##### 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 3, 2007
 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 No. 1-8899
 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
  Title of each class
    
    Name of each exchange on which registeredCommon Stock, $0.05 par value 
Rights to Purchase Series A Junior 
Participating Preferred Stock
    
    New York Stock Exchange
New York Stock Exchange
  Title of each class
 Class A Common Stock, $0.05 par value
 þ o
 o þ
 þ o
 þ
  þ o o
 o þ
   DOCUMENTS INCORPORATED BY REFERENCE




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##### 



EXPLANATORY NOTE
   TABLE OF CONTENTS
 Item
    
    
    
    Page No.PART III
    
    
    
    
    1Item 10.
    
    Directors, Executive Officers and Corporate Governance
    
    
    1Item 11.
    
    Executive Compensation
    
    
    5Item 12.
    
    Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters
    
    
    30Item 13.
    
    Certain Relationships, Related Transactions and Director Independence
    
    
    32Item 14.
    
    Principal Accounting Fees and Services
    
    
    33PART IV
    
    
    
    
    34Item 15.
    
    Exhibits, Financial Statement Schedules
    
    
    34Signatures
    
    
    
    
    37Ex-31.1 Section 302 Certification of Co-CEOEx-31.2 Section 302 Certification of Co-CEOEx-31.3 Section 302 Certification of CFOEx-32.1 Section 906 Certification of Co-CEOEx-32.2 Section 906 Certification of Co-CEOEx-32.3 Section 906 Certification of CFO




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PART III
 
 ITEM 10. Directors, Executive Officers and Corporate Governance
 Directors and Executive Officers
 Directors
  Director ofthe CompanyName
    
    Age
    
    Position
    
    sinceE. Bonnie Schaefer
    
    
    54
    
    
    Co-Chairman of the Board
and Co-Chief Executive Officer
    
    
    1998Marla L. Schaefer
    
    
    58
    
    
    Co-Chairman of the Board,
Co-Chief Executive Officer and Secretary
    
    
    1990Ira D. Kaplan
    
    
    48
    
    
    Senior Vice President
and Chief Financial Officer
    
    
    1999Bruce G. Miller
    
    
    65
    
    
    Director
    
    
    1983Steven H. Tishman
    
    
    50
    
    
    Director
    
    
    1998Ann Spector Lieff
    
    
    55
    
    
    Director
    
    
    2003Martha Clark Goss
    
    
    57
    
    
    Director
    
    
    2005
 E. Bonnie Schaefer
 Marla L. Schaefer
 Ira D. Kaplan
 Bruce G. Miller
 1




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Steven H. Tishman
 Ann Spector Lieff
 Martha Clark Goss
 Executive officers
  Name
    
    Age
    
    PositionE. Bonnie Schaefer
    
    54
    
    Co-Chairman of the Board and Co-Chief Executive OfficerMarla L. Schaefer
    
    58
    
    Co-Chairman of the Board, Co-Chief Executive Officer and SecretaryIra D. Kaplan
    
    48
    
    Senior Vice President and Chief Financial Officer
 Section 16(a) Beneficial Ownership Reporting Compliance
   2




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Codes of Conduct
 www.clairestores.com
 Membership and Meetings of the Board of Directors and its Committees
   CorporateGovernance andName
    
    Board
    
    Audit
    
    Compensation
    
    NominatingMarla L. Schaefer
    
    Co-ChairE. Bonnie Schaefer
    
    Co-ChairIra D. Kaplan
    
    MemberBruce G. Miller
    
    Member
    
    Chair
    
    Member
    
    MemberSteven H. Tishman
    
    Member
    
    Member
    
    
    
    MemberAnn Spector Lieff
    
    Member
    
    
    
    Member
    
    ChairMartha Clark Goss
    
    Member
    
    Member
    
    Chair
    
    Member
 Committees of the Board of Directors
  Audit Committee www.clairestores.com
 3




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##### Table of Contents



Compensation Committee www.clairestores.com
 Corporate Governance and Nominating Committee
 
    
    identifying individuals qualified to become board members and review and make
recommendations to the full board whether members should stand for re-election at the next
annual meeting of shareholders;
    
    reviewing and approving all related party transactions within the meaning of Item 404 of
Regulation S-K of the Securities Act;
    
    overseeing management continuity planning processes; and
    
    developing and recommending to our board of directors a set of corporate governance
principles applicable to us and our business, including development of corporate governance
guidelines, guidelines for periodic evaluation of the board, its committees and individual
directors, and procedures for submission of director candidates by our shareholders.
 www.clairestores.com
  www.clairestores.com
 Chairman Emeritus
  4




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Corporate Governance
  Communications Between Shareholders and the Board
  Executive Sessions
  Director Independence
  
 ITEM 11. Executive Compensation
 Compensation Discussion and Analysis
  Executive Compensation Philosophy
  Quality of Personnel
 5




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Competitiveness
 Alignment of Interests
 Responsiveness to Circumstances and Understood by Named Executive Officers
 Compliance with Regulatory Guidelines and Sensible Standards of Corporate Governance
 Executive Compensation Administration
   6




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Elements of our Compensation Program
  7




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Base Salary
   AnnualizedFiscal 2006
    
    Fiscal 2007
    
    PercentageBase Salary
    
    Base Salary
    
    IncreaseE. Bonnie Schaefer
    
    $
    800,000
    
    
    $
    900,000
    
    
    
    12.5
    %Marla L. Schaefer
    
    $
    800,000
    
    
    $
    900,000
    
    
    
    12.5
    %Ira D. Kaplan
    
    $
    475,000
    
    
    $
    500,000
    
    
    
    5.26
    %
   Annual Bonuses
  8




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Long-Term Incentive Awards
     9




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Long Term Incentive Plan Grant Practices
   Benefits
  Retirement Plans
  10




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Other Benefits and Perquisites
    Separation and Change in Control Agreements
   11




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Compensation Committee Report
  Members of the Compensation Committee
 
 Summary Compensation Table
  Non-Non-Equity
    
    
    Qualified
    
    
    All OtherName and
    
    
    
    
    
    
    
    
    
    
    
    
    
    Stock
    
    
    Incentive Plan
    
    
    Deferred
    
    
    Compen-Principal
    
    Fiscal
    
    
    Salary
    
    
    Bonus
    
    Awards
    
    
    Compensation
    
    
    Compensation
    
    
    sation
    
    
    TotalPosition
    
    Year
    
    
    ($)
    
    
    ($)
    
    ($)(1)
    
    
    ($)(2)
    
    
    ($)
    
    
    ($)(3)
    
    
    ($)E. Bonnie Schaefer
    
    
    2007
    
    
    $
    900,000
    
    
    
    
    
    
    $
    851,066
    
    
    $
    792,000
    
    
    
    0
    
    
    $
    121,504
    
    
    $
    2,664,570Co-Chairman and
Co-Chief Executive
OfficerMarla L. Schaefer
    
    
    2007
    
    
    
    900,000
    
    
    
    
    
    
    
    851,066
    
    
    
    792,000
    
    
    
    0
    
    
    
    103,207
    
    
    
    2,646,273Co-Chairman and
Co-Chief Executive
Officer
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    00Ira D. Kaplan
    
    
    2007
    
    
    
    500,000
    
    
    
    
    
    
    
    340,426
    
    
    
    280,000
    
    
    
    0
    
    
    
    253,180
    
    
    
    1,373,606Senior Vice
President and Chief
Financial Officer
 
 (1)
    
    This column reflects the aggregate dollar amount recognized for financial statement
reporting purposes for Fiscal 2007 with respect to outstanding performance share awards. The
aggregate dollar amount was determined in accordance with the provisions of SFAS 123(R), but
without regard to any estimate of forfeitures related to service-based vesting conditions. 12




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See Note 6 to our Consolidated Financial Statements in our Form 10-K for Fiscal 2007 regarding
the relevant assumptions underlying these valuations.(2)
    
    Amounts shown in the column were paid pursuant to non-equity compensation arrangements
established by the Committee at the beginning of Fiscal 2007 based on our achievement of
certain increases in levels of EBITDA, SG&A as a percentage of sales, inventory turnover,
markdown percentages of sales and gross margin percentages for Fiscal 2007.(3)
    
    The amounts reported in the All Other Compensation column reflect, for each named executive
officer, the sum of: (i)
    
    the incremental cost to us of the perquisite of the use of a company
automobile, which equaled $6,037 for E. Bonnie Schaefer;(ii)
    
    occasionally, spouses/guests of named executive officers ride along on an
aircraft chartered by us when such plane is already going to a specific destination for
a business purpose, which decreases the portion of the cost that is tax deductible for
us; and in Fiscal 2007 this additional benefit amounted to $15,999 for E. Bonnie
Schaefer;(iii)
    
    the amount of any matching contributions to our 401(k) Plan, which amounted to
$3,300 for E. Bonnie Schaefer, $0 for Marla L. Schaefer and $4,300 for Ira D. Kaplan
and our 2005 Management Deferred Compensation Plan, which amounted to $44,519 for E.
Bonnie Schaefer, $44,519 for Marla L. Schaefer and $24,880 for Ira D. Kaplan;(iv)
    
    the dollar value of life insurance premiums paid by us, which amounted to
$51,649 for E. Bonnie Schaefer and $58,688 for Marla L. Schaefer; and(v)
    
    for Ira D. Kaplan, $224,000 amount was paid in a lump sum as compensation for
unused vacation days.
 Grants of Plan-Based Awards in Fiscal 2007
  Estimated Future Payouts
    
    Estimated Future PayoutsUnder Non-Equity Incentive
    
    Under Equity IncentivePlan Awards (1)
    
    Plan Awards (2)Grant
    
    Threshold
    
    Target
    
    Maximum
    
    Threshold
    
    Target
    
    MaximumName
    
    Date
    
    ($)
    
    ($)
    
    ($)
    
    (#)
    
    (#)
    
    (#)E. Bonnie Schaefer
    
    
    4/27/06
    
    
    $
    405,000
    
    
    $
    1,350,000
    
    
    $
    2,025,000
    
    
    
    37,500
    
    
    
    75,000
    
    
    
    150,000Marla L. Schaefer
    
    
    4/27/06
    
    
    
    405,000
    
    
    
    1,350,000
    
    
    
    2,025,000
    
    
    
    37,500
    
    
    
    75,000
    
    
    
    150,000Ira D. Kaplan
    
    
    4/27/06
    
    
    
    125,000
    
    
    
    500,000
    
    
    
    750,000
    
    
    
    15,000
    
    
    
    30,000
    
    
    
    60,000
 
 (1)
    
    These amounts represent cash bonus amounts payable under the incentive plan. Amounts shown
in the column were paid pursuant to non-equity compensation arrangements established by the
Committee at the beginning of our fiscal year based on our achievement of certain increases in
levels of EBITDA, SG&A as a percentage of sales, inventory turnover, markdown percentages of
sales and gross margin percentages for Fiscal 2007.(2)
    
    These amounts represent performance units granted under the incentive plan. In Fiscal 2007, each of
Ms. E. Bonnie Schaefer and Ms. Marla L. Schaefer were granted 75,000 performance shares and
Ira D. Kaplan was granted 30,000 performance shares. The performance shares may be earned
over a three-year performance period, subject to a vesting schedule of 25%, 25% and 50% over
the three-year period, commencing January 29, 2006 (the Vesting Schedule), and further
subject to achievement of certain performance goals (Share Performance Goals) in the first
year in the three-year vesting cycle previously established by the Committee. The Share
Performance Goals for Fiscal 2007 are subject to targets and associated levels (e.g.
threshold, plan and a maximum level) for participation that could result in performance shares
being issued at 50%, 100% or 200% of the amount of performance shares granted during the
three-year performance period. 13




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Employment Agreements
 Amended and Restated Employment Agreements with Marla L. Schaefer and E. Bonnie Schaefer, our
Co-Chief Executive Officers
     Employment Agreement with Ira D. Kaplan, Our Chief Financial Officer
   14




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Potential Payments Upon Termination or Change in Control
 Employment Agreements with our Co-Chief Executive Officers
 Termination without cause or for good reason.
 Termination in connection with or in anticipation of a change in control.
 15




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Employment through a change in control.
  (a)
    
    the acquisition by any Person of Beneficial Ownership (within the meaning of Rule
13d-3 promulgated under the Exchange Act) of fifty percent (50%) or more of either (1)
our then outstanding shares of common stock (the Outstanding Company Common Stock) or
(2) the combined voting power of our then outstanding voting securities entitled to vote
generally in the election of directors (the Outstanding Company Voting Securities);
provided, however, that for this purpose, the following acquisitions will not constitute
a Change of Control: (w) any acquisition directly from us; (x) any acquisition by us; (y)
 16




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any acquisition by any employee benefit plan (or related trust) sponsored or
maintained by us or any of our Related Entities; or (z) any acquisition by any
corporation pursuant to a transaction which complies with clauses (1), (2) and (3)
of (c) below; or(b)
    
    during any period of two (2) consecutive years (not including any period prior to
the effective date of the 2005 Plan) individuals who constitute the board on the
effective date of the 2005 Plan (the Incumbent Board) cease for any reason to
constitute at least a majority of the board; provided, however, that any individual
becoming a director subsequent to the effective date of the 2005 Plan whose election, or
nomination for election by our shareholders, was approved by a vote of at least a
majority of the directors then comprising the Incumbent Board will be considered as
though such individual were a member of the Incumbent Board, but excluding, for this
purpose, any such individual whose initial assumption of office occurs as a result of an
actual or threatened election contest with respect to the election or removal of
directors or other actual or threatened solicitation of proxies or consents by or on
behalf of a Person other than the board; or(c)
    
    consummation of a reorganization, merger, statutory share exchange or consolidation
or similar corporate transaction involving us or any of our subsidiaries, a sale or other
disposition of all or substantially all of our assets, or the acquisition of assets or
stock of another entity by us or any of our subsidiaries (each a Business Combination),
in each case, unless, following such Business Combination, (1) all or substantially all
of the individuals and entities who were the Beneficial Owners, respectively, of the
Outstanding Company Common Stock and Outstanding Company Voting Securities immediately
prior to such Business Combination beneficially own, directly or indirectly, more than
fifty percent (50%) of, respectively, the then outstanding shares of common stock and the
combined voting power of the then outstanding voting securities entitled to vote
generally in the election of directors, as the case may be, of the corporation resulting
from such Business Combination (including, without limitation, a corporation which as a
result of such transaction owns us or all or substantially all of our assets either
directly or through one or more subsidiaries) in substantially the same proportions as
their ownership, immediately prior to such Business Combination of the Outstanding
Company Common Stock and Outstanding Company Voting Securities, as the case may be, (2)
no Person (excluding any employee benefit plan (or related trust) of ours or such
corporation resulting from such Business Combination or the combined voting power of the
then outstanding voting securities of such corporation except to the extent that such
ownership existed prior to the Business Combination and (3) at least a majority of the
members of the board of directors of the corporation resulting from such Business
Combination were members of the Incumbent Board at the time of the execution of the
initial agreement, or of the action of the board, providing for such Business
Combination; or(d)
    
    approval by our shareholders of our complete liquidation or dissolution.
 Employment Agreement with Ira D. Kaplan
 Termination without cause or for good reason by Mr. Kaplan.
 17




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##### Table of Contents



Termination in connection with a change of control.
    Employment through a change in control.
  18




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Outstanding Equity Awards at End of Fiscal 2007
  Outstanding Equity Awards at February 3, 2007
 Option Awards
    
    Stock AwardsEquityIncentiveEquity
    
    PlanIncentive
    
    Awards:Equity
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Plan
    
    Market orIncentive
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Awards:
    
    PayoutPlan
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Number of
    
    Value ofAwards:
    
    
    
    
    
    
    
    
    
    
    
    
    
    Market
    
    Unearned
    
    UnearnedNumber of
    
    Number of
    
    Number of
    
    
    
    
    
    
    
    
    
    Number of
    
    Value of
    
    Shares,
    
    Shares,Securities
    
    Securities
    
    Securities
    
    
    
    
    
    
    
    
    
    Shares of
    
    Shares of
    
    Units or
    
    Units orUnderlying
    
    Underlying
    
    Underlying
    
    Option
    
    
    
    
    
    Units that
    
    Units of
    
    Other
    
    OtherUnexercised
    
    Unexercised
    
    Unexercised
    
    Exercise
    
    Option
    
    Have Not
    
    Stock that
    
    Rights that
    
    Rights thatOptions (#)
    
    Options (#)
    
    Unearned
    
    Price
    
    Expiration
    
    Vested
    
    Have not
    
    Have Not
    
    Have NotName
    
    Exercisable (1)
    
    Unexercisable
    
    Options (#)
    
    ($)(2)
    
    Date
    
    (#)(3)
    
    Vested ($)(4)
    
    Vested (#)
    
    Vested ($)E. Bonnie Schaefer
    
    
    50,000
    
    
    
    0
    
    
    
    0
    
    
    $
    10.19
    
    
    
    12/13/09
    
    
    
    37,500
    (a)
    
    $
    1,293,375
    
    
    
    
    
    
    
    100,000
    
    
    
    0
    
    
    
    0
    
    
    
    18.61
    
    
    
    02/02/14
    
    
    
    9,375
    (b)
    
    
    323,34418,750
    (c)
    
    
    646,688Marla L. Schaefer
    
    
    50,000
    
    
    
    0
    
    
    
    0
    
    
    
    10.19
    
    
    
    12/13/09
    
    
    
    37,500
    (a)
    
    
    1,293,375
    
    
    
    
    
    
    
    100,000
    
    
    
    0
    
    
    
    0
    
    
    
    18.61
    
    
    
    02/02/14
    
    
    
    9,375
    (b)
    
    
    323,34418,750
    (c)
    
    
    646,688Ira D. Kaplan
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    3,750
    (b)
    
    
    129,338
    
    
    
    
    
    
    
    7,500
    (c)
    
    
    258,675
 
 (1)
    
    All of the options described are vested.(2)
    
    The exercise price of the options is calculated based upon the closing price for our common
stock as reported on the New York Stock Exchange (NYSE) for the effective date of the grant.(3)
    
    The following footnotes set forth the vesting dates for the outstanding performance shares
(which generally depends upon continued employment with us): (a)
    
    These restricted stock awards will vest on February 1,
2008 or if earlier, upon a change in control.(b)
    
    These performance shares will vest after we receive our audited financial statements for
the fiscal year ended February 2, 2008 or if earlier, upon a change in control.(c)
    
    These performance shares will vest after we receive our audited financial statements for
the fiscal year ended January 31, 2009 or if earlier, upon a change in control. (4)
    
    The value was calculated based upon the closing price for our common stock as reported on the
New York Stock Exchange (NYSE) on February 3, 2007.


19



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Option Exercises and Stock Vested in Fiscal 2007
  Option Awards
    
    Stock VestingNumber of Shares
    
    The Value of SharesNumber of Shares
    
    
    
    
    
    Acquired Upon
    
    Acquired UponAcquired
    
    Value Realized on
    
    Vesting
    
    VestingName
    
    on Exercise (#)
    
    Exercise ($)
    
    (#)
    
    ($) (1)E. Bonnie Schaefer
    
    
    
    
    
    
    
    
    
    
    37,500
    
    
    $
    1,240,313Marla L. Schaefer
    
    
    100,000
    
    
    $
    1,722,000
    
    
    
    37,500
    
    
    
    1,240,313Ira D. Kaplan
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
 
 (1)
    
    Value is based on the closing price for our common stock as reported on the New
York Stock Exchange (NYSE) on the date of vesting. Nonqualified Deferred Compensation
  Aggregate
    
    AggregateExecutive
    
    Company
    
    Aggregate
    
    Withdrawals/
    
    Balance at LastContribution for
    
    Contribution for
    
    Earnings in
    
    Distributions in
    
    Day of FiscalName
    
    Fiscal 2007 ($)(1)
    
    Fiscal 2007 ($)(1)
    
    Fiscal 2007 ($)(2)
    
    Fiscal 2007 ($)(3)
    
    2007 ($)(4)E. Bonnie Schaefer
    
    $
    19,999.98
    
    
    $
    44,519.23
    
    
    $
    37,591
    
    
    
    0
    
    
    $
    497,154.97Marla L. Schaefer
    
    
    89,038.45
    
    
    
    44,519.23
    
    
    
    135,376
    
    
    
    0
    
    
    
    1,576,098.72Ira D. Kaplan
    
    
    49,759.63
    
    
    
    24,879.81
    
    
    
    112,548
    
    
    
    0
    
    
    
    1,177,177.01
 
 (1)
    
    These contributions are fully vested at all times.(2)
    
    This amount reflects the aggregate of earnings under the 2005 Management Deferred
Compensation Plan and the 1999 Management Deferred Compensation Plan. Calculation of earnings
were calculated based on investments in certain mutual funds.(3)
    
    This amount reflects the aggregate of withdrawals and distributions under the 2005
Management Deferred Compensation Plan and the 1999 Management Deferred Compensation Plan.(4)
    
    This amount reflects the aggregate of the balances of the 2005 Management Deferred
Compensation Plan and the 1999 Management Deferred Compensation Plan. Employee Benefit Plans
 1996 Incentive Compensation Plan
 20




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2005 Incentive Compensation Plan
      22




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24




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25




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(a)
    
    the acquisition by any Person of Beneficial Ownership (within the meaning of Rule
13d-3 promulgated under the Exchange Act) of fifty percent (50%) or more of either (1)
our then outstanding shares of common stock (the Outstanding Company Common Stock) or
(2) the combined voting power of our then outstanding voting securities entitled to vote
generally in the election of directors (the Outstanding Company Voting Securities);
provided, however, that for this purpose, the following acquisitions will not constitute
a Change of Control: (w) any acquisition directly from us; (x) any acquisition by us; (y)
any acquisition by any employee benefit plan (or related trust) sponsored or maintained
by us or any of our Related Entities; or (z) any acquisition by any corporation pursuant
to a transaction which complies with clauses (1), (2) and (3) of (c) below; or(b)
    
    during any period of two (2) consecutive years (not including any period prior to
the effective date of the 2005 Plan) individuals who constitute the board on the
effective date of the 2005 Plan (the Incumbent Board) cease for any reason to
constitute at least a majority of the board; provided, however, that any individual
becoming a director subsequent to the effective date of the 2005 Plan whose election, or
nomination for election by our shareholders, was approved by a vote of at least a
majority of the directors then comprising the Incumbent Board will be considered as
though such individual were a member of the Incumbent Board, but excluding, for this
purpose, any such individual whose initial assumption of office occurs as a result of an
actual or threatened election contest with respect to the election or removal of
directors or other actual or threatened solicitation of proxies or consents by or on
behalf of a Person other than the board; or(c)
    
    consummation of a reorganization, merger, statutory share exchange or consolidation
or similar corporate transaction involving us or any of our subsidiaries, a sale or other
disposition of all or substantially all of our assets, or the acquisition of assets or
stock of another entity by us or any of our subsidiaries (each a Business Combination),
in each case, unless, following such Business Combination, (1) all or substantially all
of the individuals and entities who were the Beneficial Owners, respectively, of the
Outstanding Company Common Stock and Outstanding Company Voting Securities immediately
prior to such Business Combination beneficially own, directly or indirectly, more than
fifty percent (50%) of, respectively, the then outstanding shares of common stock and the
combined voting power of the then outstanding voting securities entitled to vote
generally in the election of directors, as the case may be, of the corporation resulting
from such Business Combination (including, without limitation, a corporation which as a
result of such transaction owns us or all or substantially all of our assets either
directly or through one or more subsidiaries) in substantially the same proportions as
their ownership, immediately prior to such Business Combination of the Outstanding
Company Common Stock and Outstanding Company Voting Securities, as the case may be, (2)
no Person (excluding any employee benefit plan (or related trust) of ours or such
corporation resulting from such Business Combination or the combined voting power of the
then outstanding voting securities of such corporation except to the extent that such
ownership existed prior to the Business Combination and (3) at least a majority of the
members of the board of directors of the corporation resulting from such Business
Combination were members of the Incumbent Board at the time of the execution of the
initial agreement, or of the action of the board, providing for such Business
Combination; or
 26




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##### Table of Contents



(d)
    
    approval by our shareholders of our complete liquidation or dissolution.
  Claires Stores, Inc. 1999 Management Deferred Compensation Plan
      27




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Claires Stores, Inc. 2005 Management Deferred Compensation Plan
       28




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Compensation Committee Interlocks and Insider Participation
  Compensation of Directors
 Cash Component
 Equity Component
 Equity Retention Guidelines
 29




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##### Table of Contents



Fiscal 2007 Board of Directors Compensation (1)
 Fees Earned
    
    
    
    
    
    All Otheror Paid in
    
    Stock
    
    CompensationName
    
    Cash ($)
    
    Awards ($)
    
    ($)
    
    Total ($)Martha Clark Goss
    
    $
    85,000
    
    
    $
    112,148
    (1)
    
    
    0
    
    
    $
    197,148Bruce G. Miller
    
    
    87,000
    
    
    
    112,148
    (1)
    
    
    0
    
    
    
    199,148Steven H. Tishman
    
    
    73,000
    
    
    
    112,148
    (1)
    
    
    0
    
    
    
    185,148Ann Spector Lieff
    
    
    71,500
    
    
    
    112,148
    (1)
    
    
    0
    
    
    
    183,648
 
 (1)
    
    On June 27, 2006, each of our non-employee directors received an annual grant of 4,600
shares of restricted stock, subject to forfeiture in the event the director no longer serves
as a director of ours for any reason, other than as a result of death, disability, or a change
in control, on the earlier to occur of (x) the day prior to the date of the next annual
meeting, or (y) one year from the date of grant. The aggregate dollar amount was determined in
accordance with the provisions of SFAS 123(R), but without regard to any estimate of
forfeitures related to service-based vesting conditions. See Note 6 to our Consolidated
Financial Statements in our Form 10-K for Fiscal 2007 regarding the relevant assumptions
underlying these valuations. Dividends are paid on our common stock, which includes our
restricted stock. 
 ITEM 12. Security Ownership of Certain Beneficial Owners and Management and Related
Stockholder Matters
 Equity Compensation Plan Information
  Number of securitiesremaining available forNumber of securities to
    
    Weighted-average
    
    future issuance underbe issued upon exercise
    
    exercise price of
    
    equity compensation plansof outstanding options,
    
    outstanding options,
    
    (excluding securitieswarrants and rights
    
    warrants and rights
    
    reflected in column (a))Plan Category
    
    (a)
    
    (b)
    
    (c)Equity compensation
plans approved by
security holders
    
    
    484,000
    
    
    $
    16.31
    
    
    
    9,192,709Equity compensation
plans not approved
by security holders
    
    
    
    
    
    
    
    
    
    
    Total
    
    
    484,000
    
    
    
    16.31
    
    
    
    9,192,709
 Security Ownership
  
    
    each person who we know beneficially owns more than 5% of either class of our common
stock;
    
    each director;
    
    each nominee for director;
    
    each named executive officer named in the Summary Compensation Table; and
    
    all of our directors and named executive officers as a group.
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Shares of
    
    
    
    
    
    Shares of Class ACommon Stock
    
    Percent
    
    Common Stock
    
    Percent
    
    Combined PercentName and Address of Beneficial Owner
    
    Beneficially Owned
    
    of Class
    
    Beneficially Owned
    
    of Class
    
    of Voting SecuritiesRowland Schaefer
    
    
    2,764,452
    (1)
    
    
    3.1
    
    
    
    4,475,850
    (5)
    
    
    92.0
    
    
    
    34.7E. Bonnie Schaefer (2)
    
    
    2,906,114
    (3)(4)
    
    
    3.3
    
    
    
    4,475,850
    (5)
    
    
    92.0
    
    
    
    34.8Marla L. Schaefer (2)
    
    
    3,012,551
    (4)(6)
    
    
    3.4
    
    
    
    4,475,850
    (5)
    
    
    92.0
    
    
    
    34.9Royce & Associates, LLC (7)1414 Avenue of the AmericasNew York, NY 10019
    
    
    6,732,920
    (7)
    
    
    7.6
    
    
    
    
    
    
    
    
    
    
    
    4.9Ira D. Kaplan (2)
    
    
    41,200
    
    
    
    *
    
    
    
    
    
    
    
    
    
    
    
    *Bruce G. Miller (8)18 Columbia TurnpikeFlorham Park, NY 07932
    
    
    136,400
    
    
    
    *
    
    
    
    
    
    
    
    
    
    
    
    *Steven H. Tishman (8)c/o Rothschild Inc.1251 Avenue of the Americas51st FloorNew York, NY 10020
    
    
    31,200
    (9)
    
    
    *
    
    
    
    
    
    
    
    
    
    
    
    *Ann Spector Lieff (8)P.O. Box 430330Miami, FL 33243
    
    
    29,200
    (9)
    
    
    *
    
    
    
    
    
    
    
    
    
    
    
    *Martha Clark Goss (8)
    
    
    15,733
    
    
    
    *
    
    
    
    
    
    
    
    
    
    
    
    *All directors and current
named executive officers as
a group (7 persons)
    
    
    3,495,255
    (10)
    
    
    3.9
    
    
    
    4,475,850
    (5)
    
    
    92.0
    
    
    
    35.2
 
 *
    
    Less than 1% of the shares outstanding of such class.(1)
    
    Includes (i) 68,865 shares of common stock held by Schaefer Family Holdings, Inc., (ii)
1,862,362 shares held by Rowland Schaefer Trust U/A/D 2/2/01, (iii) 745,916 shares held by
Sylvia Schaefer Trust, (iv) 86,165 shares held by Schaefer/Wisenthal Partnership, LLLP, and
(v) 1,144 shares held by Schaefer Family Holdings No. 2. Mr. Schaefer disclaims beneficial
ownership of these shares, except to the extent of his pecuniary interest therein. 31




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##### Table of Contents



(2)
    
    The named individual is a director and a named executive officer of the Company.(3)
    
    Includes (i) 150,000 shares subject to currently exercisable stock options, (ii) 75,000
shares of restricted stock, of which 37,500 shares remain subject to forfeiture pursuant to
the terms of the restricted stock grant, and (iii) 3,971 other shares directly owned.(4)
    
    Includes (i) 68,865 shares of common stock held by Schaefer Family Holdings, Inc., (ii)
1,862,362 shares held by Rowland Schaefer Trust U/A/D 2/2/01, and (iii) 745,916 shares held by
The Sylvia Schaefer Trust. Bonnie Schaefer and Marla Schaefer disclaim beneficial ownership of
these shares, except to the extent of their pecuniary interest therein. Excludes 86,165 shares
held by Schaefer/Wisenthal Partnership, LLLP and 1,144 shares held by Schaefer Family Holdings
No. 2 referenced in footnote 1 because neither Bonnie Schaefer nor Marla Schaefer have present
voting or investment control over these shares.(5)
    
    Shares held by the Schaefer A Partnership. Rowland Schafer, Bonnie Schaefer and Marla
Schaefer disclaim beneficial ownership of these shares, except to the extent of their
respective pecuniary interest therein.(6)
    
    Includes (i) 150,000 shares subject to currently exercisable stock options, (ii) 75,000
shares of restricted stock, of which 37,500 shares remain subject to forfeiture pursuant to
the terms of the restricted stock grant, and (iii) 110,408 other shares directly owned.(7)
    
    Based on a Schedule 13G filed on January 19, 2007 with the SEC by Royce & Associates, LLC.(8)
    
    The named individual is a director of the Company.(9)
    
    Includes 20,000 shares subject to currently exercisable stock options.(10)
    
    Includes an aggregate of 340,000 shares issuable upon the exercise of stock options currently
exercisable. 
 ITEM 13. Certain Relationships, Related Transactions and Director Independence
     32




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ITEM 14. Principal Accounting Fees and Services
 Relationship With Our Independent Registered Public Accounting Firm
  Fees Paid To Our Independent Registered Public Accounting Firm
  Audit Fees
  Audit-Related Fees
  Tax Fees
  All Other Fees
  Pre-Approval Policies and Procedures
   33




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##### Table of Contents



PART IV.
 
 Item 15. Exhibits, Financial Statement Schedules
  1. Financial Statements
  2. Financial Statement Schedules
  3. Exhibits
 (2)(a)
    
    Agreement and Plan of Merger dated March 20, 2007 between Bauble Holdings,
Corp., a Delaware corporation, Bauble Acquisition Sub, Inc., a Florida
corporation and a direct wholly-owned subsidiary of Parent and Claires Stores,
Inc., a Florida corporation (incorporated by reference to Exhibit 2.1 to the
Companys Current Report on Form 8-K dated March 22, 2007).(3)(a)
    
    Amended and Restated Articles of Incorporation of Claires Stores, Inc.
(formerly known as CSI Florida Acquisition, Inc.) (incorporated by reference to
Exhibit 3.1 to the Companys Current Report on Form 8-K dated June 30, 2000).(3)(b)
    
    Articles of Amendment to the Amended and Restated Articles of Incorporation of
Claires Stores, Inc. (incorporated by reference to Exhibit 3(c) to the Companys
Annual Report on Form 10-K filed on April 15, 2004).(3)(c)
    
    Amended and Restated Bylaws of Claires Stores, Inc. (incorporated by reference
to Exhibit 3.1 to the Companys Quarterly Report on Form 10-Q filed on December
6, 2006).(4)(a)
    
    Rights Agreement, effective May 30, 2003 between Claires Stores, Inc. and
Wachovia Bank, N.A., as Rights Agent, together with the following exhibits
thereto: Exhibit A  Form of Articles of Amendment Designating the Series A
Junior Participating Preferred Stock of Claires Stores, Inc.; Exhibit B  Form
of Right Certificate; Exhibit C  Summary of Rights to Purchase Shares of
Preferred Shares of Claires Stores, Inc. (incorporated by reference to Exhibit
4.1 to the Companys Registration Statement on Form 8-A filed on June 23, 2003).(4)(b)
    
    First Amendment to Rights Agreement dated as of March 20,
2007 to the Rights Agreement, dated May 30, 2003 by and between Claires
Stores, Inc.
 34




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##### Table of Contents



and American Stock Transfer and Trust Company, as successor to Wachovia
Bank, N.A., as Rights Agent (incorporated by reference to Exhibit 4.1 to
the Companys Current Report on Form 8-K dated March 22, 2006).(4)(c)
    
    Shareholder Agreement dated as of March 20, 2007, among
Bauble Holdings, Corp., a Delaware corporation, Bauble Acquisition Sub, Inc., a
Florida corporation and a direct wholly-owned subsidiary of Parent, and each of
the other parties signatory hereto (incorporated by reference to Exhibit 2.1 to
the Companys Current Report on Form 8-K dated March 22, 2007).(10)(a)
    
    Amended and Restated 1996 Incentive Compensation Plan of the Company
(incorporated by reference to Exhibit 10.1 to the Companys Quarterly Report on
Form 10-Q filed on June 8, 2005 relating to the 2003 Annual Meeting of
Stockholders).(10)(b)
    
    401(k) Profit Sharing Plan, as amended (incorporated by reference to Exhibit
10(e) to the Companys Annual Report on Form 10-K for the fiscal year ended
February 1, 1992).(10)(c)
    
    2005 Management Deferred Compensation Plan effective as of February 4, 2005
(incorporated by reference to Exhibit 10.2 to the Companys Quarterly Report on
Form 10-Q filed on June 8, 2005).(10)(d)
    
    Amended and Restated Office Lease dated January 1, 2004 between the Company
and Rowland Schaefer Associates (incorporated by reference to Exhibit 10(x) to
the Companys Annual Report on Form 10-K filed on April 15, 2004).(10)(e)
    
    Retirement Agreement dated December 2003 between Claires Stores, Inc. and
Rowland Schaefer (incorporated by reference to Exhibit 10(y) to the Companys
Annual Report on Form 10-K filed on April 15, 2004).(10)(f)
    
    Loan and Security Agreement dated March 31, 2004 by and among, the Company,
as lead borrower for BMS Distributing Corp., Claires Boutiques, Inc., CBI
Distributing Corp., and Claires Puerto Rico Corp., Fleet Retail Group, Inc., as
administrative agent for and the revolving credit lenders and other financial
institutions or entities from time to time parties thereto, and Fleet National
Bank as issuer (incorporated by reference to Exhibit 10(z) to the Companys
Annual Report on Form 10-K filed on April 15, 2004).(10)(g)
    
    2005 Incentive Compensation Plan (incorporated by
reference to Exhibit 10 (c) to the Companys Annual Report on Form 10-K filed
on April 13, 2005).(10)(h)
    
    Amended and Restated Employment Agreement dated January
18, 2007 between Claires Stores, Inc., a Florida corporation and Bonnie
Schaefer (incorporated by reference to Exhibit 10.2 to the Companys Current
Report on Form 8-K dated January 19, 2007).(10)(i)
    
    Amended and Restated Employment Agreement dated January
18, 2007 between Claires Stores, Inc., a Florida corporation and Marla
Schaefer
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##### Table of Contents



(incorporated by reference to Exhibit 10.3 to the Companys Current
Report on Form 8-K dated January 19, 2007).(10)(j)
    
    Employment Agreement dated January 18, 2007 between
Claires Stores, Inc., a Florida corporation and Ira Kaplan (incorporated by
reference to Exhibit 10.1 to the Companys Current Report on Form 8-K dated
January 19, 2007).(24)
    
    Power of Attorney (incorporated by reference the Companys Annual
Report on Form 10-K filed on April 19, 2007).Each management contract or compensatory plan or arrangement to be filed
as an exhibit to this report pursuant to Item 14(c) is listed in exhibit
nos. (10)(a), (10)(b), (10)(c), (10)(e), (10)(g), (10)(h), and (10)(i).(31.1)
    
    Certification of Co-Chief Executive Officerpursuant to Rules
13a-14(a) and 15d-14(a).(1)(31.2)
    
    Certification of Co-Chief Executive Officer pursuant to Rules 13a-14(a) and
15d-14(a).(1)(31.3)
    
    Certification of Chief Financial Officer pursuant to Rules 13a-14(a) and
15d-14(a).(1)(32.1)
    
    Certification of Co-Chief Executive Officer pursuant to 18 USC Section 1350, as
adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.(2)(32.2)
    
    Certification of Co-Chief Executive Officer pursuant to 18 USC Section 1350, as
adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.(2)(32.3)
    
    Certification of Chief Financial Officer pursuant to 18 USC Section 1350, as
adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.(2)
 
 (1)
    
    Filed herewith.(2)
    
    Furnished herewith. 36




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##### Table of Contents



SIGNATURES
  CLAIRES STORES, INC.May 25, 2007
    
    By:
    
    /s/Ira D. KaplanIra D. Kaplan, Senior Vice President and Chief
Financial Officer
  May 25, 2007
    
    *Marla L. Schaefer, Co-Chairman of the Board of
Directors (principal co-executive officer and
director)May 25, 2007
    
    *E. Bonnie Schaefer, Co-Chairman of the Board of
Directors (principal co-executive officer and
director)May 25, 2007
    
    *Ira D. Kaplan, Senior Vice President, Chief
Financial Officer and Director (principal
financial and accounting officer and director)May 25, 2007
    
    *Martha Clark Goss, DirectorMay 25, 2007
    
    *Ann Spector Lieff, DirectorMay 25, 2007
    
    *Bruce G. Miller, Director
 37




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##### Table of Contents



May 25, 2007
    
    *Steven H. Tishman, Director
 
  By:
    
    /s/  Ira D. KaplanIra D. KaplanAttorney-in-fact
 38




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##### Table of Contents



INDEX TO EXHIBITS
 EXHIBIT NO.
    
    DESCRIPTION31.1
    
    Certification of Co-Chief Executive Officer pursuant to Rule 13a-14(a) and
15d-14(a).31.2
    
    Certification of Co-Chief Executive Officer pursuant to Rule 13a-14(a) and
15d-14(a).31.3
    
    Certification of Chief Financial Officer pursuant to Rule 13a-14(a) and
15d-14(a).32.1
    
    Certification of Co-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 Co-Chief Executive Officer pursuant to 18 USC Section
1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.32.3
    
    Certification of Chief Financial Officer pursuant to 18 USC Section 1350,
as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
 39