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EXHIBIT 10.1
 
 
EMPLOYMENT AGREEMENT
 
THIS EMPLOYMENT AGREEMENT (the “Agreement”) is entered into and effective as of
this 13th day of September, 2007, by and between STAGE STORES, INC., a Nevada
corporation (the “Company”), and ED RECORD, an individual (the “Executive”).
 
WITNESSETH:
 
WHEREAS, the Board of Directors of the Company (the “Board”) has determined that
it is in the best interests of the Company to appoint the Executive to the
position of Executive Vice President, Chief Financial Officer of the Company
(the “Position”), subject to the terms and conditions of this Agreement; and
 
WHEREAS, the Executive desires to be appointed 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.  Company hereby appoints Executive to the Position, and
Executive hereby accepts such appointment to the Position, 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 hereof (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 twelve (12) month
period (a “Renewal Period”), unless either the Company or 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 shall
not be extended upon such expiration.
 
1.1           Failure to Extend by Company.  In the event the Company notifies
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
hereof, such failure to extend shall constitute termination of this Agreement by
the Company without Good Cause (as hereafter defined), and the Company and
Executive agree that Executive shall be entitled to receive the payments
described in Section 4.3 hereof.
 
1.2           Failure to Extend by Executive.  In the event 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 hereof, such failure to extend shall constitute termination of this
Agreement by Executive without Good Reason (as hereafter defined), and the
Company and Executive agree that Executive shall be entitled to receive the
payments described in Section 4.5 hereof.

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2.           POSITION AND DUTIES.  During such time as Executive is employed
with the Company (the “Employment Period”), 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 to expand or limit such duties, responsibilities and authority and
to override actions of the Executive.  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 Executive by
the Board, and Executive shall perform his 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 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, Executive shall notify the Board in writing of such
invitation, the entity or organization extending such invitation and the
capacity to be served by Executive for such entity or organization.  The Board
shall have the sole power and authority to authorize Executive to accept such
invitation based on such criteria and standards as the Board may determine, and
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 such action to
a duly appointed committee of the Board, including but not limited to the
Compensation Committee of the Board, and Executive agrees to treat, comply with
and be bound by any action taken by such committee as if the Board had taken
such action directly.
 
3.           COMPENSATION AND BENEFITS.  During the Employment Period, Executive
shall be paid or receive compensation and benefits as follows:
 
3.1           Base Salary.  The base salary for Executive shall be $460,000 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.  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.  Executive will be eligible for a salary increase on April 1,
2008 and annually thereafter.  Executive has received a lump sum payment of
$50,000 in conjunction with his active employment.  This lump sum payment is
subject to tax withholding and is a one time event in consideration for
Executives decision to accept employment with the Company.  Executive, however,
must remain employed until May 14, 2008 in order to retain this payment.  If
Executive’s employment is terminated by the Company without Good Cause or by the
Executive for Good Reason prior to May 14, 2008, the Executive shall have no
obligation to return this payment.  Otherwise, if Executive’s employment is
separated prior to May 14, 2008, Executive shall return this payment to the
Company within thirty (30) days of the separation of employment.

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3.2           Performance Bonus.  Executive will be eligible for an annual
performance bonus award, payable on or about April 1, 2008 and every year
thereafter that Executive is employed, as of April 1 of the then current
year.  Executive’s annual bonus target will be 65% of the Base
Salary.  Executive’s maximum bonus amount will be 130% of the Base Salary.  The
award of any bonus shall be based upon the financial earning parameters which
shall be determined by the Board in its sole discretion.  Executive’s earned
bonus for fiscal 2007 will be paid fully and not prorated.  Thereafter, in order
to receive any such performance bonuses, the Executive must be employed in the
position on April 1 of the then current year and must have worked for the
Company in the position for the previous 12 months.  Any such bonus award shall
be subject to withholdings for applicable taxes.
 
3.3           Medical, Dental and Other Benefits.  Executive is eligible to
enroll and participate in any and all benefits plans the Company provides to its
executive officers and employees including, but not limited to, medical and
dental insurance coverage for Executive and family, life insurance policy, long
term disability insurance, stock options, and retirement plans and
arrangements.  The premiums, costs and expenses for any such benefit plans under
which Executive is participating shall be borne by Company.  Executive shall
receive four (4) weeks of paid vacation each year, which if not taken may not be
carried forward to any subsequent year.  Executive, however, 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 such term is used in this Agreement.  All such medical and
dental insurance, life insurance and long term disability insurance benefits
shall immediately cease and terminate upon the later of (1) the termination date
of the Employment Period or (2) the expiration date of coverage for such
benefits by the Company as described in Section 4 hereof; provided, that upon
such termination, 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.  Company shall provide Executive with an
automobile allowance in the amount of $1,000.00 per month to be allocated at
Executive’s discretion, or such other amount designated by the Board in its sole
discretion, and such allowance shall be payable in regular installments in
accordance with the Company’s general payroll practices.
 
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3.5           Financial Planning Allowance.  Company shall reimburse Executive
for any expenses incurred by Executive in connection with the preparation of
taxes, estate planning or financial counseling up to a maximum amount of
$7,500.00 per year, or such other annual amount designated by the Board in its
sole discretion, which amount may not be carried forward to any subsequent
year.  Such 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.
 
3.6           Business Expense.  Company shall reimburse Executive for all
reasonable travel, entertainment and other business expenses incurred by
Executive in the course of performing the duties of the Position.  Such 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:
 
4.1           Terminable At Will.  Notwithstanding any other provision of this
Agreement including, but not limited to Section 1 hereof, this Agreement and
Executive’s employment with the Company or its Subsidiaries shall be terminable
at will at any time for any reason by either party upon written notice, and this
Agreement shall expire automatically when Executive ceases to hold the Position
with the Company for any reason.  Upon such termination, the rights of Executive
to receive the monies and benefits from the Company shall be determined in
accordance with the terms and provisions contained in this Section 4, and
Executives agrees that such monies and benefits are fair and reasonable and are
the sole monies and benefits which shall be due to him from the Company in the
event of termination.
 
4.2           By Company For Good Cause.  Upon written notice to Executive,
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 Executive.  Upon such termination,
Executive shall be entitled to receive any Base Salary earned and unpaid, and
fringe benefits described in Section 3.3 hereof accrued and unpaid, through the
date of such termination, and no other monies or benefits shall be payable or
owed to Executive under this Agreement.
 
4.2.2             Forfeiture of Options.  Effective as of such termination date,
any and all stock options, stock appreciation rights, restricted stock options,
warrants and other similar rights granted to or received by Executive under any
option or incentive plan of the Company to which Executive is participating or
enrolled shall immediately be terminated and forfeited, except for such options
or rights granted to or received by Executive which have fully and completely
vested prior to such termination date.  Any and all such options and rights to
which Executive has become fully and completely vested prior to such termination
date shall expire as set forth in the respective plan document or agreement
granting such options and rights.

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4.2.3             Good Cause Defined.  For purposes of this Agreement, “Good
Cause” means (i) Executive’s conviction of, or plea of nolo contendere or guilty
to, any criminal violation involving dishonesty, fraud or moral turpitude;
(ii) Executive’s gross negligence; (iii) Executive’s willful and serious
misconduct; (iv) Executive’s breach of trust or fiduciary duty in the
performance of his duties or responsibilities; (v) Executive’s willful failure
to comply with reasonable directives and policies of the Board; or
(vi) Executive’s breach of any material term or provision of this Agreement and
Executive’s failure to cure such breach within 30 days of his receipt of notice
of the breach by the Company.
 
4.3           By Company Without Good Cause.  Upon ten (10) days prior written
notice to Executive, Company may terminate this Agreement at any time during the
Employment Period without Good Cause.
 
4.3.1             Monies and Benefits to Executive.  Upon such termination,
Executive shall be entitled to receive: (i) any Base Salary earned and unpaid,
and fringe benefits described in Section 3.3 hereof accrued and unpaid, through
the date of such termination; (ii) one and one-half (1½) times the aggregate of:
(x) the Base Salary plus (y) your annual bonus target amount (65% of Base Salary
or such other higher amount as approved by the Board); (iii) any performance
bonus (65% of Base Salary or such other higher amount as approved by the Board)
for the fiscal year in which such termination occurs pro-rated through the date
of such termination; provided, however, Executive shall not receive any portion
of the performance bonus unless the Board determines in good faith that
Executive would have been entitled to receive any performance bonus for the
fiscal year in which such termination occurred in accordance with Section 3.2
hereof; (iv) continuation of the fringe benefits described in Section 3.3 hereof
under which Executive is participating as of the date of such termination for a
period of twelve (12) months from the date of such termination; (v) payment  for
outplacement services for Executive for a period of twelve (12) months from the
date of such termination, provided, however, the aggregate amount of such
payments for outplacement services shall not exceed $15,000.00.
 
4.3.2             Payment of Monies and Benefits.  The payments described in
Section 4.3.1(i) and 4.3.1(ii) hereof shall be paid to Executive in a lump
sum within thirty (30) days from the date of such termination and shall be
subject to withholdings for applicable taxes.  The payment described in
Section 4.3.1(iii) hereof 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.  The benefits described
in Section 4.3.1(iv) shall be provided in accordance with the Company’s standard
policies and practices.  The payments described in Section 4.3.1(v) hereof shall
be paid directly to the entity providing outplacement services to Executive
within thirty (30) days of receipt of an invoice or statement from such entity.

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4.3.3             Forfeiture of Options.  Effective as of such termination date,
any and all stock options, stock appreciation rights, restricted stock options,
warrants and other similar rights granted to or received by Executive under any
option or incentive plan of the Company to which Executive is participating
shall immediately be terminated and forfeited, except for such options or rights
granted to or received by Executive which have fully and completely vested prior
to such termination date.  Any and all such options and rights to which
Executive has become fully and completely vested prior to such termination date
shall expire as set forth in the respective plan document or agreement granting
such options and rights.
 
4.4           By Executive for Good Reason.  Upon thirty (30) days prior written
notice to Company, Executive may terminate this Agreement at any time during the
Employment Period for “Good Reason” (as hereafter defined), and if requested by
Company, Executive shall continue to work exclusively for the Company during
such thirty (30) day 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 period upon written notice to Executive.
 
4.4.1             Monies and Benefits to Executive.  Upon such termination,
Executive shall be entitled to receive: (i) any Base Salary earned and unpaid,
and fringe benefits described in Section 3.3 hereof accrued and unpaid, through
the date of such termination; (ii) one and one-half (1½) times the aggregate of:
(x) the Base Salary plus (y) your annual bonus target amount (65% of Base Salary
or such other higher amount as approved by the Board); (iii) any performance
bonus (65% of Base Salary or such other higher amount as approved by the Board)
for the fiscal year in which such termination occurs pro-rated through the date
of such termination; provided, however, Executive shall not receive any portion
of the performance bonus unless the Board determines in good faith that
Executive would have been entitled to receive any performance bonus for the
fiscal year in which such termination occurred in accordance with Section 3.2
hereof; (iv) continuation of the fringe benefits described in Section 3.3 hereof
under which Executive is participating as of the date of such termination for a
period of twelve (12) months from the date of such termination; and (v) payment
of outplacement services for Executive for a period of twelve (12) months from
the date of such termination; provided, however, the aggregate amount of such
payments for outplacement services shall not exceed $15,000.00.
 
4.4.2             Payment of Monies and Benefits.  The payments described in
Section 4.4.1(i) and 4.4.1(ii) hereof shall be paid to Executive within thirty
(30) days from the date of such termination and shall be subject to withholdings
for applicable taxes.  The payment described in Section 4..1(iii) hereof 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.  The benefits described in Section 4.4.1(iv) shall be provided
in accordance with the Company’s standard policies and practices.  The payments
described in Section 4.4.1(v) hereof shall be paid directly to the entity
providing outplacement services to Executive within ten (10) days of receipt of
an invoice or statement from such entity.

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4.4.3             Forfeiture of Options.  Effective as of such termination date,
any and all stock options, stock appreciation rights, restricted stock options,
warrants and other similar rights granted to or received by Executive under any
option of incentive plan of the Company to which Executive is participating
shall immediately be terminated and forfeited, except for such options or rights
granted to or received by Executive which have fully and completely vested prior
to such termination date.  Any and all such options and rights to which
Executive has become fully and completely vested prior to such termination date
shall expire as set forth in the respective plan document or agreement granting
such options and rights.
 
4.4.4             Good Reason Defined.  For purposes of this Agreement, “Good
Reason” shall exist if, without Executive’s express written consent, the
Company: (i)  decreases Executive’s Base Salary from the level in effect on the
date of the decrease; (ii) willfully fails to include Executive in any incentive
compensation plans, bonus plans, or other plans and benefits provided by the
Company to other executive level executive; (iii) materially reduces, decreases
or diminishes the nature, status or duties and responsibilities of the Position
from those in effect on the date hereof, and such reduction, decrease or
diminution is not reasonably related to or the result of an adverse change in
Executive’s performance of assigned duties and responsibilities; (iv) the hiring
by Company of an executive senior to Executive; (v) requires Executive to
regularly perform the duties and responsibilities of the Position at a location
which is more than fifty (50) miles from the location of Executive’s principal
place of employment; or, (vi) requires Executive to engage in any accounting,
financial reporting or other practice as part of the duties of the Position that
Executive believes violates: (i) the law or (ii) US GAAP Principles and has so
informed any of the Company’s senior executives.  Notwithstanding the above,
Good Reason shall not include the death, disability or voluntary retirement of
Executive or any other voluntary action taken by or agreed to by Executive
related to the Position or its employment with the Company or its Subsidiaries.
 
4.5           By Executive Without Good Reason.  Upon thirty (30) days prior
written notice to Company, Executive may terminate this Agreement at any time
during the Employment Period without Good Reason, and if requested by the
Company, Executive shall continue to work exclusively for the Company during
such thirty (30) day 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 period upon written notice to Executive.

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4.5.1             Monies and Benefits to Executive.  Executive shall be entitled
to receive any Base Salary earned and unpaid, and fringe benefits described in
Section 3.3 hereof accrued and unpaid, through the date of such termination or
the date on which the Company terminates this Agreement during such thirty (30)
day period, and no other monies or benefits shall be payable or owed to
Executive under this Agreement.
 
4.5.2             Forfeiture of Options.  Effective as of such termination date,
any and all stock options, stock appreciation rights, restricted stock options,
warrants and other similar rights granted to or received by Executive under any
option or incentive plan of the Company to which Executive is participating or
enrolled shall immediately be terminated and forfeited, except for such options
or rights granted to or received by Executive which have fully and completely
vested prior to such termination date.  Any and all such options and rights to
which Executive has become fully and completely vested prior to such termination
date shall expire as set forth in the respective plan document or agreement
granting such options and rights.
 
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 three (3)
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 Executive
with Good Reason, Executive shall be entitled to receive, and 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 hereof shall not be applicable to such
Change in Control or termination.  Solely for the purposes under this Section
4.6, the Executive shall have Good Reason to terminate this Agreement upon a
Change of Control if the Executive is not the Chief Financial Officer for the
Company’s successor and the successor is not a publicly traded entity on a
listed exchange.
 
4.6.1             Monies and Benefits to Executive.  Upon such Change in Control
or termination, Executive shall be entitled to receive: (i) any Base Salary
earned and unpaid, and fringe benefits described in Section 3.3 hereof accrued
and unpaid, through the date of such Change in Control or termination;
(ii) three (3) times the aggregate of (x) the Base Salary plus (y) your annual
bonus target (65% of Base Salary or such other higher amount as approved by the
Board); (iii) any performance bonus (65% of Base Salary or such other higher
amount as approved by the Board) for the fiscal year in which such Change in
Control or termination occurs pro-rated through the date of such Change in
Control or termination; provided, however, Executive shall not receive any
portion of the performance bonus under this Section 4.6.1(iii) unless the Board
determines in good faith that Executive would have been entitled to receive any
performance bonus for the fiscal year in which such Change in Control or
termination occurred in accordance with Section 3.2 hereof; (iv) continuation of
the fringe benefits described in Sections 3.3 hereof under which Executive is
participating as of the date of such Change in Control or termination for a
period of thirty-six (36) months from the date of such Change in Control or
termination; (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 hereof for a period of thirty-six (36) months from the date of
such Change in Control or termination.

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4.6.2             Payment of Monies and Benefits.  The payments described in
Sections 4.6.1(i) and 4.6.1(ii) hereof shall be paid to Executive in a lump sum
within thirty (30) days of the date of such Change in Control or termination and
shall be subject to withholdings for applicable taxes.  The payment described in
Section 4.6.1(iii) hereof shall be payable in a lump sum on or before April 1
following the end of the fiscal year in which such Change in Control or
termination occurred and shall be subject to withholdings for applicable
taxes.  The benefits described in Section 4.6.1(iv) hereof shall be provided in
accordance with the Company’s or its successor’s standard policies and
practices.  The payments described in Section 4.6.1(v) hereof shall be paid
directly to the entity providing outplacement services to 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
Executive in accordance with the Company’s or its successor’s policies and
procedures.
 
4.6.3             Vesting of Options.  Effective as of such Change in Control or
termination date, any and all stock options, stock appreciation rights,
restricted stock options, warrants and other similar rights granted to or
received by Executive under any option or incentive plan of the Company or its
successors to which Executive is participating or enrolled shall immediately
become fully and completely vested and exercisable as if Executive had satisfied
any and all terms, conditions or requirements described or contained in such
plan.  In the event Executive has not previously exercised, or does not
exercise, all or any portion of such options or rights within sixty (60) days of
the date of such Change in  Control or termination (the “Exercise Period”),
Executive shall be entitled to receive, and Company or its successor shall be
obligated to pay, compensation for such unexercised options or rights in an
amount equal to (i) the number of shares not exercised by Executive under such
options or rights multiplied by (ii) the closing price of the common stock of
the Company or its successor as of the day immediately prior to such Change in
Control or termination minus the exercise price of Executive described in such
options or rights (the “Option Compensation”).  The Option Compensation shall be
payable in a lump sum within thirty (30) days after the expiration of the
Exercise Period, and shall be subject to withholdings for applicable
taxes.  Executive shall take any and all actions, and execute and deliver to
Company or its successor any and all agreements, certificates or instruments,
necessary or required to consummate the transactions contemplated under this
Section 4.6.3 including, but not limited to, the assignment, transfer or
conveyance of any and all shares and rights to be acquired by the Company or its
successor and the cancellation, revocation or termination of any options or
rights Executive has or may have under any such option or incentive plan.

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Notwithstanding anything herein to the contrary, if any payments or benefits due
under this Agreement (including but not limited to the continuation of fringe
benefits following termination of employment or the cash payment for options
following a change in control) would subject the Executive to accelerated
taxation and additional taxes under Code Section 409A if such payments or
benefits were made at the time described herein, then the Company shall take
such actions as are necessary (but only to the minimum extent necessary) to
cause such payments to comply with the requirements of Code Section 409A such
that the payments or benefits provided hereunder are not taxable under or are no
longer subject to Code Section 409A.  Without limitation, if Executive is a
“specified employee” within the meaning of Code Section 409A, the payments due
under this Agreement may be delayed for a period of six months following the
Executive’s separation from service and in such case, all payments that were
otherwise scheduled to be paid within such six-month period shall be
accumulated, with interest at the annual rate of 5%, and paid in a lump sum
immediately following the end of such six-month period.
 
4.6.4             Change in Control Defined.  For purpose of this Agreement, a
“Change in Control” shall be deemed to have occurred as of the date (i) any
“person” or “group ” (as such terms are used in Section 13(b) of the Securities
Exchange Act of 1934, as amended (the “Exchange Act”)) is or becomes the
“beneficial owner” (as defined in Rule 13d 3 under the Exchange Act), directly
or indirectly, of securities of the Company representing twenty-five percent
(25%) or more of the combined voting power of the Company’s then outstanding
securities, and within one (1) year after such “person” or “group” becomes the
beneficial owner of twenty-five percent (25%) or more of the combined voting
power of the Company (the “Trigger Date”), the members of the Board immediately
prior to the Trigger Date cease to constitute a majority of the Board, (ii) the
consummation of a consolidation or merger of the Company in which the Company is
not the surviving or continuing corporation, or pursuant to which shares of the
Company’s common stock would be converted into cash, securities or other
property, other than a merger of the Company in which the holders of the
Company’s common stock immediately prior to the merger have (directly or
indirectly) at least a fifty one percent (51%) ownership interest in the
outstanding common stock of the surviving corporation immediately after the
merger, or (iii) any sale, lease, exchange or other transfer (in one transaction
or a series of related transactions) of 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.
 
4.6.5             Payments from Tax Implications.
 
(a)           Gross-Up Payment.  Notwithstanding anything to the contrary in
this Agreement, in the event it shall be determined that any payment or
distribution made, or benefit provided (including, but not limited to,
Section 4.6.3 hereof), by the Company to or for the benefit of Executive under
this Agreement but determined without regard to any additional payments required
under this Section 4.6.5 (each, a “Payment”), would be subject to the excise tax
imposed by Section 4999 of the Internal Revenue Code of 1986, as amended from
time to time (the “Code”), or any similar excise tax, or any interest or
penalties incurred by Executive with respect to such excise tax (such tax with
any such interest and penalties being collectively referred to as the “Excise
Tax”), Executive shall be entitled to receive an additional payment (a “Gross Up
Payment”) from the Company in an amount such that after payment by Executive of
all taxes (including any Excise Tax, income tax or payroll tax) imposed upon the
Gross Up Payment and any interest or penalties imposed with respect to such
taxes, Executive retains from the Gross Up Payment an amount equal to the Excise
Tax imposed upon the Payments.

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(b)           Determination of Gross-Up Payment.  Subject to the provisions of
Section 4.6.5(c) hereof, all determinations required to be made under this
Section 4.6.5, including a determination of the requirement for and amount of
any Gross Up Payment, shall be made by the independent public accounting firm
which is then retained by the Company to audit its financial statements (the
“Accounting Firm”) which shall provide detailed supporting calculations both to
the Company and Executive within thirty (30) business days of the date of such
termination, if applicable, or such earlier time as is requested by the Company,
provided that any determination that an Excise Tax is payable by Executive shall
be made on the basis of substantial authority.  Any initial Gross Up Payment
shall be paid to Executive within fifteen (15) business days of the receipt of
the Accounting Firm’s determination.  If the Accounting Firm determines that no
Excise Tax is payable by Executive, the Accounting Firm shall furnish Executive
with a written opinion that he has substantial authority not to report any
Excise Tax on his federal income tax return.  Any determination by the
Accounting Firm meeting the requirements of this Section 4.6.5(b) shall be
binding upon the Company and Executive; subject only to payments pursuant to the
following sentence based on a determination that additional Gross Up Payments
should have been made, consistent with the calculations required to be made
hereunder (the amount of such additional payments, including any interest and
penalties, being collectively referred to as the “Gross Up Underpayment” ).  In
the event the Company exhausts its remedies pursuant to Section 4.6.5(c) hereof
and Executive thereafter is required to make a payment of any Excise Tax, the
Accounting Firm shall determine the amount of the Gross Up Underpayment that has
occurred and any such Gross Up Underpayment shall be promptly paid by the
Company to or for the benefit of Executive.  The fees and disbursements of the
Accounting Firm shall be paid by the Company.
 
(c)           Remedies to Company.  Executive shall notify the Company in
writing of any claim by the Internal Revenue Service that, if successful, would
require the payment by the Company of a Gross Up Payment.  Such notification
shall be given as soon as practicable but not later than ten (10) business days
after Executive receives written notice of such claim and shall apprise the
Company of the nature of such claim and the date on which such claim is
requested to be paid.  Executive shall not pay such claim prior to the
expiration of thirty (30) days following the date on which Executive gives such
notice to the Company (or such shorter period ending on the date that any
payment of taxes with respect to such claim is due).  If the Company notifies
Executive in writing prior to the expiration of such thirty (30) day period that
the Company desires to contest such claim at the Company’s sole cost and expense
and the Company will provide the indemnification as required by this Section
4.6.5(c), Executive shall: (1) give the Company any information reasonably
requested by the Company relating to such claim; (2) take such action in
connection with contesting such claim as the Company shall reasonably request in
writing from time to time, including, but not limited to, accepting legal
representation with respect to such claim by an attorney reasonably selected by
the Company and reasonably satisfactory to Executive; (3) cooperate with the
Company in good faith in order effectively to contest such claim, and (4) permit
the Company to participate in any proceedings relating to such claim.

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The Company shall bear and pay directly all costs and expenses (including
additional interest and penalties) incurred in connection with such contest and
shall indemnify and hold Executive harmless, on an after tax basis, for any
Excise Tax, income tax or payroll tax, including interest and penalties with
respect thereto, imposed as a result of such representation and payment of costs
and expenses.  Without limitation on the foregoing provisions of this
Section 4.6.5(c), the Company shall control all proceedings taken in connection
with such contest and, at its sole option, may pursue or forgo any and all
administrative appeals, proceedings, hearings and conferences with the taxing
authority with respect to such claim and may, at its sole option, either direct
Executive to pay the tax claimed and sue for a refund or contest the claim in
any permissible manner, and Executive agrees to prosecute such contest to a
determination before any administrative tribunal, in a court of initial
jurisdiction and in one or more appellate courts, as the Company shall
determine; provided, however, that if the Company directs Executive to pay such
claim and sue for a refund, the Company shall advance the amount of such payment
to Executive, on an interest free basis and shall indemnify and hold Executive
harmless, on an after tax basis, from any Excise Tax, income tax or payroll tax,
including interest or penalties with respect thereto, imposed with respect to
such advance or with respect to any imputed income with respect to such advance;
and further provided that any extension of the statute of limitations relating
to the payment of taxes for the taxable year of Executive with respect to which
such contested amount is claimed to be due shall be limited solely to such
contested amount, unless Executive agrees otherwise.  Furthermore, the Company's
control of the contest shall be limited to issues with respect to which a Gross
Up Payment would be payable hereunder and Executive shall be entitled to settle
or contest, as the case may be, any other issue raised by the Internal Revenue
Service or any other taxing authority.
 
(d)           Refund of Excise Tax to Company.  If, after the receipt by
Executive of an amount advanced by the Company pursuant to Section 4.6.5(c),
Executive becomes entitled to receive any refund with respect to such claim,
Executive shall (subject to the Company's complying with the requirements of
Section 4.6.5(c) hereof) promptly pay to the Company the amount of such refund,
together with any and all interest paid or credited thereon after taxes
applicable thereto.  If, after the receipt by Executive of an amount advanced by
the Company pursuant to Section 4.6.5(c) hereof a determination is made that
Executive shall not be entitled to any refund with respect to such claim and the
Company does not notify Executive in writing of its intent to contest such
denial of refund prior to the expiration of thirty (30) days after such
determination, then any obligation of Executive to repay such advance shall be
forgiven and the amount of such advance shall offset, to the extent thereof, the
amount of Gross Up Payment required to be paid by the Company.

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4.7           Execution of Release by Executive.  Company shall not be obligated
to pay any portion of the monies and benefits described above, if any, unless
and until Executive shall have executed and delivered to the Company a release
of all claims against the Company and its Subsidiaries 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 this Agreement was terminated, in form and
substance reasonably satisfactory to the Company.
 
5.           POST-EMPLOYMENT DUTIES.  For a period of three (3) years following
the termination of this Agreement, Executive shall: (i) fully and truthfully
cooperate and assist the Company and its Subsidiaries, 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 in any way or of any
nature whatsoever arising from, related to or connected with any period in which
Executive was employed by or otherwise provided services to the Company or its
Subsidiaries or in which 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 on any and all issues
or matters for which the Company or its Subsidiaries may seek his cooperation,
assistance, participation, involvement or consultation.  Such assistance shall
be provided at such times and dates which shall not unreasonably interfere or
conflict with Executive’s then current employment.  The Company shall reimburse
Executive for any and all costs and expenses reasonably incurred by Executive in
providing such assistance in accordance with the standard policies and
procedures of the Company in effect from time to time related to such
reimbursable expenses.
 
6.           CONFIDENTIAL INFORMATION.  Executive acknowledges that Executive
will have access or be privy to certain confidential business and proprietary
information of the Company and its Subsidiaries as a result of Executive’s
employment with the Company or its Subsidiaries.  Such confidential information
may include but is not limited to business decisions, plans, procedures,
strategies and policies, legal matters affecting 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”).  Executive acknowledges and agrees the Confidential Information
is and shall remain the sole and exclusive property of the Company or such
Subsidiary.  Executive shall not disclose to any unauthorized person, or use for
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
Executive’s acts or omissions.  Executive agrees to maintain the confidentiality
of the Confidential Information after the termination of Executive’s employment;
provided, further, that if at any time Executive or any person or entity to
which 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, 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, Executive
shall ensure that only the portion of the Confidential Information which
Executive or such person is advised by written opinion of the Company’s counsel
that Executive is legally required to disclose is disclosed, and 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 Executive covenants and agrees to deliver to the
Company upon termination of this Agreement, and at any other time as the Company
may request, any and all property of the Company including, but not limited to,
keys, computers, credit cards, company car, memoranda, notes, plans, records,
reports, computer tapes, printouts and software, Confidential Information in any
form whatsoever, and other documents and data (and copies thereof) and relating
to the Company or any Subsidiary which he may then posses or have under his
control or to which Executive had access to or possession of in the course of
such employment.

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7.           COVENANT NOT TO COMPETE, SOLICIT OR DISPARAGE.  Executive hereby
agrees that for a period of two (2) years following the expiration or
termination of this Agreement (the “Non-Compete Period”), Executive shall not:
(i) directly or indirectly, either individually or for any other person or
entity (whether as an officer, director, employee, owner, stockholder,
consultant, agent, advisor, general partner, limited partner or otherwise), or
as a part of a group, own, operate, manage, control, participate in, consult
with, render services for, or in any manner engage in any business competing
with any part of the business presently engaged in by the Company within any
geographical area in which the Company engages or has proposed to engage in such
business (or solicit any person to engage in any of the foregoing activities);
(ii) directly or indirectly, individually or for any other person or entity
induce or attempt to induce any employee of the Company to leave the employ of
the Company, hire any person who is an employee of the Company as of or
immediately prior to the time of such hiring, or induce or attempt to induce any
manufacturers’ representative, customer, supplier, licensee, agent or any other
person or entity having a business relationship with the Company to cease doing
business with or reduce the volume of its business with the Company; or
(iii) initiate, participate or engage in any communication whatsoever with any
current or former customer, supplier, vendor or competitor of the Company or its
Subsidiaries or any of their respective shareholders, partners, members,
directors, managers, officers, employees or agents, or with any current or
former shareholder, partner, member, director, manager, officer, employee or
agent of the Company or its Subsidiaries, or with any third party, which
communication could reasonably be interpreted as derogatory or disparaging to
the Company or its Subsidiaries, including but not limited to the business,
practices, policies, shareholders, partners, members, directors, managers,
officers, employees, agents, advisors and attorneys of the Company or its
Subsidiaries.  Provided, however, nothing herein shall prohibit Executive from
being a passive owner of or controlling, directly or indirectly, of not more
than five percent (5%) in the aggregate of the outstanding stock of any class of
a corporation which is publicly traded and which competes in the business of the
Company so long as Executive has no direct or indirect participation in the
management of such corporation.  Executive acknowledges that the foregoing
restriction is reasonable in all respects and that there is no less restrictive
provision in terms of duration, prohibited activities or geographic area which
would adequately protect the Company’s assets and other legitimate business
interests.  For purposes of the foregoing, a business shall be deemed to be
competing with the business of 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. Notwithstanding the foregoing,
in the event any part of this covenant set forth in this provision shall be held
invalid, illegal or unenforceable by a court of competent jurisdiction,
Executive and the Company hereby agree that such invalid, illegal or
unenforceable provision or section hereof shall be severed from this Agreement
without affecting the remaining portions hereof in any manner.  In the event any
portion of this provision related to the time or geographical area restrictions
hereof shall be declared by a court of competent jurisdiction to exceed the
maximum time or geographical area restrictions such court deems reasonable or
enforceable, said time or geographic area restriction shall be deemed to become
and thereafter shall be such time or geographic area which such court shall deem
reasonable and enforceable.

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8.           ARBITRATION.  Should any dispute arise relating to the meaning,
interpretation, enforcement or application of this Agreement, such 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 the employment dispute arbitration rules of the American Arbitration
Association, 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 the provisions of Sections 6 and 7 of this
Agreement.
 

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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 Executive:
Ed Record
     
4418 Della Creek Way
     
Missouri City, Texas 77459
                   
To Company:
Stage Stores, Inc.
     
10201 Main Street
     
Houston, Texas 77025
     
Attention:  EVP-Human Resources
 

 
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.  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, 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
hereof.  In the event that any provision of this Agreement shall be determined
to be invalid or unenforceable, such provision shall be deemed limited by
construction in scope and effect to the minimum extent necessary to render the
same valid and enforceable, and, in the event such a limiting construction is
impossible, such 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.

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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 such 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
hereunder 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 any party hereto 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
hereof.  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 such 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 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.           MULTIPLE COUNTERPARTS.  This Agreement may be executed in two or
more counterparts, each of which is deemed to be an original and all of which
taken together constitute one and the same agreement.
 
17.           CONFIDENTIAL INFORMATION.  The parties agree that Executive shall
not disclose to or consciously utilize for the benefit of the Company any
confidential, proprietary information of his prior employers that he learned
during the course of employment.
 
18.           INDEMNIFICATION.  The Company agrees to indemnify and hold
Executive harmless for any costs, attorney fees or damages that he may suffer if
his former employer (Kohl’s) attempts to enforce the terms of any provision of
his prior employment agreement.  The Executive shall have the right to select
counsel to represent him in any such matters for which the Company will
reimburse Executive for all reasonable costs and attorney fees.
 
19.           FURTHER ASSURANCES.  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.

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20.           CONSTRUCTION.  In the event an ambiguity or question of intent or
interpretation arises, this Agreement shall be construed as if drafted jointly
by 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.
 
21.           SURVIVAL.  Executive and the Company agree that the terms and
conditions of Sections 4 through 15 (inclusive), 19, 20 and 21 hereof shall
survive and continue in full force and effect, notwithstanding any expiration or
termination of the Employment Period or this Agreement.
 
22.           ENTIRE AGREEMENT.  This Agreement contains and constitutes the
entire agreement between Executive and the Company and supersedes and cancels
any prior agreements, representations, warranties, or communications, whether
oral or written, between Executive and the Company relating to the subject
matter hereof in any way.
 
23.           GENDER AND 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.
 
 
STAGE STORES, INC.,
“COMPANY”
a Nevada Corporation
 
 
     
/s/ James R. Scarborough
 
By:
Jim Scarborough
 
Title:
Chairman & CEO
       
“EXECUTIVE”
/s/ Ed Record
 
Ed Record, an individual

 
 
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