STAGE STORES INC (Form: 10-Q, Received: 12/08/2016 16:09:19)

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 October 29, 2016



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.)

2425 West Loop South, Houston, Texas (Address of principal executive offices)	77027 (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 December 1, 2016 , there were 27,165,301 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
		October 29, 2016 and January 30, 2016	3
		Condensed Consolidated Statements of Operations and Comprehensive Loss
		Three and Nine Months Ended October 29, 2016 and October 31, 2015	4
	Condensed Consolidated Statements of Cash Flows
		Nine Months Ended October 29, 2016 and October 31, 2015	5
	Condensed Consolidated Statement of Stockholders' Equity
		Nine Months Ended October 29, 2016	6
		Notes to Condensed Consolidated Financial Statements (Unaudited)	7
Item 2.	Management's Discussion and Analysis of Financial Condition and Results of Operations		15
Item 3.	Quantitative and Qualitative Disclosures about Market Risk		23
Item 4.	Controls and Procedures		23

PART II OTHER INFORMATION

Item 1.	Legal Proceedings		23
Item 1A.	Risk Factors		23
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds		24
Item 3.	Defaults Upon Senior Securities		25
Item 4.	Mine Safety Disclosures		25
Item 5.	Other Information		25
Item 6.	Exhibits		25

SIGNATURES			26

Table of Contents

PART I – FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

Stage Stores, Inc.

Condensed Consolidated Balance Sheets

(in thousands, except par value)

(Unaudited)



	October 29, 2016			January 30, 2016
ASSETS
Cash and cash equivalents	$	18,902		$	16,487
Merchandise inventories, net	569,343			435,996
Prepaid expenses and other current assets	60,283			48,279
Total current assets	648,528			500,762

Property, equipment and leasehold improvements, net of accumulated depreciation of $660,056 and $621,649, respectively	315,865			311,717
Intangible assets	15,235			15,235
Other non-current assets, net	22,711			20,385
Total assets	$	1,002,339		$	848,099

LIABILITIES AND STOCKHOLDERS' EQUITY
Accounts payable	$	210,995		$	84,019
Accrued expenses and other current liabilities	64,126			71,863
Total current liabilities	275,121			155,882

Long-term debt obligations	236,592			162,876
Other long-term liabilities	100,549			99,588
Total liabilities	612,262			418,346

Commitments and contingencies

Common stock, par value $0.01, 100,000 shares authorized, 32,331 and 32,030 shares issued, respectively	323			320
Additional paid-in capital	409,690			406,034
Treasury stock, at cost, 5,175 shares, respectively	(43,301		)	(43,068		)
Accumulated other comprehensive loss	(5,936		)	(6,353		)
Retained earnings	29,301			72,820
Total stockholders' equity	390,077			429,753
Total liabilities and stockholders' equity	$	1,002,339		$	848,099

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

Table of Contents

Stage Stores, Inc.

Condensed Consolidated Statements of Operations and Comprehensive Loss

(in thousands, except per share data)

(Unaudited)



	Three Months Ended						Nine Months Ended
	October 29, 2016			October 31, 2015			October 29, 2016			October 31, 2015

Net sales	$	317,140		$	351,575		$	988,275		$	1,101,804
Cost of sales and related buying, occupancy and distribution expenses	260,550			275,479			779,128			846,324
Gross profit	56,590			76,096			209,147			255,480
Selling, general and administrative expenses	84,564			92,096			260,076			281,783
Interest expense	1,395			743			3,616			1,995
Loss before income tax	(29,369		)	(16,743		)	(54,545		)	(28,298		)
Income tax benefit	(13,735		)	(6,560		)	(23,492		)	(11,093		)
Net loss	$	(15,634	)	$	(10,183	)	$	(31,053	)	$	(17,205	)

Other comprehensive income:
Amortization of employee benefit related costs, net of tax of $86, $74, $256 and $221, respectively	$	139		$	120		$	417		$	360
Total other comprehensive income	139			120			417			360
Comprehensive loss	$	(15,495	)	$	(10,063	)	$	(30,636	)	$	(16,845	)

Basic loss per share data:
Basic loss per share	$	(0.58	)	$	(0.32	)	$	(1.15	)	$	(0.54	)
Basic weighted average shares outstanding	27,155			32,017			27,066			31,917

Diluted loss per share data:
Diluted loss per share	$	(0.58	)	$	(0.32	)	$	(1.15	)	$	(0.54	)
Diluted weighted average shares outstanding	27,155			32,017			27,066			31,917

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

Table of Contents

Stage Stores, Inc.

Condensed Consolidated Statements of Cash Flows

(in thousands)

(Unaudited)



	Nine Months Ended
	October 29, 2016			October 31, 2015
Cash flows from operating activities:
Net loss	$	(31,053	)	$	(17,205	)
Adjustments to reconcile net loss to net cash provided by (used in) operating activities:
Depreciation, amortization and impairment of long-lived assets	54,285			58,326
Loss on retirements of property, equipment and leasehold improvements	273			712
Deferred income taxes	1,965			(557		)
Tax (deficiency) benefit from stock-based compensation	(3,295		)	540
Stock-based compensation expense	7,345			8,926
Amortization of debt issuance costs	164			164
Excess tax benefits from stock-based compensation	—			(945		)
Deferred compensation obligation	233			163
Amortization of employee benefit related costs	673			581
Construction allowances from landlords	6,994			2,127
Other changes in operating assets and liabilities:
Increase in merchandise inventories	(133,347		)	(175,806		)
Increase in other assets	(18,527		)	(3,335		)
Increase in accounts payable and other liabilities	119,544			95,476
Net cash provided by (used in) operating activities	5,254			(30,833		)

Cash flows from investing activities:
Additions to property, equipment and leasehold improvements	(67,934		)	(69,156		)
Proceeds from disposal of assets	1,177			37
Net cash used in investing activities	(66,757		)	(69,119		)

Cash flows from financing activities:
Proceeds from revolving credit facility borrowings	389,701			428,783
Payments of revolving credit facility borrowings	(314,783		)	(304,960		)
Proceeds from long-term debt obligation	5,830			—
Payments of long-term debt obligations	(3,507		)	(1,466		)
Payments for stock related compensation	(857		)	(3,708		)
Proceeds from issuance of stock awards	—			543
Excess tax benefits from stock-based compensation	—			945
Cash dividends paid	(12,466		)	(13,916		)
Net cash provided by financing activities	63,918			106,221
Net increase in cash and cash equivalents	2,415			6,269

Cash and cash equivalents:
Beginning of period	16,487			17,165
End of period	$	18,902		$	23,434

Supplemental disclosures including non-cash investing and financing activities:
Interest paid	$	3,425		$	1,816
Income taxes paid	$	2,931		$	15,053
Unpaid liabilities for capital expenditures	$	4,631		$	10,526

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

Table of Contents

Stage Stores, Inc.

Condensed Consolidated Statement of Stockholders’ Equity

For the Nine Months Ended October 29, 2016

(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 January 30, 2016	32,030	$	320	$	406,034		(5,175	)	$	(43,068	)	$	(6,353	)	$	72,820		$	429,753
Net loss	—	—		—			—		—			—			(31,053		)	(31,053		)
Other comprehensive income	—	—		—			—		—			417			—			417
Dividends on common stock, $0.45 per share	—	—		—			—		—			—			(12,466		)	(12,466		)
Deferred compensation	—	—		233			—		(233		)	—			—			—
Issuance of equity awards, net	301	3		(3		)	—		—			—			—			—
Tax withholdings paid for net settlement of stock awards	—	—		(624		)	—		—			—			—			(624		)
Stock-based compensation expense	—	—		7,345			—		—			—			—			7,345
Tax deficiency from stock-based compensation	—	—		(3,295		)	—		—			—			—			(3,295		)
Balance at October 29, 2016	32,331	$	323	$	409,690		(5,175	)	$	(43,301	)	$	(5,936	)	$	29,301		$	390,077

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

Table of Contents

Stage Stores, Inc.

Notes to Condensed Consolidated Financial Statements

(Unaudited)

1. Basis of Presentation

The accompanying condensed consolidated financial statements of Stage Stores, Inc. and its subsidiary (“we,” “us” or “our”) have been prepared in accordance with the requirements of the U.S. Securities and Exchange Commission (“SEC”) for interim financial information and do not include all of the information and footnotes required by accounting principles generally accepted in the United States of America (“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. Results of operations for such interim periods are not necessarily indicative of the results of operations for a full year due to seasonal and other factors. The condensed consolidated financial statements should be read in conjunction with the audited consolidated financial statements and notes thereto filed with our Annual Report on Form 10-K for the year ended January 30, 2016 (“Form 10-K”).

References to a particular year are to our fiscal year, which is the 52- or 53-week period ending on the Saturday closest to January 31st of the following calendar year. For example, a reference to “2016” is a reference to the fiscal year ending January 28, 2017, and “2015” is a reference to the fiscal year ended January 30, 2016. Each of 2016 and 2015 are comprised of 52 weeks.

Customer Loyalty Program . Prior to the third quarter of 2016, customers who spent a required amount within a specified time frame using our private label credit card received reward certificates which could be redeemed for merchandise. We estimated the net cost of the rewards and recorded a liability associated with unredeemed certificates and customer spend toward unissued certificates. The cost of the loyalty rewards program was recorded in cost of sales. In the third quarter of 2016, we expanded our loyalty program to enable all customers to earn benefits regardless of how they choose to pay. We record deferred revenue for the retail value of certificates earned, net of estimated breakage, as customers make purchases towards earning reward certificates.

Recent Accounting Standards . In May 2014, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2014-09, Revenue from Contracts with Customers , which supersedes most existing revenue recognition guidance in GAAP. The core principle of the guidance is that a company should recognize revenue when it transfers promised goods or services to customers in an amount that reflects what a company expects to be entitled to in exchange for those goods or services. ASU 2014-09 allows for either a retrospective or cumulative effect transition method of adoption. In August 2015, the FASB issued ASU 2015-14, which deferred the effective date of ASU 2014-09 by one year. The new revenue standard will be effective for us in the first quarter of fiscal year ending February 2, 2019. We do not expect the adoption of ASU 2014-09 to have a material impact on our consolidated financial statements.

In February 2016, the FASB issued ASU 2016-02, Leases , which requires lessees to recognize the assets and liabilities that arise from finance and operating leases on the balance sheet. In addition, this guidance requires disclosures about the amount, timing and uncertainty of cash flows arising from leases. The new standard will be effective for us in the first quarter of fiscal year ending February 1, 2020. We are currently evaluating the impact that the adoption of this ASU will have on our consolidated financial statements and we expect that our reported assets and liabilities will significantly increase under the new standard.

In March 2016, the FASB issued ASU 2016-09, Compensation - Stock Compensation (Topic 718): Improvements to Employee Share-Based Payment Accounting , which modifies several aspects of the accounting for share-based payment transactions, including the income tax consequences, classification of awards as either equity or liabilities, and classification on the statement of cash flows. Under the new standard, excess income tax benefits and tax deficiencies related to equity awards that vest or settle will be recognized as income tax expense, rather than within additional paid-in capital on the balance sheet. The recognition of excess tax benefits and losses may create significant volatility in earnings. We do not expect the adoption of the other requirements of this ASU to have a material impact on our consolidated financial statements. The new standard will be effective for us in the first quarter of fiscal year ending February 3, 2018.

In August 2016, the FASB issued ASU 2016-15, Statement of Cash Flows (Topic 230): Classification of Certain Cash Receipts and Cash Payments , which provides guidance on certain specific cash flow issues including proceeds received from the settlement of insurance claims. This guidance requires cash proceeds received from the settlement of insurance claims to be classified on the statement of cash flows on the basis of the related insurance coverage (that is, the nature of the loss). The new standard is effective for fiscal years and interim periods beginning after December 15, 2017, with early adoption permitted. We do not expect the adoption of this ASU to have a material impact on our consolidated statements of cash flows.

Table of Contents

2. Stock-Based Compensation

Stock-based compensation expense by type of grant for each period presented was as follows (in thousands):



	Three Months Ended						Nine Months Ended
	October 29, 2016			October 31, 2015			October 29, 2016			October 31, 2015
Stock appreciation rights (“SARs”)	$	—		$	—		$	—		$	30
Non-vested stock	1,362			1,719			5,311			5,133
Performance shares	(569		)	1,278			2,034			3,763
Total compensation expense	793			2,997			7,345			8,926
Related tax benefit	(298		)	(1,126		)	(2,762		)	(3,356		)
Stock-based compensation expense, net of tax	$	495		$	1,871		$	4,583		$	5,570

As of October 29, 2016 , we have unrecognized compensation cost of $18.6 million related to stock-based compensation awards granted. That cost is expected to be recognized over a weighted average period of 2.4 years .

SARs

Prior to 2012, we granted stock options and SARs to our employees, which generally vested over four years from the date of grant. There were no stock options outstanding as of January 30, 2016. Outstanding SARs will expire, if not exercised or forfeited, within seven years from the date of grant. Exercised SARs are settled by the issuance of common stock in an amount equal to the increase in our stock price between the grant date and the exercise date.

The following table summarizes SARs activity for the nine months ended October 29, 2016 :



SARs	Number of Shares		Weighted Average Exercise Price		Weighted Average Remaining Contractual Term (years)	Aggregate Intrinsic Value (in thousands)
Outstanding, vested and exercisable at January 30, 2016	224,400		$	17.16
Forfeited	(39,750	)	14.66
Outstanding, vested and exercisable at October 29, 2016	184,650		$	17.70	1.1	$	—

No SARs were exercised during the nine months ended October 29, 2016 . The aggregate intrinsic value of stock options and SARs exercised during the nine months ended October 31, 2015 was $0.9 million .

Table of Contents

Non-vested Stock

We grant shares of non-vested stock to our employees and non-employee 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 non-vested stock activity for the nine months ended October 29, 2016 :



Non-vested Stock	Number of Shares		Weighted Average Grant Date Fair Value
Outstanding at January 30, 2016	894,526		$	20.20
Granted	1,396,947		6.78
Vested	(371,656	)	19.45
Forfeited	(238,290	)	12.25
Outstanding at October 29, 2016	1,681,527		10.34

The weighted-average grant date fair value for non-vested stock granted during the nine months ended October 29, 2016 and October 31, 2015 was $6.78 and $20.65 , respectively. The aggregate intrinsic value of non-vested stock that vested during the nine months ended October 29, 2016 and October 31, 2015 , was $2.7 million and $5.4 million , respectively. 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 during nine months ended October 29, 2016 was 289,757 .

Performance Shares

We grant performance shares as a means of rewarding management for our long-term performance based on shareholder return performance measures. The actual number of shares that may be issued ranges from zero to a maximum of twice the number of granted shares outstanding, as reflected in the table below, and is based on our shareholder return performance relative to a specific group of companies over a 3 -year performance cycle. If earned, the performance shares vest following the 3 -year cycle. Compensation expense is recorded ratably over the vesting period and is based on the fair value at grant date as determined using a Monte Carlo probability model. Grant recipients do not have any shareholder rights until the granted shares have been issued.

The following table summarizes information about the performance shares that were outstanding at October 29, 2016 :



Period Granted	Target Shares Outstanding at January 30, 2016	Target Shares Granted	Target Shares Vested		Target Shares Forfeited		Target Shares Outstanding at October 29, 2016	Weighted Average Grant Date Fair Value Per Share
2014	160,423	—	(3,438	)	(36,667	)	120,318	$	33.84
2015	223,876	—	(6,983	)	(45,707	)	171,186	28.33
2016	—	451,680	(5,168	)	(90,439	)	356,073	8.69
Total	384,299	451,680	(15,589	)	(172,813	)	647,577

The weighted-average grant date fair value for performance shares granted during the nine months ended October 29, 2016 and October 31, 2015 was $8.69 and $28.33 , respectively. For the 2013 performance grant, none of the 112,750 target shares that were outstanding at January 30, 2016 were earned. The aggregate intrinsic value of performance shares that vested during the nine months ended October 29, 2016 and October 31, 2015 was $0.1 million and $4.9 million , respectively. The payment of the employees’ tax liability for 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 during nine months ended October 29, 2016 was 11,323 .

Table of Contents

3. Debt Obligations

Debt obligations for each period presented consisted of the following (in thousands):



	October 29, 2016		January 30, 2016
Revolving Credit Facility	$	231,758	$	156,840
Finance obligations	2,981		3,764
Other financing	8,225		5,119
Total debt obligations	242,964		165,723
Less: Current portion of debt obligations	6,372		2,847
Long-term debt obligations	$	236,592	$	162,876

On October 6, 2014 , we entered into a Second Amended and Restated Credit Agreement for a $300.0 million senior secured revolving credit facility (“Revolving Credit Facility”) with a seasonal increase to $350.0 million and a $50.0 million letter of credit subfacility. The Revolving Credit Facility matures on October 6, 2019 .

We use the Revolving Credit Facility to provide financing for working capital and general corporate purposes, as well as to finance capital expenditures and to support our letter of credit requirements. Borrowings 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, cash and cash equivalents are pledged as collateral. The daily interest rates are determined by a prime rate or LIBOR, plus an applicable margin, as set forth in the Revolving Credit Facility agreement. For the nine months ended October 29, 2016 , the weighted average interest rate on outstanding borrowings and the average daily borrowings were 1.83% and $188.0 million , respectively.

Letters of credit issued under the Revolving Credit Facility support certain merchandise purchases and collateralize retained risks and deductibles under various insurance programs. At October 29, 2016 , outstanding letters of credit totaled approximately $5.7 million . These letters of credit expire within twelve months of issuance. Excess borrowing availability under the Revolving Credit Facility at October 29, 2016 was $112.2 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 to $30 million in a fiscal year, and (iii) the repurchase of common stock under certain circumstances. The 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 October 29, 2016 , we were in compliance with all of the debt covenants of the Revolving Credit Facility agreement and we expect to remain in compliance.

During the nine months ended October 29, 2016 , we borrowed approximately $5.8 million under an equipment financing note bearing an effective interest rate of 3.2% . The equipment financing note is payable in monthly installments over a three -year term and is secured by certain equipment.

Table of Contents

4. Earnings per Share

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



	Three Months Ended						Nine Months Ended
	October 29, 2016			October 31, 2015			October 29, 2016			October 31, 2015
Basic EPS:
Net loss	$	(15,634	)	$	(10,183	)	$	(31,053	)	$	(17,205	)
Less: Allocation of earnings to participating securities	—			—			—			—
Net loss allocated to common shares	(15,634		)	(10,183		)	(31,053		)	(17,205		)

Basic weighted average shares outstanding	27,155			32,017			27,066			31,917
Basic EPS	$	(0.58	)	$	(0.32	)	$	(1.15	)	$	(0.54	)

	Three Months Ended						Nine Months Ended
	October 29, 2016			October 31, 2015			October 29, 2016			October 31, 2015
Diluted EPS:
Net loss	$	(15,634	)	$	(10,183	)	$	(31,053	)	$	(17,205	)
Less: Allocation of earnings to participating securities	—			—			—			—
Net loss allocated to common shares	(15,634		)	(10,183		)	(31,053		)	(17,205		)

Basic weighted average shares outstanding	27,155			32,017			27,066			31,917
Add: Dilutive effect of stock awards	—			—			—			—
Diluted weighted average shares outstanding	27,155			32,017			27,066			31,917
Diluted EPS	$	(0.58	)	$	(0.32	)	$	(1.15	)	$	(0.54	)

The number of shares 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 common share because the effect was anti-dilutive, were as follows (in thousands):



	Three Months Ended		Nine Months Ended
	October 29, 2016	October 31, 2015	October 29, 2016	October 31, 2015
Number of anti-dilutive shares due to net loss for the period	20	9	42	52
Number of anti-dilutive SARs due to exercise price greater than average market price of our common stock	187	224	198	158

5. Stockholders’ Equity

On November 17, 2016 , our Board of Directors (“Board”) declared a quarterly cash dividend of $0.15 per share of common stock, payable on December 14, 2016 to shareholders of record at the close of business on November 29, 2016 .

Table of Contents

6. Pension Plan

We sponsor a frozen defined benefit pension plan. The components of net periodic pension cost were as follows (in thousands):



	Three Months Ended						Nine Months Ended
	October 29, 2016			October 31, 2015			October 29, 2016			October 31, 2015
Employer service cost	$	85		$	88		$	255		$	262
Interest cost	400			391			1,198			1,174
Expected return on plan assets	(437		)	(549		)	(1,312		)	(1,646		)
Net loss amortization	225			194			673			581
Net periodic pension cost	$	273		$	124		$	814		$	371

Our funding policy is to make contributions to maintain the minimum funding requirements for our pension obligations in accordance with the Employee Retirement Income Security Act. We 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. We made no contributions during the nine months ended October 29, 2016 .

7. Fair Value Measurements

We recognize or disclose the fair value of our 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, we assume the highest and best use of the asset by market participants in which we would transact and the market-based risk measurements or assumptions that market participants would use in pricing the asset or liability.

We apply the following fair value hierarchy, which prioritizes the inputs used to measure fair value into three levels, and base 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 our estimates of assumptions that market participants would use in pricing the asset or liability.

Table of Contents

Financial assets and liabilities measured at fair value on a recurring basis were as follows (in thousands):



	October 29, 2016
	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 ^(a)(b)	$	18,623	$	18,623	$	—	$	—


	January 30, 2016
	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 ^(a)(b)	$	17,286	$	17,286	$	—	$	—

^(a) The liability for the amount due to participants corresponding in value to the securities held in the grantor trust is recorded in other long-term liabilities.

^(b) 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 nine months ended October 29, 2016 and for the fiscal year ended January 30, 2016 .

Table of Contents

Non-financial assets measured at fair value on a nonrecurring basis were as follows (in thousands):



	October 29, 2016
	Balance		Quoted Prices in Active Markets for Identical Instruments (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
Assets:
Store property, equipment and leasehold improvements ^(a)	$	473	$	—	$	—	$	473



	January 30, 2016
	Balance		Quoted Prices in Active Markets for Identical Instruments (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
Assets:
Store property, equipment and leasehold improvements ^(a)	$	3,895	$	—	$	—	$	3,895

^(a) In accordance with ASC No. 360-10, Accounting for the Impairment or Disposal of Long-Lived Assets , we review the carrying value of long-lived assets periodically and when events or circumstances indicate a potential impairment has occurred. Using an undiscounted cash flow model, we evaluate the cash flow trends of our stores to identify property, equipment and leasehold improvements that may not be fully recoverable. When a store’s projected undiscounted cash flows indicate impairment, we use a discounted cash flow model to estimate the fair value of the underlying long-lived assets. An impairment write-down is recorded if the carrying value of a long-lived asset exceeds its fair value. Key assumptions in estimating future cash flows include, among other things, expected future operating performance, including expected closure date and lease term, and changes in economic conditions. For the nine months ended October 29, 2016 and fiscal year 2015 , we recognized impairment charges of $0.5 million and $10.6 million , respectively. Impairment charges are recorded in cost of sales and related buying, occupancy and distribution expenses. We believe estimated future cash flows are sufficient to support the carrying value of our long-lived assets. If estimated cash flows significantly differ in the future, there could be additional asset impairments.

Due to the short-term nature of cash and cash equivalents, payables and short-term debt obligations, the carrying value approximates the fair value of these instruments. In addition, we believe that the Revolving Credit Facility obligation approximates its fair value because interest rates are adjusted daily based on current market rates.

Table of Contents


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

Cautionary Statement Concerning Forward-Looking Statements for Purposes of the Safe Harbor Provisions of the Private Securities Litigation Reform Act of 1995

The Private Securities Litigation Reform Act of 1995 (“Act”) provides a safe harbor for forward-looking statements to encourage companies to provide prospective information, so long as those statements are identified as forward-looking and are accompanied by meaningful cautionary statements identifying important factors that could cause actual results to differ materially from those discussed in the statements. We wish to take advantage of the “safe harbor” provisions of the Act.

Certain statements in this report are forward-looking statements within the meaning of the Act, and such statements are intended to qualify for the protection of the safe harbor provided by the Act. The words “anticipate,” “estimate,” “expect,” “objective,” “goal,” “project,” “intend,” “plan,” “believe,” “will,” “should,” “may,” “target,” “forecast,” “guidance,” “outlook,” and similar expressions generally identify forward-looking statements. Similarly, descriptions of our objectives, strategies, plans, goals or targets are also forward-looking statements. Forward-looking statements relate to the expectations of management as to future occurrences and trends, including statements expressing optimism or pessimism about future operating results or events and projected sales, earnings, capital expenditures and business strategy.

Forward-looking statements are based upon a number of assumptions and factors concerning future conditions that may ultimately prove to be inaccurate and could cause actual results to differ materially from those in the forward-looking statements. Forward-looking statements that are made herein and in other reports and releases are not guarantees of future performance and actual results may differ materially from those discussed in such forward-looking statements as a result of various factors. These factors include, but are not limited to, the ability for us to maintain normal trade terms with vendors, the ability for us to comply with the various covenant requirements contained in the 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 our markets, consumer confidence, energy and gasoline prices, the value of the Mexican peso, 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 our 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 our merchandising and marketing plans as well as our store opening or relocation plans. Additional assumptions, factors and risks concerning future conditions are discussed in the Risk Factors section of the Form 10-K, and may be discussed from time to time in our other filings with the SEC, including Quarterly Reports on Form 10-Q and Current Reports on Form 8-K. Most of these factors are difficult to predict accurately and are generally beyond our control.

Forward-looking statements are and will be based upon management’s then-current views and assumptions regarding future events and operating performance, and are applicable only as of the dates of such statements. Although management believes the expectations expressed in forward-looking statements are based on reasonable assumptions within the bounds of our knowledge, forward-looking statements, by their nature, involve risks, uncertainties and other factors, any one or a combination of which could materially affect our business, financial condition, results of operations or liquidity.

Readers should carefully review the Form 10-K in its entirety including, but not limited to, our financial statements and the notes thereto and the risks and uncertainties described in Item 1A - “Risk Factors” of the Form 10-K. This report should be read in conjunction with the Form 10-K, and you should consider all of these risks, uncertainties and other factors carefully in evaluating forward-looking statements.

Readers are cautioned not to place undue reliance on forward-looking statements, which speak only as of the date they are made. We undertake no obligation to publicly update forward-looking statements whether as a result of new information, future events or otherwise. Readers are advised, however, to consult any further disclosures we make on related subjects in our public announcements and SEC filings.

Table of Contents

For purposes of the following discussion, all references to the “ third quarter 2016 ” and the “ third quarter 2015 ” are for the 13-week fiscal periods ended October 29, 2016 and October 31, 2015 , respectively, and all references to “ year-to-date 2016 ” and “ year-to-date 2015 ” are for the 39-week fiscal periods ended October 29, 2016 and October 31, 2015 , respectively.

The financial information, discussion and analysis that follow should be read in conjunction with our consolidated financial statements and the related notes included in this Form 10-Q as well as the financial and other information included in the Form 10-K.

Our Business

We are a retailer operating specialty department stores primarily in small and mid-sized towns and communities. Our merchandise assortment is a well-edited selection of moderately priced brand name and private label apparel, accessories, cosmetics, footwear and home goods. As of October 29, 2016 , we operated 820 specialty department stores located in 38 states under the BEALLS, GOODY’S, PALAIS ROYAL, PEEBLES and STAGE nameplates and a direct-to-consumer business.

Results of Operations

Select financial results for the third quarter 2016 were as follows (comparisons are to the third quarter 2015 ):


•	Net sales decreased $34.4 million , or 9.8% .


•	Comparable sales decreased 8.2% .


•	Gross profit decreased $19.5 million , or 25.6% .


•	Selling, general and administrative (“SG&A”) expenses decreased $7.5 million , or 8.2% .


•	Diluted loss per common share was ( $0.58 ), compared with ( $0.32 ).


•	Adjusted diluted loss per common share (non-GAAP) was ( $0.57 ), compared with ( $0.29 ) (see reconciliation of non-GAAP financial measures on page 17).


•	We declared and paid cash dividends of $4.2 million, or $0.15 per common share.


•	Inventories were down approximately 8%.

2016 Strategy and Outlook

Sales for the year-to-date 2016 were lower compared to the year-to-date 2015, primarily attributable to a decline in traffic in our stores. Sales for the year-to-date 2016 have been particularly challenged in Texas, Louisiana, Oklahoma and New Mexico, which have been impacted by depressed oil prices and the weak Mexican peso. Compared with the first and second quarter 2016, comparable sales for the third quarter 2016 improved slightly. We have responded to the challenging sales environment by controlling our inventories, reducing expenses and lowering capital expenditures.

During the third quarter 2016, we took additional markdowns to move clearance merchandise and we had a clean, fresh inventory position going into the fourth quarter. We have increased our emphasis on gifts for the holiday season, building upon last year’s well received selection of men’s gifts and adding an extensive collection of items for women, including new bath and cosmetic offerings and hair styling products. We also have a strong assortment of seasonal apparel, including lightweight sweaters, fleece and outerwear. In our women’s categories, we have focused on popular trends, such as little black dresses, bomber jackets and fashion boots.

We scaled back our advertising and store expenses during the year-to-date 2016 to be better positioned to invest in these areas for the holiday season. We plan to increase the presence of sales associates in our stores to provide a higher level of customer service during the holiday season and we have several new promotions that align with the heavier shopping periods. We will also be reaching out to more customers through our marketing campaigns to highlight our merchandise offerings and our stores will feature improved signage to showcase our value and compelling price points.

We are offering greater value to our customers with our tender-neutral loyalty program, Style Circle Rewards®, which we launched in the third quarter 2016. This new loyalty club complements our existing private label credit card program and will allow us to better understand our customers’ shopping habits, offer even more personalized promotional offers, and provide attractive rewards. We believe that these loyalty programs provide enhanced benefits to our customers and are powerful tools to drive higher transaction value and frequency of visits.

Table of Contents

During the year-to-date 2016, we have made strategic investments in our stores and our e-commerce technology to create a more enjoyable shopping experience for our customers. We remodeled and refreshed an additional 85 stores, and have updated over 200 stores representing approximately 45% of our sales base since the initiative began in 2015. The investments in our stores include improved lighting, upgraded fixtures, comfortable fitting rooms and enhanced layouts. We have also improved the navigation of our website to make it simpler and faster to shop and we continue to enhance the functionality of our mobile app.

As part of our strategic initiative to exit stores that do not meet our sales productivity and profitability benchmarks, we closed 15 stores during the year-to-date 2016, and we expect to close approximately 35 stores in total for 2016.

Non-GAAP Financial Measures

The following supplemental information presents the results from operations for the three and nine months ended October 29, 2016 and October 31, 2015 on a GAAP basis and on a non-GAAP basis to show earnings excluding charges related to: (i) our corporate headquarters consolidation, which includes duplicate rent expense and moving related costs; (ii) severance associated with our workforce reduction initiative; and (iii) our strategic store closures, which includes fixture moving costs and lease termination charges. We believe this supplemental financial information enhances an investor’s understanding of our financial performance as it excludes those items which impact comparability of operating trends. The non-GAAP financial information should not be considered in isolation or viewed as a substitute for net loss, diluted loss per common share, cash flow from operations or other measures of performance as defined by GAAP. Moreover, the inclusion of non-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 GAAP disclosures to non-GAAP financial measures (in thousands, except diluted loss per common share):



	Three Months Ended						Nine Months Ended
	October 29, 2016			October 31, 2015			October 29, 2016			October 31, 2015
Net loss (GAAP)	$	(15,634	)	$	(10,183	)	$	(31,053	)	$	(17,205	)
Consolidation of corporate headquarters (pretax)	—			1,313			110			1,941
Severance charges associated with workforce reduction (pretax)	—			—			794			—
Strategic store closures and other initiatives (pretax)	443			183			1,394			8,834
Income tax impact	(271		)	(692		)	(989		)	(4,224		)
Adjusted net loss (non-GAAP)	$	(15,462	)	$	(9,379	)	$	(29,744	)	$	(10,654	)

Diluted loss per share (GAAP)	$	(0.58	)	$	(0.32	)	$	(1.15	)	$	(0.54	)
Consolidation of corporate headquarters (pretax)	—			0.04			—			0.06
Severance charges associated with workforce reduction (pretax)	—			—			0.03			—
Strategic store closures and other initiatives (pretax)	0.02			0.01			0.05			0.28
Income tax impact	(0.01		)	(0.02		)	(0.03		)	(0.13		)
Adjusted diluted loss per share (non-GAAP)	$	(0.57	)	$	(0.29	)	$	(1.10	)	$	(0.33	)

Table of Contents

Third Quarter 2016 Compared to Third Quarter 2015

The following table sets forth the results of operations for the periods presented (in thousands, except percentages):



	Three Months Ended
	October 29, 2016					October 31, 2015					Change
	Amount			% to Sales ^(a)		Amount			% to Sales ^(a)		Amount			%

Net sales	$	317,140		100.0	%	$	351,575		100.0	%	$	(34,435	)	(9.8	)%
Cost of sales and related buying, occupancy and distribution expenses	260,550			82.2	%	275,479			78.4	%	(14,929		)	(5.4	)%
Gross profit	56,590			17.8	%	76,096			21.6	%	(19,506		)	(25.6	)%
Selling, general and administrative expenses	84,564			26.7	%	92,096			26.2	%	(7,532		)	(8.2	)%
Interest expense	1,395			0.4	%	743			0.2	%	652			87.8	%
Loss before income tax	(29,369		)	(9.3	)%	(16,743		)	(4.8	)%	(12,626		)	75.4	%
Income tax benefit	(13,735		)	(4.3	)%	(6,560		)	(1.9	)%	(7,175		)	109.4	%
Net loss	$	(15,634	)	(4.9	)%	$	(10,183	)	(2.9	)%	$	(5,451	)	53.5	%

^(a) Percentages may not foot due to rounding.

Net Sales

Sales for the third quarter 2016 of $317.1 million decreased $34.4 million, or 9.8% , from $351.6 million for the third quarter 2015 . Comparable sales, which are sales in stores that are open for at least 14 full months prior to the reporting period, including direct-to-consumer sales, decreased 8.2% in the third quarter 2016 compared to a 3.5% decrease in the third quarter 2015 . Direct-to-consumer sales contributed 0.3% to the comparable sales rate in the third quarter 2016 and 0.4% in the third quarter 2015 . The 8.2% decrease in comparable sales reflects a decrease of 12.1% in the number of transactions, partially offset by an increase of 4.4% in average transaction value. The decrease in transactions is primarily attributable to a decline in traffic in our stores. The growth in average transaction value was comprised of a 3.4% decline in average unit retail and an increase of 8.1% in units per transaction. Sales were negatively impacted by unseasonably warm weather and lower consumer demand, especially in our stores in Texas, Louisiana, Oklahoma and New Mexico, which continued to be impacted by depressed oil prices, and in our markets near the Mexican border due to the weak Mexican peso. Comparable sales in these four states were down 9.4%, while comparable sales in the balance of our chain was down 6.8%.

Our best performing merchandise categories were home and cosmetics. Dresses and women’s denim were the best performing apparel categories. Sales of our fall seasonal merchandise, which includes sweaters, outerwear, fleece and boots were lower than expected as a result of warmer temperatures in our markets.

Gross Profit

Gross profit for the third quarter 2016 was $56.6 million , a decrease of $19.5 million or 25.6% , from $76.1 million for the third quarter 2015 . Gross profit, as a percent of sales, decreased to 17.8% for the third quarter 2016 from 21.6% for the third quarter 2015 . The 3.8 % decrease in the gross profit rate reflects a 1.8 % increase in merchandise cost of sales rate and a 2 % increase in the buying, occupancy and distribution expenses rate. The increase in merchandise cost of sales rate is the result of additional markdowns to drive sales and clear inventories in the third quarter 2016 compared to the third quarter 2015 . The increase in the buying, occupancy and distribution expense rate is the result of deleverage from lower sales in the third quarter 2016 compared to the third quarter 2015 .

Selling, General and Administrative Expenses

SG&A expenses for the third quarter 2016 decreased $7.5 million to $84.6 million from $92.1 million for the third quarter 2015 . The decrease in SG&A expenses for third quarter 2016 compared to the third quarter 2015 is primarily due to lower payroll, advertising and incentive compensation expense. As a percent of sales, SG&A expenses increased to 26.7% for the third quarter 2016 from 26.2% for the third quarter 2015 due to deleverage from lower sales.

Table of Contents

Interest Expense

Net interest expense was $1.4 million for the third quarter 2016 , compared to $0.7 million for the third quarter 2015 . Interest expense is primarily comprised of interest on borrowings under the Revolving Credit Facility, related letters of credit and commitment fees, amortization of debt issuance costs and interest on finance obligations. The increase in interest expense is primarily due to an increase in the average daily borrowings under the Revolving Credit Facility for the third quarter 2016 compared to the third quarter 2015 .

Income Taxes

Our effective income tax rate for the third quarter 2016 was 46.8% , resulting in an estimated tax benefit of $13.7 million . This compares to income tax benefit of $6.6 million and effective tax rate of 39.2% for the third quarter 2015 . We are currently estimating an annual net loss for fiscal year 2016 which causes permanent tax benefits that would normally reduce the effective tax rate to be reflected as an increased percentage of the net loss.

Year-to-Date 2016 Compared to Year-to-Date 2015

The following table sets forth the results of operations for the periods presented (in thousands, except percentages):



	Nine Months Ended
	October 29, 2016					October 31, 2015					Change
	Amount			% to Sales ^(a)		Amount			% to Sales ^(a)		Amount			%

Net sales	$	988,275		100.0	%	$	1,101,804		100.0	%	$	(113,529	)	(10.3	)%
Cost of sales and related buying, occupancy and distribution expenses	779,128			78.8	%	846,324			76.8	%	(67,196		)	(7.9	)%
Gross profit	209,147			21.2	%	255,480			23.2	%	(46,333		)	(18.1	)%
Selling, general and administrative expenses	260,076			26.3	%	281,783			25.6	%	(21,707		)	(7.7	)%
Interest expense	3,616			0.4	%	1,995			0.2	%	1,621			81.3	%
Loss before income tax	(54,545		)	(5.5	)%	(28,298		)	(2.6	)%	(26,247		)	92.8	%
Income tax benefit	(23,492		)	(2.4	)%	(11,093		)	(1.0	)%	(12,399		)	111.8	%
Net loss	$	(31,053	)	(3.1	)%	$	(17,205	)	(1.6	)%	$	(13,848	)	80.5	%

^(a) Percentages may not foot due to rounding.

Net Sales

Sales for the year-to-date 2016 of $988.3 million decreased $113.5 million , or 10.3% , from $1,101.8 million for the year-to-date 2015 . Comparable sales, which are sales in stores that are open for at least 14 full months prior to the reporting period, including direct-to-consumer sales, decreased 8.9% for the year-to-date 2016 compared to a 1.3% decrease for year-to-date 2015 . Direct-to-consumer sales contributed 0.2% to the comparable sales rate in the year-to-date 2016 and 0.4% in the year-to-date 2015 . The 8.9% decrease in comparable sales reflects a decrease of 13.5% in the number of transactions, partially offset by an increase of 5.3% in average transaction value. The decrease in transactions is primarily attributable to a decline in traffic in our stores. The growth in average transaction value was comprised of a 0.1% improvement in average unit retail and an increase of 5.2% in units per transaction. Sales were negatively impacted by lower consumer demand, especially in our stores in Texas, Louisiana, Oklahoma and New Mexico, which continued to be impacted by depressed oil prices, and in our markets near the Mexican border due to the weak Mexican peso. Comparable sales in these four states were down 11.3%, while comparable sales in the balance of our chain was down 6%.

Our best performing merchandise categories were home, cosmetics and men’s. Activewear and women’s denim were the best performing apparel categories.

Table of Contents

Gross Profit

Gross profit for the year-to-date 2016 was $209.1 million , a decrease of $46.3 million , or 18.1% , compared to $255.5 million for the year-to-date 2015 . Gross profit, as a percent of sales, decreased to 21.2% for the year-to-date 2016 from 23.2% for the year-to-date 2015 . The 2.0 % decrease in the gross profit rate reflects a 0.6 % increase in merchandise cost of sales rate and a 1.4 % increase in the buying, occupancy and distribution expenses rate. The increase in merchandise cost of sales rate is the result of additional markdowns to drive sales and clear inventories in the year-to-date 2016 compared to the year-to-date 2015 . The increase in the buying, occupancy and distribution expense rate is the result of deleverage from lower sales and higher depreciation related to strategic investments, partially offset by $8.2 million higher impairment charges recognized in the year-to-date 2015 compared with the year-to-date 2016 .

Selling, General and Administrative Expenses

SG&A expenses for the year-to-date 2016 decreased $21.7 million to $260.1 million , from $281.8 million for the year-to-date 2015 . The decrease in SG&A expenses is primarily due lower payroll, advertising, benefits and incentive compensation expense. As a percent of sales, SG&A expenses increased to 26.3% for the year-to-date 2016 from 25.6% for the year-to-date 2015 due to deleverage from lower sales.

Interest Expense

Net interest expense was $3.6 million for the year-to-date 2016 and $2.0 million for the year-to-date 2015 . 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 obligations. The increase in interest expense is primarily due to an increase in the average daily borrowings under the Revolving Credit Facility for the year-to-date 2016 as compared with the year-to-date 2015 .

Income Taxes

Our effective income tax rate for the year-to-date 2016 was 43.1% , resulting in an estimated tax benefit of $23.5 million . This compares to an income tax benefit of $11.1 million for the year-to-date 2015 at an effective rate 39.2% . We are currently estimating an annual net loss for fiscal year 2016 which causes permanent tax benefits that would normally reduce the effective tax rate to be reflected as an increased percentage of the net loss.

Table of Contents

Seasonality and Inflation

Our business is seasonal and historically sales are 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 approximately 30% of our annual sales, with each of the other quarters accounting for approximately 22% to 24%. Working capital requirements fluctuate during the year and generally reach their highest levels during the third and fourth quarters. We do not believe that inflation has had a material effect on our results of operations. However, there can be no assurance that our business will not be affected by inflation in the future.

Liquidity and Capital Resources

Our liquidity is currently provided by (i) existing cash balances, (ii) operating cash flows, (iii) normal trade credit terms from our vendors and their factors and (iv) our Revolving Credit Facility. Our primary cash requirements are for seasonal inventory purchases, capital investments in our stores, direct-to-consumer business and information technology and the payment of our quarterly cash dividends.

While there can be no assurances, we believe that our sources of liquidity will be sufficient to cover working capital needs, planned capital expenditures and debt service requirements for the remainder of 2016 and the foreseeable future.

Key components of our cash flow are summarized below (in thousands):



	Nine Months Ended
	October 29, 2016			October 31, 2015
Net cash provided by (used in):
Operating activities	$	5,254		$	(30,833	)
Investing activities	(66,757		)	(69,119		)
Financing activities	63,918			106,221

Operating Activities

During the year-to-date 2016 , we generated $5.3 million in cash from operating activities. Net loss, adjusted for non-cash expenses, provided cash of approximately $30.6 million . Changes in operating assets and liabilities used net cash of approximately $32.3 million , which included increases of $133.3 million in merchandise inventories, primarily due to seasonal receipts, and $18.5 million in other assets, partially offset by an increase of $119.5 million in accounts payable and other liabilities primarily related to inventory purchases. Additionally, cash flows from operating activities included construction allowances from landlords of $7.0 million , which funded a portion of the capital expenditures related to leasehold improvements in our new corporate office building and store leasehold improvements in relocated, expanded and remodeled stores.

During the year-to-date 2015 , we used $30.8 million in cash from operating activities. Net loss, adjusted for non-cash expenses, provided cash of approximately $50.7 million . Changes in operating assets and liabilities used net cash of approximately $83.7 million , which included increases of $175.8 million in merchandise inventories, primarily due to seasonal receipts and strategic investments in cosmetics, and $3.3 million in other assets, partially offset by an increase of $95.5 million in accounts payable and other liabilities primarily related to inventory purchases. Additionally, cash flows from operating activities included construction allowances from landlords of $2.1 million , which funded a portion of the capital expenditures related to store leasehold improvements in new, relocated, expanded and remodeled stores.

Table of Contents

Investing Activities

Capital expenditures were $67.9 million for the year-to-date 2016 compared to $69.2 million for the year-to-date 2015 . The decrease in capital expenditures in the year-to-date 2016 compared to the year-to-date 2015 is due to a decrease in store expansions and remodels. We received construction allowances from landlords of $7.0 million in the year-to-date 2016 and $2.1 million in the year-to-date 2015 to fund a portion of the capital expenditures related to store leasehold improvements and our new corporate office building. 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.

We estimate that capital expenditures in 2016, net of construction allowances from landlords, will be approximately $65 million as compared to $87 million for 2015. The expenditures are principally for store remodels, expansions and relocations, and investments in our technology and direct-to-consumer business.

Financing Activities

We use the Revolving Credit Facility to provide financing for working capital and general corporate purposes, as well as to finance capital expenditures and to support our letter of credit requirements. Borrowings 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, cash and cash equivalents are pledged as collateral. The daily interest rates are determined by a prime rate or LIBOR, plus an applicable margin, as set forth in the Revolving Credit Facility agreement. For the year-to-date 2016 , the weighted average interest rate on outstanding borrowings and the average daily borrowings were 1.83% and $188.0 million , respectively, compared to 1.50% and $80.2 million year-to-date 2015 . The increase in average daily borrowings for the year-to-date 2016 compared to the year-to-date 2015 is primarily due to stock repurchases made in the fourth quarter 2015 and capital expenditures.

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 to $30.0 million in a fiscal year, and (iii) the repurchase of common stock under certain circumstances. The 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 October 29, 2016 , we were in compliance with all of the debt covenants of the agreement and we expect to remain in compliance.

During the year-to-date 2016 , we borrowed approximately $5.8 million under an equipment financing note bearing an effective interest rate of 3.2% . The equipment financing note is payable in monthly installments over a three-year term and is secured by certain equipment.

We paid $12.5 million in cash dividends during the year-to-date 2016 . On November 17, 2016 , our Board declared a quarterly cash dividend of $0.15 per share of common stock, payable on December 14, 2016 to shareholders of record at the close of business on November 29, 2016 .

Table of Contents

Recent Accounting Standards

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

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

We are subject to market risk from exposure to changes in interest rates on borrowings under the Revolving Credit Facility. An increase or decrease of 10% in interest rates would not have a material effect on our financial condition, results of operations, or liquidity.

ITEM 4. CONTROLS AND PROCEDURES

Disclosure Controls and Procedures

Management, with the participation of our Chief Executive Officer and Chief Financial Officer, has evaluated the effectiveness of our disclosure controls and procedures, as that term is defined in Rules 13a-15(e) and 15d-15(e) of the Securities Exchange Act of 1934, as amended (“Exchange Act”), as of the end of the period covered by this report. Based on that evaluation, our Chief Executive Officer and Chief Financial Officer have each concluded that such disclosure controls and procedures were effective as of the end of the period covered by this report.

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.

Our management is responsible for establishing and maintaining adequate internal control over financial reporting. There were no changes in our internal control over financial reporting during the three months ended October 29, 2016 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

PART II – OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

No response is required under Item 103 of Regulation S-K.

ITEM 1A. RISK FACTORS

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

Table of Contents

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

On March 7, 2011, our Board approved a stock repurchase program (“2011 Stock Repurchase Program”) which authorized us to repurchase up to $200.0 million of our outstanding common stock. The 2011 Stock Repurchase Program will expire when we have repurchased $200.0 million of our outstanding common stock, unless terminated earlier by our Board. Through January 30, 2016, we repurchased approximately $141.6 million of our outstanding common shares under the 2011 Stock Repurchase Program. Also in March 2011, our Board authorized us to repurchase shares of our outstanding common stock equal to the amount of the proceeds and related tax benefits from the exercise of stock options, stock appreciation rights (“SARs”) and other equity grants. Purchases of shares of our common stock may be made from time to time, either on the open market or through privately negotiated transactions and are financed by our existing cash, cash flow and other liquidity sources, as appropriate.

The table below sets forth information regarding our repurchases of common stock during the three months ended October 29, 2016 :



ISSUER PURCHASES OF EQUITY SECURITIES
Period	Total Number of Shares Purchased ^(a)	Average Price Paid Per Share ^(a)		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 ^(b)

July 31, 2016 to August 27, 2016	3,818	$	6.00	—	$	58,351,202

August 28, 2016 to October 1, 2016	8,039	5.37		—	$	58,351,202

October 2, 2016 to October 29, 2016	1,195	5.14		—	$	58,351,202

Total	13,052	$	5.53	—

^(a) Although we did not repurchase any of our common stock during the three months ended October 29, 2016 under the 2011 Stock Repurchase Program:


•	We reacquired 2,462 shares of common stock from certain employees to cover tax withholding obligations from the vesting of restricted and performance stock at a weighted average acquisition price of $5.80 per common share; and

•

The trustee of the grantor trust established by us for the purpose of holding assets under our deferred compensation plan purchased an aggregate of 10,590 shares of our common stock in the open market at a weighted average price of $5.47 in connection with the option to invest in our stock under the deferred compensation plan and reinvestment of dividends paid on our common stock held in trust in the deferred compensation plan.

^(b) Reflects the $200.0 million authorized under the 2011 Stock Purchase Program, less the $141.6 million repurchased using our existing cash, cash flow and other liquidity sources since March 2011.

Table of Contents

ITEM 3. DEFAULTS UPON SENIOR SECURITIES

None.

ITEM 4. MINE SAFETY DISCLOSURES

None.

ITEM 5. OTHER INFORMATION

None.

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

3*	Amended and Restated Bylaws of Stage Stores, Inc. dated September 15, 2016.

10.1*	Employment Agreement between Thorsten I. Weber and Stage Stores, Inc. dated September 29, 2016.

10.2*	Form of Indemnity Agreement.

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 as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

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 as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

32*	Certification Pursuant to 18 U.S.C. Section 1350 as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

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.

Table of Contents

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.

Dated: December 8, 2016	/s/ Michael L. Glazer
	Michael L. Glazer
	President and Chief Executive Officer
	(Principal Executive Officer)


Dated: December 8, 2016	/s/ Oded Shein
	Oded Shein
	Executive Vice President, Chief Financial Officer and Treasurer
	(Principal Financial Officer)

AMENDED AND RESTATED BYLAWS

STAGE STORES, INC .

September 15, 2016

TABLE OF CONTENTS



		Page

ARTICLE 1.	OFFICES	1

1.1	Business Office	1
1.2	Registered Office	1

ARTICLE 2.	SHAREHOLDERS	1

2.1	Annual Shareholder Meeting	1
2.2	Special Shareholder Meeting	1
2.3	Place of Shareholder Meeting	1
2.4	Notice of Shareholder Meeting	1
2.5	Waiver of Notice	2
2.6	Fixing of Record Date	2
2.7	Shareholder List	2
2.8	Shareholder Quorum and Voting Requirements	3
	2.8.1 Quorum	3
	2.8.2 Voting of Shares	3
2.9	Quorum and Voting Requirements of Voting Groups	3
2.10	Greater Quorum or Voting Requirements	3
2.11	Proxies	4
2.12	Corporation’s Acceptance of Votes	4
2.13	Action by Shareholders Without a Meeting	5
	2.13.1 Written Consent	5
	2.13.2 Effective Date and Revocation of Consents	6
	2.13.3 Unanimous Consent for Election of Directors	6
2.14	Voting for Directors	6

ARTICLE 3.	BOARD OF DIRECTORS	6

3.1	General Powers	6
3.2	Number, Tenure and Qualification of Directors	6
3.3	Regular Meetings of the Board of Directors	7
3.4	Special Meetings of the Board of Directors	7
3.5	Notice of, and Waiver of Notice for, Special Director Meeting	7
3.6	Director Quorum and Voting	7
	3.6.1 Quorum	7
3.7	Director Action Without a Meeting	8
3.8	Resignation of Directors	8
3.9	Removal of Directors	8
3.10	Board of Directors Vacancies	8
3.11	Director Compensation	8



		Page

3.12	Director Committees	9
	3.12.1 Creation of Committees	9
	3.12.2 Selection of Members	9
	3.12.3 Required Procedures	9
	3.12.4 Authority	9
3.13	Acquisition of Controlling Interest	9

ARTICLE 4.	OFFICERS	10

4.1	Number of Officers	10
4.2	Appointment and Term of Office	10
4.3	Removal of Officers	10
4.4	Resignation of Officers	10
4.5	President	10
4.6	Vice Presidents	11
4.7	Secretary	11
4.8	Treasurer	11
4.9	Salaries	11

ARTICLE 5.	INDEMNIFICATION	12
5.1	Indemnification Respecting Third Party Claims	12
5.2	Indemnification Respecting Derivative Claims	12
5.3	Determination of Entitlement to Indemnification	13
5.4	Right to Indemnification upon Successful Defense & for Service as a Witness	13
5.5	Advance of Expenses	14
5.6	Notice of Action; Assumption of Defense	14
5.7	Indemnification Not Exclusive	15
5.8	Corporate Obligations; Reliance	15
5.9	Further Changes	15
5.10	Successors	16
5.11	Insurance	16
5.12	Indemnification of Employees and Agents	16
5.13	Definition of Certain Terms	17

ARTICLE 6.	STOCK	17

6.1	Issuance of Shares	17
6.2	Certificates for Shares	17
	6.2.1 Content	17
	6.2.2 Legend as to Class or Series	17
	6.2.3 Shareholder List	18
	6.2.4 Transferring Shares	18
	6.2.5 Lost Certificates	18
6.3	Shares Without Certificates	18
	6.3.1 Issuing Shares Without Certificates	18
	6.3.2 Information Statement Required	18



		Page

6.4	Registration of the Transfer of Shares	18
6.5	Restrictions on Transfer or Registration of Shares	18
6.6	Corporation’s Acquisition of Shares	19
6.7	Special Rights	20

ARTICLE 7.	DISTRIBUTIONS	20

7.1	Distributions to Shareholders	20
7.2	Unclaimed Distributions	20

ARTICLE 8.	MISCELLANEOUS	20

8.1	Inspection of Records by Shareholders and Directors	20
8.2	Corporate Seal	20
8.3	Amendments	20

iii

AMENDED AND RESTATED BYLAWS

STAGE STORES, INC.

September 15, 2016

ARTICLE 1. OFFICES

1.1 Business Office . The principal office of the corporation shall be located at any place either within or outside the State of Nevada as designated in the corporation’s most recent document on file with the Nevada Secretary of State. The corporation may have such other offices, either within or without the State of Nevada, as the board of directors may designate or as the business of the corporation may require from time to time.

1.2 Registered Office . The registered office of the corporation shall be located within the State of Nevada and may be, but need not be, identical with the principal office. The address of the registered office may be changed from time to time.

ARTICLE 2. SHAREHOLDERS

2.1 Annual Shareholder Meeting . An annual meeting of the shareholders for the election of directors and for the transaction of such other business as may come before the meeting shall be held at the time, date and place, within or outside the State of Nevada, designated by the board of directors and stated in the meeting notice. If the day fixed for the annual meeting is a legal holiday in the State of Nevada, the meeting shall be held on the next succeeding business day.

2.2 Special Shareholder Meeting . Special meetings of the shareholders, for any purpose or purposes described in the meeting notice, may be called by the president, or by the board of directors, and shall be called by the president at the request of the holders of not less than one‑fourth of all outstanding votes of the corporation entitled to be cast on any issue at the meeting.

2.3 Place of Shareholder Meeting . The board of directors may designate any place, either within or without the State of Nevada, as the place of meeting for any annual or any special meeting of the shareholders.

2.4 Notice of Shareholder Meeting . Written notice stating the date, time, and place of any annual or special shareholder meeting shall be delivered not less than ten (10) nor more than sixty (60) days before the date of the meeting, either personally or by mail, by or at the direction of the President, the board of directors, or other persons calling the meeting, to each shareholder of record entitled to vote at such meeting and to any other shareholder entitled by the Nevada Revised Statues (the “Statutes”) or the corporation’s Articles of Incorporation to receive notice of the meeting. Notice shall be deemed to be effective at the earlier of: (1) when deposited in the United States mail, addressed to the shareholder at his address as it appears on the stock transfer books of the corporation, with postage thereon prepaid; or (2) on the date shown on the return receipt if sent by registered or certified mail, return receipt requested, and the receipt is

signed by or on behalf of the addressee; or (3) when received; or (4) three (3) days after deposit in the United States mail, if mailed postpaid and correctly addressed to an address other than that shown in the corporation’s current record of shareholders.

If any shareholder meeting is adjourned to a different date, time or place, notice need not be given of the new date, time and place, if the new date, time and place is announced at the meeting before adjournment. But if the adjournment is for more than thirty (30) days or if a new record date for the adjourned meeting is or must be fixed, then notice must be given pursuant to the requirements of the previous paragraph, to those persons who are shareholders as of the new record date.

2.5 Waiver of Notice . A shareholder may waive any notice required by the Statutes, the Articles of Incorporation, or these Bylaws, by a writing signed by the shareholder entitled to the notice, which is delivered to the corporation (either before or after the date and time stated in the notice) for inclusion in the minutes or filing with the corporate records.

A shareholder’s attendance at a meeting:

(a) waives objection to lack of notice or defective notice of the meeting, unless the shareholder at the beginning of the meeting objects to holding the meeting or transacting business at the meeting because of lack of notice or effective notice; and

(b) waives objection to consideration of a particular matter at the meeting that is not within the purpose or purposes described in the meeting notice, unless the shareholder objects to considering the matter when it is presented.

2.6 Fixing of Record Date . For the purpose of determining shareholders of any voting group entitled to notice of, or to vote at, any meeting of shareholders, or shareholders entitled to receive payment of any distribution, or in order to make a determination of shareholders for any other purpose, the board of directors may fix in advance a date as the record date. The record date shall not be more than sixty (60) nor less than ten (10) days prior to the date on which the particular action requiring such determination of shareholders is to be taken. If no record date is so fixed by the board for the determination of shareholders entitled to notice of, or to vote at, a meeting of shareholders, the record date for determination of those shareholders shall be at the close of business on the day the first notice is delivered to shareholders. If no record date is fixed by the board for the determination of shareholders entitled to receive a distribution, the record date shall be the date the board authorizes the distribution. With respect to actions taken in writing without a meeting, the record date shall be the date the first shareholder signs the consent.

When a determination of shareholders entitled to vote at any meeting of shareholders has been made as provided in this Section, that determination shall apply to any adjournment of the meeting unless the board of directors fixes a new record date, which it must do if the meeting is adjourned to a date more than one hundred twenty (120) days after the date fixed for the original meeting.

2.7 Shareholder List . After fixing a record date for a shareholder meeting, the corporation shall prepare a list of the names of its shareholders entitled to be given notice of the meeting. The shareholder list must be available for inspection by any shareholder, beginning on

the earlier of ten (10) days before the meeting for which the list was prepared or two (2) business days after notice of the meeting is given for which the list was prepared and continuing through the meeting, and any adjournment of the meeting. The list shall be available at the corporation’s principal office or at a place identified in the meeting notice in the city where the meeting is to be held.

2.8 Shareholder Quorum and Voting Requirements .

2.8.1 Quorum . Except as otherwise required by the Statutes or the Articles of Incorporation, a majority of the outstanding shares of the corporation, represented by person or by proxy, shall constitute a quorum at each meeting of the shareholders. If a quorum exists, action on a matter, other than the election of directors, is approved if the votes cast favoring the action exceed the votes cast opposing the action, unless the Articles of Incorporation or the Statutes require a greater number of affirmative votes.

2.8.2 Voting of Shares . Unless otherwise provided in the Articles of Incorporation or these Bylaws, each outstanding share, regardless of class, is entitled to one vote upon each matter submitted to a vote at a meeting of shareholders.

2.9 Quorum and Voting Requirements of Voting Groups . If the Articles of Incorporation or the Statutes provide for voting by a single voting group on a matter, action on that matter is taken when voted upon by that voting group.

Once a share is represented for any purpose at a meeting, it is deemed present for quorum purposes for the remainder of the meeting and for any adjournment of the meeting unless a new record date is or must be set for that adjourned meeting.

Shares entitled to vote as a separate voting group may take action on a matter at a meeting only if a quorum of those shares exists with respect to that matter. Unless the Articles of Incorporation or the Statutes provide otherwise, a majority of the votes entitled to be cast on the matter by the voting group constitutes a quorum of that voting group for action on that matter.

If the Articles of Incorporation or the Statutes provide for voting by two or more voting groups on a matter, action on that matter is taken only when voted upon by each of those voting groups counted separately. Action may be taken by one voting group on a matter even though no action is taken by another voting group entitled to vote on the matter.

If a quorum exists, action on a matter, other than the election of directors, by a voting group is approved if the votes cast within the voting group favoring the action exceed the votes cast opposing the action, unless the Articles of Incorporation or the Statutes require a greater number of affirmative votes.

2.10 Greater Quorum or Voting Requirements . The Articles of Incorporation may provide for a greater quorum or voting requirement for shareholders, or voting groups of shareholders, than is provided for by these Bylaws. An amendment to the Articles of Incorporation that adds, changes, or deletes a greater quorum or voting requirement for shareholders must meet the same quorum requirement and be adopted by the same vote and voting groups required to take

action under the quorum and voting requirement then in effect or proposed to be adopted, whichever is greater.

2.11 Proxies . At all meetings of shareholders, a shareholder may vote in person or by proxy which is executed in writing by the shareholder or which is executed by his duly authorized attorney‑in‑fact. The proxy shall be filed with the Secretary of the corporation or other person authorized to tabulate votes before or at the time of the meeting. No proxy shall be valid after six (6) months from the date of its creation unless (i) it is coupled with an interest; or (ii) the shareholder specifies in the proxy the length of time for which the proxy will continue in force; provided that, the proxy may not exceed 7 years from the date of its creation. All proxies are revocable unless they meet specific requirements of irrevocability set forth in the Statutes. The death or incapacity of a voter does not invalidate a proxy unless the corporation is put on notice. A transferee for value who receives shares subject to an irrevocable proxy, can revoke the proxy if he had no notice of the proxy.

2.12 Corporation’s Acceptance of Votes .

2.12.1 If the name signed on a vote, consent, waiver, proxy appointment, or proxy appointment revocation corresponds to the name of a shareholder, the corporation, if acting in good faith, is entitled to accept the vote, consent, waiver, proxy appointment, or proxy appointment revocation and give it effect as the act of the shareholder.

2.12.2 If the name signed on a vote, consent, waiver, proxy appointment, or proxy appointment revocation does not correspond to the name of a shareholder, the corporation, if acting in good faith, is nevertheless entitled to accept the vote, consent, waiver, proxy appointment, or proxy appointment revocation and give it effect as the act of the shareholder if:

(a) the shareholder is an entity as defined in the Statutes and the name signed purports to be that of an officer or agent of the entity;

(b) the name signed purports to be that of an administrator, executor, guardian, or conservator representing the shareholder and, if the corporation requests, evidence of fiduciary status acceptable to the corporation has been presented with respect to the vote, consent, wavier, proxy appointment or proxy appointment revocation;

(c) the name signed purports to be that of a receiver or trustee in bankruptcy of the shareholder and, if the corporation requests, evidence of this status acceptable to the corporation has been presented with respect to the vote, consent, waiver, proxy appointment, or proxy appointment revocation; or

(d) the name signed purports to be that of a pledgee, beneficial owner, or attorney‑in‑fact of the shareholder and, if the corporation requests, evidence acceptable to the corporation of the signatory’s authority to sign for the shareholder has been presented with respect to the vote, consent, waiver, proxy appointment or proxy appointment revocation; or

(e) two or more persons are the shareholder as co‑tenants or fiduciaries and the name signed purports to be the name of at least one of the co‑owners and the person signing appears to be acting on behalf of all co‑tenants or fiduciaries.

2.12.3 If shares are registered in the names of two or more persons, whether fiduciaries, members of a partnership, co‑tenants, husband and wife as community property, voting trustees, persons entitled to vote under a shareholder voting agreement or otherwise, or if two or more persons (including proxy holders) have the same fiduciary relationship respecting the same shares, unless the secretary of the corporation or other officer or agent entitled to tabulate votes is given written notice to the contrary and is furnished with a copy of the instrument or order appointing them or creating the relationship wherein it is so provided, their acts with respect to voting shall have the following effect:

(a) if only one votes, such act binds all;

(b) if more than one votes, the act of the majority so voting bind all;

(c) if more than one votes, but the vote is evenly split on any particular matter, each fraction may vote the securities in question proportionately.

If the instrument so filed or the registration of the shares shows that any tenancy is held in unequal interests, a majority or even split for the purpose of this Section shall be a majority or even split in interest.

2.12.4 The corporation is entitled to reject a vote, consent, waiver, proxy appointment or proxy appointment revocation if the secretary or other officer or agent authorized to tabulate votes, acting in good faith, has reasonable basis for doubt about the validity of the signature on it or about the signatory’s authority to sign for the shareholder.

2.12.5 The corporation and its officer or agent who accepts or rejects a vote, consent, waiver, proxy appointment or proxy appointment revocation in good faith and in accordance with the standards of this Section are not liable in damages to the shareholder for the consequences of the acceptance or rejection.

2.12.6 Corporate action based on the acceptance or rejection of a vote, consent, waiver, proxy appointment or proxy appointment revocation under this Section is valid unless a court of competent jurisdiction determines otherwise.

2.13 Action by Shareholders Without a Meeting .

2.13.1 Written Consent . Any action required or permitted to be taken at a meeting of the shareholders may be taken without a meeting and without prior notice if one or more consents in writing, setting forth the action so taken, shall be signed by the holders of outstanding shares having not less than the minimum number of votes that would be necessary to authorize or take such action at a meeting at which all shareholders entitled to vote with respect to the subject matter thereof were present and voted. Action taken under

this Section has the same effect as action taken at a duly called and convened meeting of shareholders and may be described as such in any document.

2.13.2 Effective Date and Revocation of Consents . No action taken pursuant to this Section shall be effective unless all written consents necessary to support the action are received by the corporation within a sixty‑day period and not revoked. Such action is effective as of the date the last written consent is received necessary to effect the action, unless all of the written consents specify an earlier or later date of the action. Any shareholder giving a written consent pursuant to this Section may revoke the consent by a signed writing describing the action and stating that the consent is revoked, provided that the writing is received by the corporation prior to the effective date of the action.

2.13.3 Unanimous Consent for Election of Directors . Notwithstanding subsection (a), directors may not be elected by written consent unless such consent is unanimous by all shares entitled to vote for the election of directors.

2.14 Voting for Directors . Unless otherwise provided in the Articles of Incorporation, every shareholder entitled to vote for the election of directors has the right to cast, in person or by proxy, all of the votes to which the shareholder’s shares are entitled for as many persons as there are directors to be elected and for whose election such shareholder has the right to vote. At each meeting of the shareholders for the election of directors at which a quorum is present, a director nominee shall be elected to the board of directors if the votes properly cast for such nominee’s election exceed the votes properly cast against such nominee’s election; provided, however, that the nominees receiving a plurality of the votes properly cast shall be elected to the board of directors at any such meeting of the shareholders at which the number of nominees for election exceeds the number of directors to be elected.

ARTICLE 3. BOARD OF DIRECTORS

3.1 General Powers . Unless the Articles of Incorporation have dispensed with or limited the authority of the board of directors by describing who will perform some or all of the duties of a board of directors, all corporate powers shall be exercised by or under the authority, and the business and affairs of the corporation shall be managed under the direction, of the board of directors.

3.2 Number, Tenure and Qualification of Directors . The authorized number of directors shall be eleven (11); provided, however, that if the corporation has less than two (2) shareholders entitled to vote for the election of directors, the board of directors may consist of a number of individuals equal to or greater than the number of those shareholders and in any case the corporation shall have at least one (1) director. The current number of directors shall be within the limit specified above, as determined (or as amended from time to time) by a resolution adopted by either the shareholders or the directors. The term of office for each director shall be one year. A director shall hold office to the end of his elected term or until the director’s earlier death, resignation, or removal. However, if his term expires, he shall continue to serve until his successor shall have been elected and qualified, or until there is a decrease in the number of directors. Directors do not need to be residents of Nevada or shareholders of the corporation.

3.3 Regular Meetings of the Board of Directors . A regular meeting of the board of directors shall be held without other notice than this Bylaw immediately after, and at the same place as, the annual meeting of shareholders, for the purpose of appointing officers and transacting such other business as may come before the meeting. The board of directors may provide, by resolution, the time and place for the holding of additional regular meetings without other notice than such resolution.

3.4 Special Meetings of the Board of Directors . Special meetings of the board of directors may be called by or at the request of the president or any director. The person authorized to call special meetings of the board of directors may fix any place as the place for holding any special meeting of the board of directors.

3.5 Notice of, and Waiver of Notice for, Special Director Meeting . Unless the Articles of Incorporation provide for a longer or shorter period, notice of the date, time, and place of any special director meeting shall be given at least two days before the meeting either orally or in writing. Any director may waive notice of any meeting. Except as provided in the next sentence, the waiver must be in writing and signed by the director entitled to the notice. The attendance of a director at a meeting shall constitute a waiver of notice of the meeting, except where a director attends a meeting for the express purpose of objecting to the transaction of any business and at the beginning of the meeting (or promptly upon his arrival) objects to holding the meeting or transacting business at the meeting, and does not thereafter vote for or assent to action taken at the meeting. Unless required by the Articles of Incorporation, neither the business to be transacted at, nor the purpose of, any special meeting of the board of directors need be specified in the notice or waiver of notice of the meeting.

3.6 Director Quorum and Voting .

3.6.1 Quorum . A majority of the number of directors prescribed by resolution shall constitute a quorum for the transaction of business at any meeting of the board of directors unless the Articles of Incorporation require a greater percentage.

Unless the Articles of Incorporation provide otherwise, any or all directors may participate in a regular or special meeting by, or conduct the meeting through the use of, any means of communication by which all directors participating may simultaneously hear each other during the meeting. A director participating in a meeting by this means is deemed to be present in person at the meeting.

A director who is present at a meeting of the board of directors or a committee of the board of directors when corporate action is taken is deemed to have assented to the action taken unless: (1) the director objects at the beginning of the meeting (or promptly upon his arrival) to holding or transacting business at the meeting and does not thereafter vote for or assent to any action taken at the meeting; and (2) the director contemporaneously requests his dissent or abstention as to any specific action be entered in the minutes of the meeting; or (3) the director causes written notice of his dissent or abstention as to any specific action be received by the presiding officer of the meeting before its adjournment or to the corporation immediately after adjournment of the meeting. The right of dissent or abstention is not available to a director who votes in favor of the action taken.

3.7 Director Action Without a Meeting . Any action required or permitted to be taken by the board of directors at a meeting may be taken without a meeting if all the directors consent to such action in writing. Action taken by consent is effective when the last director signs the consent, unless, prior to that time, any director has revoked a consent by a signed writing received by the corporation, or unless the consent specifies a different effective date. A signed consent has the effect of a meeting vote and may be described as such in any document.

3.8 Resignation of Directors . A director may resign at any time by giving a written notice of resignation to the corporation. The resignation is effective when the notice is received by the corporation, unless the notice specifies a later effective date.

3.9 Removal of Directors . The shareholders may remove one or more directors at a meeting called for that purpose if notice has been given that a purpose of the meeting is such removal. The removal may be with or without cause unless the Articles of Incorporation provide that directors may only be removed with cause. If a director is elected by a voting group of shareholders, only the shareholders of that voting group may participate in the vote to remove him. A director may be removed only if the number of votes cast to remove him is at least two thirds (2/3) of the voting power of the issued and outstanding stock.

3.10 Board of Directors Vacancies . Unless the Articles of Incorporation provide otherwise, if a vacancy occurs on the board of directors, including a vacancy resulting from an increase in the number of directors, the shareholders may fill the vacancy. During the time that the shareholders fail or are unable to fill such vacancies, then and until the shareholders act:

(a) the board of directors may fill the vacancy; or

(b) if the directors remaining in office constitute fewer than a quorum of the board, they may fill the vacancy by the affirmative vote of a majority of all the directors remaining in office.

If the vacant office was held by a director elected by a voting group of shareholders:

(a) if there are one or more directors elected by the same voting group, only those directors are entitled to vote to fill the vacancy if it is filled by the directors; and

(b) only the holders of shares of that voting group are entitled to vote to fill the vacancy if it is filled by the shareholders.

A vacancy that will occur at a specific later date (by reason of a resignation effective at a later date) may be filled before the vacancy occurs but the new director may not take office until the vacancy occurs.

3.11 Director Compensation . By resolution of the board of directors, each director may be paid his expenses, if any, of attendance at each meeting of the board of directors and may be paid a stated salary as director or a fixed sum for attendance at each meeting of the board of directors or both. No such payment shall preclude any director from serving the corporation in any other capacity and receiving compensation therefor.

3.12 Director Committees .

3.12.1 Creation of Committees . Unless the Articles of Incorporation provide otherwise, the board of directors may create one or more committees and appoint members of the board of directors to serve on them. Each committee must have one or more members, who shall serve at the pleasure of the board of directors.

3.12.2 Selection of Members . The creation of a committee and appointment of members to it must be approved by the greater of (1) a majority of all the directors in office when the action is taken or (2) the number of directors required by the Articles of Incorporation to take such action.

3.12.3 Required Procedures . Those Sections of this Article 3 which govern meetings, actions without meetings, notice and waiver of notice, quorum and voting requirements of the board of directors, apply to committees and their members.

3.12.4 Authority . Unless limited by the Articles of Incorporation, each committee may exercise those aspects of the authority of the board of directors which the board of directors confers upon such committee in the resolution creating the committee. Provided, however, a committee may not:

(a) authorize distributions;

(b) approve or propose to shareholders action that the Statutes require be approved by shareholders;

(d) amend the Articles of Incorporation pursuant to the authority of directors to do so;

(e) adopt, amend or repeal bylaws;

(f) approve a plan of merger not requiring shareholder approval;

(g) authorize or approve reacquisition of shares, except according to a formula or method prescribed by the board of directors; or

(h) authorize or approve the issuance or sale or contract for sale of shares or determine the designation and relative rights, preferences, and limitations of a class or series of shares, except that the board of directors may authorize a committee (or an officer) to do so within limits specifically prescribed by the board of directors.

3.13 Acquisition of Controlling Interest . Notwithstanding anything to the contrary in these Bylaws and to the extent not inconsistent with the corporation's Articles of Incorporation, the board of directors may impose stricter requirements on the acquisition of a controlling interest in the corporation than the provisions of the laws of the State of Nevada (currently Chapter 78 of the Nevada Revised Statutes) regarding the acquisition of a controlling interest in the corporation

or any other action deemed by the board of directors to be an attempt to gain control of the corporation. Furthermore, any election to be governed by Chapter 78 of the Nevada Revised Statutes or other applicable law of the State of Nevada shall not restrict the board of directors from taking any action to protect the interests of the corporation and its shareholders including, but not limited to, adopting or executing plans, arrangements or instruments that deny rights, privileges, power or authority to a holder of a specified number of shares or percentage of share ownership or voting power.

In the event at any time the corporation does not meet the statutory criteria to be an “issuing corporation” and obtain the benefits of the Nevada Revised Statutes with respect to the acquisition of a controlling interest, the provisions of the Nevada Revised Statutes with respect to the acquisition of a controlling interest are fully adopted as if the corporation was an “issuing corporation.

ARTICLE 4. OFFICERS

4.1 Number of Officers . The officers of the corporation shall be a president, a secretary and a treasurer, each of whom shall be appointed by the board of directors. Such other officers and assistant officers as may be deemed necessary, including any vice presidents, may also be appointed by the board of directors. If specifically authorized by the board of directors, an officer may appoint one or more officers or assistant officers. The same individual may simultaneously hold more than one office in the corporation.

4.2 Appointment and Term of Office . The officers of the corporation shall be appointed by the board of directors for a term as determined by the board of directors. If no term is specified, they shall hold office until the first meeting of the directors held after the next annual meeting of shareholders. If the appointment of officers shall not be made at such meeting, such appointment shall be made as soon thereafter as is convenient. Each officer shall hold office until his successor shall have been duly appointed and shall have qualified until his death, or until he shall resign or is removed. The designation of a specified term does not grant to the officer any contract rights, and the board may remove the officer at any time prior to the termination of such term.

4.3 Removal of Officers . Any officer or agent may be removed by the board of directors at any time, with or without cause. Such removal shall be without prejudice to the contract rights, if any, of the person so removed. Appointment of an officer or agent shall not of itself create contract rights.

4.4 Resignation of Officers . Any officer may resign at any time, subject to any rights or obligations under any existing contracts between the officers and the corporation, by giving notice to the president or board of directors. An officer’s resignation shall take effect at the time specified therein, and the acceptance of such resignation shall not be necessary to make it effective.

4.5 President . Unless the board of directors has designated the chairman of the board as chief executive officer, the president shall be the chief executive officer of the corporation and, subject to the control of the board of directors, shall in general supervise and control all of the business and affairs of the corporation. Unless there is a chairman of the board, the president shall, when present, preside at all meetings of the shareholders and of the board of directors. The

president may sign, with the secretary or any other proper officer of the corporation thereunder authorized by the board of directors, certificates for shares of the corporation and deeds, mortgages, bonds, contracts, or other instruments which the board of directors has authorized to be executed, except in cases where the signing and execution thereof shall be expressly delegated by the board of directors or by these Bylaws to some other officer or agent of the corporation, or shall be required by law to be otherwise signed or executed; and in general shall perform all duties incident to the office of president and such other duties as may be prescribed by the board of directors from time to time.

4.6 Vice Presidents . If appointed, in the absence of the president or in the event of his death, inability or refusal to act, the vice president (or in the event there be more than one vice president, the vice presidents in the order designate at the time of their election, or in the absence of any designation, then in the order of their appointment) shall perform the duties of the president, and when so acting, shall have all the powers of, and be subject to, all the restrictions upon the president.

4.7 Secretary . The secretary shall: (a) keep the minutes of the proceedings of the shareholders, the board of directors, and any committees of the board in one or more books provided for that purpose; (b) see that all notices are duly given in accordance with the provisions of these Bylaws or as required by law; (c) be custodian of the corporate records; (d) when requested or required, authenticate any records of the corporation; (e) keep a register of the post office address of each shareholder which shall be furnished to the secretary by such shareholder; (f) sign with the president, or a vice president, certificates for shares of the corporation, the issuance of which shall have been authorized by resolution of the board of directors; (g) have general charge of the stock transfer books of the corporation; and (h) in general perform all duties incident to the office of secretary and such other duties as from time to time may be assigned by the president or by the board of directors. Assistant secretaries, if any, shall have the same duties and powers, subject to the supervision of the secretary.

4.8 Treasurer . The treasurer shall: (a) have charge and custody of and be responsible for all funds and securities of the corporation; (b) receive and give receipts for monies due and payable to the corporation from any source whatsoever, and deposit all such moneys in the name of the corporation in such bank, trust companies, or other depositaries as shall be selected by the board of directors; and (c) in general perform all of the duties incident to the office of treasurer and such other duties as from time to time may be assigned by the president or by the board of directors. If required by the board of directors, the treasurer shall give a bond for the faithful discharge of his or her duties in such sum and with such surety or sureties as the board of directors shall determine. Assistant Treasurers, if any, shall have the same powers and duties, subject to the supervision of the treasurer.

4.9 Salaries . The salaries of the officers shall be fixed from time to time by the board of directors.

ARTICLE 5. INDEMNIFICATION

5.1 Indemnification Respecting Third Party Claims . The Corporation (as defined in Section 5.13 below), to the full extent and in a manner permitted by Nevada law as in effect from time to time, shall indemnify, in accordance with the provisions of this Article, any person (including the heirs, executors, administrators or estate of any such person) who was or is made a party to or is threatened to be made a party to any threatened, pending or completed action, suit or proceeding (including any appeal thereof), whether civil, criminal, administrative, or investigative (other than an action by or in the right of the Corporation or by any corporation, limited liability company, partnership, joint venture, trust, employee benefit plan or other enterprise of which the Corporation owns, directly or indirectly through one or more other entities, a majority of the voting power or otherwise possesses a similar degree of control), by reason of the fact that such person is or was a director or officer, of the Corporation, or is or was serving at the request of the Corporation as a director, officer, member, manager, partner, trustee or fiduciary (a “Subsidiary Officer”) of another corporation, limited liability company, partnership, joint venture, trust, employee benefit plan or other enterprise (any such entity for which a Subsidiary Officer so serves, an “Associated Entity”), against expenses, including attorneys’ fees and disbursements, judgments, fines and amounts paid in settlement actually and reasonably incurred by such person in connection with such action, suit or proceeding if such person is not liable pursuant to Section 78.138 of the Statutes, or acted in good faith and in a manner such person reasonably believed to be in or not opposed to the best interests of the Corporation, and, with respect to any criminal action or proceeding, had no reasonable cause to believe their conduct was unlawful; provided, however , that (i) the Corporation shall not be obligated to indemnify a person who is or was a director or officer of the Corporation or a Subsidiary Officer of an Associated Entity against expenses incurred in connection with an action, suit, proceeding or investigation to which such person is threatened to be made a party but does not become a party unless the incurring of such expenses was authorized by or under the authority of the Board of Directors (as defined in Section 5.13 below) and (ii) the Corporation shall not be obligated to indemnify against any amount paid in settlement unless the Board of Directors has consented to such settlement. The termination of any action, suit or proceeding by judgment, order, settlement or conviction or upon a plea of nolo contendere or its equivalent shall not, of itself, create a presumption that the person (i) is liable pursuant to Section 78.138 of the Statutes or (ii) did not act in good faith and in a manner which such person reasonably believed to be in or not opposed to the best interests of the Corporation, or with respect to any criminal action or proceeding, that such person had reasonable cause to believe that their conduct was unlawful. Notwithstanding anything to the contrary in the foregoing provisions of this Section 5.1, a person shall not be entitled, as a matter of right, to indemnification pursuant to this Section 5.1 against costs or expenses incurred in connection with any action, suit or proceeding commenced by such person against the Corporation or any Associated Entity or any person who is or was a director, officer or fiduciary of the Corporation or a Subsidiary Officer of any Associated Entity (including, without limitation, any action, suit or proceeding commenced by such person to enforce such person’s rights under this Article, unless and only to the extent that such person is successful on the merits of such claim), but such indemnification may be provided by the Corporation in a specific case as permitted by Section 5.7 below.

5.2 Indemnification Respecting Derivative Claims . The Corporation, to the full extent and in a manner permitted by Nevada law as in effect from time to time, shall indemnify, in accordance with the provisions of this Article, any person (including the heirs, executors,

administrators or estate of any such person) who was or is made a party to or is threatened to be made a party to any threatened, pending or completed action or suit (including any appeal thereof) brought in the right of the Corporation to procure a judgment in its favor by reason of the fact that such person is or was a director or officer of the Corporation, or is or was serving as a Subsidiary Officer of an Associated Entity, against expenses (including attorneys’ fees and disbursements) and costs actually and reasonably incurred by such person in connection with the defense or settlement of such action or suit if such person is not liable pursuant to Section 78.138 of the Statutes, or acted in good faith and in a manner such person reasonably believed to be in or not opposed to the best interests of the Corporation, except that no indemnification shall be made in respect of any claim, issue or matter as to which such person shall have been adjudged by a court of competent jurisdiction after exhaustion of all appeals therefrom to be liable to the Corporation unless, and only to the extent that the court in which such action or suit was brought or other court of competent jurisdiction determines that, in view of all the circumstances of the case, such person is fairly and reasonably entitled to indemnity for such expenses and costs as a court of competent jurisdiction or such other court shall deem proper; provided, however , that the Corporation shall not be obligated to indemnify a director or officer of the Corporation or a Subsidiary Officer of an Associated Entity against expenses incurred in connection with an action or suit to which such person is threatened to be made a party but does not become a party unless the incurrence of such expenses was authorized by or under the authority of the Board of Directors. Notwithstanding anything to the contrary in the foregoing provisions of this Section 5.2, a person shall not be entitled, as a matter of right, to indemnification pursuant to this Section 5.2 against costs and expenses incurred in connection with any action or suit in the right of the Corporation commenced by such person, but such indemnification may be provided by the Corporation in any specific case as permitted by Section 5.7 below.

5.3 Determination of Entitlement to Indemnification . Any indemnification to be provided under either of Sections 5.1 or 5.2 above (unless ordered by a court of competent jurisdiction or advanced as provided in Section 5.5 below) shall be made by the Corporation only as authorized in the specific case upon a determination that indemnification of the director or officer is proper under the circumstances. Such determination must be made (i) by a majority vote of a quorum of shareholder, (ii) by the Board of Directors by majority vote of a quorum consisting of directors who were not parties to the action, suit or proceeding, (iii) if a majority vote of a quorum consisting of directors who were not parties to the action, suit or proceeding so orders, by independent legal counsel in a written opinion, or (iv) if a quorum consisting of directors who were not parties to the action, suit or proceeding cannot be obtained, by independent legal counsel in a written opinion. In the event a request for indemnification is made by any person referred to in Sections 5.1 or 5.2 above, the Corporation shall use its reasonable best efforts to cause such determination to be made not later than sixty (60) days after such request is made after the final disposition of such action, suit or proceeding.

5.4 Right to Indemnification upon Successful Defense and for Service as a Witness .

5.4.1 Notwithstanding the other provisions of this Article, to the extent that a present or former director or officer has been successful on the merits or otherwise in defense of any action, suit or proceeding referred to in either of Sections 5.1 or 5.2 above, or in defense of any claim, issue or matter therein, such person shall be indemnified against

expenses (including attorneys’ fees and disbursements) and costs actually and reasonably incurred by such person in connection therewith without the necessity of the determination described in Section 5.3 above.

5.4.2 To the extent any person who is or was a director or officer of the Corporation or a Subsidiary Officer of an Associated Entity has served or prepared to serve as a witness in, but is not a party to, any action, suit or proceeding (whether civil, criminal, administrative, regulatory or investigative in nature), including any investigation by any legislative or regulatory body or by any securities or commodities exchange of which the Corporation or an Associated Entity is a member or to the jurisdiction of which it is subject, by reason of their services as a director or officer of the Corporation, or their service as a Subsidiary Officer of an Associated Entity (assuming such person is or was serving as a Subsidiary Officer of such Associated Entity), the Corporation may indemnify such person against expenses (including attorneys’ fees and disbursements) and out-of-pocket costs actually and reasonably incurred by such person in connection therewith and, if the Corporation has determined to so indemnify such person, shall use its reasonable best efforts to provide such indemnity within sixty (60) days after receipt by the Corporation from such person of a statement requesting such indemnification, averring such service and reasonably evidencing such expenses and costs; it being understood, however, that the Corporation shall have no obligation under this Article to compensate such person for such person’s time or efforts so expended.

5.5 Advance of Expenses .

5.5.1 Expenses and costs incurred by any present or former director or officer of the Corporation in defending a civil or criminal action, suit or proceeding shall, to the extent permitted by law, be paid by the Corporation in advance of the final disposition of such action, suit or proceeding upon receipt of an undertaking in writing by or on behalf of such person to repay such amount if it shall ultimately be determined by a court of competent jurisdiction that such person is not entitled to be indemnified by the Corporation as authorized by this Article.

5.5.2 Expenses and costs incurred by any other person referred to in Sections 5.1 or 5.2 above in defending a civil, criminal, administrative, regulatory or investigative action, suit or proceeding may be paid by the Corporation in advance of the final disposition of such action, suit or proceeding as authorized by or under the authority of the Board of Directors upon receipt of an undertaking in writing by or on behalf of such person to repay such amount if it shall ultimately be determined that such person is not entitled to be indemnified by the Corporation in respect of such costs and expenses as authorized by this Article and subject to any limitations or qualifications provided by or under the authority of the Board of Directors.

5.6 Notice of Action; Assumption of the Defense . Promptly after receipt by any person referred to in Sections 5.1, 5.2 or 5.5 above of notice of the commencement of any action, suit or proceeding in respect of which indemnification or advancement of expenses may be sought under any such Section, such person (the “Indemnitee”) shall notify the Corporation thereof. The Corporation shall be entitled to participate in the defense of any such action, suit or proceeding and, to the extent that it may wish, except in the case of a criminal action or proceeding, to assume

the defense thereof with counsel chosen by it. If the Corporation shall have notified the Indemnitee of its election so to assume the defense, it shall be a condition of any further obligation of the Corporation under such Sections to indemnify the Indemnitee with respect to such action, suit or proceeding that the Indemnitee shall have provided an undertaking in writing to repay all legal or other costs and expenses subsequently incurred by the Corporation in conducting such defense if it shall ultimately be determined that the Indemnitee is not entitled to be indemnified in respect of the costs and expenses of such action, suit or proceeding by the Corporation as authorized by this Article or under separate agreement as authorized by Section 5.7 below. Notwithstanding anything in this Article to the contrary, after the Corporation shall have notified the Indemnitee of its election so to assume the defense, the Corporation shall not be liable under such Sections for any legal or other costs or expenses subsequently incurred by the Indemnitee in connection with the defense of such action, suit or proceeding, unless (a) the parties thereto include both (i) the Corporation and the Indemnitee, or (ii) the Indemnitee and other persons who may be entitled to seek indemnification or advancement of expenses under any such Section and with respect to whom the Corporation shall have elected to assume the defense, and (b) the counsel chosen by the Corporation to conduct the defense shall have determined, in their sole discretion, that, under applicable standards of professional conduct, a conflict of interest exists that would prevent them from representing both (i) the Corporation and the Indemnitee, or (ii) the Indemnitee and such other persons, as the case may be, in which case the Indemnitee may retain separate counsel at the expense of the Corporation to the extent provided in such Sections and Section 5.3 above.

5.7 Indemnification Not Exclusive . The provision of indemnification to or the advancement of expenses and costs to any person under this Article, or the entitlement of any person to indemnification or advancement of expenses and costs under this Article does not exclude any other rights to which a person seeking indemnification or advancement of expenses may be entitled under the articles of incorporation or any bylaw, agreement, vote of stockholders or disinterested directors or otherwise, for either an action in such person’s official capacity or an action in another capacity while holding such person’s office, it being the policy of the Corporation that indemnification of the persons specified in Sections 5.1 and 5.2 above shall be made to the fullest extent permitted by law.

5.8 Corporate Obligations; Reliance . The provisions of Sections 5.1, 5.2, 5.4.1 and 5.5.1 above shall be deemed to create a binding obligation on the part of the Corporation to the directors and officers of the Corporation, and the persons who are serving as Subsidiary Officers of Associated Entities, on the effective date of this Article and persons thereafter elected as directors and officers of the Corporation, or serving as Subsidiary Officers of Associated Entities (including persons who served as directors or officers of the Corporation or served as Subsidiary Officers of Associated Entities on or after such date but who are no longer so serving at the time they present claims for advancement of expenses or indemnity), and such persons in acting in their capacities as directors or officers of the Corporation, or serving as Subsidiary Officers of any Associated Entity, shall be entitled to rely on such provisions of this Article.

5.9 Further Changes . Neither the amendment nor repeal of this Article, nor the adoption of any provision of the Articles of Incorporation inconsistent with this Article, shall eliminate or reduce the effect of such provisions in respect of any act or omission or any matter occurring prior to such amendment, repeal or adoption of an inconsistent provision regardless of when any cause of action, suit or claim relating to any such matter accrued or matured or was

commenced, and such provision shall continue to have effect in respect of such act, omission or matter as if such provision had not been so amended or repealed or if a provision inconsistent therewith had not been so adopted.

5.10 Successors . The right, if any, of any person who is or was a director or officer of the Corporation, or is or was serving as a Subsidiary Officer of an Associated Entity, to indemnification or advancement of expenses under Sections 5.1 through 5.9 above shall continue after such person shall have ceased to be a director or officer of the Corporation or a Subsidiary Officer of an Associated Entity and shall inure to the benefit of the heirs, distributees, executors, administrators and other legal representatives of such person.

5.11 Insurance .

5.11.1 The Corporation may purchase and maintain insurance or make other financial arrangements on behalf of any person who is or was a director or officer of the Corporation, or is or was serving as a Subsidiary Officer of any Associated Entity, against any liability asserted against such person and liability and expenses incurred by such person in any such capacity, or arising out of such person’s status as such, whether or not the Corporation would have the power to indemnify such person against such liability and expenses.

5.11.2 The other financial arrangements made by the Corporation pursuant to Section 5.11.1 may include the following: (a) the creation of a trust fund; (b) the establishment of a program of self-insurance; (c) the securing of its obligation of indemnification by granting a security interest or other lien on any assets of the Corporation; and (d) the establishment of a letter of credit, guaranty or surety. No financial arrangement made pursuant to this subsection may provide protection for a person adjudged by a court of competent jurisdiction, after exhaustion of all appeals therefrom, to be liable for intentional misconduct, fraud or a knowing violation of law, except with respect to the advancement of expenses or indemnification ordered by a court.

5.11.3 Any insurance or other financial arrangement made on behalf of a person pursuant to this section may be provided by the Corporation or any other person approved by the Board of Directors, even if all or part of the other person’s stock or other securities is owned by the Corporation.

5.11.4 In the absence of fraud: (a) the decision of the Board of Directors as to the propriety of the terms and conditions of any insurance or other financial arrangement made pursuant to this Section and the choice of the person to provide the insurance or other financial arrangement is conclusive; and (b) the insurance or other financial arrangement (i) is not void or voidable, and (ii) does not subject any director approving it to personal liability for his action, even if, in either case, a director approving the insurance or other financial arrangement is a beneficiary of the insurance or other financial arrangement.

5.12 Indemnification of Employees and Agents . The Corporation may, to the extent authorized from time to time by the Board of Directors, provide rights to indemnification and to the advancement of expenses to employees and agents of the Corporation and Associated Entities similar to those conferred in this Article to directors and officers of the Corporation.

5.13 Definitions of Certain Terms . For purposes of this Article, (i) references to the “Corporation” shall include, in addition to the resulting corporation, any constituent corporation (including any constituent of a constituent) absorbed in a consolidation or merger which, if its separate existence had continued, would have had power and authority to indemnify its directors or officers so that any person who is or was a director or officer of such constituent corporation, or is or was a director or officer of such constituent corporation serving at the request of such constituent corporation as a director, officer, employee or agent of another corporation, partnership, joint venture, trust, employee benefit plan or other enterprise, shall stand in the same position under the provisions of this Article with respect to the resulting or surviving corporation as such person would have with respect to such constituent corporation if its separate existence had continued; (ii) references to the “Board of Directors” shall mean the board of directors of the Corporation; (iii) references to “fines” shall include any excise taxes assessed on a person with respect to any employee benefit plan; (iv) references to “a director or officer of the Corporation” or to “serving as a Subsidiary Officer” shall also include any service as a director, officer, employee or agent of the Corporation or any Associated Entity which service imposes duties on, or involves services by, such person with respect to any employee benefit plan, its participants, or beneficiaries; and (v) a person who acted in good faith and in a manner such person reasonably believed to be in the interest of the participants and beneficiaries of an employee benefit plan shall be deemed to have acted in a manner “not opposed to the best interests of the Corporation” as referred to in this Article.

ARTICLE 6. STOCK

6.1 Issuance of Shares . The issuance or sale by the corporation of any shares of its authorized capital stock of any class, including treasury shares, shall be made only upon authorization by the board of directors, unless otherwise provided by statute. The board of directors may authorize the issuance of shares for consideration consisting of any tangible or intangible property or benefit to the corporation, including cash, promissory notes, services performed, contracts or arrangements for services to be performed, or other securities of the corporation. The corporation shall have the authority to issue preferred stock.

6.2 Certificates for Shares .

6.2.1 Content . Certificates representing shares of the corporation shall at minimum, state on their face the name of the corporation and that it is formed under the laws of the State of Nevada; the name of the person to whom issued; and the number and class of shares and the designation of the series, if any, the certificate represents; and be in such form as determined by the board of directors. The certificates shall be signed (either manually or by facsimile) by the president or a vice president and by the secretary or an assistant secretary and may be sealed with a corporate seal or a facsimile thereof. Each certificate for shares shall be consecutively numbered or otherwise identified.

6.2.2 Legend as to Class or Series . If the corporation is authorized to issue different classes of shares or different series within a class, the designations, relative rights, preferences and limitations applicable to each class and the variations in rights, preferences and limitations determined for each series (and the authority of the board of directors to determine variations for future series) must be summarized on the front or back of each certificate. Alternatively, each certificate may state conspicuously on its front or back that

the corporation will furnish the shareholder this information on request in writing and without charge.

6.2.3 Shareholder List . The name and address of the person to whom the shares represented thereby are issued, with the number of shares and date of issue, shall be entered on the stock transfer books of the corporation.

6.2.4 Transferring Shares . All certificates surrendered to the corporation for transfer shall be canceled and no new certificates shall be issued until the former certificates for a like number of shares shall have been surrendered and canceled, except that in case of a lost, destroyed, or mutilated certificates, a new one may be issued therefor upon such terms and indemnity to the corporation as the board of directors may prescribe.

6.2.5 Lost Certificates . The board of directors may direct a new certificate or certificates or uncertificated shares to be issued in place of any certificate or certificates theretofore issued by the corporation alleged to have been lost, stolen or destroyed, upon the making of an affidavit of that fact by the person claiming the certificates of stock to be lost, stolen or destroyed. When authorizing the issue of a new certificate or certificates or uncertificated shares, the board of directors may, in its discretion and as a condition precedent to the issuance thereof, require the owner of the lost, stolen or destroyed certificate or certificates, or his legal representative, to advertise the same in such manner as it shall require and/or to give the corporation a bond in such sum as it may direct as indemnity against any claim that may be made against the corporation with respect to the certificates alleged to have been lost, stolen or destroyed.

6.3 Shares Without Certificates

6.3.1 Issuing Shares Without Certificates . Unless the Articles of Incorporation provide otherwise, the board of directors may authorize the issue of some or all the shares of any or all of its classes or series without certificates. The authorization does not affect shares already represented by certificates until they are surrendered to the corporation.

6.3.2 Information Statement Required . Within a reasonable time after the issue or transfer of shares without certificates, the corporation shall send the shareholder a written statement containing, at a minimum, the information required by the Statutes.

6.4 Registration of the Transfer of Shares . Registration of the transfer of shares of the corporation shall be made only on the stock transfer books of the corporation. In order to register a transfer, the record owner shall surrender the shares to the corporation for cancellation, properly endorsed by the appropriate person or persons with reasonable assurances that the endorsements are genuine and effective. Unless the corporation has established a procedure by which a beneficial owner of shares held by a nominee is to be recognized by the corporation as the owner, the person in whose name shares stand in the books of the corporation shall be deemed by the corporation to be the owner thereof for all purposes.

6.5 Restrictions on Transfer or Registration of Shares . The board of directors or shareholders may impose restrictions on the transfer or registration of transfer of shares (including any security convertible into, or carrying a right to subscribe for or acquire shares). A restriction

does not affect shares issued before the restriction was adopted unless the holders of the shares are parties to the restriction agreement or voted in favor of or otherwise consented to the restriction.

A restriction on the transfer or registration of transfer of shares may be authorized:

(a) to maintain the corporation’s status when it is dependent on the number or identity of its shareholders;

(b) to preserve entitlements, benefits or exemptions under federal or local laws; and

A restriction on the transfer or registration of transfer of shares may:

(a) obligate the shareholder first to offer the corporation or other persons (separately, consecutively or simultaneously) an opportunity to acquire the restricted shares;

(b) obligate the corporation or other persons (separately, consecutively or simultaneously) to acquire the restricted shares;

(c) require as a condition to such transfer or registration, that any one or more persons, including the holders of any of its shares, approve the transfer or registration if the requirement is not manifestly unreasonable; or

(d) prohibit the transfer or the registration of transfer of the restricted shares to designated persons or classes of persons, if the prohibition is not manifestly unreasonable.

A restriction on the transfer or registration of transfer of shares is valid and enforceable against the holder or a transferee of the holder if the restriction is authorized by this Section and its existence is noted conspicuously on the front or back of the certificates or is contained in the information statement required by this Article 6 with regard to shares issued without certificates. Unless so noted, a restriction is not enforceable against a person without knowledge of the restriction.

Nothing in this Section 6.5 shall preclude the settlement of any transaction entered into through the facilities of the New York Stock Exchange or any other national securities exchange or automated inter-dealer quotation system. The fact that the settlement of any transaction occurs shall not negate the effect of any provision of this Section 6.5 and any transferee in such a transaction shall be subject to all of the provisions and limitations set forth in this Section 6.5.

6.6 Corporation’s Acquisition of Shares . The corporation may acquire its own shares and the shares so acquired constitute authorized but unissued shares.

If the Articles of Incorporation prohibit the reissue of acquired shares, the number of authorized shares is reduced by the number of shares acquired, effective upon amendment of the Articles of Incorporation, which amendment may be adopted by the shareholders or the board of

directors without shareholder action. The articles of amendment must be delivered to the Secretary of State and must set forth:

(a) the name of the corporation;

(b) the reduction in the number of authorized shares, itemized by class and series;

(d) a statement that the amendment was adopted by the board of directors without shareholder action and that shareholder action was not required.

6.7. Special Rights . Holders of common stock shall have no preemptive, subscription, redemption or conversion rights.

ARTICLE 7. DISTRIBUTIONS

7.1 Distributions to Shareholders . The board of directors may authorize, and the corporation may make, distributions to the shareholders of the corporation subject to any restrictions in the corporation’s Articles of Incorporation and in the Statutes.

7.2 Unclaimed Distributions . If the corporation has mailed three successive distributions to a shareholder at the shareholder’s address as shown on the corporation’s current record of shareholders and the distributions have been returned as undeliverable, no further attempt to deliver distributions to the shareholder need be made until another address for the shareholder is made known to the corporation, at which time all distributions accumulated by reason of this Section, except as otherwise provided by law, shall be mailed to the shareholder at such other address.

ARTICLE 8. MISCELLANEOUS

8.1 Inspection of Records by Shareholders and Directors . The scope of the right of shareholders and director shall be as provided under the Statutes.

8.2 Corporate Seal . A corporate seal is not required on any instrument executed for the Corporation. The board of directors may provide a corporate seal which may be circular in form and have inscribed thereon any designation including the name of the corporation, the state of incorporation, and the words “Corporate Seal.”

8.3 Amendments . The corporation’s board of directors may amend or repeal the corporations’ Bylaws at any time unless:

(a) the Articles of Incorporation or the Statutes reserve this power exclusively to the shareholders in whole or part; or

(b) the shareholders in adopting, amending, or repealing a particular bylaw provide expressly that the board of directors may not amend or repeal that bylaw; or

Any amendment which changes the voting or quorum requirement for the board must meet the same quorum requirement and be adopted by the same vote and voting groups required to take action under the quorum and voting requirements then in effect or proposed to be adopted, whichever is greater.

EMPLOYMENT AGREEMENT

This Employment Agreement (the “Agreement”) is entered into by and between STAGE STORES, INC., a Nevada corporation (the “Company”), and Thorsten I. Weber, an individual (the “Executive”), effective as of September 29, 2016 (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 Merchandising 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 the 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 the Chief Executive Officer 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 Chief Executive Officer 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, the Executive shall be paid or receive compensation and benefits as follows:

3.1 Base Salary . The base salary for the Executive shall be Five Hundred Ten 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 70% 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 Company’s 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 (if the Executive becomes reemployed with another employer and is eligible to receive medical, hospitalization and dental benefits under another employer-provided plan, the medical, hospitalization and dental benefits described herein shall be secondary to those provided under such other plan during the applicable 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 4.3.1(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 (if the Executive becomes reemployed with another employer and is eligible to receive medical, hospitalization and dental benefits under another employer-provided plan, the medical, hospitalization and dental benefits described herein shall be secondary to those provided under such other plan during the applicable 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 4.3.1(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, the Company fails to cure such event or condition within thirty (30) days of receiving the Employee’s initial notice, and the Executive terminates employment with a subsequent written notice to the Company after such thirty (30) day cure period but within ninety (90) days after the Executive provides the initial written notice to the Company of the existence of such 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 (if the Executive becomes reemployed with another employer and is eligible to receive medical, hospitalization and dental benefits under another employer-provided plan, the medical, hospitalization and dental benefits described herein shall be secondary to those provided under such other plan during the applicable period), (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 possess 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 as well as for the benefits provided by the Company in the Restricted Stock Award Agreement granted on the Effective Date (“Restricted Stock Award 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, (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, the Executive and the Company expressly agree that regardless of the requirements set forth in 7.1(a) and (b), the following entities (including their respective parents, subsidiaries, affiliates and divisions) compete with the Company and are subject to the provisions of this Section 7: Macy’s, Inc., Kohl’s Corporation, Ulta Salon, Cosmetics & Fragrance, Inc., Belk, Inc., J.C. Penney Company, Inc., Gordmans Stores, Inc., Dillards, Inc., The Bon-Ton Stores, Inc., Beall’s, Inc., Stein Mart, Inc., The TJX Companies, Inc., Ross Stores, Inc., Ascena Retail Group, Inc., The Cato Corporation, Hibbett Sports Inc., Academy, Ltd., Francesca’s Holdings Corporation, and Charming Charlie LLC. 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 position or services 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 services, 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 employment, consulting or other capacity. 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 . The Executive understands that his position with the Company is one of trust and confidence and that he has an obligation to protect the Company’s and its Subsidiaries’ assets, including their investment in the training of other employees and the cultivation of vendor relationships, both during and following the Executive’s employment. Accordingly, during and for two (2) years following termination of the Executive’s employment with the Company for any reason, the Executive agrees not to, directly or indirectly, on behalf of the Executive or any other person or entity: (a) encourage or solicit any of the employees of the Company, its Subsidiaries or their respective successors to cease employment with the Company, its Subsidiaries or their respective successors; or (b) solicit or accept business of, or call upon, any vendor, customer or client of the Company, its Subsidiaries or their respective successors for the purpose of conducting a competitive business or otherwise seeking profit from a competitive activity.

7.5 Future Employment . If the Executive in the future seeks or is offered employment, or any other position or capacity (including as a consultant) with another person or entity, the Executive agrees to inform each new employer or entity, before accepting employment or other capacity, of the existence of the restrictions contained in Section 7. Further, before

accepting any employment or other capacity with any person during the restriction period described in Section 7.1, the Executive agrees to give prior written notice to the Company of the name of such person or entity, the nature of the position or capacity, the responsibilities and duties of the position or capacity, and the industry or industries in which such other person or entity operates. The 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.

7.6 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 the 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 entering into this Agreement and for the receipt and vesting of the restricted stock award 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 or other 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 the Company agree that: (i) the Executive’s interest in the Restricted Stock Award Agreement (including the underlying restricted stock) shall automatically lapse and be forfeited; (ii) the Company shall have no obligation to make any further payments to the Executive of any nature; (iii) the Company shall be entitled to receive the full value of any payments which were previously made to the Executive, as well as the value of the Restricted Stock Award Agreement that may have vested, during the twelve (12) months preceding the date of the Executive’s termination, for any reason, to the date on which a court or arbitration panel held or found the restrictions described in Section 7.1 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) the Company shall have no obligation to make any further payments to the Executive under the terms of Sections 4.3, 4.4, 4.5 and 4.6 of the Employment Agreement; and (vi) the 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:	Thorsten I. Weber 3010 Bridle Bluff Ct. Katy, Texas 77494

To Company:	Stage Stores, Inc. 2425 West Loop South Houston, Texas 77027 Attention: Chief Human Resources Officer

With a copy to:	Stage Stores, Inc. 2425 West Loop South Houston, Texas 77027 Attention: Chief Legal Officer

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 L. Glazer
	By:	Michael L. Glazer
	Title:	President and CEO

“EXECUTIVE”	/s/	Thorsten I. Weber
		Thorsten I. Weber, an individual

INDEMNITY AGREEMENT

This Indemnity Agreement (“Agreement”) is made as of __________, 20__, by and between STAGE STORES, INC., a Nevada corporation (“Company”), and _______________ (“Indemnitee”). This Agreement supersedes and replaces any and all previous agreements between the Company and Indemnitee covering the subject matter of this Agreement.

RECITALS

WHEREAS, highly competent persons have become more reluctant to serve publicly-held corporations as directors and officers or in other capacities unless they are provided with adequate protection through insurance and indemnification against inordinate risks of claims and actions against them arising out of their service to and activities on behalf of the corporation;

WHEREAS, the Board of Directors of the Company (“Board”) has determined that, in order to attract and retain qualified individuals, the Company will attempt to maintain on an ongoing basis, at its sole expense, liability insurance to protect persons serving the Company and its subsidiaries from certain liabilities;

WHEREAS, Nevada Revised Statutes 78.7502 and 78.751 (“Statutes”) empower the Company to indemnify and advance expenses to its officers, directors, employees and agents by agreement and to indemnify and advance expenses to persons who serve, at the request of the Company, as directors, officers, employees, or agents of other corporations or enterprises, and expressly provides that the indemnification provided by the Statutes is not exclusive;

WHEREAS, the Bylaws of the Company (as amended, the “Bylaws”) provide for mandatory indemnification of its officers and directors to the fullest extent permitted by applicable law, subject to certain limitations specified in the Bylaws, and the Company wishes to clarify and enhance the rights and obligations of the Company and the Indemnitee with respect to indemnification;

WHEREAS, in order to induce and encourage highly experienced and capable persons such as the Indemnitee to serve and continue to serve as directors and officers of the Company and its affiliates and/or in other capacities with respect to the Company and its affiliates, and to otherwise promote the desirable end that such persons will resist what they consider unjustified lawsuits and claims made against them in connection with the good faith performance of their duties to the Company, with the knowledge that certain costs, judgments, liabilities and expenses incurred by them in their defense of such litigation are to be borne by the Company, the Board of the Company has determined that the following Agreement is reasonable and prudent to promote and ensure the best interests of the Company and its shareholders; and

WHEREAS, this Agreement is a supplement to and in furtherance of the Bylaws and any resolutions adopted pursuant thereto, and shall not be deemed a substitute therefor, nor to diminish or abrogate any rights of Indemnitee thereunder.

NOW, THEREFORE, in consideration of the premises and the covenants contained herein, the Company and Indemnitee do hereby covenant and agree as follows:

Section 1. Service by Indemnitee. The Indemnitee will serve and/or continue to serve as a director or officer of the Company, or in such other capacity designated by the Company, faithfully and to the best of the Indemnitee’s ability so long as the Indemnitee is duly elected, appointed or designated and until such time as the Indemnitee is removed, terminated, or tenders a resignation that is accepted by the Board.

Section 2. Definitions . As used in this Agreement:

(a) References to “agent” shall mean any person who is or was a director, officer, or employee of the Company or a subsidiary of the Company or other person authorized by the Company to act for the Company, to include such person serving in such capacity as a director, officer, employee, fiduciary or other official of another corporation, partnership, limited liability company, joint venture, trust or other enterprise at the request of, for the convenience of, or to represent the interests of the Company or a subsidiary of the Company.

(b) “Change of Control” means a change in control of the Company of a nature that would be required to be reported in response to Item 5.01 of Current Report on Form 8-K (or in response to any similar item on any similar schedule or form) promulgated under the Securities Exchange Act of 1934 (“Exchange Act”), whether or not the Company is then subject to such reporting requirement; provided, however, that, without limitation, such a Change of Control shall be deemed to have occurred if after the Effective Date (i) any “person” (as such term is used in Sections 13(d) and 14(d) of the Exchange Act) becomes the “beneficial owner” (as defined in Rule 13d-3 under the Exchange Act), directly or indirectly, of securities of the Company representing thirty percent (30%) or more of the combined voting power of the Company’s then outstanding securities without the prior approval of at least two-thirds of the members of the Board of Directors in office immediately prior to such person attaining such percentage; (ii) the Company is a party to a merger, consolidation, sale of assets or other reorganization, or a proxy contest, as a consequence of which members of the Board of Directors in office immediately prior to such transaction or event constitute less than a majority of the Board of Directors thereafter; or (iii) during any period of two consecutive years, individuals who at the beginning of such period constituted the Board of Directors (including for this purpose any new director whose election or nomination for election by the Company’s shareholders was approved by a vote of at least two-thirds of the directors then still in office who were directors at the beginning of such period) cease for any reason to constitute at least a majority of the Board of Directors.

(c) “Corporate Status” describes the status of a person who is or was a director, officer, employee or agent of the Company or of any other corporation, limited liability company, partnership or joint venture, trust or other enterprise which such person is or was serving at the request of the Company.

(d) “Disinterested Director” shall mean a director of the Company who is not and was not a party to the Proceeding in respect of which indemnification is sought by Indemnitee.

(e) “Enterprise” shall mean the Company and any other corporation, limited liability company, partnership, joint venture, trust or other enterprise of which Indemnitee is or was serving at the request of the Company as a director, officer, trustee, partner, managing member, employee, agent or fiduciary.

(f) “Expenses” shall include all attorneys’ fees, retainers, court costs, transcript costs, fees of experts and other professionals, witness fees, travel expenses, duplicating costs, printing and binding costs, telephone charges, postage, delivery service fees, any federal, state, local or foreign taxes imposed on Indemnitee as a result of the actual or deemed receipt of any payments under this Agreement, ERISA excise taxes and penalties, and all other disbursements or expenses of the types customarily incurred in connection with prosecuting, defending, preparing to prosecute or defend, investigating, being or preparing to be a witness in, or otherwise participating in, a Proceeding. Expenses also shall include (i) Expenses incurred in connection with any appeal resulting from any Proceeding, including without limitation the premium, security for, and other costs relating to any cost bond, supersedeas bond, or other appeal bond or its equivalent, and (ii) for purposes of Section 13(d) only, Expenses incurred by Indemnitee in connection with the interpretation, enforcement or defense of Indemnitee’s rights under this Agreement, by litigation or otherwise. Expenses, however, shall not include amounts paid in settlement by Indemnitee or the amount of judgments or fines against Indemnitee.

(g) “Independent Counsel” shall mean a law firm, or a member of a law firm, that is experienced in matters of corporation law and neither presently is, nor in the preceding five years has been, retained to represent: (i) the Company or Indemnitee in any matter material to either such party (other than with respect to matters concerning the Indemnitee under this Agreement, or of other indemnitees under similar indemnification agreements), or (ii) any other party to the Proceeding giving rise to a claim for indemnification hereunder. Notwithstanding the foregoing, the term “Independent Counsel” shall not include any person who, under the applicable standards of professional conduct then prevailing, would have a conflict of interest in representing either the Company or Indemnitee in an action to determine Indemnitee’s rights under this Agreement. The Company agrees to pay the reasonable fees and expenses of the Independent Counsel referred to above and to fully indemnify such counsel against any and all Expenses, claims, liabilities and damages arising out of or relating to this Agreement or its engagement pursuant hereto.

(h) The term “Proceeding” shall include any threatened, pending or completed action, suit, claim, counterclaim, cross claim, arbitration, mediation, alternate dispute resolution mechanism, investigation, inquiry, administrative hearing or any other actual, threatened or completed proceeding, whether brought in the right of the Company or otherwise and whether of a civil, criminal, administrative, legislative, or investigative (formal or informal) nature, including any appeal therefrom, in which Indemnitee was, is or will be involved as a party, potential party, non-party witness or otherwise by reason of the fact that Indemnitee is or was a director or officer of the Company, by reason of any action taken by Indemnitee (or a failure to take action by Indemnitee) or of any action (or failure to act) on Indemnitee’s part while acting pursuant to Indemnitee’s Corporate Status, in each case whether or not serving in such capacity at the time any liability or Expense is incurred for which indemnification, reimbursement, or advancement of Expenses can be provided under this Agreement. If the Indemnitee believes in good faith that a given situation may lead to or culminate in the institution of a Proceeding, this shall be considered a Proceeding under this paragraph.

(i) Reference to “other enterprise” shall include employee benefit plans; references to “fines” shall include any excise tax assessed with respect to any employee benefit plan; references to “serving at the request of the Company” shall include any service as a director, officer, employee or agent of the Company which imposes duties on, or involves services by, such director, officer, employee or agent with respect to an employee benefit plan, its participants or beneficiaries; and a person who acted in good faith and in a manner such person reasonably believed to be in the best interests of the participants and beneficiaries of an employee benefit plan shall be deemed to have acted in manner “not opposed to the best interests of the Company” as referred to in this Agreement.

Section 3. Indemnity in Third-Party Proceedings . The Company shall indemnify Indemnitee in accordance with the provisions of this Section 3 if Indemnitee is, or is threatened to be made, a party to or a participant in any Proceeding, other than a Proceeding by or in the right of the Company to procure a judgment in its favor. Pursuant to this Section 3, Indemnitee shall be indemnified to the fullest extent permitted by applicable law against all Expenses, judgments, fines and amounts paid in settlement (including all interest, assessments and other charges paid or payable in connection with or in respect of such Expenses, judgments, fines and amounts paid in settlement) actually and reasonably incurred by Indemnitee or on Indemnitee’s behalf in connection with such Proceeding or any claim, issue or matter therein, if Indemnitee (a) acted in good faith and in a manner such person reasonably believed to be in or not opposed to the best interests of the Company and, in the case of a criminal Proceeding had no reasonable cause to believe that Indemnitee’s conduct was unlawful or (b) is not liable pursuant to Nevada Revised Statute 78.138. The parties intend that this Agreement shall provide to the fullest extent permitted by law for indemnification in excess of that expressly permitted by statute, including, without limitation, any indemnification provided by the Articles of Incorporation of the Company (as amended, the “Articles”), the Bylaws, vote of its shareholders or disinterested directors or applicable law.

Section 4. Indemnity in Proceedings by or in the Right of the Company . The Company shall indemnify Indemnitee in accordance with the provisions of this Section 4 if Indemnitee is, or is threatened to be made, a party to or a participant in any Proceeding by or in the right of the Company to procure a judgment in its favor. Pursuant to this Section 4, Indemnitee shall be indemnified to the fullest extent permitted by applicable law against all Expenses actually and reasonably incurred by Indemnitee or on Indemnitee’s behalf in connection with such Proceeding or any claim, issue or matter therein, if Indemnitee (a) acted in good faith and in a manner such person reasonably believed to be in or not opposed to the best interests of the Company or (b) is not liable pursuant to Nevada Revised Statute 78.138. No indemnification for Expenses shall be made under this Section 4 in respect of any claim, issue or matter as to which Indemnitee shall have been finally adjudged by a court of competent jurisdiction after exhaustion of all appeals therefrom to be liable to the Company or for amounts paid in settlement to the Company, unless and only to the extent that the court in which the Proceeding was brought shall determine upon application that, despite the adjudication of liability but in view of all the circumstances of the case, Indemnitee is fairly and reasonably entitled to indemnification for such Expenses and amounts paid in settlement as the court deems proper.

Section 5. Indemnification for Expenses of a Party Who is Wholly or Partly Successful . Notwithstanding any other provisions of this Agreement, to the fullest extent permitted by applicable law and to the extent that Indemnitee is a party to (or a participant in) and is successful, on the merits or otherwise, in any Proceeding or in defense of any claim, issue or matter therein, in whole or in part, the Company shall indemnify Indemnitee against all Expenses actually and reasonably incurred by Indemnitee in connection therewith, without the necessity of the determination set forth in Section 11(a) of this Agreement. If Indemnitee is not wholly successful in such Proceeding but is successful, on the merits or otherwise, as to one or more but less than all claims, issues or matters in such Proceeding, the Company shall indemnify Indemnitee against all Expenses actually and reasonably incurred by Indemnitee or on Indemnitee’s behalf in connection with or related to each successfully resolved claim, issue or matter to the fullest extent permitted by law. For purposes of this Section and without limitation, the termination of any claim, issue or matter in such a Proceeding by dismissal, with or without prejudice, shall be deemed to be a successful result as to such claim, issue or matter.

Section 6. Indemnification For Expenses of a Witness . Notwithstanding any other provision of this Agreement, to the fullest extent permitted by applicable law and to the extent that Indemnitee is, by reason of Indemnitee’s Corporate Status, a witness or otherwise asked to participate in any Proceeding to which Indemnitee is not a party, Indemnitee shall be indemnified against all Expenses actually and reasonably incurred by Indemnitee or on Indemnitee’s behalf in connection therewith.

Section 7. Partial Indemnification . If Indemnitee is entitled under any provision of this Agreement to indemnification by the Company for some or a portion of Expenses, but not, however, for the total amount thereof, the Company shall nevertheless indemnify Indemnitee for the portion thereof to which Indemnitee is entitled.

Section 8. Exclusions . Notwithstanding any provision in this Agreement, the Company shall not be obligated under this Agreement to make any indemnification payment in connection with any claim made against Indemnitee:

(a) for which payment has actually been made to or on behalf of Indemnitee under any insurance policy or other indemnity provision, except with respect to any excess beyond the amount paid under any insurance policy or other indemnity provision; or

(b) for (i) an accounting of profits made from the purchase and sale (or sale and purchase) by Indemnitee of securities of the Company within the meaning of Section 16(b) of the Exchange Act or similar provisions of state statutory law or common law, or (ii) any reimbursement of the Company by the Indemnitee of any bonus or other incentive-based or equity-based compensation or of any profits realized by the Indemnitee from the sale of securities of the Company, as required in each case under the Exchange Act, the terms of any other agreement between Indemnitee and the Company or the terms of any compensation plan or policy of the Company; or

(c) except as provided in Section 13(d) of this Agreement, in connection with any Proceeding (or any part of any Proceeding) initiated by Indemnitee, including any Proceeding (or any part of any Proceeding) initiated by Indemnitee against the Company or its directors, officers, employees or other indemnitees, unless (i) the Board authorized the Proceeding (or any part of any Proceeding) prior to its initiation or (ii) the Company provides the indemnification, in its sole discretion, pursuant to the powers vested in the Company under applicable law.

Section 9. Advances of Expenses . Notwithstanding any provision of this Agreement to the contrary (other than Section 13(d)), the Company shall advance, to the extent not prohibited by law, the Expenses incurred by Indemnitee in connection with any Proceeding (or any part of any Proceeding) not initiated by Indemnitee, and such advancement shall be made within thirty (30) days after the receipt by the Company of a statement or statements requesting such advances from time to time, whether prior to or after final disposition of any Proceeding. Advances shall be unsecured and interest free. Advances shall be made without regard to Indemnitee’s ability to repay the Expenses and without regard to Indemnitee’s ultimate entitlement to indemnification under the other provisions of this Agreement. In accordance with Section 13(d), advances shall include any and all reasonable Expenses incurred pursuing an action to enforce this right of advancement, including Expenses incurred preparing and forwarding statements to the Company to support the advances claimed. The Indemnitee shall qualify for advances upon the execution and delivery to the Company of this Agreement, which shall constitute an undertaking providing that the Indemnitee undertakes to repay the amounts advanced (without interest) to the extent that it is ultimately determined that Indemnitee is not entitled to be indemnified by the Company. No other form of undertaking shall be required other than the execution of this Agreement. This Section 9 shall not apply to any claim made by Indemnitee for which indemnity is excluded pursuant to Section 8.

Section 10. Procedure for Notification and Defense of Claim .

(a) Indemnitee shall notify the Company in writing of any matter with respect to which Indemnitee intends to seek indemnification or advancement of Expenses hereunder as soon as reasonably practicable following the receipt by Indemnitee of written notice. The written notification to the Company shall include a description of the nature of the Proceeding and the facts underlying the Proceeding. To obtain indemnification under this Agreement, Indemnitee shall submit to the Company a written request, including such documentation and information as is reasonably available to Indemnitee and is reasonably necessary to determine whether and to what extent Indemnitee is entitled to indemnification following the final disposition of such Proceeding. The omission by Indemnitee to notify the Company hereunder will not relieve the Company from any liability which it may have to Indemnitee under this Agreement or otherwise, and any delay in so notifying the Company shall not constitute a waiver by Indemnitee of any rights under this Agreement. The Chief Executive Officer or Secretary of the Company shall, promptly upon receipt of such a request for indemnification, advise the Board in writing that Indemnitee has requested indemnification.

(b) If the Company shall be obligated to pay the Expenses in connection with any Proceeding against the Indemnitee, the Company shall be entitled to assume and control the defense of such Proceeding (with counsel consented to by the Indemnitee, which consent shall not be unreasonably withheld), upon the delivery to the Indemnitee of written notice of its election to do so. After delivery of such notice, consent to such counsel by the Indemnitee and the retention of such counsel by the Company, the Company will not be liable to the Indemnitee under this Agreement for any fees of separate counsel subsequently incurred by the Indemnitee with respect to the same Proceeding, provided that the reasonable fees and expenses of Indemnitee’s counsel shall be at the expense of the Company if:

(i) The employment of separate counsel by the Indemnitee has been previously authorized by the Company;

(ii) The Indemnitee or counsel selected by the Company shall have concluded that there may be a conflict of interest between the Company and the Indemnitee or among Indemnitees jointly represented in the conduct of any such defense; or

(iii) The Company shall not, in fact, have employed counsel, to which Indemnitee has consented as aforesaid, to assume the defense of such Proceeding.

(c) The Company may participate in the Proceeding at its own expense. The Company will not, without prior written consent of the Indemnitee, effect any settlement of a claim in any threatened or pending Proceeding unless such settlement solely involves the payment of money and includes an unconditional release of the Indemnitee from all liability on any claims that are or were threatened to be made against the Indemnitee in the Proceeding.

Section 11. Procedure Upon Application for Indemnification .

(a) Upon written request by Indemnitee for indemnification pursuant to Section 10(a), a determination, if required by applicable law, with respect to Indemnitee’s entitlement thereto shall be made in the specific case: (i) if a Change in Control shall have occurred, by Independent Counsel in a written opinion to the Board, a copy of which shall be delivered to Indemnitee; or (ii) if a Change in Control shall not have occurred, (A) by a majority vote of the Disinterested Directors, even though less than a quorum of the Board, (B) by a committee of Disinterested Directors designated by a majority vote of the Disinterested Directors, even though less than a quorum of the Board, (C) if there are no such Disinterested Directors or, if such Disinterested Directors so direct, by Independent Counsel in a written opinion to the Board, a copy of which shall be delivered to Indemnitee or (D) if so directed by the Board, by a majority vote of a quorum of shareholders of the Company; and, if it is so determined that Indemnitee is entitled to indemnification, payment to Indemnitee shall be made within ten (10) days after such determination. Indemnitee shall reasonably cooperate with the person, persons or entity making such determination with respect to Indemnitee’s entitlement to indemnification, including providing to such person, persons or entity upon reasonable advance request any documentation or information which is not privileged or otherwise protected from disclosure and which is reasonably available to Indemnitee and reasonably necessary to such determination. Any costs or Expenses (including attorneys’ fees and disbursements) incurred by Indemnitee in so cooperating with the person, persons or entity making such determination shall be borne by the Company (irrespective of the determination as to Indemnitee’s entitlement to indemnification) and the Company indemnifies and agrees to hold Indemnitee harmless from any such costs or Expenses. The Company promptly will advise Indemnitee in writing with respect to any determination that Indemnitee is or is not entitled to indemnification, including a description with specificity of any reason or basis for which indemnification has been denied.

(b) In the event the determination of entitlement to indemnification is to be made by Independent Counsel pursuant to Section 11(a) hereof, the Independent Counsel shall be selected as provided in this Section 11(b). If a Change in Control shall not have occurred, the Independent Counsel shall be selected by the Board, and the Company shall give written notice to Indemnitee advising Indemnitee of the identity of the Independent Counsel so selected. If a Change in Control shall have occurred, the Independent Counsel shall be selected by Indemnitee (unless Indemnitee shall request that such selection be made by the Board, in which event the preceding sentence shall apply), and Indemnitee shall give written notice to the Company advising it of the identity of the Independent Counsel so selected. In either event, Indemnitee or the Company, as the case may be, may, within ten (10) days after such written notice of selection shall have been given, deliver to the Company or to Indemnitee, as the case may be, a written objection to such selection; provided , however , that such objection may be asserted only on the ground that the Independent Counsel so selected does not meet the requirements of “Independent Counsel” as defined in Section 2 of this Agreement, and the objection shall set forth with particularity the factual basis of such assertion. Absent a proper and timely objection, the person so selected shall act as Independent Counsel. If such written objection is so made and substantiated, the Independent Counsel so selected may not serve as Independent Counsel unless and until such objection is withdrawn or a court has determined that such objection is without merit. If, within twenty (20) days after the later of submission by Indemnitee of a written request for indemnification pursuant to Section 10(a) hereof and the final disposition of the Proceeding, no Independent Counsel shall have been selected and not objected to, either the Company or Indemnitee may petition a court for resolution of any objection which shall have been made by the Company or Indemnitee to the other’s selection of Independent Counsel and/or for the appointment as Independent Counsel of a person selected by such court or by such other person as such court shall designate, and the person with respect to whom all objections are so resolved or the person so appointed shall act as Independent Counsel under Section 11(a) of this Agreement. Upon the due commencement of any judicial proceeding or arbitration pursuant to Section 13(a) of this Agreement, Independent Counsel shall be discharged and relieved of any further responsibility in such capacity (subject to the applicable standards of professional conduct then prevailing).

Section 12. Presumptions and Effect of Certain Proceedings .

(a) In making a determination with respect to entitlement to indemnification under this Agreement, the person or persons or entity making such determination shall, to the fullest extent not prohibited by law, presume that Indemnitee is entitled to indemnification under this Agreement if Indemnitee has submitted a request for indemnification in accordance with Section 10(a) of this Agreement, and the Company shall, to the fullest extent not prohibited by law, have the burden of proof to overcome that presumption in connection with the making by any person, persons or entity of any determination contrary to that presumption. Neither the failure of the Company (including by its directors or Independent Counsel) to have made a determination prior to the commencement of any action pursuant to this Agreement that indemnification is proper in the circumstances because Indemnitee has met the applicable standard of conduct, nor an actual determination by the Company (including by its directors or Independent Counsel) that Indemnitee has not met such applicable standard of conduct, shall be a defense to the action or create a presumption that Indemnitee has not met the applicable standard of conduct.

(b) Subject to Section 13(e), if the person, persons or entity empowered or selected under Section 11 of this Agreement to determine whether Indemnitee is entitled to indemnification shall not have made a determination within sixty (60) days after receipt by the Company of the request therefor, the requisite determination of entitlement to indemnification shall, to the fullest extent not prohibited by law, be deemed to have been made and Indemnitee shall be entitled to such indemnification, absent (i) a misstatement by Indemnitee of a material fact, or an omission of a material fact necessary to make Indemnitee’s statement not materially misleading, in connection with the request for indemnification, or (ii) a prohibition of such indemnification under applicable law; provided, however, that such 60-day period may be extended for a reasonable time, not to exceed an additional thirty (30) days, if the person, persons or entity making the determination with respect to entitlement to indemnification in good faith requires such additional time for the obtaining or evaluating of documentation and/or information relating thereto; and provided, further, that the foregoing provisions of this Section 12(b) shall not apply (i) if the determination of entitlement to indemnification is to be made by the shareholders pursuant to Section 11(a) of this Agreement and if (A) within fifteen (15) days after receipt by the Company of the request for such determination the Board has resolved to submit such determination to the shareholders for their consideration at an annual meeting thereof to be held within seventy-five (75) days after such receipt and such determination is made thereat, or (B) a special meeting of shareholders is called within fifteen (15) days after such receipt for the purpose of making such determination, such meeting is held for such purpose within sixty (60) days after having been so called and such determination is made thereat, or (ii) if the determination of entitlement to indemnification is to be made by Independent Counsel pursuant to Section 11(a) of this Agreement.

(c) The termination of any Proceeding or of any claim, issue or matter therein, by judgment, order, settlement or conviction, or upon a plea of nolo contendere or its equivalent, shall not (except as otherwise expressly provided in this Agreement) of itself adversely affect the right of Indemnitee to indemnification or create a presumption that Indemnitee did not act in good faith and in a manner which such person reasonably believed to be in or not opposed to the best interests of the Company or, with respect to any criminal Proceeding, that Indemnitee had reasonable cause to believe that Indemnitee’s conduct was unlawful.

(d) For purposes of any determination of good faith, Indemnitee shall be deemed to have acted in good faith if Indemnitee’s action is based on the records or books of account of the Enterprise, including financial statements, or on information supplied to Indemnitee by the directors or officers of the Enterprise in the course of their duties, or on the advice of legal counsel for the Enterprise or on information or records given or reports made to the Enterprise by an independent certified public accountant or by an appraiser or other expert selected with the reasonable care by the Enterprise. The provisions of this Section 12(d) shall not be deemed to be exclusive or to limit in any way the other circumstances in which the Indemnitee may be deemed to have met the applicable standard of conduct set forth in this Agreement.

(e) The knowledge and/or actions, or failure to act, of any director, officer, trustee, partner, managing member, fiduciary, agent or employee of the Enterprise shall not be imputed to Indemnitee for purposes of determining the right to indemnification under this Agreement.

Section 13. Remedies of Indemnitee .

(a) Subject to Section 13(e), in the event that (i) a determination is made pursuant to Section 11 of this Agreement that Indemnitee is not entitled to indemnification under this Agreement, (ii) advancement of Expenses is not timely made pursuant to Section 9 of this Agreement, (iii) no determination of entitlement to indemnification shall have been made pursuant to Section 11(a) of this Agreement within ninety (90) days after receipt by the Company of the request for indemnification, (iv) payment of indemnification is not made pursuant to Section 5, 6 or 7 or the last sentence of Section 11(a) of this Agreement within ten (10) days after receipt by the Company of a written request therefor, (v) payment of indemnification pursuant to Section 3 or 4 of this Agreement is not made within ten (10) days after a determination has been made that Indemnitee is entitled to indemnification, or (vi) in the event that the Company or any other person takes or threatens to take any action to declare this Agreement void or unenforceable, or institutes any litigation or other action or Proceeding designed to deny, or to recover from, the Indemnitee the benefits provided or intended to be provided to the Indemnitee hereunder, Indemnitee shall be entitled to an adjudication by a court of Indemnitee’s entitlement to such indemnification or advancement of Expenses. Alternatively, Indemnitee, at Indemnitee’s option, may seek an award in arbitration to be conducted by a single arbitrator pursuant to the Commercial Arbitration Rules of the American Arbitration Association. Indemnitee shall commence such proceeding seeking an adjudication or an award in arbitration within 180 days following the date on which Indemnitee first has the right to commence such proceeding pursuant to this Section 13(a); provided , however , that the foregoing clause shall not apply in respect of a proceeding brought by Indemnitee to enforce Indemnitee’s rights under Section 5 of this Agreement. The Company shall not oppose Indemnitee’s right to seek any such adjudication or award in arbitration.

(b) In the event that a determination shall have been made pursuant to Section 11(a) of this Agreement that Indemnitee is not entitled to indemnification, any judicial proceeding or arbitration commenced pursuant to this Section 13 shall be conducted in all respects as a de novo trial, or arbitration, on the merits and Indemnitee shall not be prejudiced by reason of that adverse determination. In any judicial proceeding or arbitration commenced pursuant to this Section 13 the Company shall have the burden of proving Indemnitee is not entitled to indemnification or advancement of Expenses, as the case may be.

(c) If a determination shall have been made pursuant to Section 11(a) of this Agreement that Indemnitee is entitled to indemnification, the Company shall be bound by such determination in any judicial proceeding or arbitration commenced pursuant to this Section 13, absent (i) a misstatement by Indemnitee of a material fact, or an omission of a material fact necessary to make Indemnitee’s statement not materially misleading, in connection with the request for indemnification, or (ii) a prohibition of such indemnification under applicable law.

(d) The Company shall, to the fullest extent not prohibited by law, be precluded from asserting in any judicial proceeding or arbitration commenced pursuant to this Section 13 that the procedures and presumptions of this Agreement are not valid, binding and enforceable and shall stipulate in any such court or before any such arbitrator that the Company is bound by all the provisions of this Agreement. It is the intent of the Company that, to the fullest extent permitted by law, the Indemnitee not be required to incur legal fees or other Expenses associated with the interpretation, enforcement or defense of Indemnitee’s rights under this Agreement by litigation or otherwise because the cost and expense thereof would substantially detract from the benefits intended to be extended to the Indemnitee hereunder. The Company shall, to the fullest extent permitted by law, indemnify Indemnitee against any and all Expenses and, if requested by Indemnitee, shall (within ten (10) days after receipt by the Company of a written request therefor) advance, to the extent not prohibited by law, such Expenses to Indemnitee, which are incurred by Indemnitee in connection with any action brought by Indemnitee for indemnification or advance of Expenses from the Company under this Agreement or under any directors’ and officers’ liability insurance policies maintained

by the Company if, in the case of indemnification, Indemnitee is wholly successful on the underlying claims; if Indemnitee is not wholly successful on the underlying claims, then such indemnification shall be only to the extent Indemnitee is successful on such underlying claims or otherwise as permitted by law, whichever is greater.

(e) Notwithstanding anything in this Agreement to the contrary, no determination as to entitlement of Indemnitee to indemnification under this Agreement shall be required to be made prior to the final disposition of the Proceeding.

Section 14. Non-exclusivity; Survival of Rights; Insurance; Subrogation .

(a) The rights of indemnification and to receive advancement of Expenses as provided by this Agreement shall not be deemed exclusive of any other rights to which Indemnitee may at any time be entitled under applicable law, the Articles, the Bylaws, any agreement, a vote of shareholders or a resolution of directors, or otherwise. No amendment, alteration or repeal of this Agreement or of any provision hereof shall limit or restrict any right of Indemnitee under this Agreement in respect of any action taken or omitted by such Indemnitee in Indemnitee’s Corporate Status prior to such amendment, alteration or repeal. To the extent that a change in the Statutes, whether by statute or judicial decision, permits greater indemnification or advancement of Expenses than would be afforded currently under the Bylaws, Articles and this Agreement, it is the intent of the parties hereto that Indemnitee shall enjoy by this Agreement the greater benefits so afforded by such change. No right or remedy herein conferred is intended to be exclusive of any other right or remedy, and every other right and remedy shall be cumulative and in addition to every other right and remedy given hereunder or now or hereafter existing at law or in equity or otherwise. The assertion or employment of any right or remedy hereunder, or otherwise, shall not prevent the concurrent assertion or employment of any other right or remedy.

(b) To the extent that the Company maintains an insurance policy or policies providing liability insurance for directors, officers, employees, or agents of the Enterprise, Indemnitee shall be covered by such policy or policies in accordance with its or their terms to the maximum extent of the coverage available for any such current or former director, officer, employee or agent under such policy or policies. If, at the time of the receipt of a notice of a claim pursuant to the terms hereof, the Company has director and officer liability insurance in effect, the Company shall give prompt notice of such claim or of the commencement of a Proceeding, as the case may be, to the insurers in accordance with the procedures set forth in the respective policies. The Company shall thereafter take all necessary or desirable action to cause such insurers to pay, on behalf of the Indemnitee, all amounts payable as a result of such Proceeding in accordance with the terms of such policies.

(c) In the event of any payment under this Agreement, the Company shall be subrogated to the extent of such payment to all of the rights of recovery of Indemnitee, who shall execute all papers required and take all action necessary to secure such rights, including execution of such documents as are necessary to enable the Company to bring suit to enforce such rights.

(d) The Company shall not be liable under this Agreement to make any payment of amounts otherwise indemnifiable (or for which advancement is provided under this Agreement) under this Agreement if and to the extent that Indemnitee has otherwise actually received such payment under any insurance policy, contract, agreement or otherwise.

(e) The Company’s obligation to indemnify or advance Expenses under this Agreement to Indemnitee who is or was serving at the request of the Company as a director, officer, trustee, partner, managing member, fiduciary, employee or agent of any other corporation, limited liability company, partnership, joint venture, trust, employee benefit plan or other enterprise shall be reduced by any amount Indemnitee has actually received as indemnification or advancement of Expenses from such other corporation, limited liability company, partnership, joint venture, trust or other enterprise.

Section 15. Duration of Agreement . This Agreement shall continue until and terminate upon the later of: (a) ten (10) years after the date that Indemnitee shall have ceased to serve in any position of Corporate Status or (b) one (1) year after the final termination of any Proceeding then pending in respect of which Indemnitee is granted rights of indemnification or advancement of Expenses hereunder and of any proceeding commenced by Indemnitee pursuant to Section 14 of this Agreement relating thereto. The indemnification and advancement of expenses rights provided by or granted pursuant to this Agreement shall be binding upon and be enforceable by the parties hereto and their respective successors and assigns (including any direct or indirect successor by purchase, merger, consolidation or otherwise to all or substantially all of the business or assets of the Company), shall continue as to an Indemnitee who has ceased to be a director, officer, employee or agent of the Company or of any other Enterprise, and shall inure to the benefit of Indemnitee and Indemnitee’s spouse, assigns, heirs, devisees, executors and administrators and other legal representatives.

Section 16. Severability . If any provision or provisions of this Agreement shall be held to be invalid, illegal or unenforceable for any reason whatsoever: (a) the validity, legality and enforceability of the remaining provisions of this Agreement (including without limitation, each portion of any Section of this Agreement containing any such provision held to be invalid, illegal or unenforceable, that is not itself invalid, illegal or unenforceable) shall not in any way be affected or impaired thereby and shall remain enforceable to the fullest extent permitted by law; (b) such provision or provisions shall be deemed reformed to the extent necessary to conform to applicable law and to give the maximum effect to the intent of the parties hereto; and (c) to the fullest extent possible, the provisions of this Agreement (including, without limitation, each portion of any Section of this Agreement containing any such provision held to be invalid, illegal or unenforceable, that is not itself invalid, illegal or unenforceable) shall be construed so as to give effect to the intent manifested thereby.

Section 17. Enforcement .

(a) The Company expressly confirms and agrees that it has entered into this Agreement and assumed the obligations imposed on it hereby in order to induce Indemnitee to serve as a director, officer or other key agent within the Enterprise, and the Company acknowledges that Indemnitee is relying upon this Agreement in serving in such capacity.

(b) This Agreement constitutes the entire agreement between the parties hereto with respect to the subject matter hereof and supersedes all prior agreements and understandings, oral, written and implied, between the parties hereto with respect to the subject matter hereof; provided, however, that this Agreement is a supplement to and in furtherance of the Articles, the Bylaws and applicable law, and shall not be deemed a substitute therefor, nor to diminish or abrogate any rights of Indemnitee thereunder.

Section 18. Modification and Waiver . No supplement, modification or amendment of this Agreement shall be binding unless executed in writing by the parties hereto. No waiver of any of the provisions of this Agreement shall be deemed or shall constitute a waiver of any other provisions of this Agreement nor shall any waiver constitute a continuing waiver.

Section 19. Notice by Indemnitee . Indemnitee agrees to notify the Company in writing as soon as reasonably practicable upon being served with any summons, citation, subpoena, complaint, indictment, information or other document relating to any Proceeding or matter which may be subject to indemnification or advancement of Expenses covered hereunder. The failure of Indemnitee to so notify the Company shall not relieve the Company of any obligation which it may have to the Indemnitee under this Agreement or otherwise.

Section 20. Notices . All notices, requests, demands and other communications under this Agreement shall be in writing and shall be deemed to have been duly given if (a) delivered by hand and receipted for by the party to whom said notice or other communication shall have been directed, (b) mailed by certified or registered mail with postage prepaid, on the third business day after the date on which it is so mailed, (c) mailed by reputable overnight courier and the courier provides confirmation of delivery to the party to whom said notice or other communication shall have been directed, or (d) sent by email transmission and receipted for by the party to whom said notice or other communication shall have been directed:

(a) If to Indemnitee, at the address indicated on the signature page of this Agreement, or such other address as Indemnitee shall provide to the Company.

(b) If to the Company to:

Stage Stores, Inc.

Attn: Chief Legal Officer

2425 West Loop South

Houston, TX 77027

Email: legalnotices@stagestores.com

or to any other address as may have been furnished to Indemnitee by the Company.

Section 21. Contribution . To the fullest extent permissible under applicable law, if the indemnification provided for in this Agreement is unavailable to Indemnitee for any reason whatsoever, the Company, in lieu of indemnifying Indemnitee, shall contribute to the amount incurred by Indemnitee, whether for judgments, fines, penalties, excise taxes, amounts paid or to be paid in settlement and/or for Expenses, in connection with any claim relating to an indemnifiable event under this Agreement, in such proportion as is deemed fair and reasonable in light of all of the circumstances of such Proceeding in order to reflect (a) the relative benefits received by the Company and Indemnitee as a result of the event(s) and/or transaction(s) giving cause to such Proceeding; and/or (b) the relative fault of the Company (and its directors, officers, employees and agents) and Indemnitee in connection with such event(s) and/or transaction(s).

Section 22. Applicable Law and Consent to Jurisdiction . This Agreement and the legal relations among the parties shall be governed by, and construed and enforced in accordance with, the laws of the State of Nevada, without regard to its conflict of laws rules. The Company and Indemnitee hereby irrevocably and unconditionally (a) agree that any action or proceeding arising out of or in connection with this Agreement shall be brought only in a state or federal court in Harris County, Texas and not any other court, (b) consent to submit to the exclusive jurisdiction of any court in Harris County for purposes of any action or proceeding arising out of or in connection with this Agreement, (c) waive any objection to the laying of venue of any such action or proceeding in any court in Harris County, and (d) waive, and agree not to plead or to make, any claim that any such action or proceeding brought in any court in Harris County has been brought in an improper or inconvenient forum.

Section 23. Identical Counterparts . This Agreement may be executed in one or more counterparts, each of which shall for all purposes be deemed to be an original but all of which together shall constitute one and the same Agreement. Only one such counterpart signed by the party against whom enforceability is sought needs to be produced to evidence the existence of this Agreement.

Section 24. Miscellaneous . The headings of this Agreement are inserted for convenience only and shall not be deemed to constitute part of this Agreement or to affect the construction thereof.

IN WITNESS WHEREOF, the parties have caused this Agreement to be signed as of the day and year first above written.



STAGE STORES, INC.			INDEMNITEE


By:
Name:			Name:
Title:			Address:

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

AS ADOPTED PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002

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.



Date:	December 8, 2016	/s/ Michael L. Glazer
		Michael L. Glazer
		President and 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

AS ADOPTED PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002

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.



Date:	December 8, 2016	/s/ Oded Shein
		Oded Shein
		Executive Vice President,
		Chief Financial Officer and Treasurer

EXHIBIT 32

CERTIFICATION PURSUANT TO

18 U.S.C. SECTION 1350

AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Quarterly Report of Stage Stores, Inc. (the “Company”) on Form 10-Q for the quarter ended October 29, 2016 , as filed with the Securities and Exchange Commission on the date hereof (the “Report”), we, Michael L. Glazer and Oded Shein, President and Chief Executive Officer and Executive Vice President, Chief Financial Officer and Treasurer, 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.



Date:	December 8, 2016	/s/ Michael L. Glazer
		Michael L. Glazer
		President and Chief Executive Officer



	/s/ Oded Shein
	Oded Shein
	Executive Vice President,
	Chief Financial Officer and Treasurer