Audit Committee Charter

1. DESCRIPTION AND PURPOSE The Audit Committee (the "Committee") is a standing committee of the Board of Directors (the "Board") of Stage Stores, Inc. (the "Company"). Its purpose is to oversee the accounting and financial reporting processes of the Company and the audits of the financial statements and internal controls of the Company. The Committee shall act independently as authorized and assist the Board in fulfilling its oversight responsibilities by reviewing the financial information which will be provided to the Board and others, the internal control structure, the audit process, and the adherence to applicable laws and regulations. Considering the size and complexity of the Company, the Committee shall apply reasonable materiality standards to all of its activities.
2. COMPOSITION, EXPERTISE, AND INDEPENDENCE REQUIREMENTS OF AUDIT COMMITTEE MEMBERS
   1. Number of Members The Committee shall consist of at least three members, comprised solely of Independent Directors, as that term is defined below.
   2. Qualifications
      1. Financial Literacy. Each member of the Committee must be able to read and understand fundamental financial statements, including the Company's balance sheet, income statement, and cash flow statement.
      2. Financial Expertise. At least one member of the Committee must be an "Audit Committee Financial Expert ("ACFE"), as defined by the SEC and determined by the Board. An ACFE must possess all of the following attributes (the "Attributes"):
         1. an understanding of generally accepted accounting principles and financial statements;
         2. the ability to assess the general application of generally accepted accounting principles in connection with the accounting for estimates, accruals and reserves;
         3. experience preparing, auditing, analyzing or evaluating financial statements that present a breadth and level of complexity of accounting issues that are generally comparable to the breadth and complexity of issues that can reasonably be expected to be raised by the Company's financial statements, or experience actively supervising one or more persons engaged in such activities;
         4. an understanding of internal control over financial reporting; and
         5. an understanding of audit committee functions.
         The ACFE must have acquired the Attributes through any one or more of the following:
         1. education and experience as a principal financial officer, principal accounting officer, controller, public accountant or auditor or experience in one or more positions that involve the performance of similar functions;
         2. experience actively supervising a principal financial officer, principal accounting officer, controller, public accountant, auditor or person performing similar functions;
         3. experience overseeing or assessing the performance of companies or public accountants with respect to the preparation, auditing or evaluation of financial statements; or
         4. other relevant experience.
      3. Independence. As used in this Charter, "Independent Director" means a member of the Board who does not have a material relationship with the Company, including any of its subsidiaries (either directly or as a partner, shareholder or officer of an organization that has a relationship with the Company). A director is not independent if:
         1. The director is, or has been within the last three years, an employee of the Company, or an Immediate Family Member is, or has been within the last three years, an Executive Officer of the Company;
         2. The director has received, or has an Immediate Family Member who has received, during any twelve-month period within the last three years, more than $100,000 in direct compensation from the Company, other than director and committee fees and pension or other forms of deferred compensation for prior service (provided such compensation is contingent in any way on continued service);
         3. The director or an Immediate Family Member is a current partner of a firm that is the Company's internal or external auditor; the director is a current employee of such a firm; the director has an Immediate Family Member who is a current member of such a firm and who participates in the firm's audit, assurance or tax compliance (but not tax planning) practice; or the director or an Immediate Family Member was within the last three years (but is no longer) a partner or employee of such a firm and personally worked on the Company's audit within that time;
         4. The director or an Immediate Family Member is, or has been within the last three years, employed as an Executive Officer of another company where any of the Company's present Executive Officers at the same time served on that company's compensation committee; or
         5. The director is a current employee, or an Immediate Family Member is a current Executive Officer, of a company that has made payments to, or received payments from, the Company for property or services in an amount which, in any of the last three fiscal years, exceeds the greater of $1 million, or 2% of such other company's consolidated gross revenues. In applying this test, both the payments and the consolidated gross revenues to be measured shall be those reported in the last completed fiscal year. The look-back provision for this test applies solely to the financial relationship between the Company and the director or Immediate Family Member's current employer; the Company need not consider former employment of the director or Immediate Family Member.
   For purposes of independence, any three year look back periods commence on the date the relationship ceases.
   
   An "Executive Officer" means the Company's chief executive officer, president, principal financial officer, principal accounting officer (or, there is no such accounting officer, the controller), any vice president of the Company in charge of a principal business unit, division or function (such as sales, administration or finance), any other officer who performs a policy making function, or any other person who performs similar policy-making functions for the Company.
   
   An "Immediate Family Member" includes a person's spouse, parents, children, siblings, mothers and fathers-in-law, sons and daughters-in-law, brothers and sisters-in-law, and anyone (other than domestic employees) who shares such person's home.
3. MEETINGS
   1. Frequency
      The Committee shall meet as frequently as circumstances require, but in any event on a quarterly basis. The Committee may ask members of management or others to attend meetings and may provide pertinent information to them as the Committee deems necessary.
   2. Executive Sessions with Key Personnel and Agents
      The Committee should meet privately in executive session at least annually with management, the director of the Company's internal auditing department, the independent registered public accounting firm, and as a committee to discuss any matters that the Committee or any of those groups believe should be discussed. In addition, the Committee should communicate with management and the independent registered public accounting firm quarterly to review the Company's financial statements and significant findings based upon the independent registered public accounting firm's limited review procedures.
   3. Keeping Minutes
      Minutes shall be taken for each Committee meeting which shall then be approved at the next meeting of the Committee.
4. AUTHORITY
   The Committee's authority is as follows:
   1. Authority to Select, Retain, Terminate, Determine Compensation and Oversee Independent Registered Public Accounting Firm/Settle Disputes
      The Committee is authorized to select, retain, terminate, determine compensation and oversee the work of any independent registered public accounting firm engaged (including resolving disagreements between management and the independent registered public accounting firm regarding financial reporting) for the purpose of preparing or issuing an audit report or related work or performing other audit, review or attestation services for the Company, and each such independent registered public accounting firm must report directly to the Committee.
   2. Authority to Engage Advisers
      The Committee is authorized to engage independent counsel and other advisers, as it determines necessary to carry out its duties.
   3. Authority to Conduct Independent Investigations
      The Committee is authorized to conduct any investigation appropriate to fulfilling its responsibilities and duties.
   4. Authority to Directly Access Corporate Employees and Information
      The Committee is authorized to fully and directly access the independent registered public accounting firm, anyone in the Company, and any and all information and records of the Company.
   5. Funding
      The Committee is authorized, and the Company shall provide for, appropriate funding, as determined by the Committee, in its capacity as a committee of the Board, for payment of: (i) compensation to any independent registered public accounting firm engaged for the purpose of preparing or issuing an audit report or performing other audit, review or attestation services for the Company, (ii) compensation to any advisers employed by the Committee under Section B of this Article IV, (iii) ordinary administrative expenses of the Committee that are necessary or appropriate in carrying out its duties.
5. RESPONSIBILITIES AND DUTIES
   The Committee's primary responsibilities and duties are as follows:
   1. In General
      1. Monitor the integrity of the Company's financial reporting process and systems of internal controls regarding finance, accounting, and legal compliance,
      2. Select, retain, terminate, determine compensation and oversee the work of the Company's independent registered public accounting firm,
      3. Ensure the independence and monitor the performance of the Company's independent registered public accounting firm and the performance of the Company's internal auditing department,
      4. Provide an avenue of communication between the independent registered public accounting firm and the Company's internal auditing department, and
      5. Provide an avenue of communication among the independent registered public accounting firm, management, the Company's internal auditing department, and the Board.
   2. Review Procedures
      1. Review and reassess the adequacy of this Charter on an annual basis. Submit this Charter to the Board for approval and have it published at least every three years in accordance with SEC regulations and the rules of the stock exchange on which the Company's securities are traded.
      2. Review the Company's annual audited financial statements prior to filing or distribution. Review should include discussion with management and the independent registered public accounting firm of significant issues regarding principles, practices, and judgments.
      3. In conjunction with management, the independent registered public accounting firm, and the Company's internal auditors, consider the integrity of the Company's financial reporting processes and controls. Discuss significant financial risk exposures and the steps management has taken to monitor, control and report such exposures. Review significant findings prepared by the independent registered public accounting firm and the Company's internal auditing department together with management's responses. The scope of this review should at a minimum include a discussion of significant deficiencies and material weaknesses in internal controls and any fraud, by management, whether or not material, as reported by management, the auditing department or the independent registered public accounting firm.
      4. Review with management and the independent registered public accounting firm the Company's quarterly financial results prior to the release of earnings and/or the Company's quarterly financial statements prior to filing or distribution. Discuss any significant changes to the Company's accounting principles and any items required to be communicated by the independent registered public accounting firm in accordance with SAS 61 (Communications with Audit Committees). The Chairman of the Committee may represent the entire Committee for purposes of this review.
      5. Review with the independent registered public accounting firm and objectively weigh the information provided by the independent registered public accounting firm and the soundness of the Company's accounting policies in connections with:
         1. The Company's financial statements and related footnotes and the independent registered public accounting firm's report thereon, including their report on the adequacy of the Company's internal controls and any significant recommendations they may offer to improve internal controls;
         2. Any significant accruals, reserves or estimates which may have a material impact on the financial statements;
         3. Any difficulties or disputes with management encountered by the independent registered public accounting firm during the course of the audit and any instances of second opinions sought by management;
         4. All critical accounting policies and practices to be used by the Company;
         5. All alternative treatments of financial information within generally accepted accounting principles that have been discussed with management, the ramifications of the use of such alternative disclosures and treatment, and the treatment preferred by the independent registered public accounting firm;
         6. Other material written communications between the independent registered public accounting firm and management, such as any management letter or schedule of unadjusted differences.
         7. The adequacy of the Company's internal controls and any significant findings during the year and management's responses thereto, including at a minimum significant deficiencies and material weaknesses in internal controls and any fraud, whether or not material, by management;
         8. Any difficulties encountered in the course of the audits, including any restrictions on the scope of the independent registered public accounting firm's work or access to required information;
         9. Any separate service that the independent registered public accounting firm is providing the Company with written confirmation from the independent registered public accounting firm regarding the nature of the service and existence of pre-approval from the Committee; and
         10. When required, the soundness of the internal quality-control procedures of the independent registered public accounting firm including its standing before the Public Company Accounting Oversight Board and the nature of any investigation or other proceedings related to its quality controls or performance.
      6. Receive a copy of the attestation by the independent registered public accounting firm of management's assessment of the effectiveness of the Company's internal control structure and procedures for financial reporting.
      7. Consider with management and the independent registered public accounting firm the possible impact of any pending changes in accounting standards or rules as promulgated by the FASB or others.
      8. Review with legal counsel any legal and regulatory matters that may have a material impact on the financial statements and any reports received from regulators, and any environmental compliance and reserves.
      9. Report Committee actions to the Board with such recommendations as the Committee may deem appropriate.
      10. Conduct an appropriate review of all related party transactions involving the Company for potential conflict of interest situations on an ongoing basis and all such transactions shall be approved by the Committee.
   3. Management Override of Internal Controls
      The Committee should address the risk of fraud at the Company including, but not limited to, taking such actions as the Committee may deem appropriate to deter and detect management overrides of internal controls over financial reporting.
   4. Independent Registered Public Accounting Firm
      1. The independent registered public accounting firm is directly accountable to the Committee. The Committee has the direct responsibility for the selection, compensation, retention and oversight of the work of any independent registered public accounting firm engaged (including resolution of disagreements between management and the independent registered public accounting firm regarding financial reporting) for the purpose of preparing or issuing an audit report or related work or performing other audit, review or attestation services for the Company, and each such independent registered public accounting firm must report directly to the Committee.
      2. The Committee is responsible for ensuring that the independent registered public accounting firm submits to the Committee a formal written statement delineating all relationships between the independent registered public accounting firm and the Company, consistent with Independence Standards Board Standard 1 (Independence Discussions with Audit Committees). The Committee is also responsible for actively engaging in a dialogue with the independent registered public accounting firm with respect to any disclosed relationships or services that may impact the objectivity and independence of the independent registered public accounting firm and for taking, or recommending that the Board take appropriate action to oversee the independence of the independent registered public accounting firm. The Committee shall review the independence and the performance of the independent registered public accounting firm, select the independent registered public accounting firm, and terminate the independent registered public accounting firm when circumstances warrant. To ensure independence, on an annual basis, the Committee shall review and discuss with the independent registered public accounting firm all significant relationships it has with the Company that could impair the independent registered public accounting firm's independence.
      3. The Committee shall review the independent registered public accounting firm's audit plan - discuss scope, staffing, locations, reliance upon management, and internal audit and general audit approach to ensure completeness of coverage, reduction in redundant efforts, and the effective use of audit resources.
      4. The Committee shall approve the fees and other significant compensation to be paid to the independent registered public accounting firm.
      5. The Committee shall approve any change in the independent registered public accounting firm's engagement partner or audit partner responsible for the audit of the Company's financial statements and confirm that the independent registered public accounting firm has rotated its lead or controlling audit partner having primary responsibility for the audit or the audit partner responsible for reviewing the audit with an assignment not to exceed five fiscal years.
   5. Prohibited Non Audit Services
      Except as provided in Section F, below, the independent registered public accounting firm shall not provide to the Company, contemporaneously with an audit, any non audit service, including the following:
      1. bookkeeping or other services related to the accounting records or financial statements of the Company;
      2. financial information systems design and implementation;
      3. appraisal or valuation services, fairness opinions, or contribution in kind reports;
      4. actuarial services;
      5. internal audit outsourcing services;
      6. management functions or human resources;
      7. broker or dealer, investment adviser, or investment banking services;
      8. legal services and expert services unrelated to the audit; and
      9. any other service that the Public Company Accounting Oversight Board determines, by regulation, is impermissible.
      The independent registered public accounting firm may engage in any non audit service, including tax services, that is not described in Subsections 1 through 9 above, only if the activity is approved in advance by the Committee in accordance with Section F, below.
   6. Pre approval Requirements
      In General. All auditing services (which may entail providing comfort letters in connection with securities underwritings) and non audit services, other than as provided in Section E, above, provided to the Company by the independent registered public accounting firm shall be pre approved by the Committee.
      
      De Minimus Exception. Notwithstanding anything to the contrary in this Section F, the pre approval requirement shall not apply to the provision of non audit services for the Company, if:
      1. the aggregate amount of all such non audit services provided to the Company constitutes not more than five percent (5%) of the total amount of revenues paid by the Company to the independent registered public accounting firm during the fiscal year in which the non audit services are provided;
      2. the non-audit services were not recognized by the Company at the time of the engagement to be non audit services; and
      3. the non-audit services are promptly brought to the attention of the Committee and approved prior to the completion of the audit by the Committee or by one or more members of the Committee who are members of the Board to whom authority to grant such approvals has been delegated by the Committee.
      
      Disclosure to Investors. Any approval by the Committee of a non audit service to be performed by the independent registered public accounting firm shall be disclosed to investors in periodic reports required by Section 13(a) of the Exchange Act.
      
      Delegation of Pre Approval Authority. The Committee may delegate to one or more designated members of the Committee who are Independent Directors of the Board of Directors, the authority to grant pre approvals required by this Section F. The decisions of any Committee member to whom authority is delegated under this paragraph to pre approve an activity under this Section F shall be presented to the full Committee at each of its scheduled meetings.
      
      Approval of Audit Services for Other Purposes. If the Committee approves an audit service within the scope of the engagement of the independent registered public accounting firm, the audit service shall be deemed to have been pre approved for purposes of this Section F.
   7. Complaint Procedures; Dispute Resolution
      1. Accounting Complaints. The Committee shall establish procedures for (i) the receipt, retention and treatment of complaints received by the Company regarding accounting, internal accounting controls, or auditing matters, and (ii) the confidential, anonymous submission by employees of the Company of concerns regarding questionable accounting or auditing matters. These procedure, which may be incorporated into a more comprehensive code of ethics, shall at a minimum: (i) set forth a statement about the Company's commitment to comply with the laws; (ii) encourage employees to inform the Company of conduct amounting to a violation of the applicable standards; (iii) describe prohibited conduct; (iv) set forth compliance procedures that employees can easily use, including making anonymous complaints, and (v) provide assurances that there will be no retaliation for reporting suspected violations.
      2. Financial Accounting Policy Dispute Resolution. The Committee shall establish procedures for resolving disputes between the independent registered public accounting firm and management over issues pertaining to financial reporting. The Committee shall resolve these disputes, and for such purpose, the procedures may allow the Committee to obtain a second opinion from independent advisors. The procedures shall in no way allow the Committee to improperly influence the independent registered public accounting firm.
   8. Required Response to Audit Discoveries
      If, in the course of conducting an audit of the Company, the Company's independent registered public accounting firm informs the Committee that an illegal act (whether or not perceived to have a material effect on the financial statements of the Company) has been detected or has otherwise come to the attention of the independent registered public accounting firm, (a) the Committee shall immediately direct the Company's senior management to take timely and appropriate remedial action with respect to the illegal act and to advise the Committee of the action taken, and (b) the Committee shall obtain written confirmation from the independent registered public accounting firm that the remedial action taken has satisfactorily addressed the illegal act. At the next regularly scheduled meeting of the Board, or sooner if deemed appropriate by the Committee, the Committee shall report to the Board the illegal act, the remedial action taken and the status of the matter. The Committee may delegate to one or more designated members of the Committee who are Independent Directors the authority to carry out the actions required by this Section H.
   9. Audit Committee Report
      To the extent required by statute or regulation to be provided in the Company's proxy statements or other filing with the SEC,
      1. The Committee must state whether:
         1. The Committee has reviewed and discussed the Company's audited financial statements with management;
         2. The Committee has discussed with the independent registered public accounting firm the matters required to be discussed by SAS 61 (Communications with Audit Committees), as may be modified or supplemented;
         3. The Committee has received the written disclosures and the letter from the independent registered public accounting firm required by Independence Standards Board Standard No. 1 (Independence Discussions with Audit Committees), as may be modified or supplemented, and has discussed with the independent registered public accounting firm the independent registered public accounting firm's independence; and
         4. Based on the review and discussions referred to in paragraphs (1)(a) through (1)(c) of this Section I, the Committee recommended to the Board that the audited financial statements be included in the Company's Annual Report on Form 10 K for the last fiscal year for filing with the SEC.
      2. The name of each member of the Committee must appear below the required disclosure.
6. CERTIFICATION
   Once each year the Committee shall provide the Company through the Board, and the Company shall provide to NYSE, or other primary stock exchange on which the Company's securities are traded, a written certification regarding:
   1. Any determination that the Board has made regarding the independence of directors who are members of the Committee pursuant to this Charter;
   2. The financial literacy of the Committee members;
   3. The determination that at least one member of the Committee has past employment experience in finance or accounting, requisite professional certification in accounting, or other comparable experience or background which results in the individual's financial sophistication, including having been a chief executive officer, chief financial officer or other senior officer with financial oversight responsibilities; and
   4. The annual review and reassessment of this Charter.
7. NOTIFICATION OF NON COMPLIANCE
   The Company shall provide to the NYSE, or other primary stock exchange on which the Company's securities are traded, prompt notification after an executive officer becomes aware of any material noncompliance by the Company of the qualitative listing requirements related to the Committee such as deviation from the composition and independence requirements and any restrictions placed on the authority, duties and responsibilities contained in this Charter.
8. GOING CONCERN ANNOUNCEMENT
   In the event the Company receives an opinion from its independent registered public accounting firm that contains a going concern qualification, it shall make a public announcement through the news media disclosing the receipt of such qualification within seven (7) days following the filing of the audit opinion with the SEC.