores, the operation of its Big Lots Furniture and Odd Lots

Furniture stores (the "Company Business"); (ii) Employer is one of the limited

number of persons who has developed such business; (iii) the Company Business is

national in scope; (iv) Executive's work for Employer will give him access to

the confidential affairs of Employer; and (v) the agreements and covenants of

Executive contained in this Paragraph 9 are essential to the business and

goodwill of Employer. Accordingly, Executive covenants and agrees that:

 

                           (A)      During the term of Executive's employment

                                    with Employer and for a period of two (2)

                                    years (the "Restricted Period") following

                                    either the voluntary termination of such

                                    employment by Executive or the termination

                                    of such employment for "cause" (as such

                                    terms is defined in Subsection 7(a)(iii)

                                    above, Executive shall not in any location

                                    where Employer's retail stores are located

                                    throughout the United States of America,

                                    directly or indirectly, (1) engage in the

                                    Company Business for Executive's own account

                                    (other than pursuant to this Employment

                                    Agreement), (2) render any services to any

                                    person engaged in such activities (other

                                    than Employer), or (3) or engage in any

                                    Competitive Activity (as defined above),

                                    PROVIDED, HOWEVER, that in the event of a

                                    Change in

 

 

 

                                       19

<PAGE>   20

 

                                    Control the Restricted Period shall be for a

                                    period of six (6) months.

 

                           (B)      During the Restricted Period, Executive

                                    shall keep secret and retain in strictest

                                    confidence, and shall not use for his

                                    benefit or the benefit of others, all

                                    confidential matters relating to the Company

                                    Business hereafter learned by Executive, and

                                    shall not disclose them to anyone except

                                    with Employer's express written consent and

                                    except for information which (i) is at the

                                    time of receipt or thereafter becomes

                                    publicly known through no wrongful act of

                                    Executive, or (ii) is received from a third

                                    party not under an obligation to keep such

                                    information confidential and without breach

                                    of this Employment Agreement.

 

                           (C)      So long as there has not occurred a Change

                                    in Control, Executive shall not, during the

                                    Restricted Period, without Employer's prior

                                    written consent, directly or indirectly,

                                    solicit or encourage to leave the employment

                                    of Employer or any of its subsidiaries, any

                                    executive of Employer or any of its

                                    subsidiaries.

 

                           (D)      All memoranda, notes, lists, records and

                                    other documents (and all copies thereof)

                                    made or compiled by Executive or made

                                    available to Executive concerning the

                                    Company Business shall be Employer's

                                    property and shall be delivered to Employer

                                    at any time on request.

 

                                       20

<PAGE>   21

 

                  (b) RIGHTS AND REMEDIES UPON BREACH. If Executive breaches any

of the provisions of Paragraph 9(a) (the "Restrictive Covenants"), or a breach

thereof is imminent, Employer shall have the following rights and remedies, each

of which rights and remedies shall be independent of the other and severally

enforceable, and all of which rights and remedies shall be in addition to, and

not in lieu of, any other rights and remedies available to Employer under law or

in equity:

 

                           (i)      The right and remedy to have the Restrictive

                                    Covenants specifically enforced by any court

                                    having equity jurisdiction, including,

                                    without limitation, the right to an entry

                                    against Executive of restraining orders and

                                    injunctions (preliminary, temporary or

                                    permanent) against violations, threatened or

                                    actual, and whether or not then continuing,

                                    of such covenants, it being acknowledged and

                                    agreed that any such breach or threatened

                                    breach will cause irreparable injury to

                                    Employer and that money damage will not

                                    provide adequate remedy to Employer; and

 

                           (ii)     The right and remedy to require Executive to

                                    account for and pay over to Employer all

                                    compensation, profits, monies, accruals,

                                    increments, or other benefits derived or

                                    received by him as the result of any

                                    transactions constituting a breach of the

                                    Restrictive Covenants. Employer may set off

                                    any amounts finally determined to be due it

                                    under this Paragraph 9(b) against any

                                    amounts owed to Executive.

 

                  (c) SEVERABILITY OF COVENANTS. Executive acknowledges and

agrees that the Restrictive Covenants are reasonable in geographical and

temporal scope, with respect to the activities restricted and in all other

respects. If it is determined that any of the Restrictive

 

 

 

                                       21

<PAGE>   22

 

Covenants, or any part thereof, is invalid or unenforceable, the remainder of

the Restrictive  Covenants shall not thereby be affected and shall be given

full effect, without regard to the invalid portions.

 

                  (d) BLUE-PENCILLING. If it is determined that any of the

Restrictive Covenants, or any part thereof, is unenforceable because of the

duration or geographical scope of such provision, the duration or scope of such

provision, as the case may be, shall be reduced so that such provision becomes

enforceable and, in its reduced form, such provision shall then be enforceable

and shall be enforced.

 

         10. WITHHOLDING TAXES. Except as otherwise provided, all payments to

Executive, including the bonus compensation under this Employment Agreement,

shall be subject to withholding on account of federal, state, and local taxes as

required by law. Any amounts remitted by Employer to the appropriate taxing

authorities a taxes withheld by Employer from Executive on income realized by

Executive shall reduce the amounts payable by Employer to Executive hereunder.

If any particular payment required hereunder is insufficient to provide the

amount of such taxes required to be withheld, Employer may withhold such taxes

from any other payment due Executive.

 

         11. NO CONFLICTING AGREEMENTS. Executive represents and warrants that

he is not a party to any agreement, contract or understanding, whether

employment or otherwise, which would restrict or would prohibit him from

undertaking or performing employment in accordance with the terms and conditions

of this Employment Agreement.

 

         12. SEVERABLE PROVISIONS. The provisions of this Employment Agreement

are severable, and if any one or more provisions may be determined to be illegal

or otherwise unenforceable, in whole or in part, the remaining provisions and

any partially unenforceable provision to the extent enforceable in any

jurisdiction shall, nevertheless, be binding and enforceable.

 

 

 

                                       22

<PAGE>   23

 

         13. BINDING AGREEMENT. Each of CSC and Consolidated shall require any

successor (whether direct or indirect), by purchase, merger, consolidation,

reorganization or otherwise, to all or substantially all of the business and/or

assets of any of them expressly to assume and to agree to perform this

Employment Agreement in the same manner and to the same extent that each of them

would be required to perform if no such succession has taken place. This

Employment Agreement shall be binding upon and inure to the benefit of each of

CSC and Consolidated and any successor of any of them, including without

limitation any persons acquiring directly or indirectly all or substantially all

of the business and/or assets of any of them whether by sale, merger,

consolidation, reorganization or otherwise (and such successor shall thereafter

be deemed the "Employer" for purposes of this Employment Agreement), but shall

not otherwise be assignable or delegatable by CSC or Consolidated.

 

                  This Employment Agreement shall inure to the benefit of and be

enforceable by Executive and each of Executive's personal or legal

representatives, executive, administrators, successor, heirs, distributees

and/or legatees.

 

         14. NOTICES. Any notice or other communication required or permitted

hereunder shall be in writing and shall be delivered personally, telegraphed,

telexed, sent by facsimile transmission or sent by certified, registered or

express mail, postage prepaid. Any such notice shall be deemed given when so

delivered personally, telegraphed, telexed, or sent by facsimile transmission

or, if mailed five (5) days after the date of deposit in the United States mails

as follows:

 

<TABLE>

<CAPTION>

<S>                                                           <C>

                           (i)      if to the Employer to:    Consolidated Stores Corporation

                                                              300 Phillipi Road

                                                              Columbus, Ohio  43228-1310

                                                              Attention:  Charles Haubiel, Esq.

                                                              Vice President and General Counsel

 

                                    with a copy to:           Chairman of the Compensation Committee

                                                              of the CSC Board of Directors

</TABLE>

 

 

                                       23

<PAGE>   24

 

<TABLE>

<CAPTION>

<S>                                                           <C>

                           (ii)     if to the Executive to:   Michael J. Potter

                                                              1127 Poppy Hills Drive

                                                              Blacklick, OH 43230

</TABLE>

 

                  Any such person may by notice given in accordance with this

Paragraph to the other parties hereto, designate another address or person for

receipt by such person of notices hereunder.

 

         15. WAIVER. The failure of either party to enforce any provision or

provisions of this Employment Agreement shall not in any way be construed as a

waiver of any such provision or provisions as to any future violations thereof,

nor prevent that party thereafter from enforcing each and every other provision

of this Employment Agreement. The rights granted the parties herein are

cumulative and the waiver of any single remedy shall not constitute a waiver of

such party's rights to assert all other legal remedies available to it under the

circumstances.

 

         16. MISCELLANEOUS. This Employment Agreement supersedes all prior

agreements and understandings between the parties and may not be modified or

terminated orally. No modification, termination or attempted waiver shall be

valid unless in writing and signed by the party against whom the same is sought

to be enforced. If Executive is successful in any proceeding against Employer to

collect amounts due Executive under this Employment Agreement, Employer shall

reimburse Executive for his court costs and reasonable attorneys' fees in

connection therewith.

 

         17. GOVERNING LAW. This Employment Agreement shall be governed by and

constructed according to the laws of the State of Ohio.

 

         18. CAPTIONS AND PARAGRAPHS HEADINGS. Captions and paragraph headings

used herein are for convenience and are not a part of this Employment Agreement

and shall not be used in construing it.

 

 

 

                                       24

<PAGE>   25

 

         19. INTERPRETATION. Where necessary or appropriate to the meaning

hereof, the singular and plural shall be deemed to include each other, and the

masculine, feminine and neuter shall be deemed to include each other.

 

         20. AMENDMENTS. Neither CSC nor Consolidated shall amend, terminate, or

suspend this Employment Agreement or any provision hereof without the written

consent of Executive.

 

         21. LEGAL FEES AND EXPENSES. It is the intent of Employer that

Executive not be required to incur the expenses associated with the enforcement

of his rights under this Employment Agreement in the event of a Change in

Control by litigation or other legal action because the cost and expense thereof

would substantially detract from the benefits intended to be extended to

Executive hereunder. Accordingly, if it should appear to Executive that Employer

has failed to comply with any of its obligations under this Employment

Agreement, or in the event that Employer or any other person takes any action to

declare this Employment Agreement void and/or unenforceable, or institutes any

litigation designed to deny, and/or to recover from, Executive the benefits

intended to be provided to Executive hereunder, Employer hereby irrevocably

authorizes Executive from time to time to retain counsel of his choice at the

expense of Employer to represent Executive in connection with the initiation or

defense of any litigation and/or other legal action, whether by or against

Employer or any director, officer, stockholder, or other person affiliated with

Employer in any jurisdiction. Notwithstanding any existing or prior

attorney-client relationship between Employer and such counsel, into an

attorney-client relationship with such counsel, and in that connection Employer

acknowledges that a confidential relationship shall exist between Executive and

such counsel. Employer shall pay and be solely responsible for any and all

attorneys' and related fees and expenses incurred by Executive as a result of

Employer or any person contesting the validity and/or enforceability of this

Employment Agreement or any provision hereof.

 

 

 

                                       25

<PAGE>   26

 

         IN WITNESS WHEREOF, the parties have caused this Employment Agreement

to be effective as of the 26th day of June, 2000.

 

Attest:                        CONSOLIDATED STORES CORPORATION,

                               a Delaware Corporation

 

 

/s/ Charles W. Haubiel II      By: /s/ David T. Kollat

----------------------------       --------------------------------------------

Secretary                          David T. Kollat

                                   Chairman of the Compensation Committee

                                   of the Board of Directors

 

Attest:                        CONSOLIDATED STORES CORPORATION,

                               an Ohio Corporation

 

 

/s/ Charles W. Haubiel II      By: /s/ David T. Kollat

----------------------------       --------------------------------------------

Secretary                          David T. Kollat

                                   Chairman of the Compensation Committee

                                   of the Board of Directors

 

 

 

                                   /s/ MICHAEL J. POTTER

                                   ---------------------------------------------

                                   Michael J. Potter