AGREEMENT

 

                                 MICHAEL D. RAY

 

                                    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

Michael D. Ray ("Executive"), is made as of July 8, 2005 (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 of three

         (3) year(s) beginning on the Effective Date (the "Term"). The Term will

         be extended for successive one-year periods starting on the third

         anniversary of the Effective Date and on each subsequent anniversary

         date, unless Executive or the Company cancels the automatic extension

         by providing written notice to the other at least 120 days prior to the

         anniversary date.

 

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

 

 

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                (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 his 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" Change of Control means the occurrence of any of

the following: (a) the Board approves the sale of all or substantially all of

the assets of the Company in a single transaction or series of related

transactions; (b) the Company sells and/or one or more shareholders sells a

sufficient amount of its capital stock (whether by tender offer, original

issuance, or a single or series of related stock purchase and sale agreements

and/or transactions) sufficient to confer on the purchaser or purchasers thereof

(whether individually or a group acting in concert) beneficial ownership of at

least 35% of the combined voting power of the voting securities of the Company;

(c) the Company is party to a merger, consolidation or combination, other than

any merger, consolidation or combination that would result in the holders of the

voting securities of the Company outstanding immediately prior thereto

continuing to represent (either by remaining outstanding or by being converted

into voting securities of the surviving entity) more than 50% of the combined

voting power of the voting securities of the Company (or such surviving entity)

outstanding immediately after such merger, consolidation or combination; or (d)

a majority of the board of directors consists of individuals who are not

Continuing Directors (for this purpose, a Continuing Director is an individual

who (i) was a director of the Company on March 1, 2001 or (ii) whose election or

nomination as a director of the Company is approved by a vote of at least a

 

 

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majority of the directors then comprising the Continuing Directors).

Notwithstanding the foregoing, a "Change of Control" does not include any event

under which a lender acquires ownership and/or control of management of the

Company pursuant to a default by the Company under the lending agreement(s) and

events occur subsequently that would otherwise constitute a Change of Control.

 

         "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 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

his 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 in cash for the current year, 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. Earned Bonus shall not

include any options or restricted shares earned pursuant to any long term

incentive plan of the Company in effect from time to time

 

          "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

 

 

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                (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, 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

 

                (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 his 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 Senior Vice President,

         Director of Stores of the Company or such other title as designated by

         the Chief Executive Officer or the Company's Board of Directors.

 

 

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                (b)     Powers and Responsibilities.

 

                (i)     Executive shall use Executives  best efforts to

                        faithfully  perform the duties of his 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 his employment under

                        this Agreement, represents and warrants that he 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 he is a party. During the

                        Employment Term Executive shall not enter into any

                        agreement that would preclude, hinder or impair his

                        ability to fulfill responsibilities described in

                        Section 3(b)(i) specifically or this Agreement

                        generally.

 

SECTION 4.      COMPENSATION AND BENEFITS

 

                (a)     Annual Base Salary. Executive's base salary shall be

         $275,000.00 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 may participate in the

         Stein Mart Executive Deferred Compensation Plan (the "Deferred

         Compensation Plan").  The Company reserves the right to alter, modify,

 

 

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         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 his employment in his capacity as an officer,

         employee or agent of the Company, Executive shall be entitled to

         indemnification from the 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

         $1,100.00 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.

 

 

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                (j)     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