Claires Stores, Inc.
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
SCHEDULE 14A
(Rule 14a-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934
Filed by the Registrant x
Filed by a Party other than the Registrant o
Check the appropriate box:
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Preliminary Proxy Statement
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Confidential, For Use of the Commission Only
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Definitive Proxy Statement
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(as permitted by Rule 14a-6(e)(2)) |
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Definitive Additional Materials |
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Soliciting Material Pursuant to Rule 14a-12 |
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(Name of Registrant as Specified in Its Charter)
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Payment of Filing Fee (Check the appropriate box):
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Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11. |
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Check box if any part of the fee is offset as provided by Exchange Act Rule 0-11(a)(2) and
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Date Filed: |
CLAIRES STORES, INC.
3 S.W. 129th Avenue
Pembroke Pines, Florida 33027
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
To be held on June 27, 2006
To our shareholders:
You are cordially invited to attend the 2006 annual meeting of the shareholders of Claires
Stores, Inc., which will be held at The St. Regis Fontainebleau Room, Two East 55th Street, at
Fifth Avenue, New York, New York 10022 on June 27, 2006, at 9:30 a.m., New York City time. At the
meeting, shareholders will vote on the following matters:
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The election of seven directors, each to serve for a one-year term; |
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2. |
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To ratify the appointment of KPMG LLP as our independent registered public
accounting firm for the fiscal year ending on February 3, 2007; |
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To vote on a shareholder proposal regarding our operations in Northern Ireland;
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To transact such other business as may properly come before the annual meeting,
including any adjournments or postponements of the meeting. |
If you own shares of our common stock as of the close of business on May 1, 2006, you can vote
those shares by proxy or at the meeting.
By order of the Board of Directors,
MARLA L. SCHAEFER
Co-Chairman of the Board
E. BONNIE SCHAEFER
Co-Chairman of the Board
May 22, 2006
YOUR VOTE IS IMPORTANT
IT IS IMPORTANT THAT PROXIES BE RETURNED PROMPTLY.
THEREFORE, WHETHER OR NOT YOU EXPECT TO ATTEND THE MEETING
IN PERSON, PLEASE SIGN, DATE AND RETURN THE ENCLOSED PROXY
OR PROXIES, AS THE CASE MAY BE, AS SOON AS POSSIBLE IN THE
ENCLOSED POSTAGE PRE-PAID ENVELOPE.
TABLE OF CONTENTS
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CLAIRES STORES, INC.
3 S.W. 129th Avenue
Pembroke Pines, Florida 33027
PROXY STATEMENT
Our board of directors is soliciting proxies from the holders of our common stock to be voted
at our 2006 annual meeting of shareholders to be held on June 27, 2006, beginning at 9:30 a.m. New
York City time, at The St. Regis Fontainebleau Room, Two East 55th Street, at Fifth Avenue, New
York, New York, and at any adjournments or postponements thereof.
We are first mailing this proxy statement and the enclosed form of proxy or proxies, as the
case may be, on or about May 22, 2006. We are sending this proxy statement in connection with the
proxy solicitation. You should review the information provided herein in conjunction with our
annual report, for the fiscal year ended January 28, 2006, referred to as 2006 or fiscal 2006,
which accompanies this proxy statement. Our principal executive office is located at 3 S.W.
129th Avenue, Pembroke Pines, Florida 33027 and our telephone number is (954) 433-3900.
ABOUT THE MEETING
What is the purpose of the annual meeting?
At the annual meeting, shareholders will act upon the matters outlined in the accompanying
notice of meeting, including the election of seven directors, the ratification of the appointment
of KPMG LLP as our independent registered public accounting firm and the shareholder proposal
regarding our Northern Ireland operations.
Who is entitled to notice of and to vote at the meeting?
Only shareholders of record at the close of business on the record date, May 1, 2006, are
entitled to receive notice of the annual meeting and to vote the shares of common stock and Class A
common stock that they held on that date at the meeting, or any postponements or adjournments of
the meeting. Each outstanding share of common stock entitles its holder to cast one vote on each
matter to be voted upon, and each outstanding share of Class A common stock entitles its holder to
cast ten votes on each matter to be voted upon.
Who can attend the meeting?
All shareholders as of the record date, or their duly appointed proxies, may attend. Please
note that if you hold shares in street name (that is, through a broker or other nominee), you
will need to bring a copy of a brokerage statement reflecting your stock ownership as of the record
date.
What constitutes a quorum?
The presence at the meeting, in person or by proxy, of the holders of a majority of the
aggregate combined voting power of the shares of common stock (one vote per share) and Class A
common stock (ten votes per share) outstanding as of the record date will constitute a quorum,
permitting business to be conducted at the meeting. As of the record date, 94,045,702 shares of
our common stock were outstanding and 4,884,557 shares of our Class A common stock were
outstanding. Proxies received but marked as abstentions and broker non-votes will be included in
the calculation of the number of votes considered to be present at the meeting but will not be
counted as votes cast for or against any given matter. An independent inspector of elections
appointed for the annual meeting will determine whether or not a quorum is present and will
tabulate votes cast by proxy or in person at the annual meeting.
1
If less than a majority of the aggregate combined voting power of the outstanding shares of
common stock and Class A common stock entitled to vote are represented at the meeting, a majority
of the votes present, either in person or by proxy, at the meeting may adjourn the meeting to
another date, time or place, and notice need not be given of the new date, time or place if the new
date, time or place is announced at the meeting before an adjournment is taken.
How do I vote?
If you complete and properly sign the accompanying proxy card(s), and return it to us, it will
be voted as you direct. If you are a registered shareholder and you attend the meeting, you may
deliver your completed proxy card(s) in person. Street name shareholders who wish to vote at the
meeting will need to obtain a proxy from the institution that holds their shares.
Can I vote by telephone or by Internet?
If your shares are held in street name, you may vote by telephone or Internet. Eligible
shareholders should review their proxy card for instructions for voting by telephone or Internet.
Please follow the directions on your proxy card carefully. Shareholders submitting proxies or
voting instructions via the Internet should understand that there may be costs associated with
electronic access, such as usage charges from Internet access providers and telephone companies,
that would be borne by the shareholder.
The deadline for voting by telephone or Internet is 11:59 p.m. on June 26, 2006.
Can I change my vote after I return my proxy card(s)?
Yes. Even after you have submitted your proxy card(s), you may change your vote at any time
before the proxy is exercised by filing with our Secretary either a notice of revocation or a duly
executed proxy card(s) bearing a later date. The powers of the proxy holders will be suspended if
you attend the meeting in person and so request, although attendance at the meeting will not by
itself revoke a previously granted proxy or proxies, as the case may be.
What are the boards recommendations?
Unless you give other instructions on your proxy card(s), the persons named as proxy holders
on the signed proxy card(s) will vote in accordance with the recommendations of our board of
directors. The board recommends a vote:
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for the election of the nominated slate of directors. See Proposal 1
Election of Directors. |
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for the ratification of the appointment of KPMG LLP as our independent
registered public accounting firm for the fiscal year ending on February 3,
2007, referred to as fiscal 2007. See Proposal 2 Ratification of
Independent Registered Public Accounting Firm. |
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against the shareholder proposal regarding our operations in Northern
Ireland. See Proposal 3 Shareholder Proposal Regarding Our Operations In
Northern Ireland. |
The board does not know of any other matters that may be brought before the meeting nor does
it foresee or have reason to believe that the proxy holders will have to vote for substitute or
alternate nominees for director. In the event that any other matter should properly come before
the meeting or any nominee for director is not available for election, the proxy holders will vote
as recommended by the board of directors.
What vote is required to approve each item?
Proposal 1 Election of Directors. The affirmative vote of a plurality of the votes cast,
either in person or by proxy, at the meeting by the holders of the outstanding shares of our common
stock (one vote per share) and Class A common stock (ten votes per share), voting together as a
single class, is required for the election of directors. A properly executed proxy marked
WITHHOLD AUTHORITY with respect to the election of one or more directors will not be voted with
respect to the director or directors indicated, although it will be counted for
2
purposes of determining whether there is a quorum. Shareholders do not have the right to
cumulate their votes for directors.
Proposal 2 Ratification of the appointment of our Independent Registered Public Accounting
Firm. The affirmative vote of a majority of the votes cast, either in person or by proxy, at the
meeting by the holders of the outstanding shares of our common stock (one vote per share) and Class
A common stock (ten votes per share), voting together as a single class, is required to ratify the
appointment of KPMG LLP as our independent registered public accounting firm. A properly executed
proxy marked ABSTAIN with respect to this proposal will not be voted, although it will be counted
for purposes of determining whether there is a quorum. Accordingly, an abstention will have the
effect of a negative vote since it is not counted as a vote cast.
Proposal 3 Shareholder Proposal regarding our Operations in Northern Ireland. The
affirmative vote of a majority of the votes cast, either in person or by proxy, at the meeting by
the holders of the outstanding shares of our common stock (one vote per share) and Class A common
stock (ten votes per share), voting together as a single class, is required to approve the
shareholder proposal regarding our operations in Northern Ireland. A properly executed proxy
marked ABSTAIN with respect to this proposal will not be voted, although it will be counted for
purposes of determining whether there is a quorum. Accordingly, an abstention will have the effect
of a negative vote since it is not counted as a vote cast.
Other Items. In the event other items are properly brought before the shareholders at the
meeting, the affirmative vote of a majority of the votes cast (either in person or by proxy) at the
meeting by the holders of the outstanding shares of common stock (one vote per share) and Class A
common stock (ten votes per share), voting together as a single class, will be required for
approval.
What is the effect of broker non-votes?
If you hold your shares in street name through a broker or other nominee, your broker or
nominee may not be permitted to exercise voting discretion with respect to some of the matters to
be acted upon. Thus, if you do not give your broker or nominee specific instructions, your shares
may not be voted on those matters and will not be counted in determining the number of shares
necessary for approval. Shares represented by such broker non-votes will, however, be counted in
determining whether there is a quorum.
Who pays for the preparation of the proxy?
We will pay the cost of preparing, assembling and mailing the proxy statement, notice of
meeting and enclosed proxy card. In addition to solicitation by mail, certain of our directors,
officers and regular employees may, without extra compensation, solicit proxies by telephone,
facsimile and personal interview. We also request banks, brokers and other custodians, nominees
and fiduciaries to forward copies of the proxy material to the beneficial owners of both classes of
our common stock and to request authority for the execution of proxies, and we may reimburse such
persons for their expenses incurred in connection with these activities.
May I see a list of the shareholders entitled to vote?
Any shareholder of record as of the record date may look at the complete list of the
shareholders entitled to vote at the annual meeting so long as it is for a purpose germane to the
annual meeting. The list will be available during normal business hours, at our offices located at
350 Fifth Avenue, New York, New York 10118, for a period of ten days prior to the meeting and at
the meeting itself.
What should I have received to enable me to vote?
Your package from us should contain this proxy statement, the accompanying notice of annual
meeting, a common stock proxy card and/or a Class A common stock proxy card, as applicable, our
2006 annual report to shareholders and our 2006 annual report on Form 10-K. This package is being
mailed on or about May 22, 2006.
3
SECURITY OWNERSHIP
The following table shows the number of shares of common stock and Class A common stock
beneficially owned as of May 1, 2006 by the following individuals or groups:
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each person who we know beneficially owns more than 5% of either class of our common stock; |
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each director; |
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each nominee for director; |
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each executive officer named in the Summary Compensation Table; and |
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all of our directors and executive officers as a group. |
The table also sets forth, in its final column, the combined voting power of the voting
securities on all matters presented to the shareholders for their approval, except for such
separate class votes as are required by law.
Unless otherwise indicated, the address for each named person is c/o Claires Stores, Inc., 3
S.W. 129th Avenue, Pembroke Pines, Florida 33027, and each named person has sole voting
and investment power over the shares shown below.
The number of shares beneficially owned by each individual or group is based upon information
in documents filed by such person with the Securities and Exchange Commission, other publicly
available information or information available to us. Percentage ownership in the following table
is based on 94,045,702 shares of common stock and 4,884,557 shares of Class A common stock
outstanding as of May 1, 2006. Beneficial ownership is determined in accordance with the rules of
the Securities and Exchange Commission and generally includes voting or investment power with
respect to securities. Shares of our common stock subject to options that are presently
exercisable or exercisable within 60 days of May 1, 2006 are deemed to be outstanding and
beneficially owned by the person holding the options for the purpose of computing the percentage of
ownership of that person, but are not treated as outstanding for the purpose of computing the
percentage of any other person.
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Shares of |
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Shares of |
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Common Stock |
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Stock Beneficially |
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Combined Percent of |
Name and Address |
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Beneficially Owned |
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Voting Securities |
Rowland Schaefer |
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2,815,753 |
(1) |
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3.0 |
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4,312,594 |
(5) |
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88.3 |
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32.2 |
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E. Bonnie Schaefer(2) |
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2,902,143 |
(3)(4) |
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3.1 |
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4,312,594 |
(5) |
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88.3 |
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32.2 |
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Marla L. Schaefer(2) |
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3,009,017 |
(4)(6) |
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3.2 |
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4,313,732 |
(5) |
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88.3 |
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32.2 |
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Barclays Global Investors, NA(7)
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11,180,173 |
(7) |
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11.9 |
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7.8 |
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45 Fremont Street
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San Francisco, CA 94105 |
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Putnam, LLC
d/b/a Putnam Investments(8)
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7,558,252 |
(8) |
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8.0 |
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5.3 |
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One Post Office Square
Boston, MA 02109 |
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Royce & Associates, LLC(9)
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5,658,540 |
(9) |
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6.0 |
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4.0 |
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1414 Avenue of the Americas
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New York, NY 10019
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Ira D. Kaplan(2) |
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41,200 |
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Shares of |
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Shares of |
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Class A Common |
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Common Stock |
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Percent of |
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Stock Beneficially |
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Percent of |
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Combined Percent of |
Name and Address |
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Beneficially Owned |
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Class |
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Owned |
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Class |
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Voting Securities |
Bruce G. Miller(10)
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131,900 |
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* |
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* |
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18 Columbia Turnpike
Florham Park, NJ 07932 |
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Steven H. Tishman(10)
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26,600 |
(11) |
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* |
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* |
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c/o Rothschild Inc.
1251 Avenue of the Americas
51st Floor
New York, NY 10020 |
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Ann Spector Lieff(10)
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24,600 |
(12) |
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* |
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P.O. Box 430330
Miami, FL 33243 |
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Martha Clark Goss(10) |
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11,133 |
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* |
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Northern Trust Bank of Florida, NA
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303,750 |
(13) |
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6.2 |
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2.1 |
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700 Brickell Avenue
Miami, FL 33131 |
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All directors and current |
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3,694,450 |
(14) |
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3.9 |
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4,313,732 |
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88.3 |
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32.7 |
|
executive officers as a group (7
persons) |
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* |
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Less than 1% of the shares outstanding of such class. |
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(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) 137,984 shares held by Schaefer/Wisenthal Partnership, LLLP, and
(v) 626 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. |
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(2) |
|
The named individual is a director, a nominee for director and an executive officer of
Claires. |
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(3) |
|
Includes (i) 150,000 shares subject to currently exercisable stock options, and (ii) 75,000
shares of restricted stock, of which 56,250 shares remain subject to forfeiture pursuant to
the terms of the restricted stock grant. |
|
(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 137,984
shares held by Schaefer/Wisenthal Partnership, LLLP and 626 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) |
|
Includes (i) 3,560,816 shares held by The Rowland Schaefer Trust U/A/D 02/02/01, and (ii)
751,778 shares held by The Rowland Schaefer Trust U/A/D 1983. Does not include shares held in
a trust referred to in footnote 13 because none of Rowland Schaefer, Bonnie Schaefer or Marla
Schaefer have present voting or investment control over these shares. |
|
(6) |
|
Includes (i) 250,000 shares subject to currently exercisable stock options, and (ii) 75,000
shares of restricted stock, of which 56,250 shares remain subject to forfeiture pursuant to
the terms of the restricted stock grant. |
|
(7) |
|
Based on a Schedule 13G filed on January 31, 2006 with the SEC jointly by Barclays Global
Investors, NA (BGI N.A.), Barclays Global Fund Advisors (BGFA), Barclays Global Investors,
Ltd. (BGI Ltd.) and Barclays Global Investors Japan Trust and Banking Company Limited
(collectively, the Barclays Group). The Schedule 13G indicates that 11,180,173 shares of
our common stock were beneficially owned by the Barclays Group, as to which (i) BGI N.A. has
sole voting power with respect to 8,587,707 shares and sole dispositive power with respect to
9,738,587 shares, (ii) BGFA has sole voting power with |
5
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respect to 966,254 shares and sole dispositive power with respect to 967,448 shares and
(iii) BGI Ltd. has sole voting power with respect to 448,094 shares and sole dispositive
power with respect to 474,138 shares. |
|
(8) |
|
Based on a Schedule 13G filed on February 2, 2006 with the SEC jointly by Marsh & McLennan
Companies, Inc. (MMC), Putnam, LLC d/b/a/ Putnam Investments (PI), Putnam Investment
Management, LLC (PIM), and The Putnam Advisory Company, LLC (PAC, and collectively with
MMC, PI and PIM, the Putnam Group). The Schedule 13G indicates that 7,558,252 shares of our
common stock were beneficially owned by the Putnam Group, as to which (i) none of the Putnam
Group entities has sole voting power nor sole dispositive power with respect to any of such
shares, (ii) PI has shared voting power with respect to 555,014 shares and shared dispositive
power with respect to 3,779,126 shares, (iii) PIM has shared voting power with respect to
28,700 shares and shared dispositive power with respect to 2,997,743 shares and (iv) PAC has
shared voting power with respect to 526,314 shares and shared dispositive power with respect
to 781,383. |
|
(9) |
|
Based on a Schedule 13G filed on January 12, 2006 with the SEC by Royce & Associates, LLC. |
|
(10) |
|
The named individual is a director and a nominee for director. |
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(11) |
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Includes 20,000 shares subject to currently exercisable stock options. |
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(12) |
|
Includes 20,000 shares subject to currently exercisable stock options. |
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(13) |
|
Represents shares held in a trust for the benefit of certain of the children of Mr. Schaefer,
including Bonnie Schaefer and Marla Schaefer, for which Northern Trust Bank of Florida, NA is
the trustee and as to which shares it disclaims beneficial ownership. |
|
(14) |
|
Includes an aggregate of 440,000 shares issuable upon the exercise of stock options currently
exercisable. |
PROPOSAL 1 ELECTION OF DIRECTORS
Our articles of incorporation and bylaws provide that the number of directors that we will
have will be at least three, but no more than nine, unless changed by amendment to the articles of
incorporation and bylaws, with the exact number to be set by the directors. The corporate
governance and nominating committee has selected, and the board has approved, the nomination of the
seven persons set forth below as directors at the annual meeting, all of whom are current
directors. If elected, each of these directors will hold office until the 2007 annual meeting of
shareholders or until his or her successor is duly elected and qualified.
For additional information regarding the nominees for director who also serve as our executive
officers, see Management.
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Present Position with the Company, Principal |
|
Director of the |
Name |
|
Age |
|
Occupation and Business Experience |
|
Company Since |
Marla L. Schaefer (1)
|
|
|
57 |
|
|
Co-Chairman of the
Board of Directors
and Co-Chief
Executive Officer
of Claires since
November 20, 2003;
Acting Co-Chairman
and Co-Chief
Executive Officer
from November 2002
to November 2003;
Co-Vice Chairman of
the Board of
Directors of
Claires from
January 1999 to
November 2003; Vice
Chairman of the
Board of Directors
of Claires from
March 1998 to
January 1999;
Senior Vice
President of
Claires Boutiques
since April 1998;
Vice President of
Fashion
Merchandising of
Claires Boutiques
from April 1990
until April 1998;
Secretary since
April 2002
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1990 |
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6
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Present Position with the Company, Principal |
|
Director of the |
Name |
|
Age |
|
Occupation and Business Experience |
|
Company Since |
E. Bonnie Schaefer (1)
|
|
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53 |
|
|
Co-Chairman of the
Board of Directors
and Co-Chief
Executive Officer
of Claires since
November 20, 2003;
Acting Co-Chairman
and Co-Chief
Executive Officer
from November 2002
to November 2003;
Co-Vice Chairman of
the Board of
Directors of
Claires from
January 1999 to
November 2003;
Executive Vice
President Real
Estate of Claires
Boutiques since
1997; Vice
President Real
Estate of Claires
Boutiques from 1994
to 1997
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1998 |
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Ira D. Kaplan
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|
47 |
|
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Director of
Claires; Senior
Vice President and
Chief Financial
Officer of Claires
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1999 |
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Bruce G. Miller
|
|
|
64 |
|
|
Director of
Claires; Managing
Director, Financial
Institutions Group,
of Ryan, Beck, Inc.
since July 1992
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1983 |
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Steven H. Tishman
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49 |
|
|
Director of
Claires; Managing
Director of
Rothschild Inc.
since October 2002;
Managing Director
of Robertson
Stephens, Inc. from
November 1999 until
July 2002; Senior
Managing Director
of Bear, Stearns &
Co. Inc. from July
1993 until November
1999; Director of
Cedar Fair, L.P.
and Odimo, Inc.
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1998 |
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Ann Spector Lieff
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54 |
|
|
Director of
Claires; Founder
and President since
1998 of The Lieff
Company, a
consulting group,
specializing in CEO
mentoring,
leadership
development,
corporate
strategies to
assist and expand
organizations in
the management of
their business
practices, and
advisory services
to corporate
boards; Chief
Executive Officer
of SPECs Music
from 1980 until
1998; Director of
Herzfeld Caribbean
Basin Fund,
Hastings
Entertainment, Inc.
and Birks &
Mayors, Inc.
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2003 |
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Martha Clark Goss
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56 |
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Director of
Claires; Chief
Operating and
Financial Officer
since 2003 of
Amwell Holdings,
LLC/Hopewell
Holdings LLC, a
holding company for
a healthcare
reinsurance company
start-up;
Consultant at
Resources
Connection since
2002, a financial
and consulting
company; Chief
Financial Officer
from 1999 until
2001 at The Capital
Markets Company
(CAPCO), a provider
of e-based
solutions to the
global financial
services and
capital markets
industry; Chief
Financial Officer
of Booz-Allen &
Hamilton Inc. from
1995 to 1999, a
management
consulting firm;
Senior Vice
President
Enterprise
Integrated Risk
Management and
Control of The
Prudential
Insurance Company
of America from
1994 until 1995
(various other
positions with
Prudential from
1981 through 1995);
Director of Ocwen
Financial
Corporation
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2005 |
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(1) |
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Each is the daughter of Mr. Rowland Schaefer, our Chairman Emeritus. |
7
Director Independence. The board of directors has analyzed the independence of each director
and nominee and has determined that the following directors are independent under the New York
Stock Exchange rules and have no material relationships with us (either directly or as a partner,
shareholder or officer of an organization that has a relationship with us): Messrs. Tishman and
Miller, Ms. Lieff and Ms. Goss. In particular, the board has determined that none of these
directors have relationships that would cause them not to be independent under the specific
criteria of Section 303A.02 of the New York Stock Exchange (NYSE) Listed Company Manual.
Vote Required. The election of directors will be decided by a plurality of the votes cast,
either in person or by proxy, at the meeting by the holders of the outstanding shares of our common
stock (one vote per share) and Class A common stock (ten votes per share), voting together as a
single class.
The board of directors has no reason to believe that any nominee will refuse to act or be
unable to accept election; however, in the event that a nominee for a directorship to be elected is
unable to accept election or if any other unforeseen contingencies should arise, it is intended
that proxies will be voted for the remaining nominee(s) and for such other person(s) as may be
designated by the board of directors, unless directed by a proxy to do otherwise.
The board recommends that shareholders vote for each of the nominees for director set forth
above.
MANAGEMENT
The following table sets forth the names, ages, positions and backgrounds of our current
executive officers. Each of these executive officers serves until the election and qualification
of such individuals successor or until his or her death, resignation or removal by the board of
directors.
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|
|
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|
Name |
|
Age |
|
Position |
E. Bonnie Schaefer |
|
|
53 |
|
|
Co-Chairman and Co-Chief Executive Officer of the Board |
|
|
|
|
|
|
|
Marla L. Schaefer |
|
|
57 |
|
|
Co-Chairman and Co-Chief Executive Officer of the
Board and Secretary |
|
|
|
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|
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Ira D. Kaplan |
|
|
47 |
|
|
Senior Vice President and Chief Financial Officer |
E. Bonnie Schaefer has been our Co-Chairman and Co-Chief Executive Officer since November
2003. Ms. Schaefer served as our Vice Chairman of our Board from January 1999 to November 2003.
From November 2002 to November 2003, during Mr. Rowland Schaefers medical leave of absence, Ms.
Schaefer, together with Marla Schaefer, assumed the responsibilities of Mr. Schaefer by becoming
Acting Co-Chairman and Co-Chief Executive Officer. Ms. Schaefer is the daughter of Rowland
Schaefer and the sister of Marla L. Schaefer.
Marla L. Schaefer has been our Co-Chairman and Co-Chief Executive Officer since November 2003,
and has served as a director since 1990. Ms. Schaefer served as our Vice Chairman of our Board
from March 1998 to November 2003 and has been our Secretary since April 2002. From November 2002
to November 2003, during Mr. Rowland Schaefers medical leave of absence, Ms. Schaefer, together
with E. Bonnie Schaefer, assumed the responsibilities of Mr. Schaefer by becoming Acting
Co-Chairman and Co-Chief Executive Officer. Ms. Schaefer is the daughter of Rowland Schaefer and
the sister of E. Bonnie Schaefer.
Ira D. Kaplan has been our Chief Financial Officer since September 1990 and our Senior Vice
President since April 1997.
8
Membership and Meetings of the Board of Directors and its Committees
Our business is managed under the direction of the board of directors. The board meets during
our fiscal year to review significant developments affecting us and to act on matters requiring
board approval. Each of our directors attended at least 75% of the aggregate of (i) the number of
the meetings of the board of directors which were held during the period that such person served on
the board of directors and (ii) the number of meetings of all committees on which that person
served which were held during the period that such person served on such committee. All of our
directors were in attendance at our 2005 Annual Meeting.
Current committee membership and the number of meetings of the full Board and each Committee
during fiscal 2006 are shown in the table below.
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Corporate |
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Governance and |
Name |
|
Board |
|
Audit |
|
Compensation |
|
Nominating |
Marla L. Schaefer |
|
Co-Chair |
|
|
|
|
|
|
E. Bonnie Schaefer |
|
Co-Chair |
|
|
|
|
|
|
Ira D. Kaplan |
|
Member |
|
|
|
|
|
|
Bruce G. Miller |
|
Member |
|
Chair |
|
Member |
|
Member |
Steven H. Tishman |
|
Member |
|
Member |
|
|
|
Member |
Ann Spector Lieff |
|
Member |
|
|
|
Member |
|
Chair |
Martha Clark Goss |
|
Member |
|
Member |
|
Chair |
|
Member |
Number of Meetings
held in Fiscal 2006 |
|
9 |
|
8 |
|
8 |
|
2 |
Committees of the Board of Directors
We currently have three standing committees: the audit committee, the compensation committee
and the corporate governance and nominating committee.
Audit Committee. The members of our audit committee are, and will continue to be, independent
under the listing standards of the New York Stock Exchange. The board of directors has determined
that each of the members of our audit committee satisfies the financial literacy and experience
requirements of the NYSE and the rules of the Securities and Exchange Commission such that each
member is an audit committee financial expert. The audit committee operates under a written
charter, a copy of which is available on our website at www.clairestores.com. and is attached to
this proxy statement. The charter is available in print to any shareholder who requests it in
writing from our Director of Investor Relations at Claires Stores, Inc., 350 Fifth Avenue, New
York, New York 10118. The audit committee represents the board in its relations with our
independent registered public accounting firm and oversees the financial reporting and disclosures
prepared by our management. The audit committees functions include meeting with our management
and our independent registered public accounting firm, reviewing and discussing our audited and
unaudited financial statements with our management, reviewing with our independent registered
public accounting firm the plan and results of their audit of our financial statements, determining
the independent registered public accounting firm and discussing with management and the
independent registered public accounting firm the quality and adequacy of our internal controls.
The audit committee meets independently with our independent registered public accounting firm and
has the sole authority to retain and dismiss our independent registered public accounting firm.
Our independent registered public accounting firm has unrestricted access to our audit committee.
For more information regarding the functions of the audit committee and its activities during
fiscal 2006, see the Report of the Audit Committee below.
Compensation Committee. The members of our compensation committee are, and will continue to
be, independent under the listing standards of the NYSE. The compensation committee is responsible
for approving compensation and bonuses for our co-chief executive officers and, based upon input
from our co-chief executive officers, approving compensation and bonuses for our other executive
officer, for administering our 1996 Stock Option Plan and our 2005 Incentive Compensation Plan.
The compensation committee operates under a written charter, a copy of which is available on our
website at www.clairestores.com. The charter is available in print to any shareholder who requests
it in writing from our Director of Investor Relations at Claires Stores, Inc., 350 Fifth
9
Avenue, New York, New York 10118. For more information regarding the functions of the
compensation committee and its activities during fiscal 2006, see the Report on Executive
Compensation below.
Corporate Governance and Nominating Committee. The members of our corporate governance and
nominating committee are, and will continue to be, independent as defined under the listing
standards of the NYSE. The functions of the corporate governance and nominating committee include:
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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; |
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reviewing and approving all related party transactions within the meaning of
Item 404 of Regulation S-K of the Securities Act; |
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overseeing management continuity planning processes; and |
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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. |
Our corporate governance guidelines are available on our website at www.clairestores.com, and
are also available in print to any shareholder who requests them in writing from our Director of
Investor Relations at Claires Stores, Inc., 350 Fifth Avenue, New York, New York 10118.
All director nominees must possess certain core competencies, some of which may include
experience in retail, international business/markets, real estate, store operations, logistics,
product design, merchandising, marketing, strategy, human resources, technology, media or public
relations, finance or accounting, or experience as a CEO or CFO. In addition to having one or more
of these core competencies, when identifying, evaluating and considering potential candidates for
membership on our board, including those recommended or nominated by shareholders in accordance
with the guidelines set forth in our bylaws and applicable laws, the corporate governance and
nominating committee considers relevant educational, business and industry experience and
demonstrated character and judgment. Directors will not be nominated for re-election unless it is
affirmatively determined that the director is making a substantial contribution to the overall
effectiveness of the board.
The corporate governance and nominating committee identifies individuals qualified to become
members of the board when any vacancy occurs on the board by reason of disqualification,
resignation, retirement, death or an increase in the size of the board, and selects or recommends
that the board select director nominees for each annual meeting of shareholders and director
nominees to fill vacancies on the board that may occur between annual meetings of shareholders.
The corporate governance and nominating committee will also consider director candidates
recommended by shareholders if we receive such recommendation no later than the close of business
on the 120th calendar day prior to the first anniversary of the date on which we first mailed our
proxy materials for the preceding years annual meeting of shareholders. Accordingly, for us to
consider a recommendation for our 2007 annual meeting, we must receive the written nomination on or
before January 20, 2007.
Any such recommendations should be sent to our corporate governance and nominating committee,
attention chairman, c/o Claires Stores, Inc., 350 Fifth Avenue, New York, New York 10118 and
should include (i) the name, age, business address and residence address of the candidate, (ii) the
principal occupation or employment of the candidate, (iii) the class and number of shares of our
common stock which are beneficially owned by the candidate, (iv) a description of all
relationships, arrangements, and understandings between the shareholder and the candidate and any
other person or persons (naming such person or persons) pursuant to which the nominations are to be
made by the shareholder and (v) any other information relating to the candidate that is required to
be disclosed in solicitations of proxies for election of directors, or is otherwise required, in
each case pursuant to the proxy rules under the Securities Exchange Act of 1934, as amended
(including without limitation the candidates written
10
consent to be considered as a nominee and to serve if elected). The shareholder providing the
recommendation must also provide the information required to be provided to us pursuant to our
bylaws.
Notwithstanding the foregoing, the board is not required to solicit proxies for the election
of any person the shareholder nominates at the meeting. We received no such recommendations for
our 2006 annual meeting. The process by which the corporate governance and nominating committee
evaluates candidates submitted by shareholders does not differ from the process it follows for
evaluating other nominees, except that the corporate governance and nominating committee may also
take into consideration the number of shares held by the recommending shareholder, the length of
time that such shares have been held and the number of candidates submitted by each shareholder or
group of shareholders over the course of time.
The corporate governance and nominating committee operates under a written charter, a copy of
which is available on our website at www.clairestores.com. The charter is available in print to
any shareholder who requests it in writing from our Director of Investor Relations at Claires
Stores, Inc., 350 Fifth Avenue, New York, New York 10118.
Chairman Emeritus
Rowland Schaefer has been our Chairman Emeritus of the Board since his retirement in November
2003. He served as our Chairman of the Board, President and Chief Executive Officer since our
inception in 1961. Mr. Schaefer is the father of E. Bonnie Schaefer and Marla L. Schaefer. See
Certain Relationships and Related Transactions.
CORPORATE GOVERNANCE
The following does not constitute soliciting material and should not be deemed filed or
incorporated by reference in any other filing by us under the Securities Act of 1933 or the
Securities Exchange Act of 1934.
Our business and affairs are managed under the direction of our board of directors, except
with respect to those matters reserved for our shareholders. Our board of directors establishes
our overall corporate governance policies, reviews the performance of our senior management in
executing our business strategy and managing our day-to-day operations and acts as an advisor to
our senior management. Our boards mission is to further the long-term interests of our
shareholders. Members of the board of directors are kept informed of our business through
discussions with our management, primarily at meetings of the board of directors and its
committees, and through reports and analyses presented to them. The board and each of its
committees audit, compensation, corporate governance and nominating also have the authority
to retain, at our expense, outside counsel, consultants or other advisors in the performance of
their duties.
Codes of Conduct
We maintain a Code of Business Conduct and Ethics that is applicable to all employees and
directors. Additionally, we maintain a Code of Ethics that is applicable to our Co-CEOs and senior
financial officers. These codes of conduct require continued observance of high ethical standards
such as honesty, integrity and compliance with the law in the conduct of the our business. Each of
these codes of conduct is publicly available on our website at www.clairestores.com. We intend to
post on our website amendments to, and waivers for our directors and executive officers from, each
of these codes of conduct. Violations under either code of conduct must be reported to the Audit
Committee. Each of these codes of conduct may also be requested in print by writing to the
Director of Investor Relations at Claires Stores, Inc., 350 Fifth Avenue, New York, New York
10118.
Communications Between Shareholders and the Board
The board of directors has designated Mr. Bruce Miller as the presiding director as that
term is defined in Section 303A.03 of the NYSE Manual. Shareholders or other interested parties
wishing to communicate with our board of directors should submit any communications in writing to
the presiding director at Claires Stores, Inc., 350 Fifth Avenue, New York, New York 10118. The
presiding director will determine whether to relay the communication to the full board or to any
individual director or directors to whom the communication is directed.
11
Executive Sessions
To ensure free and open discussion and communication among the non-management directors of the
board, the non-management directors meet in executive sessions periodically, with no members of
management present. Our independent directors met in executive session before, during or after
each of our four regularly scheduled quarterly board meetings in fiscal 2006, and at various other
times during fiscal 2006. At every meeting of independent directors, the presiding director leads
the meeting.
Evaluation of Directors
The corporate governance and nominating committee oversees a formal evaluation process to
assess the composition and performance of the board, each committee, and each individual director
on an annual basis. The assessment is conducted to ensure the board, committees, and individual
members are effective and productive and to identify opportunities for improvement and skill set
needs. As part of the process, each member completes a detailed and thorough questionnaire that
includes board, committee and individual assessments. While results are aggregated and summarized
for discussion purposes, individual responses are not attributed to any member and are kept
confidential to ensure honest and candid feedback is received. The corporate governance and
nominating committee reports the results annually to the board, at which time the board discusses
opportunities and agrees upon plans for improvement as appropriate. A director will not be
nominated for re-election unless it is affirmatively determined that he or she is substantially
contributing to the overall effectiveness of the board.
12
EXECUTIVE COMPENSATION
The following table sets forth information concerning compensation awarded to, earned by or
paid to our executive officers during fiscal 2006, collectively referred to below as the named
executive officers, for services rendered to us during each of the past three fiscal years.
Summary Compensation Table
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Long Term |
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Annual Compensation |
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Compensation Awards |
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|
Restricted |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other Annual |
|
Stock |
|
Securities |
|
|
Name and |
|
Fiscal |
|
|
|
|
|
Bonus |
|
Compensation |
|
Award(s) |
|
Underlying Options |
|
All Other |
Principal Position |
|
Year |
|
Salary($) |
|
($) |
|
($)(1) |
|
($) |
|
(#) |
|
Compensation ($)(2) |
E. Bonnie Schaefer |
|
|
2006 |
|
|
|
800,000 |
|
|
|
1,360,000 |
|
|
|
0 |
|
|
|
1,874,474 |
(3) |
|
|
0 |
|
|
|
127,065 |
(4) |
Co-Chairman and |
|
|
2005 |
|
|
|
650,000 |
|
|
|
1,462,500 |
|
|
|
0 |
|
|
|
0 |
|
|
|
100,000 |
|
|
|
130,676 |
(5) |
Co-Chief |
|
|
2004 |
|
|
|
400,000 |
|
|
|
800,000 |
|
|
|
0 |
|
|
|
0 |
|
|
|
0 |
|
|
|
1,994 |
|
Executive
Officer |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Marla L. Schaefer |
|
|
2006 |
|
|
|
800,000 |
|
|
|
1,360,000 |
|
|
|
0 |
|
|
|
1,874,474 |
(3) |
|
|
0 |
|
|
|
127,053 |
(4) |
Co-Chairman and |
|
|
2005 |
|
|
|
650,000 |
|
|
|
1,462,500 |
|
|
|
0 |
|
|
|
0 |
|
|
|
100,000 |
|
|
|
130,676 |
(5) |
Co-Chief Executive |
|
|
2004 |
|
|
|
400,000 |
|
|
|
800,000 |
|
|
|
0 |
|
|
|
0 |
|
|
|
0 |
|
|
|
20,554 |
|
Officer |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Ira D. Kaplan |
|
|
2006 |
|
|
|
475,000 |
|
|
|
546,250 |
|
|
|
0 |
|
|
|
77,175 |
(6) |
|
|
0 |
|
|
|
78,301 |
(4) |
Senior Vice |
|
|
2005 |
|
|
|
400,000 |
|
|
|
600,000 |
|
|
|
0 |
|
|
|
0 |
|
|
|
75,000 |
|
|
|
81,317 |
(5) |
President and Chief |
|
|
2004 |
|
|
|
338,008 |
|
|
|
600,000 |
|
|
|
0 |
|
|
|
0 |
|
|
|
0 |
|
|
|
17,357 |
|
Financial Officer |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
|
Amounts for executive perquisites and other personal benefits, securities or property
did not exceed the lesser of either $50,000 or 10% of annual salary and bonus. |
|
(2) |
|
Amounts represent matching contributions by us under our 401(k) profit sharing plan and
our management deferred compensation plan. |
|
(3) |
|
Represents the value of both restricted stock ($1,681,500) awarded and performance
shares ($192,974) earned in fiscal 2006, as more fully described in this footnote. In
fiscal 2006, each of Ms. E. Bonnie Schaefer and Ms. Marla L. Schaefer was awarded 75,000
shares of restricted stock. The value of each of these grants of restricted stock
($1,681,500) reported in the table is based upon the total initial grant of 75,000 shares
times the last reported sale price of an unrestricted share of common stock on the NYSE on
February 11, 2005 ($22.42), the date of grant. The market value of the 75,000 shares of
restricted stock was $2,315,250, based on the last reported sales price of an unrestricted
share of common stock on the NYSE on January 27, 2006, the last trading day of Fiscal 2006
($30.87), not taking into account the forfeiture provisions described below. The named
executive officer will be required to forfeit a portion of the restricted stock shares if
not employed on the following dates, which results in the following vesting schedule:
twenty-five percent (25%) of the restricted stock vested on February 1, 2006, twenty-five
percent (25%) of the restricted stock will vest on February 1, 2007, and fifty percent
(50%) of the restricted stock will vest on February 1, 2008. Vesting on the restricted
stock is subject to acceleration upon the occurrence of a change in control (as defined in
each of their employment agreements described under Employment Agreements with our
Co-CEOs below) or the occurrence of certain other events (as described in Employment
Agreements with our Co-CEOs below). As of the last trading day of fiscal 2006, 56,250
shares of restricted stock were subject to forfeiture based on the vesting schedule of the
restricted stock. Using a stock price of $22.42 referenced above, the value of the 18,750
shares of restricted stock not subject to forfeiture, as of the end of fiscal 2006, was
$420,375 for each of Ms. Bonnie Schaefer and Ms. Marla Schaefer. Dividends are paid on our
common stock, which includes our restricted stock. Also in fiscal 2006, each of Ms. E.
Bonnie Schaefer and Ms. Marla L. Schaefer were granted 50,000 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 February 1, 2005 (the
Vesting |
13
|
|
|
|
|
Schedule), and further subject to achievement of certain performance goals (Share
Performance Goals) in each of the three years in the three-year vesting cycle previously
established by the compensation committee of our board of directors. The Share Performance
Goals for fiscal 2006 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. For fiscal 2006, the number of performance shares earned by each of Ms.
E. Bonnie Schaefer and Ms. Marla Schaefer was 6,250 shares, with a market value of $192,974,
based on the closing price of our common stock on January 27, 2006 ($30.87), the last
trading day of fiscal 2006. Dividends are not paid on performance shares until the shares
are actually issued, which is expected to occur prior to May 31, 2006.
|
|
(4) |
|
Includes a one-time special distribution from our deferred compensation plan paid to
all participants as a result of the death of a participant in fiscal 2006. |
|
(5) |
|
Includes a one-time special distribution from our deferred compensation plan paid to
all participants as a result of a death of a participant in fiscal 2005. This amount was
overstated by approximately $32,000, for each of Ms. Bonnie Schaefer and Ms. Marla
Schaefer, and by approximately $20,000 for Ira Kaplan, in the fiscal 2005 summary
compensation table. |
|
(6) |
|
In fiscal 2006, Mr. Kaplan was granted 20,000 performance shares. The performance
shares are subject to the same Vesting Schedule, Share Performance Goals and target levels
as set forth in footnote 3 above for Ms. Marla Schaefer and Ms. Bonnie Schaefer. For
fiscal 2006, the number of performance shares earned by Mr. Kaplan was 2,500 shares, with a
market value of $77,175, based on the closing price of our common stock on January 27, 2006
($30.87), the last trading day of fiscal 2006. Dividends are not paid on performance
shares until the shares are actually issued, which is expected to occur prior to May 31,
2006. |
Stock Option Grants
No stock option grants were made to any named executive officer during fiscal 2006.
Option Exercises and Year-End Values
The following table sets forth certain information concerning the exercise of stock options by
the named executive officers during fiscal 2006 and unexercised stock options held by the named
executive officers as of January 28, 2006 under our 1991 and 1996 stock option plans.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Number of Securities |
|
|
|
|
|
|
|
|
|
|
|
|
Underlying Unexercised |
|
Value of Unexercised |
|
|
|
|
|
|
|
|
|
|
Options Held as of |
|
In-the-Money Options as of |
|
|
Shares |
|
|
|
|
|
January 28, 2006 (1) |
|
January 28, 2006 (2) |
|
|
Acquired on |
|
Value |
|
|
|
|
|
|
|
|
Name |
|
Exercise |
|
Realized |
|
Exercisable |
|
Unexercisable |
|
Exercisable |
|
Unexercisable |
E. Bonnie Schaefer |
|
|
|
|
|
|
|
|
|
|
150,000 |
|
|
|
0 |
|
|
$ |
2,260,000 |
|
|
|
0 |
|
Marla L. Schaefer |
|
|
|
|
|
|
|
|
|
|
250,000 |
|
|
|
0 |
|
|
$ |
4,451,000 |
|
|
|
0 |
|
Ira D. Kaplan |
|
|
19,600 |
|
|
$ |
261,072 |
|
|
|
195,270 |
|
|
|
0 |
|
|
$ |
3,406,684 |
|
|
|
0 |
|
|
|
|
(1) |
|
On January 19, 2006, our compensation committee approved accelerating the vesting of
93,750 options, 93,750 options and 126,190 options, held by E. Bonnie Schaefer, Marla
Schaefer and Ira Kaplan, respectively, effective January 23, 2006. |
|
(2) |
|
Value of unexercised in-the-money options is the sum of the value of each option
granted, calculated on a grant by grant basis. The value of each option is equal to the
product of the number of shares that could be acquired upon the exercise of unexercised
options as of the end of fiscal 2006 multiplied by the difference between the exercise
price for the grant and the market price on the last trading day of fiscal 2006 of $30.87
per share, excluding grants for which the difference is equal to or less than zero. |
14
Compensation of Directors
Cash Component. We do not pay director fees to directors who are our employees. For fiscal
2006, our non-employee directors received an annual retainer of $35,000 and received $1,000 for
physical attendance at board and committee meetings or $500 for telephonic attendance at board and
committee meetings. The audit committee chairman received an additional annual retainer of $15,000
and all audit committee members, not including the chairman, received an additional annual retainer
of $10,000. Other committee chairmen received an additional annual retainer of $7,500 and all
members of other committees, not including the chairman, received an additional annual retainer of
$5,000. Our non-employee directors are reimbursed for out-of-pocket expenses incurred in
connection with their attendance at board meetings. All fees earned by our non-employee directors
are paid on a quarterly basis.
Equity Component. On August 16, 2005, our non-employee directors received an annual grant of
4,600 shares of restricted stock for fiscal 2006 (other than Ms. Goss, who received an additional
prorated annual grant of 1,533 shares of restricted stock, or a total of 6,133 shares of restricted
stock). In fiscal 2007, based on the current compensation package for our non-employee directors,
non-employee members of the board elected or re-elected at our 2006 annual meeting will receive an
annual grant of 4,600 shares of restricted stock on the date the director is elected or re-elected
by our shareholders at the annual meeting. In each case, the restricted stock is subject to
forfeiture in the event the director no longer serves as our director for any reason, other than as
a result of death, disability, or a change in control (as defined in our 2005 incentive
compensation plan), 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.
Equity Retention Guidelines. In accordance with current guidelines in effect for our
non-employee directors, as long as the non-employee director serves as our director, each
non-employee director must retain at least 50% of each annual grant of restricted stock. In
addition, the director must beneficially own (whether as a result of open market purchases, stock
option exercises, or restricted stock grants) at least 5,000 shares of our common stock by no later
than three years from the date the director is appointed or elected to the board, or, in the case
of directors serving on the board as of August 16, 2005, by no later than the later of (x) three
years from the date of their initial appointment or election to the board, or (y) August 16, 2007.
Fiscal 2006 Board of Directors Compensation (1)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total |
|
|
|
|
|
|
|
|
|
|
|
|
|
Annual Committee |
|
Total |
|
Restricted |
Director |
|
Compensation |
|
Annual Retainer |
|
Attendance Fees |
|
Chair Fees |
|
Retainer(s) |
|
Cash Fees |
|
Stock (2) |
Marla L. Schaefer (3) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
E. Bonnie Schaefer
(3) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Ira D. Kaplan (3) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Martha Clark Goss |
|
$ |
229,565 |
|
|
$ |
35,000 |
|
|
$ |
21,500 |
|
|
$ |
7,500 |
|
|
$ |
15,000 |
|
|
$ |
79,000 |
|
|
$ |
150,565 |
|
Bruce G. Miller |
|
$ |
194,430 |
|
|
$ |
35,000 |
|
|
$ |
21,500 |
|
|
$ |
15,000 |
|
|
$ |
10,000 |
|
|
$ |
81,500 |
|
|
$ |
112,930 |
|
Steven H. Tishman |
|
$ |
179,430 |
|
|
$ |
35,000 |
|
|
$ |
16,500 |
|
|
|
|
|
|
$ |
15,000 |
|
|
$ |
66,500 |
|
|
$ |
112,930 |
|
Ann Spector Lieff |
|
$ |
175,430 |
|
|
$ |
35,000 |
|
|
$ |
15,000 |
|
|
$ |
7,500 |
|
|
$ |
5,000 |
|
|
$ |
62,500 |
|
|
$ |
112,930 |
|
|
|
|
(1) |
|
Table does not include compensation for items such as reimbursement for out-of-pocket
expenses. |
|
(2) |
|
On August 16, 2005, our non-employee directors received an annual grant of 4,600 shares of
restricted stock (other than Ms. Goss, who also received an additional prorated annual grant
of 1,533 shares of restricted stock, or a total of 6,133 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 value of the restricted stock reported in the table is based upon the last
reported sale price of an unrestricted share of common stock on the NYSE on August 16, 2005
($24.55). If the value of these restricted shares was based on the last reported sales price
of an unrestricted share of common stock on the NYSE on January 27, 2006, the last trading day
of fiscal 2006 ($30.87), the market value of these shares would be $142,002 (other than Ms.
Goss, for which the market value would be $189,326). Dividends are paid on our common stock,
which includes our restricted stock. |
|
(3) |
|
We do not pay director fees to directors who are our employees. |
15
Employment Agreements with our Co-CEOs
On February 11, 2005, we entered into employment agreements with E. Bonnie Schaefer, our
co-chief executive officer and co-chairman of the board of directors, and Marla Schaefer, our
co-chief executive officer and co-chairman of the board of directors (whom we collectively refer to
as the chief executives), which were approved by the compensation committee of the board and our
independent directors.
Each of the employment agreements provides for an initial three-year term, with automatic one
year renewal periods (with a three-year renewal period in the event of a change in control), unless
we or the chief executive provides notice of non-renewal. Pursuant to the employment agreements,
each chief executive received an annual base salary of $800,000 during the first year of the
employment agreement, subject to increase thereafter based on annual review, with a minimum annual
increase of three percent (3%). In April 2006, the compensation committee of the board of
directors increased the annual base salary for each of our co-chief executive officers to $900,000,
effective January 30, 2006. Each chief executive is also eligible to receive incentive
compensation of up to 225% of such chief executives base salary (Incentive Compensation) based
on achievement of performance criteria, to be established each year by an independent committee of
the board. Upon signing of the employment agreement, each chief executive was granted 75,000
shares of restricted stock, twenty-five percent (25%) of which vested on February 1, 2006,
twenty-five (25%) of which will vest on February 1, 2007 and fifty (50%) of which will vest on
February 1, 2008. Each chief executive will be entitled to receive performance shares during each
year of employment, subject to the achievement of performance goals established by the compensation
committee. The performance goals for fiscal 2006 were established by the compensation committee in
April 2005 and the performance goals for fiscal 2007 were established by the compensation committee
in April 2006 for cash bonuses and performance shares for fiscal 2006 and cash bonuses and
performance units for fiscal 2007, respectively. The employment agreements provide for expense
reimbursements and other customary employee benefits.
If the chief executive is terminated by us without cause (as defined in the employment
agreements) or the chief executive terminates her employment for good reason (as defined in the
employment agreements): (i) the chief executive will receive payment of two (2) times the amount of
the chief executives annual base salary; (ii) the chief executive will receive payment of two (2)
times the Incentive Compensation (determined as set forth in the employment agreements); and (iii)
we will continue to provide the chief executive with certain benefits until the chief executives
full retirement date for Social Security purposes or until the age of seventy (70). Also, the
restricted stock and performance shares held by chief executive will immediately vest.
If we terminate the chief executive pursuant to a change of control (as defined in the
employment agreements): (i) the chief executive will receive payment of three (3) times the amount
of the chief executives annual base salary; (ii) the chief executive will receive payment of three
(3) times the Incentive Compensation (determined as set forth in the employment agreements); and
(iii) we will continue to provide the chief executive with her benefits under the employment
agreement until the chief executives full retirement date for Social Security purposes or until
the age of seventy (70). Also, the restricted stock and performance shares held by chief executive
will immediately vest.
If the chief executives employment is terminated as a result of disability, or if the chief
executive terminates her employment with us without good reason, we will provide certain benefits
as set forth in the employment agreements for a period of twelve (12) months (or in the case of
disability, thirty-six (36) months). In the case where we terminate the chief executives
employment for cause or the chief executive terminates her employment without good reason, the
portion of the restricted stock and performance shares that have not vested as of the termination
date will terminate; however, if the chief executives employment is terminated because of
disability or death, the restricted stock and performance shares held by chief executive will
immediately vest.
Each of the employment agreements provides for customary protections of our confidential
information and intellectual property and that each chief executive will not, during her employment
term and for a period of two (2) years following her period of employment, compete with us, employ
or attempt to employ employees of ours, or call on or solicit any of the actual or targeted
prospective customers or clients of ours.
16
Employee Benefit Plans
1996 Incentive Compensation Plan. On August 13, 1996, our board of directors adopted the 1996
Stock Option Plan, which was approved by our shareholders at our 1997 annual meeting, and which we
refer to as our 1996 Plan. On February 16, 2000, our board adopted an amendment to the 1996 Plan
in order to increase the number of shares of common stock available for grant under the 1996 Plan
from 6,000,000 to 8,000,000, plus the number of shares unused or recaptured under our 1991 Stock
Option Plan, which was approved by our shareholders at the 2000 annual meeting. On March 12, 2003,
our board of directors approved additional amendments to and restatement of the 1996 Plan, which
were approved by our shareholders at the 2003 annual meeting. Effective as of June 28, 2005 (the
date of our 2005 annual meeting), all remaining shares available for issuance under the 1996 Plan
were rolled-over into the 2005 Incentive Compensation Plan, which was approved by our shareholders
on that date. As a result, no new grants will be made under the 1996 Plan.
The purpose of the 1996 Plan is to provide an additional incentive to attract and retain
qualified competent persons who provide services and upon whose efforts and judgment our success is
largely dependent, through the encouragement of stock ownership in us by these persons. In
furtherance of this purpose, the 1996 Plan authorizes, among other things, the discretion to grant
incentive stock options, nonqualified stock options, restricted stock, stock appreciation rights,
or SARs, and other stock-related awards and performance or annual incentive awards to purchase
shares of the common stock to all regular employees, including directors and officers who are
regular employees, non-employee directors, and persons who provide consulting or other services to
us as independent contractors. The 1996 Plan also provides for participants to finance the
exercise of options and the payment of taxes in connection therewith, as well as the use of already
owned shares of common stock as payment of the exercise price for options granted under the 1996
Plan.
The 1996 Plan is administered by the compensation committee which has been designated by our
board and which consists entirely of independent directors. Both our board and the committee have
the power to determine who should be awarded options, the number of shares to be granted and the
exercise price of the options and other terms. In addition, both our board and the committee have
the power and authority to construe and interpret the 1996 Plan, and the acts of the board or the
committee are final, conclusive and binding upon all interested parties.
The shares acquired upon exercise of options granted under the 1996 Plan are authorized and
issued shares of our common stock. Our shareholders do not have any preemptive rights to purchase
or subscribe for any common stock by reason of the reservation and issuance of common stock under
the 1996 Plan. Any option granted under the 1996 Plan that expired or terminated for any reason
other than having been exercised in full, the unpurchased shares subject to that option will again
become available for purposes of issuance under the 1996 Plan. The 1996 Plan limits the total
aggregate number of options, SARs, restricted shares of common stock, deferred shares of common
stock, shares as a bonus or in lieu of our other obligations, and other stock-based awards granted
to any one participant to 500,000 for each type of award. The maximum amount that may be paid out
as an annual incentive award or other cash award in any fiscal year to any one participant is
$1,000,000, and the maximum amount that may be earned as a performance award or other cash award in
respect of a performance period by any one participant is $5,000,000.
All grants of options or SARs under the 1996 Plan are evidenced by an agreement between us and
the grantee which contains the terms and conditions of the award, such as the exercise price, term
and any restrictions on the exercisability of the options or SARs granted. The exercise price per
share subject to an option and the grant price of an SAR are determined by the board or the
committee, but in the case of an ISO must not be less than the fair market value of a share of our
common stock on the date of grant. The exercise price of an option may be paid in cash, by
certified or official bank check, by money order, by delivery of already owned shares of common
stock having a fair market value equal to the exercise price, by the withholding of shares issuable
upon exercise of the option, by such other consideration as our board or committee deems
appropriate or by a combination of the foregoing. Generally, options or SARs granted under the
1996 Plan are not assignable or transferable, other than by will or by the laws of descent and
distribution or, in the case of a nonqualified stock option, with the prior consent of our board or
the committee. During the lifetime of an optionee, an option is exercisable only by the optionee
or a permitted transferee. The expiration date of an option will be determined by the board or the
committee at the time of the grant, but in no event will an option be exercisable after the
expiration of ten years from the date of grant.
17
Our board or the committee may amend any option granted under the 1996 Plan at any time,
provided that such amendment may not substantially impair the rights of an optionee under an
outstanding option without the optionees consent. The 1996 Plan has been replaced with the 2005
Plan.
2005 Incentive Compensation Plan. In March, 2005, our board of directors, upon recommendation
of our compensation committee, adopted a new 2005 Incentive Compensation Plan, which was amended
and restated in May 2005, and which we refer to as the 2005 Plan. The 2005 Plan was approved at
our 2005 annual meeting held on June 28, 2005 by our shareholders and was effective as of that
date. As of January 28, 2006, we had granted 19,900 shares of restricted stock under the 2005
Plan.
The purpose of the 2005 Plan is to provide a means for us and our subsidiaries and other
designated affiliates of ours, which we refer to as Related Entities, to attract key personnel to
provide services to us and our Related Entities, as well as, to provide a means whereby those key
persons can acquire and maintain stock ownership, thereby strengthening their commitment to the
welfare of us and our Related Entities and promoting the mutuality of interests between
participants and our shareholders. A further purpose of the 2005 Plan is to provide participants
with additional incentive and reward opportunities designed to enhance the profitable growth of us
and our Related Entities, and provide participants with annual and long term performance incentives
to expend their maximum efforts in the creation of shareholder value.
The terms of the 2005 Plan provide for grants of stock options, stock appreciation rights or
SARs, restricted stock, deferred stock, other stock-related awards and performance awards that may
be settled in cash, stock or other property.
Under the 2005 Plan, the total number of shares of our common stock that may be subject to the
granting of awards under the 2005 Plan at any time during the term of the Plan is equal to
2,000,000 shares, increased by approximately 7,300,000 shares that remained available for delivery
under 1996 Plan as of the effective date of the 2005 Plan. The foregoing limit will be increased
by the number of shares with respect to awards previously granted under the 2005 Plan that are
forfeited, expire or otherwise terminate without issuance of shares, or that are settled for cash
or otherwise do not result in the issuance of shares, and the number of shares that are tendered
(either actually or by attestation) or withheld upon exercise of an award, to pay the exercise
price or any tax withholding requirements. Awards issued in substitution for awards previously
granted by a company acquired by us or a Related Entity, or with which we or any Related Entity
combines, do not reduce the limit on grants of Awards under the 2005 Plan.
The 2005 Plan imposes individual limitations on the amount of certain awards in part to comply
with Section 162(m) of the Internal Revenue Code of 1986, which we refer to as the Code. Under
these limitations, during any fiscal year during any part of which the 2005 Plan is in effect, no
participant may be granted (i) options or stock appreciation rights with respect to more than
500,000 shares, or (ii) shares of restricted stock, shares of deferred stock, performance shares
and other stock based-awards with respect to more than 500,000 shares, subject to adjustment in
certain circumstances. The maximum amount that may be paid out as performance units in any
12-month period is $5,000,000 (pro-rated for any performance period that is less than 12 months
based upon the ratio of the number of days in the performance period as compared to 365), and the
maximum amount that may be paid out as performance units in any performance period that is greater
than 12 months is $10,000,000.
A committee of our board of directors, which we refer to as the Committee, administers the
2005 Plan. The Committee is authorized to adjust the limitations described in the two preceding
paragraphs and is authorized to adjust outstanding awards (including adjustments to exercise prices
of options and other affected terms of awards) in the event that a dividend or other distribution
(whether in cash, shares of common stock or other property), recapitalization, forward or reverse
split, reorganization, merger, consolidation, spin-off, combination, repurchase, share exchange or
other similar corporate transaction or event affects our common stock so that an adjustment is
appropriate in order to prevent dilution or enlargement of the rights of participants. The
Committee is also authorized to adjust performance conditions and other terms of awards in response
to these kinds of events or in response to changes in applicable laws, regulations or accounting
principles.
The persons eligible to receive awards under the 2005 Plan are the officers, directors,
employees and independent contractors of ours and our Related Entities. An employee on leave of
absence may be considered as still in our employ or in the employ of a Related Entity for purposes
of eligibility for participation in the 2005 Plan.
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Our board of directors will select the Committee that will administer the 2005 Plan.
Currently, the 2005 Plan will be administered by our compensation committee. All Committee members
must be non-employee directors as defined by Rule 16b-3 of the Exchange Act, outside directors
for purposes of Section 162(m) of the Code, and independent as defined by the New York Stock
Exchange or any other national securities exchange on which our securities may be listed for
trading in the future. However, except as otherwise required to comply with Rule 16b-3 of the
Exchange Act or Section 162(m) of the Code, our board of directors may exercise any power or
authority granted to the Committee. Subject to the terms of the 2005 Plan, the Committee is
authorized to select eligible persons to receive awards, determine the type and number of awards to
be granted and the number of shares of our common stock to which awards will relate, specify times
at which awards will be exercisable or settleable (including performance conditions that may be
required as a condition thereof), set other terms and conditions of awards, prescribe forms of
award agreements, interpret and specify rules and regulations relating to the 2005 Plan and make
all other determinations that may be necessary or advisable for the administration of the 2005
Plan.
The Committee is authorized to grant stock options, including both incentive stock options or
ISOs, which can result in potentially favorable tax treatment to the participant, and non-qualified
stock options, and SARs entitling the participant to receive the amount by which the fair market
value of a share of our common stock on the date of exercise (or the change in control price, as
defined in the Plan, following a change in control) exceeds the grant price of the SAR. The
exercise price per share subject to an option and the grant price of an SAR are determined by the
Committee, but in the case of an ISO must not be less than the fair market value of a share of our
common stock on the date of grant. For purposes of the 2005 Plan, the term fair market value
means the fair market value of our common stock, awards or other property as determined by the
Committee or under procedures established by the Committee. Unless otherwise determined by the
Committee or our board of directors, the fair market value of our common stock as of any given date
will be the closing sales price per share of our common stock as reported on the principal stock
exchange or market on which our common stock is traded on the date as of which such value is being
determined or, if there is no sale on that date, the last previous day on which a sale was
reported. The maximum term of each option or SAR, the times at which each option or SAR will be
exercisable, and provisions requiring forfeiture of unexercised options or SARs at or following
termination of employment or service generally are fixed by the Committee except that no option or
SAR may have a term exceeding 10 years. Options may be exercised by payment of the exercise price
in cash, shares that have been held for at least six months (or that the Committee otherwise
determines will not result in a financial accounting charge to us), outstanding awards or other
property having a fair market value equal to the exercise price, as the Committee may determine
from time to time. Methods of exercise and settlement and other terms of the SARs are determined
by the Committee. SARs granted under the 2005 Plan may include limited SARs exercisable for a
stated period of time following a change in control of us or upon the occurrence of some other
event specified by the Committee, as discussed below.
The Committee is authorized to grant restricted stock and deferred stock. Restricted stock is
a grant of shares of our common stock which may not be sold or disposed of, and which may be
forfeited in the event of certain terminations of employment or service, prior to the end of a
restricted period specified by the Committee. A participant granted restricted stock generally has
all of the rights of a shareholder of ours, unless otherwise determined by the Committee. An award
of deferred stock confers upon a participant the right to receive shares of our common stock at the
end of a specified deferral period, and may be subject to possible forfeiture of the award in the
event of certain terminations of employment prior to the end of a specified restricted period.
Prior to settlement, an award of deferred stock carries no voting or dividend rights or other
rights associated with share ownership, although dividend equivalents may be granted, as discussed
below.
The Committee is authorized to grant dividend equivalents conferring on participants the right
to receive, currently or on a deferred basis, cash, shares of our common stock, other awards or
other property equal in value to dividends paid on a specific number of shares of our common stock
or other periodic payments. Dividend equivalents may be granted alone or in connection with
another award, may be paid currently or on a deferred basis and, if deferred, may be deemed to have
been reinvested in additional shares of our common stock, awards or otherwise as specified by the
Committee.
The Committee is authorized to grant shares of our common stock as a bonus free of
restrictions, or to grant shares of our common stock or other awards in lieu of our obligations to
pay cash under the 2005 Plan or other plans or compensatory arrangements, subject to such terms as
the Committee may specify.
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The Committee is authorized to grant awards under the 2005 Plan that are denominated or
payable in, valued by reference to, or otherwise based on or related to shares of our common stock.
Such awards might include convertible or exchangeable debt securities, other rights convertible or
exchangeable into shares of our common stock, purchase rights for shares of our common stock,
awards with value and payment contingent upon our performance or any other factors designated by
the Committee, and awards valued by reference to the book value of shares of our common stock or
the value of securities of or the performance of specified subsidiaries or business units. The
Committee determines the terms and conditions of such awards.
The right of a participant to exercise or receive a grant or settlement of an award, and the
timing thereof, may be subject to such performance conditions (including subjective individual
goals) as may be specified by the Committee. In addition, the 2005 Plan authorizes specific
performance awards, which represent a conditional right to receive cash, shares of our common stock
or other awards upon achievement of certain preestablished performance goals and subjective
individual goals during a specified fiscal year. Performance awards granted to persons whom the
Committee expects will, for the year in which a deduction arises, be covered employees (as
defined below) will, if and to the extent intended by the Committee, be subject to provisions that
should qualify such awards as performance-based compensation not subject to the limitation on tax
deductibility by us under Code Section 162(m). For purposes of Section 162(m), the term covered
employee means our chief executive officer and each other person whose compensation is required to
be disclosed in our filings with the SEC by reason of that person being among our four highest
compensated named executive officers as of the end of a taxable year. If and to the extent
required under Section 162(m) of the Code, any power or authority relating to a performance award
intended to qualify under Section 162(m) of the Code is to be exercised by the Committee, not our
board of directors.
Subject to the requirements of the 2005 Plan, with respect to our covered employees, the
Committee will determine performance award terms, including the required levels of performance with
respect to specified business criteria, the corresponding amounts payable upon achievement of such
levels of performance, termination and forfeiture provisions and the form of settlement. One or
more of the following business criteria for us, on a consolidated basis, and/or for Related
Entities, or for business or geographical units of ours and/or a Related Entity (except with
respect to the total shareholder return and earnings per share criteria), will be used by the
Committee in establishing performance goals for performance awards to covered employees that are
intended to qualify under Section 162(m): (1) earnings per share; (2) revenues or margins; (3) cash
flow; (4) operating margin; (5) return on net assets, investment, capital, or equity; (6) economic
value added; (7) direct contribution; (8) net income; pretax earnings; earnings before interest and
taxes; earnings before interest, taxes, depreciation and amortization; earnings after interest
expense and before extraordinary or special items; operating income; income before interest income
or expense, unusual items and income taxes, local, state or federal and excluding budgeted and
actual bonuses which might be paid under any ongoing bonus plans of the Company; (9) working
capital; (10) management of fixed costs or variable costs; (11) identification or consummation of
investment opportunities or completion of specified projects in accordance with corporate business
plans, including strategic mergers, acquisitions or divestitures; (12) total shareholder return;
(13) debt reduction; (14) comparable store sales; (15) inventory turn; (16) markdowns as a
percentage of sales; and (17) selling, general and administrative expenses as a percentage of
sales; and (18) any of the above goals determined on an absolute or relative basis or as compared
to the performance of a published or special index deemed applicable by the Committee including,
but not limited to, the Standard & Poors 500 Stock Index or a group of comparable companies. The
Committee may exclude the impact of an event or occurrence which the Committee determines should
appropriately be excluded, including without limitation (i) restructurings, discontinued
operations, extraordinary items, and other unusual or non-recurring charges, (ii) an event either
not directly related to our operations or not within the reasonable control of our management, or
(iii) a change in accounting standards required by generally accepted accounting principles.
In granting performance awards, the Committee may establish unfunded award pools, the
amounts of which will be based upon the achievement of a performance goal or goals based on one or
more of certain business criteria described in the 2005 Plan (including, for example, total
shareholder return, net income, pretax earnings, EBITDA, earnings per share, comparable store
sales, and return on investment).
Awards may be settled in the form of cash, shares of our common stock, other awards or other
property, in the discretion of the Committee. The Committee may require or permit participants to
defer the settlement of all or part of an award in accordance with such terms and conditions as the
Committee may establish, including payment
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or crediting of interest or dividend equivalents on deferred amounts, and the crediting of
earnings, gains and losses based on deemed investment of deferred amounts in specified investment
vehicles. The Committee is authorized to place cash, shares of our common stock or other property
in trusts or make other arrangements to provide for payment of our obligations under the 2005 Plan.
The Committee may condition any payment relating to an award on the withholding of taxes and may
provide that a portion of any shares of our common stock or other property to be distributed will
be withheld (or previously acquired shares of our common stock or other property be surrendered by
the participant) to satisfy withholding and other tax obligations. Awards granted under the 2005
Plan generally may not be pledged or otherwise encumbered and are not transferable except by will
or by the laws of descent and distribution, or to a designated beneficiary upon the participants
death, except that the Committee may, in its discretion, permit transfers for estate planning or
other purposes subject to any applicable restrictions under Rule 16b-3 of the Exchange Act.
Awards under the 2005 Plan are generally granted without a requirement that the participant
pay consideration in the form of cash or property for the grant (as distinguished from the
exercise), except to the extent required by law. The Committee may, however, grant awards in
exchange for other awards under the 2005 Plan awards or under other company plans, or other rights
to payment from us, and may grant awards in addition to and in tandem with such other awards,
rights or other awards.
The Committee may, in its discretion, accelerate the exercisability, the lapsing of
restrictions or the expiration of deferral or vesting periods of any award, and such accelerated
exercisability, lapse, expiration and if so provided in the award agreement, vesting will occur
automatically in the case of a change in control of the Company, as defined in the 2005 Plan
(including the cash settlement of SARs and limited SARs which may be exercisable in the event of
a change in control). In addition, the Committee may provide in an award agreement that the
performance goals relating to any performance based award will be deemed to have been met upon the
occurrence of any change in control. Upon the occurrence of a change in control, if so provided
in the award agreement, stock options and limited SARs (and other SARs which so provide) may be
cashed out based on a defined change in control price, which will be the higher of (i) the cash
and fair market value of property that is the highest price per share paid (including extraordinary
dividends) in any reorganization, merger, consolidation, liquidation, dissolution or sale of
substantially all of our assets, or (ii) the highest fair market value per share (generally based
on market prices) at any time during the 60 days before and 60 days after a change in control.
For purposes of the 2005 Plan, a change in control will be deemed to occur upon the earliest
of the following:
(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) the then
outstanding shares of common stock of the Company (the Outstanding Company Common Stock) or (2)
the combined voting power of the then outstanding voting securities of the Company 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 the Companys 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
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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.
Our board of directors may amend, alter, suspend, discontinue or terminate the 2005 Plan or
the Committees authority to grant awards without further shareholder approval, except shareholder
approval must be obtained for any amendment or alteration if such approval is required by law or
regulation or under the rules of any stock exchange or quotation system on which shares of our
common stock are then listed or quoted. Thus, shareholder approval may not necessarily be required
for every amendment to the 2005 Plan which might increase the cost of the 2005 Plan or alter the
eligibility of persons to receive awards. Shareholder approval will not be deemed to be required
under laws or regulations, such as those relating to ISOs, that condition favorable treatment of
participants on such approval, although our board of directors may, in its discretion, seek
shareholder approval in any circumstance in which it deems such approval advisable. Unless earlier
terminated by our board of directors, the 2005 Plan will terminate at such time as no shares of our
common stock remain available for issuance under the 2005 Plan and we have no further rights or
obligations with respect to outstanding awards under the 2005 Plan.
Claires Stores, Inc. Management Deferred Compensation Plan. Effective as of July 26, 1999,
we adopted a non-qualified deferred compensation plan, referred to as the Claires Stores, Inc.
Management Deferred Compensation Plan, or the 1999 Deferred Compensation Plan. The 1999 Deferred
Compensation Plan was amended on January 1, 2001. In response to new legislation enacted at the
end of calendar year 2004, the 1999 Deferred Compensation Plan was frozen, effective as of February
4, 2005, and no future contributions were made into the 1999 Deferred Compensation Plan on or after
that date. The 1999 Deferred Compensation Plan will continue to remain in existence until all
benefits are paid out to the participants and beneficiaries, in accordance with and pursuant to the
terms set forth in the 1999 Deferred Compensation Plan.
The purpose of the 1999 Deferred Compensation Plan was to permit some of our selected key
employees to elect to defer all or a portion of their cash compensation to be received from us
until the earlier of the termination of his or her employment with us or a specified date in the
future, as indicated in the initial election form executed by the individual key employee. In the
event of a change in control, as defined in the 1999 Deferred Compensation Plan, all amounts
contributed to the 1999 Deferred Compensation Plan will become immediately payable to the
participants in accordance with their individual account balances.
The key employees had the ability to elect to defer up to one hundred (100%) of their base
salary and one hundred percent (100%) of their bonuses for a plan year, which, for purposes of the
1999 Deferred Compensation Plan, is a calendar year.
In addition to the elective deferrals described above, participants may have received a
discretionary employer contribution which was determined by us on an annual basis. The individual
amounts for each participant, which is not necessarily the same for each participant, was based
upon a certain percentage of the participants base salary for the plan year and the number of
years of employment with us. The actual percentage amounts are set forth in the 1999 Deferred
Compensation Plan.
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Each participant is one hundred percent (100%) vested in all contributions, including elective
deferrals and discretionary employer contributions, made on his or her behalf to the 1999 Deferred
Compensation Plan, if any, at all times.
Participants may select from a variety of investment alternatives, including life insurance,
for purposes of calculating the investment return attributable to their elective deferrals and/or
the non-discretionary employer contributions made on their behalf. Under the terms of the 1999
Deferred Compensation Plan, we will be required to pay out amounts to a participant based upon the
investment alternatives selected by the participant.
All amounts contributed to the 1999 Deferred Compensation Plan, including the participant
elective deferrals and the discretionary employer contributions, were funded into a grantor rabbi
trust and, thus, all such amounts remain subject to the claims of our creditors in the event we
become bankrupt or insolvent.
At the appropriate time of distribution, each participant will receive either a lump sum
distribution or installment payments of the contributions, including the elective deferrals, the
discretionary employer contributions and earnings thereon, if any, made to the 1999 Deferred
Compensation Plan on his or her behalf. The actual method of distribution will depend upon the
event which gives rise to the right of distribution. For example, if a participant terminates
employment due to retirement, as defined in the 1999 Deferred Compensation Plan, he or she will
have the option of receiving his or her benefits in the form of a lump sum or installments payable
over either 5, 10 or 15 years. In the event that a participant dies while employed by us, his or
her beneficiary or beneficiaries may be entitled to receive additional death benefits under the
1999 Deferred Compensation Plan. In-service withdrawals with a penalty or other withdrawals to
cover unforeseen financial emergencies are also allowed, subject to the terms of the 1999 Deferred
Compensation Plan.
Claires Stores, Inc. 2005 Management Deferred Compensation Plan. In response to new
legislation that was enacted at the end of calendar year 2004, we adopted a new non-qualified
deferred compensation plan, referred to as the Claires Stores, Inc. 2005 Management Deferred
Compensation Plan, or 2005 Deferred Compensation Plan, effective as of February 4, 2005. The 2005
Deferred Compensation Plan is substantially the same as the 1999 Deferred Compensation Plan, except
for the changes required by the new legislation.
The purpose of the 2005 Deferred Compensation Plan is to permit some of our selected key
employees to elect to defer all or a portion of their cash compensation to be received from us
until the earlier of the termination of his or her employment with us or a specified date in the
future, as indicated in the initial election form executed by the individual key employee. In the
event of a change in control, as defined in the 2005 Deferred Compensation Plan, all amounts
contributed to the 2005 Deferred Compensation Plan will become immediately payable to the
participants in accordance with their individual account balances.
The key employees have the ability to elect to defer up to one hundred (100%) of their base
salary and one hundred percent (100%) of their bonuses for a plan year, which, for purposes of the
2005 Deferred Compensation Plan, is a calendar year.
In addition to the elective deferrals described above, participants may receive a
discretionary employer contribution which is determined by us on an annual basis. The individual
amounts for each participant, which is not necessarily the same for each participant, will be based
upon a certain percentage of the participants base salary for the plan year and years of
employment with us. The actual percentage amounts are set forth in the 2005 Deferred Compensation
Plan.
Each participant will be one hundred percent (100%) vested in all contributions, including
elective deferrals and discretionary employer contributions, made on his or her behalf to the 2005
Deferred Compensation Plan, if any, at all times.
Participants may select from a variety of investment alternatives, including life insurance,
for purposes of calculating the investment return attributable to their elective deferrals and/or
the non-discretionary employer contributions made on their behalf. Under the terms of the 2005
Deferred Compensation Plan, we will be required to pay out amounts to a participant based upon the
investment alternatives selected by the participant.
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All amounts contributed to the 2005 Deferred Compensation Plan, including the participant
elective deferrals and the discretionary employer contributions, will be funded into a grantor
rabbi trust and, thus, all such amounts remain subject to the claims of our creditors in the event
we become bankrupt or insolvent.
At the appropriate time of distribution, each participant will receive either a lump sum
distribution or installment payments of the contributions, including the elective deferrals, the
discretionary employer contributions and earnings thereon, if any, made to the 2005 Deferred
Compensation Plan on his or her behalf. The actual method of distribution will depend upon the
event which gives rise to the right of distribution. For example, if a participant terminates
employment due to retirement, as defined in the Deferred Compensation Plan, he or she will have the
option of receiving his or her benefits in the form of a lump sum or installments payable over
either a period from 5 to 15 years. In the event that a participant dies while employed by us, his
or her beneficiary or beneficiaries may be entitled to receive additional death benefits under the
2005 Deferred Compensation Plan. In-service withdrawals to cover unforeseen financial emergencies
are also allowed, subject to the terms of the 2005 Deferred Compensation Plan.
Compensation Committee Interlocks and Insider Participation
No member of the compensation committee is now or ever was an officer or an employee of ours.
During fiscal 2006, none of our executive officers served on the board of directors or compensation
committee of any company which any of our compensation committee members serve as executives or
employees.
COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
The following Compensation Committee Report on Executive Compensation and the performance
graph included elsewhere in this proxy statement do not constitute soliciting material and should
not be deemed filed or incorporated by reference in any other filing by us under the Securities Act
of 1933 or the Securities Exchange Act of 1934, except to the extent that we specifically
incorporate this report or the performance graph by reference therein.
Compensation Philosophy
Our compensation philosophy is to maximize shareholder value over time by aligning executive
compensation with our financial and operational performance, individual contribution and
shareholder returns. The executive compensation program is designed to:
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support a performance-oriented environment that links executive rewards to
shareholder value creation; |
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motivate and reward achievement of annual and long-term objectives; and |
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provide competitive total compensation that enables attraction and retention of key
executive talent. |
Performance criteria are reviewed each year to ensure consistency with our business
strategies. Executive officers are also given annual goals against which individual performance is
evaluated. The three main components comprising our executive compensation program during fiscal
2006 were:
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base salary; |
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annual incentive bonus; and |
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long-term incentives. |
We review the executive compensation program annually to ensure that the overall package and
each component are competitive and appropriately weighted. We use internal resources and, with
respect to establishing compensation for fiscal 2006, we used nationally recognized independent
compensation consultants, to assess the competitiveness of our executive compensation arrangements.
Market data from compensation surveys prepared by national consulting companies, which include
specialty retail companies, are considered when setting executive
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compensation. However, we also look beyond the competitive survey data during our
deliberations and place significant weight on individual job performance, future potential, the
importance of retention of individual executives based on their contribution to our business,
contribution by our executives to the increase in our shareholder value, the family history of the
co-chief executive officers relationship with us, and the longevity of our other named executive
officers tenure with us. Each year, Ms. Marla Schaefer, the Companys Co-Chairman and Co-CEO, and
Ms. Bonnie Schaefer, Companys Co-Chairman and Co-CEO, whom we collectively refer to as the
Co-CEOs, evaluate our other named executive officer, which is our CFO, and discuss with us their
assessment of these factors and how they should impact compensation decisions for our CFO. Based
on our assessment of this information, we consider the Co-CEOs compensation recommendations and
make any modifications we determine are appropriate for our CFO. We approve all individual
compensation actions and employment arrangements for our named executive officers, including any
severance benefits.
In April 2005, we finalized the performance criteria for bonuses for fiscal 2006 for our named
executive officers. We are also responsible for administering the Companys 1996 Plan and 2005
Plan.
Executive Officer Compensation
Base Compensation
We review base salaries for our named executive officers annually. Our goal is to pay
competitive base salaries, which we set at levels that will effectively attract and retain top
talent. We take into consideration the market data previously discussed and, with respect to our
CFO, the Co-CEOs evaluation and recommendations. We also consulted with nationally recognized
independent compensation consultants in establishing base salary for our named executive officers.
The base salaries of our named executive officers were based on the philosophies and objectives set
forth above. We also consider the performance of our executive officers in his or her particular
area of responsibility, overall contribution to the Companys performance, and future contributions
the named executive officers are believed to be able to make to the Company. Base salaries for our
named executive officers were increased for fiscal 2006 with special consideration given to the
following factors:
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the Companys continued successful performance in fiscal 2006; |
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length of service and knowledge of our business by our named executive officers; and |
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increase in shareholder value since our CO-CEOs assumed their
responsibilities in fiscal 2003. |
Annual Incentive Compensation
At a meeting in April 2005, we finalized the fiscal 2006 performance targets for our named
executive officers based on performance targets related to increases in net income, as adjusted,
over the prior fiscal year. These targets provided for the payment of bonuses ranging from 25% to
225% of base salary for our co-chief executive officers and 15% to 150% of base salary for our CFO.
See Executive Compensation.
Long-Term Incentive Compensation
In fiscal 2006, we did not grant any options to purchase our common stock to our named
executive officers. Rather, we moved to a system of executive officer long-term incentive
compensation based on performance goals (Share Performance Goals) for performance shares that may
be earned over a three-year performance period commencing February 1, 2005. The Share Performance
Goals for the performance shares granted for fiscal 2006 to our named executive officers are based
on increases in income, before income taxes, minus interest income, plus interest expense, plus or
minus special items over the prior fiscal year in the three-year period. The performance shares
are further subject to, both, a vesting schedule of 25%, 25% and 50% over the three-year period and
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. In fiscal 2006, our Co-CEOs were each granted 50,000 performance shares and our
CFO was granted 20,000 performance shares, subject to achievement of the Share Performance Goals.
Based on the vesting schedule and Share Performance Goals achieved for fiscal 2006, each of our
Co-CEOs will be issued 6,250 shares and our CFO will be issued 2,500 shares with respect to fiscal
2006.
25
Co-Chief Executive Officers Compensation
We believe that the compensation of the Co-CEOs should be closely tied to the Companys
success, and should provide each of the Co-CEOs with a stake in the future success of the Company.
For fiscal 2006, each of the Co-CEOs base salary was $800,000 and each of the Co-CEOs was awarded a
bonus equal to 170% of their base salary (or $1,360,000), which was based on the achievement of
performance goals established by our compensation committee in April 2005. Those goals were based
on increases in the Companys annual net income, as adjusted, over the prior fiscal year. In
February 2005, each of the Co-CEOs received a restricted stock grant for 75,000 shares of
restricted stock. Twenty-five percent (25%) of the restricted stock vested on February 1, 2006,
twenty-five percent (25%) of the restricted stock will vest on February 1, 2007 and fifty percent
(50%) of the restricted stock will vest on February 1, 2008. For fiscal 2006, each of the Co-CEOs
earned 6,250 performance shares, based on achievement of established performance goals for fiscal
2006, and subject to the vesting schedule described above.
Section 162(m) of the Code
In 1993, Section 162(m) was added to the Internal Revenue Code of 1986, as amended. This
section generally provides that no publicly held company will be permitted to deduct compensation
in excess of $1 million paid in any taxable year to its chief executive officer or any of its four
other highest paid named executive officers unless:
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the compensation is payable solely on account of the attainment of performance
goals; |
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the performance goals are determined by a compensation committee of two or more
outside directors; |
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the material terms under which compensation is to be paid are disclosed to and
approved by the shareholders of the company; and |
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a compensation committee certifies that the performance goals were met. |
The effect of Section 162(m) is applicable to the Company only in the case of our current
named executive officers who have received compensation in excess of $1 million. We believe that
each of the Companys 1996 Plan and 2005 Plan has been structured in a manner that satisfies the
requirements of Section 162(m). We established performance-based goals for fiscal 2006 for each of
our current named executive officers with respect to cash annual incentive compensation bonuses;
however, the restricted stock grants of 75,000 shares to each of our Co-CEOs in February 2005 are
not subject to achievement of performance-based goals.
Members of the Compensation Committee
Martha Clark Goss, Chairman
Ann Spector Lieff
Bruce G. Miller
26
Equity Compensation Plan Information
The following table provides information as of January 28, 2006 with respect to compensation
plans, including individual compensation arrangements, under which our common stock and Class A
common stock are authorized for issuance.
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|
|
|
|
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|
|
|
|
|
|
|
|
Equity Compensation Plan Information |
|
|
Number of |
|
|
|
|
|
Number of securities |
|
|
securities to be |
|
|
|
|
|
remaining available |
|
|
issued upon |
|
Weighted-average |
|
for future issuance |
|
|
exercise of |
|
exercise price of |
|
under equity |
|
|
outstanding |
|
outstanding |
|
compensation plans |
|
|
options, warrants |
|
options, warrants |
|
(excluding securities |
Plan Category |
|
and rights |
|
and rights |
|
reflected in column(a)) |
|
|
(a) |
|
(b) |
|
(c) |
Equity compensation
plans approved by
security holders |
|
|
1,113,436 |
|
|
$ |
15.33 |
|
|
|
9,201,109 |
|
Equity
compensation plans
not approved by
security holders |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total |
|
|
1,113,436 |
|
|
$ |
15.33 |
|
|
|
9,201,109 |
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PROPOSAL 2 RATIFICATION OF OUR INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
Our audit committee has selected KPMG LLP as our independent registered public accounting firm
for fiscal 2007. KPMG LLP has been our independent registered public accounting firm since 1993.
Ratification of our independent registered public accounting firm is not required by our bylaws or
applicable law, but is being submitted to our shareholders as a matter of good corporate
governance. No determination has been made as to what action the board would take if our
shareholders do not ratify the appointment. If the appointment of KPMG LLP is approved, the audit
committee, in its discretion, may still direct the appointment of a different independent
registered public accounting firm at any time and without shareholder approval, if the audit
committee believes that such a change would be in our best interests and in the best interests of
our shareholders.
Vote Required. The approval of KPMG LLP will be decided by an affirmative vote of a majority
of the votes cast, either in person or by proxy, at the meeting by the holders of the outstanding
shares of our common stock (one vote per share) and Class A common stock (ten votes per share),
voting together as a single class.
The board recommends that shareholders vote FOR the ratification of KPMG LLP as our
independent registered public accounting firm.
Report of the Audit Committee
The following Report of the audit committee does not constitute soliciting material and should
not be deemed filed or incorporated by reference in any other filing by us under the Securities Act
of 1933 or the Securities Exchange Act of 1934.
In accordance with its written charter adopted by our board of directors, the audit
committees role is to act on behalf of the board of directors in the oversight of our accounting,
auditing and financial reporting practices. The audit committee consists of three members, each of
whom is independent as that term is defined under the applicable listing standards of the New
York Stock Exchange, the Sarbanes-Oxley Act of 2002 and applicable Securities and Exchange
Commission rules.
The Sarbanes-Oxley Act of 2002 and the committees charter require that all services provided
to us by KPMG LLP (KPMG), our independent registered public accounting firm, be subject to
pre-approval by the audit committee. The audit committee has established policies and procedures
contemplated by these rules.
27
The purpose of the audit committee is to assist our board in its oversight of:
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the integrity of our financial reports and other written financial
information filed by us with the Securities and Exchange Commission; |
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our systems of internal accounting and financial controls; |
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the qualifications, independence and performance of our independent
registered public accounting firm; and |
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our compliance with legal and regulatory requirements that may have a
material impact on our financial statements. |
In carrying out these responsibilities, the audit committee, among other things:
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monitors preparation of quarterly and annual financial reports by our
management, including disclosures made in Managements Discussion and Analysis
of Financial Condition and Results of Operations; |
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supervises the relationship between us and our independent registered public
accounting firm, including making decisions with respect to their appointment
or removal, reviewing the scope of their audit services, approving audit and
non-audit services, and confirming the independence of the independent
registered public accounting firm; and |
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overseeing managements implementation and maintenance of effective systems
of internal and disclosure controls, including review of our internal audit
program and the composition, function, staffing, budget and performance of the
internal audit group. |
In fulfilling its oversight responsibilities, the audit committee reviewed the audited
financial statements for fiscal 2006 with management, including a discussion of the quality, not
just the acceptability, of the accounting principles employed, the reasonableness of significant
judgments and the clarity of disclosures in the financial statements. Management represented to
the audit committee that our consolidated financial statements for fiscal 2006 were prepared in
accordance with generally accepted accounting principles, and that our internal control over
financial reporting as of the end of fiscal 2006 was effective. The audit committee reviewed and
discussed the financial statements for fiscal 2006 with the independent registered public
accounting firm. Consistent with the requirements of the Sarbanes-Oxley Act of 2002 and the rules
promulgated thereunder, the audit committee discussed with the independent registered public
accounting firm all of the matters required to be discussed by Statement of Auditing Standards No.
61, Communications with Audit Committees, as amended. In addition, the audit committee has
discussed with the independent registered public accounting firm their independence from our
management and from us, including matters in the written disclosures provided by the independent
registered public accounting firm to the audit committee as required by Independence Standards
Board Standard No. 1, Independence Discussion with Audit Committees. As part of this review, the
audit committee considered whether the non-audit services provided to us by KPMG during fiscal 2006
were compatible with maintaining their independence. Upon its review, the audit committee has
satisfied itself as to KPMGs independence.
In addition, the audit committee reviewed initiatives and programs aimed at strengthening the
effectiveness of our internal control structure. As part of this process, the audit committee
continued to monitor the scope and adequacy of our internal audit program, reviewing staffing
levels and steps taken to implement recommended improvements in internal procedures and controls.
The audit committee has a formal policy concerning approval of audit and non-audit services to
be provided by our independent registered public accounting firm, KPMG. The policy requires that
all services to be provided by KPMG, including audit-related and non-audit services, must be
pre-approved by the audit committee.
The members of the audit committee are not professionally engaged in the practice of auditing
or accounting and are not experts in the fields of accounting or auditing. Members of the audit
committee rely without independent verification on the information provided to them and on the
representations made by management and
28
the independent registered public accounting firm. Accordingly, the audit committees
oversight does not provide an independent basis to determine that management has maintained
appropriate accounting and financial reporting principles or appropriate internal controls and
procedures designed to assure compliance with accounting standards and applicable laws and
regulations. Furthermore, the audit committees considerations and discussions referred to above
do not assure that the audits of the financial statements have been carried out in accordance with
generally accepted auditing standards, that the financial statements are presented in accordance
with generally accepted accounting principles or that the independent registered public accounting
firm is in fact independent.
In reliance on the reviews and discussions with management and the independent accountants
referred to above, and subject to the limitations on its role and responsibilities described above,
the audit committee recommended to our board of directors, and the board of directors has approved,
that the audited financial statements be included in our Annual Report on Form 10-K for fiscal 2006
filed with the Securities and Exchange Commission. The undersigned members of the audit committee
have submitted this report to us.
Members of the Audit Committee
Bruce G. Miller, Chairman
Steven H. Tishman
Martha Clark Goss
Relationship With Our Independent Registered Public Accounting Firm
The firm of KPMG LLP has been our independent registered public accounting firm since 1993 and
will be our independent registered public accounting firm for the current fiscal year unless the
audit committee or board of directors deems it advisable to make a substitution. Our board of
directors and the audit committee, in their discretion, may change the appointment at any time
during the year if they determine that such change would be in our best interest and the best
interest of our shareholders. Representatives of KPMG LLP are expected to be present at the annual
meeting with the opportunity to make a statement if they desire to do so and respond to questions
concerning our financial affairs.
Fees Paid To Our Independent Registered Public Accounting Firm
We were billed an aggregate of $1,828,000 and $1,681,000 by KPMG LLP for fiscal 2005 and
fiscal 2006, respectively, as follows:
Audit Fees
For professional services rendered for the annual audit of our consolidated financial
statements, annual audit of our internal control over financial reporting, review of our quarterly
financial statements and services that are normally provided in connection with statutory and
regulatory filings, $1,768,000 for fiscal 2005 and $1,649,000 for fiscal 2006.
Audit-Related Fees
For assistance in the documentation of an accounting policies manual, turnover certificates
for Claires Accessories UK Ltd., review of related SEC filings, and an audit of employee benefit
plans, $47,000 for fiscal 2005. For professional services related to an audit of employee benefit
plans and turnover certificates for Claires Accessories UK Ltd., $28,000 for fiscal 2006.
Tax Fees
For tax compliance, $0 for fiscal 2005 and $0 for fiscal 2006.
29
All Other Fees
For licenses for accounting research and tax compliance software and customs training, $13,000
for fiscal 2005. For licenses for accounting research and tax compliance software, $4,000 for
fiscal 2006.
Pre-Approval Policies and Procedures
We pre-approve a schedule of audit and non-audit services expected to be performed by KPMG LLP
in a given fiscal year. In addition, the audit committee delegates authority to its Chairman to
pre-approve additional audit and non-audit services by KPMG LLP (other than services that have been
generally pre-approved by the audit committee) since the previous meeting at which pre-approval
decisions were reported. The Chairman reports any such pre-approval decisions to the audit
committee at its next scheduled meeting.
All of the services described above under Audit Fees, Audit-Related Fees, Tax Fees and
All Other Fees for fiscal 2005 and fiscal 2006 were pre-approved by the audit committee.
PROPOSAL 3 SHAREHOLDER PROPOSAL REGARDING OUR OPERATIONS IN NORTHERN IRELAND
In accordance with the Securities and Exchange Commission rules, the following shareholder
proposal was submitted to us by the Office of the Comptroller of the City of New York, William C.
Thompson, Jr., State Comptroller, located at 1 Centre Street, New York, New York 10007, on behalf
of the New York City Employees Retirement System, which beneficially holds 80,345 shares of our
common stock, New York City Teachers Retirement System, which beneficially holds 94,500 shares of
our common stock, the New York City Fire Department Pension Fund, which beneficially holds 15,500
shares of our common stock, the New York City Police Pension Fund, which beneficially holds 35,600
shares of our common stock, and the New York City Board of Education Retirement System, which
beneficially holds 4,200 shares of our common stock.
WHEREAS, Claires Stores, Inc. has a subsidiary in Northern Ireland;
WHEREAS, the securing of a lasting peace in Northern Ireland encourages us to promote means
for establishing justice and equality;
WHEREAS, employment discrimination in Northern Ireland was cited by the International
Commission of Jurists as being one of the major causes of sectarian strife;
WHEREAS, Dr. Sean MacBride, founder of Amnesty International and Nobel Peace laureate, has
proposed several equal opportunity employment principles to serve as guidelines for corporations in
Northern Ireland. These include:
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1. |
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Increasing the representation of individuals from underrepresented
religious groups in the workforce including managerial, supervisory,
administrative, clerical and technical jobs. |
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2. |
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Adequate security for the protection of minority employees both at the
workplace and while traveling to and from work. |
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3. |
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The banning of provocative religious or political emblems from the
workplace. |
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4. |
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All job openings should be publicly advertised and special recruitment
efforts should be made to attract applicants from underrepresented religious
groups. |
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5. |
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Layoff, recall, and termination procedures should not in practice,
favor particular religious groupings. |
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6. |
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The abolition of job reservations, apprenticeship restrictions, and
differential employment criteria, which discriminate on the basis of religion or
ethnic origin. |
30
|
7. |
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The development of training programs that will prepare substantial
numbers of current minority employees for skilled jobs, including the expansion of
existing programs and the creation of new programs to train, upgrade, and improve
the skills of minority employees. |
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8. |
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The establishment of procedures to assess, identify and actively
recruit minority employees with potential for further advancement. |
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9. |
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The appointment of a senior management staff member to oversee the
companys affirmative action efforts and the setting up of timetables to carry out
affirmative action principles. |
RESOLVED, Shareholders request the Board of Directors to:
Make all possible lawful efforts to implement and/or increase activity on each of the nine
MacBride Principles.
Supporting Statement by the Comptroller of the City of New York
We believe that our company benefits by hiring from the widest available talent pool. An
employees ability to do the job should be the primary consideration in hiring and promotion
decisions.
Implementation of the MacBride Principles by Claires Stores, Inc. will demonstrate its
concern for human rights and equality of opportunity in its international operations.
Please vote your proxy FOR these concerns.
Response by our Board of Directors and Management in Opposition to Proposal 3
Your directors recommend a vote AGAINST this shareholder proposal for the following reasons:
We are committed to providing equal opportunity employment. As a matter of policy, we do not
discriminate against our employees or applicants for employment on the basis of religion.
Individuals are evaluated on their ability and qualifications to perform their jobs, regardless of
their race, sex, national origin, age, color or religion. Similarly, our recruiting procedures are
designed to provide equal opportunity, and we comply with non-discrimination laws in effect in the
countries and localities where we operate.
Of approximately 3,000 retail stores worldwide, we operated approximately 20 retail stores in
Northern Ireland as of the end of fiscal 2006. Of approximately 18,000 of our employees worldwide,
as of the end of fiscal 2006, fewer than 75 worked in Northern Ireland.
In addition to following our own non-discrimination policies, we comply with the standards of
the Northern Ireland Fair Employment legislation, as updated by the Fair Employment and Treatment
(Northern Ireland) Order of 1998. In addition, we are registered with, and cooperate with, the
Equality Commission for Northern Ireland, which oversees equal opportunity in employment. These
laws make religious discrimination and preferential treatment in employment illegal. These laws
also prohibit indirect religious discrimination and require compulsory reviews of employers
recruitment, training and promotion practices with applicable provisions of the Code of Practice
issued by the Equality Commission, specifically to promote and protect equality of opportunity in
employment in Northern Ireland.
The objectives of both the MacBride Principles and the laws referenced above are to eliminate
employment discrimination in Northern Ireland. We wholeheartedly support this objective. However,
by adopting the MacBride Principles, we would be accountable to two sets of similar, but not
identical, fair employment guidelines, making it difficult for us to determine what standard will
best help us run our business in Northern Ireland. This would be neither necessary nor desirable,
particularly in light of our own internal policies and practices with respect to the promotion of
fair and equal employment opportunities. We are also concerned that implementation of a
potentially rigid set of principles, such as the MacBride Principles, may lead to divisiveness and
unfairness among our employees in Northern Ireland.
31
Your directors believe that our current policies and actions in this regard demonstrate our
commitment to making all reasonable efforts to promote equal opportunity and eliminate
discrimination in employment on the basis of religion. In our boards opinion, this commitment,
together with our policies and practices and compliance with laws in effect with respect to these
matters, should ensure continued protection of equal opportunities for our employees in Northern
Ireland. Therefore, the board believes that endorsement or implementation of the MacBride
Principles is not necessary to ensure fair and equal opportunity of employment for its employees in
Northern Ireland.
Vote Required. The approval of the shareholder proposal regarding our operations in Northern
Ireland will be decided by an affirmative vote of a majority of the votes cast, either in person or
by proxy, at the meeting by the holders of the outstanding shares of our common stock (one vote per
share) and Class A common stock (ten votes per share), voting together as a single class. At each
of our 2004 and 2005 annual meetings, the same shareholder presented a substantially identical
proposal. Shareholders rejected each of those proposals, with over 80% of the votes cast voting
against it in 2004 and approximately 90% of the votes cast voting against it in 2005.
For the reasons set for the above, the board recommends that shareholders vote AGAINST this
proposal.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
We lease our executive offices located in Pembroke Pines, Florida from Rowland Schaefer &
Associates, a general partnership owned by two corporate general partners. Each of E. Bonnie
Schaefer and Marla Schaefer, our Co-Chairmen, as well as a sister of our Co-Chairmen, have an
approximately 32% ownership interest in the general partnership, and Ira D. Kaplan, our Chief
Financial Officer, has an approximately 5% ownership interest in the general partnership. During
fiscal 2006, we paid Rowland Schaefer & Associates, Inc. approximately $1,217,000 for rent, real
estate taxes and operating expenses as required under the lease. After obtaining approval of our
corporate governance and nominating committee, we executed a new lease in January 2004 which
expires on December 31, 2013.
We lease retail space for a Claires Boutiques store in New York City from 720 Lexington
Realty LLC, a limited liability corporation that is controlled by our two Co-Chairmen and a sister
of our Co-Chairmen. During fiscal 2006, we paid approximately $460,000 for rent to 720 Lexington
Realty LLC. The lease expired on January 31, 2005 and our corporate governance and nominating
committee approved the terms of a new lease in January 2005. The new lease terms provide for a
five-year term with a five year renewal option, and annual rental payments of $460,000 (exclusive
of real estate taxes and other operating expenses to be paid by us under the lease).
Management believes that these lease arrangements are on no less favorable terms than we could
obtain from unaffiliated third parties.
We entered into an agreement, effective as of November 30, 2003, with Rowland Schaefer, who at
the time was on a medical leave of absence from his position as our chairman and chief executive
officer. Mr. Schaefer is the father of each of E. Bonnie Schaefer and Marla Schaefer, our Co-CEOs
and Co-Chairmen. Pursuant to the agreement, Mr. Schaefer resigned as chairman and chief executive
officer and all other positions as an officer and director of any of our companies and his
employment agreement was terminated. Mr. Schaefer agreed to provide consulting services to us and
to serve as Chairman Emeritus of the board. As consideration for terminating the employment
agreement and his continued service as Chairman Emeritus, Mr. Schaefer receives an aggregate annual
payment of $1,300,000, payable for each of the five years from the date of his resignation.
32
CORPORATE PERFORMANCE GRAPH
The following graph compares the cumulative total return of an investment in our common stock
with an investment in the S&P 500 Stock Index and the Retail Index for the five fiscal years ending
January 31, 2006. This graph assumes the investment of $100 in our common stock, the S&P 500 and
the S&P Apparel Retail Index on January 31, 2001 and assumes dividends are reinvested. Measurement
points are on the last trading day of each of the five fiscal years.
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Fiscal Year Ending January 31, |
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2001 |
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2002 |
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2003 |
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2004 |
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2005 |
|
2006 |
Claires Stores, Inc. |
|
|
100.00 |
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|
$ |
95.75 |
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|
$ |
120.56 |
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$ |
189.36 |
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$ |
216.39 |
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$ |
340.57 |
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S&P500 |
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100.00 |
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83.85 |
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|
64.55 |
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|
86.87 |
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92.28 |
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101.86 |
|
S&P Apparel Retail |
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100.00 |
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70.60 |
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|
62.45 |
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82.15 |
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99.45 |
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94.27 |
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33
MISCELLANEOUS
Annual Report on Form 10-K
We have mailed copies of our annual report on Form 10-K with this proxy statement to holders
of shares of common stock and Class A common stock as of the record date, May 1, 2006. We will
provide without charge, to each holder of shares of common stock and Class A common stock as of the
record date, a copy of our annual report on Form 10-K for the fiscal year ended January 28, 2006 as
filed with the Securities and Exchange Commission on the written request of any such holder
addressed to our Director of Investor Relations at Claires Stores, Inc., 350 Fifth Avenue, New
York, New York 10118.
Section 16(a) Beneficial Ownership Reporting Compliance
Section 16(a) of the Securities Exchange Act requires our directors and executive officers, as
well as persons who own more than 10% of a registered class of our equity securities, collectively
referred to as the reporting persons, to file reports of initial beneficial ownership and changes
in beneficial ownership on Forms 3, 4 and 5 with the Securities and Exchange Commission and the New
York Stock Exchange. These reporting persons are also required by Securities and Exchange
Commission regulations to furnish us with copies of all such reports that they file.
To our knowledge, based solely on a review of the copies of such reports furnished to us and
representations that no other reports were required, during and with respect to fiscal 2006, all
reporting persons have timely complied with all filing requirements applicable to them, other than
one Form 4 relating to one day of sales within a series of sales of our common stock which occurred
on June 9, 2005 by a partnership affiliated with our Co-CEOs, which was reported on a Form s filed
on June 14, 2005, one day after the required due date. The other sales within these series of
sales by the partnership were reported within the required two-day filing date.
INFORMATION CONCERNING SHAREHOLDER PROPOSALS
Shareholders interested in presenting a proposal to be considered for inclusion in the proxy
statement for presentation at the 2007 annual meeting of shareholders may do so by following the
procedures prescribed in Securities and Exchange Commission Rule 14a-8. To be eligible for
inclusion, shareholder proposals must be received by us on or before January 20, 2007.
After the January 20, 2007 deadline, shareholders interested in presenting a proposal for
consideration at the 2007 annual meeting of shareholders may submit the proposal and present it at
the 2007 annual meeting, but we are not obligated to include the proposal in our proxy materials.
Rule 14a-4 of the Securities and Exchange Commissions proxy rules allows a company to use
discretionary voting authority to vote on matters coming before an annual meeting of shareholders,
if the company does not have notice of the matter at least 45 days before the date corresponding to
the date on which the company first mailed its proxy materials for the prior years annual meeting
of shareholders or the date specified by an overriding advance notice provision in the companys
bylaws. Accordingly, for our 2007 annual meeting of shareholders, a shareholder must submit such
written notice to the corporate secretary on or before April 7, 2007.
34
OTHER MATTERS
As of the date of this proxy statement, we are not aware of any matter to be presented for
action at the meeting other than the matters set forth above. If any other matter is properly
brought before the meeting for action by shareholders, proxies in the enclosed form returned to us
will be voted in accordance with the recommendation of the board of directors or, in the absence of
such a recommendation, in accordance with the judgment of the proxy holders. By order of the board
of directors,
MARLA L. SCHAEFER
Co-Chairman of the Board
E. BONNIE SCHAEFER
Co-Chairman of the Board
May 22, 2006
35
ANNUAL MEETING OF SHAREHOLDERS OF
CLAIRES STORES, INC.
COMMON STOCK
June 27, 2006
Please date, sign and mail
your proxy card in the
envelope provided as soon
as possible.
â
Please detach along perforated line and mail in the envelope provided.
â
n
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PLEASE SIGN, DATE AND RETURN PROMPTLY IN THE ENCLOSED ENVELOPE. PLEASE MARK YOUR VOTE IN BLUE OR BLACK INK AS SHOWN HERE
x
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FOR
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AGAINST
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ABSTAIN |
1.
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Election of Directors by the holders of the Common Stock and the Class A Common Stock, voting together as a single class. |
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2. |
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Ratification of the audit committees appointment of KPMG LLP as
the Companys independent registered public accounting firm. |
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NOMINEES: |
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FOR ALL NOMINEES |
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¡ ¡ |
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Marla L. Schaefer E. Bonnie Schaefer |
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Approval
of the shareholder proposal regarding the Companys business operations in Northern Ireland.
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WITHHOLD AUTHORITY FOR ALL NOMINEES |
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¡ ¡ | |
Ira D. Kaplan Bruce G. Miller |
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FOR ALL EXCEPT (See instructions below) |
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¡ ¡ ¡ |
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Steven H. Tishman Ann Spector Lieff Martha Clark Goss |
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In their discretion, said proxies are authorized to vote upon any other business which may properly come before the Meeting. |
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THIS PROXY WILL BE VOTED AS DIRECTED. IF NO CONTRARY INSTRUCTION IS
INDICATED, THE VOTE OF THE UNDERSIGNED WILL BE CAST FOR
ITEM 1, FOR ITEM 2 AND AGAINST ITEM 3.
THE BOARD OF DIRECTORS REQUESTS THAT YOU FILL IN, SIGN, DATE AND RETURN THE PROXY CARD PROMPTLY USING THE ENCLOSED ENVELOPE. |
INSTRUCTION: To withhold authority to vote for any individual nominee(s),
mark FOR ALL EXCEPT and fill in the circle next to
each nominee you wish to
withhold, as shown here: = |
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To change the address on your account, please check the box
at right and indicate your new address in the address space
above. Please note that changes to the registered name(s)
on the account may not be submitted
via this method. |
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Signature
of Shareholder
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Date:
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Signature
of Shareholder
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Date:
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Note: |
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Please sign exactly as your name or names appear on this Proxy. When shares are held jointly, each holder should sign. When signing as executor, administrator, attorney, trustee or guardian, please give full title as such. If the signer is a corporation, please sign full corporate name by duly authorized officer, giving full title as such. If signer is a partnership, please sign in partnership name by authorized person.
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n
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n
CLAIRES STORES, INC.
COMMON STOCK
ANNUAL MEETING OF SHAREHOLDERS - JUNE 27, 2006
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned, a shareholder of
CLAIRES STORES, INC. (the Company), hereby revoking any proxy heretofore given, does hereby appoint Ms. Marla L. Schaefer and Ms. E. Bonnie Schaefer, or either of them, proxies with power of substitution, for and in the name of the undersigned to attend the Annual Meeting of Shareholders of the Company to be held at The St. Regis Fontainebleau Room,
Two East 55th Street, at Fifth Avenue, New York, New York, on June 27, 2006 at 9:30 a.m.,
New York City time, or at any adjournment or postponement thereof, and there to vote, as designated on the reverse side, all shares of Common Stock of said Company which the undersigned would be entitled to vote if personally present at said meeting, all as described in the Proxy Statement dated May 22, 2006, receipt of which, together with the Annual Report to Shareholders is hereby acknowledged, as follows:
(Continued and to be signed on the reverse side.)
n
14475 n
ANNUAL MEETING OF SHAREHOLDERS OF
CLAIRES STORES, INC.
CLASS A COMMON STOCK
June 27, 2006
Please date, sign and mail
your proxy card in the
envelope provided as soon
as possible.
â
Please detach along perforated line and mail in the envelope provided.
â
n
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PLEASE SIGN, DATE AND RETURN PROMPTLY IN THE ENCLOSED ENVELOPE. PLEASE MARK YOUR VOTE IN BLUE OR BLACK INK AS SHOWN HERE
x
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FOR
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AGAINST
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ABSTAIN |
1.
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Election of Directors by the holders of the Common Stock and the Class A Common Stock, voting together as a single class. |
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2. |
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Ratification of the audit committees appointment of KPMG LLP as
the Companys independent registered public accounting firm. |
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o |
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o |
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o |
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NOMINEES: |
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o
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FOR ALL NOMINEES |
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¡ ¡ |
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Marla L. Schaefer E. Bonnie Schaefer |
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3. |
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Approval
of the shareholder proposal regarding the Companys business operations in Northern Ireland.
|
|
o |
|
o |
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o |
o |
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WITHHOLD AUTHORITY FOR ALL NOMINEES |
|
¡ ¡ | |
Ira D. Kaplan Bruce G. Miller |
|
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o
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FOR ALL EXCEPT (See instructions below) |
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¡ ¡ ¡ |
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Steven H. Tishman Ann Spector Lieff Martha Clark Goss |
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4. |
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In their discretion, said proxies are authorized to vote upon any other business which may properly come before the Meeting. |
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THIS PROXY WILL BE VOTED AS DIRECTED. IF NO CONTRARY INSTRUCTION IS
INDICATED, THE VOTE OF THE UNDERSIGNED WILL BE CAST FOR
ITEM 1, FOR ITEM 2 AND AGAINST ITEM 3.
THE BOARD OF DIRECTORS REQUESTS THAT YOU FILL IN, SIGN, DATE AND RETURN THE PROXY CARD PROMPTLY USING THE ENCLOSED ENVELOPE. |
INSTRUCTION: To withhold authority to vote for any individual nominee(s),
mark FOR ALL EXCEPT and fill in the circle next to
each nominee you wish to
withhold, as shown here: = |
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To change the address on your account, please check the box
at right and indicate your new address in the address space
above. Please note that changes to the registered name(s)
on the account may not be submitted
via this method. |
|
o |
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Signature
of Shareholder
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Date:
|
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Signature
of Shareholder
|
|
Date:
|
|
|
|
|
|
Note: |
|
Please sign exactly as your name or names appear on this Proxy. When shares are held jointly, each holder should sign. When signing as executor, administrator, attorney, trustee or guardian, please give full title as such. If the signer is a corporation, please sign full corporate name by duly authorized officer, giving full title as such. If signer is a partnership, please sign in partnership name by authorized person.
|
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n
n
n
CLAIRES STORES, INC.
CLASS A COMMON STOCK
ANNUAL MEETING OF SHAREHOLDERS - JUNE 27, 2006
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned, a shareholder of
CLAIRES STORES, INC. (the Company), hereby revoking any proxy heretofore given, does hereby appoint Ms. Marla L. Schaefer and Ms. E. Bonnie Schaefer, or either of them, proxies with power of substitution, for and in the name of the undersigned to attend the Annual Meeting of Shareholders of the Company to be held at The St. Regis Fontainebleau Room,
Two East 55th Street, at Fifth Avenue, New York, New York, on June 27, 2006 at 9:30 a.m.,
New York City time, or at any adjournment or postponement thereof, and there to vote, as designated on the reverse side, all shares of Class A Common Stock of said Company which the undersigned would be entitled to vote if personally present at said meeting, all as described in the Proxy Statement dated May 22, 2006, receipt of which, together with the Annual Report to Shareholders is hereby acknowledged, as follows:
(Continued and to be signed on the reverse side.)
n
14475 n