##### Table of Contents



UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
 Washington, DC 20549
 FORM 10-K/A
 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 February 2, 2008
 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
 Claires Stores, Inc.
  Florida
    
    59-0940416(State or other jurisdiction of incorporation or organization)
    
    (I.R.S. Employer Identification No.)3 S.W. 129th Avenue, Pembroke Pines, Florida
    
    33027(Address of principal executive offices)
    
    (Zip Code)
 Registrants telephone number, including area code: (954) 433-3900   None
 o þ
 o þ
 þ o
 þ
  Large accelerated filer o
    
    Accelerated filer o
    
    Non-accelerated filer þ(Do not check if a smaller reporting company)
    
    Smaller reporting company o
 o þ
  DOCUMENTS INCORPORATED BY REFERENCE




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TABLE OF CONTENTS  PART IIIItem 10. Directors, Executive Officers and Corporate GovernanceItem 11. Executive CompensationItem 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder MattersItem 13. Certain Relationships and Related TransactionsItem 14. Principal Accountant Fees and ServicesPART IVItem 15. Exhibits, Financial Statement SchedulesSIGNATURESEX-31.1 Section 302 Certification of CEOEX-31.2 Section 302 Certification of CFOEX-32.1 Section 906 Certification of CEOEX-32.2 Section 906 Certification of CFO    Table of Contents  Explanatory Notes
     
 PART III.
 
 Item 10. Directors, Executive Officers and Corporate Governance
  Name
    
    Age
    
    PositionEugene S. Kahn
    
    
    57
    
    
    Chief Executive Officer and DirectorJames Conroy
    
    
    37
    
    
    Executive Vice PresidentJohn A. Zimmermann
    
    
    49
    
    
    President of North AmericaMark Smith
    
    
    49
    
    
    President and Managing Director of EuropeJ. Per Brodin
    
    
    46
    
    
    Senior Vice President and Chief Financial OfficerPeter P. Copses
    
    
    49
    
    
    Chairman of our Board of DirectorsRobert J. DiNicola
    
    
    60
    
    
    DirectorGeorge G. Golleher
    
    
    60
    
    
    DirectorRohit Manocha
    
    
    48
    
    
    DirectorRon Marshall
    
    
    54
    
    
    DirectorLance A. Milken
    
    
    32
    
    
    Director
 Eugene S. Kahn
 James Conroy
 2




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John A. Zimmermann
 Mark Smith
 J. Per Brodin
 Peter P. Copses
 Robert J. DiNicola
 George G. Golleher
 Rohit Manocha
 3




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Ron Marshall
 Lance A. Milken
 Board Composition
  Board Committees
  Code of Ethics
  
 Item 11. Executive Compensation
 Compensation Discussion and Analysis
 Introduction
   4




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Compensation Philosophy and Objectives
   Components of Executive Compensation
  Base Salary.
 Bonus.
  Stock Option Awards.
 5




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6




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Name
    
    Number of Stock Options GrantedTarget
    
    StretchPerformance
    
    PerformanceTime Options
    
    Options
    
    OptionsEugene S. Kahn
    
    
    477,440
    
    
    
    477,440
    
    
    
    298,400Mark Smith
    
    
    223,800
    
    
    
    223,800
    
    
    
    149,200James Conroy
    
    
    175,000
    
    
    
    175,000
    
    
    
    87,500
  Management Equity Investments.
 No. of Shares of ParentName
    
    Common Stock PurchasedEugene S. Kahn
    
    
    100,000Mark Smith
    
    
    112,500
  Benefits Programs
 Retirement Plans .
 7




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Perquisites.
 Severance Pay and Benefits upon Termination of Employment under Certain Circumstances.
 Eugene S. Kahn
    Mark Smith
  8




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James Conroy
    Former Executive Officers
  9




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Compensation Committee Report
  
 10




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##### Table of Contents



Summary Compensation Table
  Non-EquityStock
    
    
    Option
    
    
    Incentive Plan
    
    
    All OtherName and Principal
    
    Fiscal
    
    
    Salary
    
    
    Bonus
    
    
    Awards
    
    
    Awards
    
    
    Compensation
    
    
    Compensation
    
    
    TotalPosition
    
    Year
    
    
    ($)
    
    
    ($)
    
    
    ($)1
    
    
    ($)1
    
    
    ($)
    
    
    ($)
    
    
    ($)Eugene S. Kahn 
Chief Executive Officer
    
    
    2007
    
    
    
    688,461
    
    
    
    778,994
    (2)
    
    
    260,417
    
    
    
    1,558,379
    
    
    
    0
    
    
    
    67,230
    (3)
    
    
    3,353,481James Conroy(4)
Executive Vice President
    
    
    2007
    
    
    
    83,250
    
    
    
    150,000
    (5)
    
    
    0
    
    
    
    123,636
    
    
    
    0
    
    
    
    0
    
    
    
    356,886Mark Smith

President and Managing
Director of Europe
    
    
    2007
    
    
    
    461,277
    
    
    
    469,065
    (6)
    
    
    173,611
    
    
    
    793,741
    
    
    
    0
    
    
    
    17,988
    (7)
    
    
    1,915,682E. Bonnie Schaefer(8)
Former Co-Chief Executive Officer
    
    
    2007
    
    
    
    374,575
    
    
    
    0
    
    
    
    1,924,521
    
    
    
    0
    
    
    
    0
    
    
    
    1,756,519
    (9)
    
    
    4,055,615Marla L.
Schaefer(8)
Former Co-Chief Executive Officer
    
    
    2007
    
    
    
    374,575
    
    
    
    0
    
    
    
    1,924,521
    
    
    
    0
    
    
    
    0
    
    
    
    1,763,558
    (10)
    
    
    4,062,654Ira D. Kaplan(11)
Former Chief Financial Officer
    
    
    2007
    
    
    
    515,000
    
    
    
    0
    
    
    
    436,659
    
    
    
    297,100
    
    
    
    139,277
    
    
    
    765,950
    (12)
    
    
    2,153,986Lisa LaFosse(13)
Former President and Chief
Operating Officer of North
America
    
    
    2007
    
    
    
    595,193
    
    
    
    0
    
    
    
    343,287
    
    
    
    303,883
    
    
    
    48,679
    
    
    
    604,547
    (14)
    
    
    1,895,589
 
 (1)
    
    These columns reflect the amounts recognized for financial statement reporting purposes in
Fiscal 2007 for the portion of the fair value of stock and option awards of Parent common stock granted
or purchased in Fiscal 2007 in accordance with FAS 123(R). For a description of the
assumptions used in calculating the fair value of stock and option awards under SFAS No. 123(R), see
Note 8 Stock Options and Stock-Based Compensation of the notes to our consolidated financial
statements. The amounts in this column reflect the accounting expense to the Company in
connection with such stock and option awards and do not reflect the amount of compensation actually
received by the named executive officer during Fiscal 2007. Restricted stock awards and option awards for our current named executive officers and certain
former executive officers employed by the Company as of February 2, 2008 are described in
Outstanding Equity Awards at End of Fiscal 2007.(2)
    
    Includes a minimum guaranteed incentive bonus of $666,666 and a one-time sign-on bonus of
$112,328 pursuant to the terms of Mr. Kahns employment agreement. 11




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(3)
    
    Includes (i) $61,280 for reimbursement of living expenses paid pursuant to the terms of Mr.
Kahns
employment agreement, grossed-up for income tax purposes, and (ii) $5,950 for automobile
allowance.(4)
    
    Mr. Conroy became an executive officer on December 13, 2007 and the information included in
the table reflects his compensation from that date until our fiscal year end. From May 2007
through December 12, 2007, Mr. Conroy was a consultant to us and received consulting fees of
approximately $379,000.(5)
    
    Represents one-time relocation bonus paid to Mr. Conroy pursuant to the terms of his
employment agreement.(6)
    
    Reflects minimum guaranteed incentive bonus pursuant to the terms of Mr. Smiths employment
agreement.(7)
    
    Represents automobile allowance.(8)
    
    E. Bonnie Schaefer and Marla L. Schaefer resigned their positions as Co-Chief Executive
Officers at the time of the Merger, with an effective date of resignation of June 2007. As a
result of the Merger, stock options, stock units and restricted stock held by E. Bonnie Schaefer and Marla
Schaefer were cashed out. See Option Exercises and Stock Vested in Fiscal 2007. Also as a
result of the Merger, each of E. Bonnie Schaefer and Marla Schaefer was paid approximately
$11,175,733 and $12,197,891, respectively, as a result of the change of control provisions
included in their respective employment agreements, including payments for gross-up on excise taxes.(9)
    
    Includes: (i) retention bonus of $1,138,500 paid in connection with the Merger, (ii) $51,649
for life insurance premiums, and (iii) $566,370 for matching contributions under
deferred compensation plans, which were terminated at the time of the Merger.(10)
    
    Includes: (i) retention bonus of $1,138,500 paid in connection with the Merger, (ii) $58,688
for life insurance premiums, and (iii) $566,370 for matching contributions under deferred
compensation plans, which were terminated at the time of the Merger.(11)
    
    Mr. Kaplan ceased serving as our Chief Financial Officer in February 2008.(12)
    
    Includes (i) retention bonus of $507,500 paid in connection with the Merger, and (ii) $258,450
for matching contributions under deferred compensation plans, which were terminated at the time of the Merger. As a result of the Merger, stock options and restricted stock held by Ira D. Kaplan were cashed out. See Option Exercises and Stock Vested in Fiscal 2007.(13)
    
    Ms. LaFosse ceased serving as our President and Chief Operating Officer of North America in
April 2008.(14)
    
    Includes (i) retention bonus of $442,500 paid in connection with the Merger, and (ii) $162,047 for matching contributions under deferred compensation plans, which were terminated at the time of the Merger. As a result of the Merger, stock options and restricted stock held by Lisa LaFosse were cashed out. See Option Exercises and Stock Vested in Fiscal 2007. Employment Arrangements
 Eugene S. Kahn
   Mark Smith
 12




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James Conroy
   J. Per Brodin
   13




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John Zimmermann
      14




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Grants of Plan-Based Awards in Fiscal 2008
  All OtherOption
    
    
    
    
    
    
    GrantAll Other
    
    
    Awards:
    
    
    
    
    
    
    DateStock
    
    
    Number
    
    
    
    
    
    
    FairAwards:
    
    
    of
    
    
    Exercise
    
    
    Value ofEstimated Future Payouts
    
    
    Estimated Future Payouts
    
    
    Number
    
    
    Securities
    
    
    or Base
    
    
    StockUnder Non-Equity
    
    
    
    
    
    
    Under Equity Incentive
    
    
    of Shares
    
    
    Under-
    
    
    Price of
    
    
    andIncentive Plan Awards
    
    
    Plan Awards(1)
    
    
    of Stock
    
    
    lying
    
    
    Option
    
    
    OptionGrant
    
    
    Threshold
    
    
    Target
    
    
    Maximum
    
    
    Threshold
    
    
    Target
    
    
    Maximum
    
    
    or Units
    
    
    Options
    
    
    Awards
    
    
    AwardsName
    
    Date
    
    
    ($)
    
    
    ($)
    
    
    ($)
    
    
    (#)
    
    
    (#)
    
    
    (#)
    
    
    (#)
    
    
    (#)
    
    
    ($/Sh)
    
    
    ($)(2)Eugene S. Kahn
    
    
    
    
    
    
      
    (3)
  
    
      
    (3)
  
    
      
    (3)Restricted Shares
    
    
    5/29/07
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    75,000
    
    
    
    
    
    
    
    
    
    
    
    750,000Time Options
    
    
    5/29/07
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    477,440
    (4)
    
    
    10.00
    
    
    
    2,210,547Performance Options
    
    
    5/29/07
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    477,440
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    10.00
    
    
    
    2,313,197Stretch Options
    
    
    5/29/07
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    298,400
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    10.00
    
    
    
    1,315,944Management Investment
Options
    
    
    5/29/07
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    100,000
    (5)
    
    
    100,000
    (6)
    
    
    10.00
    
    
    
    505,000James Conroy
    
    
    
    
    
    
    
    (7)
    
    
    
    (7)
    
    
    
    (7)Time Options
    
    
    12/13/07
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    175,000
    (4)
    
    
    10.00
    
    
    
    763,000Performance Options
    
    
    12/13/07
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    175,000
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    10.00
    
    
    
    807,625Stretch Options
    
    
    12/13/07
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    87,500
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    10.00
    
    
    
    371,875Management Investment
Options
    
    
    12/13/07
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Mark Smith
    
    
    
    
    
    
      
    (3)
  
    
      
    (3)
  
    
      
    (3)Restricted Shares
    
    
    5/29/07
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    50,000
    
    
    
    
    
    
    
    10.00
    
    
    
    500,000Time Options
    
    
    5/29/07
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    223,800
    (4)
    
    
    10.00
    
    
    
    1,036,194Performance Options
    
    
    5/29/07
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    223,800
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    10.00
    
    
    
    1,084,311Stretch Options
    
    
    5/29/07
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    149,200
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    10.00
    
    
    
    657,972Management Investment
Options
    
    
    5/29/07
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    112,500
    (5)
    
    
    112,500
    (6)
    
    
    10.00
    
    
    
    568,125Ira D. Kaplan(8)
    
    
    
    
    
    
    128,750
    
    
    
    515,000
    
    
    
    772,500Time Options
    
    
    6/29/07
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    100,000
    (4)
    
    
    10.00
    
    
    
    458,000Performance Options
    
    
    6/29/07
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    100,000
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    10.00
    
    
    
    495,500Stretch Options
    
    
    6/29/07
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    35,800
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    10.00
    
    
    
    156,446Management Investment
Options
    
    
    6/29/07
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    51,000
    (5)
    
    
    51,000
    (6)
    
    
    
    
    
    
    258,060Lisa LaFosse(9)
    
    
    
    
    
    
    180,000
    
    
    
    360,000
    
    
    
    720,000Time Options
    
    
    6/29/07
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    100,000
    (4)
    
    
    10.00
    
    
    
    458,000Performance Options
    
    
    6/29/07
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    100,000
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    10.00
    
    
    
    495,500Stretch Options
    
    
    6/29/07
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    35,800
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    10.00
    
    
    
    156,446Management Investment
Options
    
    
    6/29/07
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    60,000
    (5)
    
    
    60,000
    (6)
    
    
    
    
    
    
    303,600
 
 (1)
    
    This column shows the number of options to purchase Parent common stock with
performance-based vesting requirements granted to our current named executive officers and
certain former executive officers in Fiscal 2007.
 (2)
    
    This column reflects the amounts recognized for financial statement reporting purposes in
Fiscal 2007 for the portion of the fair value of stock awards of Parent common stock granted
or purchased in Fiscal 2007 in accordance with FAS 123(R). For a description of the
assumptions used in calculating the fair value of option awards under SFAS No. 123(R), see
Note 8 Stock Options and Stock-Based Compensation of the notes to our consolidated financial
statements. 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 Fiscal 2007.
 (3)
    
    Messrs. Kahn and Smith received guaranteed bonuses for Fiscal 2007 under the terms of their
respective employment agreements. See Summary Compensation Table.
 15




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(4)
    
    Represents the number of options to purchase shares of Parent common stock with time-based
vesting requirements granted to our current named executive officers and certain former
executive officers in Fiscal 2007.
 (5)
    
    Represents the number of shares of Parent common stock purchased by our current named
executive officers and certain former executive officers in Fiscal 2007.
 (6)
    
    Represents the number of fully-vested options to purchase Parent common stock granted to our
current named executive officers and certain former executive officers in Fiscal 2007.
 (7)
    
    Mr. Conroy was not granted a non-equity incentive award in Fiscal 2007 because he did not
join the Company until December 2007.
 (8)
    
    Mr. Kaplan ceased serving as our Chief Financial Officer in February 2008. As a result, all
future incentive plan awards have been cancelled.
 (9)
    
    Ms. LaFosse ceased serving as our President and Chief Operating Officer of North America in
April 2008. As a result, all future incentive plan awards have been cancelled.
 16




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Outstanding Equity Awards at End of Fiscal 2007
  Outstanding Equity Awards at February 2, 2008
 Option Awards
    
    
    Stock AwardsMarketValue ofNumber of
    
    
    Number of
    
    
    
    
    
    
    
    
    
    
    Number of
    
    
    Shares orSecurities
    
    
    Securities
    
    
    
    
    
    
    
    
    
    
    Shares or
    
    
    Units ofUnderlying
    
    
    Underlying
    
    
    Option
    
    
    
    
    
    
    Units of Stock
    
    
    StockUnexercised
    
    
    Unexercised
    
    
    Exercise
    
    
    Option
    
    
    That Have
    
    
    That HaveOptions (#)
    
    
    Options (#)
    
    
    Price
    
    
    Expiration
    
    
    Not Vested
    
    
    Not VestedName
    
    Exercisable
    
    
    Unexercisable
    
    
    ($)
    
    
    Date
    
    
    (#)
    
    
    ($)(a)
    
    (b)
    
    
    (c)
    
    
    (e)
    
    
    (f)
    
    
    (g)
    
    
    (h)Eugene S. KahnRestricted Shares
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    75,000
    
    
    
    750,000Time Options(1)
    
    
    
    
    
    
    477,440
    
    
    
    10.00
    
    
    
    5/29/2014Performance Options(2)
    
    
    
    
    
    
    477,440
    
    
    
    10.00
    
    
    
    5/29/2014Stretch Options(3)
    
    
    
    
    
    
    298,400
    
    
    
    10.00
    
    
    
    5/29/2014Management Investment
Options(4)
    
    
    100,000
    
    
    
    
    
    
    
    10.00
    
    
    
    5/29/2014James ConroyRestricted SharesTime Options(1)
    
    
    
    
    
    
    175,000
    
    
    
    10.00
    
    
    
    12/13/2014Performance Options(2)
    
    
    
    
    
    
    175,000
    
    
    
    10.00
    
    
    
    12/13/2014Stretch Options(3)
    
    
    
    
    
    
    87,500
    
    
    
    10.00
    
    
    
    12/13/2014Mark SmithRestricted Shares
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    50,000
    
    
    
    500,000Time Options(1)
    
    
    
    
    
    
    223,800
    
    
    
    10.00
    
    
    
    5/29/2014Performance Options(2)
    
    
    
    
    
    
    223,800
    
    
    
    10.00
    
    
    
    5/29/2014Stretch Options(3)
    
    
    
    
    
    
    149,200
    
    
    
    10.00
    
    
    
    5/29/2014Management Investment
Options(4)
    
    
    112,500
    
    
    
    
    
    
    
    10.00
    
    
    
    5/29/2014Ira D. Kaplan(5)Time Options(1)
    
    
    
    
    
    
    100,000
    
    
    
    10.00
    
    
    
    6/29/2014Performance Options(2)
    
    
    
    
    
    
    100,000
    
    
    
    10.00
    
    
    
    6/29/2014Stretch Options(3)
    
    
    
    
    
    
    35,800
    
    
    
    10.00
    
    
    
    6/29/2014Management Investment
Options(4)
    
    
    51,000
    
    
    
    
    
    
    
    10.00
    
    
    
    6/29/2014Lisa LaFosse(6)Time Options(1)
    
    
    
    
    
    
    100,000
    
    
    
    10.00
    
    
    
    6/29/2014Performance Options(2)
    
    
    
    
    
    
    100,000
    
    
    
    10.00
    
    
    
    6/29/2014Stretch Options(3)
    
    
    
    
    
    
    35,800
    
    
    
    10.00
    
    
    
    6/29/2014Management Investment
Options(4)
    
    
    60,000
    
    
    
    
    
    
    
    10.00
    
    
    
    6/29/2014
 
 (1)
    
    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.(2)
    
    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 and become exercisable in two equal annual installments on each of the first
two anniversaries of the Measurement date, subject to acceleration in the event of a change
in control or a specified liquidity event, as set forth in the option grant letter. 17




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##### Table of Contents



(3)
    
    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 in two equal annual installments on each of the first
two anniversaries of the Measurement Date, subject to acceleration in the event of a change
in control or a specified liquidity event, as set forth in the option grant letter. Prior to
a qualified initial public offering with gross proceeds of not less than $300.0 million, 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 a qualified initial public
offering, Value Per Share is Parents Net Equity Value divided by the number of fully
diluted shares. Net Equity Value is calculated as the sum of (1) 8.5 times Parents EBITDA
for the four fiscal quarters ending on the Measurement Date, (2) the sum of all cash and cash
equivalents and the aggregate exercise price of all outstanding options or warrants to
purchase shares of Parents common stock as of the Measurement Date, less (3) Parents debt
as of the Measurement Date. Upon a defined liquidity event, Value Per Share is the price per
share realized by the Parents 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.(4)
    
    The management investment options are fully-vested.(5)
    
    Mr. Kaplan ceased serving as our Chief Financial Officer in February 2008. As a result,
all time, performance and stretch options granted to the former executive officer have been
cancelled.(6)
    
    Ms. LaFosse ceased serving as our President and Chief Operating Officer of North America in
April 2008. As a result, all time, performance and stretch options granted to the former
executive officer have been cancelled. Option Exercises and Stock Vested in Fiscal 2007
  
    
    the number of stock options held by such persons;
    
    the aggregate cash payments that were made in respect of such stock options upon
consummation of the Merger;
    
    the aggregate number of restricted shares that vested upon consummation of the Merger;
    
    the aggregate cash payment that was made in respect of the restricted shares upon
consummation of the Merger;
    
    the aggregate number of stock units held by such person;
    
    the cash payment that was made in respect of the stock units upon consummation of the
Merger; and
    
    the total cash
payment such person
received in respect of
all payments described in
this table upon
consummation of the
Merger (in all cases
before applicable
withholding taxes).
 18




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##### Table of Contents



Stock Options
    
    Restricted Shares
    
    Stock Units(1)(2)(3)Cash
    
    
    
    
    
    Cash
    
    
    
    
    
    Cash
    
    Total CashName
    
    Number
    
    Payment(4)
    
    Number
    
    Payment
    
    Number
    
    Payment
    
    PaymentBonnie Schaefer
    
    
    150,000
    
    
    $
    2,579,500
    
    
    
    37,500
    
    
    $
    1,237,500
    
    
    
    53,125
    
    
    $
    1,753,125
    
    
    $
    5,570,125Marla Schaefer
    
    
    150,000
    
    
    $
    2,579,500
    
    
    
    37,500
    
    
    $
    1,237,500
    
    
    
    53,125
    
    
    $
    1,753,125
    
    
    $
    5,570,125Ira Kaplan(4)
    
    
    0
    
    
    
    0
    
    
    
    0
    
    
    
    0
    
    
    
    21,250
    
    
    $
    701,250
    
    
    $
    701,250Lisa LaFosse(4)
    
    
    0
    
    
    
    0
    
    
    
    0
    
    
    
    0
    
    
    
    18,750
    
    
    $
    618,750
    
    
    $
    618,750
 
 (1)
    
    Pursuant to the Companys 2006 Long Term Incentive Plan and 2007 Long
Term Incentive Plan under the Companys Amended and Restated 1996
Incentive Compensation Plan and Amended and Restated 2005 Incentive
Compensation Plan.(2)
    
    In connection with the Merger, stock-based units were converted into
the right to receive an amount in cash equal to the number of shares
of common stock previously subject to such stock unit, multiplied by
the $33.00 per share merger consideration (or if the stock unit
provides for payments to the extent the value of the shares exceed a
specified reference price, the amount, if any by which the $33.00 per
share merger consideration exceeds such reference price).(3)
    
    The amounts set forth under this Cash Payment column are calculated
based on the actual exercise prices underlying the related options, as
opposed to the weighted average exercise price per share of vested
options.(4)
    
    Mr. Kaplan and Ms. LaFosse purchased Parent common stock during Fiscal
2007. With each share purchased the named executive officers, Mr.
Kaplan and Ms. LaFosse was granted an option to purchase an additional
fully-vested share of Parent common stock at an exercise price of
$10.00 per share.
 Nonqualified Deferred Compensation
  Compensation of Directors
   Fees Earnedor Paid in
    
    
    OptionCash(1)
    
    
    Awards(2)
    
    
    TotalName
    
    ($)
    
    
    ($)
    
    
    ($)Peter P. Copses
    
    
    38,333
    
    
    
    73,600
    
    
    
    111,933Robert J. DiNicola
    
    
    35,333
    
    
    
    111,653
    
    
    
    146,986George G. Golleher
    
    
    35,333
    
    
    
    111,802
    
    
    
    147,135Rohit Manocha
    
    
    38,333
    
    
    
    73,600
    
    
    
    111,933Ron Marshall
    
    
    9,333
    
    
    
    73,600
    
    
    
    82,933Lance Milken
    
    
    38,333
    
    
    
    73,600
    
    
    
    111,933
 
 (1)
    
    Includes annual retainer fees, committee fees and meeting fees earned but not yet paid.(2)
    
    Reflects options to purchase 20,000 shares of Parent common stock granted to each-
non-employee director, valued at $10.00 per share. In addition, Messrs. DiNicola and
Golleher purchased $500,000 of Parent common stock and were granted, fully-vested options to
purchase 50,000 shares of Parent common stock. This column reflects the amounts recognized
for financial statement reporting purposes in Fiscal 2007 for the portion of the fair value
of option awards to purchase Parent common stock granted in Fiscal 2007 in accordance with
FAS 123(R). For a description of the assumptions used in calculating the fair value of
option awards under SFAS No. 123(R), see Note 8 Stock-Options and Stock-Based Compensation of
the notes to our consolidated financial statements. 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 Fiscal
2007. 
 19




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##### Table of Contents



Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters
   Name of Beneficial Owner (1)
    
    Number of Shares
    
    
    Percentage (2)Apollo Management VI, L.P.
    
    
    59,507,500
    (3)
    
    
    98.2Peter P. Copses(3)(4)
    
    
    
    
    
    
    Robert J. DiNicola(5)
    
    
    120,000
    (6)
    
    
    *George G. Golleher(5)
    
    
    120,000
    (6)
    
    
    *Eugene S. Kahn(5)
    
    
    275,000
    (7)
    
    
    *Ira D. Kaplan(5)
    
    
    102,000
    (8)
    
    
    *Rohit Manocha(3) (5)
    
    
    20,000
    (9)Ron Marshall(5)
    
    
    20,000
    (9)
    
    
    *Lance Milken(3)(4)
    
    
    
    
    
    
    Mark Smith(5)
    
    
    275,000
    (10)
    
    
    *Lisa
LaFosse(5)
    
    
    120,000

(11)
    
    
    All officers
and directors as a group (10 persons)
    
    
    1,052,000
    
    
    
    1.8
 
 *
    
    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 persons ownership percentage, but not for purposes of computing.(2)
    
    These percentages are calculated on the basis of 60,571,000 outstanding shares of
Claires Inc.s common stock.(3)
    
    Represents all equity interests of Claires Inc. held of record by controlled
affiliates of Apollo Management VI, L.P. (collectively, Apollo). Apollo Management VI
L.P. has the voting and investment power over the shares held on behalf of Apollo. Each of
Messers. Copses, Manocha and Milken , who have relationships with Apollo, disclaim
beneficial ownership of any shares of Claires Inc. that may be deemed beneficially owned
by Apollo Management VI, L.P., 9 West 57th Street, New York, New York 10019.(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, Kaplan, Manocha, Marshall
and Smith and Ms. LaFosse is c/o Claires Inc., 2400 W . Central Road, Hoffman Estates, IL 60192.(6)
    
    Includes fully-vested options to purchase 70,000 shares of common stock.(7)
    
    Includes 75,000 restricted shares of common stock, which remain subject to forfeiture
pursuant to the terms of the grant, and a fully-vested option to purchase 100,000 shares of
common stock.(8)
    
    Includes a fully-vested option to purchase 51,000 shares of common stock.(9)
    
    Includes a fully-vested option to purchase 20,000 shares of common stock.(10)
    
    Includes 50,000 restricted shares of common stock, which remain subject to forfeiture
pursuant to the terms of the grant, and a fully-vested option to purchase 112,500 shares of
common stock.(11)
    
    Includes a fully vested option to purchase 60,000 shares of
common stock.


20



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##### Table of Contents



Item 13. Certain Relationships and Related Transactions
  Advisory Fee
  Stockholders Agreement
  Executive Offices Lease
  
 Item 14. Principal Accountant Fees and Services
 Relationship With Our Independent Registered Public Accounting Firm
  21




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##### Table of Contents



Fees Paid To Our Independent Registered Public Accounting Firm
  Audit Fees
   Audit-Related Fees
   Tax Fees
  All Other Fees
   Pre-Approval Policies and Procedures
  22




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##### Table of Contents



PART IV.
 
 Item 15. Exhibits, Financial Statement Schedules
 3. Exhibits
 3.1
    
    Articles of Incorporation of Claires Stores, Inc.*3.2
    
    By-laws of Claires Stores, Inc.*3.3
    
    Certificate of Incorporation of Afterthoughts Merchandising Corp.*3.4
    
    By-laws of Afterthoughts Merchandising Corp.*3.5
    
    Certificate of Incorporation of BMS Distributing Corp.*3.6
    
    By-laws of BMS Distributing Corp.*3.7
    
    Certificate of Incorporation of CBI Distributing Corp.*3.8
    
    By-laws of CBI Distributing Corp.*3.9
    
    Articles of Incorporation of Claires Boutiques, Inc.*3.10
    
    By-laws of Claires Boutiques, Inc.*3.11
    
    Certificate of Incorporation of Claires Canada Corp.*3.12
    
    By-laws of Claires Canada Corp.*3.13
    
    Certificate of Incorporation of Claires Puerto Rico Corp.*3.14
    
    By-laws of Claires Puerto Rico Corp.*3.15
    
    Certificate of Incorporation of Sassy Doo!, Inc.*3.16
    
    By-laws of Sassy Doo!, Inc.*4.1
    
    Senior Notes Indenture, dated as of May 29, 2007, between Bauble Acquisition Sub, Inc. and The Bank of New York, as Trustee*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*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*4.4
    
    Senior Notes Supplemental Indenture, dated as of May 29, 2007, by and among Claires 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*4.5
    
    Senior Toggle Notes Supplemental Indenture, dated as of May 29, 2007, by and among Claires 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*4.6
    
    Senior Subordinated Notes Supplemental Indenture, dated as of May 29, 2007, by and among Claires 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*4.7
    
    Form of 9.25% Senior Notes due 2015*4.8
    
    Form of 9.625%/10.375% Senior Toggle Notes due 2015*4.9
    
    Form of 10.50% Senior Subordinated Notes due 2017*
 23




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##### Table of Contents



4.10
    
    Senior Notes Registration Rights Agreement, dated May 29, 2007, by and among Claires Stores, Inc., the Guarantors listed on Schedule I thereto
and Bear, Stearns & Co. Inc., Credit Suisse Securities (USA) LLC, Lehman Brothers Inc., ABN AMRO Incorporated, Mizuho Securities USA Inc. and
Natexis Bleichroeder Inc.*4.11
    
    Senior Subordinated Notes Registration Rights Agreement, dated May 29, 2007, by and among Claires Stores, Inc., the Guarantors listed on
Schedule I thereto and Bear, Stearns & Co. Inc., Credit Suisse Securities (USA) LLC, Lehman Brothers Inc., ABN AMRO Incorporated, Mizuho
Securities USA Inc. and Natexis Bleichroeder Inc.*10.1
    
    Credit Agreement, dated as of May 29, 2007, among Bauble Holdings Corp., Bauble Acquisition Sub, Inc. (to
be merged with and into Claires 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*10.2
    
    Management Services Agreement, dated as of May 29, 2007, among Claires Stores, Inc., Bauble Holdings Corp.
and Apollo Management VI, L.P. and Tri-Artisan Capital Partners, LLC and TACP Investments  Claires LLC*10.3
    
    Claires Inc. Amended and Restated Stock Incentive Plan, dated June 29, 2007*10.4
    
    Standard Form of Option Grant Letter (Target Performance Option and Stretch Performance Option)*10.5
    
    Standard Form of Option Grant Letter (Target Performance Option)*10.6
    
    Standard Form of Director Option Grant Letter*10.7
    
    Employment Agreement with Eugene S. Kahn*10.8
    
    Employment Agreement with Mark Smith*10.9
    
    Employment Agreement with James Conroy*10.10
    
    Amended and Restated Office Lease dated January 1, 2004 between the Company and Rowland Schaefer Associates*10.11
    
    Employment Agreement with John Zimmermann**21.1
    
    Subsidiaries of Claires Stores, Inc.**24
    
    Power of Attorney (included on signature page to Form 10-K filed on April 25, 2008)31.1
    
    Certification of Chief Executive Officer pursuant to Rules 13a-14(a) and 15d-14(a)***31.2
    
    Certification of Chief Financial Officer pursuant to Rules 13a-14(a) and 15d-14(a)***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***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***
 (*)
    
    Filed previously as exhibit to the Registration Statement on Form S-4 (File No. 333-148108) by the
Company on December 17, 2007.(**)
    
    Filed or furnished previously as exhibit to Annual Report on Form 10-K by the Company on April 25, 2008.(***)
    
    Filed herewith.
 24




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##### Table of Contents



SIGNATURES
  CLAIRES STORES, INC.June 2, 2008
    By:
    /s/ Eugene S. KahnEugene S. Kahn, Chief Executive Officer(principal executive officer)June 2, 2008
    By:
    /s/ J. Per BrodinJ. Per Brodin, Senior Vice President and ChiefFinancial Officer (principal financial and
accounting officer) 25