SEVERANCE AGREEMENT AND RELEASE

Exhibit 10.31

THIS SEVERANCE AGREEMENT AND RELEASE (“Agreement”) is entered into between Tuesday Morning, Inc., its related and affiliated entities (collectively, “Tuesday Morning”), and Xxxx Xxxxxxx (“Employee”), and is intended to be a full and final resolution of all matters involving Employee’s employment with Tuesday Morning. Specifically, the parties to this Agreement agree to the following:

1. Termination of Employment. Employee’s employment with Tuesday Morning terminated effective as of June 2, 2014 (the “Termination Date”).

2. Payments. Provided Employee executes this Agreement within the 45-day time period provided for in Section 8(d) of this Agreement and does not revoke this Agreement as provided for in Section 8(e) of this Agreement, and in consideration for Employee’s signing this Agreement, in lieu of notice regarding the termination of employment, and for complying with the terms of this Agreement, Tuesday Morning will pay to Employee $250,000, less applicable deductions (the “Separation Payment”). The Separation Payment will be made in 24 equal installments on Tuesday Morning’s consecutive regularly scheduled paydays with the first payment to be made on the first regularly scheduled payday following the expiration of the revocation period provided for in Section 8(e) of this Agreement, but in no event later than sixty (60) days following the Termination Date. Each such installment shall be deemed a separate payment for purposes of the Final Treasury Regulations under Section 409A of the Internal Revenue Code of 1986, as amended, (the “Code”), if applicable. Tuesday Morning is not offering any tax advice to Employee regarding the Separation Payment. In the event of Employee’s death prior to the date that all installments of the Separation Payment have been made pursuant to this Section 2, Tuesday Morning shall pay any remaining installments in accordance with the payment schedule set forth herein to Employee’s surviving spouse, or if Employee does not have a surviving spouse, to Employee’s estate.

Tuesday Morning also will pay to Employee the cash value of Employee’s earned but unused days of vacation time. This payment will be subject to applicable deductions. Employee understands and agrees that upon his receipt of the payments described above he will have been fully compensated for all work he has performed for Tuesday Morning and that he will not make any other claims to Tuesday Morning for any type of compensation.

The parties agree that Tuesday Morning does not have a legal obligation to make the Separation Payment, but that it chooses to do so in consideration for Employee’s promises in this Agreement. Employee agrees and understands that the Separation Payment is conditioned upon Employee’s continuing compliance with the terms of this Agreement. A breach by Employee of any term of this Agreement will result in the termination of Tuesday Morning’s obligation to make any further installment payments

Initials

/s/ REM /s/ JB

under this Agreement and Employee will repay to Tuesday Morning any part of the Separation Payment Employee has received under the terms of this Agreement.

3. Benefits. All of Employee’s employment benefits from Tuesday Morning will terminate as of the Termination Date except where provided for by a specific Tuesday Morning benefit plan, by an applicable statute, or by this Agreement. Pursuant to the Consolidated Omnibus Budget Reconciliation Act (“COBRA”), Employee and his eligible family members have the right to continue their coverage under Tuesday Morning’s health insurance plan. If Employee elects under COBRA to continue coverage for himself and his eligible family members under Tuesday Morning’s health insurance plan as of June 3, 2014, then for each month from June 3, 2014 to May 31, 2015, Employee will pay the employee portion of the premium and Tuesday Morning will pay the difference between the premium amount Employee pays and the total monthly premium due for Employee’s COBRA coverage (the “Employee COBRA Premium”). If Employee elects to continue his coverage under Tuesday Morning’s health insurance plan after May 31, 2015, he will be responsible for paying the full premium for the coverage. In the event of Employee’s death prior to May 31, 2015, Tuesday Morning shall continue to pay the Employer COBRA Premium for COBRA coverage for Employee’s surviving spouse until the earlier of (i) May 31, 2015; or (ii) the date the surviving spouse’s coverage under COBRA terminates for any reason.

4. Career Transition Services. Tuesday Morning will provide Employee with career transition services from RiseSmart that will assist the Employee in his search for a new position. Tuesday Morning will pay up to $2,500 to RiseSmart for a service package, if and to the extent the service is initiated by Employee prior to March 15th of the calendar year following the calendar year containing the Termination Date.

5. Return of Tuesday Morning Property. As of the date Employee signs this Agreement, he represents that he has returned to Tuesday Morning all Company-owned or leased property or documents in his possession or under his control, except for documents related to his compensation and benefits.

6. Nondisclosure and Nonuse. Employee, during his employment by Tuesday Morning, has had access to and has become familiar with Tuesday Morning’s operations, procedures, computer systems, customer information, pricing techniques, methods of doing business, merchandise, marketing plans, financial and accounting information, employee salary and benefit information and other confidential information which is regularly used in the operation of Tuesday Morning’s business, but is not within the public domain. For the purposes of this Agreement all such information is collectively referred to as the “Confidential Information.” Employee acknowledges and agrees that the Confidential Information is a valuable, special and unique asset of Tuesday Morning, the disclosure or use of which could cause substantial injury and loss of profits and goodwill to Tuesday Morning. Accordingly, Employee shall not directly or indirectly in any way use or disclose any of the Confidential Information. Employee also agrees that he will not access Tuesday Morning’s computer systems, download files or information from Tuesday

Morning’s computer systems or in any way interfere, disrupt, modify or change any computer program used by Tuesday Morning or any data stored on Tuesday Morning’s computer systems.

7. Release. Employee, on behalf of himself and his heirs, executors or administrators, hereby releases, discharges and agrees not to xxx or file any charges or claims against Tuesday Morning, its predecessors, successors and assigns, parent, subsidiaries, affiliates, current and former directors, officers, shareholders, employees, representatives, agents, and employee benefit plans under any local, state, or federal law, for any type of claim, demand or action whatsoever. Employee understands and agrees that he is waiving and releasing any and all claims he may have against Tuesday Morning, its predecessors, successors and assigns, parent, subsidiaries, affiliates, current and former directors, officers, shareholders, employees, representatives, agents, and employee benefit plans, including, but not limited to, claims for unpaid wages, employment discrimination, breach of contract, fraud, emotional distress, wrongful discharge, negligence, personal injury and retaliation, whether or not such claims arise under common-law, contract or tort theories or under any federal, state or local law, including without limitation Title VII of the Civil Rights Act of 1964; Sections 1981 through 1988 of Title 42 of the United States Code; the Equal Pay Act; the National Labor Relations Act; the Employee Retirement Income Security Act of 1974; the Americans With Disabilities Act of 1990; the Family and Medical Leave Act of 1993, as amended; the Fair Labor Standards Act of 1938, as amended; and the Genetic Information Nondiscrimination Act of 2008. This release does not affect Employee’s right to benefits under the terms of any employee benefit plan in which he participated while employed by Tuesday Morning, his right to enforce the terms of this Agreement, or any right which as a matter of law may not be waived.

8. Waiver of Age Discrimination Claim. Pursuant to the Age Discrimination in Employment Act of 1967 (29 U.S.C. §626), Employee acknowledges:

(a) He is encouraged to have this Agreement reviewed by an attorney;

(b) He is releasing all claims relating to his employment and separation from employment under the Age Discrimination in Employment Act of 1967;

(d) He has forty-five (45) days from the date he receives this Agreement to consider this Agreement;

(e) For a period of seven (7) days following the date Employee signs this Agreement, Employee may revoke this Agreement and this Agreement shall not become effective or enforceable until the revocation period expires. In order

for the revocation to be effective it must be in writing and delivered to the Company’s Human Resources Department in Dallas, Texas;

(f) By executing this Agreement, Employee represents that he fully understands all provisions of the Agreement and understands the consequences of executing this Agreement.

9. Waiver of Future Employment. Employee agrees that in the future he will not apply for employment with Tuesday Morning and will not accept any offer of employment made by any employee of Tuesday Morning or anyone purporting to represent Tuesday Morning.

10. No Harm. Employee will not engage in any conduct or take any action, written or oral, that will reflect negatively on or harm the reputation or business interest of Tuesday Morning. Employee agrees not to interfere with Tuesday Morning’s operations or its relationships with its employees, vendors and customers.

11. References. In response to requests by prospective employers for information about Employee’s employment by Tuesday Morning, Tuesday Morning will disclose only Employee’s dates of employment and position and will verify his salary.

12. Confidentiality of this Agreement. It is the express intent of the parties that the terms and conditions of this Agreement shall not be disclosed except in response to a validly issued subpoena, a request from a government agency or as set out below. The parties agree that Tuesday Morning may disclose the terms of this Agreement to its officers, directors, managers, attorneys and to those employees who are necessary to carry out the terms of the Agreement. The parties also agree that Tuesday Morning (including its parent, subsidiaries, affiliates and representatives thereof) may disclose this Agreement and the terms hereof as deemed advisable or as otherwise required by financial and public company reporting requirements such as U.S. Generally Accepted Accounting Standards, the U.S. Securities & Exchange Commission rules and regulations, Public Company Accounting Oversight Board auditing standards, the Nasdaq Stock Market listing rules or similar rules, regulations and standards. The parties agree that Employee may disclose the terms of this Agreement to his spouse, his attorney and to his financial advisor.

13. Non-Solicitation or Hiring. Employee agrees that he will not hire or solicit for employment any employees, officers or senior management of Tuesday Morning for a period of six (6) months after the date of this Agreement.

14. Attorney Advice/Voluntary Agreement. Employee acknowledges that Tuesday Morning has advised Employee by this writing that Employee should consult an attorney before executing this Agreement. Employee understands it is Employee’s choice whether or not to enter into this Agreement and that Employee’s decision to do so is voluntary and is made knowingly.

15. No Admission of Wrongdoing. This Agreement shall not in any way be construed as an admission by Tuesday Morning that it has violated any law or acted wrongfully with respect to Employee or any other person.

16. Entire Agreement/Modification. This Agreement sets forth the entire agreement between the parties and fully supersedes any and all prior agreements or understandings between the parties regarding the subjects in this Agreement. No change or modification of this Agreement shall be valid or binding upon the parties unless such change or modification is in writing and signed by the parties.

17. Governing Law. This Agreement shall be governed by, and construed in accordance with, the laws of the State of Texas.

18. Miscellaneous. This Agreement shall be construed as a whole in accordance with its fair meaning and not strictly for or against any of the parties. If any court determines that any provision of this Agreement is unenforceable for any reason, the parties agree that such determination shall not bar or affect the parties’ right to enforce the remaining provisions of this Agreement. A waiver of a breach of any term of this Agreement by any party shall not be construed as a waiver of any subsequent breach of the same term or of any other breach of a different term. This Agreement may be executed by each party in separate counterparts, each of which shall be deemed an original and constitute one document.

19. Section 409A Compliance.

(a) Notwithstanding any provisions of this Agreement to the contrary, to the extent (i) any payments to which Employee becomes entitled under this Agreement, constitute deferred compensation subject to Section 409A of the Code, (ii) Employee is deemed at the time of such termination of employment to be a “specified employee” as defined in the applicable Final Treasury Regulations under Section 409A of the Code, or any successor provision thereto, and (iii) at the time of Employee’s separation from service Tuesday Morning is publicly traded (as defined in Section 409A of Code) and the provisions of this Section 19(a) otherwise apply to Employee, then such payment or payments shall not be made or commence until the earliest of the expiration of the six (6) month period measured from the date of Employee’s Termination Date (or, if earlier, the date of death of Employee). Upon the expiration of the applicable deferral period, any payments which would have otherwise been made during that period (whether in a single sum or in installments) in the absence of this Section 19 shall be paid to Employee or Employee’s beneficiary in one lump sum.

(b) It is intended that this Agreement comply with or be exempt from the provisions of Section 409A of the Code and the Final Treasury Regulations and guidance of general applicability issued thereunder so as to not subject Employee to the payment of additional interest and taxes under Section 409A of the Code, and

in furtherance of this intent, this Agreement shall be interpreted, operated and administered in a manner consistent with these intentions.

20. Acknowledgment. By signing below, the parties represent that they have carefully read and considered this Agreement and fully understand the extent and impact of its provisions. The parties acknowledge they have signed this Agreement voluntarily.

EMPLOYEE		TUESDAY MORNING, INC.


By:	/s/ Xxxx Xxxxxxx	By:	/s/ Xxxx Xxxxx
	Xxxx Xxxxxxx		Xxxx Xxxxx
			EVP, CAO and CFO


July 14, 2014		7/14/14
Date signed		Date signed

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SEVERANCE AGREEMENT AND RELEASE

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