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EX-32.1 - EX-32.1 - CLAIRES STORES INC | g27335exv32w1.htm |
EX-32.2 - EX-32.2 - CLAIRES STORES INC | g27335exv32w2.htm |
EX-31.1 - EX-31.1 - CLAIRES STORES INC | g27335exv31w1.htm |
EX-31.2 - EX-31.2 - CLAIRES STORES INC | g27335exv31w2.htm |
Table of Contents
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 10-K/A
Amendment No. 1
Amendment No. 1
þ | ANNUAL REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the fiscal year ended January 29, 2011
OR
o | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the transition period from to
Commission File Nos. 1-8899 and 333-148108
Claires Stores, Inc.
(Exact name of registrant as specified in its charter)
Florida | 59-0940416 | |
(State or other jurisdiction of incorporation or organization) | (I.R.S. Employer Identification No.) | |
2400 West Central Road, Hoffman Estates, Illinois | 60192 | |
(Address of principal executive offices) | (Zip Code) |
Registrants telephone number, including area code: (847) 765-1100
Securities registered pursuant to Section 12(b) or 12(g) of the Act: None
Securities registered pursuant to Section 12(b) or 12(g) of the Act: None
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule
405 of the Securities Act.
Yes o No þ
Indicate by check mark if the registrant is not required to file reports pursuant to Section
13 or Section 15(d) of the Exchange Act.
Yes o No þ
Yes o No þ
Indicate by check mark whether the registrant (1) has filed all reports required to be filed
by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or
for such shorter period that the registrant was required to file such reports), and (2) has been
subject to such filing requirements for the past 90 days. Yes þ
No o
Indicate by check mark whether the registrant has submitted electronically and posted on its
corporate Web site, if any, every Interactive Data File required to be submitted and posted
pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the
preceding 12 months (or for such shorter period that the registrant was required to submit and post
such files). Yes o No o
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation
S-K (§ 229.405 of this chapter) is not contained herein, and will not be contained, to the
best of registrants knowledge, in definitive proxy or information statements incorporated by
reference in Part III of this Form 10-K or any amendment to this Form 10-K. þ
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated
filer, a non-accelerated filer, or a smaller reporting company in Rule 12b-2 f the Exchange Act.
Large accelerated filer o | Accelerated filer o | Non-accelerated filer þ | Smaller reporting company o | |||
(Do not check if a smaller reporting company) |
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of
the Exchange Act). Yes o No þ
The aggregate market value of the registrants voting and non-voting common equity held by
non-affiliates of the registrant is zero. The registrant is a privately held corporation.
As of May 1, 2011, 100 shares of the Registrants common stock, $.001 par value were outstanding.
DOCUMENTS INCORPORATED BY REFERENCE
None
None
TABLE OF CONTENTS
Table of Contents
Explanatory Notes
Claires Stores Inc., which we refer to as Claires, the Company, we, our or similar
terms, and typically these references include our subsidiaries, is filing this Amendment No. 1 (the
Amendment) to its Annual Report on Form 10-K for the fiscal year ended January 29, 2011, filed
with the Securities and Exchange Commission (the SEC) on April 21, 2011, for purposes of
including the information in Part III of the Form 10-K, as permitted under General Instruction G(3)
to Form 10-K. In connection with the filing of this Amendment and pursuant to the rules of the
SEC, we are including with this Amendment certain currently dated certifications of the Chief
Executive Officer and Chief Financial Officer.
We have not updated or amended the disclosures contained in the original Form 10-K to reflect
events that have occurred since the filing of the original Form 10-K, or modified or updated those
disclosures in any way other than as described in Part III of the Form 10-K. Accordingly, this
Amendment should be read in conjunction with any other filings made with the SEC subsequent to the
filing of the Form 10-K on April 21, 2011.
In May 2007, the Company was acquired by investment funds and certain co-investment vehicles
managed by Apollo Management VI, L.P., an affiliate of Apollo Global Management, LLC (together with
its subsidiaries Apollo Management), through a merger (the Merger) and Claires Stores, Inc.
became a wholly-owned subsidiary of Claires Inc. (Parent).
In this Amendment, we refer to our fiscal year ended January 31, 2009 as Fiscal 2008 or FY
2008, our fiscal year ended January 30, 2010 as Fiscal 2009 or FY 2009, and our fiscal year ended
January 29, 2011 as Fiscal 2010 or FY 2010.
PART III.
Item 10. Directors, Executive Officers and Corporate Governance
Our current executive officers and directors, and their ages and positions, are as follows:
Name | Age | Position | ||||
Eugene S. Kahn
|
61 | Chief Executive Officer and Director | ||||
James G. Conroy
|
41 | President of Claires Stores | ||||
Jay K. Friedman
|
59 | President of Claires North America | ||||
Kenneth Wilson
|
44 | President of Claires Europe | ||||
J. Per Brodin
|
49 | Executive Vice President and Chief Financial Officer | ||||
Peter P. Copses
|
52 | Non-Executive Chairman of our Board of Directors | ||||
Robert J. DiNicola
|
62 | Director | ||||
George G. Golleher
|
63 | Director | ||||
Rohit Manocha
|
52 | Director | ||||
Ron Marshall
|
57 | Director | ||||
Lance A. Milken
|
35 | Director |
Eugene S. Kahn has served as the Companys Chief Executive Officer and as a member of the
Companys board of directors since May 2007. From May 2001 to January 2005, Mr. Kahn was Chairman
of the board of directors and Chief Executive Officer, and from May 1998 to April 2001 was
President and Chief Executive Officer, of The May Department Stores Company. Mr. Kahn joined May
Department Stores in 1990 and, in addition to the positions listed above, held various other
positions including, President and Chief Executive Officer of G. Fox, President and Chief Executive
Officer of Filenes, both divisions of May Department Stores, Vice Chairman and Executive Vice
Chairman. Mr. Kahns extensive experience and knowledge of the Companys operations, competitive
challenges and opportunities gained through his position as Chief Executive Officer of the Company
and his prior executive leadership and business experience, which includes almost 40 years of
experience in the retail industry, has led the board to believe that Mr. Kahn should serve as a
director of the Company.
James G. Conroy was promoted to President of Claires in April 2009, having previously served
as our Executive Vice President since December 2007. Mr. Conroy worked as a full-time consultant
to Claires from May 2007 to December 2007. Prior to joining Claires, Mr. Conroy had 17 years of
retail experience, including as a management consultant from July 2001 to December 2007, with
positions as a principal of Kurt Salmon Associates and a senior manager of Deloitte Consulting, and
as a retail executive with responsibility for strategic planning, merchandising and supply chain
management.
Jay K. Friedman became our President of North America in January 2011. From 2006 to 2010, Mr.
Friedman served in various capacities with Jones Apparel Group, including President and Chief
Executive Officer of Jones Retail Corporation,
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Nine West Group from 2006 to 2010, and Group President of Wholesale Footwear from 2006 to
2007. During his tenure as President and CEO of Jones Retail Corporation, Nine West Group, Mr.
Friedman had responsibility for a 1,000 store division that operated nine retail concepts and
three web businesses. Prior to joining Claires, Mr. Friedman had over 25 years of experience in
operating and managing major divisions of several large-scale, multi-unit retail and apparel
businesses, including, most recently, Jones Apparel Group, and, previously Etienne Aigner, Foot
Locker, Dayton Hudson Corporation, May Company and Macys.
Kenneth Wilson became our President of Europe in January 2009. From June 1990 to January
2009, Mr. Wilson served in various capacities with Levi Strauss Europe, including President of
Levis Brand Europe from November 2001 to October 2005 and Senior Vice President Commercial
Operations from November 2005 until January 2009. During his tenure with Levis, Mr. Wilson
expanded the European Division of the Levis business and opened in excess of 250 new stores.
J. Per Brodin became our Senior Vice President and Chief Financial Officer in February 2008
and was promoted to Executive Vice President and Chief Financial Officer in May 2010. From November
2005 until joining the Company, Mr. Brodin served in various capacities with Centene Corporation,
including Senior Vice President and Chief Financial Officer and Vice President and Chief Accounting
Officer. From March 2002 to November 2005, Mr. Brodin served as Vice President, Accounting and
Reporting for The May Department Stores Company. From 1989 to February 2002, Mr. Brodin was with
the Audit and Business Advisory Practice of Arthur Andersen, LLP, serving as Senior Manager with
their Professional Standards Group from February 2000 until February 2002.
Peter P. Copses became Chairman of the Companys board of directors in May 2007 upon
consummation of the Merger. Mr. Copses co-founded Apollo Management in 1990. Prior to joining
Apollo Management, Mr. Copses was an investment banker at Drexel Burnham Lambert Incorporated, and
subsequently at Donaldson, Lufkin, & Jenrette Securities, concentrating on the structuring,
financing and negotiation of mergers and acquisitions. Mr. Copses has served as a director of RBS
Global, Inc., a diversified, multi-platform industrial company, since July 2006. In addition,
since July 2010, Mr. Copses has served as the chairman of the board of directors of CKE
Restaurants, Inc. (CKE), an owner, operator, franchisor and licensor of quick service
restaurants. Mr. Copses also served as a director of Linens n Things, Inc. (LNT), a retailer of
home textiles, housewares and decorative home accessories, from February 2006 until February 2010.
Mr. Copses also served as a director of Rent-A-Center, Inc., the nations largest operator of
rent-to-own stores, from August 1998 to December 2007. Over the course of the past 20 years, Mr.
Copses has served on the board of directors of several other retail businesses, including General
Nutrition Centers, Inc. and Zale Corporation. In light of our ownership structure and Mr. Copses
position with Apollo Management, his knowledge of the retail industry and his extensive financial
and business experience, including his background as an investment banker, the board believes it is
appropriate for Mr. Copses to serve as a director of the Company.
Robert J. DiNicola became a member of the Companys board of directors in May 2007 following
the consummation of the Merger. Mr. DiNicola has also served as a director of CKE since July 2010
and serves as the Senior Retail Advisor for Apollo Management. Mr. DiNicola served as Chief
Executive Officer and Chairman of the Board of LNT from February 2006 until May 2008, when LNT and
its parent company filed a voluntary petition under Chapter 11 of the U.S. Bankruptcy Code, which
was converted to a Chapter 7 liquidation in February 2010. Mr. DiNicola served as Executive
Chairman of General Nutrition Centers, Inc. (GNC) from December 2004 to March 2007, and as the
interim CEO and Chairman of GNC from December 2004 to June 2005. Mr. DiNicola also held numerous
positions with Zale Corporation, including Chief Executive Officer from April 1994 to 2002, and
Chairman of the Board from April 1994 to 2004. Prior to joining Zale Corporation, Mr. DiNicola
served as the Chairman and Chief Executive Officer of the Bon Marché, a division of Federated
Department Stores. Beginning his retail career in 1972, Mr. DiNicola has also worked for Macys
and The May Department Stores Company. In light of our ownership structure and Mr. DiNicolas
knowledge of the retail industry and the competitive challenges and opportunities facing the
Company gained through his executive leadership and management experience in the retail industry,
the board believes it is appropriate for Mr. DiNicola to serve as a director of the Company.
George G. Golleher became a member of the Companys board of directors in May 2007 following
the consummation of the Merger. Since May 2007, Mr. Golleher has served as Chairman and Chief
Executive Officer of Smart & Final Inc., an operator of warehouse grocery stores. In addition, Mr.
Golleher has served as a director of CKE since July 2010. Mr. Golleher was a director of Simon
Worldwide, Inc., a promotional marketing company, from September 1999 to April 2006, and was also
its Chief Executive Officer from March 2003 to April 2006. From March 1998 to May 1999, Mr.
Golleher served as President, Chief Operating Officer and director of Fred Meyer, Inc., a food and
drug retailer. Prior to joining Fred Meyer, Inc., Mr. Golleher served for 15 years with Ralphs
Grocery Company until March 1998, ultimately as the Chief Executive Officer and Vice Chairman of
the Board. From 2002 until April 2009, Mr. Golleher served as a director of Rite Aid Corporation,
one of the largest retail drugstore chains in the United States. Mr. Golleher has also been a
business consultant and private equity investor since June 1999. In light of our ownership
structure and Mr. Gollehers knowledge of the retail industry and the competitive challenges and
opportunities facing the Company gained through his executive leadership and
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management experience in the retail industry, the board believes it is appropriate for Mr. Golleher
to serve as a director of the Company.
Rohit Manocha became a member of the Companys board of directors in May 2007 following the
consummation of the Merger. Mr. Manocha is a co-founding Partner of Tri-Artisan Capital Partners,
LLC (Tri-Artisan). Mr. Manocha is also co-President
of Morgan Joseph TriArtisan Group, Inc., an affiliate of TriArtisan. Tri-Artisan is a New York and London based merchant banking firm, founded in
2002, that invests, on behalf of its investors, in private equity transactions and provides
investment banking services. Prior to joining Tri-Artisan, Mr. Manocha was a senior banker at
Thomas Weisel Partners, ING Barings and Lehman Brothers. In light of our ownership structure and
Mr. Manochas position with Tri-Artisan and his extensive financial and business experience, the
board believes it is appropriate for Mr. Manocha to serve as a director of the Company.
Ron Marshall has served as a member of the Companys board of directors since December 2007.
Mr. Marshall has served as President and Chief Executive Officer of The Great Atlantic & Pacific
Tea Company from February 2010 through July 2010. From January 2009 until January 2010, Mr.
Marshall was President and Chief Executive Officer, and director of Borders Group Inc., a national
bookseller. From 1998 to 2006, he served as Chief Executive Officer of Nash Finch Company and was
a member of its board of directors. Prior to joining Nash Finch, Mr. Marshall served as Chief
Financial Officer of Pathmark Stores, Inc., Dart Group Corporation, Barnes & Noble Bookstores,
Inc., NBIs The Office Place and Jack Eckerd Corporation. Mr. Marshall has also been a principal of
Wildridge Capital Management since 2006. Mr. Marshall is a certified public accountant. In light
of our ownership structure and Mr. Marshalls knowledge of the retail industry and the competitive
challenges and opportunities facing the Company gained through his executive leadership and
management experience in the retail industry, the board believes it is appropriate for Mr. Marshall
to serve as a director of the Company.
Lance A. Milken became a member of the Companys board of directors in May 2007. Mr. Milken
is a Partner at Apollo Management, where he has worked since 1998. In addition, Mr. Milken has
served as a director of CKE since July 2010. Mr. Milken also serves as a member of the Milken
Institute board of trustees. In light of our ownership structure and Mr. Milkens position with
Apollo Management and his extensive financial and business experience, including his experience in
leveraged finance, the board believes it is appropriate for Mr. Milken to serve as a director of
the Company.
Board Composition
The Companys board of directors is composed of seven directors. Each director serves for
annual terms and until his or her successor is elected and qualified. Apollo Management indirectly
controls a majority of the common stock of our Parent and, as such, Apollo Management has the
ability to elect all of the members of our board of directors. Apollo Management has agreed to
elect to our board of directors the designee of an affiliate of Tri-Artisan Capital Partners, LLC
(Tri-Artisan). Tri-Artisan has invested in one of Apollo Managements co-investment vehicles
that was used to consummate the Merger. Rohit Manocha is the current designee of Tri-Artisan. We
are a privately held company. Accordingly, we have no nominating committee nor do we have written
procedures by which security holders may recommend nominees to our board of directors. In
addition, we do not currently have a policy with respect to the consideration of diversity in
identifying director nominees.
Board Committees
The board of directors has the authority to appoint committees to perform certain management
and administration functions. The board of directors has currently appointed an audit committee
and a compensation committee. The members of the audit committee are Peter Copses (Chairman),
Lance Milken, Rohit Manocha, and Ron Marshall. The audit committee is responsible for reviewing
and monitoring our accounting controls and internal audit functions and recommending to the board
of directors the engagement of our outside auditors. The board of directors has determined that
Mr. Copses is an audit committee financial expert within the meaning of SEC regulations. The
members of the compensation committee are Peter Copses (Chairman), Lance Milken and Rohit Manocha.
The compensation committee is responsible for establishing and administering our executive
compensation program, which includes reviewing and approving the annual salaries, stock option
grants, and other compensation of our executive officers and, upon recommendation and consultation
with our CEO, for employees other than our CEO. The compensation committee, or the full board of
directors, also provides assistance and recommendations with respect to our general compensation
policies and practices and assists with the administration of our compensation plans. The audit
and compensation committees are not required to, and do not, meet the independence requirements of
Nasdaq or the New York Stock Exchange. See Certain Relationships and Related
Transactions-Director Independence.
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Board Leadership Structure and Risk Oversight
Our boards leadership structure currently separates the positions of Chief Executive Officer
and Chairman of the board of directors. We believe this leadership structure is appropriate due, in
part, to the demanding nature of these positions and because Apollo Management controls our stock
and our board. The board has not designated a lead independent director.
The board of directors exercises its role in the oversight of risk as a whole and through the
audit committee. The audit committee oversees the management of the Companys enterprise risk
management program, and reviews with our vice president of compliance and other members of our
senior management team the critical risks facing the Company, their relative magnitude and
managements actions to mitigate these risks.
Code of Ethics
The board of directors has adopted a Code of Ethics that applies to the Companys chief executive
officer and senior financial officers. A waiver from any provision of the code of ethics may only
be granted by the audit committee. In addition, Claires has adopted a Code of Business Conduct
and Ethics applicable to all employees, officers and directors. Our Code of Ethics and Code of
Business Conduct and Ethics are posted on our website at www.clairestores.com.
Item 11. Executive Compensation
Compensation Discussion and Analysis
Introduction
The board of directors appointed after the Merger, which at the time of the Merger did not
include Eugene S. Kahn, our Chief Executive Officer, negotiated employment agreements and other
arrangements with Mr. Kahn. In addition, on December 13, 2007, upon consultation with an
independent compensation consultant with respect to the salary and bonus ranges of executives in
comparable peer group companies, our board of directors approved an employment agreement with James
Conroy, who was appointed Executive Vice President in December 2007, on terms substantially
consistent with those provided to Mr. Kahn. In April 2009, Mr. Conroy was promoted to President of
Claires Stores, and the Compensation Committee of the board of directors approved an amendment to
Mr. Conroys employment agreement. An additional amendment to Mr. Conroys employment agreement
was approved in May 2010. In February 2008, our board of directors approved compensation
arrangements for J. Per Brodin, our then Senior Vice President and Chief Financial Officer. In May
2010, Mr. Brodin was promoted to Executive Vice President and Chief Financial Officer, and the
compensation committee of the board of directors approved an amendment to Mr. Brodins compensation
arrangements. In January 2009, we entered into an employment agreement with Kenneth Wilson, our
President of Claires Europe. In January 2011, Jay K. Friedman became our President of North
America and we entered into an employment agreement with Mr. Friedman.
This Compensation Disclosure and Analysis describes, among other things, the compensation
objectives and the elements of the executive compensation program embodied by the foregoing
agreements with Messrs. Kahn, Conroy, Wilson and Brodin (each, a named executive officers in Fiscal
2010), which form the core of the executive compensation program. For Fiscal 2010, Mr. Friedman,
who joined the Company in January 2011, is the fifth named executive officer. However, because he
worked for the Company for less than one month of Fiscal 2010, the following discussion of Fiscal
2010 compensation is not generally applicable to him.
During Fiscal 2010, the basic elements of compensation for our Chief Executive Officer and our
other current named executive officers remained essentially unchanged.
Compensation Philosophy and Objectives
Our Compensation Committee developed an executive compensation program designed to reward the
achievement of specific annual and long-term goals by the Company, and which is designed to align
the executives interests with those of our stockholders by rewarding performance above established
goals, with the ultimate objective of improving stockholder value. Our Compensation Committee
evaluates both performance and compensation to ensure that the Company maintains its ability to
attract, retain and motivate qualified employees in key positions and that compensation to key
employees remains competitive relative to the compensation paid by similar sized companies. Our
Compensation Committee believes that the executive compensation packages provided by the Company to
the current named executive officers should include both cash and stock-based compensation that
reward performance as measured against established goals.
In negotiating the initial employment agreements and arrangements with our current named
executive officers, our board of directors and Compensation Committee, as the case may be, placed
significant emphasis on aligning the
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management interests with those of Apollo Management. Our Chief Executive Officer made a
significant equity investment in Parent common stock and our other current named executive officers
received equity awards that included performance vesting options.
Components of Executive Compensation
The principal components of compensation for our current named executive officers are base
salary, annual performance bonus, management equity investments in Parent, stock option awards, and
other benefits and perquisites.
Base Salary. The Company provides our current named executive officers with base salary to
compensate them for services rendered during the fiscal year. Base salaries for the current named
executive officers are determined for each executive based on his position and scope of
responsibility. The initial base salaries for our current named executive officers were established
in their initial employment agreements or other written arrangements.
Bonus. Our current named executive officers are eligible to receive annual cash performance
bonuses in addition to their base salary. These bonuses are intended to motivate and reward
achievement of annual financial objectives and to provide a competitive total compensation package
to our executives.
Our Compensation Committee sets threshold, target and maximum numeric performance goals for
each performance metric at or near the beginning of each annual performance period, with input from
senior management. These performance goals are based on projected internal plan targets available
to the Compensation Committee at that time. Performance metrics are further weighted based on the
executives responsibility from a global, North American and European perspective. The Compensation
Committee believed that these performance targets goals would be difficult to achieve, but could be
achieved with significant effort on the part of its executives and that payment of the maximum
amounts would occur only upon the achievement of results in excess of internal and general market
expectations and our long-term strategic objectives.
In Fiscal 2010, cash bonuses for Mr. Kahn and Mr. Conroy were based on the following combined
global and targeted weighted performance metrics: same store sales (36%), new store sales (8%),
earnings before interest, taxes, depreciation and amortization (EBITDA), as adjusted (36%), and
free cash flow (20%). In Fiscal 2010, the cash bonus for Mr. Brodin was based on the following
combined global and targeted weighted performance metrics: same store sales (31%), new store sales
(8%), earnings before interest, taxes, depreciation and amortization (EBITDA), as adjusted (31%),
free cash flow (20%) and expense control (10%). For our European named executive officer, on a
European division basis, we further weighted these performance factors and modified their
corresponding performance goals.
The performance bonuses earned for Fiscal 2010 were based on the named executive officer
meeting or exceeding the following numeric performance goals established by our Compensation
Committee at or near the beginning of Fiscal 2010.
Fiscal 2010 Performance Goals
Same Store Sales | New Store Sales | Adjusted EBITDA | Free Cash Flow | Expense Control | ||||||||||||||||
Bonus Level | (%)(1) | ($ in millions)(2) | ($ in millions(3) | ($ in millions) | (% of Sales) | |||||||||||||||
Threshold |
2.00 | 24 | 245 | 176 | 59.1 | % | ||||||||||||||
Target |
4.20 | 25 | 261 | 192 | 58.4 | % | ||||||||||||||
Maximum |
6.40 | 26 | 277 | 208 | 57.8 | % |
(1) | We include a store in the calculation of same store sales once it has been in operation 60 weeks after its initial opening. | |
(2) | New store sales include sales from stores open less than 60 weeks. | |
(3) | EBITDA represents income from continuing operations before provision (benefit) for income tax, interest income and expense and depreciation and amortization, as adjusted for certain non-recurring and non-cash expenses. |
The following table indicates the threshold (minimum), target and maximum annual potential bonuses
that our named executive officers were eligible to receive for Fiscal 2010, expressed as a dollar
amount and as a percentage of the named executive officers Fiscal 2010 annual base salary,
assuming that the numeric performance goals established by our Compensation Committee for each of
the performance metrics applicable to the named executive officer at the threshold,
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target or maximum levels were achieved. The last column of the table reflects the actual
performance bonus earned by the named executive officer for Fiscal 2010.
Fiscal Year 2010 Bonus Table
Potential | ||||||||||||||||
Name | Potential Threshold | Target | Potential Maximum | Actual | ||||||||||||
Eugene S. Kahn
Chief Executive Officer |
$ | 500,000(50 | %) | $ | 1,000,000(100 | %) | $ | 1,500,000(150 | %) | $ | 1,400,205 | |||||
James G. Conroy
President |
$ | 332,500(50 | %) | $ | 665,000(100 | %) | $ | 997,500(150 | %) | $ | 931,137 | |||||
Kenneth Wilson
President of Claires Europe |
$ | 309,773(50 | %) | $ | 619,545(100 | %) | $ | 929,318(150 | %) | $ | 388,624 | |||||
J. Per Brodin
Executive Vice President and Chief Financial Officer |
$ | 147,000(30 | %) | $ | 294,000(60 | %) | $ | 441,000(90 | %) | $ | 399,456 |
Stock Option Awards. On June 29, 2007, our board of directors and the stockholders of Parent
adopted the Claires Inc. Amended and Restated Incentive Plan. In May 2011, the Compensation
Committee approved certain amendments to the Plan (as amended, the Incentive Plan). At the same
time, conforming amendments were made to outstanding stock options, including those held by the
named executive officers. The Incentive Plan provides employees, directors or consultants who were
previously employed by Parent or its affiliates who are in a position to contribute to the
long-term success of these entities with shares of common stock or stock options to aid in
attracting, retaining and motivating individuals of outstanding ability. The Incentive Plan
provides for the grant of shares of common stock, incentive stock options, and non-qualified stock
options. The aggregate number of shares currently reserved for issuance under the Incentive Plan is
8,200,000.
The Incentive Plan is administered by our Compensation Committee, which has the authority to
determine who should be awarded options or shares, the number of shares to be granted or to be
subject to an option, the exercise price or purchase price of such awards, and other applicable
terms and conditions. Our Compensation Committee has delegated to our Chief Executive Officer the
authority to grant options under the Incentive Plan to employees at certain non-senior levels that
replace former non-senior employees and also seeks input from our Chief Executive Officer on option
grants to employees, other than our Chief Executive Officer. Our board of directors or our
Compensation Committee has the power and authority to construe and interpret the Incentive Plan,
and their acts are final, conclusive, and binding on all parties.
Stock option grants granted under the Incentive Plan are divided between time options,
performance options and stretch performance options. The stock options generally expire seven years
after the date of grant. The time options become vested and exercisable in four equal installments
based on the anniversary of the date of grant or the anniversary of a designated date, subject to
acceleration in the event of a change in control (as defined in the option grant letter). The
performance options provide that if on any Measurement Date, the Value Per Share equals or
exceeds the Target Stock Price, then the performance options will vest and become exercisable.
The stretch performance options provide that if on any Measurement Date, the Value Per Share
equals or exceeds the Stretch Stock Price, then the stretch performance options will vest and
become exercisable. Prior to an initial public offering, a Measurement Date is the end of a fiscal
quarter beginning with or following the last day of the second quarter of our 2009 fiscal year.
Prior to an initial public offering, Value Per Share is Parents Net Equity Value divided by the
number of fully diluted shares. Net Equity Value is calculated as (1) 8.5 times Parents EBITDA for
the four fiscal quarters ending on the Measurement Date, plus (2) the sum of all cash and cash
equivalents and the aggregate exercise price of all outstanding options or warrants to purchase
shares of Parents common stock as of the Measurement Date, less (3) the sum of Parents debt and
capital leases as of the Measurement Date. Upon a defined liquidity event, Value Per Share is the
price per share realized by Parents principal stockholders. The Target Stock Price means $10.00
compounded at an annual rate of 22.5% from May 29, 2007 to the Measurement Date, and the Stretch
Stock Price means $10.00, compounded at an annual rate of 32% from May 29, 2007 to the Measurement
Date. In addition, effective May 2011, the performance options and certain of the stretch
performance options will also vest if prior to the end of Parents Fiscal 2012, an initial public
offering is consummated at a price at least equal to a specified target IPO price (as defined in
the Incentive Plan) and if during any four fiscal quarter period prior to or concurrent with the
end of Parents Fiscal 2012 year certain EBITDA and leverage-based performance targets are achieved (the 2012
Vesting Events).
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Unless the term of a vested option would otherwise terminate earlier, all vested options
generally terminate on the 91st day following an individuals termination for any reason (other
than death or disability, in which case such option will terminate on the 181st day following
termination). The exercise price of options may be paid in the form of cash, a certified check,
bank draft, or any other form of payment permitted by the board of directors or Compensation
Committee of our board of directors. In addition, in certain circumstances, a grantee may exercise
his or her options on a cashless basis by using shares (including shares to be delivered on option
exercises) to pay the exercise price and withholding taxes.
Common stock issued under the Incentive Plan is subject to various restrictions. During the
one-year period following the grantees termination of employment (or the date of exercise, if
later), Parent or its principal stockholders may repurchase any or all of the shares purchased
pursuant to an option. Such shares may be purchased for fair market value; however, the purchase
price may be less depending upon the circumstances surrounding the grantees termination of
employment. In addition, if Parents principal stockholders sell a majority of Parent, they may
require a grantee to participate in the sale, or a grantee may require such principal stockholders
to allow it to participate in the sale, in either case under the same terms and conditions as
applicable to the principal stockholders. Shares acquired pursuant to an award generally may not
otherwise be transferred until an initial public offering, and certain investors have voting proxy
on all shares of common stock issued pursuant to the Incentive Plan.
In the event any recapitalization, forward or reverse split, reorganization, merger,
consolidation, spin-off, repurchase, exchange or issuance of shares or other securities, any stock
dividend or other special and nonrecurring dividend or distribution (whether in the form of cash,
securities or other property), liquidation, dissolution, or other similar transactions or events,
affects the shares, our board of directors or Compensation Committee of our board of directors will
make appropriate equitable adjustments in order to prevent dilution or enlargement of a grantees
rights under the Incentive Plan. Such adjustments may be applicable to the number and kind of
shares available for grant of awards; the number and kind of shares which may be delivered with
respect to outstanding awards; and the exercise price. In addition, in recognition of any unusual
or nonrecurring events, our board of directors or Compensation Committee of our board of directors
may adjust any terms and conditions applicable to outstanding awards, which may include
cancellation of outstanding options in exchange for the in-the-money value, if any, of the vested
portion.
The board of directors or Compensation Committee of our board of directors may amend or
terminate the Incentive Plan or any award issued thereunder; however, in general, no such amendment
or termination may adversely affect the rights of a grantee.
Management Equity Investments. Our board of directors awards certain management employees the
opportunity to purchase or acquire Parent common stock at a price of $10.00 per share, the
estimated fair market value of the Companys common stock after the closing of the Merger. With
each share received, the management employee is granted an option to purchase an additional share
of Parent common stock at an exercise price of $10.00 per share. These options expire in seven
years. There were no management equity investments by our current named executive officers in
Fiscal 2010. In May 2011, an amended offer under substantially similar terms was made to
management employees. This offer, which expired May 20, 2011, supersedes all previously pending
offers. The terms of this offer included that the 2012 Vesting Events described above will apply
(pro rata based on the number of new shares purchased) to a portion of the stretch performance
options held by each offeree who holds such stretch performance options and who accepts the offer
to subscribe for shares of the Parent. The 2012 vesting events apply to all of the stretch options
granted to Mr. Kahn.
The shares of Parent common stock acquired by the current named executive officers are subject
to restrictions on transfer, repurchase rights and other limitations.
Benefits Programs. The current named executive officers participate in a variety of
retirement, health and welfare, and paid time-off benefits designed to enable us to attract and
retain our workforce in a competitive marketplace. Health and welfare and paid time-off benefits
helped ensure that we have a productive and focused workforce through reliable and competitive
health and other benefits.
Retirement Plans. The Company maintains the Claires Stores, Inc. 401(k) Savings and
Retirement Plan (the 401(k) Plan) to enable eligible employees to save for retirement through a
tax-advantaged combination of elective employee contributions and our matching contributions, and
provide employees the opportunity to directly manage their retirement plan assets through a variety
of investment options. The 401(k) Plan allowed eligible employees to elect to contribute from 1% to
50% of their eligible compensation to an investment trust on a pre-tax basis, up to the maximum
dollar amounts permitted by law. Eligible compensation generally means all wages, salaries and fees
for services. Prior to April 2009, matching contributions under the 401(k) Plan were 50% of the
first 4% of eligible compensation that each eligible participant elected to be contributed to the
401(k) Plan on his or her behalf. The portion of an employees account under the 401(k) Plan that
was attributable to matching contributions vested as follows: 20% after one year of service, 20%
after two years of service, 20% after three years of service, 20% after four years of service and
20% after five years of service.
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However, regardless of the number of years of service, an employee was fully vested in our
matching contributions (and the earnings thereon) if the employee retired at age 65 or later, or
terminated employment by reason of death or total and permanent disability. The 401(k) Plan was
designed to provide for distributions in a lump sum or installments after termination of service.
However, loans and in-service distributions under certain circumstances such as a hardship,
attainment of age 59 1/2 or a disability, were permitted. The amounts, if any, of our matching
contributions under the 401(k) Plan for Fiscal 2010 for each of the current named executive
officers is included in the All Other Compensation column of the Summary Compensation Table.
Effective April 2009, we no longer provide matching contributions for any of our employees under
our 401(k) plan.
Perquisites. While we believe that perquisites should not be a major part of executive
compensation, we recognize the need to provide our current named executive officers with certain
perquisites that are reasonable and consistent with our overall compensation program. Accordingly,
certain of our current named executive officers receive customary expense reimbursement, relocation
benefits, life insurance and an automobile allowance.
Severance Pay and Benefits upon Termination of Employment under Certain Circumstances. Our
Compensation Committee believes the severance pay and benefits payable to the current named
executive officers aid in the attraction and retention of these executives as a competitive
practice and is balanced by the inclusion of restrictive covenants (such as non-compete provisions)
to protect the value of the Company and Parent following a termination of an executives
employment. In addition, the Company believes the provision of these contractual benefits will keep
the executives focused on the operation and management of the business.
Eugene S. Kahn. Pursuant to his employment agreement, Mr. Kahn is entitled to specified
severance compensation in the event of a termination of employment by the Company without cause or
by the executive officer for good reason. In either case, subject to execution of a release of
claims, Mr. Kahn is entitled to continued payments of base salary for the remainder of the term,
but for no less than two years if the termination occurs during the eighteen-month period following
a change in control (as defined in the employment agreement). Mr. Kahn is also entitled to
reimbursement for premiums for continued health benefits for the severance period. In addition, Mr.
Kahn will be entitled to an annual bonus, prorated for the period of employment during the year,
based on actual performance of the Company for the year of termination. Upon such a termination, a
portion of all restricted stock, time options, and performance options with respect to which the
performance goals have been achieved will vest pro-rata based on the portion of the option which
would have vested on the next vesting date and the number of days of employment since the most
recent vesting date, and Mr. Kahn will generally be entitled to exercise vested options for a 180
day period unless they would have otherwise expired earlier. The agreement prohibits Mr. Kahn from
engaging in competitive and similar activities and from soliciting clients and customers for the
remainder of the period during which the executive is receiving payments, but for no less than one
year following his termination of employment, and his agreement provides for customary protection
of confidential information and intellectual property.
Upon termination of employment because of death or disability, Mr. Kahn (or his estate) will
be entitled to an annual performance bonus, prorated for the period of employment during the year,
based on actual performance of the Company for the year of termination, and unvested shares of
restricted stock become fully vested. Time options that are not exercisable as of the date of
termination because of death or disability and performance options with respect to which
performance goals have been achieved will vest, and options which are exercisable as of such date
will generally remain exercisable for one year, in the case of Mr. Kahn, unless they would have
otherwise expired earlier.
Upon any other termination, other than for cause, stock options that are not exercisable as of
the date of termination will expire, and options which are exercisable as of such date will
generally remain exercisable for a 90 day period, unless they would otherwise expire earlier.
James G. Conroy. Pursuant to his employment agreement, as amended, Mr. Conroy is entitled to
specified severance compensation in the event of a termination of employment by the Company without
cause, non-renewal of the employment agreement or by the executive officer for good reason. In any
case, subject to execution of a release of claims, Mr. Conroy is entitled to continued payments of
base salary for a twelve month period following such date of termination, but if the termination
occurs during the eighteen-month period following a change in control (as defined in the employment
agreement), then the payment of base salary shall continue for the longer of the period until the
end of the then remaining term or 12 months. Mr. Conroy is also entitled to reimbursement for
premiums for continued health benefits for the length of the severance period. In addition, Mr.
Conroy will be entitled to an annual bonus, prorated for the period of employment during the year,
based on actual performance of the Company for the year of termination. Upon such a termination,
Mr. Conroy will generally be entitled to exercise vested options for a 90 day period, unless they
would have otherwise expired earlier. The agreement prohibits Mr. Conroy from engaging in
competitive and similar activities and from soliciting clients and customers for the remainder of
the period during which the executive is receiving payments, but for no less than one year
following his termination of employment, and his agreement provides for customary protection of
confidential information and intellectual property.
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Upon termination of employment because of death or disability, Mr. Conroy (or his estate) will
be entitled to an annual performance bonus, prorated for the period of employment during the year,
based on actual performance of the Company for the year of termination. Time options that are not
exercisable as of the date of termination because of death or disability and performance options
with respect to which performance goals have been achieved will vest pro-rata based on the portion
of the option which would have vested on the next vesting date and the number of days of employment
since the most recent vesting date, and options which are exercisable as of such date will
generally remain exercisable for 180 days, unless they would have otherwise expired earlier.
Upon any other termination, other than for cause, stock options that are not exercisable as of
the date of termination will expire, and options which are exercisable as of such date will
generally remain exercisable for a 90 day period, unless they would otherwise expire earlier.
Jay Friedman. Pursuant to Mr. Friedmans employment agreement, either Mr. Friedman or Company
may provide the other with a notice of termination, giving the other party 12 months written
notice. Once notice is received, regardless of by whom it is provided, pursuant to the above, the
Company may, at its sole discretion, terminate Mr. Friedmans employment with immediate effect by
paying his base salary and the value of or continuation of benefits (excluding bonus) in lieu of
all or the balance of any unexpired period of notice, at the Companys choice. The right of the
Company to make a payment of base salary and benefits (excluding bonus) in lieu of all or part of a
notice period does not give rise to any right to receive such a payment or the right to receive any
other payment or benefit thereunder. Alternatively, Company may terminate the agreement with
immediate effect and without any payment if Mr. Friedman commits gross negligence or a number of
other serious breaches of his obligations, as outlined in the agreement. The agreement prohibits
Mr. Friedman from engaging in competitive and similar activities and from soliciting clients and
customers for up to one year following his termination of employment, and his agreement provides
for customary protection of confidential information and intellectual property.
Upon termination, however arising, Mr. Friedman shall not be entitled to any compensation for
the loss of any rights or benefits under any share option, bonus, long-term incentive plan or other
profit sharing or equity scheme operated by the Company in which Mr. Friedman may participate,
which rights and benefits shall at all times remain governed by the rules of the relevant plan(s),
option agreement, and vesting schedule.
Kenneth Wilson. Pursuant to Mr. Wilsons employment agreement, either Mr. Wilson or Company
may provide the other with a notice of termination, giving the other party 12 months written
notice. Once notice is received, regardless of by whom it is provided, pursuant to the above, the
Company may, at its sole discretion, terminate Mr. Wilsons employment with immediate effect by
paying his base salary and the value of or continuation of benefits (excluding bonus) in lieu of
all or the balance of any unexpired period of notice, at the Companys choice. The right of the
Company to make a payment of base salary and benefits (excluding bonus) in lieu of all or part of a
notice period does not give rise to any right to receive such a payment or the right to receive any
other payment or benefit thereunder. Alternatively, Company may terminate the agreement with
immediate effect and without any payment if Mr. Wilson commits gross negligence or a number of
other serious breaches of his obligations, as outlined in the agreement. The agreement prohibits
Mr. Wilson from engaging in competitive and similar activities and from soliciting clients and
customers for up to one year following his termination of employment, and his agreement provides
for customary protection of confidential information and intellectual property.
Upon termination, however arising, Mr. Wilson shall not be entitled to any compensation for
the loss of any rights or benefits under any share option, bonus, long-term incentive plan or other
profit sharing or equity scheme operated by the Company in which Mr. Wilson may participate, which
rights and benefits shall at all times remain governed by the rules of the relevant plan(s), option
agreement, and vesting schedule.
J. Per Brodin. Mr. Brodin is entitled to receive a severance payment equal to 12 months of his
base salary, subject to reduction for amounts earned from other employment during the 12-month
period, in the event his employment is terminated without cause. Mr. Brodin is subject to customary
restrictive covenants, such as non-solicitation and non-disclosure covenants, for a period of 12
months following a termination of employment. Upon termination of employment, other than for cause,
stock options that are not exercisable as of the date of termination will expire, and options which
are exercisable as of such date will generally remain exercisable for a 90 day period, unless they
would otherwise expire earlier.
Compensation Committee Report
The compensation committee has reviewed and discussed the Compensation Discussion and Analysis
with respect to FY 2010 compensation required by Item 402(b) of Regulation S-K with management
and, based on such review and discussion, recommended to the Companys Board that the Compensation
Discussion and Analysis be included in this Amendment.
Peter P. CopsesChairman
Rohit Manocha
Lance A. Milken
Rohit Manocha
Lance A. Milken
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Compensation Committee Interlocks and Insider Participation
Messrs. Copses, Manocha and Milken were the only members of the compensation committee during
FY 2010. No member of the compensation committee is now, or was during FY 2010 or any time prior
thereto, an officer or employee of the Company. None of our executive officers currently serves or
ever has served as a member of the board of directors, the compensation committee, or any similar
body, of any entity one of whose executive officers serves or served on our Board or our
compensation committee.
Summary Compensation Table
The following table sets forth information concerning compensation awarded to, earned by or
paid to our current named executive officers in Fiscal 2010, 2009, and 2008 for services rendered
to us during that time.
Non-Equity | ||||||||||||||||||||||||||||||||
Stock | Option | Incentive Plan | All Other | |||||||||||||||||||||||||||||
Name and Principal | Fiscal | Salary | Bonus | Awards | Awards | Compensation | Compensation | Total | ||||||||||||||||||||||||
Position | Year | ($) | ($) | ($) | ($)1 | ($) | ($) | ($) | ||||||||||||||||||||||||
Eugene S. Kahn |
2010 | 1,000,000 | 1,400,205 | (2) | 0 | 0 | 0 | 219,185 | (3) | 2,619,390 | ||||||||||||||||||||||
Chief Executive Officer |
2009 | 1,000,000 | 983,650 | (2) | 0 | 0 | 0 | 142,229 | 2,125,879 | |||||||||||||||||||||||
2008 | 1,000,000 | 0 | (2) | 0 | 0 | 0 | 132,289 | 1,132,289 | ||||||||||||||||||||||||
James G. Conroy |
2010 | 648,750 | 931,137 | (2) | 0 | 0 | 0 | 10,200 | (4) | 1,590,087 | ||||||||||||||||||||||
President |
2009 | 600,000 | 590,190 | (2) | 0 | 346,250 | 0 | 15,356 | 1,551,796 | |||||||||||||||||||||||
2008 | 598,846 | 225,000 | (5) | 0 | 0 | 77,483 | 901,329 | |||||||||||||||||||||||||
Jay Friedman(6) |
2010 | 34,615 | 150,000 | (7) | 0 | 1,030,317 | 0 | 850 | (4) | 1,315,782 | ||||||||||||||||||||||
President North America |
||||||||||||||||||||||||||||||||
Kenny Wilson(8) |
2010 | 577,613 | 388,621 | (2) | 0 | 0 | 0 | 40,275 | (9) | 1,006,510 | ||||||||||||||||||||||
President Europe |
2009 | 575,108 | 769,993 | (10) | 0 | 972,800 | 0 | 165,156 | 2,483,057 | |||||||||||||||||||||||
J. Per Brodin |
2010 | 477,500 | 399,456 | (2) | 0 | 0 | 0 | 219,332 | (11) | 1,096,288 | ||||||||||||||||||||||
Executive Vice President |
2009 | 440,000 | 302,714 | (2) | 0 | 0 | 0 | 6,600 | 749,314 | |||||||||||||||||||||||
and Chief Financial Officer |
2008 | 431,538 | 0 | (2) | 0 | 502,200 | 0 | 6,600 | 940,338 |
(1) | This column reflects the amounts recognized for financial statement reporting purposes for the portion of the fair value of option awards to purchase Parent common stock in accordance with ASC Topic 718, - Stock Compensation (formerly, Statement of Financial Accounting Standards No. 123 (Revised), Share-Based Payment). For a description of the assumptions used in calculating the fair value of option awards under ASC Topic 718, Compensation-Stock Compensation, see Note 9-Stock Options and Stock-Based Compensation of the Notes to our Consolidated Financial Statements included in our Fiscal 2010 Form 10-K. The amounts in this column reflect the accounting expense to the Company in connection with such option awards and do not reflect the amount of compensation actually received by the named executive officer during the respective fiscal year. | |
(2) | Represents bonus paid in accordance with the annual numeric performance goals established by our Compensation Committee. See Components of Executive Compensation, Bonus. | |
(3) | Includes (i) $198,330 for reimbursement of living expenses pursuant to Mr. Kahns employment agreement, grossed up for income tax purposes, (ii) $10,200 for automobile allowance, and (iii) $10,655 for life insurance reimbursement. | |
(4) | Represents automobile allowance. | |
(5) | Represents one-time minimum guaranteed incentive bonus pursuant to Mr. Conroys employment agreement. | |
(6) | Mr. Friedman became an executive officer on January 3, 2011 and the information included in the table reflects his compensation from that date until our fiscal year end. | |
(7) | Represents one-time sign on bonus paid to Mr. Friedman pursuant to the terms of his employment agreement. | |
(8) | Represents amounts in British pounds converted to U.S. dollars at applicable average exchange rates. | |
(9) | Includes (i) automobile allowance of $26,158, and (ii) medical insurance expenses of $14,118. | |
(10) | Includes (i) one-time sign-on bonus of $219,139 pursuant to Mr. Wilsons employment agreement. | |
(11) | Includes (i) relocation expenses of $212,732 and (ii) $6,600 for automobile allowance. |
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Employment Arrangements with our Executive Officers
Eugene S. Kahn
On April 19, 2007, in connection with the Merger, Parent entered into an employment agreement
with our Chief Executive Officer, Eugene S. Kahn, containing the following terms: a base salary of
$1,000,000; a bonus opportunity of 100% of base salary for achievement of target level of
performance, with the opportunity to earn more or less than that for achievement above or below
target (however, for Fiscal 2007, Mr. Kahn received a minimum bonus of 100% of base salary,
prorated based upon the number of days during Fiscal 2007 following the closing of the Merger), a
time option to purchase 477,440 shares of common stock of Parent at an exercise price of $10.00 per
share; a target performance option to purchase 477,440 shares of common stock of Parent at an
exercise price of $10.00 per share; a stretch performance option to purchase 298,400 shares of
common stock of Parent at an exercise price of $10.00 per share; a grant of 75,000 shares of common
stock of Parent that vest in four equal annual installments on May 29, 2008, 2009, 2010 and 2011,
subject to acceleration in the event of a change in control (as defined in the employment
agreement), and a loan from Parent to facilitate Mr. Kahns payment of taxes triggered by such
grant of common stock that may be forgivable in whole or in part under certain circumstances. In
addition, Mr. Kahn purchased 100,000 shares of common stock of Parent at a purchase price of $10.00
per share, and in return for such investment received an option to purchase an additional 100,000
fully-vested shares of common stock of Parent at an exercise price of $10.00 per share. Mr. Kahn is
entitled to expense reimbursement and other customary employee benefits, as well as relocation and
temporary housing expenses. Mr. Kahn has agreed not to engage in competitive and similar activities
or solicit customers or clients until the later of one year following his termination of employment
or the end of the period during which he is entitled to severance pay, and his agreement provides
for customary protection of confidential information and intellectual property. The agreement sets
forth a three-year term (terminating on May 29, 2010) and automatic renewal for successive one-year
periods unless either Mr. Kahn or Parent provides notice of non-renewal.
Pursuant to his employment agreement, as described above, Mr. Kahn is entitled to specified
severance compensation in the event of a termination of employment by the Company without cause or
by Mr. Kahn for good reason.
James G. Conroy
On December 13, 2007, we entered into an employment agreement with our Executive Vice
President, James Conroy, containing the following terms: a base salary of $585,000; a bonus
opportunity of 75% of base salary for achievement of target level of performance, with the
opportunity to earn more or less than that for achievement above or below target; a time option to
purchase 175,000 shares of common stock of Parent at an exercise price of $10.00 per share; a
target performance option to purchase 175,000 shares of common stock of Parent at an exercise price
of $10.00 per share; and a stretch performance option to purchase 87,500 shares of common stock of
Parent at an exercise price of $10.00 per share. In addition, Mr. Conroy has the opportunity to
purchase up to an additional 30,000 shares of common stock of Parent at a purchase price of $10.00
per share, and in return for such investment will receive an option to purchase an equal number of
fully-vested shares of common stock of Parent at an exercise price of $10.00 per share. Mr. Conroy
is entitled to expense reimbursement and other customary employee benefits, as well as relocation,
including a $150,000 relocation bonus, and temporary housing expenses. Mr. Conroy is also entitled
to receive a guaranteed minimum annual bonus for Fiscal 2008 of $225,000. Mr. Conroy has agreed
not to engage in competitive and similar activities or solicit customers or clients until the later
of one year following his termination of employment or the end of the period during which he is
entitled to severance pay, and his agreement provides for customary protection of confidential
information and intellectual property. In March 2008, Mr. Conroys annual base salary was
increased to $600,000. In April 2009, Mr. Conroy was promoted to President. Mr. Conroys
Employment Agreement was amended in connection with such promotion, comprised of the following: (i)
extension of the expiration of the initial two-year term of the Employment Agreement from February
28, 2010, to April 30, 2011, (ii) an increase from 75% to 100% for the bonus potential that can be
earned under the Companys Annual Incentive Plan for target bonus, (iii) an additional grant of
options to purchase an aggregate of 125,000 shares of common stock of the parent of the Company at
an exercise price of $10 per share, consisting of 50,000 time-vested options, 50,000
performance-vested options and 25,000 stretch-performance options, and (iv) eligibility to purchase
up to an additional 20,000 shares of common stock of the parent of the Company at $10 per share,
and to receive a matching option at an exercise price of $10 per share for each share of stock
purchased. On May 25, 2010, Mr. Conroys employment agreement was further amended to provide for
an annual base salary of $665,000, effective May 1, 2010, on the basis of his previous promotion to
President in April 2009 and his Fiscal 2010 merit increase. The agreement provides for automatic
renewals for successive one-year periods unless either Mr. Conroy or Parent provides notice of
non-renewal.
Pursuant to his Employment Agreement, as described above, Mr. Conroy is entitled to specified
severance compensation in the event of a termination of employment by the Company without cause or
by Mr. Conroy for good reason.
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Jay Friedman
Effective January 3, 2011, we entered into an employment agreement with our President of North
America, Jay Friedman, containing the following terms: a base salary of $600,000; a bonus
opportunity of 100% of base salary for achievement of target level of performance, with the
opportunity to earn more or less than that for achievement above or below target; a time option to
purchase 80,000 shares of common stock of Parent at an exercise price of $10.00 per share; and a
target performance option to purchase 80,000 shares of common stock of Parent at an exercise price
of $10.00 per share. In addition, Mr. Friedman has the opportunity to purchase up to an additional
30,000 shares of common stock of Parent at a purchase price of $10.00 per share, and in return for
such investment will receive an option to purchase an equal number of fully-vested shares of common
stock of Parent at an exercise price of $10.00 per share. Mr. Friedman is entitled to expense
reimbursement and other customary employee benefits, as well as relocation, including a relocation
allowance of $100,000, reimbursement up to $15,000 for professional fees incurred by executive in
connection with negotiation and documentation of the agreement, and temporary housing expenses. Mr.
Friedman is also entitled to receive a guaranteed minimum annual bonus for Fiscal 2011 of $300,000.
Mr. Friedman was also entitled to receive a sign-on bonus of $150,000, which was paid to him in
January 2011. Mr. Friedman has agreed not to engage in competitive and similar activities or
solicit customers or clients until the later of one year following his termination of employment or
the end of the period during which he is entitled to severance pay, and his agreement provides for
customary protection of confidential information and intellectual property. The agreement sets
forth a two-year term (terminating on February 2, 2013) and automatic renewal for successive
one-year periods unless either Mr. Friedman or the Company provides notice of non-renewal.
Kenneth Wilson
Effective January 18, 2009, we entered into an employment agreement with our President of
Europe, Kenneth Wilson, containing the following terms: a base salary of £365,000; a bonus
opportunity of 100% of base salary for achievement of target level of performance, with the
opportunity to earn more or less than that for achievement above or below target; a time option to
purchase 160,000 shares of common stock of Parent at an exercise price of $10.00 per share; a
target performance option to purchase 160,000 shares of common stock of Parent at an exercise price
of $10.00 per share; and a stretch performance option to purchase 80,000 shares of common stock of
Parent at an exercise price of $10.00 per share. In addition, Mr. Wilson has the opportunity to
purchase up to an additional 30,000 shares of common stock of Parent at a purchase price of $10.00
per share, and in return for such investment will receive an option to purchase an equal number of
fully-vested shares of common stock of Parent at an exercise price of $10.00 per share. Mr. Wilson
is entitled to expense reimbursement and other customary employee benefits, as well as relocation,
and temporary housing expenses. Mr. Wilson is also entitled to receive a guaranteed minimum annual
bonus for Fiscal 2009 of £365,000. Mr. Wilson was also entitled to receive a conditional sign-on
bonus of up to £200,000 of which £152,000 was paid to him in February 2009, upon satisfaction of
the conditions agreed to by the Company. Mr. Wilson has agreed not to engage in competitive and
similar activities or solicit customers or clients until the later of one year following his
termination of employment or the end of the period during which he is entitled to severance pay,
and his agreement provides for customary protection of confidential information and intellectual
property.
J. Per Brodin
On February 11, 2008, Mr. Brodin was appointed to serve as the Companys Senior Vice President
and Chief Financial Officer. Mr. Brodin receives an annual base salary of $440,000 and an annual
target bonus of 60% of his base salary. The actual amount of the bonus, which will range from 30%
to 90% of Mr. Brodins base salary, will depend upon the achievement of certain annual performance
objectives. At the time of his employment with the Company, Mr. Brodin also received a time option
to purchase 60,000 shares of common stock of Parent at an exercise price of $10.00 per share and a
target performance option to purchase 60,000 shares of common stock of Parent at an exercise price
of $10.00 per share. In May 2011, as a result of his previous promotion to Executive Vice
President, Mr. Brodin received a stretch performance option to purchase 25,000 shares of common
stock of Parent at an exercise price of $10.00 per share. In addition, Mr. Brodin has the
opportunity to purchase up to an additional 25,000 shares of common stock of Parent at a purchase
price of $10.00 per share, and in return for such investment will receive an option to purchase an
equal number of shares of common stock of Parent at an exercise price of $10.00 per share. This
matching option will vest in two equal annual installments, 12 months and 24 months respectively,
after the date of issue. Mr. Brodin is entitled to expense reimbursement and other customary
employee benefits, as well as relocation and temporary housing expenses. Mr. Brodin is also
entitled to receive a severance payment equal to 12 months of his base salary, subject to reduction
for amounts earned from other employment during the 12-month period, in the event his employment is
terminated without cause. Mr. Brodin is subject to customary restrictive covenants, such as
non-competition, non-solicitation and non-disclosure covenants, for a period of 12 months following
the termination of his employment. On May 25, 2010, Mr. Brodin was promoted to the position of
Executive Vice President and Chief Financial Officer. In connection with such promotion, Mr.
Brodins annual base salary was increased to $490,000, effective May 1, 2010, on the basis of his
promotion, his added responsibility over our global Information Technology function and his Fiscal
2010 merit increase.
13
Table of Contents
Grants of Plan-Based Awards in Fiscal 2010
Option grants to our named executive officers in Fiscal 2010 are set forth below:
All Other | ||||||||||||||||||||||||||||
Option | Exercise | |||||||||||||||||||||||||||
Estimated Future Payouts | Awards: | or Base | ||||||||||||||||||||||||||
Under Equity Incentive | Number | Price of | Grant Date Fair | |||||||||||||||||||||||||
Plan Awards | of Securities | Option | Value of Stock and | |||||||||||||||||||||||||
Threshold | Target | Maximum | Underlying Options | Awards | Option Awards | |||||||||||||||||||||||
Name | Grant Date | (#) | (#) | (#) | (#)(2) | ($/Sh) | ($)(1) | |||||||||||||||||||||
Jay Friedman Time Options |
1/3/11 | | 160,000 | | | 10.00 | 583,117 | |||||||||||||||||||||
Performance Options |
1/3/11 | | 160,000 | | 160,000 | 10.00 | 447,200 |
(1) | This column reflects the grant date fair value of equity awards in accordance with ASC Topic 718, Compensation ¯ Stock Compensation. For a description of the assumptions used in calculating the fair value of option awards under ASC Topic 718, Compensation ¯ Stock Compensation, see Note 9 Stock Options and Stock-Based Compensation of the Notes to our Consolidated Financial Statements included in our Fiscal 2010 Form 10-K. | |
(2) | This column shows the number of options to purchase Parent common stock with performance-based vesting requirements granted to the named executive officer in Fiscal 2011, which is also reflected in the Estimated Future Payouts Under Equity Incentive Plan Awards column of this table. |
Outstanding Equity Awards at End of Fiscal 2010
The following table provides information about the number of outstanding equity awards held by
our current named executive officers and certain former named executive officers at January 29,
2011.
Outstanding Equity Awards at January 29, 2011
Option Awards | Stock Awards | |||||||||||||||||||||||
Number of | ||||||||||||||||||||||||
Securities | Number of | Number of | Market Value of | |||||||||||||||||||||
Underlying | Securities | Shares or | Shares or | |||||||||||||||||||||
Unexercised | Underlying | Units of Stock | Units of Stock | |||||||||||||||||||||
Options | Unexercised | Option | That Have | That Have | ||||||||||||||||||||
Exercisable | Options | Exercise Price | Option | Not Vested | Not Vested | |||||||||||||||||||
Name | (#) | Unexercisable (#) | ($) | Expiration Date | (#) | ($) | ||||||||||||||||||
Eugene S. Kahn Restricted Shares |
18,750 | 187,500 | (1) | |||||||||||||||||||||
Time Options(2) |
358,080 | 119,360 | 10.00 | 5/29/2014 | ||||||||||||||||||||
Performance Options(3) |
477,440 | 10.00 | 5/29/2014 | |||||||||||||||||||||
Stretch Options(3) |
298,400 | 10.00 | 5/29/2014 | |||||||||||||||||||||
Management Investment
Options(4) |
100,000 | 10.00 | 5/29/2014 | |||||||||||||||||||||
James G. Conroy Time Options(2) |
143,750 | 81,250 | 10.00 | (5) | ||||||||||||||||||||
Performance Options(3) |
225,000 | 10.00 | (6) | |||||||||||||||||||||
Stretch Options(3) |
112,500 | 10.00 | (7) | |||||||||||||||||||||
Jay Friedman Time Options(2) |
160,000 | 10.00 | 1/3/2018 | |||||||||||||||||||||
Performance Options(3) |
160,000 | 10.00 | 1/3/2018 | |||||||||||||||||||||
Kenneth Wilson Time Options(2) |
80,000 | 80,000 | 10.00 | 1/18/2016 | ||||||||||||||||||||
Performance
Options(3) |
160,000 | 10.00 | 1/18/2016 | |||||||||||||||||||||
Stretch Options(3) |
80,000 | 10.00 | 1/18/2016 | |||||||||||||||||||||
J. Per Brodin Time Options(2) |
30,000 | 30,000 | 10.00 | 2/11/2015 | ||||||||||||||||||||
Performance Options(3) |
60,000 | 10.00 | 2/11/2015 |
14
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(1) | Valued at $10.00 per share. | |
(2) | The time option becomes vested and exercisable in four equal annual installments on May 29, 2008, 2009, 2010 and 2011, subject to acceleration in the event of a change in control. | |
(3) | The target performance option generally provides that if on any Measurement Date, the Value Per Share equals or exceeds the Target Stock Price, then the target performance option will vest. The stretch performance option generally provides that if on any Measurement Date, the Value Per Share equals or exceeds the Stretch Stock Price, then the stretch performance option will vest and become exercisable. Prior to an initial public offering, a Measurement Date is the end of a fiscal quarter beginning with or following the last day of the second quarter of our fiscal year ending in 2010. Prior to an initial public offering, Value Per Share is Parents Net Equity Value divided by the number of fully diluted shares. Net Equity Value is calculated as the (1) 8.5 times Parents EBITDA for the four fiscal quarters ending on the Measurement Date, plus (2) the sum of all cash and cash equivalents and the aggregate exercise price of all outstanding options or warrants to purchase shares of Parents common stock as of the Measurement Date, less (3) Parents debt as of the Measurement Date. Upon a defined liquidity event, Value Per Share is the price per share realized by the Parents principal stockholders. The Target Stock Price means $10.00 compounded at an annual rate of 22.5% from May 29, 2007 to the Measurement Date, and the Stretch Stock Price means $10.00, compounded at an annual rate of 32% from May 29, 2007 to the Measurement Date. In May 2011, subsequent to the end of Fiscal 2010, the terms of the outstanding target performance options and certain of the outstanding stretch performance options were amended to include an additional vesting criteria applicable through the end of the Companys Fiscal 2012. See Compensation Discussion and Analysis Components of Executive Compensation Stock Option Awards. | |
(4) | The management investment options are fully-vested. | |
(5) | Unexercisable time options include: (i) 43,750 options expiring 12/13/2014, and (ii) 37,500 options expiring 4/16/2016. | |
(6) | Unexercisable performance options include: (i) 175,000 options expiring 12/13/2014, and (ii) 50,000 options expiring 4/16/2016. | |
(7) | Unexercisable stretch options include: (i) 87,500 options expiring 12/13/2014, and (ii) 25,000 options expiring 4/16/2016. |
15
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Option Exercises and Stock Vested in Fiscal 2010
None of our named executive officers exercised any options during Fiscal 2010. The following table sets forth information with respect to restricted stock held by our named executive officers that vested during Fiscal 2010. |
Stock Awards | ||||||||
Number of Shares acquired | Value realized on Vesting | |||||||
Name | on Vesting (#) | ($) | ||||||
Eugene S. Kahn |
18,750 | 187,500(1) |
(1) | Valued at $10.00 per share. |
Nonqualified Deferred Compensation
The Company does not maintain any defined contribution or other plan that provides for the
deferral of compensation on a basis that is not tax qualified.
Potential Payments Upon Termination or Change-In-Control
See Compensation Discussion and AnalysisEmployment Arrangements with our Executive Officers
for a description of the potential payments to our named executive officers upon termination or
change-in-control.
Compensation of Directors
Non-employee directors receive an annual retainer of $50,000, plus $2,000 for each board
meeting and committee meeting they attend ($1,000 if participating in any board meeting
telephonically) and are reimbursed for out-of-pocket expenses incurred in connection with their
duties as directors. Fees paid to Peter Copses and Lance Milken for their services as directors
are paid to Apollo Management, and fees paid to Rohit Manocha for his services as a director are
paid to Tri-Artisan.
The total compensation of our non-employee directors earned for FY 2010 is shown in the following
table.
Fees Earned | ||||
or Paid in | ||||
Cash(1) | ||||
Name | ($) | |||
Peter P. Copses (2) |
67,000 | |||
Robert J. DiNicola |
58,000 | |||
George G. Golleher |
58,000 | |||
Rohit Manocha (3) |
67,000 | |||
Ron Marshall |
61,000 | |||
Lance A. Milken(2) |
67,000 |
(1) | Includes annual retainer fees and committee fees. | |
(2) | Fees paid to Apollo Management. | |
(3) | Fees paid to Tri-Artisan Capital. |
16
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Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters
The Companys parent, Claires Inc., owns all of the Companys issued and outstanding capital
stock.
The table below sets forth certain information regarding the beneficial ownership of the
common stock of Claires Inc. with respect to each entity or person that is a beneficial owner of
more than 5% of its outstanding common stock and beneficial ownership of its common stock by each
director and named executive officer and all directors and officers as a group, at January 29,
2011:
Name of Beneficial Owner (1) | Number of Shares | Percentage(2)(2) | ||||||
Apollo Management VI, L.P. |
59,467,500 | (3) | 98.1 | |||||
Peter P. Copses(3)(4) |
| | ||||||
Lance A. Milken(3)(4) |
| | ||||||
Robert J. DiNicola(5) |
120,000 | (6) | * | |||||
George G. Golleher(5) |
120,000 | (6) | * | |||||
Rohit Manocha (3) (5) |
20,000 | (7) | * | |||||
Ron Marshall(5) |
20,000 | (7) | * | |||||
Eugene S. Kahn(5) |
633,080 | (8) | 1.0 | |||||
James G. Conroy |
143,750 | (9) | * | |||||
Kenneth Wilson |
80,000 | (10) | * | |||||
J. Per Brodin |
30,000 | (11) | * | |||||
All officers and directors as a group (10 persons) |
1,166,830 | 1.9 |
* | Less than 1% of the outstanding shares. | |
(1) | The amounts and percentages of common stock beneficially owned are reported on the basis of regulations of the SEC governing the determination of beneficial ownership of securities. Under the rules of the SEC, a person is deemed to be a beneficial owner of a security if that person has or shares voting power, which includes the power to vote or direct the voting of such security, or power, which includes the power to dispose of or to direct the disposition of such security. A person is also deemed to be a beneficial owner of any securities of which that person has a right to acquire beneficial ownership within 60 days. Securities that can be so acquired are deemed to be outstanding for purposes of computing such persons ownership percentage, but not for purposes of computing. | |
(2) | These percentages are calculated on the basis of 60,592,500 outstanding shares of Claires Inc.s common stock. | |
(3) | Represents all equity interests of Claires Inc. held of record by Apollo Investment Fund VI, L.P. (AIF VI), and Apollo Claires Investors A LLC, Apollo Claires Investors B LLC and Apollo Claires Investors C LLC (collectively, Apollo Claires). Apollo Management VI, L.P. (Management VI) is the manager of AIF VI and Apollo Claires. AIF VI Management, LLC (AIF VI LLC) is the general partner of Management VI. Apollo Management, L.P. (Apollo Management) is the sole member and manager of AIF VI LLC. Apollo Management GP, LLC (Management GP) is the general partner of Apollo Management. Apollo Management Holdings, L.P. (AMH) is the sole member and manager of Management GP. Apollo Management Holdings GP, LLC (AMH GP) is the general partner of AMH. Each of AIF VI, Apollo Claires, Management VI, AIF VI LLC, Apollo Management, Management GP, AMH, and AMH GP (collectively, the Apollo Entities) disclaim beneficial ownership of all shares of Claires Inc. common stock held of record or beneficially owned by any of the Apollo Entities, except to the extent of any pecuniary interest therein. The address of AIF VI and Apollo Claires is c/o Apollo Management, One Manhattanville Road, Suite 201, Purchase, New York 10577. The address of Management VI, AIF VI LLC, Apollo Management, Management GP, AHM and AMH GP is c/o Apollo Management, L.P., 9 West 57th St., New York, New York 10019. Leon Black, Joshua Harris and Marc Rowan are the managers and executive officers of AMH GP and as such effectively have the power to exercise voting and investment control with respect to the shares of our common stock held of record or beneficially owned by any of the Apollo Entities. Each of Messrs. Black, Harris and Rowan disclaims beneficial ownership of such shares except to the extent of any pecuniary interest therein. The address of Messrs. Black, Harris and Rowan is c/o Apollo Management, L.P., 9 West 57th Street, New York, New York 10019. Each of Messers. Copses, and Milken, who are partners or principals of Apollo, disclaim beneficial ownership of any shares of Claires Inc. that may be deemed beneficially owned by the Apollo Entities. | |
(4) | The address for Messrs. Copses and Milken is c/o Apollo Management, L.P., 9 West 57th Street New York, New York 10019. | |
(5) | The address for each of Messrs. DiNicola, Golleher, Kahn, Manocha, Marshall, Conroy, Wilson and Brodin is c/o Claires Inc., 2400 W. Central Road, Hoffman Estates, IL 60192. | |
(6) | Includes fully-vested options to purchase 70,000 shares of common stock. | |
(7) | Includes a fully-vested option to purchase 20,000 shares of common stock held by Tri-Artisan, an entity affiliated with Mr. Manocha. | |
(8) | Includes (i) 100,000 owned shares, (ii) 75,000 restricted shares of common stock, of which 18,780 shares remain subject to forfeiture pursuant to the terms of the grant, (iii) a fully-vested option to purchase 100,000 shares of common stock, and (iv) a fully-vested time-vested option to purchase 358,080 shares. | |
(9) | Includes fully-vested option to purchase 143,750 shares. | |
(10) | Includes fully-vested option to purchase 80,000 shares. | |
(11) | Includes fully-vested option to purchase 30,000 shares. |
17
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Item 13. Certain Relationships and Related Transactions, and Director Independence
Management Fee
Upon consummation of the Merger, the Company entered into a management services agreement with
Apollo Management and Tri-Artisan Capital Partners, LLC, or Tri-Artisan, a member of one of Apollo
Managements co-investment vehicles. Under this management services agreement, Apollo Management
and Tri-Artisan agreed to provide us certain investment banking, management, consulting, and
financial planning services on an ongoing basis for a fee of $3.0 million per year. Apollo
Management receives $2,615,449 of this annual fee and Tri-Artisan receives $384,551. Rohit
Manocha, one of our directors, is a co-founding Partner of Tri-Artisan. Under this management
services agreement, Apollo Management also agreed to provide us with certain financial advisory and
investment banking services from time to time in connection with major financial transactions that
may be undertaken by us or our subsidiaries in exchange for fees customary for such services after
taking into account expertise and relationships within the business and financial community of
Apollo Management. Under this management services agreement, we also agreed to provide customary
indemnification.
Stockholders Agreement
Parent and Apollo Management have entered into a stockholders agreement that sets forth
applicable provisions relating to the management and ownership of Parent and its subsidiaries,
including the right of Tri-Artisan (a member of Apollo Managements co-investment vehicles) to
appoint one of the members of Claires board of directors and the right of Apollo Management to
appoint the remaining members of Claires board of directors. In addition, the stockholders
agreement contains customary information rights, drag along rights, tag along rights, preemptive
rights, registration rights and restrictions on the transfer of Claires common stock.
Retail Design Fees
The Company paid store planning and retail design fees to a company owned by the
brother-in-law of James Conroy, the President of Claires. For Fiscal 2010 and Fiscal 2009, the
Company paid fees of approximately $1.2 million and $0.9 million, respectively, which included
third party and reimbursable charges of $0.2 million and $0.1 million, respectively. The
arrangement was entered into during Fiscal 2008 and the fees paid during that period were not
significant. This transaction was approved by the Audit Committee of the Board of Directors.
Senior Secured Second Lien Note Offering
In March 2011, the Company issued and sold $450,000,000 aggregate principal amount of its
8.875% Senior Secured Second Lien Notes due 2019 in a private offering. Morgan Joseph TriArtisan
LLC was one of the initial purchasers of the notes. An affiliate of Apollo Management has a
non-controlling interest in Morgan Joseph TriArtisan LLC and its affiliates. Additionally, Rohit
Manocha, one of our directors, is co-President of Morgan Joseph TriArtisan Group Inc., an affiliate
of Morgan Joseph TriArtisan LLC. In the note offering, Morgan Joseph TriArtisan LLC received a
customary initial purchasers discount of $300,000, or 2.0% of the aggregate principal amount of
notes for which Morgan Joseph TriArtisan LLC was the initial purchaser.
Policies and Procedures for Review of Related Party Transactions
Pursuant to its written charter, our audit committee must review and approve all material
related-party transactions, which include any related party transactions that we would be required
to disclose pursuant to Item 404 of Regulation S-K promulgated by the SEC. In determining whether
to approve a related party transaction, our audit committee will consider a number of factors,
including whether the related party transaction is on terms and conditions no less favorable to us
than may reasonably be expected in arms-length transactions with unrelated parties.
Director Independence
We are not a listed issuer whose securities are listed on a national securities exchange or in
an inter-dealer quotation system which has requirements that a majority of the board of directors
be independent. However, if we were a listed issuer whose securities were traded on the New York
Stock Exchange and subject to such requirements, we would be entitled to rely on the controlled
company exception contained in the NYSE Listing Manual, Section 303A.00 for the exception from the
independence requirements related to the majority of our Board of Directors and for the
independence requirements related to our Compensation Committee. Pursuant to NYSE Listing Manual,
Section 303A.00, a company of which more than 50% of the voting power for the election of directors
is held by an individual, a group or another company is exempt from the requirements that its board
of directors consist of a majority of independent directors and that the compensation committee
(and, if applicable, the nominating committee) of such company be comprised solely of independent
directors. At May 1,
18
Table of Contents
2011, Apollo Management VI, L.P. beneficially owned 98.1% of the voting power of the Company
which would qualify the Company as a controlled company eligible for exemption under the rule.
Item 14. Principal Accountant Fees and Services
Relationship With Our Independent Registered Public Accounting Firm
The firm of KPMG LLP has been our independent registered public accounting firm since 1993 and
will be our independent registered public accounting firm for the current fiscal year unless the
audit committee or board of directors deems it advisable to make a substitution. Our board of
directors and the audit committee, in their discretion, may change the appointment at any time
during the year if they determine that such change would be in our best interest and the best
interest of the Company.
Fees Paid To Our Independent Registered Public Accounting Firm
We were billed or expect to be billed an aggregate of $1,459,112 and $1,211,432 by KPMG LLP
for Fiscal 2010 and Fiscal 2009, respectively, as follows:
Audit Fees
For professional services rendered for the annual audit of our Consolidated Financial
Statements, review of our quarterly financial statements and services that are normally provided in
connection with statutory and regulatory filings, $1,332,612 and $1,206,432 for Fiscal 2010 and
Fiscal 2009, respectively.
Audit-Related Fees
For professional services related to debt comfort letter, $125,000 for Fiscal 2010.
For professional services related to SEC comment letters, $3,500 for Fiscal 2009.
Tax Fees
For tax compliance, $0 for Fiscal 2010 and Fiscal 2009, respectively.
All Other Fees
For license for tax compliance software, $1,500 for Fiscal 2010 and Fiscal 2009,
respectively.
Pre-Approval Policies and Procedures
We pre-approve a schedule of audit and non-audit services expected to be performed by KPMG LLP
in a given fiscal year. In addition, the audit committee delegates authority to its Chairman to
pre-approve additional audit and non-audit services by KPMG LLP (other than services that have been
generally pre-approved by the audit committee) since the previous meeting at which pre-approval
decisions were reported. The Chairman reports any such pre-approval decisions to the audit
committee at its next scheduled meeting. All of the services described above under Audit Fees,
Audit-Related Fees, Tax Fees and All Other Fees for Fiscal 2010 and Fiscal 2009
were pre-approved by the audit committee.
19
Table of Contents
PART IV.
Item 15. Exhibits, Financial Statement Schedules
3. | Exhibits |
3.1
|
Articles of Incorporation of Claires Stores, Inc.(1) | |
3.2
|
By-laws of Claires Stores, Inc.(1) | |
3.3
|
Certificate of Incorporation of BMS Distributing Corp.(1) | |
3.4
|
By-laws of BMS Distributing Corp.(1) | |
3.5
|
Certificate of Incorporation of CBI Distributing Corp.(1) | |
3.6
|
By-laws of CBI Distributing Corp.(1) | |
3.7
|
Articles of Incorporation of Claires Boutiques, Inc.(1) | |
3.8
|
By-laws of Claires Boutiques, Inc.(1) | |
3.9
|
Certificate of Incorporation of Claires Canada Corp.(1) | |
3.10
|
By-laws of Claires Canada Corp.(1) | |
3.11
|
Certificate of Incorporation of Claires Puerto Rico Corp.(1) | |
3.12
|
By-laws of Claires Puerto Rico Corp.(1) | |
4.1
|
Senior Notes Indenture, dated as of May 29, 2007, between Bauble Acquisition Sub, Inc. and The Bank of New York, as Trustee(1) | |
4.2
|
Senior Toggle Notes Indenture, dated as of May 29, 2007, between Bauble Acquisition Sub, Inc. and The Bank of New York, as Trustee(1) | |
4.3
|
Senior Subordinated Notes Indenture, dated as of May 29, 2007, between Bauble Acquisition Sub, Inc. and The Bank of New York, as Trustee(1) | |
4.4
|
Senior Notes Supplemental Indenture, dated as of May 29, 2007, by and among Claires Stores, Inc., the guarantors listed on Exhibit A thereto and The Bank of New York, as Trustee, to the Senior Notes Indenture, dated as of May 29, 2007, between Bauble Acquisition Sub, Inc. and The Bank of New York, as Trustee(1) | |
4.5
|
Senior Toggle Notes Supplemental Indenture, dated as of May 29, 2007, by and among Claires Stores, Inc., the guarantors listed on Exhibit A thereto and The Bank of New York, as Trustee, to the Senior Toggle Notes Indenture, dated as of May 29, 2007, between Bauble Acquisition Sub, Inc. and The Bank of New York, as Trustee(1) | |
4.6
|
Senior Subordinated Notes Supplemental Indenture, dated as of May 29, 2007, by and among Claires Stores, Inc., the guarantors listed on Exhibit A thereto and The Bank of New York, as Trustee, to the Senior Subordinated Notes Indenture, dated as of May 29, 2007, between Bauble Acquisition Sub, Inc. and The Bank of New York, as Trustee(1) | |
4.7
|
Form of 9.25% Senior Notes due 2015(1) | |
4.8
|
Form of 9.625%/10.375% Senior Toggle Notes due 2015(1) | |
4.9
|
Form of 10.50% Senior Subordinated Notes due 2017(1) | |
4.10
|
Indenture, dated as of March 4, 2011, by and between Claires Escrow Corporation and The Bank of New York Mellon Trust Company, N.A., as Trustee and Collateral Agent (8) | |
20
Table of Contents
4.11
|
Supplemental Indenture, dated as of March 4, 2011, by and between Claires Stores, Inc., the Guarantors and The Bank of New York Mellon Trust Company, N.A., as Trustee and Collateral Agent (8) | |
4.12
|
Form of 8.875% Senior Secured Second Lien Notes due 2019 (included in the Indenture filed as Exhibit 4.10 hereto) (8) | |
4.13
|
Registration Rights Agreement, dated as of March 4, 2011, by and between Claires Stores, Inc., Claires Escrow Corporation, the Guarantors and the Representatives (8) | |
10.1
|
Credit Agreement, dated as of May 29, 2007, among Bauble Holdings Corp., Bauble Acquisition Sub, Inc. (to be merged with and into Claires Stores, Inc.), as Borrower, the Lenders party thereto, Credit Suisse, as Administrative Agent, Bear Stearns Corporate Lending Inc. and Mizuho Corporate Bank, Ltd., as Co-Syndication Agents, Lehman Commercial Paper Inc. and LaSalle Bank National Association, as Co-Documentation Agents, and Bear, Stearns & Co. Inc., Credit Suisse Securities (USA) LLC, and Lehman Brothers Inc., as Joint Bookrunners and Joint Lead Arrangers(1) | |
10.2
|
Management Services Agreement, dated as of May 29, 2007, among Claires Stores, Inc., Bauble Holdings Corp. and Apollo Management VI, L.P. and Tri-Artisan Capital Partners, LLC and TACP Investments Claires LLC(1) | |
10.3
|
Claires Inc. Amended and Restated Stock Incentive Plan, dated June 29, 2007(1) | |
10.4
|
1st Amendment to Claires Inc. Amended and Restated Stock Incentive Plan (2) | |
10.5
|
Standard Form of Option Grant Letter (Target Performance Option and Stretch Performance Option) (1) | |
10.6
|
Standard Form of Option Grant Letter (Target Performance Option) (1) | |
10.7
|
Standard Form of Director Option Grant Letter (1) | |
10.8
|
Standard Form of Co-Investment Letter (9) | |
10.9
|
Employment Agreement with Eugene S. Kahn (1) | |
10.10
|
Employment Agreement with James Conroy (1) | |
10.11
|
Amendment to Employment Agreement with James Conroy (3) | |
10.12
|
2nd Amendment to Employment Agreement with James Conroy (7) | |
10.13
|
Employment Agreement with Kenny Wilson (4) | |
10.14
|
Lease Agreement, dated as of February 19, 2010, by and between AGNL Bling, L.L.C. and Claires Boutiques, Inc. (6) | |
10.15
|
Guarantee and Collateral Agreement, dated and effective as of May 29, 2007, among Bauble Holding Corp., Bauble Acquisition Sub, Inc., and Credit Suisse, dated as of May 29, 2007 (5) | |
10.16
|
Mortgage, Assignment of Leases and Rents, Security Agreement and Fixture Filing, dated as of May 29, 2007 (5) | |
10.17
|
Employment Agreement with Jay Friedman (9) | |
10.18
|
Collateral Agreement, dated March 4, 2011, by and among Claires Stores, Inc., Claires Inc., the Guarantors and The Bank of New York Mellon Trust Company, N.A., as Collateral Agent (8) | |
10.19
|
Intercreditor Agreement, dated as of March 4, 2011, by and among Claires Stores, Inc., Claires Inc., the Guarantors, The Bank of New York Mellon Trust Company, N.A., as Trustee and Collateral Agent and Credit Suisse AG, Cayman Islands Branch (f/k/a/ Credit Suisse, Cayman Island Branch), as Credit Agreement Agent (8) | |
10.20
|
Second Lien Trademark Security Agreement, dated as of March 4, 2011, by and between CBI Distributing Corp. and The Bank of New York Mellon Trust Company, N.A., as Collateral Agent (8) |
21
Table of Contents
10.21
|
Claires Inc. Amended and Restated Stock Incentive Plan, dated May 20, 2011 (10) | |
10.22
|
Form of Option Grant Letter under Claires Inc. Amended and Restated Stock Incentive Plan (10) | |
21.1
|
Subsidiaries of Claires Stores, Inc. (9) | |
24
|
Power of Attorney (included on signature page of the originally filed Form 10-K) (9) | |
31.1
|
Certification of Chief Executive Officer pursuant to Rules 13a-14(a) and 15d-14(a) (11) | |
31.2
|
Certification of Chief Financial Officer pursuant to Rules 13a-14(a) and 15d-14(a) (11) | |
32.1
|
Certification of Chief Executive Officer pursuant to 18 USC Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (12) | |
32.2
|
Certification of Chief Financial Officer pursuant to 18 USC Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (12) |
(1) | Filed previously as an exhibit to the Registration Statement on Form S-4 (File No. 333-148108) by the Company on December 17, 2007. | |
(2) | Filed previously as an exhibit to Form 8-K filed by the Company on September 12, 2008. | |
(3) | Filed previously as an exhibit to Form 8-K by the Company on April 22, 2009. | |
(4) | Filed previously as an exhibit to Form 10-K/A by the Company on May 27, 2009. | |
(5) | Filed previously as an exhibit to Form 10-Q on December 8, 2009. | |
(6) | Filed previously as exhibit to Form 8-K on February 25, 2010. | |
(7) | Filed previously as exhibit to Form 10-K/A on June 1, 2010. | |
(8) | Filed previously as exhibit to Form 8-K by the Company on March 9, 2011. | |
(9) | Filed previously as exhibit to Form 10-K by the Company on April 21, 2011. | |
(10) | Filed previously as exhibit to Form 8-K by the Company on May 20, 2011. | |
(11) | Filed herewith. | |
(12) | Furnished herewith. |
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Table of Contents
SIGNATURES
Pursuant to the requirements of Section 13 of 15(d) of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly
authorized.
CLAIRES STORES, INC. |
||||
May 20, 2011 | By: | /s/ Eugene S. Kahn | ||
Eugene S. Kahn, Chief Executive Officer | ||||
(principal executive officer) | ||||
May 20, 2011 | By: | /s/ J. Per Brodin | ||
J. Per Brodin, Executive Vice President and Chief Financial Officer (principal | ||||
financial and accounting officer) |
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