STAGE STORES INC (Form: 10-Q, Received: 06/10/2014 17:02:39)

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

Form 10-Q

(Mark One)



þ	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended May 3, 2014



o	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from ______ to ______

Commission File Number 1-14035

Stage Stores, Inc .

(Exact name of registrant as specified in its charter)



NEVADA (State or other jurisdiction of incorporation or organization)	91-1826900 (I.R.S. Employer Identification No.)

10201 Main Street, Houston, Texas (Address of principal executive offices)	77025 (Zip Code)

(800) 579-2302

(Registrant's telephone number, including area code)

Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes þ No o

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes þ No o

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer or a smaller reporting company. See the definitions of "large accelerated filer," "accelerated filer" and "smaller reporting company" in Rule 12b-2 of the Exchange Act. (Check one):

Large accelerated filer þ Accelerated filer o Non-accelerated filer o Smaller reporting company o

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes o No þ

As of June 5, 2014 , there were 31,722,268 shares of the registrant's common stock outstanding.



TABLE OF CONTENTS

PART I FINANCIAL INFORMATION
			Page No.
Item 1.	Financial Statements (Unaudited)
	Condensed Consolidated Balance Sheets
		May 3, 2014 and February 1, 2014	3
	Condensed Consolidated Statements of Operations and Comprehensive Loss
		Thirteen Weeks Ended May 3, 2014 and May 4, 2013	4
	Condensed Consolidated Statements of Cash Flows
		Thirteen Weeks Ended May 3, 2014 and May 4, 2013	5
	Condensed Consolidated Statement of Stockholders' Equity
		Thirteen Weeks Ended May 3, 2014	6
	Notes to Condensed Consolidated Financial Statements		7
Item 2.	Management's Discussion and Analysis of Financial Condition and Results of Operations		18
Item 3.	Quantitative and Qualitative Disclosures about Market Risk		24
Item 4.	Controls and Procedures		24

PART II OTHER INFORMATION

Item 1.	Legal Proceedings		24
Item 1A.	Risk Factors		24
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds		25
Item 3.	Defaults Upon Senior Securities		26
Item 4.	Mine Safety Disclosures		26
Item 5.	Other Information		26
Item 6.	Exhibits		27

SIGNATURES			28

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References to a particular year are to Stage Stores, Inc.'s fiscal year, which is the 52- or 53-week period ending on the Saturday closest to January 31 ^st of the following calendar year. For example, a reference to " 2013 " is a reference to the fiscal year ended February 1, 2014 and a reference to "2014" is a reference to the fiscal year ending January 31, 2015. 2013 and 2014 are 52-week years.

PART I – FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

Stage Stores, Inc.

Condensed Consolidated Balance Sheets

(in thousands, except par value)

(Unaudited)



	May 3, 2014			February 1, 2014
ASSETS
Cash and cash equivalents	$	24,361		$	14,762
Merchandise inventories, net	449,547			434,407
Prepaid expenses and other current assets	47,526			40,082
Total current assets	521,434			489,251

Property, equipment and leasehold improvements, net of accumulated depreciation of $538,628 and $537,752, respectively	281,936			282,534
Intangible asset	14,910			14,910
Other non-current assets, net	25,166			24,142
Total assets	$	843,446		$	810,837

LIABILITIES AND STOCKHOLDERS' EQUITY
Accounts payable	$	147,651		$	125,707
Accrued expenses and other current liabilities	68,658			69,549
Total current liabilities	216,309			195,256

Long-term debt obligations	90,208			60,871
Other long-term liabilities	100,170			100,266
Total liabilities	406,687			356,393

Commitments and contingencies	—			—


Common stock, par value $0.01, 100,000 shares authorized, 31,721 and 31,222 shares issued, respectively	317			312
Additional paid-in capital	389,327			384,295
Less treasury stock - at cost, 0 and 0 shares, respectively	(1,005		)	(967		)
Accumulated other comprehensive loss	(4,554		)	(4,616		)
Retained earnings	52,674			75,420
Total stockholders' equity	436,759			454,444
Total liabilities and stockholders' equity	$	843,446		$	810,837

The accompanying notes are an integral part of these financial statements.

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Stage Stores, Inc.

Condensed Consolidated Statements of Operations and Comprehensive Loss

(in thousands, except per share data)

(Unaudited)



	Thirteen Weeks Ended
	May 3, 2014			May 4, 2013

Net sales	$	372,040		$	372,103
Cost of sales and related buying, occupancy and distribution expenses	294,099			282,474
Gross profit	77,941			89,629

Selling, general and administrative expenses	96,054			97,947
Store opening costs	808			975
Interest expense	724			586
Loss from continuing operations before income tax	(19,645		)	(9,879		)

Income tax benefit	(7,599		)	(3,691		)
Loss from continuing operations	(12,046		)	(6,188		)
Loss from discontinued operations, net of tax benefit of $4,257 and $398, respectively	(6,748		)	(668		)
Net loss	$	(18,794	)	$	(6,856	)

Other comprehensive income:
Amortization of employee benefit related costs net of tax of $38 and $58, respectively	$	62		$	95
Total other comprehensive income	62			95
Comprehensive loss	$	(18,732	)	$	(6,761	)

Basic loss per share data:
Continuing operations	$	(0.38	)	$	(0.19	)
Discontinued operations	(0.22		)	(0.02		)
Basic loss per share	$	(0.60	)	$	(0.21	)
Basic weighted average shares outstanding	31,492			32,306

Diluted loss per share data:
Continuing operations	$	(0.38	)	$	(0.19	)
Discontinued operations	(0.22		)	(0.02		)
Diluted loss per share	$	(0.60	)	$	(0.21	)
Diluted weighted average shares outstanding	31,492			32,306

The accompanying notes are an integral part of these financial statements.

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Stage Stores, Inc.

Condensed Consolidated Statements of Cash Flows

(in thousands)

(Unaudited)



	Thirteen Weeks Ended
	May 3, 2014			May 4, 2013
Cash flows from operating activities:
Net loss	$	(18,794	)	$	(6,856	)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation, amortization and impairment of long-lived assets	15,218			15,047
Loss on retirements of property and equipment	677			186
Deferred income taxes	(420		)	(428		)
Tax benefit from stock-based compensation	280			1,597
Stock-based compensation expense	1,626			1,979
Amortization of debt issuance costs	75			64
Excess tax benefits from stock-based compensation	(815		)	(1,792		)
Deferred compensation obligation	38			158
Amortization of employee benefit related costs	100			153
Construction allowances from landlords	2,425			968
Changes in operating assets and liabilities:
Increase in merchandise inventories	(15,140		)	(38,705		)
Increase in other assets	(8,548		)	(7,525		)
Increase in accounts payable and other liabilities	17,156			375
Total adjustments	12,672			(27,923		)
Net cash used in operating activities	(6,122		)	(34,779		)

Cash flows from investing activities:
Additions to property, equipment and leasehold improvements	(14,714		)	(16,809		)
Proceeds from disposal of assets	1,397			—
Net cash used in investing activities	(13,317		)	(16,809		)

Cash flows from financing activities:
Proceeds from revolving credit facility borrowings	116,340			103,125
Payments of revolving credit facility borrowings	(86,020		)	(48,475		)
Payments of long-term debt obligations	(1,200		)	(180		)
Payments for stock related compensation	(1,955		)	(2,088		)
Proceeds from exercise of stock awards	5,010			9,328
Excess tax benefits from stock-based compensation	815			1,792
Cash dividends paid	(3,952		)	(3,253		)
Net cash provided by financing activities	29,038			60,249
Net increase in cash and cash equivalents	9,599			8,661

Cash and cash equivalents:
Beginning of period	14,762			17,937
End of period	$	24,361		$	26,598

Supplemental disclosures including non-cash investing and financing activities:
Interest paid	$	702		$	502
Income taxes paid	$	5,519		$	20,876
Unpaid liabilities for capital expenditures	$	6,893		$	5,884

The accompanying notes are an integral part of these financial statements.

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Stage Stores, Inc.

Condensed Consolidated Statement of Stockholders' Equity

For the Thirteen Weeks Ended May 3, 2014

(in thousands, except per share data)

(Unaudited)



	Common Stock			Additional Paid-in Capital			Treasury Stock				Accumulated Other Comprehensive Loss			Retained Earnings
	Shares	Amount		Additional Paid-in Capital			Shares	Amount			Accumulated Other Comprehensive Loss			Retained Earnings			Total

Balance at February 1, 2014	31,222	$	312	$	384,295		—	$	(967	)	$	(4,616	)	$	75,420		$	454,444

Net loss	—	—		—			—	—			—			(18,794		)	(18,794		)
Other comprehensive income	—	—		—			—	—			62			—			62
Dividends on common stock, $0.125 per share	—	—		—			—	—			—			(3,952		)	(3,952		)
Deferred compensation	—	—		38			—	(38		)	—			—			—
Issuance of equity awards, net	499	5		5,005			—	—			—			—			5,010
Tax withholdings paid for net settlement of stock awards	—	—		(1,917		)	—	—			—			—			(1,917		)
Stock-based compensation expense	—	—		1,626			—	—			—			—			1,626
Tax benefit from stock-based compensation	—	—		280			—	—			—			—			280

Balance at May 3, 2014	31,721	$	317	$	389,327		—	$	(1,005	)	$	(4,554	)	$	52,674		$	436,759

The accompanying notes are an integral part of these financial statements.

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Stage Stores, Inc.

Notes to Condensed Consolidated Financial Statements

(Unaudited)

1. Basis of Presentation

The accompanying Condensed Consolidated Financial Statements (Unaudited) of Stage Stores, Inc. and subsidiary ("Stage Stores" or the "Company") have been prepared in accordance with Rule 10-01 of Regulation S-X and do not include all of the information and footnotes required by accounting principles generally accepted in the United States of America ("GAAP" or "U.S. GAAP") for complete financial statements. Those adjustments that are, in the opinion of management, necessary for a fair presentation of the results of the interim periods have been made. The results of operations for such interim periods are not necessarily indicative of the results of operations for a full year. The Condensed Consolidated Financial Statements (Unaudited) should be read in conjunction with the Audited Consolidated Financial Statements and notes thereto filed with Stage Stores' Annual Report on Form 10-K for the year ended February 1, 2014 . References to a particular year are to Stage Stores' fiscal year, which is the 52- or 53-week period ending on the Saturday closest to January 31 ^st of the following calendar year. For example, a reference to " 2013 " is a reference to the fiscal year ended February 1, 2014 and a reference to " 2014 " is a reference to the fiscal year ending January 31, 2015. References to "current year" pertain to the thirteen weeks ended May 3, 2014 , and references to "prior year" pertain to the thirteen weeks ended May 4, 2013 .

Stage Stores, Inc. is a Houston, Texas-based specialty department store retailer, which operates under the Bealls, Goody's, Palais Royal, Peebles and Stage nameplates. The Company offers moderately priced, nationally recognized brand name and private label apparel, accessories, cosmetics and footwear for the entire family. As of May 3, 2014 , the Company operated 853 stores located in 40 states. The Company also offers its merchandise direct-to-consumer through its eCommerce website and Send program. The eCommerce website features assortments of merchandise similar to that found in the Company's stores, as well as products not carried in its stores. The Send program allows customers in the stores to have merchandise shipped directly to their homes if the merchandise is not available in the local store.

Recent Accounting Standards. In April 2014, the FASB issued ASU No. 2014-08, which changes the requirements for reporting discontinued operations in Subtopic 205-20. The amendments in this update change the criteria for reporting discontinued operations and also require additional disclosures about discontinued operations. For public companies, the standard is effective prospectively for disposals that occur within annual periods beginning on or after December 15, 2014, and interim periods within those years. The Company has decided not to early adopt this ASU and will adopt prospectively.

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2. Discontinued Operations

Steele's, an off-price concept, was launched by the Company on November 1, 2011 and by February 1, 2014, the number of stores had grown to 35. In the first quarter of 2014, the Company made the decision to divest the Steele's stores in order to focus all of its attention on its core department store business. On March 7, 2014, the Company completed the sale of the Steele's operations. Accordingly, the results of operations of Steele's are reflected in Loss from Discontinued Operations on the Condensed Consolidated Statements of Operations and Comprehensive Loss (Unaudited) for all periods presented.

The following table summarizes the revenues and pre-tax loss of Steele's included in Loss from Discontinued Operations on the Condensed Consolidated Statements of Operations and Comprehensive Loss (Unaudited) (in thousands):



	Thirteen Weeks Ended
	May 3, 2014		May 4, 2013

Net sales	$	2,414	$	6,534

Pre-tax loss from discontinued operations	11,005		1,066

The loss from discontinued operations in the current year first quarter includes the loss on the sale of Steele's of $9.7 million .

The carrying values of the major assets and liabilities included in the Consolidated Balance Sheet related to Steele’s as of February 1, 2014 were as follows (in thousands). There were no assets or liabilities included in the Condensed Consolidated Balance Sheet (unaudited) as of May 3, 2014.



	February 1, 2014
Merchandise inventories, net	$	10,498
Property, equipment and leasehold improvements, net	732
Other assets	442
Liabilities	809

3. South Hill Consolidation

On February 11, 2013, the Company announced its plans to consolidate its South Hill, Virginia operations into its Houston, Texas corporate headquarters (the "South Hill Consolidation"). This action was the culmination of an initiative that the Company began in 2012. The reasons for the South Hill Consolidation were: (i) to have department store functions and processes entirely together in one location, (ii) to strengthen collaboration, teamwork and communications, while streamlining operations, enhancing overall operational efficiency and reducing costs, and (iii) to create consistency in merchandising, marketing and eCommerce.

Total expenses in the prior year first quarter associated with the South Hill Consolidation were $6.9 million . The costs, which were primarily for severance and transitional payroll and related benefits, recruiting and relocation costs, and visual presentation supplies and other, were recorded in selling, general and administrative expenses in the Condensed Consolidated Statement of Operations and Comprehensive Loss. Merchandise cost of sales for the prior year first quarter also includes approximately $2.8 million related to the South Hill Consolidation due to increased inventory markdowns and advertising allowances deferred in inventory. The South Hill Consolidation was completed during 2013. Total remaining unpaid severance costs as of May 3, 2014 were $0.6 million and are included in accrued expenses and other current liabilities on the Condensed Consolidated Balance Sheet.

During 2013, the Company committed to a plan to sell the building which housed its former South Hill operations. Accordingly, the disposal group with a carrying value of $0.6 million has been reclassified as held for sale and included in prepaid expenses and other current assets on the Condensed Consolidated Balance Sheet as of May 3, 2014.

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4. Stock-Based Compensation

As approved by the Company's shareholders, the Company established the Amended and Restated 2001 Equity Incentive Plan (the "2001 Equity Incentive Plan") and the Second Amended and Restated 2008 Equity Incentive Plan (the "2008 Equity Incentive Plan" and collectively with the 2001 Equity Incentive Plan, the "Equity Incentive Plans") to reward, retain and attract key personnel. The Equity Incentive Plans provide for grants of nonqualified or incentive stock options, stock appreciation rights ("SARs"), performance shares or units, stock units and stock grants. To fund the 2001 and 2008 Equity Incentive Plans, 12,375,000 and 4,550,000 shares of the Company's common stock were reserved for issuance upon exercise of awards, respectively.

The following table summarizes stock-based compensation expense by type of grant for each period (in thousands):



	Thirteen Weeks Ended
	May 3, 2014			May 4, 2013
Stock options and SARs	$	142		$	330
Non-vested stock	932			1,051
Performance shares	552			598
Total compensation expense	1,626			1,979
Related tax benefit	(611		)	(744		)
	$	1,015		$	1,235

As of May 3, 2014 , the Company had unrecognized compensation cost of $22.7 million related to stock-based compensation awards granted. That cost is expected to be recognized over a weighted average period of 2.8 years .

Stock Options and SARs

The Company historically granted shares of stock options and SARs to its employees and members of management. The right to exercise stock options and SARs generally vests over four years from the date of grant, with 25% vesting at the end of each of the first four years following the date of grant . Stock options and SARs are settled by issuance of common stock. Stock options issued prior to January 29, 2005 will generally expire, if not exercised, within ten years from the date of the grant, while stock options and SARs granted after that date will generally expire, if not exercised, within seven years from the date of grant. No stock options or SARs were granted during the thirteen weeks ended May 3, 2014 or May 4, 2013 .

The following table summarizes information about stock options and SARs outstanding under the Equity Incentive Plans as of May 3, 2014 and changes during the thirteen weeks ended May 3, 2014 :



	Number of Shares		Weighted Average Exercise Price		Weighted Average Remaining Contractual Term (years)	Aggregate Intrinsic Value (in thousands)
Outstanding at February 1, 2014	1,062,851		$	16.52
Exercised	(522,412	)	16.52
Forfeited	(21,875	)	17.35
Outstanding at May 3, 2014	518,564		$	16.48	2.8	$	1,223

Vested or expected to vest at May 3, 2014	501,879		$	16.41	2.7	$	1,217

Exercisable at May 3, 2014	435,138		$	16.09	2.6	$	1,195

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The following table summarizes information about non-vested stock options and SARs outstanding as of May 3, 2014 and changes during the thirteen weeks ended May 3, 2014 :



Stock Options/SARs	Number of Shares		Weighted Average Grant Date Fair Value
Non-vested at February 1, 2014	292,075		$	7.97
Vested	(193,524	)	7.69
Forfeited	(15,125	)	8.59
Non-vested at May 3, 2014	83,426		$	8.52

The aggregate intrinsic value of stock options and SARs, defined as the amount by which the market price of the underlying stock on the date of exercise exceeds the exercise price of the award, exercised during the thirteen weeks ended May 3, 2014 and May 4, 2013 , was $3.5 million and $5.2 million , respectively.

Non-vested Stock

The Company grants shares of non-vested stock to its employees, members of management and independent directors. The non-vested stock converts one for one to common stock at the end of the vesting period at no cost to the recipient to whom it is awarded. The vesting period of the non-vested stock ranges from one to four years from the date of grant.

The following table summarizes information about non-vested stock granted by the Company as of May 3, 2014 and changes during the thirteen weeks ended May 3, 2014 :



Non-vested Stock	Number of Shares		Weighted Average Grant Date Fair Value
Outstanding at February 1, 2014	652,459		$	20.40
Granted	272,959		23.96
Vested	(186,606	)	19.26
Forfeited	(53,820	)	21.20
Outstanding at May 3, 2014	684,992		$	22.07

The aggregate intrinsic value of non-vested stock that vested during the current year was $4.4 million . The payment of the employees' tax liability for a portion of the vested shares was satisfied by withholding shares with a fair value equal to the tax liability. As a result, the actual number of shares issued was 128,360 .

Performance Shares

The Company grants performance shares to members of senior management, at no cost to the recipient, as a means of rewarding them for the Company's long-term performance based on shareholder return performance measures. The actual number of shares that could be issued ranges from zero to a maximum of two times the number of granted shares outstanding as reflected in the table below. The actual number of shares issued is determined by the Company's shareholder return performance relative to a specific group of companies over a three -year performance cycle. Compensation expense, which is recorded ratably over the vesting period, is based on the fair value at grant date and the anticipated number of shares of the Company's common stock, which is determined on a Monte Carlo probability model. Grant recipients do not have any shareholder rights until the granted shares have been issued.

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The following table summarizes information about the performance shares that remain outstanding as of May 3, 2014 :



Period Granted	Target Shares Outstanding at February 1, 2014	Target Shares Granted During Current Year	Target Shares Vested During Current Year		Target Shares Forfeited During Current Year		Target Shares Outstanding at May 3, 2014	Weighted Average Grant Date Fair Value Per Share
2012	198,200	—	—		(20,800	)	177,400	$	18.04
2013	151,250	—	(2,241	)	(23,059	)	125,950	33.81
2014	—	166,153	—		—		166,153	33.94
Total	349,450	166,153	(2,241	)	(43,859	)	469,503

During the current year, 16,620 shares vested related to the 2011 performance share grant. The aggregate intrinsic value of shares vesting during 2014 was $0.5 million . The payment of the recipients' tax liability for shares vesting during 2014 of approximately $0.1 million was satisfied by withholding shares with a fair value equal to the tax liability. As a result, the actual number of shares issued was 12,884 .

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5. Debt Obligations

Debt obligations as of May 3, 2014 and February 1, 2014 consist of the following (in thousands):



	May 3, 2014		February 1, 2014
Revolving Credit Facility	$	85,715	$	55,395
Finance lease obligations	5,377		5,584
Other financing	1,253		2,246
Total debt obligations	92,345		63,225
Less: Current portion of debt obligations	2,137		2,354
Long-term debt obligations	$	90,208	$	60,871

The Company has a $250.0 million senior secured revolving credit facility that matures on June 30, 2016 (the "Revolving Credit Facility"). The Revolving Credit Facility includes an uncommitted accordion feature to increase the size of the facility to $350.0 million . The Revolving Credit Facility is used by the Company to provide financing for working capital, capital expenditures and other general corporate purposes. Borrowings under the Revolving Credit Facility are limited to the availability under a borrowing base that is determined principally on eligible inventory as defined by the Revolving Credit Facility agreement. Inventory and cash and cash equivalents are pledged as collateral under the Revolving Credit Facility. The daily interest rates under the Revolving Credit Facility are determined by a prime rate or LIBOR, plus an applicable margin, as set forth in the Revolving Credit Facility agreement. For the thirteen weeks ended May 3, 2014 , the weighted average interest rate on outstanding borrowings and the average daily borrowings under the Revolving Credit Facility were 1.72% and $61.4 million , respectively.

The Company also issues letters of credit under the Revolving Credit Facility to support certain merchandise purchases and to collateralize retained risks and deductibles under various insurance programs. At May 3, 2014 , the Company had outstanding letters of credit totaling approximately $4.9 million . These letters of credit expire within twelve months of issuance. Excess borrowing availability under the Revolving Credit Facility at May 3, 2014 , net of letters of credit outstanding, outstanding borrowings and accrued interest of $0.1 million , was $159.3 million .

The Revolving Credit Facility agreement contains covenants which, among other things, restrict, based on required levels of excess availability, (i) the amount of additional debt or capital lease obligations, (ii) the payment of dividends and repurchase of common stock under certain circumstances and (iii) related party transactions. The Revolving Credit Facility agreement also contains a fixed charge coverage ratio covenant in the event excess availability is below a defined threshold or an event of default has occurred. At May 3, 2014 , the Company was in compliance with all of the debt covenants of the Revolving Credit Facility agreement and expects to remain in compliance during fiscal year 2014 .

6. Earnings per Share

Basic earnings per share is computed using the weighted average number of common shares outstanding during the measurement period. Diluted earnings per share is computed using the weighted average number of common shares as well as all potentially dilutive common share equivalents outstanding during the measurement period. For the thirteen weeks ended May 3, 2014 and May 4, 2013 , 174,965 and 457,722 shares, respectively, were attributable to stock options, SARs and non-vested stock grants that would have been considered dilutive securities but were excluded from the calculation of diluted earnings per share because the effect was anti-dilutive due to the net loss for the reported periods.

Under Accounting Standards Codification ("ASC") 260-10, Earnings Per Share , non-vested stock grants that contain non-forfeitable rights to dividends or dividend equivalents are considered participating securities and are included in the calculation of basic and diluted earnings per share pursuant to the two-class method. The two-class method determines earnings per share for each class of common stock and participating securities according to dividends or dividend equivalents and their respective participation rights in undistributed earnings. Earnings per share have been calculated under the two-class method.

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The following tables show the computation of basic and diluted earnings per share from continuing operations for each period (in thousands, except per share amounts):



	Thirteen Weeks Ended
	May 3, 2014			May 4, 2013
Basic EPS from continuing operations:
Loss from continuing operations	$	(12,046	)	$	(6,188	)
Less: Allocation of earnings to participating securities	—			—
Net loss from continuing operations allocated to common shares	(12,046		)	(6,188		)

Basic weighted average shares outstanding	31,492			32,306
Basic EPS from continuing operations	$	(0.38	)	$	(0.19	)

	Thirteen Weeks Ended
	May 3, 2014			May 4, 2013
Diluted EPS from continuing operations:
Loss from continuing operations	$	(12,046	)	$	(6,188	)
Less: Allocation of earnings to participating securities	—			—
Net loss from continuing operations allocated to common shares	(12,046		)	(6,188		)

Basic weighted average shares outstanding	31,492			32,306
Add: Dilutive effect of stock awards	—			—
Diluted weighted average shares outstanding	31,492			32,306
Diluted EPS from continuing operations	$	(0.38	)	$	(0.19	)

The following table illustrates the number of stock options and SARs that were outstanding, but not included in the computation of diluted earnings per share because the exercise price of the stock options and SARs was greater than the average market price of the Company's common shares (in thousands):



	Thirteen Weeks Ended
	May 3, 2014	May 4, 2013
Number of anti-dilutive stock options and SARs outstanding	79	1

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7. Stockholders' Equity

The Company currently pays a quarterly cash dividend of $0.125 per share on its common stock. On May 22, 2014 , the Company's Board of Directors declared a quarterly cash dividend of $0.125 per share of common stock, payable on June 18, 2014 to shareholders of record at the close of business on June 3, 2014 . In the current year, the Company has paid cash dividends totaling $4.0 million .

8. Retirement Plan

The Company sponsors a frozen defined benefit plan. The components of pension cost for each period are as follows (in thousands):



	Thirteen Weeks Ended
	May 3, 2014			May 4, 2013
Employer service cost	$	52		$	90
Interest cost	423			430
Expected return on plan assets	(533		)	(559		)
Net loss amortization	100			153
Net periodic pension cost	$	42		$	114

The Company's funding policy is to make contributions to maintain the minimum funding requirements for its pension obligations in accordance with the Employee Retirement Income Security Act. The Company may elect to contribute additional amounts to maintain a level of funding to minimize the Pension Benefit Guaranty Corporation premium costs or to cover the short-term liquidity needs of the plan in order to maintain current invested positions. No contributions were made by the Company in the current year first quarter.

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9. Fair Value Measurements

The Company recognizes or discloses the fair value of its financial and non-financial assets and liabilities on a recurring and non-recurring basis. Fair value is defined as the price that would be received from selling an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. When determining the fair value measurements for assets and liabilities which are required to be recorded at fair value, the Company assumes the highest and best use of the asset by market participants in which the Company would transact and the market-based risk measurements or assumptions that market participants would use in pricing the asset or liability.

The Company applies the following fair value hierarchy, which prioritizes the inputs used to measure fair value into three levels, and bases the categorization within the hierarchy upon the lowest level of input that is available and significant to the fair value measurement:



Level 1 –	Quoted prices in active markets for identical assets or liabilities.

Level 2 –	Observable inputs other than quoted prices in active markets for identical assets and liabilities, quoted prices for identical or similar assets or liabilities in inactive markets, or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities.

Level 3 –	Inputs that are both unobservable and significant to the overall fair value measurement reflect the Company's estimates of assumptions that market participants would use in pricing the asset or liability.

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The following tables present the Company's financial assets and liabilities measured at fair value on a recurring basis in the Condensed Consolidated Balance Sheets (Unaudited) (in thousands):



	May 3, 2014
	Balance		Quoted Prices in Active Markets for Identical Instruments (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
Other assets:
Securities held in grantor trust for deferred compensation plans (1)(2)	$	21,957	$	21,957	$	—	$	—

Accrued expenses and other current liabilities:
Deferred non-employee director equity compensation plan liability (2)	$	223	$	223	$	—	$	—


	February 1, 2014
			Quoted Prices in Active Markets for Identical Instruments		Significant Other Observable Inputs		Significant Unobservable Inputs
	Balance		(Level 1)		(Level 2)		(Level 3)
Other assets:
Securities held in grantor trust for deferred compensation plans (1)(2)	$	21,023	$	21,023	$	—	$	—

Accrued expenses and other current liabilities:
Deferred non-employee director equity compensation plan liability (2)	$	226	$	226	$	—	$	—


(1)	The Company has recorded in other long-term liabilities amounts related to these assets for the amount due to participants corresponding in value to the securities held in the grantor trust.

(2)

Using the market approach, the fair values of these items represent quoted market prices multiplied by the quantities held. Net gains and losses related to the changes in fair value in the assets and liabilities under the various deferred compensation plans are recorded in selling, general and administrative expenses and were nil for the thirteen weeks ended May 3, 2014 and for the fiscal year ended February 1, 2014 .

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The following table shows the Company's non-financial assets measured at fair value on a nonrecurring basis in the Condensed Consolidated Balance Sheets (Unaudited) (in thousands):



	May 3, 2014
			Quoted Prices in Active Markets for Identical Instruments		Significant Other Observable Inputs		Significant Unobservable Inputs
	Balance		(Level 1)		(Level 2)		(Level 3)
Assets:
Store property, equipment and leasehold improvements (3)	$	83	$	—	$	—	$	83


	February 1, 2014
			Quoted Prices in Active Markets for Identical Instruments		Significant Other Observable Inputs		Significant Unobservable Inputs
	Balance		(Level 1)		(Level 2)		(Level 3)
Assets:
Store property, equipment and leasehold improvements (3)	$	4,562	$	—	$	—	$	4,562

(3)

In accordance with ASC No. 360-10, Accounting for the Impairment or Disposal of Long-Lived Assets , using an undiscounted cash flow model, the Company identified certain stores whose cash flow trends indicated that the carrying value of store property, equipment and leasehold improvements may not be fully recoverable and determined that impairment charges were necessary for the current year. The Company uses a discounted cash flow model to determine the fair value of its impaired assets. Key assumptions in determining future cash flows include, among other things, expected future operating performance and changes in economic conditions. Impairment charges of $0.1 million recognized during the current year and $0.6 million recognized during 2013 are recorded in cost of sales and related buying, occupancy and distribution expenses in the Condensed Consolidated Statements of Operations and Comprehensive Loss (Unaudited). In addition, approximately $7.4 million of impairment charges for Steele's were recognized in fiscal year 2013.

Financial instruments not measured at fair value are cash and cash equivalents, payables and debt obligations. The Company believes that the Revolving Credit Facility approximates fair value since interest rates are adjusted to reflect current rates.

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ITEM 2.	MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Forward Looking Statements

Certain statements in this Form 10-Q contain forward-looking statements that are subject to known and unknown risks, uncertainties and other factors which may cause actual results, performance or achievements to be materially different from any future results, performance or achievements expressed or implied by these forward-looking statements. Forward-looking statements reflect the Company's expectations regarding future events and operating performance and often contain words such as "believe," "expect," "may," "will," "should," "could," "anticipate," "plan" or similar words.

Forward-looking statements are based on various assumptions and factors that could cause actual results to differ materially from those in the forward-looking statements. These factors include, but are not limited to, the ability of the Company and its subsidiary to maintain normal trade terms with vendors, the ability of the Company and its subsidiary to comply with the various covenant requirements contained in the Company's Revolving Credit Facility agreement, the demand for apparel, and other factors. The demand for apparel and sales volume can be affected by significant changes in economic conditions, including an economic downturn, employment levels in the Company's markets, consumer confidence, energy and gasoline prices and other factors influencing discretionary consumer spending. Other factors affecting the demand for apparel and sales volume include unusual weather patterns, an increase in the level of competition in the Company's market areas, competitors' marketing strategies, changes in fashion trends, changes in the average cost of merchandise purchased for resale, availability of product on normal payment terms and the failure to achieve the expected results of the Company's merchandising and marketing plans as well as its store opening plans. The occurrence of any of these factors could have a material and adverse impact on the Company's business, financial condition, operating results, or liquidity. Most of these factors are difficult to predict accurately and are generally beyond the Company's control.

Readers should consider the risks and uncertainties described in the Company's Annual Report on Form 10-K for the year ended February 1, 2014 ("Form 10-K"). Readers should carefully review the Form 10-K in its entirety including, but not limited to, the Company's financial statements and the notes thereto and the risks and uncertainties described in Item 1A - "Risk Factors" of the Form 10-K. Forward-looking statements contained in this Form 10-Q are as of the date of this Form 10-Q. The Company does not undertake to update its forward-looking statements.

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General

Stage Stores, Inc. ("Stage Stores" or the "Company") is a Houston, Texas-based specialty department store retailer, which operates under the Bealls, Goody's, Palais Royal, Peebles and Stage nameplates. The Company offers moderately priced, nationally recognized brand name and private label apparel, accessories, cosmetics and footwear for the entire family. The Company also offers its merchandise direct-to-consumer through its eCommerce website and Send program. The eCommerce website features assortments of merchandise similar to that found in the Company's stores, as well as products not carried in its stores. The Send program allows customers in the stores to have merchandise shipped directly to their homes if the merchandise is not available in the local store. The Company's principal focus is on consumers in small and mid-sized markets which the Company believes are under-served and less competitive. At May 3, 2014 , the Company operated 853 stores located in 40 states.

Steele's, an off-price concept, was launched by the Company on November 1, 2011 and by February 1, 2014 the number of Steele's stores had grown to 35. In the first quarter of 2014, the Company made the decision to divest the Steele's stores in order to focus all of its attention on its core department store business. On March 7, 2014, the Company completed the sale of the Steele's operations. Accordingly, the results of operations of Steele's are reflected in Loss from Discontinued Operations on the Condensed Consolidated Statements of Operations and Comprehensive Loss (Unaudited) for all periods presented.

The Company made progress on a number of its key initiatives during the thirteen weeks ended May 3, 2014 (the "current year first quarter"). The Company implemented store-level mark down optimization and continued to make progress on size pack optimization with plans to roll out by year end. During the current year first quarter, the Company installed 13 new Estee Lauder and 13 new Clinique counters and plans to roll out approximately 50 more counters by year end. The Company also opened seven new stores in the current year first quarter and plans to open a total of 20 new stores during 2014.

The financial information, discussion and analysis that follow should be read in conjunction with the Company's Consolidated Financial Statements as included in the Form 10-K.

Results of Operations

The following table sets forth the results of operations as a percentage of sales for the periods indicated:



	Thirteen Weeks Ended (1)
	May 3, 2014		May 4, 2013
Net sales	100.0	%	100.0	%
Cost of sales and related buying, occupancy and distribution expenses	79.1		75.9
Gross profit	20.9		24.1

Selling, general and administrative expenses	25.8		26.3
Store opening costs	0.2		0.3
Interest expense	0.2		0.2
Loss from continuing operations before income tax	(5.3	)	(2.7	)

Income tax benefit	(2.0	)	(1.0	)
Loss from continuing operations	(3.2	)	(1.7	)
Loss from discontinued operations, net of tax	(1.8	)	(0.2	)
Net loss	(5.1	)%	(1.8	)%

(1) Percentages may not foot due to rounding.

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Non-GAAP Financial Measures

The following supplemental information presents the results from continuing operations for the first fiscal quarter of 2014 and 2013 . All periods are presented on a basis in conformity with accounting principles generally accepted in the United States of America ("U.S. GAAP") and on a non-U.S. GAAP basis to show earnings with and without charges associated with the South Hill Consolidation. Management believes this supplemental financial information enhances an investor's understanding of the Company's financial performance as it excludes those items which impact comparability of operating trends. The non-U.S. GAAP financial information should not be considered in isolation or viewed as a substitute for net income, cash flow from operations or other measures of performance as defined by U.S. GAAP. Moreover, the inclusion of non-U.S. GAAP financial information as used herein is not necessarily comparable to other similarly titled measures of other companies due to the potential inconsistencies in the method of presentation and items considered. The following tables set forth the supplemental financial information and the reconciliation of U.S. GAAP disclosures to non-U.S. GAAP financial metrics (in thousands, except diluted earnings per share):



	Thirteen Weeks Ended
	May 3, 2014			May 4, 2013
Net loss from continuing operations:
On a U.S. GAAP basis	$	(12,046	)	$	(6,188	)
South Hill Consolidation related charges, net of tax of $3,616	—			6,062
On a non-U.S. GAAP basis	$	(12,046	)	$	(126	)

Diluted loss per share from continuing operations:
On a U.S. GAAP basis	$	(0.38	)	$	(0.19	)
South Hill Consolidation related charges	—			0.19
On a non-U.S. GAAP basis	$	(0.38	)	$	—

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Thirteen Weeks Ended May 3, 2014 Compared to Thirteen Weeks Ended May 4, 2013

Sales for the thirteen weeks ended May 3, 2014 of $372.0 million were essentially flat with sales of $372.1 million for the thirteen weeks ended May 4, 2013 (the "prior year first quarter"). Comparable store sales, which are sales in stores that are open for at least 14 full months prior to the reporting period, including eCommerce sales, decreased 0.2% in the current year first quarter compared to a 0.7% increase in the prior year first quarter. Excluding eCommerce sales, comparable store sales decreased 0.3% in the current year first quarter and were flat in the prior year first quarter. The 0.2% decrease in comparable store sales for the current year first quarter reflects a 6.9% decrease in average unit retail and a 0.5% decrease in the number of transactions offset by a 7.2% increase in units per transaction.

On a market population basis, utilizing a ten-mile radius from each store, the small market stores outperformed the larger markets for the current year first quarter. Comparable store sales were flat for the Company's small market stores (populations less than 50,000), while the mid-sized (populations of 50,000 to 150,000) and higher-density market stores (populations greater than 150,000) experienced a comparable store sales decrease of 1.1% and 0.5%, respectively. Geographically, the Northwest, Southwest and Southeast regions performed better than the Company's overall comparable store sales.

On a merchandise category basis, cosmetics, children's, missy sportswear and footwear performed better than the Company's overall comparable store sales for the current year first quarter. The cosmetics line of business benefited from the installation of 13 additional Estee Lauder and 13 additional Clinique counters. Sales of Nike and Carter's brands helped drive the children's business, while missy sportswear and footwear benefited from sales of DKNY and Skechers merchandise, respectively.

The following is a summary of the changes in the components of the cost of sales rate between the current year first quarter and the prior year first quarter, expressed as a percent of sales:



	Increase
Merchandise cost of sales rate	3.2	%
Buying, occupancy and distribution expenses rate	—
Cost of sales rate	3.2	%

Gross profit for the current year first quarter was $77.9 million , a decrease of 13.0% from $89.6 million in the prior year first quarter. Gross profit, as a percent of sales, decreased to 20.9% in the current year first quarter from 24.1% in the prior year first quarter primarily as a result of the highly promotional retail environment and the Company's elevated clearance sales in the current year first quarter as compared to the prior year first quarter. Merchandise cost of sales for the prior year first quarter includes approximately $2.8 million related to the South Hill Consolidation.

Selling, general and administrative ("SG&A") expenses in the current year first quarter decreased $1.8 million to $96.1 million from $97.9 million in the prior year first quarter. As a percent of sales, SG&A expenses decreased to 25.8% in the current year first quarter from 26.3% in the prior year first quarter. SG&A in the prior year first quarter contained one time charges of $6.9 million related to the South Hill Consolidation. The benefit from not having similar charges in the current year first quarter was partially offset by a shift in advertising costs from the prior year second quarter to the current year first quarter associated with the Company's Mother's Day event and higher medical, workers compensation and general liabilities claims expenses during the current year first quarter.

Store opening costs of $0.8 million in the current year first quarter include costs related to the opening of 7 stores. During the prior year first quarter, the Company incurred $1.0 million in store opening costs related to the opening of 10 new stores. Store opening costs are expensed as incurred and include costs of stores opening in future quarters.

Net interest expense was $0.7 million in the current year first quarter compared to $0.6 million in the prior year first quarter. Interest expense is primarily comprised of interest on borrowings under the Revolving Credit Facility (see "Liquidity and Capital Resources"), related letters of credit and commitment fees, amortization of debt issuance costs and interest on finance lease obligations.

The Company's effective tax rate for the current year first quarter was 38.7% , resulting in an estimated tax benefit from continuing operations of $7.6 million . This compares to an effective tax rate of 37.4% and income tax benefit from continuing operations of $3.7 million in the prior year first quarter.

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Loss from discontinued operations, net of the tax benefit of $4.3 million, was $6.7 million in the current year first quarter compared to $0.7 million , net of the tax benefit of $0.4 million, in the prior year first quarter. The loss from discontinued operations in the current year first quarter includes the loss on the sale of the Steele's operations of $9.7 million before tax.

As a result of the foregoing, the Company had a net loss of $18.8 million for the current year first quarter as compared to net loss of $6.9 million for the prior year first quarter.

Seasonality and Inflation

Historically, the Company's business is seasonal and sales are traditionally lower during the first three quarters of the fiscal year (February through October) and higher during the last quarter of the fiscal year (November through January). The fourth quarter usually accounts for slightly more than 30% of the Company's annual sales, with the other quarters accounting for approximately 22% to 24% each. Working capital requirements fluctuate during the year and generally reach their highest levels during the third and fourth quarters. The Company does not expect inflation will have a material impact on its operations. However, there can be no assurance that the Company's business will not be affected by inflation in the future.

Liquidity and Capital Resources

The Company's liquidity is currently provided by (i) existing cash balances, (ii) operating cash flows, (iii) normal trade credit terms from the vendor and factor community and (iv) the Revolving Credit Facility. The Company's primary cash requirements are for capital expenditures related to new stores, store relocations and remodeling, and seasonal and new store inventory purchases.

Key components of the Company's cash flows for the current year and the prior year are summarized below (in thousands):



	Thirteen Weeks Ended
	May 3, 2014			May 4, 2013
Net cash provided by (used in):
Operating activities	$	(6,122	)	$	(34,779	)
Investing activities	(13,317		)	(16,809		)
Financing activities	29,038			60,249

Operating Activities

During the current year, the Company used $6.1 million in cash from operating activities. Net loss, adjusted for non-cash expenses, provided cash of approximately $2.0 million . Changes in operating assets and liabilities used net cash of approximately $6.5 million , which included a $15.1 million increase in merchandise inventories primarily due to the seasonal build and the strategic investments in cosmetics, partly offset by the reduction associated with the sale of the Steele's operations, and an increase in other assets of $8.5 million . These increases were partially offset by an increase in accounts payable and other liabilities of $17.2 million . Additionally, cash flows from operating activities included construction allowances from landlords of $2.4 million , which funded a portion of the capital expenditures related to store leasehold improvements in new and relocated stores.

During the prior year, the Company used $34.8 million in cash from operating activities. Net loss, adjusted for non-cash expenses, provided cash of approximately $10.1 million . Changes in operating assets and liabilities used net cash of approximately $45.9 million , which included a $38.7 million increase in merchandise inventories primarily due to planned investments in inventory and the seasonal build of inventories, and an increase in other assets of $7.5 million . These increases were partially offset by an increase in accounts payable and other liabilities of $0.4 million . Additionally, cash flows from operating activities included construction allowances from landlords of $1.0 million , which funded a portion of the capital expenditures related to store leasehold improvements in new and relocated stores.

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Investing Activities

Capital expenditures were $14.7 million in the current year as compared to $16.8 million in the prior year. For the current year, the Company opened 7 new stores and relocated one store, as compared to 10 new stores in the prior year. As noted above, the Company received construction allowances from landlords of $2.4 million in the current year and $1.0 million in the prior year to fund a portion of the capital expenditures related to store leasehold improvements in new and relocated stores. These funds are recorded as a deferred rent credit on the balance sheet and are recognized as an offset to rent expense over the lease term commencing with the date the allowances are earned.

Management currently estimates that capital expenditures in 2014 , net of construction allowances to be received from landlords, will be approximately $60 million. The expenditures will principally be for the opening of new stores, store expansions, relocations and remodels and investments in technology.

Financing Activities

The Company currently pays a cash dividend of $0.125 cents per share on its common stock. On May 22, 2014 , the Company's Board of Directors declared a quarterly cash dividend of $0.125 per share of common stock, payable on June 18, 2014 to shareholders of record at the close of business on June 3, 2014 . In the current year, the Company has paid cash dividends totaling $4.0 million .

While there can be no assurances, management believes that there should be sufficient liquidity to cover both the Company's short-term and long-term funding needs. The Company anticipates that it has adequate cash flows to cover its working capital needs, planned capital expenditures and debt service requirements for the remainder of 2014 and the foreseeable future.

Recent Accounting Standards

Disclosure concerning recent accounting standards is incorporated by reference to Note 1 of the Company's Condensed Consolidated Financial Statements (Unaudited) contained in this Form 10-Q.

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ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

None.

ITEM 4. CONTROLS AND PROCEDURES

Disclosure Controls and Procedures

As defined in Rule 13a-15(e) and 15d-15(e) of the Securities Exchange Act of 1934 (the "Exchange Act"), the term "disclosure controls and procedures" means controls and other procedures of an issuer that are designed to ensure that information required to be disclosed by the issuer in the reports that it files or submits under the Exchange Act is recorded, processed, summarized and reported, within the time periods specified in the SEC's rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed by an issuer in the reports that it files or submits under the Exchange Act is accumulated and communicated to the issuer's management, including its principal executive and principal financial officers, or persons performing similar functions, as appropriate to allow timely decisions regarding required disclosure.

Management of the Company, with the participation of the Chief Executive Officer and Chief Financial Officer, evaluated the effectiveness of the Company's disclosure controls and procedures and concluded that the Company's disclosure controls and procedures were effective as of May 3, 2014 .

Internal Control Over Financial Reporting

As defined in Rule 13a-15(f) and 15d-15(f) of the Exchange Act, the term "internal control over financial reporting" means a process designed by, or under the supervision of, the issuer's principal executive and principal financial officers, or persons performing similar functions, and effected by the issuer's board of directors, management and other personnel, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles and includes those policies and procedures that:


(1)	Pertain to the maintenance of records that in reasonable detail accurately and fairly reflect the transactions and dispositions of the assets of the issuer;


(2)	Provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the issuer are being made only in accordance with authorizations of management and directors of the issuer; and


(3)	Provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of the issuer's assets that could have a material adverse effect on the financial statements.

The Company's management is responsible for establishing and maintaining adequate internal control over financial reporting for the Company. There were no changes in the Company's internal control over financial reporting during the quarter ended May 3, 2014 that have materially affected, or are reasonably likely to materially affect, the Company's internal control over financial reporting.

PART II – OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

During the current year first quarter ended May 3, 2014 , the Company did not have any material legal proceedings brought against it, its subsidiary or their properties.

ITEM 1A. RISK FACTORS

There have not been any material changes from the risk factors as previously disclosed in the Form 10-K.

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ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

On March 7, 2011, the Board of Directors (the "Board") approved a Stock Repurchase Program (the "2011 Stock Repurchase Program") which authorized the Company to repurchase up to $200 million of its outstanding common stock. The 2011 Stock Repurchase Program will expire when the Company has repurchased $200 million of its outstanding common stock, unless terminated earlier by the Board. Through June 10, 2012, the Company repurchased approximately $100.1 million of its outstanding common stock under the 2011 Stock Repurchase Program. On June 11, 2012, the Company announced that its Board had chosen not to spend additional capital under the 2011 Stock Repurchase Program for the time being. In addition, the Board authorized the Company to repurchase shares of its outstanding common stock equal to the amount of proceeds and related tax benefits from the exercise of stock options, SARs and other equity grants. Purchases of shares of the Company's common stock may be made from time to time, either on the open market or through privately negotiated transactions and are financed by the Company's existing cash, cash flow and other liquidity sources, as appropriate.

The table below sets forth information regarding the Company's repurchases of its common stock during the current year first quarter:



ISSUER PURCHASES OF EQUITY SECURITIES
Period	Total Number of Shares Purchased (1)	Average Price Paid Per Share (1)		Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs	Approximate Dollar Value of Shares that May Yet Be Purchased Under the Plans or Programs (2)

February 2, 2014 to March 1, 2014	1,371	$	19.20	—	$	99,938,428

March 2, 2014 to April 5, 2014	67,134	24.40		—	$	99,938,428

April 6, 2014 to May 3, 2014	13,479	21.50		—	$	99,938,428

Total	81,984	$	23.84	—


(1)	Although the Company did not repurchase any of its common stock during the current year first quarter under the 2011 Stock Repurchase Program:


•	The Company reacquired 80,258 shares of common stock from certain employees to cover tax withholding obligations from exercises of Stock Appreciation Rights and the vesting of restricted stock and performance shares at a weighted average acquisition price of $23.88 per share; and

•

The trustee of the grantor trust established by the Company for the purpose of holding assets under the Company's Deferred Compensation Plan (the "Plan") purchased an aggregate of 1,726 shares of the Company's common stock in the open market at a weighted average price of $21.99 in connection with the Company Stock Investment Option under the Plan and in connection with the reinvestment of dividends paid on the Company's common stock held in trust in the Plan.


(2)	Reflects the $200.0 million authorized under the 2011 Stock Purchase Program, less the $100.1 million repurchased using the Company's existing cash, cash flow and other liquidity sources since March 2011.

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ITEM 3. DEFAULTS UPON SENIOR SECURITIES

None.

ITEM 4. MINE SAFETY DISCLOSURES

None.

ITEM 5. OTHER INFORMATION

None.

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ITEM 6. EXHIBITS

The following documents are the exhibits to this Form 10-Q. For convenient reference, each exhibit is listed according to the Exhibit Table of Item 601 of Regulation S-K.



Exhibit Number	Description

10.1*#	Amendment No. Two to Amended and Restated Private Label Credit Card Plan Agreement dated as of February 13, 2014 Between World Financial Network Bank (now Comenity Bank) and Stage Stores, Inc. and Specialty Retailers, Inc.

10.2*†	Employment Agreement between Stephen Parsons and Stage Stores, Inc. dated April 28, 2014.

24.1*	Power of Attorney: Executive Officer (William E. Gentner - Section 16 Filer).

24.2*	Power of Attorney: Executive Officer (Stephen B. Parsons - Section 16 Filer).

31.1*	Certification of Chief Executive Officer Pursuant to Rules 13a-14(a) and 15d-14(a) under the Securities Exchange Act of 1934, as amended.

31.2*	Certification of Chief Financial Officer Pursuant to Rules 13a-14(a) and 15d-14(a) under the Securities Exchange Act of 1934, as amended.

32*	Certification of Chief Executive Officer and Chief Financial Officer Pursuant to 18 U.S.C. Section 1350.

101.INS	XBRL Instance Document

101.SCH	XBRL Taxonomy Extension Schema Document

101.CAL	XBRL Taxonomy Extension Calculation Linkbase Document

101.DEF	XBRL Taxonomy Extension Definition Linkbase Document

101.LAB	XBRL Taxonomy Extension Label Linkbase Document

101.PRE	XBRL Taxonomy Extension Presentation Linkbase Document

________________________________________



*	Filed electronically herewith.
†	Management contract or compensatory plan or agreement.
#	Certain confidential portions marked with a [****] have been omitted pursuant to a confidential treatment request that has been filed separately with the Securities and Exchange Commission.

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SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.



	STAGE STORES, INC.

June 10, 2014	/s/ Michael L. Glazer
(Date)	Michael L. Glazer
	President and Chief Executive Officer
	(Principal Executive Officer)


June 10, 2014	/s/ Oded Shein
(Date)	Oded Shein
	Executive Vice President, Chief Financial Officer
	(Principal Financial Officer)

EXHIBIT 10.1

CONFIDENTIAL TREATMENT REQUESTED

THIS DOCUMENT HAS BEEN REDACTED AND IS THE SUBJECT OF A CONFIDENTIAL TREATMENT REQUEST PURSUANT TO RULE 24b-2 OF THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED. REDACTED MATERIAL IS MARKED WITH A [****] AND HAS BEEN FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.

AMENDMENT NO. TWO

AMENDED AND RESTATED

PRIVATE LABEL CREDIT CARD PLAN AGREEMENT

BETWEEN COMENITY BANK

AND

STAGE STORES, INC.

SPECIALTY RETAILERS, INC.

THIS AMENDMENT NO. TWO (“Amendment No. 2”) to that certain AMENDED AND RESTATED PRIVATE LABEL CREDIT CARD PLAN AGREEMENT entered into as of the 8 ^th day of August, 2012 and effective as of the 1 ^st day of August 2012 (the “Agreement”) by and between Stage Stores, Inc. (“SSI”) and Specialty Retailers, Inc. (“SRI”) (with SSI and SRI hereinafter collectively referred to as “Stage”) and Comenity Bank (formerly known as World Financial Network Bank) (“Bank”), is entered into by and between Bank and SSI and will be effective as of February 13, 2014 (the “Amendment No. 2 Effective Date”).

WHEREAS, Stage and Bank previously entered into the Agreement pursuant to which, among other things, Stage requested Bank to, and Bank agreed to, extend credit to qualifying individuals in the form of private label open-ended credit card accounts for the purchase of Goods and/or Services from Stage through designated Sales Channels and to issue Credit Cards to qualifying individuals under the Stage Nameplates.

WHEREAS, SRI, the wholly owned operating subsidiary of SSI and currently the employer of all Stage employees, signed the Agreement solely for purposes of Section 13.1(a) of the Agreement, thereby agreeing that the Amended and Restated Private Label Credit Card Program Agreement dated March 5, 2004 by and among SSI, SRI and Bank was terminated in its entirety upon the full execution of the Agreement and thereby terminating SRI’s status as a separate party to the Agreement effective August 1, 2012.

WHEREAS, SSI and Bank entered into Amendment No. One to the Agreement effective as of February 1, 2013

WHEREAS, SSI and Bank now desire to amend the Agreement as set forth herein.

NOW, THEREFORE, in consideration of the terms and conditions hereof, and for other good and valuable consideration, the receipt of which is hereby mutually acknowledged by the parties, SSI and Bank agree as follows:


1.	Definitions; References . Capitalized terms not otherwise defined in this Amendment No. 2 are used herein as defined in the Agreement.


2.	Section 3.6(b) Credit Decisions - Test Credit Program . Pursuant to Section 3.6(b) of the Agreement, Bank hereby agrees to make available under the Plan the Test Credit Program described in Schedule 3.6(b)-1 attached hereto, subject to the terms and conditions contained therein.


3.	Consideration; Fees . SSI and Bank agree that SSI shall pay [****] per Account opened under the Test Credit Program (the "Test Program Fee").


4.	Counterparts; Effectiveness . This Amendment No. 2 may be executed in any number of counterparts, each of which when so executed shall be deemed to be an original, but all of such counterparts shall together constitute one and the same instrument.

General . This Amendment No. 2 shall not be changed, modified or amended except in writing and signed by both of the parties hereto. Except as specifically amended in this Amendment No. 2, the provisions of the Agreement, as amended, remain unaffected and in full force and effect. The provisions of this Amendment No. 2 shall prevail in the event of any conflict between the provisions hereof and the provisions of the Agreement.

IN WITNESS WHEREOF, SSI and Bank have executed this Amendment No. 2 in manner and form sufficient to bind them as of the Amendment No. 2 Effective Date.



STAGE STORES, INC.		COMENITY BANK (formerly known as WORLD FINANCIAL NETWORK BANK)

By:	/s/ Oded Shein n	By:	/s/ John J. Coane n

	Oded Shein n		John J. Coane n
Printed Name		Printed Name

	EVP - CFO n		President n
Title		Title

Schedule 3.6(b)-1

Test Credit Program

(Employee Plan)

(a) The Employee Plan . Bank shall establish a test Account program pursuant to and subject to the terms and conditions of this Schedule 3.6(b)-1 (the “Employee Plan”). Accounts issued under the Employee Plan shall be referred to as “Employee Plan Accounts” and, for purposes of this Schedule 3.6(b)-1, shall continue to be Employee Plan Accounts irrespective of any termination, retirement or other change of status of such Employee.

(b) Establishment of Employee Plan Accounts . Subject to the terms and conditions of this Schedule 3.6(b)-1, the Employee Plan shall be available to each Employee of Stage who (i) submits a completed application to Bank on a form specially designated by Bank as an Employee application and by a delivery method (as agreed upon by the parties) that signifies to Bank that the applicant is an Employee of Stage (each, an “Employee Plan Account Application”); and (ii) meets the Employee Plan Account Application Criteria (defined below). For purposes of this Schedule 3.6(b)-1, the term “Employee” shall mean (i) any full-time or part-time employee of Stage after the Amendment No. 2 Effective Date; and (ii) any person who was a full-time or part-time employee of Stage prior to the Amendment No. 2 Effective Date and who retired from Stage, but applies for a Card prior to March 31, 2014.

(c) Applications for Employee Plan Accounts . Notwithstanding Section 3.5 of the Agreement, Employee-Applicants must submit Employee Plan Account Applications in order to qualify for the Employee Plan. For clarity, Employee Plan Account Applications shall be treated in a manner that is consistent with the treatment of mail-in applications for purposes of calculating the measurement periods, penetration rates and targets set forth on Schedule 1.3(e) and Schedule 3.5(e) of the Agreement. For further clarity, Employee Plan Account Applications that meet the criteria for a Valid Application as defined in Schedule 3.5(e) shall be considered Valid Applications for purposes of Schedule 3.6. If the Employee-Applicant satisfies the Employee Plan Account Application Criteria set forth in Section (d), below, then Bank shall issue an Employee Plan Account to such Employee-Applicant.

(d) Employee Plan Account Application Criteria . The “Employee Plan Account Application Criteria” shall be comprised of the following:

(i) The Employee-Applicant delivers to Bank an Employee Plan Account Application that includes all of the information requested by Bank in such application; and

(ii) Bank verifies the identity of the Employee-Applicant in accordance with its then-current policies and procedures and requirements of Applicable Law (e.g., US PATRIOT ACT); and

(iii) The Employee Plan Account Application passes the Bank’s then-current security screening procedures, including those required by Applicable Law and for detecting fraudulent applications; and

(iv) Bank’s underwriting of the Employee Plan Account satisfies requirements of Applicable Law including requirements of the CARD ACT and its implementing regulations (e.g., satisfaction of requirements regarding applicants for a credit card who have not attained the age of 21, consideration of the applicant’s ability to repay., etc.); and

(v) The Employee-Applicant accepts the terms and conditions of the Credit Card Agreement applicable to her/his Employee Plan Account.

(e) Plan Committee . The parties acknowledge and agree that the Plan Committee provisions set forth in Schedule 3.1 of the Agreement shall apply to the Employee Plan, subject to the specific provisions set forth in this Schedule 3.6(b)-1, including Section (g) below, which shall control. Without limiting the generality of the foregoing, Operating Procedures, including the Employee Plan Account Application Criteria shall be a Bank Matter.

(f) Treatment of Employee Plan Accounts . Except as otherwise provided in this Schedule 3.6(b)-1, each reference to “Account(s)” in the Agreement shall include “Employee Plan Account(s)” and the parties respective rights and obligations hereunder relative to the Plan shall also apply to the Employee Plan.

(g) Term and Termination of the Employee Plan

(i) Bank agrees to test the Employee Plan for [****] consecutive months from the Amendment No. 2 Effective Date (the “Employee Plan Initial Term”) and to evaluate the Employee Plan to help determine if Bank desires to continue the Employee Plan after the Employee Plan Initial Term.

(ii) Notwithstanding the foregoing, Bank may notify SSI in writing at any time: (i) after the end of the [****] month of the Employee Plan Initial Term and before thirty (30) days after the end of the Employee Plan Initial Term of its desire to alter or discontinue the Employee Plan for any reason. The parties will discuss the disposition of the Employee Plan at the next regularly scheduled Plan Committee meeting, or if the next Plan Committee meeting will not occur for more than thirty (30) days, then the parties agree to hold a special Plan Committee meeting within thirty (30) days of SSI’s receipt of Bank’s notice. The following shall apply in the event of a notice by Bank pursuant to this Section (g)(ii):

(x)

Bank shall provide to the Plan Committee in writing Bank's basis for altering or desire to terminate the Employee Plan to address any concern the Bank may have with respect to the Employee Plan. The Plan Committee shall endeavor to deliberate on the Bank's proposal, if applicable, and endeavor to mutually agree upon the alteration or disposition of the Employee Plan, including the timing of such disposition.


(y)	If the Plan Committee does not reach agreement on the alteration or disposition of the Employee Plan within thirty days after the Plan Committee meeting in which the matter was discussed, the parties shall follow the escalation process set forth in Section D of Schedule 3.1 to resolve the matter unless the Bank has requested termination of the Employee Plan.

(z)

If after the escalation process set forth in Section D of Schedule 3.1 has been exhausted and the parties have failed to agree to the terms of continuing the Employee Plan, or if the Bank has requested the termination of the Employee Plan, the parties shall cooperate in good faith to wind down the Employee Plan and the Bank shall cease accepting new Employee Plan account applications once the Employee Plan is terminated.

(iii) In the event the Employee Plan is not terminated pursuant to Section (g)(ii) then, within thirty (30) days (before or after) each twelve (12) month anniversary date of the last day of the Employee Plan Initial Term, the Bank may notify SSI in writing at any time of its desire to alter or discontinue the Employee Plan as a result of the profitability of the Employee Plan in accordance with the following procedure:


(x)	Bank shall provide to the Plan Committee in writing Bank’s basis for altering the Employee Plan to address profitability of the Employee Plan, and the Plan Committee shall deliberate on Bank’s proposal(s). The Plan Committee shall endeavor to mutually agree upon the alteration or disposition of the Employee Plan, including the timing of such disposition.


(y)	If the Plan Committee does not reach agreement on the alteration or disposition of the Employee Plan within thirty (30) days after the Plan Committee meeting in which the matter was discussed, then the parties shall follow the escalation process set forth in Section D of Schedule 3.1 to resolve the matter.


(z)	If after the escalation process set forth in Section D of Schedule 3.1 has been exhausted and the parties have failed to agree to the terms of continuing the Employee Plan, the parties shall cooperate in good faith to timely wind down the Employee Plan. At a minimum, Bank shall cease accepting new Employee Plan Account Applications once the Employee Plan is terminated.

(iv) Notwithstanding anything in this Schedule 3.6(b)-1 or Schedule 3.1 to the contrary: (A) Bank may discontinue the Employee Plan immediately by written notice on the basis of Bank’s belief that the continued offering of the Employee Plan violates Applicable Law (including any court or agency decisions and orders and staff interpretations and guidance from applicable regulatory agencies, all as determined by the reasonable opinion of Bank’s counsel) and (B) SSI may terminate the Employee Plan immediately by written notice to Bank on the basis of SSI’s belief that the continued offering of the Employee Plan violates Applicable Law (including any court or agency decisions and orders and staff interpretations and guidance from applicable regulatory agencies, all as determined by the reasonable opinion of SSI’s counsel).

(v) Following the discontinuation or termination of the Employee Plan, in accordance with the terms of this Schedule 3.6(b), Bank shall (A) cease to accept new Employee Plan Account applications pursuant to the terms of this Schedule 3.6(b); and (B) continue to support Accounts opened under the Employee Plan prior to the discontinuation or termination of the Employee Plan.

(vi) For clarity, Bank will continue to offer the Employee Plan after expiration of the Employee Plan Initial Term unless and until the Employee Plan is discontinued or terminated in accordance with the terms of this Schedule 3.6(b)-1.

EXHIBIT 10.2

EMPLOYMENT AGREEMENT

This Employment Agreement (the “Agreement”) is entered into by and between STAGE STORES, INC., a Nevada corporation (the “Company”), and Stephen Parsons, an individual (the “Executive”), effective as of April 28, 2014 (the “Effective Date”).

WITNESSETH:

WHEREAS, the Board of Directors of the Company (the “Board”) desires to provide for the continued employment of the executive from and after the effective date, and has determined that it is in the best interests of the Company to continue the employment of the Executive in the position of Executive Vice President, Chief Human Resources Officer (the “Position”), subject to the terms and conditions of this Agreement; and

WHEREAS, the Executive desires to continue his appointment to the Position, subject to the terms and conditions set forth in this Agreement.

NOW, THEREFORE, in consideration of the promises and mutual agreements herein contained and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereby agree as follows:

1. EMPLOYMENT . The Company hereby appoints the Executive to the Position, and the Executive hereby accepts such appointment and employment with the Company subject to the terms and conditions set forth in this Agreement. Subject to earlier termination in accordance with Section 4 below, this Agreement shall continue in effect for a period of thirty-six (36) months commencing from the Effective Date (the “Initial Term”). Upon the expiration of the Initial Term or any Renewal Period (as hereafter described), the term of Executive’s employment under this Agreement shall automatically be extended for an additional thirty-six (36) month period (a “Renewal Period”), subject to earlier termination in accordance with Section 4 below, unless either the Company or the Executive notifies the other party in writing at least thirty (30) days prior to the expiration of the Initial Term or the then current Renewal Period that the Employment Period (as defined in Section 2) shall not be extended upon such expiration.

1.1 Failure to Extend by Company . In the event the Company notifies the Executive that the Employment Period shall not be extended at the expiration of the Initial Term or the then current Renewal Period in accordance with Section 1, such failure to extend shall constitute termination of this Agreement by the Company without Good Cause (as defined in Section 4.2.2), and the Company and the Executive agree that the Executive shall be entitled to receive the payments described in Section 4.3.

1.2 Failure to Extend by Executive . In the event the Executive notifies the Company that the Employment Period shall not be extended at the expiration of the Initial term or the then current Renewal Period in accordance with Section 1, such failure to extend shall constitute termination of this Agreement by the Executive without Good Reason (as defined in section 4.4.3), and the Company and the Executive agree that Executive shall be entitled to receive only the payments described in Section 4.5.1.

2. POSITION AND DUTIES . During such time as the Executive is employed with the Company (the “Employment Period”), the Executive shall serve in the Position and shall have the normal duties, responsibilities and authority associated with or related to such Position, subject to the power and authority of the Board and executive officers of the Company to expand or limit such duties, responsibilities and authority and to override actions of the Executive. The Executive shall report to the Board and Executive Management of the Company. The Executive shall devote his best efforts and his full business time and attention (except for permitted vacation periods and reasonable periods of illness or other incapacity) exclusively to the business and affairs of the Company and its Subsidiaries (as hereafter defined) and any duty, task or responsibility assigned or given to the Executive by the Board, and the Executive shall perform these duties and responsibilities to the best of his abilities in a diligent, trustworthy, businesslike and efficient manner. As used in this Agreement, “Subsidiaries” shall mean any entity of which the securities having a majority of the voting power in electing directors or managers are, at the time of determination, owned by the Company either directly or through one or more Subsidiaries.

2.1 Outside Directorships . In the event the Executive is invited, solicited or otherwise asked to become a director, advisor or consultant for any entity or organization of any type or function whatsoever (other than the Company or its Subsidiaries, or any religious, charitable or civic organization), the Executive shall notify the Board in writing of such invitation, the entity or organization extending the invitation and the capacity to be served by the Executive for such entity or organization. The Board shall have the sole power and authority to authorize the Executive to accept such invitation based on such criteria and standards as the Board may determine, and the Executive shall not accept such invitation without the Board’s prior written consent, which consent shall not be unreasonably withheld.

2.2 Delegation by Board . Whenever this Agreement calls for action on the part of the Board, the Board may delegate responsibility for the action to a duly appointed committee of the Board including, but not limited to the Compensation Committee of the Board, and the Executive agrees to treat, comply with and be bound by any action taken by such committee as if the Board had taken such action directly.

3. COMPENSATION AND BENEFITS . During the Employment Period, Executive shall be paid or receive compensation and benefits as follows:

3.1 Base Salary . The base salary for the Executive shall be Four Hundred Twenty Five Thousand dollars per year, or such other rate as the Board may designate from time to time (the “Base Salary”). The Base Salary shall be payable in regular installments in accordance with the Company’s general payroll practices and shall be subject to withholdings for applicable taxes and other legally-required or previously-agreed payroll deductions. The Executive’s performance shall be evaluated annually in March of each year. Any future salary increases will be based on the Executive’s individual performance and will be approved by the Board in its sole discretion.

3.2 Incentive Compensation . For any fiscal year ending during the Employment Period, the Board may, but is not obligated to, award incentive compensation to the Executive based upon the Company’s operating results for and the Executive’s performance during such fiscal year and such other performance objectives, targets and criteria for the Executive that the Board may establish and adjust for that fiscal year (the “Incentive Compensation”). The amount of any Incentive Compensation shall be calculated as a percentage of the Base Salary (current Target Rate is 50% of Base Salary) in effect during that fiscal year, which percentage shall be determined and may be adjusted by the Board (the “Target Rate”) based on such results, performance and objectives. In addition to such results, performance and objectives, the Board may take into account any extraordinary, unusual or non-recurring items realized or incurred by the Company during that fiscal year deemed appropriate by the Board in determining any Incentive Compensation. The Company shall pay to the Executive any approved Incentive Compensation on or around April 1 following the end of the fiscal year for which the Incentive Compensation was based; provided, that the Executive was employed in the Position as of that fiscal year end, and any such Incentive Compensation shall be subject to withholdings for applicable taxes and other legally-required or previously-agreed payroll deductions.

3.3 Medical, Dental and Other Benefits . The Executive shall be eligible to enroll and participate in any and all benefit plans the Company provides to its senior level executives, as modified, amended or terminated from time to time in accordance with the applicable policies or plan documents and which may include, but not be limited to, medical and dental coverage, life and disability insurance, retirement plans and deferred compensation plans. The premiums, costs and expenses for any benefit plans under which the Executive is participating shall be borne by the Executive and the Company in accordance with the Company’s policies related to such plans. The Executive shall receive four (4) weeks of paid vacation each year, which if not taken may not be carried forward to any subsequent year. The Executive shall not receive any compensation for any unused vacation days and upon termination of employment for any reason, any unused vacation days shall be forfeited. Any and all benefits provided for hereunder shall not be included in the definition of the term “Base Salary” as that term is used in this Agreement. All such benefits shall immediately cease and terminate upon the later of (1) the termination date of the Employment Period, (2) the expiration date of coverage under the terms of the applicable plan document, or (3) the expiration date of coverage for such benefits by the Company as described in Section 4; provided, that upon such termination, the Executive shall have the right to elect to continue any or all of such health benefits, programs or coverage, at his sole cost and expense, in accordance with and subject to the terms and limitations set forth in the Consolidated Omnibus Reconciliation Act of 1985 (“COBRA”) and the regulations promulgated in connection therewith.

3.4 Automobile Allowance . The Company shall provide the Executive with an automobile allowance in the amount of $1,000.00 per month to be allocated at the Executive’s discretion, or such other monthly amount designated by the Board, and that allowance shall be payable in regular installments in accordance with the Company’s general payroll practices.

3.5 Financial Planning Allowance . The Company shall provide for the Executive an allowance for reimbursement of any expense incurred by the Executive in the preparation of taxes, estate planning or financial counseling in the amount of $5,000.00 per calendar year, or such other annual amount designated by the Board. Such reimbursement shall not be grossed up for taxes and shall be paid on or before December 31 ^st of the applicable calendar year and any unused amount shall not be carried over to subsequent years, but shall be forfeited.

3.6 Business Expense . The Company shall reimburse the Executive for all reasonable travel, entertainment and other business expenses incurred by the Executive in the course of performing the duties of the Position. Those expenses shall be reimbursed in accordance with the standard policies and procedures of the Company in effect from time to time related to such reimbursable expenses.

4. TERMINATION; EFFECTS OF TERMINATION . This Agreement may be terminated upon the occurrence of any of the following events; provided that the termination of this Agreement shall not affect either party's ongoing obligations under this Agreement. Upon such termination, the rights of the Executive to receive monies and benefits from the Company shall be determined in accordance with this Section 4, and the Executive agrees that such monies and benefits are fair and reasonable and are the sole monies and benefits which shall be due to him under this Agreement from the Company in the event of termination.

4.1 Termination Due to Death or Disability . This Agreement will automatically terminate in the event of the Executive’s death or Disability (as hereafter defined).

4.1.1 Monies and Payments to the Executive . Upon termination in the event of the Executive’s death or Disability, the Executive (or as applicable, his designated beneficiary or personal representative or estate) shall be entitled to receive: (i) earned and unpaid Base Salary, unreimbursed business expenses due under Section 3.6 and any other benefits due under Section 3.3 or otherwise through the date of such termination and (ii) any life insurance, disability insurance or retirement plan benefits due under the terms of the applicable policies or plans. No other monies or benefits shall be payable or owed to the Executive (or as applicable, his designated beneficiary or personal representative or estate) under this Agreement. The monies described in (i) above shall be paid to the Executive (or as applicable, his designated beneficiary or personal representative or estate) in a lump sum on the Company’s next regular payday after the date of such termination and shall be subject to withholdings for applicable taxes and any other legally required or previously agreed payroll deductions. The monies described in (ii) above shall be paid to the Executive (or as applicable, his designated beneficiary or personal representative or estate) in accordance with the terms of the applicable plans.

4.1.2 Disability Defined . For the purposes of this Agreement, the Executive shall be deemed to have terminated his employment by reason of “Disability”, if it is determined by the carrier of the companies Long Term Disability policy that the executive has become disabled and is eligible for long term disability payments from the plan.

4.2 By Company For Good Cause . Upon written notice to the Executive, the Company may immediately terminate this Agreement at any time during the Employment Period for “Good Cause” (as hereafter defined).

4.2.1 Monies and Payments to The Executive . Upon termination for Good Cause, the Executive shall be entitled to receive earned and unpaid Base Salary, unreimbursed business expenses due under Section 3.6 and any other benefits due under Section 3.3 or otherwise through the date of such termination, and no other monies or benefits shall be payable or owed to the Executive under this Agreement. The monies described above shall be paid to the Executive in a lump sum on the Company’s next regular payday after the date of such termination and shall be subject to withholdings for applicable taxes and any other legally required or previously agreed payroll deductions.

4.2.2 Good Cause Defined . If the Company terminates the Executive’s employment for any of the following reasons, the termination shall be for “Good Cause”: (i) the Executive’s criminal conviction of a felony by a federal or state court of competent jurisdiction including any plea of guilty or no contest; (ii) a material and significant act of dishonesty by the Executive relating to the Company; (iii) a failure to comply with the Company’s “Code of Ethics and Business Conduct” Policy; or (iv) the Executive’s failure to follow a direct, reasonable and lawful order from the Company’s Board within the reasonable scope of the Position, which failure, if remediable, is not remedied within thirty (30) days after written notice to the Executive.”

4.3 By Company Without Good Cause . Upon fifteen (15) days prior written notice to the Executive, the Company may terminate this Agreement at any time during the Employment Period without Good Cause.

4.3.1 Monies and Benefits to The Executive . Upon termination without Good Cause, the Executive shall be entitled to receive: (i) earned and unpaid Base Salary, unreimbursed business expenses due under Section 3.6 and any other benefits due under Section 3.3 or otherwise through the date of such termination, and subject to his execution of a release of claims as described in Section 4.7, (ii) one (1) times the aggregate of (x) the Base Salary plus (y) the Incentive Compensation at the Target Rate in effect as of the date of such termination, (iii) any Incentive Compensation for the fiscal year in which such termination occurs pro-rated through the date of such termination; provided, however, the Executive shall not receive any portion of the Incentive Compensation under this Section 4.3.1(iii) unless the Board determines that the Executive would have been entitled to receive any Incentive Compensation for the fiscal year in which such termination occurred in accordance with Section 3.2, (iv) continuation of the medical and dental benefits described in Section 3.3 under which the Executive is participating as of the date of such termination for a period of twelve (12) months from the date of such termination; provided that such continuation of benefits shall be pursuant to COBRA, with the Company paying such portions of the applicable premiums as it would have paid had the Executive continued to be a full-time active employee of Company for such period, and (v) payment of outplacement services from a professional third party selected by the Company for the Executive for a period of twelve (12) months from the date of such termination; provided, however, the aggregate amount of such payments shall not exceed $15,000.00. Notwithstanding anything in this Section 4, however, the Company shall not be required to commence or continue any payment of monies or benefits other than those described

in Section 4.3(i) above if the Executive attempts to rescind the release of claims he has executed or fails to comply with his ongoing obligations under this Agreement.

4.3.2 Payment of Monies and Benefits . The payments described in Section 4.3.1(i) shall be paid to the Executive in a lump sum on the Company’s next regular payday after the date of such termination and shall be subject to withholdings for applicable taxes and any other legally required or previously agreed payroll deductions. Any payment described in Section 4.3.1(ii) shall be paid to the Executive in twenty-six (26) equal installments on the Company’s regular bi-weekly paydays, commencing on the first regular payday that occurs eight (8) or more days after the Executive returns an executed copy of any release of claims provided by the Company, and continuing until fully paid, and shall be subject to withholdings for applicable taxes and any other legally required or previously agreed payroll deductions. For purposes of Section 409A, the right to a series of installment payments under this Agreement shall be treated as a right to a series of separate payments. Any payment described in Section 4.3.1(iii) shall be payable in a lump sum on or before April 1 following the end of the fiscal year in which such termination occurred and shall be subject to withholdings for applicable taxes and any other legally required or previously agreed payroll deductions. Any benefits described in Section 4.3.1(iv) shall be provided in accordance with the terms of the applicable plans and in compliance with COBRA regulations. The payment described in Section 4.3.1(v) shall be paid directly to the entity providing outplacement services to the Executive within ten (10) days of receipt of an invoice or statement from that entity.

4.4 By The Executive for Good Reason . Upon thirty (30) days prior written notice, the Executive may terminate this Agreement at any time during the Employment Period for “Good Reason” (as hereafter defined and subject to the notice and cure periods hereafter described).

4.4.1 Monies and Benefits to The Executive . Upon termination for Good Reason, the Executive shall be entitled to receive: (i) earned and unpaid Base Salary, unreimbursed business expenses due under Section 3.6 and any other benefits due under Section 3.3 or otherwise through the date of such termination or the date on which the Company terminates this Agreement during such thirty (30) day period; and, subject to his execution of a release of claims as described in Section 4.7, (ii) one (1) times the aggregate of (x) the Base Salary plus (y) the Incentive Compensation at the Target Rate in effect as of the date of such termination, (iii) any Incentive Compensation for the fiscal year in which such termination occurs pro-rated through the date of such termination; provided, however, the Executive shall not receive any portion of the Incentive Compensation under this Section 4.4.1(iii) unless the Board determines in good faith that the Executive would have been entitled to receive any Incentive Compensation for the fiscal year in which such termination occurred in accordance with Section 3.2, (iv) continuation of the medical and dental benefits described in Section 3.3 under which the Executive is participating as of the date of such termination for a period of twelve (12) months from the date of such termination; provided that such continuation of benefits shall be pursuant to COBRA, with the Company paying such portions of the applicable premiums as it would have paid had the Executive continued to be a full-time active employee of Company for such period, and (v) payment of outplacement services from a professional third party selected by the Company for Executive for a period of twelve (12) months from the date of such termination; provided, however, the aggregate amount

of such payments shall not exceed $15,000.00. Notwithstanding anything in this Section 4, however, the Company shall not be required to commence or continue any payment of monies or benefits other than those described in Section 4.3(i) above if the Executive attempts to rescind the release of claims he has executed or fails to comply with his ongoing obligations under this Agreement.

4.4.2 Payment of Monies and Benefits . The payments described in Section 4.4.1(i) shall be paid to the Executive on the Company’s next regular payday after the date of such termination and shall be subject to withholdings for applicable taxes and any other legally required or previously agreed payroll deductions. Any payment described in Section 4.4.1(ii) shall be paid to the Executive in twenty-six (26) equal installments on the Company’s regular paydays, commencing on the first regular payday that occurs eight (8) or more days after the Executive returns an executed copy of any release of claims provided by the Company, and continuing until fully paid, and shall be subject to withholdings for applicable taxes and any other legally required or previously agreed payroll deductions. For purposes of Section 409A, the right to a series of installment payments under this Agreement shall be treated as a right to a series of separate payments. Any payment described in Section 4.4.1(iii) shall be payable in a lump sum on or before April 1 following the end of the fiscal year in which such termination occurred and shall be subject to withholdings for applicable taxes and any other legally required or previously agreed payroll deductions. Any benefits described in Section 4.4.1(iv) shall be provided in accordance with the terms of the applicable plans and in compliance with COBRA regulations. The payment described in Section 4.4.1(v) shall be paid directly to the entity providing outplacement services to the Executive within ten (10) days of receipt of an invoice or statement from that entity.

4.4.3 Good Reason Defined . For purposes of this Agreement, “Good Reason” shall exist if, without the Executive’s express written consent, the Company: (i) materially reduces or decreases the Executive’s Base Salary or Incentive Compensation opportunity level from the level in effect on the Effective Date (or some subsequent higher level put into effect by the Board subsequent to the Effective Date), unless such reduction or decrease is in connection with an across-the-board reduction or decrease in the Base Salaries or Incentive Compensation opportunity levels of all the Company’s other senior level executives, (ii) willfully fails to include the Executive in any incentive compensation plans, bonus plans, or other plans and benefits provided by the Company to other executive level executives, (iii) materially reduces, decreases or diminishes the nature, status or duties and responsibilities of the Position from those in effect on the Effective Date, and such reduction, decrease or diminution is not reasonably related to or the result of an adverse change in the Executive’s performance of assigned duties and responsibilities, or (iv) requires the Executive to (A) regularly perform the duties and responsibilities of the Position at, or (B) relocate the Executive’s principal place of employment to, a location which is more than fifty (50) miles from the location of the Executive’s principal place of employment as of the Effective Date. Notwithstanding the above, Good Reason shall not include the death, Disability or voluntary retirement of the Executive or any other voluntary action taken by or agreed to by the Executive related to the Position or his employment with the Company or its Subsidiaries. Further, Good Reason shall not include any of the events or conditions described in items (i), (ii), (iii) or (iv) above unless the Executive provides notice to the Company of the existence of the event or condition within ninety (90) days of the initial existence of the event or condition and, upon receipt of such

notice, the Company has a period of at least thirty (30) days during which to cure the event or condition. If requested by the Company, the Executive shall continue to work exclusively for the Company during such thirty (30) day cure period; provided, however, the Company shall have the right, in its sole discretion, to terminate this Agreement at any time during such thirty (30) day cure period upon written notice to the Executive.

4.5 By The Executive Without Good Reason . Upon fifteen (15) days prior written notice to the Company, the Executive may terminate this Agreement at any time during the Employment Period without Good Reason. If requested by the Company, the Executive shall continue to work exclusively for the Company during such fifteen (15) day period; provided, however, the Company shall have the right, in its sole discretion, to terminate this Agreement at any time during such fifteen (15) day period upon written notice to the Executive.

4.5.1 Monies and Benefits to The Executive . The Executive shall be entitled to receive earned and unpaid Base Salary, unreimbursed business expenses due under Section 3.6 and any other benefits due under Section 3.3 or otherwise through the date of such termination or the date on which the Company terminates this Agreement during such fifteen (15) day period, and no other monies or benefits shall be payable or owed to the Executive under this Agreement. The monies described above shall be paid to the Executive in a lump sum on the Company’s next regular payday after the date of such termination and shall be subject to withholdings for applicable taxes and any other legally required or previously agreed payroll deductions.

4.6 By Company Due to Change in Control . In the event a Change in Control (as hereafter defined) occurs and during the period beginning six (6) months before the Change in Control and ending twenty-four (24) months after the Change in Control: (i) this Agreement is terminated by the Company or its successor without Good Cause, or (ii) this Agreement is terminated by the Executive with Good Reason, the Executive shall be entitled to receive, and the Company or its successor shall be obligated to pay, the monies and benefits described in this Section 4.6, and Sections 4.3 or 4.4 shall not be applicable to such Change in Control or termination.

4.6.1 Monies and Benefits to the Executive . Upon termination of the Executive’s employment in connection with a Change in Control, the Executive shall be entitled to receive: (i) earned and unpaid Base Salary, unreimbursed business expenses due under Section 3.6 and any other benefits due under Section 3.3 or otherwise accrued and unpaid, through the date of such termination of employment, and subject to his execution of a release of claims as described in Section 4.7, (ii) two (2) times the aggregate of (x) the Base Salary plus (y) the Incentive Compensation at the Target Rate in effect as of the date of such termination, (iii) any Incentive Compensation for the fiscal year in which such termination occurs pro-rated through the date of termination at the Target Rate; (iv) continuation of the medical, dental and other benefits described in Section 3.3 under which the Executive is participating as of the date of such Change in Control for a period of twenty-four (24) months from the date of termination provided that such continuation of benefits shall be pursuant to COBRA, with the Company paying such portions of the applicable premiums as it would have paid had the Executive continued to be a full-time active employee of the Company for such period with no changes to such benefits or plans, (v) payment of outplacement services for Executive for a period of twelve (12) months from the date of such Change in Control or termination; provided, however, the aggregate amount of such payments shall not exceed $15,000.00, and

(vi) continuation of the financial planning allowance described in Section 3.5 for a period of twenty-four (24) months from termination. Notwithstanding anything in this Section 4, however, the Company shall not be required to commence or continue any payment of monies or benefits other than as described in Section 4.3(i) above if the Executive attempts to rescind the release of claims he has executed or fails to comply with his ongoing obligations under this Agreement.

4.6.2 Payment of Monies and Benefits . The payments described in Section 4.6.1(i) shall be paid to the Executive in a lump sum on the Company’s or its successor’ next regular payday, if applicable, or within thirty (30) days of the date of termination, whichever is earlier, and shall be subject to withholding for applicable taxes and any other legally required or previously agreed payroll deductions. Any payment described in Sections 4.6.1(ii) and (iii) shall be paid to the Executive in a lump sum within thirty (30) days, but no sooner than eight (8) days after the Executive returns an executed copy of any release of claims provided by the Company (provided that such release be delivered to the Executive within seven (7) days or less following termination) and shall be subject to withholdings of applicable taxes and any other legally required or previously agreed payroll deductions. Any benefits described in Section 4.6.1(iv) shall be provided in accordance with the terms of the applicable plans and in compliance with COBRA regulations. The payments described in Section 4.6.1(v) shall be paid directly to the entity providing outplacement services to the Executive within ten (10) days of receipt of an invoice or statement from such entity. The reimbursement of the expenses related to Section 4.6.1(vi) shall be made to the Executive in accordance with the Company’s or its successor’s policies and procedures.

4.6.3 Change in Control Defined . For purposes of this Agreement, a “Change in Control” shall be deemed to have occurred:

(a) on such date within the 12-month period following the date that any one person, or more than one person acting as a group (as defined in §1.409A 3(i)(5)(v)(B) of the Treasury Regulations), acquires ownership of stock that represents twenty-five percent (25%) or more of the combined voting power of the Company’s then outstanding securities (the “Trigger Date”), that a majority of the individuals who, as of the Trigger Date, constitute the Board (the “Incumbent Board”) are replaced by new members whose appointment or election is not endorsed by a majority of the members of the Incumbent Board before the date of such appointment or election;

(b) as of the date that any one person, or more than one person acting as a group (as defined in §1.409A-3(i)(5)(v)(B) of the Treasury Regulations), acquires ownership of stock that, together with stock held by such person or group, constitutes more than 50% of either (1) the then outstanding shares of common stock of the Company or (2) the combined voting power of the then outstanding voting securities of the Company entitled to vote generally in the election of directors; provided, however, if any one person or more than one person acting as a group, is considered to own more than fifty percent (50%) of the total fair market value or total voting power of the stock of the Company, the acquisition of additional stock by the same person or persons shall not be considered to cause a Change in Control; or

(c) the date any one person, or more than one person acting as a group (as defined in §1.409A-3(i)(5)(v)(B) of the Treasury Regulations), acquires (or has acquired during the 12-month period ending on the date of the most recent acquisition by such person or persons) all, or substantially all, of the assets of the Company, except for any sale, lease exchange or transfer resulting from any action taken by any creditor of the Company in enforcing its rights or remedies against any assets of the Company in which such creditor holds a security interest. Provided further, a transfer of assets by the Company shall not be treated as a Change in Control if the assets are transferred to:


(i)	A shareholder of the Company (immediately before the asset transfer) in exchange for or with respect to its stock;


(ii)	An entity, 50% or more of the total value or voting power of which is owned, directly or indirectly, by the Company;

(iii) A person, or more than one person acting as a group, that owns, directly or indirectly, 50% or more of the total value or voting power of all the outstanding stock of the Company; or


(iv)	An entity, at least 50% of the total value or voting power of which is owned, directly or indirectly, by a person described in paragraph (iii) herein.

For purposes of subsection (c) and except as otherwise provided in paragraph (i), a person’s status is determined immediately after the transfer of the assets.

4.6.4 Application of Golden Parachute Limits . Anything in this Agreement to the contrary notwithstanding, in the event it shall be determined that any payment or distribution by the Company or its successor to or for the benefit of Executive, whether paid or payable or distributed or distributable pursuant to the terms of this Agreement or otherwise (a “Payment”), would be subject to the excise tax imposed by Section 4999 of the Code (such excise tax, together with any interest thereon, any penalties, additions to tax, or additional amounts with respect to such excise tax, and any interest in respect of such penalties, additions to tax or additional amounts, being collectively referred herein to as the “Excise Tax”), then if the aggregate of all Payments that would be subject to the Excise Tax, reduced by all Federal, state and local taxes applicable thereto, including the Excise Tax is less than the amount Executive would receive, after all such applicable taxes, if Executive received Payments equal to an amount which is $1.00 less than three times the Executive’s “base amount”, as defined in and determined under Section 280G of the Code, then, such Payments shall be reduced or eliminated to the extent necessary so that the aggregate Payments received by Executive will not be subject to the Excise Tax. If a reduction in the Payments is necessary, reduction shall occur in the following order: first, a reduction of cash payments not attributable to equity awards which vest in an accelerated basis; second, a reduction in any other cash amount payable to Executive; third, the reduction of any employee benefit valued as a “parachute payment” (as defined in Section 280G of the Code); and fourth, the cancellation of accelerated vesting of stock awards. If acceleration of vesting of stock award compensation is to be reduced, such acceleration of vesting shall be cancelled in the reverse order of the date of grant of Executive’s stock awards. All determinations made under this Section 4.6.4 and the assumptions to be utilized in arriving at such determinations shall be made by a registered public accounting firm designated by Executive and reasonably acceptable to the Company

(the “Accounting Firm”). All fees and expenses of the Accounting Firm shall be borne solely by the Company or its successor.

4.7 Execution of Release by the Executive . Except for payment of earned and unpaid Base Salary, unused and accrued vacation, unreimbursed business expenses due under Section 3.6 and any other benefits due under Section 3.3 or otherwise through the date of the Executive’s termination, the Company shall not be obligated to pay any portion of the monies and benefits described above, if any, unless the Executive shall have executed and delivered to the Company a release of any and all claims or causes of action against the Company and its subsidiaries and successors and their respective shareholders, partners, member, directors, managers, officers, employees, agents and attorneys, arising out of or related to any act or omission which occurred on or prior to the date on which the Executive’s employment was terminated, in form and substance satisfactory to the Company within 60 days of the Executive’s date of termination. Such release shall also include other provisions including non disparagement and confidentiality by the Executive , litigation assistance and a no rehire agreement.

4 . 8 Section 409A . This Agreement is intended to comply with Internal Revenue Code Section 409A and related U.S. Treasury regulations or pronouncements (“Section 409A”) and any ambiguous provision will be construed in a manner that is compliant with or exempt from the application of Section 409A. Any reference to an Executive’s termination of employment shall mean a cessation of the employment relationship between the Executive and the Company which constitutes a “separation from service” as determined in accordance with Section 409A of the Internal Revenue Code and related regulations. Notwithstanding any provision to the contrary in this Agreement, if the Executive is deemed on his date of termination to be a “specified employee” within the meaning of that term under Section 409A(a)(2)(B) of the Internal Revenue Code, then the payments and benefits under this Agreement that are subject to Section 409A and paid by reason of a termination of employment shall be made or provided (subject to the last sentence hereof) on the later of (A) the payment date set forth in this Agreement, or (B) the date that is the earliest of (i) the expiration of the six-month period measured from the date of the Executive’s termination of employment or (ii) the date of the Executive’s death, if applicable (the “Delay Period”). Payments subject to the Delay Period shall be paid to the Executive without interest for such delay in payment.

4.9 Conditions of Reimbursement . With respect to any reimbursement of expenses of, or any provision of in-kind benefits to, the Executive, as specified under this Agreement, such reimbursement of expenses or provision of in-kind benefits shall be subject to the following conditions: (1) the expenses eligible for reimbursement or the amount of in‑kind benefits provided in one taxable year shall not affect the expenses eligible for reimbursement or the amount of in-kind benefits provided in any other taxable year, except for any medical reimbursement arrangement providing for the reimbursement of expenses referred to in Section 105(b) of the Internal Revenue Code; (2) the reimbursement of an eligible expense shall be made no later than the end of the year after the year in which such expense was incurred; and (3) the right to reimbursement or in‑kind benefits shall not be subject to liquidation or exchange for another benefit.

5. POST-EMPLOYMENT DUTIES . For a period of two (2) years following the termination of this Agreement, the Executive shall: (i) fully and truthfully cooperate and assist the Company and its subsidiaries or successors, to the fullest extent possible, in any and all issues, matters, legal proceedings or litigation related to or associated with the business, management or operation of or any other matter involving the Company or its subsidiaries or successors in any way or of any nature whatsoever arising from, related to or connected with any period in which the Executive was employed by or otherwise provided services to the Company or its subsidiaries or successors or in which the Executive has or may have past knowledge, information or experience or applicable expertise, and (ii) fully cooperate, assist, participate and work with the Company or its subsidiaries or successors on any and all issues or matters for which the Company or its subsidiaries or successors may seek the Executive’s cooperation, assistance, participation, involvement or consultation. Such assistance shall be provided at such times and dates which shall not unreasonably interfere or conflict with the Executive’s then current employment. The Company or its successor shall reimburse the Executive for any and all costs and expenses reasonably incurred by the Executive in providing such assistance in accordance with the standard policies and procedures of the Company or its successor in effect from time to time related to such reimbursable expenses.

6. CONFIDENTIAL INFORMATION . The Company agrees that during the course of and in connection with the Executive’s employment with the Company, the Company will provide and the Executive agrees to accept access to and knowledge of Confidential Information (as hereafter defined). Confidential Information may include but is not limited to business decisions, plans, procedures, strategies and policies, legal matters affecting the Company and its subsidiaries and their respective businesses, personnel, customer records information, trade secrets, bid prices, evaluations of bids, contractual terms and arrangements (prospective purchases and sales), pricing strategies, financial and business forecasts and plans and other information affecting the value or sales of products, goods, services or securities of the Company or its subsidiaries, and personal information regarding employees (collectively, the “Confidential Information”). The Executive acknowledges and agrees the Confidential Information is and shall remain the sole and exclusive property of the Company or such subsidiary. The Executive shall not disclose to any unauthorized person, or use for the Executive’s own purposes, any Confidential Information without the prior written consent of the Board, which consent may be withheld by the Board at its sole discretion, unless and to the extent that the aforementioned matters become generally known to and available for use by the public other than as a result of the Executive’s acts or omissions. The Executive agrees to maintain the confidentiality of the Confidential Information after the termination of the Executive’s employment; provided, further, that if at any time the Executive or any person or entity to which the Executive has disclosed any Confidential Information becomes legally compelled (by deposition, interrogatory, request for documents, subpoena, civil investigative demand or similar process) to disclose any of the Confidential Information, the Executive shall provide the Company with prompt, prior written notice of such requirement so the Company, in its sole discretion, may seek a protective order or other appropriate remedy and/or waive compliance with the terms hereof. In the event that such protective order or other remedy is not obtained or the Company waives compliance with the provisions hereof, the Executive shall ensure that only the portion of the Confidential Information which the Executive or such person is advised by written opinion of the Company’s counsel that the Executive is legally required to disclose is disclosed, and the Executive further covenants and agrees to exercise reasonable efforts to obtain assurance that the recipient of such Confidential Information shall not further disclose such Confidential Information to others, except as required by law, following such disclosure. In addition the Executive covenants and agrees to deliver to the Company upon termination of this Agreement, and at any other time as the Company may request, any and all property of the Company including, but not limited to, keys, computers, credit cards, company car, memoranda, notes, plans, records, reports, computer tapes, printouts and software, Confidential Information in any form whatsoever, and other documents and data (and copies thereof) and relating to the Company or any subsidiary which he may then

posses or have under his control or to which the Executive had access to or possession of in the course of such employment.

7. PROTECTION OF OTHER BUSINESS INTERESTS

7.1 Additional Protection of Confidential Information . For and in consideration of the benefits set forth in this Agreement, the Company and Executive agree to the non-competition provisions of this Section 7. Further, the Executive agrees that due to the Executive’s knowledge of the Confidential Information, the Executive would inevitably use and/or disclose that information, in breach of the Executive’s confidentiality and non-disclosure obligations under this Agreement, if the Executive worked in certain capacities or engaged in certain activities for a period of time following the termination of the Executive’s employment relationship with the Company, specifically in the position which involved either (i) responsibility and decision-making authority or input at the executive level regarding any subject, or (ii) responsibility or decision-making authority or input at any management level in the Executive’s individual area of assignment with the Company, or (iii) responsibility or decision-making authority or input that otherwise allows for the use of the Confidential Information for the benefit of any person (including the Executive) or entity that competes with the Company. Therefore, for two (2) years following the termination of Executive’s employment with the Company for any reason, the Executive agrees not to be employed by, consult for or otherwise act on behalf of any person or entity (without regard to geographic location) for a business that competes with the Company. For purposes of the foregoing, a business shall be deemed to compete with the Company if such business (a) operates apparel stores in small markets (populations of less than 25,000) and (b) operates a significant number of its apparel stores (75% or more of its total apparel stores) in 10,000 to 30,000 square foot formats. In addition, Executive and Company expressly agree that regardless of the requirements set forth in 7.1(a) and (b), the following entities compete with the Company and are subject to the provisions of this Section 7: J. C. Penney Company Inc., Belk Inc., Ascena Retail Group (including all divisions), Cato Corp., Bon Ton Stores Inc., Stein Mart Inc., Beall’s Inc. and Hibbett Sports Inc. The Executive acknowledges that this commitment is intended to protect the Confidential Information and is not intended to be applied or interpreted as a covenant against competition.

7.2 Reasonableness of Restriction . The Company has attempted to place the most reasonable limitations on the Executive’s subsequent business activities as are necessary to protect the Confidential Information and the Executive agrees that such restrictions are reasonable. In order to accommodate the Executive in obtaining subsequent employment, the Company may, in its discretion, grant a waiver of one or more of the restrictions or subsequent business activities described in Section 7.1. A request for a waiver shall be in writing and must be received by the Company at least thirty (30) days before the proposed commencement date of the Restricted Occupation for which the Executive is seeking a waiver. The request must include the full name and address of the organization with or for which the Executive proposes to perform the Restricted Occupation, the title to be held or capacity to be occupied by the Executive and a complete description of the responsibilities, decision-making authority and duties the Executive expects to perform in such Restricted Occupation. If the Company decides to grant a waiver in its sole discretion, the waiver may be subject to such restrictions and conditions as the Company may impose. Also, the granting of such waiver shall not be deemed to make the Confidential Information public and the Confidential Information shall remain confidential. Further, except as specifically provided in the waiver, the Executive’s obligations

of confidentiality and non-disclosure under this Agreement shall continue in full force and effect.

7.3 Protection of Other Business Relationships . The Executive understands that the Executive’s position with the Company is one of trust and confidence and that he has an obligation to protect the Company’s assets, including its investment in the training of its other employees, both during and following his employment relationship. Therefore, the Executive agrees that for two (2) years following his employment with the Company, the Executive will not, directly or indirectly on behalf of any person (including the Executive) or entity, solicit any of the employees of the Company or its subsidiaries or successor to cease employment with the Company or any subsidiary or successor.

7.4 Non-Solicitation . For two (2) years following termination of the Executive’s employment with the Company for any reason, the Executive agrees not to solicit or accept business of, or call upon, any customer or client of the Company for the purpose of conducting a competitive business or otherwise seeking profit from a competitive activity.

7.5 Future Employment .

7.5.1 If Executive in the future, seeks or is offered employment, or any other position or capacity with another company or entity, Executive agrees to inform each new employer or entity, before accepting employment, of the existence of the restrictions contained in Section 7. Further, before taking any employment position with any person during the non-competition period, Executive agrees to give prior written notice to Company of the name of such person or entity. Company shall be entitled to advise such person or entity of the provisions of Section 7 and to otherwise deal with such person or entity to ensure that the provisions of Section 7 are enforced and duly discharged.

7.5.2 If Executive in the future seeks or is offered employment with another company or entity, Executive may provide Company with written notice stating the name of the prospective employer, Executive’s prospective position, responsibilities and duties, and the industry or industries in which the prospective employer operates.

7.6 Tolling of Restrictive Periods . If the Executive violates any of the restrictions contained in Section 7, the restrictive periods shall be suspended and will not run in favor of the Executive until such time as the Executive cures the violation to the satisfaction of Company.

7.7 Materiality and Conditionality of Section . The provisions of Section 7 are material to this Agreement. Executive’s agreement to strictly comply with Section 7 is a precondition for Executive’s entering into this Agreement and for receipt of payments and vesting of Restricted Stock pursuant to Restricted Stock Award Agreement. Whether or not Section 7 or any portion thereof has been held or found invalid or unenforceable for any reason whatsoever by a court, and, transfer or other constituted legal authority of competent jurisdiction, upon any violation of Section 7 or any portion thereof, or upon a finding that a violation would have occurred if such Section 7 or any portion thereof were enforceable, the Executive and Company agree that: (i) the Executive’s interest in the Restricted Stock Award Agreement shall automatically lapse and be forfeited; (ii) Company shall have no obligation to make any further payments to Executive of any nature; (iii) Company shall be entitled to receive the full value of any payments which were previously made to the Executive in the previous twelve (12) months, as well as the value of any Restricted Stock that may have vested during the past twelve

(12) months from the date of the Executive’s termination, for any reason, to the date on which a court or arbitration panel held or found the non-compete article to have been violated; (iv) the Executive’s interest in any post-termination payment pursuant to Sections 4.3, 4.4, 4.5 and 4.6 of this Agreement shall automatically lapse and be forfeited; (v) Company shall have no obligation to make any further payments to Executive under the terms of Sections 4.3, 4.4, 4.5 and 4.6 of the Employment Agreement; and (vi) Company shall be entitled to receive the full value of any payments which were previously made to the Executive pursuant to Sections 4.3, 4.4, 4.5 and 4.6 of the Employment Agreement in the previous twelve (12) months.

8. ARBITRATION . Should any dispute arise relating to the meaning, interpretation, enforcement or application of this Agreement, the dispute shall be settled in Harris County, Texas, in accordance with the terms, conditions and requirements described or contained in the Company’s arbitration policy, if any, and Rules of the American Arbitration Association governing individual employee agreements, and all costs of such arbitration including, but not limited to reasonable attorney’s fees and costs, shall be borne by the losing party. The Company, however, shall be entitled to obtain injunctive relief from any court of competent jurisdiction to enforce any provisions of this Agreement.

In the event the Company does not have an arbitration program, the Executive and the Company acknowledge that their employment relationship and this Agreement relate to interstate commerce and agree that any disputes, claims or controversies between the Executive and the Company or any subsidiary which may arise out of the Executive’s employment relationship with Company and/or this Agreement shall be settled by arbitration. Any arbitration shall be in accordance with the Rules of the American Arbitration Association governing individual employee agreements and shall be undertaken pursuant to the Federal Arbitration Act. Arbitration will be held before a single arbitrator in Harris County, Texas unless the Executive and the Company or the involved subsidiary mutually agree on another location. The decision of the arbitrator will be enforceable in any court of competent jurisdiction. The arbitrator may award costs and attorneys’ fees in connection with the arbitration to the prevailing party; however, in the arbitrator’s discretion, each party may be ordered to bear that party’s own costs and attorneys’ fees. Punitive, liquidated or indirect damages shall not be awarded by the arbitrator unless such damages would be awarded by a court of competent jurisdiction applying the relevant law. The arbitrator shall have the authority to award injunctive or other equitable relief; however, nothing in this agreement to arbitrate, shall preclude the Company or involved subsidiary from obtaining injunctive relief or other equitable from a court of competent jurisdiction prohibiting any on-going breaches of this Agreement by the Executive while the arbitration is pending.

9. NOTICES . Any notice provided for in this Agreement shall be in writing and shall be either personally delivered, or mailed by first class mail, return receipt requested, to the recipient at the address indicated below:



	To the Executive:



	To Company:	Stage Stores, Inc.
		10201 Main Street
		Houston, Texas 77025
		Attention: Executive VP, Human Resources

	With a copy to:	McAfee & Taft
		Two Leadership Square
		211 North Robinson, 10 ^th floor
		Oklahoma City, Oklahoma 73102-7103
		Attn: N. Martin Stringer, Esq.

or such other address or to the attention of such other person as the recipient party shall have specified by prior written notice to the sending party. Any notice under this Agreement shall be deemed to have been given when so delivered or mailed.

10. GOVERNING LAW . Except as provided in Section 8, all issues and questions concerning the construction, validity, enforcement and interpretation of this Agreement shall be governed by, and construed in accordance with, the laws of the State of Texas, without giving effect to any choice of law or conflict of law rules or provisions (whether of the State of Texas or any other jurisdiction) that would cause the application of the laws of any jurisdiction other than the State of Texas. In furtherance of the foregoing and except as provided in Section 8, the internal law of the State of Texas shall control the interpretation and construction of this Agreement, even though under the jurisdiction’s choice of law or conflict of law analysis, the substantive law of some other jurisdiction would ordinarily apply.

11. SEVERABILITY . Each section, subsection and lesser section of this Agreement constitutes a separate and distinct undertaking, covenant or provision of this Agreement. In the event that any provision of this Agreement shall be determined to be invalid or unenforceable, that provision shall be deemed limited by construction in scope and effect to the minimum extent necessary to render it valid and enforceable, and, in the event that a limiting construction is impossible, the invalid or unenforceable provision shall be deemed severed from this Agreement, but every other provision of this Agreement shall remain in full force and effect.

12. AMENDMENTS; MODIFICATIONS . Neither this Agreement nor any term or provision in it may be changed, waived, discharged, rescinded or terminated orally, but only by an agreement in writing signed by the party against whom or which the enforcement of the change, waiver, discharge, rescission or termination is sought.

13. WAIVER . No failure on the part of either party to this Agreement to exercise, and no delay in exercising, any right, power or remedy created under this Agreement shall operate as a waiver thereof, nor shall any single or partial exercise of any right, power or remedy by any such party preclude any other or further exercise thereof or the exercise of any other right, power or remedy. No waiver by either party to this Agreement to any breach of, or default in, any term or condition of this Agreement shall constitute a waiver of or assent to any succeeding breach of or default in the same or any other term or condition of this Agreement. The terms and provisions of this Agreement, whether individually or in their entirety, may only be waived in writing and signed by the party against whom or which the enforcement of the waiver is sought.

14. SUCCESSORS AND ASSIGNS . This Agreement shall be binding upon and inure to the benefits of the successors, assigns, heirs, legatees, devisees, executors, administrators, receivers, trustees and representatives of the Executive and the Company and its Subsidiaries and their respective successors, assigns, administrators, receivers, trustees and representatives.

15. HEADINGS . The headings contained in this Agreement are for reference purposes only and shall not affect in any way the meaning or interpretation of this Agreement.

16. COUNTERPARTS . This Agreement may be executed in counterparts, each of which is deemed to be an original and both of which taken together constitute one and the same agreement.

17. FEES AND EXPENSES . All costs and expenses incurred by either party in the preparation and negotiation of this Agreement shall be borne solely by the party incurring such expense without right of reimbursement.

18. FURTHER ASSURANCES . The Executive and the Company covenant and agree that each will execute any additional instruments and take any actions as may be reasonably requested by the other party to confirm or perfect or otherwise to carry out the intent and purpose of this Agreement.

19. CONSTRUCTION . In the event an ambiguity or question of intent or interpretation arises, this Agreement shall be construed as if drafted jointly by the Executive and the Company, and no presumption or burden of proof shall arise favoring or disfavoring either by virtue of the authorship of any of the provisions of this Agreement.

20. SURVIVAL . The Executive and the Company agree that the terms and conditions of Sections 4 through 15 (inclusive), 19, 20 and 21 shall survive and continue in full force and effect, notwithstanding any expiration or termination of the Employment Period or this Agreement.

21. ENTIRE AGREEMENT . This Agreement contains and constitutes the entire agreement between the Executive and the Company and supersedes and cancels any prior agreements, representations, warranties, or communications, whether oral or written, between the Executive and the Company or its subsidiaries relating to the subject matter hereof in any way.

22. GENDER; NUMBER PLURALITY . Unless the context otherwise requires, whenever used in this Agreement the singular shall include the plural, the plural shall include the singular, and the masculine gender shall include the neuter or feminine gender and vice versa.

IN WITNESS WHEREOF, the parties hereto have executed and delivered this Agreement as of the date first above written.



“COMPANY”	STAGE STORES, INC., a Nevada Corporation /s/ Michael Glazer
	By: Michael Glazer
	Title: President & CEO



“EXECUTIVE”	/s/ Stephen Parsons
	Stephen Parsons, an individual

EXHIBIT 24.1

POWER OF ATTORNEY

KNOW ALL MEN BY THESE PRESENTS, that the undersigned Executive Officer of Stage Stores, Inc., a Nevada corporation (the “Company”), in connection with the preparation and filing of reports on Form 3, 4 and 5 (as well as applications for EDGAR filer identification numbers and any other reports required under Section 16(a) of the Securities Exchange Act of 1934) and Form 144, if required under the Securities Act of 1933, on my behalf including, but not limited to, those cases where time is short or I am unavailable to review the form, hereby constitute and appoint Michael L. Glazer, Oded Shein and Richard E. Stasyszen, and each of them (with full power to each of them to act alone), the undersigned’s true and lawful attorneys-in-fact and agents, for the undersigned and on the undersigned’s behalf and in the undersigned’s name, place and stead, in any and all capacities, to prepare, sign, and file with the Securities and Exchange Commission reports on Form 3, 4 and 5 (as well as applications for EDGAR filer identification numbers and any other reports required under Section 16(a) of the Securities Exchange Act of 1934) and Form 144, if required under the Securities Act of 1933, together with all amendments thereto, with all exhibits and any and all documents required to be filed with respect thereto with the Securities and Exchange Commission and any other regulatory authority granting unto such attorneys-in-fact, and each of them, full power and authority to do and perform each and every act and thing requisite and necessary to be done in order to effectuate the same as fully to all intents and purposes as the undersigned might or could do in person, hereby ratifying and confirming all that said attorneys-in-fact and agents, or any of them, might lawfully do or cause to be done by virtue hereof.

IN WITNESS WHEREOF, the undersigned has signed this Power of Attorney as of the 7 ^th day of April, 2014.

/s/ William E. Gentner n

William E. Gentner

Executive Vice President

Chief Marketing Officer

EXHIBIT 24.2

POWER OF ATTORNEY

IN WITNESS WHEREOF, the undersigned has signed this Power of Attorney as of the 30 ^th day of April, 2014.

/s/ Stephen B. Parsons n

Stephen B. Parsons

Executive Vice President

Chief Human Resources Officer

EXHIBIT 31.1

CERTIFICATION OF CHIEF EXECUTIVE OFFICER PURSUANT TO

RULES 13a-14(a) AND 15d-14(a) UNDER THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED

I, Michael L. Glazer, certify that:


1.	I have reviewed this Quarterly Report on Form 10-Q of Stage Stores, Inc.;


2.	Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;


3.	Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;


4.	The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a–15(f) and 15d–15(f)) for the registrant, and have:


(a)	Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;


(b)	Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;


(c)	Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and


(d)	Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting.


5.	The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors:


(a)	All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and


(b)	Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.



June 10, 2014	/s/ Michael L. Glazer
	Michael L. Glazer
	Chief Executive Officer

EXHIBIT 31.2

CERTIFICATION OF CHIEF FINANCIAL OFFICER PURSUANT TO

RULES 13a-14(a) AND 15d-14(a) UNDER THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED

I, Oded Shein, certify that:


1.	I have reviewed this Quarterly Report on Form 10-Q of Stage Stores, Inc.;


2.	Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;


3.	Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;


4.	The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a–15(f) and 15d–15(f)) for the registrant, and have:


(a)	Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;


(b)	Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;


(c)	Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and


(d)	Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting.


5.	The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors:


(a)	All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and


(b)	Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.



June 10, 2014	/s/ Oded Shein
	Oded Shein
	Chief Financial Officer

EXHIBIT 32

CERTIFICATION PURSUANT TO

18 U.S.C. SECTION 1350

In connection with the Quarterly Report of Stage Stores, Inc. (the "Company") on Form 10-Q for the quarter ended May 3, 2014 as filed with the Securities and Exchange Commission on the date hereof (the "Report"), we, Michael Glazer and Oded Shein, Chief Executive Officer and Chief Financial Officer, respectively, of the Company, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that to our knowledge:


1.	The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and


2.	The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.



June 10, 2014	/s/ Michael L. Glazer
	Michael L. Glazer
	Chief Executive Officer



	/s/ Oded Shein
	Oded Shein
	Chief Financial Officer