Document:

Form of senior debt security -- medium-term note (Buffered REN Linked to Int'l)

 Exhibit 4.02 
 LEHMAN BROTHERS HOLDINGS INC. 
 Buffered Return Enhanced Notes Linked to a Basket of International Indices Due
October 3, 2010 
  

			
	Number R-1	 	$5,470,000
	ISIN US52517P6H95	 	CUSIP 52517P6H9

 See Reverse for Certain Definitions 
 THIS SECURITY (THIS “SECURITY”) IS A GLOBAL SECURITY WITHIN THE MEANING OF THE INDENTURE HEREINAFTER REFERRED TO AND IS REGISTERED IN
THE NAME OF A DEPOSITORY OR A NOMINEE THEREOF. UNLESS AND UNTIL IT IS EXCHANGED IN WHOLE OR IN PART FOR SECURITIES IN CERTIFICATED FORM, THIS SECURITY MAY NOT BE TRANSFERRED EXCEPT AS A WHOLE BY THE DEPOSITORY TO A NOMINEE OF THE DEPOSITORY OR BY A
NOMINEE OF THE DEPOSITORY TO SUCH DEPOSITORY OR ANOTHER NOMINEE OF THE DEPOSITORY OR BY THE DEPOSITORY OR ANY SUCH NOMINEE TO A SUCCESSOR DEPOSITORY OR A NOMINEE OF SUCH SUCCESSOR DEPOSITORY. UNLESS THIS SECURITY IS PRESENTED BY AN AUTHORIZED
REPRESENTATIVE OF THE DEPOSITORY TO LEHMAN BROTHERS HOLDINGS INC. OR ITS AGENT FOR REGISTRATION OF TRANSFER, EXCHANGE OR PAYMENT, AND ANY SECURITY ISSUED IS REGISTERED IN THE NAME OF CEDE & CO. OR IN SUCH OTHER NAME AS REQUESTED BY AN
AUTHORIZED REPRESENTATIVE OF THE DEPOSITORY (AND ANY PAYMENT IS MADE TO CEDE & CO. OR TO SUCH OTHER ENTITY AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF THE DEPOSITORY), ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR OTHERWISE
BY OR TO ANY PERSON IS WRONGFUL INASMUCH AS THE REGISTERED OWNER HEREOF, CEDE & CO., HAS AN INTEREST HEREIN. 
 LEHMAN BROTHERS
HOLDINGS INC., a corporation duly organized and existing under the laws of the State of Delaware (hereinafter called the “Company”), for value received, hereby promises to pay to CEDE & CO. or registered assigns, at the
office or agency of the Company in the Borough of Manhattan, The City of New York, on the Maturity Date, in such coin or currency of the United States of America at the time of payment shall be legal tender for the payment of public and private
debts, for each $1,000 principal amount of the Securities represented hereby, an amount equal to the Payment at Maturity. THE SECURITIES REPRESENTED HEREBY SHALL NOT BEAR ANY INTEREST. 
 Any amount payable on the Maturity Date hereon will be paid only upon presentation and surrender of this Security. 
 REFERENCE IS HEREBY MADE TO THE FURTHER PROVISIONS OF THIS SECURITY SET FORTH ON THE REVERSE HEREOF WHICH FURTHER PROVISIONS SHALL FOR ALL PURPOSES HAVE
THE SAME EFFECT AS IF SET FORTH AT THIS PLACE. 

 IN WITNESS WHEREOF, Lehman Brothers Holdings Inc. has caused this instrument to be signed by its
Chairman of the Board, its President, its Vice Chairman, its Chief Financial Officer, one of its Vice Presidents or its Treasurer, by manual or facsimile signature under its corporate seal, attested by its Secretary or one of its Assistant
Secretaries by manual or facsimile signature. 
 Dated: October 3, 2007 
  

							
	[SEAL]	 	LEHMAN BROTHERS HOLDINGS INC.	 	
				
		 	By:	 	  
	 	
		 		 	Vice President	 	
				
		 	Attest:	 	  
	 	
		 		 	Assistant Secretary	 	

 TRUSTEE’S CERTIFICATE OF AUTHENTICATION 
 This is one of the Securities of the series designated therein referred to in the within-mentioned Indenture. 
  

			
	CITIBANK, N.A.
	as Trustee
		
	By:	 	  

		 	    Authorized Officer

  

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 Reverse of Security 
 This Security is one of a duly authorized series of Securities of the Company designated as Buffered Return Enhanced Notes Linked to a Basket of International Indices Due October 3, 2010 (herein called the
“Securities”). The Company may, without the consent of the holders of the Securities, create and issue additional securities ranking equally with the Securities and otherwise similar in all respects so that such additional
securities shall be consolidated and form a single series with the Securities; provided that no additional securities can be issued if an Event of Default has occurred with respect to the Securities. This series of Securities is one of an indefinite
number of series of debt securities of the Company, issued and to be issued under an indenture, dated as of September 1, 1987, as amended (herein called the “Indenture”), duly executed and delivered by the Company and Citibank,
N.A., as trustee (herein called the “Trustee”, which term includes any successor trustee under the Indenture), to which Indenture and all indentures supplemental thereto reference is hereby made for a description of the rights,
limitations of rights, obligations, duties and immunities thereunder of the Company, the Trustee and the Holders of the Securities. 
 The
Payment at Maturity at the request of the Trustee shall be determined by the Calculation Agent pursuant to the Calculation Agency Agreement. The Trustee shall fully rely on the determination by the Calculation Agent of the Payment at Maturity and
shall have no duty to make any such determination. The Calculation Agent will provide written notice to the Trustee at its New York office, on which notice the Trustee may conclusively rely, of the Payment at Maturity on or prior to 11:00 a.m. on
the Business Day preceding the Maturity Date. 
 All calculations with respect to the Basket Ending Level and the Basket Return will be
rounded to the nearest one hundred-thousandth, with five one-millionths rounded upward (e.g., .876545 would be rounded to .87655); all dollar amounts related to determination of the payment per $1,000 principal amount Security at maturity
will be rounded to the nearest ten-thousandth, with five one hundred-thousandths rounded upward (e.g., .76545 would be rounded up to .7655); and all dollar amounts paid on the aggregate principal amount of Securities per Holder will be
rounded to the nearest cent, with one-half cent rounded upward. 
 This Security is not subject to any sinking fund. 
 If an Event of Default with respect to the Securities shall occur and be continuing, the amounts payable on all of the Securities may be declared due
and payable in the manner and with the effect provided in the Indenture. The amount payable to the Holder hereof upon any acceleration permitted under the Indenture will be equal to the Payment at Maturity calculated as though the date of
acceleration were the Maturity Date and the third Business Day immediately preceding the date of acceleration were the Valuation Date. If the maturity of the Securities is accelerated because of an Event of Default, the Company shall, or shall cause
the Calculation Agent to, provide written notice to the Trustee at its New York office, on which notice the Trustee may conclusively rely, and to The Depository Trust Company of the cash amount due with respect to the Securities as promptly as
possible and in no event later than two Business Days after the date of acceleration. 

 The Indenture contains provisions permitting the Company and the Trustee, with the consent of the
holders of not less than 66 2/3% in aggregate principal amount of each series of Securities at the time
Outstanding to be affected (each series voting as a class), evidenced as in the Indenture provided, to execute supplemental indentures adding any provisions to, or changing in any manner or eliminating any of the provisions of the Indenture or of
any supplemental indenture or modifying in any manner the rights of the holders of the Securities of all such series; provided, however, that no such supplemental indenture shall, among other things, (i) change the fixed
maturity of any Security, or reduce the principal amount thereof, or reduce the rate or extend the time of payment of interest thereon, if any, or reduce any premium payable on redemption, or make the principal thereof, or premium, if any, or
interest thereon, if any, payable in any coin or currency other than that hereinabove provided, without the consent of the holder of each Security so affected, or (ii) change the place of payment on any Security, or impair the right to
institute suit for payment on any Security, or reduce the aforesaid percentage of Securities, the holders of which are required to consent to any such supplemental indenture, without the consent of the holders of each Security so affected. It is
also provided in the Indenture that, prior to any declaration accelerating the maturity of any series of Securities, the holders of a majority in aggregate principal amount of the Securities of such series Outstanding may on behalf of the holders of
all the Securities of such series waive any past default or Event of Default under the Indenture with respect to such series and its consequences, except a default in the payment of interest, if any, or the principal of, or premium, if any, on any
of the Securities of such series, or in the payment of any sinking fund installment or analogous obligation with respect to Securities of such series. Any such consent or waiver by the Holder of this Security shall be conclusive and binding upon
such Holder and upon all future holders and owners of this Security and any Securities which may be issued in exchange or substitution hereof, irrespective of whether or not any notation thereof is made upon this Security or such other Securities.

 No reference herein to the Indenture and no provision of this Security or of the Indenture shall alter or impair the obligation of
the Company, which is absolute and unconditional, to pay the Payment at Maturity with respect to this Security. 
 The Securities are
issuable in denominations of $1,000 and any whole multiples of $1,000. 
 The Company, the Trustee, and any agent of the Company or of the
Trustee may deem and treat the registered holder (the “Holder”) hereof as the absolute owner of this Security (whether or not this Security shall be overdue and notwithstanding any notation of ownership or other writing hereon), for
the purpose of receiving payment hereof, or on account hereof, and for all other purposes and neither the Company nor the Trustee nor any agent of the Company or of the Trustee shall be affected by any notice to the contrary. All such payments made
to or upon the order of such registered holder shall, to the extent of the sum or sums paid, effectually satisfy and discharge liability for moneys payable on this Security. 
 No recourse for the payment of the principal of, premium, if any, or interest on this Security, or for any claim based hereon or otherwise in respect
hereof, and no recourse under or upon any obligation, covenant or agreement of the Company in the Indenture or any indenture supplemental thereto or in any Security, or because of the creation of any indebtedness represented 

  

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thereby, shall be had against any incorporator, stockholder, officer or director, as such, past, present or future, of the Company or of any successor
corporation, either directly or through the Company or any successor corporation, whether by virtue of any constitution, statute or rule of law or by the enforcement of any assessment or penalty or otherwise, all such liability being, by the
acceptance hereof and as part of the consideration for the issue hereof, expressly waived and released. 
 As provided in the Indenture and
subject to certain limitations therein set forth, the transfer of this Security is registrable in the Security Register, upon surrender of this Security for registration of transfer at the Corporate Trust Office or agency in a Place of Payment for
this Security, duly endorsed by, or accompanied by a written instrument of transfer in form satisfactory to the Company and the Security Registrar duly executed by, the Holder hereof or such Holder’s attorney duly authorized in writing, and
thereupon one or more new Securities of this series or of like tenor and of authorized denominations and for the same aggregate principal amount, will be issued to the designated transferee or transferees. 
 The Company intends to treat, and by purchasing this Security, the Holder agrees to treat, for all tax purposes, this Security as a cash-settled
financial contract, rather than as a debt instrument. 
 THE INDENTURE AND THIS SECURITY SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE
WITH THE LAWS OF THE STATE OF NEW YORK. 
 Definitions 
 Set forth below are definitions of the terms used in this Security. 
 “Basket” shall mean
the basket of four indices to which the Securities are linked. The Basket consists of the Dow Jones EURO STOXX 50® Index, the FTSE 100 Index®, the Nikkei 225SM Index and the S&P®/ASX 200 Index.

 “Basket Ending Level”, as calculated by the Calculation Agent, is calculated as follows: 
 Basket Starting Level × [1 + (the sum of (Basket Index Return × Index Weighting) 
 for all Basket Indices)] 
 “Basket Index” refers to each of the Dow
Jones EURO STOXX 50® Index, the FTSE 100 Index®, the Nikkei 225SM Index and the S&P®/ASX 200 Index. 
 “Basket Index Ending Level” of a Basket Index is the Closing Level of that Basket Index on the Valuation Date. 
 “Basket Index Return”, as calculated by the Calculation Agent, is calculated as follows for each Basket Index: 
 Basket Index Ending Level – Basket Index Starting Level 
 Basket Index Starting Level 
  

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 “Basket Index Starting Level” for each of the four Basket Indices is as follows:

  

			
	 Dow Jones EURO STOXX 50® Index
	  	4,381.71
	 FTSE 100 ® Index
	  	6,466.80
	 Nikkei 225SM Index
	  	16,785.69
	 S&P®/ASX 200 Index
	  	6,567.80

 “Basket Return”, as calculated by the Calculation Agent, is calculated as follows:

 Basket Ending Level – Basket Starting Level 
 Basket Starting Level 
 “Basket Starting Level” shall equal 1,000. 
 “Buffer Amount” shall equal 10%. 
 “Business Day”, notwithstanding any provision in the Indenture, shall mean any day that is not a Saturday or Sunday and that is not a day on which banking institutions in the City of New York are authorized or obligated by
law to close. 
 “Calculation Agency Agreement” shall mean the Calculation Agency Agreement, dated as of December 21,
2006 between the Company and the Calculation Agent, as amended from time to time, or any successor calculation agency agreement. 
 “Calculation Agent” shall mean the person that has entered into an agreement with the Company providing for, among other things, the determination of the Payment at Maturity, which term shall, unless the context otherwise
requires, include its successors and assigns. The initial Calculation Agent shall be Lehman Brothers Inc. 
 “Closing
Level” of a Basket Index on any Trading Day will equal the official closing level of such Basket Index, or any Successor Basket Index thereto, published following the regular official weekday close of trading for such Basket Index on that
Trading Day. 
 “Closing Price” of a security, on any particular day, means the last reported sales price for that security
on the Relevant Exchange at the scheduled weekday closing time of the regular trading session of the Relevant Exchange. If, however, the security is not listed or traded on a bulletin board, then the Closing Price of the security will be determined
using the average execution price per share that an affiliate of the Company pays or receives upon the purchase or sale of the security used to hedge the Company’s obligations under the Securities. 
 “Company” shall have the meaning set forth on the face of this Security. 
 “Holder” shall have the meaning set forth on the reverse of this Security. 
 “Indenture” shall have the meaning set forth on the reverse of this Security. 
  

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 “Index Weighting” shall mean, with respect to each Basket Index, the weighting for such
Basket Index (each an “Index Weighting”). The Index Weightings of the four Basket Indices are as follows: 
  

				
	 Dow Jones EURO STOXX 50® Index
	  	36.80	%
	 FTSE 100 ® Index
	  	31.30	%
	 Nikkei 225SM Index
	  	22.70	%
	 S&P®/ASX 200 Index
	  	9.20	%

 “Leverage Factor” shall equal 1.11111. 
 “Market Disruption Event”, with respect to any of the Basket Indices (or any Successor Basket Index), means: 
  

	 	•	 	 a suspension, absence or material limitation of trading of stocks then constituting 20% or more of the level of such Basket Index (or the relevant Successor Basket
Index) on the Relevant Exchanges for such securities at any time during the one hour period preceding the close of the principal trading session on such Relevant Exchange; 

  

	 	•	 	 a breakdown or failure in the price and trade reporting systems of the primary market of any Relevant Exchange as a result of which the reported trading prices for
stocks then constituting 20% or more of the level of such Basket Index (or the relevant Successor Basket Index) at any time during the one hour period preceding the close of the principal trading session on such Relevant Exchange are materially
inaccurate; 

  

	 	•	 	 a suspension, absence or material limitation of trading on any major securities exchange for trading in futures or options contracts or exchange traded funds
related to such Basket Index (or the relevant Successor Basket Index) at any time during the one hour period preceding the close of the principal trading session on such exchange; or 

  

	 	•	 	 a decision to permanently discontinue trading in the relevant futures or options contracts or exchange traded funds; 

 in each case as determined by the Calculation Agent in its sole discretion. 
 For the purpose of determining whether a Market Disruption Event exists at any time, if trading in a security included in a Basket Index (or the relevant Successor Basket Index) is materially suspended or materially
limited at that time, then the relevant percentage contribution of that security to the level of such Basket Index (or the relevant Successor Basket Index) shall be based on a comparison of: 
  

	 	•	 	 the portion of the level of such Basket Index (or the relevant Successor Basket Index) attributable to that security relative to 

  

	 	•	 	 the overall level of such Basket Index (or the relevant Successor Basket Index), in each case immediately before that suspension or limitation.

  

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 For purposes of determining whether a Market Disruption Event has occurred: 
  

	 	•	 	 a limitation on the hours or number of days of trading will not constitute a Market Disruption Event if it results from an announced change in the regular business
hours of the Relevant Exchange or market; 

  

	 	•	 	 limitations pursuant to the rules of any Relevant Exchange similar to NYSE Rule 80B (or any applicable rule or regulation enacted or promulgated by any other
self-regulatory organization or any government agency of scope similar to NYSE Rule 80B as determined by the Calculation Agent in its sole discretion) on trading during significant market fluctuations will constitute a suspension, absence or
material limitation of trading; 

  

	 	•	 	 a suspension of trading in futures or options contracts on a Basket Index (or the relevant Successor Basket Index) by the primary securities market trading in such
contracts by reason of: 

  

	 	•	 	 a price change exceeding limits set by such exchange or market, 

  

	 	•	 	 an imbalance of orders relating to such contracts, or 

  

	 	•	 	 a disparity in bid and ask quotes relating to such contracts 

 will, in each such case, constitute a suspension, absence or material limitation of trading in futures or options contracts related to such Basket Index (or the relevant Successor Basket Index); and 
  

	 	•	 	 a suspension, absence or material limitation of trading on any Relevant Exchange or on the primary market on which futures or options contracts related to a Basket
Index (or the relevant Successor Basket Index) are traded will not include any time when such market is itself closed for trading under ordinary circumstances. 

 “Maturity Date” shall mean October 3, 2010, unless that day is not a Business Day, in which case the amount equal to the Payment
at Maturity that would otherwise be due on the scheduled Maturity Date will instead be due on the next succeeding Business Day following such scheduled Maturity Date, with the same effect as if paid on the scheduled Maturity Date; provided that if
due to a non-Trading Day or a Market Disruption Event, the Valuation Date is postponed so that it falls less than three Business Days prior to the scheduled Maturity Date, the Maturity Date will be the third Business Day following the Valuation
Date, as postponed. 
 “Participation Rate” shall equal 200%. 
 “Payment at Maturity”, as calculated by the Calculation Agent for each $1,000 principal amount Security, shall equal: 
  

	 	•	 	 If the Basket Ending Level is above the Basket Starting Level, the lesser of: 

  

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 (1) $1,000 + [$1,000 × (Basket Return × Participation Rate)]; and 
 (2) $1,530 
  

	 	•	 	 If the Basket Ending Level is equal to or below the Basket Starting Level by an amount equal to or less than the Buffer Amount, $1,000.

  

	 	•	 	 If the Basket Ending Level is below the Basket Starting Level by more than the Buffer Amount, $1,000 + [$1,000 × (Basket Return + Buffer Amount) ×
Leverage Factor]. 

 “Place of Payment” shall mean the place or places where the Payment at Maturity on
the Securities is payable. 
 “Pricing Date” shall mean September 28, 2007. 
 “Relevant Exchange” for any security (or any combination thereof) then included in a Basket Index or any Successor Basket Index, means
the primary exchange, quotation system (which includes bulletin board services) or other market of trading for such security. 
 “Securities” shall have the meaning set forth on the reverse of this Security. 
 “Successor Basket
Index” shall have the meaning specified under “Discontinuation of a Basket Index; Alteration of Method of Calculation” with respect to each Basket Index. 
 “Trading Day” means a day, as determined by the Calculation Agent, on which trading is generally conducted (i) on the Relevant
Exchanges for securities included in the Basket Index (or the relevant Successor Basket Index) and (ii) the exchanges on which futures or options contracts related to the Basket Index (or the relevant Successor Basket Index) are traded, other
than a day on which trading on such Relevant Exchange or exchange on which such securities, futures or options contracts are traded is scheduled to close prior to its scheduled weekday closing time. 
 “Trustee” shall have the meaning set forth on the reverse of this Security. 
 “Valuation Date” shall mean September 29, 2010; provided, however, that if the Valuation Date is not a Trading Day or if there is
a Market Disruption Event on such day, with respect to a Basket Index, the Calculation Agent will: 
  

	 	•	 	 with respect to each Basket Index for which such day is a Trading Day and for which a Market Disruption Event has not occurred, determine the Closing
Level of such Basket Index for use in calculating the Basket Index Ending Level by reference to the Closing Level of such Basket Index on that Trading Day; and 

  

	 	•	 	 with respect to each Basket Index for which such day is not a Trading Day or for which a Market Disruption Event has occurred, determine the Closing
Level of such Basket Index for use in calculating the Basket Index Ending Level by reference to the Closing Level of such Basket Index on the next Trading Day for such Basket Index on which there is not a Market Disruption Event; provided,
however, if a Market Disruption Event with respect to such Basket Index occurs on each of the eight Trading Days following the originally 

  

 7 

	 	 
scheduled Valuation Date, then the Calculation Agent shall determine the Closing Level of such Basket Index for use in calculating the Basket Index Ending
Level in accordance with the formula for and method of calculating the Closing Level of such Basket Index last in effect prior to commencement of the Market Disruption Event (or prior to the non-Trading Day), using the closing price (or, if trading
in the relevant securities has been materially suspended or materially limited, its good faith estimate of the closing price that would have prevailed but for such suspension or limitation or non-Trading Day) on such eighth scheduled Trading Day of
each security most recently included in the Basket Index. 

 All terms used but not defined in this Security are used
herein as defined in the Calculation Agency Agreement or the Indenture. 
 Calculation Agent 
 The Calculation Agent will determine, among other things, the Basket Ending Level (including each Basket Index Return and each Basket Index Ending
Level), the Basket Return and the Payment at Maturity, if any, on the Securities. In addition, the Calculation Agent will determine whether there has been a Market Disruption Event or a discontinuation of any Basket Index (or the relevant Successor
Basket Index) and whether there has been a material change in the method of calculating any of the Basket Indices. All calculations, determinations and adjustments made by the Calculation Agent will be at the sole discretion of the Calculation Agent
and will, in the absence of manifest error, be conclusive for all purposes and binding on Holders and on the Company. The Company may appoint a different Calculation Agent from time to time after the date of the original issue of the Securities
without Holders’ consent and without notifying Holders. 
 Discontinuation of a Basket Index; Alteration of Method of Calculation 
 Dow Jones EURO STOXX 50® Index 
 If STOXX Limited discontinues publication of the Dow Jones EURO STOXX 50® Index and STOXX
Limited or another entity publishes a successor or substitute index that the Calculation Agent determines, in its sole discretion, to be comparable to the discontinued Dow Jones EURO STOXX 50®
 Index (such index being referred to herein as a “Successor Basket Index”), then any Basket Index Closing Level for such Basket Index will be determined by reference to the level of such Successor Basket Index at the close of
trading on the Relevant Exchange or market for the Successor Basket Index on the Valuation Date. Upon any selection by the Calculation Agent of a Successor Basket Index, the Calculation Agent will cause written notice thereof to be promptly
furnished to the Trustee, to the Company and to the Holders. 
 If STOXX Limited discontinues publication of the Dow Jones EURO STOXX
50® Index prior to, and such discontinuation is continuing on, the Valuation Date and the Calculation Agent determines, in its sole discretion, that no Successor Basket Index is available
at such time, or the Calculation Agent has previously selected a Successor Basket Index and publication of such Successor Basket Index is discontinued prior to, and such discontinuation is continuing on, the 

  

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Valuation Date, or if STOXX Limited (or the publisher of any Successor Basket Index) fails to calculate and publish a Closing Level for the Dow Jones EURO
STOXX 50® Index (or any Successor Basket Index) on any date when it would ordinarily do so in accordance with its customary practice, then the Calculation Agent will determine the Closing
Level for such date. The Closing Level will be computed by the Calculation Agent in accordance with the formula for and method of calculating the Dow Jones EURO STOXX 50® Index or Successor
Basket Index, as applicable, last in effect prior to such discontinuation or failure to calculate or publish a Closing Level for the Dow Jones EURO STOXX 50® Index or Successor Basket
Index, as applicable, using the Closing Price (or, if trading in the relevant securities has been materially suspended or materially limited, its good faith estimate of the Closing Price that would have prevailed but for such suspension or
limitation) at the close of the principal trading session on such date of each security most recently included in the Dow Jones EURO STOXX 50® Index or Successor Basket Index, as
applicable. 
 If at any time the method of calculating the Dow Jones EURO STOXX 50®
 Index or a Successor Basket Index, or the level thereof, is changed in a material respect, or if the Dow Jones EURO STOXX 50® Index or a Successor Basket Index is in any other way
modified so that the Dow Jones EURO STOXX 50® Index or such Successor Basket Index does not, in the opinion of the Calculation Agent, fairly represent the level of the Dow Jones EURO STOXX
50® Index or such Successor Basket Index had such changes or modifications not been made, then the Calculation Agent will, at the close of business in New York City on each date on which
the Dow Jones EURO STOXX 50® Index Closing Level is to be determined, make such calculations and adjustments as, in the good faith judgment of the Calculation Agent, may be necessary in
order to arrive at a level of a stock index comparable to the Dow Jones EURO STOXX 50® Index or such Successor Basket Index, as the case may be, as if such changes or modifications had not
been made, and the Calculation Agent will calculate the Closing Level with reference to the Dow Jones EURO STOXX 50® Index or such Successor Basket Index, as adjusted. Accordingly, if the
method of calculating the Dow Jones EURO STOXX 50® Index or a Successor Basket Index is modified so that the level of the Dow Jones EURO STOXX 50® Index or such Successor Basket Index is a fraction of what it would have been if there had been no such modification (e.g., due to a split in the Dow Jones EURO STOXX 50® Index), then the Calculation Agent will adjust its calculation of the Dow Jones EURO STOXX 50® Index or such Successor Basket Index in order to arrive at a
level of the Dow Jones EURO STOXX 50® Index or such Successor Basket Index as if there had been no such modification (e.g., as if such split had not occurred). 
 FTSE 100 Index® 
 If FTSE discontinues publication of the FTSE 100 Index® and FTSE or another entity publishes a successor or substitute index that the Calculation Agent determines, in its sole discretion, to be comparable to the discontinued FTSE 100 Index® (such index being referred to herein as a “Successor Basket Index”), then any Basket Index Closing Level will be determined by reference to the
level of such Successor Basket Index at the close of trading on the relevant exchange or market for the Successor Basket Index on the Valuation Date. Upon any selection by the Calculation Agent of a Successor Basket Index, the Calculation Agent will
cause written notice thereof to be promptly furnished to the Trustee, to the Company and to the Holders. 
  

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 If FTSE discontinues publication of the FTSE 100 Index® prior to, and such discontinuance is continuing on, the Valuation Date and the Calculation Agent determines, in its sole discretion, that no Successor Basket Index is available at such time, or the Calculation Agent
has previously selected a Successor Basket Index and publication of such Successor Basket Index is discontinued prior to, and such discontinuation is continuing on, the Valuation Date, or if FTSE (or the publisher of any Successor Basket Index)
fails to calculate and publish a Closing Level for the FTSE 100 Index® (or any Successor Basket Index) on any date when it would ordinarily do so in accordance with its customary practice,
then the Calculation Agent will determine the Closing Level on such date. The Closing Level will be computed by the Calculation Agent in accordance with the formula for and method of calculating the FTSE 100 Index® or Successor Basket Index, as applicable, last in effect prior to such discontinuation or failure to calculate or publish a Closing Level for the FTSE 100 Index®
 or Successor Basket Index, as applicable, using the Closing Price (or, if trading in the relevant securities has been materially suspended or materially limited, its good faith estimate of the Closing Price that would have prevailed but for
such suspension or limitation) at the close of the principal trading session on such date of each security most recently included in the FTSE 100 Index® or Successor Basket Index, as
applicable. 
 If at any time the method of calculating the FTSE 100 Index® or a
Successor Basket Index, or the level thereof, is changed in a material respect, or if the FTSE 100 Index® or a Successor Basket Index is in any other way modified so that the FTSE 100
Index® or such Successor Basket Index does not, in the opinion of the Calculation Agent, fairly represent the level of the FTSE 100 Index® or such Successor Basket Index had such changes or modifications not been made, then the Calculation Agent will, at the close of business in New York City on each date on which the FTSE 100 Index® Closing Level is to be determined, make such calculations and adjustments as, in the good faith judgment of the Calculation Agent, may be necessary in order to arrive at a level of a stock
index comparable to the FTSE 100 Index® or such Successor Basket Index, as the case may be, as if such changes or modifications had not been made, and the Calculation Agent will calculate
the Closing Level with reference to the FTSE 100 Index® or such Successor Basket Index, as adjusted. Accordingly, if the method of calculating the FTSE 100 Index® or a Successor Basket Index is modified so that the level of such FTSE 100 Index® or FTSE or Successor Basket Index is a fraction of what it would have been
if there had been no such modification (e.g., due to a split in the FTSE 100 Index®), then the Calculation Agent will adjust such FTSE 100 Index in order to arrive at a level of the FTSE
100 Index® or such Successor Basket Index as if there had been no such modification (e.g., as if such split had not occurred). 
 Nikkei 225SM Index 
 If Nikkei Inc. discontinues publication of the Nikkei 225SM Index and Nikkei Inc. or another entity publishes a successor or substitute index that the Calculation Agent determines, in its sole discretion, to be comparable to the discontinued
Nikkei 225SM Index (such index being referred to herein as a “Successor Basket Index”), then any Basket Index Closing Level for such Basket Index
will be determined by reference to the level of such Successor Basket Index at the close of trading on the Tokyo Stock Exchange (2nd session) or the
Relevant Exchange or market for the Successor Basket Index on the Valuation Date. Upon any selection by the Calculation Agent of a Successor Basket Index, the Calculation Agent will cause written notice thereof to be promptly furnished to the
Trustee, to the Company and to the Holders. 
  

 10 

 If Nikkei Inc. discontinues publication of the Nikkei 225SM Index prior to, and such discontinuation is continuing on, the Valuation Date and the Calculation Agent determines, in its sole discretion, that no Successor Basket Index is
available at such time, or the Calculation Agent has previously selected a Successor Basket Index and publication of such Successor Basket Index is discontinued prior to, and such discontinuation is continuing on the Valuation Date, or if Nikkei
Inc. (or the publisher of any Successor Basket Index) fails to calculate and publish a Closing Level for the Nikkei 225SM Index (or any Successor Basket
Index) on any date when it would ordinarily do so in accordance with its customary practice, then the Calculation Agent will determine the Closing Level for such date. The Closing Level will be computed by the Calculation Agent in accordance with
the formula for and method of calculating the Nikkei 225SM Index or Successor Basket Index, as applicable, last in effect prior to such discontinuation or
failure to calculate or publish a Closing Level for the Nikkei 225SM Index or Successor Basket Index, as applicable, using the Closing Price (or, if
trading in the relevant securities has been materially suspended or materially limited, its good faith estimate of the Closing Price that would have prevailed but for such suspension or limitation) at the close of the principal trading session on
such date of each security most recently included in the Nikkei 225SM Index or Successor Basket Index, as applicable. 

 If at any time the method of calculating the Nikkei 225SM Index or a Successor Basket Index, or the level thereof, is changed in a material respect, or if the Nikkei 225SM Index or
a Successor Basket Index is in any other way modified so that the Nikkei 225SM Index or such Successor Basket Index does not, in the opinion of the
Calculation Agent, fairly represent the level of the Nikkei 225SM Index or such Successor Basket Index had such changes or modifications not been made,
then the Calculation Agent will, at the close of business in New York City on each date on which the Nikkei 225SM Index Closing Level is to be determined,
make such calculations and adjustments as, in the good faith judgment of the Calculation Agent, may be necessary in order to arrive at a level of a stock index comparable to Nikkei 225SM Index or such Successor Basket Index, as the case may be, as if such changes or modifications had not been made, and the Calculation Agent will calculate the Closing Level with reference to the Nikkei 225SM Index or such Successor Basket Index, as adjusted. Accordingly, if the method of calculating the Nikkei 225SM
 Index or a Successor Basket Index is modified so that the level of Nikkei 225SM Index or such Successor
Basket Index is a fraction of what it would have been if there had been no such modification (e.g., due to a split in the Nikkei 225SM Index), then the
Calculation Agent will adjust its calculation of the Nikkei 225SM Index or such Successor Basket Index in order to arrive at a level of Nikkei 225SM Index or such Successor Basket Index as if there had been no such modification (e.g., as if such split had not occurred). 

 S&P®/ASX 200
Index 
 If the S&P/ASX Committee discontinues publication of the S&P®
/ASX 200 Index and the S&P/ASX Committee or another entity publishes a successor or substitute index that the Calculation Agent determines, in its sole discretion, to be comparable to the discontinued S&P®/ASX 200 Index (such index being referred to herein as a “Successor Basket Index”), then any Basket Index Closing Level will be determined by reference to the level of such Successor 

  

 11 

 
Basket Index at the close of trading on the Relevant Exchange or market for the Successor Basket Index on the Valuation Date. Upon any selection by the
Calculation Agent of a Successor Basket Index, the Calculation Agent will cause written notice thereof to be promptly furnished to the Trustee, to the Company and to the Holders. 
 If the S&P/ASX Committee discontinues publication of the Successor Basket Index prior to, and such discontinuation is continuing on, the Valuation
Date and the Calculation Agent determines, in its sole discretion, that no Successor Basket Index is available at such time, or the Calculation Agent has previously selected a Successor Basket Index and publication of such Successor Basket Index is
discontinued prior to, and such discontinuation is continuing on, the Valuation Date, or if the S&P/ASX Committee (or the publisher of any Successor Basket Index) fails to calculate and publish a Closing Level for the S&P®/ASX 200 Index (or any Successor Basket Index) on any date when it would ordinarily do so in accordance with its customary practice, then the Calculation Agent will determine the Closing Level
on such date. The Closing Level will be computed by the Calculation Agent in accordance with the formula for and method of calculating the S&P®/ASX 200 Index or Successor Basket Index,
as applicable, last in effect prior to such discontinuation or failure to calculate or publish a Closing Level for the S&P®/ASX 200 Index or Successor Basket Index, as applicable, using
the Closing Price (or, if trading in the relevant securities has been materially suspended or materially limited, its good faith estimate of the Closing Price that would have prevailed but for such suspension or limitation) at the close of the
principal trading session on such date of each security most recently included in the S&P®/ASX 200 Index or Successor Basket Index, as applicable. 
 If at any time the method of calculating the S&P®/ASX 200 Index or a Successor Basket
Index, or the level thereof, is changed in a material respect, or if the S&P®/ASX 200 Index or a Successor Basket Index is in any other way modified so that the S&P®/ASX 200 Index or such Successor Basket Index does not, in the opinion of the Calculation Agent, fairly represent the level of the S&P®
/ASX 200 Index or such Successor Basket Index had such changes or modifications not been made, then the Calculation Agent will, at the close of business in New York City on each date on which the S&P®/ASX 200 Index Closing Level is to be determined, make such calculations and adjustments as, in the good faith judgment of the Calculation Agent, may be necessary in order to arrive at a level of a stock index
comparable to the S&P®/ASX 200 Index or such Successor Basket Index, as the case may be, as if such changes or modifications had not been made, and the Calculation Agent will calculate
the Index Closing Level with reference to the S&P®/ASX 200 Index or such Successor Basket Index, as adjusted. Accordingly, if the method of calculating the S&P®/ASX 200 Index or a Successor Basket Index is modified so that the level of such S&P®/ASX 200 Index or Successor Basket Index is a
fraction of what it would have been if there had been no such modification (e.g., due to a split in the S&P®/ASX 200 Index), then the Calculation Agent will adjust such S&P®/ASX 200 Index in order to arrive at a level of the S&P®/ASX 200 Index or such Successor Basket Index as if there had been no such
modification (e.g., as if such split had not occurred). 
  

 12 

 The following abbreviations, when used in the inscription on the face of the within Security, shall be
construed as though they were written out in full according to applicable laws or regulations: 
  

							
	TEN COM -	    	as tenants in common	    	UNIF GIFT MIN ACT - _________ Custodian  _________
		    		    	                          (Cust)             
     (Minor)

	TEN ENT -	    	as tenants by the entireties	    	under Uniform Gifts to Minors
	JT TEN -	    	as joint tenants with right of	    	Act	  	  

		    	Survivorship and not as tenants in common	    		  	( State)

 Additional abbreviations may also be used though not in the above list. 
                                       
                   
 FOR VALUE RECEIVED, the
undersigned hereby sells, assigns and transfers unto 
 PLEASE INSERT SOCIAL SECURITY OR OTHER 
 IDENTIFYING NUMBER OF ASSIGNEE 
  

			
	 	 	
	 	 	

  
  
  

	
	 

 (Name and Address of Assignee, including zip code, must be printed or typewritten.) 
  
  

	
	 

 the within Security, and all rights thereunder, hereby irrevocably constituting and appointing 
  
  

	
	 

 to transfer the said Security on the books of the Company, with full power of substitution in the premises.

 Dated: 
 __________________________________________ 
 NOTICE: The signature to this assignment must correspond with the name as it appears
upon the face of the within Security in every particular, without alteration or enlargement or any change whatever. 
 Signature(s) Guaranteed: 

__________________________ 
 THE SIGNATURE(S) SHOULD BE GUARANTEED BY AN
ELIGIBLE GUARANTOR INSTITUTION (BANKS, STOCKBROKERS, SAVINGS AND LOAN ASSOCIATIONS AND CREDIT UNIONS WITH MEMBERSHIP IN AN APPROVED MEDALLION SIGNATURE GUARANTEE PROGRAM), PURSUANT TO S.E.C. RULE 17Ad-15.Employment Agreement

 Exhibit 10.1 
 LINDA MCFARLAND FARTHING 
 AGREEMENT 
 WITH 
 STEIN MART, INC. 
 This Agreement (this “Agreement”) entered into in the City of Jacksonville and State of Florida between Stein Mart, Inc., a
Florida corporation and its divisions, subsidiaries and affiliates (the “Company”), and Linda McFarland Farthing (“Executive”), is made as of August 27, 2007 (the “Effective
Date”). 
 In consideration of the promises and mutual covenants contained herein, the parties, intending to be legally bound,
agree as follows: 
 SECTION 1. TERM OF EMPLOYMENT 
 (a) Term. The Company agrees to employ Executive, and Executive agrees to be employed by the Company, for a period beginning on the date of the Executive’s assuming the responsibilities of the office of
President and Chief Executive Officer which shall be on or about September 24, 2007, and continue until terminated by either the Executive or the Company upon not less than sixty (60) days advance written notice (the
“Term”). 
 SECTION 2. DEFINITIONS 
 “Board of Directors” means the Board of Directors of Stein Mart, Inc. and any of its divisions, affiliates or subsidiaries. 
 “Cause” means the occurrence of any one or more of the following: 
 (a) Executive has been convicted of, or pleads guilty or nolo contendere to, a felony involving dishonesty, theft,
misappropriation, embezzlement, fraud crimes against property or person, or moral turpitude which negatively impacts the Company; or 
 (b) Executive intentionally furnishes materially false, misleading, or omissive information to the Company or persons to whom the Executive reports; or 
 (c) Executive intentionally fails to fulfill any assigned responsibilities for compliance with the Sarbanes-Oxley Act of 2002 or violates
the same; or 

 (d) Executive intentionally and wrongfully damages material assets of the Company; or

 (e) Executive intentionally and wrongfully discloses material Confidential Information of the Employer; or 
 (f) Executive intentionally and wrongfully engages in any competitive activity which would constitute a material breach of the duty of
loyalty; or 
 (g) Executive intentionally breaches any stated material employment policy or any material provision of the
Company’s Ethics Policy, or 
 (h) Executive intentionally commits a material breach of this Agreement, or 
 (i) Executive intentionally engages in acts or omissions which constitute failure to follow reasonable and lawful directives of the
Company, provided, however, that such acts or omissions are not cured within five (5) days following the Company’s giving notice to Executive that the Company considers such acts or omissions to be “Cause” under this Agreement.

 No act, or failure to act, on the part of Executive shall be deemed “intentional” if it was due primarily to an error in
judgment or negligence, but shall be deemed “intentional” only if done, or omitted to be done, by the Executive not in good faith and without reasonable belief that Executive’s action or omission was in or not opposed to the best
interests of the Company. Failure to meet performance standards or objectives shall not constitute Cause for purposes hereof. 
 “Change of Control” means the occurrence of any of the following: (a) the acquisition of more than 50% of the value or voting power of the Company’s stock by a person or group in a transaction or a series
of related transactions; (b) the acquisition in a period of twelve months or less of at least 35% of the Company’s stock by a person or group in a transaction or a series of related transactions; (c) the replacement of a majority of
the Company’s board in a period of twelve months or less by directors who were not endorsed by a majority of the current board members; or (d) the acquisition in a period of twelve months or less of 40% or more of the Company’s assets
by an unrelated entity. 
 “Compensation Committee” means the Company’s Compensation Committee or, if no such
committee exists, the term Compensation Committee shall mean the Company’s Board of Directors. 
 “Competing
Business” means any business which (i) at the time of determination, is substantially similar to the whole or a substantial part of the business conducted by the Company or any of its divisions or affiliates; (ii) at the time
of determination, is operating a store or stores which, during its or their fiscal year preceding the determination, had aggregate net sales, including sales in leased and 

  

 2 

 
licensed departments, in excess of $10,000,000, if such store or any such stores is or are located in a city or within a radius of 25 miles from the outer
limits of a city where the Company, or any of its divisions or affiliates, is operating a store or stores which, during their fiscal year preceding the determination, had aggregate net sales, including sales in leased and licensed departments, in
excess of $10,000,000; and (iii) had aggregate net sales at all locations, including sales in leased and licensed departments and sales by its divisions and affiliates, during its fiscal year preceding that in which the Executive first rendered
personal services thereto, in excess of $25,000,000. 
 “Disability” shall mean Executive’s incapacity due to
physical or mental illness or cause, which results in the Executive being unable to perform Executive’s duties with Company on a full-time basis for a period of six (6) consecutive months. Any dispute as to disability shall be conclusively
determined by written opinions rendered by two qualified physicians, one selected by Executive, and one selected by Company. 
 “Earned Bonus” means the bonus paid, if any, pursuant to the Company’s incentive compensation plans in effect from time to time. Earned Bonus shall be prorated based on the ratio of the number of days during
such year that Executive was employed to 365. 
 “Good Reason” means the occurrence of any one or more of the
following: 
  

	(i)	a material and continuing failure to pay to Executive compensation and benefits (as described in Section 4) that have been earned, if any, by Executive, except failure
to pay or provide compensation or benefits that are in dispute between the Company and the Executive unless such failure continues following the resolution of such dispute; or 

  

	(ii)	a material reduction in Executive’s compensation or benefits (as described in Section 4) which is materially more adverse to the Executive than similar reductions
applicable to other executives of a similar level of status within the Company as Executive; or 

  

	(iii)	The assignment to Executive of duties which results in a material diminution in such position, authority, duties or responsibilities and which could reasonably be believed to be
demeaning, excluding any isolated and inadvertent action not taken in bad faith and which is remedied by the Company within fifteen (15) days after receipt of notice thereof given by Executive; or 

  

	(iv)	Any failure by the Company to comply with any of the material provisions of this Agreement and which is not remedied by the Company within thirty (30) days after receipt of
notice thereof given by Executive; or 

  

 3 

	(v)	any requirement that Executive perform duties that, in the good faith professional judgment of Executive, after consultation with the Board of Directors of the Company, are
inconsistent with ethical or lawful business practices; or 

  

	(vi)	Executive’s being required to relocate to a principal place of employment more than one-hundred (100) miles from Executive’s current principal place of employment in
Jacksonville, Florida during the Term unless the Company shall pay all reasonable costs and expenses related thereto. 

 Provided,
however, after a Change of Control, the term “Good Reason” shall also mean any restructuring or reassignment of any of the Executive’s responsibilities, in a manner that diminishes them or is materially adverse to
the Executive, from that which was in effect at the time of the Change of Control. 
 “Termination Date” means the last day
Executive actively provides services to Company or written notice by the Board of Directors or Chief Executive Officer of the last date Executive is to be employed, whichever is earlier. 
 SECTION 3. TITLE, POWERS AND RESPONSIBILITIES 
 (a) Title. Executive shall be
the President and Chief Executive Officer of the Company. 
 (b) Powers and Responsibilities. 
  

	(i)	Executive shall use Executives best efforts to faithfully perform the duties of Executive’s employment and shall perform such duties as are usually performed by a person
serving in Executive’s position with a business similar in size and scope as the Company and such other additional duties as may be prescribed from time to time by the Company which are reasonable and consistent with the Company’s
operations, taking into account officer’s expertise and job responsibilities. Executive agrees to devote Executive’s full business time and attention to the business and affairs of the Company. Executive shall serve on such boards and in
such offices of the Company or its subsidiaries as the Company’s Board of Directors reasonably requests. 

  

	(ii)	Executive, as a condition to Executive’s employment under this Agreement, represents and warrants that Executive can assume and fulfill responsibilities described in
Section 3(b)(i) without any risk of violating any non-compete or other restrictive covenant or other agreement to which Executive is a party. During the Employment Term Executive shall not enter into any agreement that would preclude, hinder or
impair Executive’s ability to fulfill responsibilities described in Section 3(b)(i) specifically or this Agreement generally. 

  

 4 

 SECTION 4. COMPENSATION AND BENEFITS 
 (a) Annual Base Salary. Executive’s base salary shall be $826,000.00 per year (“Annual Base Salary”),
which amount may be periodically reviewed at the discretion of the Compensation Committee. The Annual Base Salary shall be payable in accordance with the Company’s standard payroll practices and policies and shall be subject to such
withholdings as required by law or as otherwise permissible under such practices or policies. 
 (b) Earned Bonus.
Executive shall be eligible to receive an Earned Bonus. Nothing in this Section 4(b) guarantees that any Earned Bonus will be paid. 
 (c) Employee Benefit Plans. Executive shall be entitled to receive the benefits described in Schedule A attached hereto, if and for as long as the Company sponsors such plans and such plans remain in effect for
other executives with the same level of status as Executive. 
 (d) Stock Options. The Board of Directors, in its
discretion, may grant rights to Executive under the Stein Mart, Inc. Omnibus Plan (the “Option Plan”) on terms set by the Board of Directors. 
 (e) Deferred Compensation. Executive will participate in the Stein Mart Executive Deferred Compensation Plan (the
“Deferred Compensation Plan”). The Company reserves the right to alter, modify, revise or eliminate the Deferred Compensation Plan provided that any such change to the terms will apply to Executive and similarly situated
participants. 
 (f) Vacation, Holidays and Salary Continuation. Executive shall receive a total of 27 days of paid
vacation, or holidays on a pro rata basis during any 365 day period of the Term pro rata. The amount may be adjusted in accordance with the Company’s standard policy or as directed by the Company’s Board of Directors. Any
vacation or holiday leave time not used during any 365 day period of the Term will not carry forward to the next 365 period and will be forfeited. Executive will also participate in the Company’s Management Salary Continuation Plan as in effect
from time to time. The Company reserves the right to alter, modify, revise or eliminate the Management Salary Continuation Plan provided that any such change to the terms will apply to Executive and similarly situated participants. 
 (g) Expense Reimbursements. Executive shall have the right to expense reimbursements in accordance with the Company’s standard
policy on expense reimbursements as in effect from time to time. 
 (h) Indemnification. With respect to
Executive’s acts or failures to act during Executive’s employment in Executive’s capacity as an officer, employee or agent of the Company, Executive shall be entitled to indemnification from the 

  

 5 

 
Company, and to liability insurance coverage (if any), on the same basis as other officers of the Company. Executive shall be indemnified by Company, and
Company shall pay Executive’s related expenses when and as incurred, all to the full extent permitted by law. Subject to applicable law, the Company reserves the right to discontinue indemnification in the event the Company determines that the
Executive has breached this Agreement or the Executive has or intends to advance a business or legal position contrary to the Company’s interests. Notwithstanding the foregoing, Executive shall not be entitled to any indemnification if a
judgment or other final adjudication establishes that any act or omission of Executive was material to the cause of action so adjudicated and that such act or omission constituted: (i) a criminal violation, unless Executive had reasonable cause
to believe that Executive’s conduct was lawful or had no reasonable cause to believe that such conduct was unlawful, (ii) a transaction from which Executive derived an improper personal benefit, or (iii) willful misconduct or a
conscious disregard for the best interests of the Company. 
 (i) Automobile Allowance. The Company will pay Executive
$1,100 per month (paid quarterly) which shall be used for the lease, purchase, maintenance and/or operation of a vehicle that Executive is to use for business travel or may use for personal travel. Executive shall be solely responsible for any taxes
associated with the automobile allowance afforded to him. 
 (j) Remote Residence. The While Executive maintains her
permanent residence in Charlotte, NC, but not to exceed two years from the Effective Date, the Company, at the Company’s expense, shall provide Executive (i) with a suitable, furnished apartment in Jacksonville, Florida for her exclusive
use, and (ii) with first-class commercial transportation between Charlotte, NC and Jacksonville, FL on a weekly basis, and will provide private aircraft transportation for Ms. Farthing between those two cities no more than 12 times in any
12-month period, to be used at her discretion. 
 (k) Other Perquisites. The Company will provide Executive with such
other perquisites as may be made generally available to the highest level of senior executives of the Company. 
 SECTION 5. TERMINATION OF EMPLOYMENT

 (a) General. The Board of Directors shall have the right to terminate Executive’s employment and this
Agreement at any time with or without Cause, and Executive shall have the right to terminate Executive’s employment and this Agreement at any time with or without Good Reason; provided that obligations under this Section 5,
Section 6 and Section 7 shall survive termination of the Agreement. 
 (b) Termination by Board of Directors
without Cause or by Executive for Good Reason. If (i) the Board of Directors terminates Executive’s employment 

  

 6 

 
without Cause, or (ii) Executive resigns for Good Reason, then in either of those circumstances, the Company’s only obligation to Executive under
this Agreement (except as provided in §5(f) hereof) shall be to pay Executive’s earned but unpaid base salary, if any, up to the Termination Date. The Company shall only be obligated to make such payments and provide such benefits under
any employee benefit plan, program or policy in which Executive was a participant as are explicitly required to be paid to Executive by the terms of any such benefit plan, program or policy following the Termination Date. In the event the Company
terminates the Executive without cause, no less than sixty (60) days notice will be given as provided in section 1 hereof. 
 (c) Termination by the Board of Directors for Cause or by Executive without Good Reason. If the Board of Directors of the Company terminates Executive’s employment for Cause or Executive resigns without Good Reason, the
Company’s only obligation to Executive under this Agreement shall be to pay Executive’s earned but unpaid Annual Base Salary, if any, up to the Termination Date. The Company shall only be obligated to make such payments and provide such
benefits under any employee benefit plan, program or policy in which Executive was a participant as are explicitly required to be paid to Executive by the terms of any such benefit plan, program or policy following the Termination Date. 

(d) Termination for Disability. Subject to the definitions and requirements of Section 2 (“Disability”), after
six (6) consecutive months of such disability leave of absence, Executive’s service may be terminated by Company. In the event Executive is terminated from employment due to Disability, the Company shall: 
 (1) pay Executive’s Annual Base Salary through the end of the month in which Executive’s employment terminates as soon as
practicable after Executive’s employment terminates; 
 (2) pay Executive’s Earned Bonus, pro rata and if
any, for the fiscal year in which such termination of employment occurs; 
 (3) pay Executive an additional nine
(9) months of compensation at the then-Annual Base Salary; 
 (4) pay or cause the payment of benefits to which Executive
is entitled under the terms of any disability plan of the Company covering the Executive at the time of such Disability: 
 (5) pay premiums for COBRA coverage as provided in Section 5(g); and 
 (6) make such payments and provide such
benefits as otherwise called for under the terms of each other employee benefit plan, program and policy in 

  

 7 

 
which Executive was a participant; provided no payments made under Section 5(d)(2) or Section 5(d)(3) shall be taken into account in computing any
payments or benefits described in this Section 5(d)(4). 
 (7) in the event the Executive has any options or restricted
shares (but excluding “performance shares” which shall be governed by the terms set forth in the grant as to such shares) which are not vested on the date of termination for Disability, then pay to the Executive (i) as to any unvested
options, the net value of the excess, if any, of the closing price of the Company’s shares on the NASDAQ for the day on which the Disability occurred and the exercise price of such unvested options multiplied by the number of shares subject to
options which failed to vest; and (ii) as to any unvested restricted shares, the value of the closing price of the Company’s shares on the NASDAQ for the day on which the Disability occurred multiplied by the number of restricted shares,
if any, which failed to vest due to such termination of employment for Disability. 
 Notwithstanding the Executive’s Disability, during
the period of Disability leave, Executive shall be paid in full (net of insurance) as if Executive were actively performing services. Executive agrees to simultaneously utilize available leave under the Family and Medical Leave Act of 1993 during
such disability leave of absence. During the period of such Disability leave of absence, the Board of Directors may designate someone to perform Executive’s duties. Executive shall have the right to return to full-time service so long as
Executive is able to resume and faithfully perform Executive’s full-time duties. 
 (e) Death. (i) If
Executive’s employment terminates as a result of Executive’s death, the Company shall: 
 (1) pay to
Executive’s designated beneficiaries or estate Executive’s Annual Base Salary through the end of the month in which Executive’s employment terminates as soon as practicable after Executive’s death; 
 (2) pay to Executive’s designated beneficiaries or estate Executive’s Earned Bonus, when actually determined, for the year in
which Executive’s death occurs, and 
 (3) make such payments and provide such benefits as otherwise called for under the
terms of each other employee benefit plan, program and policy in which Executive was a participant; provided no payments made under Section 5(e)(2) shall be taken into account in computing any payments or benefits described in this
Section 5(e)(3). 
 (4) in the event the Executive has any options or restricted shares (but excluding “performance
shares” which shall be governed by the terms set forth in the grant as to such shares) which are not vested on the date of 

  

 8 

 
termination for Death, then pay to the executive (i) as to any unvested options, the net value of the excess, if any, of the closing price of the
Company’s shares on the NASDAQ for the day on which the Death occurred and the exercise price of such unvested options multiplied by the number of shares subject to options which failed to vest; and (ii) as to any unvested restricted
shares, the value of the closing price of the Company’s shares on the NASDAQ for the day on which the Death occurred multiplied by the number of restricted shares, if any, which failed to vest due to such termination of employment for Death.

 Any amounts payable to Executive under this Agreement which are unpaid at the date of Executive’s death or payable hereunder or otherwise by reason
of Executive’s death, shall be paid in accordance with the terms of this Agreement to Executive’s Estate. 
 (f)
Relinquishment of Corporate Positions. Executive shall automatically cease to be an officer and/or director of the Company and its affiliates as of Executive’s Termination Date. 
 (g) Payment of Benefits. If the Executive is terminated in accordance with Section 5(b) (relating to termination without Cause
or with Good Reason) or 5(f) (relating to termination following a Change of Control): 
 (1) In addition to all other amounts
payable to Executive under this Section 5, the Executive shall be entitled to receive, upon written request, all benefits payable to him under any of Company’s tax-qualified employee benefit plans and any other plan, program or arrangement
relating to deferred compensation, retirement or other benefits including, without limitation, any profit sharing plan, 401(k), employee stock ownership plan, or any plan established as a supplement to any of the aforementioned plans or expressly
provided by other provisions of this Agreement, whether now existing or hereafter established prior to the Termination Date, with additional service and benefit credits (based on not less than the amount of salary and Earned Bonus Executive would
have received under this Agreement had Executive’s services not terminated) for periods through the end of the then current Employment Term. 
 (h) Limitation. Anything in this Agreement to the contrary notwithstanding, Executive’s entitlement to or payments under any other plan or agreement shall be limited to the extent necessary so that no
payment to be made to Executive on account of termination of Executive’s employment with the Company will be subject to the excise tax imposed by Section 4999 of the Internal Revenue Code of 1986, as amended (the “Code”), as then
in effect, but only if, by reason of such limitation, Executive’s net after tax benefit shall exceed the net after tax benefit if such reduction were not made. “Net after tax benefit” shall mean (i) the sum of all payments and
benefits that Executive is then entitled to receive under any section of this Agreement or other plan or agreement that would constitute a “parachute payment” within the meaning of Section 280G of the Code, less (i) the amount of

  

 9 

 
federal income tax payable with respect to the payments and benefits described in clause (i) above calculated at the maximum marginal income tax rate
for each year in which such payments and benefits shall be paid to Executive (based upon the rate in effect for such year as set forth in the Code at the time of the first payment of the foregoing), less (ii) the amount of excise tax imposed
with respect to the payments and benefits described in clause (i) above by Section 4999 of the Code. Any limitation under this Section I.A.1.a)(1)(a)(i) of Executive’s entitlement to payments shall be made in the manner and in
the order directed by Executive. 
 SECTION 6. COVENANTS BY EXECUTIVE 
 (a) Company Property. Upon the termination of Executive’s employment for any reason, Executive shall promptly return all
Company Property which had been entrusted or made available to Executive by the Company. “Property” means all records, files, memoranda, communication, reports, price lists, plans for current or prospective business
operations, customer lists, drawings, plans, sketches, keys, codes, computer hardware and software and other property of any kind or description prepared, used or possessed by Executive during Executive’s employment by the Company (and any
duplicates of any such Property) together with any and all information, ideas, concepts, discoveries, processes, intellectual property, inventions and the like conceived, made, developed or acquired at any time by Executive individually or with
others during Executive’s employment which relate to the Company or its products or services or operations. Concurrent with this Agreement Executive agrees to execute an agreement governing and protecting the Company’s intellectual
property, a copy of which is attached as Exhibit B. 
 (b) Trade Secrets. Executive agrees that Executive shall hold in
a fiduciary capacity for the benefit of the Company and shall not directly or indirectly use or disclose any Trade Secret that Executive may have acquired during the term of Executive’s employment by the Company for so long as such information
remains a Trade Secret. “Trade Secret” means information, including, but not limited to, technical or non-technical data, a formula, a pattern, a compilation, a program, a device, a method, a technique, a drawing or a process
that (1) derives economic value, actual or potential, from not being generally known to, and not being generally readily ascertainable by proper means by, other persons who can obtain economic value from its disclosure or use and (2) is
the subject of reasonable efforts by the Company to maintain its secrecy. This Section 6(b) is intended to provide rights to the Company which are in addition to, not in lieu of, those rights the Company has under the common law or applicable
statutes for the protection of trade secrets. 
 (c) Confidential Information. During the Employment Term and
continuing thereafter indefinitely, Executive shall hold in a fiduciary capacity for the benefit of the Company, and shall not directly or indirectly use or disclose, any Confidential Information that Executive may have acquired (whether or not
developed or compiled by Executive and whether or not Executive is authorized to have access to 

  

 10 

 
such information) during the term of, and in the course of, or as a result of Executive’s employment by the Company without the prior written consent of
the Board of Directors unless and except to the extent that such disclosure is (i) made in the ordinary course of Executive’s performance of Executive’s duties under this Agreement or (ii) required by any subpoena or other legal
process (in which event Executive will give the Company prompt notice of such subpoena or other legal process in order to permit the Company to seek appropriate protective orders). “Confidential Information” means any secret,
confidential or proprietary information possessed by the Company or any of its subsidiaries or affiliates, including, without limitation, trade secrets, customer or supplier lists, details of client or consultant contracts, current and anticipated
customer requirements, pricing policies, price lists, market studies, business plans, operational methods, marketing plans or strategies, advertising campaigns, information regarding customers or suppliers, computer software programs (including
object code and source code), data and documentation data, base technologies, systems, structures and architectures, inventions and ideas, past current and planned research and development, compilations, devices, methods, techniques, processes,
financial information and data, business acquisition plans and new personnel acquisition plans and the terms and conditions of this Agreement that has not become generally available to the public. 
 (d) Non-Competition. Executive recognizes that Executive’s duties will entail the receipt of Trade Secrets and Confidential
Information as defined in this Section 6. Those Trade Secrets and Confidential Information have been developed by the Company at substantial cost and constitute valuable and unique property of the Company. Accordingly, the Executive
acknowledges that protection of Trade Secrets and Confidential Information is a legitimate business interest. Executive agrees not to compete with the Company during the Employment Term and for a reasonable and limited period thereafter. Therefore,
during the Employment Term and for a period of two years thereafter, the Executive shall not have an investment of $100,000.00 or more in a Competing Business (as defined herein) and shall not render personal services to any such Competing Business
in any manner, including, without limitation, as owner, partner, director, trustee, officer, employee, consultant or advisor thereof. If the Executive shall breach the covenants contained in this Non-Competition provision, the Company shall have no
further obligation to make any payment to the Executive pursuant to this Agreement and may recover from the Executive all such damages as it may be entitled to at law or in equity. In addition, the Executive acknowledges that any such breach is
likely to result in irreparable harm to the Company. The Company shall be entitled to specific performance of the covenants in this Section 6, including entry of a temporary restraining order in state or federal court, preliminary and permanent
injunctive relief against activities in violation of this Section 6, or both, or other appropriate judicial remedy, writ or order, in addition to any damages and legal expenses which the Company may be legally entitled to recover. Executive
acknowledges and agrees that the covenants in this Section 6 shall be construed as agreements independent of any other provision of 

  

 11 

 
this Agreement or any other agreement between the Company and Executive, and that the existence of any claim or cause of action by Executive against the
Company, whether predicated upon this Agreement or any other agreement, shall not constitute a defense to the enforcement by the Company of such covenants. The provisions of this subsection (d) shall not be applicable to Executive if Executive
is terminated from employment without Cause or the Executive resigns from employment for Good Reason 
 (e)
Non-Solicitation. During the Employment Term and for a period of two years hereafter (such period is referred to as the “No Recruit Period”), the Executive will not solicit, either directly or indirectly, any person that Executive
knows or should reasonably know to be an employee of the Company, whether any such employees are now or hereafter through the No Recruit Period so employed or engaged to terminate their employment with the Company. The foregoing is not intended to
limit any legal rights or remedies that any employee of the Company may have under common law with regard to any interference by Executive at any time with the contractual relationship the Company may have with any of its employees. 
 (f) Reasonable and Continuing Obligations. Executive agrees that Executive’s obligations under this Section 6 are
obligations which will continue beyond the date Executive’s employment terminates and that such obligations are reasonable, fair and equitable in scope. The terms and duration are necessary to protect the Company’s legitimate business
interests and are a material inducement to the Company to enter into this Agreement. Executive further acknowledges that the consideration for this Section 6 is Executive’s employment or continued employment. Executive will not be paid any
additional compensation during this Restricted Period for application or enforcement of the restrictive covenants contained in this Section 6. 
 (g) Work Product. The term “Work Product” includes any and all information, programs, concepts, processes, discoveries, improvements, formulas, know-how and inventions, in any form whatsoever,
relating to the business or activities of the Company, or resulting from or suggested by any work developed by the Executive in connection with the Company, or by the Executive at the Company’s request. Executive acknowledges that all Work
Product developed during the Term is property of the Company and accordingly, Executive does hereby irrevocably assign all Work Product developed by the Executive to the Business Manager and agrees: (a) to assign to the Business Manager, free
from any obligation of the Company, all of the Executive’s right, title and interest in and to Work Product conceived, discovered, researched, or developed by the Executive either solely or jointly with others during the term of this Agreement
and for three (3) months after the termination or nonrenewal of this Agreement; and (b) to disclose to the Company promptly and in writing such Work Product upon the Executive’s acquisition thereof. 
  

 12 

 SECTION 7. MISCELLANEOUS 
 (a) Notices. Notices and all other communications shall be in writing and shall be deemed to have been duly given when personally
delivered or when mailed by United States registered or certified mail. Notices to the Company shall be sent to: 
 STEIN
MART, INC 
 Attention: Hunt Hawkins 
 1200 Riverplace Boulevard, 5th Floor 
 Jacksonville, FL 32207 
 Facsimile: (904) 346-1297 
 Notices and communications to Executive shall be sent to the address Executive most recently provided to the Company. 
 (b) No Waiver. No failure by either the Company or Executive at any time to give notice of any breach by the other of, or to
require compliance with, any condition or provision of this Agreement shall be deemed a waiver of any provisions or conditions of this Agreement. 
 (c) Governing Law. This Agreement shall be governed by Florida law without reference to the choice of law principles thereof. Any litigation that may be brought by either the Company or Executive involving the
enforcement of this Agreement or any rights, duties, or obligations under this Agreement, shall be brought exclusively before a court of competent jurisdiction in and for Duval County, Florida. 
 (d) Assignment. This Agreement shall be binding upon and inure to the benefit of the Company and any successor in interest to the
Company or any segment of such business. The Company may assign this Agreement to any affiliate or successor that acquires all or substantially all of the assets and business of the Company or a majority of the voting interests of the Company. The
Company will require any successor (whether direct or indirect, by operation of law, by purchase, merger, consolidation or otherwise to all or substantially all of the business and/or assets of Company) to expressly assume and agree to perform this
Agreement in the same manner and to the same extent that Company would be required to perform it if no such succession had taken place. As used in this Agreement, “Company” shall mean Company as defined above and, unless the context
otherwise requires, any successor to its business and/or assets as aforesaid which assumes and agrees to perform this Agreement by operation of law, or otherwise. Executive’s rights and obligations under this Agreement are personal and shall
not be assigned or transferred. 
  

 13 

 (e) Other Agreements. This Agreement replaces and merges any and all previous
agreements and understandings regarding all the terms and conditions of Executive’s employment relationship with the Company, and this Agreement constitutes the entire agreement between the Company and Executive with respect to such terms and
conditions. 
 (f) Amendment. No amendment to this Agreement shall be effective unless it is in writing and signed by
the Company and by Executive. 
 (g) Invalidity and Severability. If any part of this Agreement is held by a court of
competent jurisdiction to be invalid or otherwise unenforceable, the remaining part shall be unaffected and shall continue in full force and effect, and the invalid or otherwise unenforceable part shall be deemed not to be part of this Agreement.

 (h) Litigation. In the event that either party to this Agreement institutes litigation against the other party to
enforce Executive’s or its respective rights under this Agreement, each party shall pay its own costs and expenses incurred in connection with such litigation. As a material part of the consideration for this Agreement, BOTH PARTIES HERETO
WAIVE ANY RIGHT TO A TRIAL BY A JURY in the event of any litigation arising from this Agreement. 
 (i) Counterparts.
This Agreement may be executed in counterparts each of which shall be deemed an original, but all of which together shall constitute one and the same instrument. 
 (j) Executive Recusal. Executive shall recusal himself from all deliberations of the Board regarding this Agreement,
Executive’s employment by the Company or related matters. 
 IN WITNESS
WHEREOF, the Company and Executive have executed this Agreement this 2nd day of October, 2007, effective as of the Effective Date. 

 

							
	STEIN MART, INC.	 		 	LINDA MCFARLAND FARTHING
				
	 By:
	 	 /s/ Jay Stein
	 		 	 /s/ Linda McFarland Farthing

		 	 Jay Stein, President & CEO
	 		 	

  

 14 

 SCHEDULE A 
 BENEFITS 
  

	1.	Retirement Plan/Life Insurance/AD&D 

 The
Executive shall be entitled to participate in all retirement plans and will be entitled to life insurance and AD&D benefits which other senior executives of the Company or affiliates of the Company are eligible. 
  

	2.	Long-Term Disability 

 The Executive shall be
entitled to participate in all Long-Term and Life Time Disability plans which other senior executives of the Company or affiliates of the Company are eligible. 
  

	3.	Medical/Dental Benefits 

 The Executive shall be
entitled to medical/dental benefits which other senior executives of the Company or affiliates of the Company are eligible. 
  

 A-1

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