FIFTH AMENDMENT TO THE EMPLOYMENT AGREEMENT

FIFTH AMENDMENT TO THE EMPLOYMENT AGREEMENT

THE FIFTH AMENDMENT TO THE EMPLOYMENT AGREEMENT (the “Fifth Amendment”) is made and entered effective the 23 day of April, 2010, by Xxxx Stores, Inc. (the “Company”) and Xxxxxxx Xxxxxxx (the “Executive”). The Executive and the Company previously entered into an Employment Agreement effective May 31, 2001; a First Amendment to the Employment Agreement effective January 30, 2003; a Second Amendment to the Employment Agreement effective May 18, 2005; a Third Amendment to the Employment Agreement effective April 6, 2007; and a Fourth Amendment to the Employment Agreement effective June 9, 2009 (the original Agreement; First Amendment to the Employment Agreement; Second Amendment to the Employment Agreement; Third Amendment to the Employment Agreement; and Fourth Amendment to the Employment Agreement are attached and collectively referred to herein as the “Agreement”), and it is now the intention of the Executive and the Company to further amend the Agreement as set forth below. Accordingly, the Executive and the Company now enter into this Fifth Amendment.

I. The Executive and the Company amend the Agreement by deleting Paragraph 1 of the Agreement in its entirety and replacing it with the following new Paragraph 1:

1. Term. The employment of the Executive by the Company will continue as of the date hereof and end on February 2, 2013, unless extended or terminated in accordance with this Agreement, including the extensions contemplated both in paragraphs 1 and 4(b). During March 2011, and during March every year thereafter (every one year) for so long as the Executive is employed by the Company, upon the written request of the Executive, the Board shall consider extending the Executive’s employment with the Company. Such request must be delivered to the Chairman of the Compensation Committee no later than the last day in February which precedes the March in which the requested extension will be considered. The Board shall advise the Executive, in writing, on or before the April 1st following its consideration of the Executive’s written request, whether it approves of such extension. The failure of the Board to provide such written advice shall constitute approval of the Executive’s request for the extension. If the Executive’s request for an extension is approved, this Agreement shall be extended one additional year.

II. The Executive and the Company further amend the Agreement by deleting the first sentence of Paragraph 4(a) of the Agreement in its entirety and replacing it with the following new sentence:

4(a). Salary. During his employment, the Company shall pay the Executive a base salary of not less than One Million One Hundred and Twenty-Seven Thousand and Five Hundred Dollars ($1,127,500.00) per annum.

III. The Executive and the Company further amend the Agreement by deleting the first sentence of Paragraph 4(i) of the Agreement in its entirety and replacing it with the following new three sentences:

4(i). Subject to the third sentence of this paragraph 4(i), the Executive and his spouse shall be entitled to continue, until their respective deaths, to participate (at no cost to the Executive and his spouse) in the following Company employee benefit plans and arrangements (or other benefit plans or arrangements providing substantially similar benefits) in which the Executive participates on the date hereof): medical, dental, vision and behavioral health insurance; life insurance; accidental death and dismemberment insurance; group excess personal liability (collectively, “Benefits”); and the Company shall annually provide the Executive for as long as he lives an amount equal to the maximum employer matching contribution permitted under the terms and limits of the Company’s 401(k) plan in effect during the year of such payment (assuming the Executive remained employed with the Company and made the maximum contribution to such plan permitted by law), grossed up to reflect the pretax nature of a 401(k) contribution (the “Matching Contribution”).

Notwithstanding the preceding sentence, no payment provided in paragraph 4(a) [Salary] of this Agreement shall be considered a benefit plan or arrangement pursuant to this paragraph 4(i) and the Executive, or his spouse, shall not be entitled to continuation of any payment provided in paragraph 4(a) pursuant to this paragraph 4(i). Notwithstanding the first sentence of this paragraph 4(i) to the contrary and subject to COBRA, Executive's spouse as of March 1, 2010 shall cease to be entitled to the Benefits as of the date that Executive and such spouse are no longer legally married (other than as a result of Executive's death).

IV. The Executive and the Company further amend the Agreement by adding the following new Paragraph 4(k):

4(k). Restricted Stock Award. The Executive shall receive a restricted stock award with a face value of Four Million and Eight Hundred Thousand Dollars ($4,800,000). The number of shares awarded will be determined based on the Company’s stock price at the close of the market on March 17, 2010 as reported on Nasdaq. Except as otherwise provided by this Agreement, the shares will “cliff” vest in full (100%) on March 18, 2013 (thirty-six months from grant date), provided the Executive continues service with the Company through such date, provided however, that restricted stock that would otherwise vest on a date on which a sale of such shares by the Executive would violate the Xxxxxxx Xxxxxxx Policy shall vest as set forth in the Restricted Stock Agreement. The terms and conditions of this restricted stock award will be set forth in the Notice of Grant of Award, the Xxxx Stores, Inc. Restricted Stock Agreement (the “Restricted Stock Agreement”), and the Xxxx Stores, Inc. 2008 Equity Incentive Plan. The term “restricted stock” in this Agreement shall mean shares of stock granted under the terms of a Restricted Stock Agreement.

V. The Executive and the Company further amend the Agreement by adding the following new Paragraph 4(l):

4(l). Performance Share Award. The Executive shall receive for the fiscal year ending on January 29, 2011 a target number of Performance Shares equal to Three Million Dollars ($3,000,000) divided by the closing market price on March 17, 2010 as reported on Nasdaq. The Performance Shares shall represent the right to receive Common Shares of the Company’s stock determined by the extent to which the target level of adjusted pretax profit for the fiscal year ending January 29, 2011, approved by the Compensation Committee of the Xxxx Stores, Inc. Board of Directors, has been attained and certified by the Compensation Committee. Except as otherwise provided in the Performance Share Agreement, the Company shall issue, based on performance attained, Unvested Common Shares of the Company’s stock in settlement of Performance Shares on the Settlement Date of March 21, 2011. Except as otherwise provided in the Performance Share Agreement, Unvested Common Shares issued in settlement of the Performance Shares shall vest and become Vested Common Shares on January 14, 2013, provided the Executive continues service with the Company through such date, provided however, that Unvested Common Shares that would otherwise become Vested Common Shares on a date on which a sale of such shares by the Executive would violate the Xxxxxxx Xxxxxxx Policy shall become Vested Common Shares as set forth in the Performance Share Agreement. The terms and conditions of the Performance Shares shall be set forth in the Notice of Grant of Performance Shares, the Xxxx Stores, Inc. Performance Share Agreement (the “Performance Share Agreement”), and the Xxxx Stores, Inc. 2008 Equity Incentive Plan. Capitalized terms in this paragraph 4(j) shall have the same meanings assigned to such terms in the Performance Share Agreement.

VI. The Executive and the Company further amend the Agreement by deleting Paragraph 9(e) of the Agreement in its entirety and replacing it with the following new Paragraph 9(e) of the Agreement:

(e) Non-Renewal. If the Agreement expires as set forth in paragraph 7(h) [Non-Renewal], the Company shall have no further obligations to the Executive except as set forth in paragraphs 7(h) and 13 and except that the Executive shall immediately become fully vested in any restricted stock granted to the Executive by the Company under the Xxxx Stores, Inc. Restricted Stock Agreement which has not become vested as of such expiration date. The Company shall also pay the Executive an annual bonus for the Company’s fiscal year ending February 2, 2013. Such bonus shall not be paid until due under the applicable Company bonus plan.

VII. The Executive and the Company further amend the Agreement by adding the following new Paragraph 10(c) of the Agreement:

Recoupment: Executive hereby understands and agrees that the Executive is subject to the Company’s recoupment policy. Under the current policy applicable to the Company’s senior executives, subject to the discretion and approval of the Company’s Board of Directors (the “Board”), the Company may, to the extent permitted by governing law, require reimbursement and/or cancellation of any Performance Share or Common Shares issued in settlement of a Performance Share to the Executive where all of the following factors are present: (1) the award was predicated upon the achievement of certain financial results that were subsequently the subject of a material restatement, (2) the Board determines that the Executive engaged in fraud or intentional misconduct that was a substantial contributing cause to the need for the restatement, and (3) a lower award would have been made to the Executive based upon the restated financial results. In each instance, the Company may seek to recover the Executive’s entire gain received by the Executive within the relevant period, plus a reasonable rate of interest.

Except for the amendments set forth above, the Agreement and all of its terms remain in force and in effect.

	XXXX STORES, INC.		EXECUTIVE
	/s/ Xxxxxx X. Xxxxxx		/s/ Xxxxxxx Xxxxxxx
	Xxxxxx Xxxxxx		Xxxxxxx Xxxxxxx
	4/30/10		4/26/10
	Date		Date