Document:

exv10w12

Exhibit 10.12

Ref:

Ref: Global Banking — Consumer and Retail Group (Level 18)

Strictly Private & Confidential

The Talbots Inc

The Talbot’s Group, Limited Partnership

c/o 175 Beal Street

Hingham MA 02043-9982

USA

	 	 	 	 	 
	     Attn:

	 	Mr Edward L Larsen
	 	21 April 2008
	 

	 	Chief Financial Officer and Treasurer	 	 

Dear Mr Larsen

Re : Withdrawal of Banking Facilities

Further to our recent discussions, and to our withdrawal letter dated 8 April 2008, we are
pleased to confirm that your proposed changes to the reduction schedule are acceptable to us.
Thus, the following reduction schedule will become effective immediately upon our receipt of
your acknowledgement of this letter:

Uncommitted Import Letter of Credit Facility

	 	 	 	 	 
	Amount	 	 	 	 
	Outstanding	 	Previous Limit	 	New Limit
	USD43,253,935.61

	 	USD60,000,000.-
	 	USD60,000,000.-*

 

* This Uncommitted Import Letter of Credit Facility Limit will be reduced to USD40,000,000.- on 9
June 2008, USD20,000,000.- on
8 July 2008 and be cancelled
on 8 August 2008.

Any further advances we may approve will be considered on a case by case basis and will be at our
absolute discretion.

The amounts currently outstanding, and any further advances we may grant from time to time, will
remain subject to our customary overriding right of repayment upon demand and will continue to be
subject to any security held by ourselves.

Nothing in this letter should be construed as waiving any of our rights all of which we
hereby expressly reserve.

The Hongkong and Shanghai Banking Corporation Limited

Hong Kong
Main Office: 1 Queen’s Road Central, Hong Kong

Tel: 2822 1111 Fax:

Telex: 73205 HSBC HK Telegrams: Hongbank Hongkong

Web: www.hsbc.com.hk

 

Ref:

Please acknowledge your acceptance of the abovementioned arrangements by signing the
duplicate of this letter and returning it to us. Should we not receive your acknowledgement by 5
May 2008, the reduction schedule set out in our previous letter of 8 April 2008 will continue to
apply.

Yours faithfully

	 	 	 	 	 
	 

	 	/s/ Oliver
JonesOliver jones

Regional Relationship Manager

	 	 

ACKNOWLEDGEMENT

The Talbots Inc hereby acknowledges its acceptance of the reduction schedule and other
arrangements set out in this letter.

	 	 	 	 	 
	 

	 	/s/ Edward L. Larsen
	 	 
	 

	 	 	 	 
	 	 	Signed for and on behalf of The Talbot Inc by its Authroised Signatory
	 
	 	 	 	 
	 

	 	Edward L. Larsen	 	 
	 

	 	 	 	 
	 

	 	Name	 	 
	 
	 	 	 	 
	 

	 	Sr. VP & CFO	 	 
	 

	 	 	 	 
	 

	 	Title	 	 
	 
	 	 	 	 
	 

	 	April 24, 2008	 	 
	 

	 	 	 	 
	 

	 	Date	 	 

The Hongkong and Shanghai Banking Corporation Limited

Hong Kong Main Office: 1 Queen’s Road Central, Hong Kong

Tel: 2822 1111 Fax:

Telex: 73205 HSBC HK Telegrams: Hongbank Hongkong

Web: www.hsbc.com.hkEx-10.1 Joan Munnelly Employment Agreement

Exhibit 10.1

EMPLOYMENT AGREEMENT

     THIS EMPLOYMENT AGREEMENT (this “Agreement”) is entered as of May 29, 2008, by and
between Claire’s Stores, Inc., a Florida corporation (the “Company”), and Joan Munnelly
(the “Executive”).

     WHEREAS, the Company desires to employ the Executive on the terms and subject to the
conditions set forth herein and the Executive has agreed to be so employed.

     NOW, THEREFORE, in consideration of the mutual representations, warranties, covenants and
agreements set forth herein, and for other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties hereto, intending to be legally bound,
agree as follows:

1.      Employment of Executive; Duties.

     1.1 Title. During the Employment Period (as defined in Section 2 hereof), the
Executive shall serve as the Chief Merchandise Officer of the Company.

     1.2 Duties.

     (a) During the Employment Period, the Executive shall have such executive and
managerial powers and duties as may be assigned to the Executive by the Chief Executive
Officer, the Chairman of the Board (the “Chairman”), or the Board of Directors (the
“Board”) of the Company, commensurate with the Executive’s position as Chief Merchandise
Officer, and shall report to the Chief Executive Officer, Chairman or the Board. The Board
or the Chief Executive Officer may adjust the duties and responsibilities of the Executive
as Chief Merchandise Officer of the Company, notwithstanding the specific title set forth
in Section 1.1 hereof, based upon the Company’s needs from time to time. Except for sick
leave, reasonable vacations and excused leaves of absence, the Executive shall, throughout
the Employment Period, devote the whole of the Executive’s working time, attention,
knowledge and skills faithfully, and to the best of the Executive’s ability, to the duties
and responsibilities of the Executive’s positions in furtherance of the business affairs
and activities of the Company and its subsidiaries and Affiliates (as defined in Section
5.4(a) hereof).

     (b) During the Employment Period, the Executive’s principal place of employment shall
be at the Company’s office in Hoffman Estates, Illinois. The Executive shall relocate to
the greater Chicago Metropolitan area.

     (c) The Executive shall at all times be subject to, comply with, observe and carry out
(i) the Company’s rules, regulations, policies and codes of ethics and/or conduct
applicable to its employees generally and in effect from time to time and (ii) such rules,
regulations, policies, codes of ethics and/or conduct, directions and restrictions as the
Board may from time to time reasonably establish or approve generally for senior executive
officers of the Company.

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     1.3 Office and Facilities

     (a) The Company shall provide the Executive with appropriate offices and with
such secretarial and other support facilities as are commensurate with Executive’s status
with 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 June
3, 2008 (the date of such commencement, the “Effective Date”). This Agreement shall govern
the 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 year
periods unless either party provides written notice (a “Notice of Non-Renewal”) at least
ninety (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 this
Agreement 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 annual
base salary in an amount equal to $525,000 (such base salary, as may be adjusted from time
to 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 payroll
practices and procedures in effect from time to time for the payment of salaries to
officers 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, based
on such review, may change the Base Salary, as it, acting in its sole discretion, shall
determine to be reasonable and appropriate.

     3.2 Bonus.

     (a) Upon commencement of employment, the Executive will be entitled to receive a
one-time relocation bonus of $100,000. This relocation bonus will be paid with the first
regular payroll date following the Effective Date. If the Executive’s employment
terminates under Section 4.4 prior to the first anniversary of the Effective Date, the
Executive 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 the
Effective Date but prior to the second anniversary of the Effective Date, the Executive
shall be required to repay to the Company 50% of the relocation bonus in this Section
3.2(a).

     (b) Pursuant to the Company’s Annual Incentive Plan (the “AIP”), with respect
to each fiscal year of the Company that begins after February 2, 2008 and that ends during
the Employment Period, the Executive shall be eligible to receive from the

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Company an annual performance bonus (the “Annual Bonus”), prorated as
applicable, based upon the attainment of annual goals established by the Board, which may
include comparable store sales, earnings before interest, taxes, depreciation and
amortization (“EBITDA”) and/or cash generation goals. The Executive’s target
Annual Bonus shall be seventy-five percent (75%) of the Executive’s Base Salary if the
targeted levels of performance to be determined by the Company for the applicable year are
met. Any Annual Bonus earned shall be payable in full as soon as reasonably practicable
following the determination thereof, but in no event later than April 15 of the following
year (unless administratively impracticable to do so because 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 the foregoing language, but subject to
the last sentence of this Section 3.2(b), with respect to the fiscal year ending January
31, 2009, the Executive will receive a minimum Annual Bonus of $196,875. Except as
otherwise expressly provided in the AIP and Section 4 hereof, any Annual Bonus (or portion
thereof) payable under this Section 3.2(b) shall not be earned and payable unless the
Executive is employed by the Company on the last day of the period to which such Annual
Bonus relates, provided that no Annual Bonus for any preceding period shall be payable if
the 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 the
other provisions of this Section 3 or elsewhere herein, the Executive shall be entitled to
receive reimbursement from the Company for all reasonable and necessary expenses incurred
by the Executive during the Term in performing the Executive’s duties hereunder on behalf
of the Company, subject to, and consistent with, the Company’s practices for expense
payment and reimbursement for senior executives, in effect from time to time. The Company
shall pay the professional expenses incurred by Executive in connection with the
negotiation and documentation of this Agreement (including all Exhibits thereto) up to a
maximum of $5,000.00.

     (b) For a period of up to six (6) months following the Effective Date, the Executive
shall also be entitled to reimbursement for lodging and transportation expenses between the
Chicago area and the Executive’s principal residence in Blacklick, Ohio, subject to the
submission of supporting documentation for such expenses in accordance with the Company’s
standard policies. In addition, the Executive will be entitled to reimbursement for
customary relocation expenses under the Company’s relocation policy, but not subject to the
repayment obligations under such relocation policy. Expense reimbursement amounts
described in this section 3.3(b) for relocation costs shall be grossed-up to the extent
includable in Executive’s income.

     3.4 Benefits.

     (a) During the Employment Period, in addition to any amounts to which the Executive
may be entitled pursuant to the other provisions of this Section 3 or elsewhere herein, the
Executive shall be entitled to participate in, and to receive benefits under, any benefit
plans, arrangements or policies made available by the Company to its

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senior executive officers generally, subject to and on a basis consistent with the
terms, conditions and overall administration of each such plan, arrangement or policy.

     (b) During the Employment Period, the Company shall provide the Executive with a
Company automobile or pay a monthly automobile allowance commensurate with other executives
at the Executive’s level. The Company shall pay all operating and maintenance expenses of
the 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 stock
options to employees or directors of the Company or of any subsidiary of the Company to
purchase 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 shall
be granted nonqualified options to purchase 375,000 shares of Common Stock at a price per
share equal to $10 for its shares on the terms set forth in the Option Grant Letter
attached hereto as Exhibit B and incorporated herein by reference (the “Option
Letter”).

     3.6 Stock Investment.

     (a) On or shortly after the Effective Date, the Executive shall have the opportunity
to 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 the
terms set forth in the Stock Letter attached hereto as Exhibit C.

     (b) Upon completion of the Stock Purchase, the Executive shall be granted an
additional fully vested nonqualified stock option to purchase 30,000 shares of Common Stock
at 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 the
provisions of this Section 4.

     4.2 Death or Disability of the Executive.

     (a) The employment of the Executive hereunder (and the Employment Period) shall
terminate upon (i) the death of the Executive and (ii) at the option of the Company, upon
not less than fifteen (15) days’ prior written notice to the Executive or the Executive’s
personal representative or guardian, if the Executive suffers a “Total Disability” (as
defined in Section 4.2(b) hereof). Upon termination for death or Total Disability, the
Company shall pay to the Executive, guardian or personal representative, as the case may
be, a prorated share of the Annual Bonus pursuant to Section 3.2(b)

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hereof (based on the period of actual employment) that the Executive would have been
entitled 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 such
termination. Any bonus shall be payable as soon as reasonably practicable following the
determination thereof, but in no event later than April 15 of the following year (unless
administratively impracticable to do so because 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.

     (b) For purposes of this Agreement, “Total Disability” shall mean (i) if the
Executive is subject to a legal decree of incompetency (the date of such decree being
deemed the date on which such disability occurred), (ii) the written determination by a
physician selected by the Company and acceptable to Executive (which acceptance shall not
be unreasonably withheld), (which expense shall be paid by the Company) that, because of a
medically determinable disease, injury or other physical or mental disability, the
Executive is unable substantially to perform, with or without reasonable accommodation, the
material duties of the Executive required hereby, and that such disability has lasted for
ninety (90) consecutive days or any one hundred twenty (120) days during the immediately
preceding twelve (12)-month period or is, as of the date of determination, reasonably
expected to last six (6) months or longer after the date of determination, in each case
based upon medically available reliable information or (iii) Executive’s qualifying for
benefits under the Company’s long-term disability coverage, if any. In conjunction with
determining mental and/or physical disability for purposes of this Agreement, the Executive
hereby consents to (x) any examinations that the Company reasonably determines are relevant
to a determination of whether the Executive is mentally and/or physically disabled or are
required by the Company physician, (y) furnish such medical information as may be
reasonably requested and (z) waive any applicable physician patient privilege that may
arise because of such examination. All expenses incurred by the Executive under this
subsection shall be paid by the Company.

     4.3 Termination by the Company Without Cause, Non-Renewal of the Agreement  by the
Company, Resignation by the Executive For Good Reason or in the  event of a Change of
Control.

     (a) The Company may terminate the Executive’s employment without “Cause” (as defined
in Section 4.3(f)), and thereby terminate the Executive’s employment (and the Employment
Period) 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 by
providing a Notice of Non-Renewal pursuant to Section 2 hereof.

     (b) The Executive may resign, and thereby terminate the Executive’s employment (and
the 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 Company
specifying in reasonable detail the reason therefore; provided, however,
that the Company shall have a reasonable opportunity to cure any such Good Reason (to the
extent possible) within such thirty (30) day notice period after the Company’s receipt of

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such notice; and provided further that, if the Company is not seeking
to cure, the Company shall not be obligated to allow the Executive to continue working
during such period and may, in its sole discretion, accelerate such termination of
employment (and the Employment Period) to any date during such period. Executive may not
terminate employment under this Agreement for Good Reason regarding any of the Company’s
acts or omissions of which Executive had actual notice for sixty (60) days or more prior to
giving notice of termination for Good Reason.

     (c) In the event the Executive’s employment is terminated pursuant to this Section
4.3, 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 which
the Executive would have been entitled pursuant to Section 3.1 hereof (at the Base
Salary rate during the year of termination) for a twelve (12)-month period following
such date of termination, with all such amounts payable in accordance with the
Company’s normal payroll practices and procedures in the same manner and at the same
time as though the Executive remained employed by the Company.

     (ii) If such termination occurs upon or within eighteen (18) months following a
Change of Control (as defined in Exhibit B attached hereto), the Company shall
continue to pay the Executive the Base Salary to which the Executive would have been
entitled pursuant to Section 3.1 hereof (at the Base Salary rate during the year of
termination) for the greater of (A) a twelve (12)-month period following such date
of termination or (B) the period until the end of the then remaining Term, with all
such amounts payable in accordance with the Company’s normal payroll practices and
procedures in the same manner and at the same time as though the Executive remained
employed 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 in
the Executive’s Base Salary and the base salary of all senior executives of the
Company, which reductions were substantially similar, then the Base Salary rate for
purposes of Section 4.3(c)(i) or (ii) hereof shall be the Base Salary rate in effect
immediately prior to such reductions.

     (iv) The Company shall pay to the Executive a prorated share of the Annual
Bonus 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 full
year during which the termination occurred, based on actual performance of the
Company for the year of such termination. The bonus shall be payable as soon as
reasonably practicable following the determination thereof, but in no event later
than April 15 of the following year (unless administratively impracticable to do so
because 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 terminated
pursuant to Section 4.3 prior to the conclusion of the fiscal period ending January
31, 2009, the Company may

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prorate the amount of the Annual Bonus the executive is entitled to receive to
account for the early termination, but it may not prorate the amount due on account
of the fact that the executive’s employment commenced after the beginning of the
fiscal period ending January 31, 2009.

     (v) If the Executive elects continuation coverage (with respect to the
Executive’s coverage and/or any eligible dependent coverage) under the Consolidated
Omnibus Budget Reconciliation Act of 1986 (“COBRA Continuation Coverage”)
with respect to the Company’s group health insurance plan, the Executive shall be
responsible for payment of the monthly cost of COBRA Continuation Coverage. Unless
prohibited by law, the Company shall reimburse the Executive for any portion of the
monthly cost of COBRA Continuation Coverage that exceeds the amount of the monthly
health insurance premium (with respect to the Executive’s coverage and/or any
eligible dependent coverage) payable by the Executive immediately prior to the date
of Executive’s termination, such reimbursements to continue (A) for a period of
twelve (12) months or (B) in the event that the Executive’s Base Salary is being
paid pursuant to Section 4.3(c)(ii), for the period set forth therein. The Company
shall pay the reimbursements on a monthly basis in accordance with the Company’s
normal payroll practices and procedures.

     (d) As a condition precedent to the Executive’s right to receive the benefits set
forth in Section 4.3(c) hereof, the Executive agrees to execute a release of the Company
and its respective Affiliates, officers, directors, stockholders, employees, agents,
insurers, representatives and successors from and against any and all claims that the
Executive may have against any such Person (as defined in Section 5.4(f) hereof) relating
to the Executive’s employment by the Company and the termination thereof, in the form
attached hereto as Exhibit D, as such form may be amended from time to time to comply with
changes in law.

     (e) For purposes of this Agreement, the Executive would be entitled to terminate the
Executive’s employment for “Good Reason” if without the Executive’s prior written
consent:

     (i) the Company fails to comply with any material obligation imposed by this
Agreement;

     (ii) a significant reduction in the Executive’s position, title or duties as
set forth in Section 1.2 of this Agreement, subject, however, to the terms and
conditions set forth in Section 1.2, or if the Executive fails to report to the
Chief Executive Officer, Chairman, or the Board;

     (iii) the Company effects a reduction in the Executive’s Base Salary, unless
all senior executives of the Company receive a substantially similar reduction in
base salary; or

     (iv) the Company requires the Executive to be based (excluding regular travel
responsibilities) at any office or location more than 75 miles outside of
Hoffman Estates, Illinois, provided that the Executive had previously relocated
to the greater Chicago metropolitan area.

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     (f) For purposes of this Agreement, “Cause” means the occurrence of any one or more of
the following events:

     (i) an act of fraud, embezzlement, theft or any other material violation of law
that 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 contrary
to 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 of
Executive’s duty of loyalty or of your obligations under this Agreement;

     (vi) material breach of any of material the Company’s policy that has been
communicated to the Executive in writing;

     (vii) the willful and continued failure to substantially perform Executive’s
duties for the Company (other than as a result of incapacity due to physical or
mental illness); or

     (viii) willful conduct by Executive that is demonstrably and materially
injurious 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 bad
faith or without a reasonable belief that Executive’s action or omission was in the best
interest 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 Election
Not to Extend the Term by the Executive.

     (a) (i) the Company may, upon action of the Board, terminate the employment of the
Executive (and the Employment Period) at any time for “Cause,” (ii) the Executive may
voluntarily resign other than for Good Reason and thereby terminate the Executive’s
employment (and the Employment Period) under this Agreement at any time upon not less than
thirty (30) days’ prior written notice or (iii) the Executive may provide a Notice of
Non-Renewal pursuant to Section 2 hereof, in which case the Executive’s employment will
terminate upon expiration of the Term.

     (b) Upon termination by the Company for Cause, by the Executive as the result of
resignation for other than for Good Reason, or by the Executive at the end of

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the Term following a Notice of Non-Renewal provided by the Executive, the Executive
shall be entitled to receive all amounts of earned but unpaid Base Salary and benefits
accrued and vested through the date of such termination.

     (c) Before the Company may terminate the Executive for Cause pursuant to Section
4.4(a)(i), the Board shall deliver to the Executive a written notice of the Company’s
intent to terminate the Executive for Cause, and the Executive shall have been given a
reasonable opportunity to cure any such acts or omissions (which are susceptible of cure as
reasonably determined by the Board by majority vote thereof) within thirty (30) days after
the Executive’s receipt of such notice.

     4.5 Resignation from Officer Positions. Upon the termination of the Executive’s
employment 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, from
any and all officer, director and/or director positions that the Executive, immediately prior to
such termination, (a) held with the Company or any of its Affiliates and (b) held with any other
entities at the direction of, or as a result of the Executive’s affiliation with, the Company or
any of its Affiliates. If for any reason this Section 4.5 is deemed to be insufficient to
effectuate such resignations, then Executive will, upon the Company’s request, execute any
documents or instruments that the Company may deem necessary or desirable to effectuate such
resignations.

     4.6 Section 409A of the Code. Notwithstanding anything to the contrary in this
Agreement, the parties mutually desire to avoid adverse tax consequences associated with the
application of Section 409A of the Code to this Agreement and agree to cooperate fully and take
appropriate reasonable actions that preserve to the Executive, to the maximum extent practical, the
full economic benefit of this Agreement while avoiding any such consequences under Section 409A of
the Code, including delaying payments and reforming the form of the Agreement if such action would
reduce or eliminate taxes and/or interest payable as a result of Section 409A of the Code. In this
regard, notwithstanding anything to the contrary in this Section 4, to the extent necessary to
comply with Section 409A of the Code, any payment required under this Section 4 shall be deferred
for a period of six (6) months, regardless of the circumstances giving rise to or the basis for
such 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 Company
promises 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 Executive
recognizes that the Company’s business interests require a confidential relationship
between the Company and the Executive and the fullest practical protection and confidential
treatment of all Confidential Information. At all times, both during and after the
Employment 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 any
media 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 a
majority 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 Information
to any of the Company Parties (as defined in Section 5.4(b) hereof).

     (b) All Confidential Information, and all other information and property affecting or
relating to the business of the Company Parties within the Executive’s possession, custody
or control, regardless of form or format, shall remain, at all times, the property of the
respective Company Parties, the appropriation, use and/or disclosure of which is governed
and restricted by this Agreement.

     (c) The Executive acknowledges and agrees that:

     (i) the Executive occupies a unique position within the Company, and the
Executive is and will be intimately involved in the development and/or
implementation of Confidential Information;

     (ii) in the event the Executive breaches this Section 5.1 with respect to any
Confidential Information, such breach shall be deemed to be a Misappropriation of
such Confidential Information; and

     (iii) any Misappropriation of Confidential Information will result in immediate
and 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 Confidential
Information to any Person, the Executive shall promptly and timely notify the Company and
provide a description and, if applicable, hand deliver a copy of such request to the
Company. The Executive irrevocably nominates and appoints the Company as the Executive’s
true and lawful attorney-in-fact to act in the Executive’s name, place and stead to perform
any act that the Executive might perform to defend and protect against any disclosure of
Confidential Information.

     (e) At any time the Company may request, during or after the Employment Period, the
Executive shall deliver to the Company all originals and copies of Confidential Information
and all other information and property affecting or relating to the business of the Company
Parties within the Executive’s possession, custody or control, regardless of form or
format, including, without limitation any Confidential Information produced by the
Executive. Both during and after the Employment Period, the Company shall have the right
of reasonable access to review, inspect, copy and/or confiscate any Confidential
Information within the Executive’s possession, custody or control.

     (f) Upon termination or expiration of this Agreement, the Executive shall immediately
return to the Company all Confidential Information, and all other information and property
affecting or relating to the business of the Company Parties, within the Executive’s
possession, custody or control, regardless of form or format, without the necessity of a
prior Company request.

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     (g) During the Employment Period, the Executive represents and agrees that the
Executive will not use or disclose any confidential or proprietary information or trade
secrets of others, including but not limited to former employers, and that the Executive
will not bring onto the premises of the Company or access such confidential or proprietary
information 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 this
Agreement and the terms contained herein confidential, and will not disclose this Agreement
or 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 legal
process, without the Company’s consent, except as necessary to enforce its terms or as may
be required by law.

     5.2 Work Product/Intellectual Property.

     (a) Assignment. The Executive hereby assigns to the Company all right, title
and interest to all “Work Product” (as defined in Section 5.4(h) hereof) that (i) relates
to any of the Company Parties’ actual or anticipated business, research and development or
existing or future products or services, or (ii) is conceived, reduced to practice,
developed or made using any equipment, supplies, facilities, assets, information or
resources of any of the Company Parties (including, without limitation, any intellectual
property rights).

     (b) Disclosure. The Executive shall promptly disclose Work Product to the
Board and perform all actions reasonably requested by the Company (whether during or after
the Employment Period) to establish and confirm the ownership and proprietary interest of
any of the Company Parties in any Work Product (including, without limitation, the
execution of assignments, consents, powers of attorney, applications and other
instruments). The Executive shall not file any patent or copyright applications related to
any 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 Executive
as stated in Section 5.1 hereof, and other good and valuable new consideration as stated in
this Agreement, including, without limitation, employment and/or continued employment with
the Company, and the business relationships, Company goodwill, work experience, client,
customer and/or vendor relationships and other fruits of employment that the Executive will
have the opportunity to obtain, use and develop under this Agreement, the Executive agrees
to 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 or
indirectly, on the Executive’s own behalf or on the behalf of any other Person, within the
United States of America or in any other country or territory in which the businesses of
the 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, being
employed by, providing services as a consultant or independent contractor to or
participating in the ownership, management, operation or control of any Competing
Business;

     (ii) induce or attempt to induce any customer, vendor, supplier, licensor or
other Person in a business relationship with any Company Party, for or with which
the Executive or employees working under the Executive’s supervision had any direct
or indirect responsibility or contact during the Employment Period, (A) to do
business with a Competing Business or (B) to cease, restrict, terminate or otherwise
reduce business with the Company for the benefit of a Competing Business, regardless
of whether the Executive initiates contact; or

     (iii) (A) solicit, recruit, persuade, influence or induce, or attempt to
solicit, recruit, persuade, influence or induce anyone employed or otherwise
retained by any of the Company Parties (including any independent contractor or
consultant), to cease or leave their employment or contractual or consulting
relationship with any Company Party, regardless of whether the Executive initiates
contact for such purposes or (B) hire, employ or otherwise attempt to establish, for
any Person, any employment, agency, consulting, independent contractor or other
business relationship with any Person who is or was employed or otherwise retained
by any of the Company Parties (including any independent contractor or consultant).

     (c) The parties hereto acknowledge and agree that, notwithstanding anything in Section
5.3(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 Section
5.3(b)(i), as long as with respect to each such investment the securities held by the
Executive do not exceed five percent (5%) of the outstanding securities of such Person and
such securities are publicly traded and registered under Section 12 of the Securities
Exchange Act of 1934, as amended (the “Exchange Act”), and (ii) the Executive may
serve on the board of directors (or other comparable position) or as an officer of any
entity at the request of the Board; provided, however, that in the case of
investments otherwise permitted under clause (i) above, the Executive shall not be
permitted to, directly or indirectly, participate in, or attempt to influence, the
management, direction or policies of (other than through the exercise of any voting rights
held 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, such
being the agreements concerning Confidential Information and other consideration as stated
in this Agreement, (ii) at the time that these restrictive covenants are made, the
limitations as to time, geographic scope and activity to be restrained, as described
herein, are reasonable and do not impose a greater restraint than necessary to protect the
good 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 business
productivity, (iii) in the event of termination of the Executive’s employment, the
Executive’s experiences and capabilities are such that the Executive can obtain gainful
employment without violating this Agreement and without the Executive incurring undue
hardship, (iv) based on the relevant benefits and other new consideration provided for in
this Agreement, including, without limitation, the disclosure and use of Confidential
Information, the restrictive covenants of this Section 5.3, as applicable according to
their terms, shall remain in full force and effect even in the event of the Executive’s
involuntary termination from employment, with or without Cause and (v)the Executive has
carefully read this Agreement and has given careful consideration to the restraints imposed
upon the Executive by this Agreement and consents to the terms of the restrictive covenants
in this Section 5.3, with the knowledge that this Agreement may be terminated at any time
in accordance with the provisions hereof.

     5.4 Definitions. For purposes of this Agreement, the following terms shall have the
following meanings:

     (a) An “Affiliate” of any specified Person means any other Person, whether now
or hereafter existing, directly or indirectly controlling or controlled by, or under direct
or indirect common control with, such specified Person. For purposes hereof, “control” or
any other form thereof, when used with respect to any Person, means the power to direct the
management and policies of such Person, directly or indirectly, whether through the
ownership 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 specialty
retail chain, which chain derives 15% or more of its revenue for the trailing 12 months
from the sale of costume jewelry or accessories targeted to girls or women seeking
merchandise similar to the merchandise sold at the Company’s stores with an average ticket
unit retail of $15 or less.

     (d) Confidential Information.

     (i) Definition. “Confidential Information” means any and all
material, information, ideas, inventions, formulae, patterns, compilations,
programs, devices, methods, techniques, processes, know how, plans (marketing,
business, strategic, technical or otherwise), arrangements, pricing and other data
of or relating to any of the Company Parties (as well as their customers and/or
vendors) 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 the
disclosure of which would have a material adverse effect on the business or planned
business 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 the
public domain, (B) that has been lawfully and independently developed and publicly
disclosed by third parties, (C) that constitutes the general non-specialized
knowledge 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 of
Confidential Information by the Executive, directly or indirectly, shall not affect
the protection and relief afforded by this Agreement regarding such information.

     (iii) Inclusions. Confidential Information includes, without
limitation, the following information (including without limitation, compilations or
collections of information) relating or belonging to any Company Party (as well as
their clients, customers and/or vendors) and created, prepared, accessed, used or
reviewed by the Executive during or after the Employment Period: (1) product and
manufacturing information, such as ingredients, combinations of ingredients and
manufacturing processes; (2) scientific and technical information, such as research
and development, tests and test results, formulae and formulations, studies and
analysis; (3) financial and cost information, such as operating and production
costs, costs of goods sold, costs of supplies and manufacturing materials,
non-public financial statements and reports, profit and loss information, margin
information and financial performance information; (4) customer related information,
such as customer related contracts, engagement and scope of work letters, proposals
and presentations, customer-related contacts, lists, identities and prospects,
practices, plans, histories, requirements and needs, price information and formulae
and information concerning client or customer products, services, businesses or
equipment specifications; (5) vendor and supplier related information, such as the
identities, practices, history or services of any vendors or suppliers and vendor or
supplier contacts; (6) sales, marketing and price information, such as marketing and
sales programs and related data, sales and marketing strategies and plans, sales and
marketing procedures and processes, pricing methods, practices and techniques and
pricing schedules and lists; (7) database, software and other computer related
information, such as computer programs, data, compilations of information and
records, software and computer files, presentation software and computer-stored or
backed-up information including, but not limited to, e-mails, databases, word
processed documents, spreadsheets, notes, schedules, task lists, images and video;
(8) employee-related information, such as lists or directories identifying
employees, representatives and contractors, and information regarding the
competencies (knowledge, skill, experience), compensation and needs of employees,
representatives and contractors and training methods; and (9) business- and
operation-related information, such as operating methods, procedures, techniques,
practices and processes, information about acquisitions, corporate or business
opportunities, 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 or
has 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 or
espionage through electronic or other means (each, an “Improper Means”); or

     (ii) the disclosure or use of any Confidential Information without the express
consent of the Company by a Person who (A) used Improper Means to acquire knowledge
of the Confidential Information (B) at the time of disclosure or use, knew or had
reason 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 limit
its use or (z) derived from or through a Person who owed a duty to the Company to
maintain its secrecy or limit its use or (C) before a material change of his or her
position, knew or had reason to know that it was Confidential Information and that
knowledge of it had been acquired by accident or mistake.

     (f) “Person” means any individual, corporation, partnership, limited liability
company, joint venture, association, business trust, joint-stock company, estate, trust,
unincorporated organization, government or other agency or political subdivision thereof or
any other legal or commercial entity.

     (g) “Restricted Period” means the longer of (i) twelve (12) months after the
date 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 pursuant
to 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 each
case whether or not patentable), all copyrights and copyrightable works, all trade secrets,
confidential information, and all other intellectual property and intellectual property
rights that are conceived, reduced to practice, developed or made by the Executive either
alone or with others in the course of employment with the Company (including employment
prior to the date of this Agreement).

     5.5 Remedies. Because the Executive’s services are unique and because the Executive
has access to Confidential Information, the Executive acknowledges and agrees that if the Executive
breaches any of the provisions of Section 5 hereof, the Company may suffer immediate and
irreparable harm for which monetary damages alone will not be a sufficient remedy. The restrictive
covenants stated in Section 5 hereof are without prejudice to the Company’s rights and causes of
action at law.

15

 

     5.6 Interpretation; Severability.

     (a) The Executive has carefully considered the possible effects on the Executive of
the covenants not to compete, the confidentiality provisions and the other obligations
contained in this Agreement, and the Executive recognizes that the Company has made every
effort to limit the restrictions placed upon the Executive to those that are reasonable and
necessary to protect the Company’s legitimate business interests.

     (b) The Executive acknowledges and agrees that the restrictive covenants set forth in
this Agreement are reasonable and necessary in order to protect the Company’s valid
business interests. It is the intention of the parties hereto that the covenants,
provisions and agreements contained herein shall be enforceable to the fullest extent
allowed by law. If any covenant, provision or agreement contained herein is found by a
court having jurisdiction to be unreasonable in duration, scope or character of
restrictions, or otherwise to be unenforceable, such covenant, provision or agreement shall
not be rendered unenforceable thereby, but rather the duration, scope or character of
restrictions of such covenant, provision or agreement shall be deemed reduced or modified
with retroactive effect to render such covenant, provision or agreement reasonable or
otherwise enforceable (as the case may be), and such covenant, provision or agreement shall
be 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 an
effect as close as permitted by applicable law to the provision declared unenforceable.
The parties hereto agree that if a court having jurisdiction determines, despite the
express intent of the parties hereto, that any portion of the covenants, provisions or
agreements contained herein are not enforceable, the remaining covenants, provisions and
agreements herein shall be valid and enforceable. Moreover, to the extent that any
provision is declared unenforceable, the Company shall have any and all rights under
applicable statutes or common law to enforce its rights with respect to any and all
Confidential Information or unfair competition by the Executive.

6.      Miscellaneous.

     6.1 Public Statements.

     (a) Media Nondisclosure. The Executive agrees that during the Employment
Period 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 any
information concerning or relating to any aspect of the Executive’s employment or
termination from employment with the Company and/or any aspect of any dispute that is the
subject 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 or
otherwise, and any member, representative, agent and/or employee of the same.

     (b) Non-Disparagement by the Executive. The Executive agrees that during the
Employment 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 its
Affiliates, including, without limitation, any such statements, comments or communications
that 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 to
communications between the Executive and, as applicable, the Executive’s attorneys or other
persons with whom communications would be subject to a claim of privilege existing under
common law, statute or rule of procedure. The Executive further agrees that the Executive
will not in any way solicit any such statements, comments or communications from others.

     (c) Non-Disparagement by the Company. The Company agrees that during the
Employment 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 constitute
libel, slander or disparagement of the Executive, including, without limitation, any such
statements, comments or communications that criticize, ridicule or are derogatory to the
Executive; provided, however, that the terms of this Section 6.1(c) shall
not apply to communications between the Company and, as applicable, the Company’s attorneys
or other persons with whom communications would be subject to a claim of privilege existing
under common law, statute or rule of procedure. The Company further agrees that the
Company will not in any way solicit any such statements, comments or communications from
others.

     6.2 ARBITRATION. SUBJECT TO THE RIGHTS UNDER SECTION 6.3 HEREOF TO SEEK INJUNCTIVE OR
OTHER 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 HERETO
ARISING UNDER OR RELATING TO THIS AGREEMENT OR THE EXECUTIVE’S EMPLOYMENT BY OR TERMINATION FROM
THE COMPANY (INCLUDING, BUT NOT LIMITED TO, THE AMOUNT OF DAMAGES, OR THE CALCULATION OF ANY BONUS
OR OTHER AMOUNT OR BENEFIT DUE) (COLLECTIVELY, “DISPUTES”). THE PARTIES EACH WAIVE THE
RIGHT TO A JURY TRIAL AND WAIVE THE RIGHT TO ADJUDICATE THEIR DISPUTES UNDER THIS AGREEMENT OUTSIDE
THE ARBITRATION FORUM PROVIDED FOR IN THIS AGREEMENT, EXCEPT AS OTHERWISE PROVIDED IN THIS
AGREEMENT.

     (a) Procedure Generally. The parties agree to submit the Dispute to a single
arbitrator selected from a panel of JAMS arbitrators. The arbitration will be governed by
the JAMS Comprehensive Arbitration Rules and Procedures in effect at the time the
arbitration is commenced, subject to the terms and modifications of this Agreement. If for
any reason JAMS cannot serve as the arbitration administrator or cannot fulfill the panel
requirements of the Arbitration Provision, the Company may select an alternative
arbitration administrator, such as AAA, to serve under the terms of this Agreement.

     (b) Arbitrator Selection. To select the arbitrator, the parties shall make
their respective strikes from a panel of former federal court judges and magistrates, to
the extent available from JAMS (the “First Panel”). If the parties cannot agree
upon an arbitrator from the First Panel or if such a panel is not available from JAMS, then
the

17

 

parties will next make their respective strikes from a panel of former Illinois state
court trial and appellate judges, to the extent available from JAMS (the “Second
Panel”). 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 agree
upon 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 JAMS
arbitrators available to serve in the Agreed Venue.

     (c) VENUE. THE PARTIES STIPULATE AND AGREE THAT THE EXCLUSIVE VENUE OF ANY
SUCH 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 award
the same damages and other relief that a court could award. The arbitrator shall issue a
reasoned award explaining the decision and any damages awarded. The arbitrator’s decision
will be final and binding upon the parties and enforceable by a court of competent
jurisdiction. 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 (without
limitation) any computations of actual damages or offsets, if applicable.

     (e) Fees and Costs. In the event of arbitration under the terms of this
Agreement, the fees charged by JAMS or other arbitration administrator and the arbitrator
shall be borne by the parties equally. In addition, the parties shall each bear their own
costs, expenses and attorneys’ fees incurred in arbitration.

     (f) Limited Scope. The following are excluded from binding arbitration under
this Agreement: claims for workers’ compensation benefits or unemployment benefits;
replevin; and claims for which a binding arbitration agreement is invalid as a matter of
law.

     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 the
right to initiate an action in any court of competent jurisdiction in order to request injunctive
or other equitable relief regarding the terms of Sections 5 or 6.2 hereof. The exclusive venue of
any such proceeding shall be in the Agreed Venue. The parties agree (a) to submit to the
jurisdiction of any competent court in the Agreed Venue, (b) to waive any and all defenses the
Executive may have on the grounds of lack of jurisdiction of such court and (c) that neither party
shall be required to post any bond, undertaking or other financial deposit or guarantee in seeking
or obtaining such equitable relief. Evidence adduced in any such proceeding for an injunction may
be used in arbitration as well. The existence of this right shall not preclude or otherwise limit
the applicability or exercise of any other rights and remedies that a party hereto may have at law
or 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 a
condition of employment and/or continued employment with the Company, as applicable; (b)

18

 

except as otherwise provided herein, this Agreement will replace any existing employment
agreement between the parties and thereby act as a novation, if applicable; (c) the Executive is
being provided with access to Confidential Information, including, without limitation, proprietary
trade 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 past
employment with the Company and all goodwill developed with the Company’s clients, customers and
other business contacts by the Executive during any past employment with Company, as applicable, is
the exclusive property of the Company; and (e) all Confidential Information and/or specialized
training accessed, created, received or utilized by the Executive during any past employment with
Company, as applicable, will be subject to the restrictions on Confidential Information described
in this Agreement, whether previously so agreed or not.

     6.5 Indemnification. The Executive shall be entitled from the Effective Date until
the end of the Employment Period in the capacity as an officer or director of the Company or any of
its subsidiaries to the benefit of the indemnification provisions contained in the By-Laws of the
Company or as a matter of law, whichever is greater. In addition, during the term of the
Executive’s employment and, where applicable under the terms of the relevant liability policy
thereafter, the Executive shall be covered under any directors’ and officers’ insurance policy
maintained by the Company.

     6.6 Post-Termination Assistance. During the Restricted Period, the Executive shall
cooperate, at the reasonable request of the Company (i) in the transition of any matter for which
the Executive had authority or responsibility during the Employment Period, or (ii) with respect to
any other matter involving the Company for which the Executive may be of assistance. The Executive
shall be entitled to reimbursement of any out-of-pocket expenses she incurs in providing such
assistance upon submission of documentation supporting such expenses.

     6.7 Entire Agreement; Waiver. This Agreement contains the entire agreement between
the Executive and the Company with respect to the subject matter hereof, and supersedes any and all
prior understandings or agreements, whether written or oral. No modification or addition hereto or
waiver or cancellation of any provision hereof shall be valid except by a writing signed by the
party to be charged therewith. No delay on the part of any party to this Agreement in exercising
any right or privilege provided hereunder or by law shall impair, prejudice or constitute a waiver
of such right or privilege.

     6.8 Governing Law. This Agreement shall be governed by and construed in accordance
with 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 the
parties under this Agreement shall be binding upon and inure to the benefit of the parties hereto
and their heirs, personal representatives, successors and permitted assigns. This Agreement is a
personal contract, and, except as specifically set forth herein, the rights and interests of the
Executive herein may not be sold, transferred, assigned, pledged or hypothecated by any party
without the prior written consent of the others. As used herein, the term “successor” as it
relates 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 equity
interests.

19

 

     6.10 Representation by Counsel; Independent Judgment. Each of the parties hereto
acknowledges that (a) it or the Executive has read this Agreement in its entirety and understands
all of its terms and conditions, (b) it or the Executive has had the opportunity to consult with
any individuals of its or the Executive’s choice regarding its or the Executive’s agreement to the
provisions contained herein, including legal counsel of its or the Executive’s choice, and any
decision not to was the Executive’s or its alone and (c) it or the Executive is entering into this
Agreement of its or the Executive’s own free will, without coercion from any source, based upon its
or the Executive’s own independent judgment.

     6.11 Interpretation. The parties and their respective legal counsel actively
participated in the negotiation and drafting of this Agreement, and in the event of any ambiguity
or mistake herein, or any dispute among the parties with respect to the provisions hereto, no
provision of this Agreement shall be construed unfavorably against any of the parties on the ground
that 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 survive
the termination of this Agreement.

     6.13 Notices. All notices and communications hereunder shall be in writing and shall
be deemed properly given and effective when received, if sent by facsimile or telecopy, or by
postage prepaid by registered or certified mail, return receipt requested, or by other delivery
service which provides evidence of delivery, as follows:

     If to the Company, to:

			
	                    	 	Claire’s Stores, Inc.

2400 W. Central Rd.

Hoffman Estates, IL 60192

Attention: General Counsel

     If to the Executive, to:

			
	                    	 	Joan Munnelly

2362 Cob Tail Way

Blacklick, Ohio 43003

     With a copy to:

			
	                    	 	Joseph F. Murray

Murray Murphy Moul + Basil LLP

1533 Lake Shore Dr.

Columbus, OH 43204

or to such other address as one party may provide in writing to the other party from time to time.

     6.14 No Conflicts. The Executive represents and warrants to the Company that her
acceptance of employment and the performance of her duties for the Company will not conflict with
or result in a violation or breach of, or constitute a default under any contract, agreement or
understanding to which she is or was a party or of which she is aware and that there are no
restrictions, covenants, agreements or limitations on her right or ability to enter into and
perform the terms of this Agreement that have not or will not be waived prior to the Effective
Date.

20

 

     6.15 Counterparts. This Agreement may be executed in one or more counterparts, each
of which shall be deemed an original and all of which together shall constitute one and the same
instrument. Facsimile transmission of any signed original document or retransmission of any signed
facsimile transmission will be deemed the same as delivery of an original. At the request of any
party, the parties will confirm facsimile transmission by signing a duplicate original document.

     6.16 Captions. Paragraph headings are for convenience only and shall not be
considered a part of this Agreement.

     6.17 No Third Party Beneficiary Rights. Except as otherwise provided in this
Agreement, no entity shall have any right to enforce any provision of this Agreement, even if
indirectly benefited by it.

     6.18 Withholdings. Any payments provided for hereunder shall be paid net of any
applicable withholdings required under Federal, state or local law and any additional withholdings
to which Executive has agreed.

     6.19 No Mitigation. In the event of any termination of the Executive’s employment
hereunder, the Executive shall be under no obligation to seek other employment or otherwise
mitigate the obligations of the Company under this Agreement.

21

 

     IN WITNESS WHEREOF, the parties have duly executed this Agreement, intending it as a document
under seal, to be effective for all purposes as of the Effective Date.

	 	 	 	 	 
	 	CLAIRE’S STORES, INC.

 	 
	 	By:  	/s/ Eugene S. Kahn
 	 
	 	 	Name:  	Eugene S. Kahn 	 
	 	 	Title:  	Chief Executive Officer 	 
	 
	 	EXECUTIVE

 	 
	 	/s/ Joan Munnelly
 	 
	 	Name:  	Joan Munnelly 	 
	 	 	 
	 

22

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