1

 
     **1.3****Office and Facilities**     (a) The Company shall provide the Executive with appropriate offices and withsuch secretarial and other support facilities as are commensurate with Executive’s statuswith the Company and adequate for the performance of Executive’s duties hereunder.**2.**      **Term of Employment**. The Executive’s employment with the Company will commence on June3, 2008 (the date of such commencement, the “Effective Date”). This Agreement shall governthe terms and conditions of the Executive’s employment by the Company, and the termination thereof,during the period that commences on the Effective Date and ends on May 31, 2010 (the“Term”), provided that the Term shall automatically be extended for successive one yearperiods unless either party provides written notice (a “Notice of Non-Renewal”) at leastninety (90) days prior to the expiration of the Term that the Term shall not be further extended.The portion of the Term during which the Executive is actually employed by the Company under thisAgreement is referred to as the “Employment Period”.**3.**      **Compensation and General Benefits**.     **3.1****Base Salary**.     (a) During the Employment Period, the Company agrees to pay to the Executive an annualbase salary in an amount equal to $525,000 (such base salary, as may be adjusted from timeto time pursuant to **Section 3.1(b)**, is referred to herein as the “Base Salary”).The Executive’s Base Salary, less amounts required to be withheld under applicable law,shall be payable in equal installments in accordance with the Company’s normal payrollpractices and procedures in effect from time to time for the payment of salaries toofficers of the Company, but in no event less frequently than monthly.     (b) The Company shall review the Executive’s performance on an annual basis and, basedon such review, may change the Base Salary, as it, acting in its sole discretion, shalldetermine to be reasonable and appropriate.     **3.2****Bonus**.     (a) Upon commencement of employment, the Executive will be entitled to receive aone-time relocation bonus of $100,000. This relocation bonus will be paid with the firstregular payroll date following the Effective Date. If the Executive’s employmentterminates under **Section 4.4**prior to the first anniversary of the Effective Date, theExecutive shall be required to repay to the Company 100% of the relocation bonus in this**Section 3.2(a)**, and if such termination occurs on or after the first anniversary of theEffective Date but prior to the second anniversary of the Effective Date, the Executiveshall be required to repay to the Company 50% of the relocation bonus in this **Section3.2(a)**.     (b) Pursuant to the Company’s Annual Incentive Plan (the “AIP”), with respectto each fiscal year of the Company that begins after February 2, 2008 and that ends duringthe Employment Period, the Executive shall be eligible to receive from the
2

 
Company an annual performance bonus (the “Annual Bonus”), prorated asapplicable, based upon the attainment of annual goals established by the Board, which mayinclude comparable store sales, earnings before interest, taxes, depreciation andamortization (“EBITDA”) and/or cash generation goals. The Executive’s targetAnnual Bonus shall be seventy-five percent (75%) of the Executive’s Base Salary if thetargeted levels of performance to be determined by the Company for the applicable year aremet. Any Annual Bonus earned shall be payable in full as soon as reasonably practicablefollowing the determination thereof, but in no event later than April 15 of the followingyear (unless administratively impracticable to do so because the Company’s results for theapplicable year had not yet been finalized) and in accordance with the Company’s normalpayroll practices and procedures. Notwithstanding the foregoing language, but subject tothe last sentence of this **Section 3.2(b)**, with respect to the fiscal year ending January31, 2009, the Executive will receive a minimum Annual Bonus of $196,875. Except asotherwise expressly provided in the AIP and **Section 4**hereof, any Annual Bonus (or portionthereof) payable under this **Section 3.****2(b)** shall not be earned and payable unless theExecutive is employed by the Company on the last day of the period to which such AnnualBonus relates, provided that no Annual Bonus for any preceding period shall be payable ifthe Executive’s employment is terminated for cause.     **3.3****Expenses**.     (a) In addition to any amounts to which the Executive may be entitled pursuant to theother provisions of this **Section 3**or elsewhere herein, the Executive shall be entitled toreceive reimbursement from the Company for all reasonable and necessary expenses incurredby the Executive during the Term in performing the Executive’s duties hereunder on behalfof the Company, subject to, and consistent with, the Company’s practices for expensepayment and reimbursement for senior executives, in effect from time to time. The Companyshall pay the professional expenses incurred by Executive in connection with thenegotiation and documentation of this Agreement (including all Exhibits thereto) up to amaximum of $5,000.00.     (b) For a period of up to six (6) months following the Effective Date, the Executiveshall also be entitled to reimbursement for lodging and transportation expenses between theChicago area and the Executive’s principal residence in Blacklick, Ohio, subject to thesubmission of supporting documentation for such expenses in accordance with the Company’sstandard policies. In addition, the Executive will be entitled to reimbursement forcustomary relocation expenses under the Company’s relocation policy, but not subject to therepayment obligations under such relocation policy. Expense reimbursement amountsdescribed in this section 3.3(b) for relocation costs shall be grossed-up to the extentincludable in Executive’s income.     **3.4****Benefits**.     (a) During the Employment Period, in addition to any amounts to which the Executivemay be entitled pursuant to the other provisions of this **Section 3**or elsewhere herein, theExecutive shall be entitled to participate in, and to receive benefits under, any benefitplans, arrangements or policies made available by the Company to its
3

 
senior executive officers generally, subject to and on a basis consistent with theterms, conditions and overall administration of each such plan, arrangement or policy.     (b) During the Employment Period, the Company shall provide the Executive with aCompany automobile or pay a monthly automobile allowance commensurate with other executivesat the Executive’s level. The Company shall pay all operating and maintenance expenses ofthe automobile during the Executive’s employment.     **3.5****Employee Stock Options**.     (a) Claire’s, Inc. has adopted a stock option plan, in the form attached hereto as**Exhibit A**and incorporated herein by reference (the “Plan”), for the grant of stockoptions to employees or directors of the Company or of any subsidiary of the Company topurchase shares of Common Stock of Claire’s, Inc. (the “Common Stock”).     (b) On or shortly after the Effective Date, pursuant to the Plan, the Executive shallbe granted nonqualified options to purchase 375,000 shares of Common Stock at a price pershare equal to $10 for its shares on the terms set forth in the Option Grant Letterattached hereto as **Exhibit B**and incorporated herein by reference (the “OptionLetter”).     **3.6****Stock Investment**.     (a) On or shortly after the Effective Date, the Executive shall have the opportunityto purchase up to 30,000 shares of Common Stock for aggregate cash consideration of$300,000 (the “Stock Purchase”). The Stock Purchase shall otherwise be on theterms set forth in the Stock Letter attached hereto as **Exhibit C**.     (b) Upon completion of the Stock Purchase, the Executive shall be granted anadditional fully vested nonqualified stock option to purchase 30,000 shares of Common Stockat a price per share equal to $10.00 on the terms set forth in the Option Letter.**4.     ****Termination**.     **4.1****General**. The employment of the Executive hereunder (and the Employment Period)shall terminate as provided in Section 2 hereof, unless earlier terminated in accordance with theprovisions of this **Section 4**.     **4.2****Death or Disability of the Executive**.     (a) The employment of the Executive hereunder (and the Employment Period) shallterminate upon (i) the death of the Executive and (ii) at the option of the Company, uponnot less than fifteen (15) days’ prior written notice to the Executive or the Executive’spersonal representative or guardian, if the Executive suffers a “Total Disability” (asdefined in **Section 4.****2(b)** hereof). Upon termination for death or Total Disability, theCompany shall pay to the Executive, guardian or personal representative, as the case maybe, a prorated share of the Annual Bonus pursuant to **Section 3.2(b)**
4

 
hereof (based on the period of actual employment) that the Executive would have beenentitled to had the Executive worked the full year during which the termination occurred,which bonus shall be based on actual performance of the Company for the year of suchtermination. Any bonus shall be payable as soon as reasonably practicable following thedetermination thereof, but in no event later than April 15 of the following year (unlessadministratively impracticable to do so because the Company’s results for the applicableyear had not yet been finalized), and in accordance with the Company’s normal payrollpractices and procedures.     (b) For purposes of this Agreement, “Total Disability” shall mean (i) if theExecutive is subject to a legal decree of incompetency (the date of such decree beingdeemed the date on which such disability occurred), (ii) the written determination by aphysician selected by the Company and acceptable to Executive (which acceptance shall notbe unreasonably withheld), (which expense shall be paid by the Company) that, because of amedically determinable disease, injury or other physical or mental disability, theExecutive is unable substantially to perform, with or without reasonable accommodation, thematerial duties of the Executive required hereby, and that such disability has lasted forninety (90) consecutive days or any one hundred twenty (120) days during the immediatelypreceding twelve (12)-month period or is, as of the date of determination, reasonablyexpected to last six (6) months or longer after the date of determination, in each casebased upon medically available reliable information or (iii) Executive’s qualifying forbenefits under the Company’s long-term disability coverage, if any. In conjunction withdetermining mental and/or physical disability for purposes of this Agreement, the Executivehereby consents to (x) any examinations that the Company reasonably determines are relevantto a determination of whether the Executive is mentally and/or physically disabled or arerequired by the Company physician, (y) furnish such medical information as may bereasonably requested and (z) waive any applicable physician patient privilege that mayarise because of such examination. All expenses incurred by the Executive under thissubsection shall be paid by the Company.     **4.3****Termination by the Company Without Cause, Non-Renewal of the Agreement****by theCompany, Resignation by the Executive For Good Reason or in the****event of a Change ofControl**.     (a) The Company may terminate the Executive’s employment without “Cause” (as definedin **Section 4.3(f)**), and thereby terminate the Executive’s employment (and the EmploymentPeriod) under this Agreement at any time with no requirement for notice to the Executive.In addition, the Company may terminate the Executive upon expiration of the Term byproviding a Notice of Non-Renewal pursuant to Section 2 hereof.     (b) The Executive may resign, and thereby terminate the Executive’s employment (andthe Employment Period), at any time for “Good Reason” (as defined in **Section 4.3(e)**hereof), upon not less than thirty (30) days’ prior written notice to the Companyspecifying in reasonable detail the reason therefore; provided, however,that the Company shall have a reasonable opportunity to cure any such Good Reason (to theextent possible) within such thirty (30) day notice period after the Company’s receipt of
5

 
such notice; and providedfurther that, if the Company is not seekingto cure, the Company shall not be obligated to allow the Executive to continue workingduring such period and may, in its sole discretion, accelerate such termination ofemployment (and the Employment Period) to any date during such period. Executive may notterminate employment under this Agreement for Good Reason regarding any of the Company’sacts or omissions of which Executive had actual notice for sixty (60) days or more prior togiving notice of termination for Good Reason.     (c) In the event the Executive’s employment is terminated pursuant to this **Section4.3**, then, subject to **Section 4.****3(d)** hereof, the following provisions shall apply:     (i) The Company shall continue to pay the Executive the Base Salary to whichthe Executive would have been entitled pursuant to **Section 3.1**hereof (at the BaseSalary rate during the year of termination) for a twelve (12)-month period followingsuch date of termination, with all such amounts payable in accordance with theCompany’s normal payroll practices and procedures in the same manner and at the sametime as though the Executive remained employed by the Company.     (ii) If such termination occurs upon or within eighteen (18) months following aChange of Control (as defined in **Exhibit B**attached hereto), the Company shallcontinue to pay the Executive the Base Salary to which the Executive would have beenentitled pursuant to **Section 3.1**hereof (at the Base Salary rate during the year oftermination) for the greater of (A) a twelve (12)-month period following such dateof termination or (B) the period until the end of the then remaining Term, with allsuch amounts payable in accordance with the Company’s normal payroll practices andprocedures in the same manner and at the same time as though the Executive remainedemployed by the Company.     (iii) In the event the Executive’s employment is terminated pursuant to this**Section 4.3**without Cause, and if the Company has previously effected reductions inthe Executive’s Base Salary and the base salary of all senior executives of theCompany, which reductions were substantially similar, then the Base Salary rate forpurposes of **Section 4.****3(c)(i)** or **(ii)**hereof shall be the Base Salary rate in effectimmediately prior to such reductions.     (iv) The Company shall pay to the Executive a prorated share of the AnnualBonus pursuant to **Section 3.****2(b)** hereof (based on the period of actual employment)that the Executive would have been entitled to had the Executive worked the fullyear during which the termination occurred, based on actual performance of theCompany for the year of such termination. The bonus shall be payable as soon asreasonably practicable following the determination thereof, but in no event laterthan April 15 of the following year (unless administratively impracticable to do sobecause the Company’s results for the applicable year had not yet been finalized),and in accordance with the Company’s normal payroll practices and procedures.Notwithstanding any of the foregoing, if the Executive’s employment is terminatedpursuant to Section 4.3 prior to the conclusion of the fiscal period ending January31, 2009, the Company may
6

 
prorate the amount of the Annual Bonus the executive is entitled to receive toaccount for the early termination, but it may not prorate the amount due on accountof the fact that the executive’s employment commenced after the beginning of thefiscal period ending January 31, 2009.     (v) If the Executive elects continuation coverage (with respect to theExecutive’s coverage and/or any eligible dependent coverage) under the ConsolidatedOmnibus Budget Reconciliation Act of 1986 (“COBRA Continuation Coverage”)with respect to the Company’s group health insurance plan, the Executive shall beresponsible for payment of the monthly cost of COBRA Continuation Coverage. Unlessprohibited by law, the Company shall reimburse the Executive for any portion of themonthly cost of COBRA Continuation Coverage that exceeds the amount of the monthlyhealth insurance premium (with respect to the Executive’s coverage and/or anyeligible dependent coverage) payable by the Executive immediately prior to the dateof Executive’s termination, such reimbursements to continue (A) for a period oftwelve (12) months or (B) in the event that the Executive’s Base Salary is beingpaid pursuant to **Section 4.****3(c)(ii)**, for the period set forth therein. The Companyshall pay the reimbursements on a monthly basis in accordance with the Company’snormal payroll practices and procedures.     (d) As a condition precedent to the Executive’s right to receive the benefits setforth in **Section 4.****3(c)** hereof, the Executive agrees to execute a release of the Companyand its respective Affiliates, officers, directors, stockholders, employees, agents,insurers, representatives and successors from and against any and all claims that theExecutive may have against any such Person (as defined in **Section 5.****4(f)** hereof) relatingto the Executive’s employment by the Company and the termination thereof, in the formattached hereto as **Exhibit D**, as such form may be amended from time to time to comply withchanges in law.     (e) For purposes of this Agreement, the Executive would be entitled to terminate theExecutive’s employment for “Good Reason” if without the Executive’s prior writtenconsent:     (i) the Company fails to comply with any material obligation imposed by thisAgreement;     (ii) a significant reduction in the Executive’s position, title or duties asset forth in Section 1.2 of this Agreement, subject, however, to the terms andconditions set forth in Section 1.2, or if the Executive fails to report to theChief Executive Officer, Chairman, or the Board;     (iii) the Company effects a reduction in the Executive’s Base Salary, unlessall senior executives of the Company receive a substantially similar reduction inbase salary; or     (iv) the Company requires the Executive to be based (excluding regular travelresponsibilities) at any office or location more than 75 miles outside ofHoffman Estates, Illinois, provided that the Executive had previously relocatedto the greater Chicago metropolitan area.
7

 
     (f) For purposes of this Agreement, “Cause” means the occurrence of any one or more ofthe following events:     (i) an act of fraud, embezzlement, theft or any other material violation of lawthat occurs during or in the course of Executive’s employment with the Company;     (ii) intentional damage to the Company’s assets;     (iii) intentional disclosure of the Company’s confidential information contraryto the Company’s policies;     (iv) material breach of Executive’s obligations under this Agreement;     (v) intentional engagement in any activity which would constitute a breach ofExecutive’s duty of loyalty or of your obligations under this Agreement;     (vi) material breach of any of material the Company’s policy that has beencommunicated to the Executive in writing;     (vii) the willful and continued failure to substantially perform Executive’sduties for the Company (other than as a result of incapacity due to physical ormental illness); or     (viii) willful conduct by Executive that is demonstrably and materiallyinjurious to the Company, monetarily or otherwise.     For purposes of this **Section 4.3(f)**, an act, or a failure to act, shall not be deemed“willful” or “intentional” unless it is done, or omitted to be done, by Executive in badfaith or without a reasonable belief that Executive’s action or omission was in the bestinterest of the Company. Failure to meet performance standards or objectives, by itself,does not constitute “Cause”.     **4.4****Termination For Cause, Voluntary Resignation Other Than For Good Reason or ElectionNot to Extend the Term by the Executive**.     (a) (i) the Company may, upon action of the Board, terminate the employment of theExecutive (and the Employment Period) at any time for “Cause,” (ii) the Executive mayvoluntarily resign other than for Good Reason and thereby terminate the Executive’semployment (and the Employment Period) under this Agreement at any time upon not less thanthirty (30) days’ prior written notice or (iii) the Executive may provide a Notice ofNon-Renewal pursuant to **Section 2**hereof, in which case the Executive’s employment willterminate upon expiration of the Term.     (b) Upon termination by the Company for Cause, by the Executive as the result ofresignation for other than for Good Reason, or by the Executive at the end of
8

 
the Term following a Notice of Non-Renewal provided by the Executive, the Executiveshall be entitled to receive all amounts of earned but unpaid Base Salary and benefitsaccrued and vested through the date of such termination.     (c) Before the Company may terminate the Executive for Cause pursuant to **Section4.****4(a)(i)**, the Board shall deliver to the Executive a written notice of the Company’sintent to terminate the Executive for Cause, and the Executive shall have been given areasonable opportunity to cure any such acts or omissions (which are susceptible of cure asreasonably determined by the Board by majority vote thereof) within thirty (30) days afterthe Executive’s receipt of such notice.     **4.5****Resignation from Officer Positions**. Upon the termination of the Executive’semployment for any reason (unless otherwise agreed in writing by the Company and the Executive),the Executive will be deemed to have resigned, without any further action by the Executive, fromany and all officer, director and/or director positions that the Executive, immediately prior tosuch termination, (a) held with the Company or any of its Affiliates and (b) held with any otherentities at the direction of, or as a result of the Executive’s affiliation with, the Company orany of its Affiliates. If for any reason this **Section 4.5**is deemed to be insufficient toeffectuate such resignations, then Executive will, upon the Company’s request, execute anydocuments or instruments that the Company may deem necessary or desirable to effectuate suchresignations.     **4.6****Section 409A of the Code**. Notwithstanding anything to the contrary in thisAgreement, the parties mutually desire to avoid adverse tax consequences associated with theapplication of Section 409A of the Code to this Agreement and agree to cooperate fully and takeappropriate reasonable actions that preserve to the Executive, to the maximum extent practical, thefull economic benefit of this Agreement while avoiding any such consequences under Section 409A ofthe Code, including delaying payments and reforming the form of the Agreement if such action wouldreduce or eliminate taxes and/or interest payable as a result of Section 409A of the Code. In thisregard, notwithstanding anything to the contrary in this Section 4, to the extent necessary tocomply with Section 409A of the Code, any payment required under this Section 4 shall be deferredfor a period of six (6) months, regardless of the circumstances giving rise to or the basis forsuch payment.**5.**      **Confidentiality, Work Product and Non-Competition and Non-Solicitation**.     **5.1****Confidentiality**.     (a) In connection with the Executive’s employment with the Company, the Companypromises to provide the Executive with access to “Confidential Information” (as defined in**Section 5.****4(d)** hereof) in support of the Executive’s employment duties. The Executiverecognizes that the Company’s business interests require a confidential relationshipbetween the Company and the Executive and the fullest practical protection and confidentialtreatment of all Confidential Information. At all times, both during and after theEmployment Period, the Executive shall not directly or indirectly: (i) appropriate,download, print, copy, remove, use, disclose, divulge, communicate or otherwise“Misappropriate” (as defined in **Section 5.****4(e)** hereof), any Confidential Information,including, without limitation, originals or copies of any Confidential Information, in anymedia or format, except for the Company’s benefit within the course
9

 
and scope of the Executive’s employment or with the prior written consent of amajority of the Board; or (ii) take or encourage any action that would circumvent,interfere with or otherwise diminish the value or benefit of the Confidential Informationto any of the Company Parties (as defined in **Section 5.****4(b)** hereof).     (b) All Confidential Information, and all other information and property affecting orrelating to the business of the Company Parties within the Executive’s possession, custodyor control, regardless of form or format, shall remain, at all times, the property of therespective Company Parties, the appropriation, use and/or disclosure of which is governedand restricted by this Agreement.     (c) The Executive acknowledges and agrees that:     (i) the Executive occupies a unique position within the Company, and theExecutive is and will be intimately involved in the development and/orimplementation of Confidential Information;     (ii) in the event the Executive breaches this **Section 5.1**with respect to anyConfidential Information, such breach shall be deemed to be a Misappropriation ofsuch Confidential Information; and     (iii) any Misappropriation of Confidential Information will result in immediateand irreparable harm to the Company.     (d) Upon receipt of any formal or informal request, by legal process or otherwise,seeking the Executive’s direct or indirect disclosure or production of any ConfidentialInformation to any Person, the Executive shall promptly and timely notify the Company andprovide a description and, if applicable, hand deliver a copy of such request to theCompany. The Executive irrevocably nominates and appoints the Company as the Executive’strue and lawful attorney-in-fact to act in the Executive’s name, place and stead to performany act that the Executive might perform to defend and protect against any disclosure ofConfidential Information.     (e) At any time the Company may request, during or after the Employment Period, theExecutive shall deliver to the Company all originals and copies of Confidential Informationand all other information and property affecting or relating to the business of the CompanyParties within the Executive’s possession, custody or control, regardless of form orformat, including, without limitation any Confidential Information produced by theExecutive. Both during and after the Employment Period, the Company shall have the rightof reasonable access to review, inspect, copy and/or confiscate any ConfidentialInformation within the Executive’s possession, custody or control.     (f) Upon termination or expiration of this Agreement, the Executive shall immediatelyreturn to the Company all Confidential Information, and all other information and propertyaffecting or relating to the business of the Company Parties, within the Executive’spossession, custody or control, regardless of form or format, without the necessity of aprior Company request.
10

 
     (g) During the Employment Period, the Executive represents and agrees that theExecutive will not use or disclose any confidential or proprietary information or tradesecrets of others, including but not limited to former employers, and that the Executivewill not bring onto the premises of the Company or access such confidential or proprietaryinformation or trade secrets of such others, unless consented to in writing by said others,and then only with the prior written authorization of the Company.     (h) The Executive represents and warrants that the Executive will agree to keep thisAgreement and the terms contained herein confidential, and will not disclose this Agreementor its terms to persons within or outside of the Company, other than members of her family,legal counsel, and personal accountant, or in response to any court order or other legalprocess, without the Company’s consent, except as necessary to enforce its terms or as maybe required by law.     **5.2****Work Product/Intellectual Property**.     (a) Assignment. The Executive hereby assigns to the Company all right, titleand interest to all “Work Product” (as defined in **Section 5.****4(h)** hereof) that (i) relatesto any of the Company Parties’ actual or anticipated business, research and development orexisting or future products or services, or (ii) is conceived, reduced to practice,developed or made using any equipment, supplies, facilities, assets, information orresources of any of the Company Parties (including, without limitation, any intellectualproperty rights).     (b) Disclosure. The Executive shall promptly disclose Work Product to theBoard and perform all actions reasonably requested by the Company (whether during or afterthe Employment Period) to establish and confirm the ownership and proprietary interest ofany of the Company Parties in any Work Product (including, without limitation, theexecution of assignments, consents, powers of attorney, applications and otherinstruments). The Executive shall not file any patent or copyright applications related toany Work Product except with the written consent of a majority of the Board.     **5.3****Non-Competition and Non-Solicitation**.     (a) In consideration of the Confidential Information being provided to the Executiveas stated in **Section 5.1**hereof, and other good and valuable new consideration as stated inthis Agreement, including, without limitation, employment and/or continued employment withthe Company, and the business relationships, Company goodwill, work experience, client,customer and/or vendor relationships and other fruits of employment that the Executive willhave the opportunity to obtain, use and develop under this Agreement, the Executive agreesto the restrictive covenants stated in this **Section 5.3**.     (b) From the Effective Date until the end of the Restricted Period (as defined in**Section 5.****4(g)** hereof), the Executive agrees that the Executive will not, directly orindirectly, on the Executive’s own behalf or on the behalf of any other Person, within theUnited States of America or in any other country or territory in which the businesses ofthe Company are conducted:
11

 
     (i) engage in a Competing Business (as defined in **Section 5.****4(c)** hereof),including, without limitation, by owning, managing, operating, controlling, beingemployed by, providing services as a consultant or independent contractor to orparticipating in the ownership, management, operation or control of any CompetingBusiness;     (ii) induce or attempt to induce any customer, vendor, supplier, licensor orother Person in a business relationship with any Company Party, for or with whichthe Executive or employees working under the Executive’s supervision had any director indirect responsibility or contact during the Employment Period, (A) to dobusiness with a Competing Business or (B) to cease, restrict, terminate or otherwisereduce business with the Company for the benefit of a Competing Business, regardlessof whether the Executive initiates contact; or     (iii) (A) solicit, recruit, persuade, influence or induce, or attempt tosolicit, recruit, persuade, influence or induce anyone employed or otherwiseretained by any of the Company Parties (including any independent contractor orconsultant), to cease or leave their employment or contractual or consultingrelationship with any Company Party, regardless of whether the Executive initiatescontact for such purposes or (B) hire, employ or otherwise attempt to establish, forany Person, any employment, agency, consulting, independent contractor or otherbusiness relationship with any Person who is or was employed or otherwise retainedby any of the Company Parties (including any independent contractor or consultant).     (c) The parties hereto acknowledge and agree that, notwithstanding anything in **Section5.****3(b)(i)** hereof, (i) the Executive may own or hold, solely as passive investments,securities of Persons engaged in any business that would otherwise be included in **Section5.****3(b)(i)**, as long as with respect to each such investment the securities held by theExecutive do not exceed five percent (5%) of the outstanding securities of such Person andsuch securities are publicly traded and registered under Section 12 of the SecuritiesExchange Act of 1934, as amended (the “Exchange Act”), and (ii) the Executive mayserve on the board of directors (or other comparable position) or as an officer of anyentity at the request of the Board; provided, however, that in the case ofinvestments otherwise permitted under clause (i) above, the Executive shall not bepermitted to, directly or indirectly, participate in, or attempt to influence, themanagement, direction or policies of (other than through the exercise of any voting rightsheld by the Executive in connection with such securities), or lend the Executive’s name to,any such Person.     (d) The Executive acknowledges that (i) the restrictive covenants contained in this**Section 5.3**hereof are ancillary to and part of an otherwise enforceable agreement, suchbeing the agreements concerning Confidential Information and other consideration as statedin this Agreement, (ii) at the time that these restrictive covenants are made, thelimitations as to time, geographic scope and activity to be restrained, as describedherein, are reasonable and do not impose a greater restraint than necessary to protect thegood will and other legitimate business interests of the Company, including
12

 
without limitation, Confidential Information (including trade secrets), client,customer and/or vendor relationships, client and/or customer goodwill and businessproductivity, (iii) in the event of termination of the Executive’s employment, theExecutive’s experiences and capabilities are such that the Executive can obtain gainfulemployment without violating this Agreement and without the Executive incurring unduehardship, (iv) based on the relevant benefits and other new consideration provided for inthis Agreement, including, without limitation, the disclosure and use of ConfidentialInformation, the restrictive covenants of this **Section 5.3**, as applicable according totheir terms, shall remain in full force and effect even in the event of the Executive’sinvoluntary termination from employment, with or without Cause and (v)the Executive hascarefully read this Agreement and has given careful consideration to the restraints imposedupon the Executive by this Agreement and consents to the terms of the restrictive covenantsin this **Section 5.3**, with the knowledge that this Agreement may be terminated at any timein accordance with the provisions hereof.     **5.4****Definitions**. For purposes of this Agreement, the following terms shall have thefollowing meanings:     (a) An “Affiliate” of any specified Person means any other Person, whether nowor hereafter existing, directly or indirectly controlling or controlled by, or under director indirect common control with, such specified Person. For purposes hereof, “control” orany other form thereof, when used with respect to any Person, means the power to direct themanagement and policies of such Person, directly or indirectly, whether through theownership of voting securities, by contract or otherwise; and the terms “controlling” and“controlled” shall have meanings correlative to the foregoing.     (b) “Company Parties” means the Company, and its direct and indirect parents,subsidiaries and Affiliates, and their successors in interest.     (c) “Competing Business” means any business that owns or operates a specialtyretail chain, which chain derives 15% or more of its revenue for the trailing 12 monthsfrom the sale of costume jewelry or accessories targeted to girls or women seekingmerchandise similar to the merchandise sold at the Company’s stores with an average ticketunit retail of $15 or less.     (d) Confidential Information.     (i) Definition. “Confidential Information” means any and allmaterial, information, ideas, inventions, formulae, patterns, compilations,programs, devices, methods, techniques, processes, know how, plans (marketing,business, strategic, technical or otherwise), arrangements, pricing and other dataof or relating to any of the Company Parties (as well as their customers and/orvendors) that is confidential, proprietary or trade secret (A) by its nature, (B)based on how it is treated or designated by a Company Party, (C) because thedisclosure of which would have a material adverse effect on the business or plannedbusiness of any of the Company Parties and/or (D) as a matter of law.
13

 
     (ii) Exclusions. Confidential Information does not include material,data, and/or information (A) that any Company Party has voluntarily placed in thepublic domain, (B) that has been lawfully and independently developed and publiclydisclosed by third parties, (C) that constitutes the general non-specializedknowledge and skills gained by the Executive during the Employment Period or (D)that is otherwise in the public domain through lawful means; provided,however, that the unauthorized appropriation, use or disclosure ofConfidential Information by the Executive, directly or indirectly, shall not affectthe protection and relief afforded by this Agreement regarding such information.     (iii) Inclusions. Confidential Information includes, withoutlimitation, the following information (including without limitation, compilations orcollections of information) relating or belonging to any Company Party (as well astheir clients, customers and/or vendors) and created, prepared, accessed, used orreviewed by the Executive during or after the Employment Period: (1) product andmanufacturing information, such as ingredients, combinations of ingredients andmanufacturing processes; (2) scientific and technical information, such as researchand development, tests and test results, formulae and formulations, studies andanalysis; (3) financial and cost information, such as operating and productioncosts, costs of goods sold, costs of supplies and manufacturing materials,non-public financial statements and reports, profit and loss information, margininformation and financial performance information; (4) customer related information,such as customer related contracts, engagement and scope of work letters, proposalsand presentations, customer-related contacts, lists, identities and prospects,practices, plans, histories, requirements and needs, price information and formulaeand information concerning client or customer products, services, businesses orequipment specifications; (5) vendor and supplier related information, such as theidentities, practices, history or services of any vendors or suppliers and vendor orsupplier contacts; (6) sales, marketing and price information, such as marketing andsales programs and related data, sales and marketing strategies and plans, sales andmarketing procedures and processes, pricing methods, practices and techniques andpricing schedules and lists; (7) database, software and other computer relatedinformation, such as computer programs, data, compilations of information andrecords, software and computer files, presentation software and computer-stored orbacked-up information including, but not limited to, e-mails, databases, wordprocessed documents, spreadsheets, notes, schedules, task lists, images and video;(8) employee-related information, such as lists or directories identifyingemployees, representatives and contractors, and information regarding thecompetencies (knowledge, skill, experience), compensation and needs of employees,representatives and contractors and training methods; and (9) business- andoperation-related information, such as operating methods, procedures, techniques,practices and processes, information about acquisitions, corporate or businessopportunities, information about partners and potential investors, strategies,projections and related documents, contracts and licenses and business records,files, equipment, notebooks, documents, memoranda, reports, notes, sample books,correspondence, lists and other written and graphic business records.
14

 
     (e) “Misappropriate”, or any form thereof, means:     (i) the acquisition of any Confidential Information by a Person who knows orhas reason to know that the Confidential Information was acquired by theft, bribery,misrepresentation, breach or inducement of a breach of a duty to maintain secrecy orespionage through electronic or other means (each, an “Improper Means”); or     (ii) the disclosure or use of any Confidential Information without the expressconsent of the Company by a Person who (A) used Improper Means to acquire knowledgeof the Confidential Information (B) at the time of disclosure or use, knew or hadreason to know that his or her knowledge of the Confidential Information was (x)derived from or through a Person who had utilized Improper Means to acquire it, (y)acquired under circumstances giving rise to a duty to maintain its secrecy or limitits use or (z) derived from or through a Person who owed a duty to the Company tomaintain its secrecy or limit its use or (C) before a material change of his or herposition, knew or had reason to know that it was Confidential Information and thatknowledge of it had been acquired by accident or mistake.     (f) “Person” means any individual, corporation, partnership, limited liabilitycompany, joint venture, association, business trust, joint-stock company, estate, trust,unincorporated organization, government or other agency or political subdivision thereof orany other legal or commercial entity.     (g) “Restricted Period” means the longer of (i) twelve (12) months after thedate of termination of employment (the Executive’s last day of work for the Company) or(ii) the period during which the Executive is receiving payments from the Company pursuantto **Section 4**hereof.     (h) “Work Product” means all patents and patent applications, all inventions,innovations, improvements, developments, methods, designs, analyses, drawings, reports,creative works, discoveries, software, computer programs, modifications, enhancements,know-how, formulations, concepts and ideas, and all similar or related information (in eachcase whether or not patentable), all copyrights and copyrightable works, all trade secrets,confidential information, and all other intellectual property and intellectual propertyrights that are conceived, reduced to practice, developed or made by the Executive eitheralone or with others in the course of employment with the Company (including employmentprior to the date of this Agreement).     **5.5****Remedies**. Because the Executive’s services are unique and because the Executivehas access to Confidential Information, the Executive acknowledges and agrees that if the Executivebreaches any of the provisions of **Section 5**hereof, the Company may suffer immediate andirreparable harm for which monetary damages alone will not be a sufficient remedy. The restrictivecovenants stated in **Section 5**hereof are without prejudice to the Company’s rights and causes ofaction at law.
15

 
     **5.6****Interpretation; Severability**.     (a) The Executive has carefully considered the possible effects on the Executive ofthe covenants not to compete, the confidentiality provisions and the other obligationscontained in this Agreement, and the Executive recognizes that the Company has made everyeffort to limit the restrictions placed upon the Executive to those that are reasonable andnecessary to protect the Company’s legitimate business interests.     (b) The Executive acknowledges and agrees that the restrictive covenants set forth inthis Agreement are reasonable and necessary in order to protect the Company’s validbusiness interests. It is the intention of the parties hereto that the covenants,provisions and agreements contained herein shall be enforceable to the fullest extentallowed by law. If any covenant, provision or agreement contained herein is found by acourt having jurisdiction to be unreasonable in duration, scope or character ofrestrictions, or otherwise to be unenforceable, such covenant, provision or agreement shallnot be rendered unenforceable thereby, but rather the duration, scope or character ofrestrictions of such covenant, provision or agreement shall be deemed reduced or modifiedwith retroactive effect to render such covenant, provision or agreement reasonable orotherwise enforceable (as the case may be), and such covenant, provision or agreement shallbe enforced as modified. If the court having jurisdiction will not review the covenant,provision or agreement, the parties hereto shall mutually agree to a revision having aneffect as close as permitted by applicable law to the provision declared unenforceable.The parties hereto agree that if a court having jurisdiction determines, despite theexpress intent of the parties hereto, that any portion of the covenants, provisions oragreements contained herein are not enforceable, the remaining covenants, provisions andagreements herein shall be valid and enforceable. Moreover, to the extent that anyprovision is declared unenforceable, the Company shall have any and all rights underapplicable statutes or common law to enforce its rights with respect to any and allConfidential Information or unfair competition by the Executive.**6.**      **Miscellaneous**.     **6.1****Public Statements**.     (a) Media Nondisclosure. The Executive agrees that during the EmploymentPeriod or at any time thereafter, except as may be authorized in writing by the Company,the Executive will not directly or indirectly disclose or release to the Media anyinformation concerning or relating to any aspect of the Executive’s employment ortermination from employment with the Company and/or any aspect of any dispute that is thesubject of this Agreement. For the purposes of this Agreement, the term “Media”includes, without limitation, any news organization, station, publication, show, website,web log (blog), bulletin board, chat room and/or program (past, present and/or future),whether published through the means of print, radio, television and/or the Internet orotherwise, and any member, representative, agent and/or employee of the same.     (b) Non-Disparagement by the Executive. The Executive agrees that during theEmployment Period or at any time thereafter, the Executive will not make any statements,comments or communications in any form, oral, written or electronic to any
16

 
Media or any customer, client or supplier of the Company or any of its Affiliates,which would constitute libel, slander or disparagement of the Company or any of itsAffiliates, including, without limitation, any such statements, comments or communicationsthat criticize, ridicule or are derogatory to the Company or any of its Affiliates;provided, however, that the terms of this **Section 6.****1(b)** shall not apply tocommunications between the Executive and, as applicable, the Executive’s attorneys or otherpersons with whom communications would be subject to a claim of privilege existing undercommon law, statute or rule of procedure. The Executive further agrees that the Executivewill not in any way solicit any such statements, comments or communications from others.     (c) Non-Disparagement by the Company. The Company agrees that during theEmployment Period or at any time thereafter, the Company will not make any statements,comments or communications in any form, oral, written or electronic, which would constitutelibel, slander or disparagement of the Executive, including, without limitation, any suchstatements, comments or communications that criticize, ridicule or are derogatory to theExecutive; provided, however, that the terms of this **Section 6.****1(c)** shallnot apply to communications between the Company and, as applicable, the Company’s attorneysor other persons with whom communications would be subject to a claim of privilege existingunder common law, statute or rule of procedure. The Company further agrees that theCompany will not in any way solicit any such statements, comments or communications fromothers.     **6.2****ARBITRATION**. SUBJECT TO THE RIGHTS UNDER SECTION 6.3 HEREOF TO SEEK INJUNCTIVE OROTHER EQUITABLE RELIEF, BINDING ARBITRATION SHALL BE THE EXCLUSIVE REMEDY FOR ANY AND ALL DISPUTES,CLAIMS OR CONTROVERSIES, WHETHER STATUTORY, CONTRACTUAL OR OTHERWISE, BETWEEN THE PARTIES HERETOARISING UNDER OR RELATING TO THIS AGREEMENT OR THE EXECUTIVE’S EMPLOYMENT BY OR TERMINATION FROMTHE COMPANY (INCLUDING, BUT NOT LIMITED TO, THE AMOUNT OF DAMAGES, OR THE CALCULATION OF ANY BONUSOR OTHER AMOUNT OR BENEFIT DUE) (COLLECTIVELY, “DISPUTES”). THE PARTIES EACH WAIVE THERIGHT TO A JURY TRIAL AND WAIVE THE RIGHT TO ADJUDICATE THEIR DISPUTES UNDER THIS AGREEMENT OUTSIDETHE ARBITRATION FORUM PROVIDED FOR IN THIS AGREEMENT, EXCEPT AS OTHERWISE PROVIDED IN THISAGREEMENT.     (a) Procedure Generally. The parties agree to submit the Dispute to a singlearbitrator selected from a panel of JAMS arbitrators. The arbitration will be governed bythe JAMS Comprehensive Arbitration Rules and Procedures in effect at the time thearbitration is commenced, subject to the terms and modifications of this Agreement. If forany reason JAMS cannot serve as the arbitration administrator or cannot fulfill the panelrequirements of the Arbitration Provision, the Company may select an alternativearbitration administrator, such as AAA, to serve under the terms of this Agreement.     (b) Arbitrator Selection. To select the arbitrator, the parties shall maketheir respective strikes from a panel of former federal court judges and magistrates, tothe extent available from JAMS (the “First Panel”). If the parties cannot agreeupon an arbitrator from the First Panel or if such a panel is not available from JAMS, thenthe
17

 
parties will next make their respective strikes from a panel of former Illinois statecourt trial and appellate judges, to the extent available from JAMS (the “SecondPanel”). Any arbitrators proposed for the First and Second Panels provided for in this**Section 6.****2(b)** must be available to serve in the Agreed Venue. If the parties cannot agreeupon an arbitrator from the Second Panel or if such a panel is not available from JAMS,then the parties will next make their respective strikes from the panel of all other JAMSarbitrators available to serve in the Agreed Venue.     (c) **VENUE****. THE PARTIES STIPULATE AND AGREE THAT THE EXCLUSIVE VENUE OF ANYSUCH ARBITRATION PROCEEDING (AND OF ANY OTHER PROCEEDING, INCLUDING ANY COURT PROCEEDING,UNDER THIS AGREEMENT) SHALL BE CHICAGO, ILLINOIS (THE “****AGREED VENUE****”).**     (d) Authority and Decision. The arbitrator shall have the authority to awardthe same damages and other relief that a court could award. The arbitrator shall issue areasoned award explaining the decision and any damages awarded. The arbitrator’s decisionwill be final and binding upon the parties and enforceable by a court of competentjurisdiction. The parties will abide by and perform any award rendered by the arbitrator.In rendering the award, the arbitrator shall state the reasons therefor, including (withoutlimitation) any computations of actual damages or offsets, if applicable.     (e) Fees and Costs. In the event of arbitration under the terms of thisAgreement, the fees charged by JAMS or other arbitration administrator and the arbitratorshall be borne by the parties equally. In addition, the parties shall each bear their owncosts, expenses and attorneys’ fees incurred in arbitration.     (f) Limited Scope. The following are excluded from binding arbitration underthis Agreement: claims for workers’ compensation benefits or unemployment benefits;replevin; and claims for which a binding arbitration agreement is invalid as a matter oflaw.     **6.3****Injunctive Relief**. The parties hereto may seek injunctive relief in arbitration;provided, however, that as an exception to the arbitration agreement set forth in**Section 6.2**hereof, the parties, in addition to all other available remedies, shall each have theright to initiate an action in any court of competent jurisdiction in order to request injunctiveor other equitable relief regarding the terms of **Sections 5**or **6.2**hereof. The exclusive venue ofany such proceeding shall be in the Agreed Venue. The parties agree (a) to submit to thejurisdiction of any competent court in the Agreed Venue, (b) to waive any and all defenses theExecutive may have on the grounds of lack of jurisdiction of such court and (c) that neither partyshall be required to post any bond, undertaking or other financial deposit or guarantee in seekingor obtaining such equitable relief. Evidence adduced in any such proceeding for an injunction maybe used in arbitration as well. The existence of this right shall not preclude or otherwise limitthe applicability or exercise of any other rights and remedies that a party hereto may have at lawor in equity.     **6.4****Settlement of Existing Rights**. In exchange for the other terms of this Agreement,the Executive acknowledges and agrees that: (a) the Executive’s entry into this Agreement is acondition of employment and/or continued employment with the Company, as applicable; (b)
18

 
except as otherwise provided herein, this Agreement will replace any existing employmentagreement between the parties and thereby act as a novation, if applicable; (c) the Executive isbeing provided with access to Confidential Information, including, without limitation, proprietarytrade secrets of one or more Company Parties, to which the Executive has not previously had access;(d) all Company inventions and intellectual property developed by the Executive during any pastemployment with the Company and all goodwill developed with the Company’s clients, customers andother business contacts by the Executive during any past employment with Company, as applicable, isthe exclusive property of the Company; and (e) all Confidential Information and/or specializedtraining accessed, created, received or utilized by the Executive during any past employment withCompany, as applicable, will be subject to the restrictions on Confidential Information describedin this Agreement, whether previously so agreed or not.     **6.5****Indemnification**. The Executive shall be entitled from the Effective Date untilthe end of the Employment Period in the capacity as an officer or director of the Company or any ofits subsidiaries to the benefit of the indemnification provisions contained in the By-Laws of theCompany or as a matter of law, whichever is greater. In addition, during the term of theExecutive’s employment and, where applicable under the terms of the relevant liability policythereafter, the Executive shall be covered under any directors’ and officers’ insurance policymaintained by the Company.     **6.6****Post-Termination Assistance**. During the Restricted Period, the Executive shallcooperate, at the reasonable request of the Company (i) in the transition of any matter for whichthe Executive had authority or responsibility during the Employment Period, or (ii) with respect toany other matter involving the Company for which the Executive may be of assistance. The Executiveshall be entitled to reimbursement of any out-of-pocket expenses she incurs in providing suchassistance upon submission of documentation supporting such expenses.     **6.7****Entire Agreement; Waiver**. This Agreement contains the entire agreement betweenthe Executive and the Company with respect to the subject matter hereof, and supersedes any and allprior understandings or agreements, whether written or oral. No modification or addition hereto orwaiver or cancellation of any provision hereof shall be valid except by a writing signed by theparty to be charged therewith. No delay on the part of any party to this Agreement in exercisingany right or privilege provided hereunder or by law shall impair, prejudice or constitute a waiverof such right or privilege.     **6.8****Governing Law**. This Agreement shall be governed by and construed in accordancewith the laws of the State of Illinois without regard to principles of conflict of laws.     **6.9****Successors and Assigns; Binding Agreement**. The rights and obligations of theparties under this Agreement shall be binding upon and inure to the benefit of the parties heretoand their heirs, personal representatives, successors and permitted assigns. This Agreement is apersonal contract, and, except as specifically set forth herein, the rights and interests of theExecutive herein may not be sold, transferred, assigned, pledged or hypothecated by any partywithout the prior written consent of the others. As used herein, the term “successor” as itrelates to the Company, shall include, but not be limited to, any successor by way of merger,consolidation or sale of all or substantially all of such Person’s assets or equityinterests.
19

 
     **6.10****Representation by Counsel; Independent Judgment**. Each of the parties heretoacknowledges that (a) it or the Executive has read this Agreement in its entirety and understandsall of its terms and conditions, (b) it or the Executive has had the opportunity to consult withany individuals of its or the Executive’s choice regarding its or the Executive’s agreement to theprovisions contained herein, including legal counsel of its or the Executive’s choice, and anydecision not to was the Executive’s or its alone and (c) it or the Executive is entering into thisAgreement of its or the Executive’s own free will, without coercion from any source, based upon itsor the Executive’s own independent judgment.     **6.11****Interpretation**. The parties and their respective legal counsel activelyparticipated in the negotiation and drafting of this Agreement, and in the event of any ambiguityor mistake herein, or any dispute among the parties with respect to the provisions hereto, noprovision of this Agreement shall be construed unfavorably against any of the parties on the groundthat the Executive, it, or the Executive’s or its counsel was the drafter thereof.     **6.12****Survival**. The applicable provisions of **Sections 4, 5**and **6**hereof shall survivethe termination of this Agreement.     **6.13****Notices**. All notices and communications hereunder shall be in writing and shallbe deemed properly given and effective when received, if sent by facsimile or telecopy, or bypostage prepaid by registered or certified mail, return receipt requested, or by other deliveryservice which provides evidence of delivery, as follows:     If to the Company, to:                     Claire’s Stores, Inc.