Exhibit 10.1

 

SETTLEMENT AGREEMENT

 

This SETTLEMENT AGREEMENT, dated April 11, 2019 (this “Agreement”), is by and
among Citi Trends, Inc., a Delaware corporation (the “Company”), Macellum SPV
III, LP, a Delaware limited partnership (“Macellum SPV”), Macellum Management,
LP, a Delaware limited partnership (“Macellum Management”), Macellum Advisors
GP, LLC, a Delaware limited liability company (“Macellum GP”), and Jonathan
Duskin.  Macellum SPV, Macellum Management, MCM GP and Mr. Duskin are
collectively, “Macellum” and each a “Macellum Party”).  The Company and Macellum
are referred to herein collectively as the “Parties” or individually as a
“Party.”

 

RECITALS:

 

WHEREAS, as of the date hereof, Macellum beneficially owns in the aggregate
494,019 shares of the issued and outstanding common stock of the Company, par
value $0.01 per share (“Common Stock”), including 2,397 shares of restricted
Common Stock, which will vest on June 6, 2019, provided Mr. Duskin is a director
of the Company at such time, representing approximately 3.8% of the outstanding
shares of Common Stock;

 

WHEREAS, by letter dated March 8, 2019, Macellum SPV provided notice to the
Company in accordance with the Company’s bylaws (the “Stockholder Nomination”)
of its intention to nominate certain individuals for election to the Company’s
Board of Directors (the “Board”) at the Company’s 2019 annual meeting of
stockholders (the “2019 Annual Meeting”); and

 

WHEREAS, the Company and Macellum have agreed that it is in their mutual
interests to enter into this Agreement to, among other things, set forth certain
agreements concerning the Board and certain other matters as hereinafter
described.

 

AGREEMENT:

 

NOW, THEREFORE, in consideration of the foregoing and reliance upon the mutual
covenants and agreements contained herein, and for other good and valuable
consideration, the receipt and sufficiency of which is hereby acknowledged, the
Parties hereby agree as follows:

 

1.                                      Board Matters.

 

(a)                                 Retirement of Director; Chairman of the
Board.  John S. Lupo, a member of the Board and the current Chairman of the
Board, will not stand for re-election as a member of the Board at the 2019
Annual Meeting.  The Company will announce a new Chairman of the Board to be
effective as of the conclusion of the 2019 Annual Meeting in the Press Release
(as defined in Section 19).

 

(b)                                 Election of New Director.

 

(i)                                     Prior to the mailing of its definitive
proxy statement for the 2019 Annual

 

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Meeting, the Company agrees that the Board and all applicable committees thereof
shall take all necessary actions to nominate Peter R. Sachse (the “New
Director”) for election to the Board at the 2019 Annual Meeting with a term
expiring at the 2020 annual meeting of stockholders of the Company (the “2020
Annual Meeting”).  Upon his election to the Board, the Company will take all
action necessary to appoint the New Director to each standing committee of the
Board; provided that the New Director meets all applicable standards of the
Nasdaq Stock Market (“Nasdaq”) and the Securities and Exchange Commission
(“SEC”) for such membership.  The Board agrees to invite the New Director to
attend all meetings of the Board and all standing committees thereof in a
non-voting observer capacity beginning on May 5, 2019 until his election to the
Board at the 2019 Annual Meeting.  As a non-voting observer, the New Director
will be provided (concurrently with delivery to the directors of the Company and
in the same manner delivery is made to them) copies of all notices, minutes,
consents, and all other materials or information (financial or otherwise) that
are provided to the directors with respect to a meeting or any written consent
in lieu of meeting; provided, however, that the New Director shall agree to hold
in confidence and trust with respect to all information so provided;
and provided further, that the Company reserves the right to withhold any
information and to exclude the New Director from any meeting or portion thereof
pursuant to Section 4(c) or if access to such information or attendance at such
meeting could (A) result in disclosure of trade secrets, (B) adversely affect
the attorney-client privilege between the Company and its counsel or (C) could
result in a conflict of interest.  The observer rights provided for in this
Section 1(b)(i) shall terminate if the New Director fails to be elected at the
2019 Annual Meeting.  Effective as of the date of this Agreement, Jonathan
Duskin shall be re-appointed as a member of the Nominating and Corporate
Governance Committee (the “Nominating Committee”) of the Board.

 

(ii)                                  The Nominating Committee has reviewed and
approved the qualifications of the New Director to serve as a member of the
Board.  In reliance on the information provided to the Company by Macellum and
the New Director, the Board has confirmed that the New Director is “independent”
as defined by the listing standards of Nasdaq and by the SEC.  In connection
with the foregoing, the Board has relied on information that the New Director
has provided to the Company, including information required to be or customarily
disclosed by directors or director candidates in proxy statements or other
filings under applicable law or stock exchange rules or listing standards,
information in connection with assessing eligibility, independence and other
criteria applicable to directors, and the Board has assumed that the director
questionnaire and other customary director onboarding documentation provided by
the New Director is or will be fully completed, true and accurate.

 

(iii)                               If, following the date of this Agreement and
prior to the expiration of the Standstill Period (as defined in Section 3), the
New Director is unable or unwilling to serve as a director for any reason (other
than on account of the failure of the New Director to be elected at the 2019
Annual Meeting) or is removed, Macellum shall have the right to propose and the
Board agrees to expeditiously appoint a replacement director to be appointed to
the Board who meets the Necessary Qualifications (as defined in Section 1(d)) 
(any director appointed as a replacement for the New Director, a “Replacement”);
provided that the Company’s obligations pursuant to this Section 1(b)(iii) shall
terminate at such time as Macellum ceases to have beneficial ownership of at
least 3.0% of the outstanding shares of Common Stock.

 

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(iv)                              For the 2019 Annual Meeting, the Company
agrees to recommend, support and solicit proxies for the election of the New
Director (or any Replacement pursuant to Section 1(b)(iii)) in the same manner
as for other independent director candidates nominated by the Company at the
2019 Annual Meeting.

 

(v)                                 Each Party acknowledges that the New
Director (and any Replacement), upon election to the Board, shall have the same
rights and benefits as any other Board members and shall be governed by and
required to comply with (i) all applicable laws and regulations, and (ii) all of
the same policies, processes, procedures, codes, rules, standards, and
guidelines applicable to members of the Board. For the avoidance of doubt,
Macellum acknowledges that the New Director shall be required to strictly adhere
to the policies on confidentiality imposed on all members of the Board. The New
Director (and any Replacement) shall be required to provide the Company with
such information as reasonably requested from all members of the Board as is
required to be disclosed under applicable law or stock exchange regulations, in
each case as promptly as necessary to enable the timely filing of the Company’s
proxy statement and other periodic reports with the SEC.

 

(c)                                  Appointment of Additional Independent
Director. The Board will work to identify and select an additional candidate
(the “Additional Independent Director”) with the Necessary Qualifications, and
will take all such action as is necessary to increase the size of the Board by
one member and to appoint the Additional Independent Director as a director to
fill the vacancy so created with a term expiring at the 2020 Annual Meeting. 
The Nominating Committee will also consider in good faith qualified candidates
who have been proposed or may be proposed privately to the Company by Macellum. 
The Board will identify, interview, review, select and appoint the Additional
Independent Director no later than September 30, 2019.  The Additional
Independent Director, upon appointment to the Board, shall have the same rights
and benefits as any other Board members and shall be governed by and required to
comply with (i) all applicable laws and regulations, and (ii) all of the same
policies, processes, procedures, codes, rules, standards, and guidelines
applicable to members of the Board. Furthermore, the Additional Independent
Director shall be considered by the Nominating Committee for inclusion on
committees of the Board in good faith in a manner consistent with other members
of the Board, for which purpose his or her respective qualifications and
experience will be reasonably considered.

 

(d)                                 Evaluation Criteria.  In evaluating any
potential director candidates identified pursuant to Section 1(c) or any
Replacement pursuant to Section 1(a)(iii), the Nominating Committee will
evaluate whether each individual candidate (i) has the requisite skill and
experience to serve as a director of a publicly traded company, (ii) has
business experience in such areas as would reasonably be expected to enhance the
overall skills, experience and competence of the Board, (iii) meets the
historical standards and criteria applied by the Company in nominating and
appointing directors, including but not limited to the absence of behavior or
conduct that may be inconsistent with the Company’s policies, codes of conduct
and ethics, corporate governance guidelines or may cause the Company
embarrassment or reputational harm if such behavior or conduct would become
public, (iv) is not prohibited or disqualified from serving as a director of the
Company pursuant to the Company’s bylaws, policies, codes of conduct and ethics,
corporate governance guidelines or any rule or regulation of the SEC, Nasdaq or
by applicable law, (v) qualifies as an “independent director” under the
applicable standards of Nasdaq and by the SEC,

 

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(vi) is not or within the past five years has not been (A) an officer, director,
employee or Affiliate of Macellum or the Company or any of their respective
Affiliates and Associates (as such terms are defined in Section 11) or (B) an
investor owning more than 5% in any Macellum fund or other fund managed by
Mr. Duskin, and (vii) is otherwise reasonably acceptable to the Nominating
Committee after exercising in good faith its fiduciary duties (the “Necessary
Qualifications”).  As part of this assessment process, each of the potential
director candidates will be required to complete a director questionnaire and
undergo a background check as well as provide the Nominating Committee with any
additional information regarding such potential candidate as it deems reasonably
necessary. Any director candidate presented to the Board by the Nominating
Committee will be nominated by the Board as the Additional Independent Director
or a Replacement only if approved by a majority of the entire Board.

 

(e)                                  Size of Board. The Board hereby agrees that
it (i) will not nominate more than seven incumbent directors for re-election at
the 2020 Annual Meeting and (ii) will take all such action as is necessary to
decrease the size of the Board to seven members immediately following the 2020
Annual Meeting unless in connection with nominating directors for the 2020
Annual Meeting the Board and all applicable committees or subcommittees thereof
by unanimous consent agree that the Board will remain at eight directors
following the 2020 Annual Meeting.

 

2.                                      Matters Related to the 2019 Annual
Meeting and Future Annual Meetings.

 

(a)                                 2019 Annual Meeting.  The Company will hold
its 2019 Annual Meeting on June 6, 2019.

 

(b)                                 Withdrawal of Stockholder Nomination. 
Effective as of the execution of this Agreement, Macellum SPV hereby irrevocably
withdraws the Stockholder Nomination and its director nominations in connection
with the 2019 Annual Meeting.  Each Macellum Party shall immediately cease, and
shall cause all of their Affiliates and Associates to cease, any and all
efforts, direct or indirect, in furtherance of the Stockholder Nomination and
any related solicitation.

 

(c)                                  Macellum Voting.  During the Standstill
Period, each Macellum Party shall cause, and shall cause its respective
Affiliates and Associates to cause, all shares of Voting Securities for which
they have the right to vote to be present for quorum purposes and to be voted at
any meeting of stockholders or at any adjournments or postponements thereof, and
to consent in connection with any action by consent in lieu of a meeting, (i) in
favor of each director nominated and recommended by the Board for election at
any such meeting and (ii) against any stockholder nominations for director that
are not approved and recommended by the Board for election at any such meeting
and against any proposals or resolutions to remove any member of the
Board.  During the Standstill Period, each Macellum Party shall also cause, and
shall cause its respective Affiliates and Associates to cause, all Voting
Securities for which they have the right to vote to be present for quorum
purposes and to be voted in accordance with this Section 2(c) at each of the
Company’s annual meetings of stockholders, and any adjournments or postponements
thereof.  During the Standstill Period, not later than five business days prior
to each of the Company’s annual meetings of stockholders, each Macellum Party
shall vote in accordance with this Section 2(c) and shall not revoke or change
any such vote.

 

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3.                                      Termination. This Agreement will remain
in full force and effect and will be fully binding on the parties hereto in
accordance with the provisions hereof until completion of the 2020 Annual
Meeting (the “Standstill Period”); provided, however, that the Board shall
provide the Representative with a notice at least 30 days before the last day on
which a stockholder of the Company may submit nominations for the Board in
connection with the 2020 Annual Meeting pursuant to the advance notice
provisions for nominations of directors contained in the Company’s bylaws (the
“Notice Date”) as to whether the Board will nominate Mr. Duskin, the New
Director and the Additional Independent Director (the “Subject Directors”) for
re-election at the 2020 Annual Meeting, and if the Board does not nominate any
of the Subject Directors for re-election at the 2020 Annual Meeting (other than
as a result of such Subject Directors refusing or declining to serve as a
nominee), the Standstill Period shall expire as of the Notice Date. Section 9
and Section 12 will survive any termination of this Agreement.

 

4.                                      Standstill.

 

(a)                                 Abstention from Certain Actions. Each
Macellum Party agrees that, following the date of this Agreement and prior to
the expiration of the Standstill Period, without the prior written consent of
the Board specifically expressed in a written resolution adopted by a majority
vote of the entire Board, it will not, and will cause each of its Affiliates,
Associates, officers, agents and other Persons (as such terms are defined in
Section 11) acting on its behalf not to, directly or indirectly, in any manner,
alone or in concert with others:

 

(i)                                     nominate any person for appointment to
the Board or election at any annual meeting of the stockholders of the Company
held between the date hereof and the expiration of the Standstill Period, submit
any proposal for consideration at, or bring any other business before, any
annual meeting of the stockholders of the Company held between the date hereof
and the expiration of the Standstill Period, or initiate, encourage or
participate in any “withhold” or similar campaign with respect to any annual
meeting of the stockholders of the Company held between the date hereof and the
expiration of the Standstill Period, or take any such actions at any special
meeting of the stockholders of the Company held between the date hereof and the
expiration of the Standstill Period;

 

(ii)                                  engage, or in any way participate,
directly or indirectly, in any “solicitation” (as such term is defined in
Rule 14a-1(l) promulgated by the SEC under the Securities Exchange Act of 1934,
as amended (the “Exchange Act”)) of proxies or written consents (whether or not
relating to the election or removal of directors), or otherwise become a
“participant in a solicitation” (as such term is defined in Instruction 3 of
Schedule 14A of Regulation 14A under the Exchange Act) in opposition to the
recommendation or proposal of the Board, or seek to advise, encourage or
influence any Person with respect to the voting of any Voting Securities;
initiate, propose or otherwise “solicit” (as such term is defined in
Rule 14a-1(l) promulgated by the SEC under the Exchange Act) stockholders of the
Company for the approval of shareholder proposals whether made pursuant to
Rule 14a-8 or Rule 14a-4 under the Exchange Act or otherwise; induce or attempt
to induce any other Person to initiate any such shareholder proposal; otherwise
communicate or seek to communicate with the Company’s stockholders or others
pursuant to Rule 14a-1(l)(2)(iv) under the Exchange Act; or seek to advise,
encourage, support or influence any

 

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Person with respect to the voting of any Voting Securities at any annual or
special meeting of stockholders (other than such encouragement, support or
influence that is consistent with Company’s management or the Board’s
recommendation in connection with such matter);

 

(iii)                               form, join or in any way participate in any
“group” (within the meaning of Rule 13d-5 of Regulation 13D-G and
Section 13(d)(3) of the Exchange Act) with respect to any Voting Securities,
other than a “group” that includes all or some lesser number of the Macellum
Parties, but does not include any other members who are not currently identified
as a Macellum Party other than an Affiliate of a Macellum Party who agrees to be
bound by the terms and conditions of this Agreement;

 

(iv)                              deposit any Voting Securities in any voting
trust or subject any Voting Securities to any arrangement or agreement with
respect to the voting of any Voting Securities, except as expressly set forth in
this Agreement (other than such voting trust, arrangement or agreement among
Macellum and any of its Affiliates who are bound by the terms and conditions of
this Agreement);

 

(v)                                 seek to have called, or cause to be called,
any meeting of stockholders of the Company;

 

(vi)                              seek, propose, make any statement with respect
to, or participate in any way in, or solicit, negotiate with, or provide any
information to any Person with respect to, a merger, acquisition, consolidation,
acquisition of control or other business combination, tender or exchange offer,
purchase, sale or transfer of assets or securities, dissolution, liquidation,
reorganization, spinoff, splitoff, restructuring, change in capital structure,
recapitalization, dividend, share repurchase or similar transaction involving
the Company, its subsidiaries or its business, whether or not any such
transaction involves a change of control of the Company (it being understood
that the foregoing shall not prohibit any Macellum Party from acquiring or
disposing of Common Stock within the limitations set forth in
Section 4(a)(xi) and Section 4(a)(xii));

 

(vii)                           institute, commence, solicit, encourage, support
or join any litigation, arbitration or other proceeding (including a derivative
action) against the Company, its current or former directors or officers,
including any action challenging the validity or enforceability of this
Agreement or this Section 4, or make any demand for a list of the Company’s
stockholders or to inspect the books and records of the Company, including
pursuant to any statutory right that any Macellum Party may have (except any
such litigation against the Company as may be necessary to enforce the terms of
this Agreement) provided, however, that the foregoing shall not prevent any
Macellum Party from (A) making counterclaims with respect to any proceeding
initiated by, or on behalf of, the Company against a Macellum Party or
(B) responding to or complying with a validly issued legal process that neither
a Macellum Party nor any of its Affiliates initiated, encouraged or facilitated;

 

(viii)                        seek, alone or in concert with others,
representation on the Board;

 

(ix)                              seek the removal of any member of the Board, a
change in the size, structure

 

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or composition of the Board, a change in executive officers of the Company or a
change to the policies and procedures of the Company, except as specifically
contemplated in this Agreement;

 

(x)                                 make any public proposals for changes in or
recommendations concerning the Company’s strategies, extraordinary or other
transactions, the Board or management items, or other matters relating to the
Company’s business;

 

(xi)                              acquire, offer or propose to acquire, or agree
to acquire (except by way of stock dividends or other distributions or offerings
made available to holders of Voting Securities generally on a pro rata basis,
provided that any such securities so received will be subject to the provisions
hereof), directly or indirectly, whether by purchase, tender or exchange offer,
through the acquisition of control of another Person, by joining a partnership,
limited partnership, syndicate or other “group” (within the meaning of
Rule 13d-5 of Regulation 13D-G and Section 13(d)(3) of the Exchange Act) or
otherwise, any Voting Securities, or otherwise become the economic owner (as
such term is defined in Section 11) of any such securities, if after giving
effect to such acquisition it (by itself or together with any other Macellum
Party, its respective Affiliates and Associates and any other Person with whom
it, such other Macellum Party or any such Affiliate or Associate has any
agreement, understanding or arrangement with respect to Voting Securities) would
be the beneficial owner or economic owner of more than 9.9% of the Company’s
outstanding Voting Securities. For the purposes of computing the beneficial
ownership at the time of any purchase, the number of outstanding Voting
Securities will be determined by the latest available Company filing with the
SEC;

 

(xii)                           other than in sale transactions on Nasdaq or
through a broker or dealer where the identity of the purchaser is not known,
sell or agree to sell, directly or indirectly, through swap or hedging
transactions or otherwise, any securities of the Company or any derivatives
relating to securities of the Company to any third party that (A) has filed a
Schedule 13D with respect to the Company or (B) will as a result of the
transaction have beneficial ownership of more than 5% of any Voting Securities;
or

 

(xiii)                        make any proposal, statement or inquiry, or
disclose any intention, plan or arrangement (whether written or oral)
inconsistent with the foregoing, or make or publicly disclose any request to
amend, waive or terminate any provision of this Agreement.

 

Notwithstanding the foregoing, nothing in this Section 4(a) or elsewhere in this
Agreement shall prohibit or restrict (A) Mr. Duskin, in his capacity as a member
of the Board, from communicating privately with the Board or any officer or
director of the Company, regarding any matter, so long as such communications
are not intended to, and would not reasonably be expected to, require any public
disclosure of such communications and are otherwise in accordance with the
Company’s practices and policies or (B) Macellum from: (i) taking any action
necessary to comply with any law, rule or regulation or any action required by
any governmental or regulatory authority or stock exchange that has, or may
have, jurisdiction over any Macellum Party or any of their respective Affiliates
or Associates, provided that a breach by any Macellum Party of this Agreement is
not the cause of the applicable requirement, (ii) privately communicating to any
of Macellum’s potential investors or investors in a manner that (I) is
consistent with ordinary course communications with their investors or potential
investors, (II) is not intended to result in public

 

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dissemination, (III) does not otherwise violate any applicable laws and (IV) is
limited to publicly-available information, or (iii) privately communicating to
any shareholders of the Company and others in a manner that (I) does not
otherwise violate any provision of this Agreement (including, for the avoidance
of doubt, this Section 4(a)), (II) does not otherwise violate any applicable
laws, (III) is limited to publicly-available information, (IV) is consistent
with the Company’s practices and policies regarding stockholder communications,
including its policies regarding the communications by board members with the
Company’s stockholders, and (V) is not initiated by any Macellum Party.

 

(b)                                 Fiduciary Duties. Nothing in Section 4(a) or
elsewhere in this Agreement shall be deemed to limit in any respect the exercise
in good faith by any director of the Company of their fiduciary duties solely in
their capacity as directors of the Company (it being understood that Macellum
shall not seek to do indirectly through any director anything that would be
inconsistent with Macellum’s obligations under this Agreement).

 

(c)                                  Enforcement of Agreement.  Macellum agrees
that the Board or any applicable committee or subcommittees thereof, in the
exercise of its fiduciary duties, may recuse the New Director and Mr. Duskin
from the portion of any Board or committee or subcommittee meeting at which the
Board or any such committee or subcommittee is evaluating and/or taking action
with respect to (i) Macellum’s ownership of Common Stock, (ii) the exercise of
any of the Company’s rights or enforcement of any of the obligations under this
Agreement, (iii) any action taken in response to actions taken by Macellum or
its Affiliates with respect to the Company or (iv) any transaction with Macellum
or its Affiliates.

 

5.                                      Representations and Warranties of
Macellum.  Each Macellum Party represents and warrants as follows:

 

(a)                                 Each Macellum Party has the power and
authority to execute, deliver and carry out the terms and provisions of this
Agreement and to consummate the transactions and perform its obligations
contemplated hereby.

 

(b)                                 This Agreement has been duly and validly
authorized, executed and delivered by each Macellum Party, constitutes a valid
and binding obligation and agreement of each Macellum Party, and is enforceable
against each Macellum Party in accordance with its terms.

 

(c)                                  This Agreement will not result in a
violation of any terms or conditions of any agreements to which such Macellum
Party is a party or by which such Macellum Party may otherwise be bound or of
any law, rule, license, regulation, judgment, order or decree governing or
affecting such Macellum Party.

 

(d)                                 No Macellum Party is a party to any
agreement, arrangement or understanding with any Person (other than another
Macellum Party) with respect to the securities, management or control of the
Company.

 

(e)                                  Macellum, together with its Affiliates and
Associates, are beneficial owners and/or economic owners, directly or
indirectly, of an aggregate of shares of Common Stock as set forth

 

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by beneficial owner and amount on Exhibit A attached hereto and such shares of
Common Stock constitute all of the Voting Securities of the Company owned by
each Macellum Party and its respective Affiliates and Associates.

 

6.             Representations and Warranties of the Company.  The Company
hereby represents and warrants as follows:

 

(a)           The Company has the corporate power and authority to execute,
deliver and carry out the terms and provisions of this Agreement and to
consummate the transactions and perform its obligations contemplated hereby.

 

(b)           This Agreement has been duly and validly authorized, executed and
delivered by the Company, constitutes a valid and binding obligation and
agreement of the Company, and is enforceable against the Company in accordance
with its terms.

 

(c)           This Agreement will not result in a violation of any terms or
conditions of any agreements to which the Company is a party or by which the
Company may otherwise be bound or of any law, rule, license, regulation,
judgment, order or decree governing or affecting the Company.

 

7.             Non-Disparagement and Confidentiality.

 

(a)           Each Macellum Party agrees that, during the Standstill Period, it
will not, and it will cause each of its Affiliates and Associates not to,
directly or indirectly, in any capacity or manner, make, express, transmit,
speak, write, verbalize or otherwise communicate in any way (or cause, further,
assist, solicit, encourage, support or participate in any of the foregoing), any
remark, comment, message, information, declaration, communication or other
statement of any kind, whether verbal, in writing, electronically transferred or
otherwise, (i) publicly, or in the case of any of the foregoing with customers,
suppliers, stockholders or employees of the Company, publicly or privately, that
might reasonably be construed to be derogatory or critical of, or negative
toward, the Company or any of its directors, officers, Affiliates, subsidiaries,
employees, agents or representatives (collectively, the “Company
Representatives”), or (ii) that reveals, discloses, incorporates, is based upon,
discusses, includes or otherwise involves any confidential or proprietary
information of the Company or its subsidiaries or Affiliates, or (iii) publicly,
or in the case of any of the foregoing with customers, suppliers, stockholders
or employees of the Company, publicly or privately, to malign, harm, disparage,
defame or damage the reputation or good name of the Company, its business or any
of the Company Representatives. For the avoidance of doubt, Macellum shall not
be prohibited by the foregoing from privately discussing with other stockholders
of the Company facts about the Company and the Company Representatives that have
been publicly disclosed by the Company so long as Macellum does not provide
commentary with respect to such facts that might reasonably be construed to be
derogatory or critical of, or negative toward, the Company or the Company
Representatives and such discussions are not reasonably expected to be made
public.

 

(b)           The Company hereby agrees that, during the Standstill Period, it
will not, and it will cause each of its Affiliates not to, directly or
indirectly, in any capacity or manner, make,

 

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express, transmit, speak, write, verbalize or otherwise communicate in any way
(or cause, further, assist, solicit, encourage, support or participate in any of
the foregoing), any remark, comment, message, information, declaration,
communication or other statement of any kind, whether verbal, in writing,
electronically transferred or otherwise, (i) publicly, or in the case of any of
the foregoing with customers, suppliers, stockholders or employees of the
Company, publicly or privately, that might reasonably be construed to be
derogatory or critical of, or negative toward, any Macellum Party or any of its
agents or representatives (collectively, the “Macellum Representatives”), or
(ii) that reveals, discloses, incorporates, is based upon, discusses, includes
or otherwise involves any confidential or proprietary information of any
Macellum Party or its subsidiaries or Affiliates, or (iii) publicly, or in the
case of any of the foregoing with customers, suppliers, stockholders or
employees of the Company, publicly or privately, to malign, harm, disparage,
defame or damage the reputation or good name of any Macellum Party or any of the
Macellum Representatives.

 

(c)           Notwithstanding the foregoing, nothing in this Section 7 or
elsewhere in this Agreement shall prohibit any Party from making any statement
or disclosure required under the federal securities laws or other applicable
laws; provided, that such Party must provide written notice to the other Parties
at least two business days prior to making any such statement or disclosure
required under the federal securities laws or other applicable laws that would
otherwise be prohibited by the provisions of this Section 7, and reasonably
consider any comments of such other Parties.

 

(d)           The limitations set forth in Section 7(a) and Section 7(b) shall
not prevent any Party from responding to any public statement made by the other
Parties of the nature described in Section 7(a) and Section 7(b) if such
statement by the other Party was made in breach of this Agreement.

 

8.             Specific Performance.  Each of Macellum, on the one hand, and the
Company, on the other hand, acknowledges and agrees that irreparable injury to
the other Party would occur in the event any of the provisions of this Agreement
were not performed in accordance with their specific terms or were otherwise
breached and that such injury would not be adequately compensable in damages. 
It is accordingly agreed that Macellum, on the one hand, and the Company, on the
other hand (the “Moving Party”), will each be entitled to specific enforcement
of, and injunctive relief to prevent any violation of, the terms hereof and the
other Party will not take action, directly or indirectly, in opposition to the
Moving Party seeking such relief on the grounds that any other remedy or relief
is available at law or in equity.  This Section 8 is not the exclusive remedy
for any violation of this Agreement.

 

9.             Forum and Governing Law.  In the event that any action will be
brought in equity to enforce the provisions of this Agreement, no Party will
allege, and each Party hereby waives the defense, that there is an adequate
remedy at law.  Furthermore, each of the Parties (a) consents to submit itself
to the personal jurisdiction of the Court of Chancery or other federal or state
courts of the State of Delaware in the event any dispute arises out of this
Agreement or the transactions or obligations contemplated by this Agreement,
(b) agrees that it shall not attempt to deny or defeat such personal
jurisdiction by motion or other request for leave from any such court,
(c) agrees that it shall not bring any action relating to this Agreement or the
transactions contemplated by this Agreement in any court other than the Court of
Chancery or other federal or state courts of the

 

10

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

 

State of Delaware, (d) irrevocably waives the right to trial by jury, (e) agrees
to waive any bonding requirement under any applicable law, in the case any other
Party seeks to enforce the terms by way of equitable relief and (f) irrevocably
consents to service of process by a reputable overnight mail delivery service,
signature requested, to the address of such Party’s principal place of business
or as otherwise provided by applicable law. THIS AGREEMENT SHALL BE GOVERNED IN
ALL RESPECTS, INCLUDING VALIDITY, INTERPRETATION AND EFFECT, BY THE LAWS OF THE
STATE OF DELAWARE APPLICABLE TO CONTRACTS EXECUTED AND TO BE PERFORMED WHOLLY
WITHIN SUCH STATE WITHOUT GIVING EFFECT TO THE CHOICE OF LAW PRINCIPLES OF SUCH
STATE.

 

10.          No Waiver.  All waivers of this Agreement shall be in writing. Any
waiver by either the Representative (as hereinafter defined), on behalf of any
Macellum Party, or the Company of a breach of any provision of this Agreement
shall not operate as or be construed to be a waiver of any other breach of such
provision or of any breach of any other provision of this Agreement. The failure
of either the Representative or the Company to insist upon strict adherence to
any term of this Agreement on one or more occasions shall not be considered a
waiver or deprive that party of the right thereafter to insist upon strict
adherence to that term or any other term of this Agreement.

 

11.          Certain Definitions.  As used in this Agreement, (a) the term
“Person” will mean any individual, partnership, corporation, group, syndicate,
trust, government or agency, or any other organization, entity or enterprise;
(b) the terms “Affiliates” and “Associates” will have the meanings set forth in
Rule 12b-2 under the Exchange Act, and will include Persons who become
Affiliates or Associates of any Person subsequent to the date hereof; (c) the
term “Voting Securities” will mean any securities of the Company entitled, or
which may be entitled, to vote in the election of directors, or securities
convertible into or exercisable or exchangeable for such securities, whether or
not subject to passage of time or other contingencies; (d) the terms “beneficial
owner” and “beneficially own” have the same meanings as set forth in Rule 13d-3
promulgated by the SEC under the Exchange Act; and (e) the terms “economic
owner” and “economically own” will have the same meanings as “beneficial owner”
and “beneficially own,” except that a Person will also be deemed to economically
own and to be the economic owner of (i) all shares of the Common Stock that such
Person has the right to acquire pursuant to the exercise of any rights in
connection with any securities or any agreement, regardless of when such rights
may be exercised and whether they are conditional and (ii) all shares of Common
Stock in which the Person has any economic interest, including, without
limitation, pursuant to a cash-settled call option or other derivative security,
contract or instruction in any way related to the price of shares of Common
Stock.

 

12.          Notices.  All notices, consents, requests, instructions, approvals
and other communications provided for herein and all legal process in regard
hereto will be in writing and will be deemed validly given, made or served, if
(a) given by e-mail, when email is sent to the e-mail address set forth below or
(b) if given by any other means, when actually received during normal business
hours at the address specified in this subsection:

 

If to the Company:

 

Citi Trends, Inc.

 

 

104 Coleman Boulevard

 

11

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Savannah, Georgia 31408

 

 

Attn: Bruce D. Smith, President and Chief Executive Officer

 

 

E-mail: bsmith@cititrends.com

 

 

 

with a copy to:

 

Alston & Bird LLP

 

 

950 F Street NW

 

 

Washington, DC 20004

 

 

Attn: Julie A. Mediamolle

 

 

E-mail: julie.mediamolle@alston.com

 

 

 

If to Macellum

 

 

or the Representative:

 

Macellum Advisors GP, LLC

 

 

99 Hudson Street, 5th Floor

 

 

New York, NY 10013

 

 

Attention: Jonathan Duskin

 

 

E-mail: Jduskin@macellumcap.com

 

 

 

with a copy to:

 

Olshan Frome Wolosky LLP

 

 

1325 Avenue of the Americas

 

 

New York, New York 10019

 

 

Attention: Elizabeth Gonzalez-Sussman

 

 

E-mail: EGonzalez@olshanlaw.com

 

or to such other address as the person to whom notice is given may have
previously furnished to the others in writing in the manner set forth above.

 

13.          Severability.  If any provision of this Agreement shall be held by
any court of competent jurisdiction to be illegal, void or unenforceable, such
provision shall be of no force and effect, but the illegality or
unenforceability of such provision shall have no effect upon the legality or
enforceability of any other provision of this Agreement.

 

14.          Counterparts.  This Agreement may be executed in counterparts, each
of which will be an original, but all of which together will constitute one and
the same Agreement.

 

15.          Successors or Assigns.  Neither this Agreement nor any right,
interest or obligation hereunder may be assigned by any Party without the prior
written consent of the other Parties and any attempt to do so will be void. 
Subject to the preceding sentence, this Agreement is binding upon, inures to the
benefit of and is enforceable by the Parties and their respective successors and
assigns.

 

16.          Entire Agreement; Amendments.  This Agreement contains the entire
understanding of the Parties with respect to the subject matter hereof.  There
are no restrictions, agreements, promises, representations, warranties,
covenants or undertakings between or among the Parties other than those
expressly set forth herein.  This Agreement may be amended only by a written
instrument duly executed by the Parties or their respective successors or
assigns.

 

12

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17.          Fees and Expenses.  Within five business days following the date
hereof, the Company will reimburse Macellum, by certified check or wire transfer
of immediately available funds, for its reasonable, documented out-of-pocket
costs, fees and expenses incurred and paid by Macellum in connection with the
Company’s 2017 annual meeting of stockholders, the 2019 Annual Meeting and the
negotiation and execution of this Agreement; provided, that such reimbursement
shall not exceed $500,000.  An officer of Macellum Capital Management, LLC shall
certify to the Company in writing that such funds were solely used to cover the
out-of-pocket costs, fees and expenses incurred by Macellum in connection with
the matters described in the preceding sentence.  Except as provided in this
Section 17, neither the Company, on the one hand, nor Macellum on the other
hand, will be responsible for any costs, fees or expenses of the other in
connection with this Agreement or in connection with the proxy solicitation
relating to the 2019 Annual Meeting and related matters.

 

18.          Interpretation and Construction.  Each of the Parties acknowledges
that it has been represented by counsel of its choice throughout all
negotiations that have preceded the execution of this Agreement, and that it has
executed the same with the advice of said independent counsel.  Each Party and
its counsel cooperated and participated in the drafting and preparation of this
Agreement and the documents referred to herein, and any and all drafts relating
thereto exchanged among the Parties will be deemed the work product of all of
the Parties and may not be construed against any Party by reason of its drafting
or preparation.  Accordingly, any rule of law or any legal decision that would
require interpretation of any ambiguities in this Agreement against any Party
that drafted or prepared it is of no application and is hereby expressly waived
by each of the Parties, and any controversy over interpretations of this
Agreement will be decided without regards to events of drafting or preparation. 
The section headings contained in this Agreement are for reference purposes only
and will not affect in any way the meaning or interpretation of this Agreement. 
The term “including” will be deemed to mean “including without limitation” in
all instances.

 

19.          Press Release. Promptly following the execution of this Agreement,
the Company and Macellum shall issue a mutually agreeable press release (the
“Press Release”) announcing this Agreement, substantially in the form attached
to this Agreement as Exhibit B. Prior to the issuance of the Press Release,
neither the Company nor any Macellum Party shall issue any press release or make
any public announcement regarding this Agreement or take any action that would
require public disclosure relating to such action without the prior written
consent of the other Party. No Party or any of its Affiliates shall make any
public statement (including, without limitation, in any filing required under
the Exchange Act) concerning the subject matter of this Agreement inconsistent
with the Press Release.

 

20.          Macellum Representative.  Macellum hereby irrevocably appoints
Jonathan Duskin as its attorney-in-fact and representative (the
“Representative”), in its place and stead, to do any and all things and to
execute any and all documents and give and receive any and all waivers, notices
or instructions in connection with this Agreement.  The Company will be entitled
to rely, as being binding on Macellum, upon any action taken by the
Representative or upon any document, notice, instruction or other writing given
or executed by the Representative.

 

[The remainder of this page intentionally left blank]

 

13

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IN WITNESS WHEREOF, each of the undersigned parties has executed or caused this
Agreement to be executed on its behalf on the date first above written.

 

 

CITI TRENDS, INC.

 

 

 

By:

/s/ Bruce D. Smith

 

Name:

Bruce D. Smith

 

Title:

President and Chief Executive Officer

 

Signature Page — Settlement Agreement

 

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

 

 

MACELLUM SPV III, LP

 

 

 

By:

Macellum Advisors GP, LLC,

 

 

its general partner

 

 

 

 

By:

/s/ Jonathan Duskin

 

Name:

Jonathan Duskin

 

Title:

Sole Member

 

 

 

 

 

 

 

MACELLUM MANAGEMENT LP

 

 

 

 

By:

Macellum Advisors GP, LLC,

 

 

its general partner

 

 

 

By:

/s/ Jonathan Duskin

 

Name:

Jonathan Duskin

 

Title:

Sole Member

 

 

 

 

 

 

 

MACELLUM ADVISORS GP, LLC

 

 

 

 

By:

/s/ Jonathan Duskin

 

Name:

Jonathan Duskin

 

Title:

Sole Member

 

 

 

 

 

/s/ Jonathan Duskin

 

Jonathan Duskin

 

Signature Page — Settlement Agreement

 

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Exhibit A

 

Macellum Ownership

 

Owner

 

Beneficially
Owned(1)

 

Economically
Owned

 

Percent of
Class

 

Macellum SPV III, LP (“Macellum SPV”)

 

489,010 shares of Common Stock

 

 

 

3.8

%

Macellum Management, LP

 

As the investment manager of Macellum SPV, 489,010 shares of Common Stock

 

 

 

3.8

%

Macellum Advisors GP, LLC (“Macellum GP”)

 

As the general partner of Macellum SPV, 489,010 shares of Common Stock

 

 

 

3.8

%

Jonathan Duskin

 

As the sole member of Macellum GP, 489,010 shares of Common Stock.

Mr. Duskin also beneficially owns 5,009 shares of Common Stock directly,
including 2,397 shares of restricted stock awarded to Mr. Duskin in his capacity
as a director of the Company, which will vest on June 6, 2019, provided
Mr. Duskin is a director of the Company at such time (as reported elsewhere in
this table)

 

2,397 shares of restricted stock awarded to Mr. Duskin in his capacity as a
director of the Company, which will vest on June 6, 2019, provided Mr. Duskin is
a director of the Company at such time

 

3.8

%

 

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

(1)  As a member of a “group” for purposes of Section 13(d)(3) of the Securities
Exchange Act of 1934, as amended, each of the Persons in the table above may be
deemed to beneficially own the 494,019 shares of Common Stock owned collectively
by all members of the Section 13(d) group, including 2,397 shares of restricted
stock awarded to Mr. Duskin in his capacity as a director of the Company, which
will vest on June 6, 2019, provided Mr. Duskin is a director of the Company at
such time . Each of the Persons above disclaims beneficial ownership of such
shares of Common Stock owned by the other members of the Section 13(d) group
except to the extent of his or its pecuniary interest therein.

 

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

 

Exhibit B

Press Release

 

Citi Trends Reaches Agreement with Macellum

 

Peter R. Sachse to be Nominated to Stand for Election at the 2019 Annual Meeting

 

John S. Lupo to Retire from the Board; Brian P. Carney to be Chairman After the
2019 Meeting

 

Nominating and Corporate Governance Committee to Initiate Search for

Additional Qualified Independent Director

 

Macellum Agrees to Standstill Provisions through 2020 Annual Meeting

 

SAVANNAH, Ga. — April 11, 2019 — Citi Trends, Inc. (NASDAQ: CTRN) (“Citi Trends”
or “the Company”) today announced that it has entered into an agreement with
Macellum SPV III, LP (“Macellum”), pursuant to which the Board intends to
nominate Peter R. Sachse to stand for election at the 2019 Annual Meeting of
Stockholders (“2019 Annual Meeting”) with a term expiring at the 2020 Annual
Meeting of Stockholders (“2020 Annual Meeting”). The Company also announced that
John S. Lupo will retire from the Board and not stand for re-election at the
2019 Annual Meeting. Following Mr. Lupo’s retirement and effective as of the
conclusion of the 2019 Annual Meeting, Brian P. Carney will serve as Chairman of
the Board.

 

Citi Trends also today announced that the Nominating and Corporate Governance
Committee will undergo a search for an additional independent director to be
identified no later than September 30, 2019. Upon the identified individual
being appointed to the Board, the Board will increase from seven to eight
members. The Board expects to reduce the size of the Board back to seven members
at the 2020 Annual Meeting, unless its members unanimously agree to remain at
eight directors.

 

Mr. Sachse brings to Citi Trends more than three decades of experience at
Macy’s, Inc. in various positions, including Chief Growth Officer, Chief of
Innovation and Business Development, Chief Stores Officer, Chief Marketing
Officer and President of Corporate Marketing. In addition, Mr. Sachse served as
Chairman and Chief Executive Officer of the macys.com division of Macy’s, Inc.
and was involved in launching Macy’s successful off-price concept Back Stage.
From February 2010 to December 2018 and from October 2006 to April 2007,
Mr. Sachse served as a director of XO Group Inc., a media and technology company
that provides content, tools, products and services for couples who are planning
weddings, creating a home, and starting a family. Mr. Sachse also previously
served as a director of Charitybuzz Inc., a for-profit internet company that
raises funds for nonprofit organizations through online charity auctions with
celebrities and brands from 2012 until 2015. Prior to serving in these roles,
Mr. Sachse was President and Chief Operating Officer of The Bon Marche, a
department store chain launched in Seattle.

 

“We have made significant progress over the last several years on our strategic
plan to grow the business, increase our profitability and provide meaningful
returns to our stockholders,” said Bruce Smith, Chief Executive Officer of Citi
Trends. “Our agreement with Macellum underscores our commitment to adding
qualified directors who can help drive long-term stockholder value. We look
forward to welcoming Peter to the Board and benefiting from his decades of
retail experience as we continue to focus on improving our merchandising,
planning and allocation, while driving efficiencies, reducing costs and
optimizing our store footprint.”

 

“On behalf of the entire Board and management team, I want to thank John for his
valuable contributions to Citi Trends over the last 15 years, including in his
role as Chairman,” said Mr. Carney.

 

“We are pleased we could reach this agreement with the Company,” said Jonathan
Duskin, sole member of Macellum Advisors GP, LLC and current member of the Citi
Trends Board. “Citi Trends is a great company with significant value potential,
and we are confident that the addition of Peter, together with a director we
will identify through a search process, will bring fresh perspectives and added
expertise to the Board.”

 

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

 

Under the terms of the agreement, Macellum has agreed to withdraw its slate of
nominees and will vote all of its shares in favor of all of the Board’s
nominees. Further, Macellum has agreed to standstill provisions through the 2020
Annual Meeting; provided that the Company agrees to nominate Mr. Duskin,
Mr. Sachse and the additional independent director to be identified at the 2020
Annual Meeting.

 

This agreement will be filed on a Form 8-K with the U.S. Securities and Exchange
Commission.

 

About Citi Trends

 

Citi Trends, Inc. is a value-priced retailer of urban fashion apparel and
accessories for the entire family. The Company operates 562 stores located in 32
states. Citi Trends’ website address is www.cititrends.com. CTRN-G

 

Forward-Looking Statements

 

All statements other than historical facts contained in this news release,
including statements regarding our future financial results and position,
business policy and plans, objectives of management for future operations and
our intentions and ability to pay dividends and complete any share repurchase
authorizations, are forward-looking statements that are subject to material
risks and uncertainties. The words “believe,” “may,” “could,” “plans,”
“estimate,” “continue,” “anticipate,” “intend,” “expect” and similar
expressions, as they relate to Citi Trends, are intended to identify
forward-looking statements, although not all forward-looking statements contain
such language. Investors are cautioned that any such forward-looking statements
are not guarantees of future performance or results and are inherently subject
to risks and uncertainties, some of which cannot be predicted or quantified.
Actual results or developments may differ materially from those included in the
forward-looking statements as a result of various factors which are discussed in
Citi Trends filings with the U.S. Securities and Exchange Commission (the
“SEC”), including those set forth under the heading “Item 1A. Risk Factors” in
the Company’s Annual Report on Form 10-K for the fiscal year ended February 3,
2018. These risks and uncertainties include, but are not limited to,
uncertainties relating to economic conditions, growth risks, consumer spending
patterns, competition within the industry, competition in our markets and the
ability to anticipate and respond to fashion trends. Any forward-looking
statements by the Company are intended to speak only as of the date such
statements are made. Except as required by applicable law, including the
securities laws of the United States and the rules and regulations of the SEC,
Citi Trends does not undertake to publicly update any forward-looking statements
in this news release or with respect to matters described herein, whether as a
result of any new information, future events or otherwise.

 

Important Additional Information

 

Citi Trends, its directors and certain of its executive officers may be deemed
to be participants in the solicitation of proxies from Citi Trends stockholders
in connection with the matters to be considered at Citi Trends’ 2019 Annual
Meeting. Citi Trends intends to file a proxy statement with the SEC in
connection with any such solicitation of proxies from Citi Trends stockholders.
INVESTORS AND STOCKHOLDERS ARE STRONGLY ENCOURAGED TO READ ANY SUCH PROXY
STATEMENT AND ACCOMPANYING PROXY CARD AND OTHER DOCUMENTS FILED WITH THE SEC
CAREFULLY AND IN THEIR ENTIRETY WHEN THEY BECOME AVAILABLE AS THEY WILL CONTAIN
IMPORTANT INFORMATION. Detailed information regarding the identity of potential
participants, and their direct or indirect interests, by security holdings or
otherwise, will be set forth in the proxy statement and other materials to be
filed with the SEC in connection with Citi Trends’ 2019 Annual Meeting.
Information regarding the direct and indirect beneficial ownership of Citi
Trends’ directors and executive officers in Citi Trends securities is included
in their SEC filings on Forms 3, 4 and 5, and additional information can also be
found in Citi Trends’ Annual Report on Form 10-K for the year ended February 3,
2018, filed with the SEC on April 18, 2018 and its Quarterly Reports on
Form 10-Q for the first three quarters of the fiscal year ended February 2, 2019
filed on June 11, 2018, September 6, 2018 and December 10, 2018, respectively.
Stockholders will be able to obtain any proxy statement, any amendments or
supplements to the proxy statement and other documents filed by Citi Trends with
the SEC for no charge at the SEC’s

 

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

 

website at www.sec.gov. Copies will also be available at no charge at the
Investor Relations section of our corporate website at www.cititrends.com.

 

Contact:

 

Bruce Smith

President and Chief Executive Officer

(912) 443-2075

 

Media Contact:

 

Andy Brimmer / Greg Klassen / Jill Kary

Joele Frank, Wilkinson Brimmer Katcher

(212) 355-4449

 

Investor Contact:

 

Bruce Goldfarb / Chuck Garske / Teresa Huang

Okapi Partners LLC

(212) 297-0720

 

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