Exhibit 10.5
CLAIRE'S INC.
2400 W. Central Rd.
Hoffman Estates, IL 60192
[date]
[name]
[address]
Re: Grant of Stock Options
Dear [first name]:
We are pleased to inform you that you have been granted options to purchase
_________(1) shares of common stock of Claire's Inc. (the "Company"), the parent
company of Claire's Stores, Inc. As further described below, the options have
varying features relating to vesting and are denominated as a "Time Option" and
a "Performance Option". These options are collectively referred to as the
"Options". The Options have been granted pursuant to the Company's Stock
Incentive Plan (the "Plan"), a copy of which is attached as Exhibit A, and the
Options and underlying Shares are subject in all respects to the provisions of
the Plan (including, without limitation, Section 8), except as specifically
modified hereby. Capitalized terms not otherwise defined in the text or in
paragraph 6 are defined in the Plan.
1. Time Option: The key terms of the Time Option are as follows:
(a) Number of Shares. __________
(b) Exercise Price per Share. $10.00
(c) Vesting. The Time Option will vest and become exercisable in four
equal annual installments on May 29 of each of 2008, 2009, 2010 and
2011, provided that the Time Option will become fully vested and
exercisable immediately prior to a Change of Control.
2. Performance Option: The key terms of the Performance Option are as
follows:
(a) Number of Shares. ___________
(b) Exercise Price per Share. $10.00
(c) Vesting. If on any Measurement Date, the Value Per Share equals or
exceeds the Target Stock Price (the "Performance Goal"), then (1) if
such Measurement Date is other than the date of a Claire's Investors
Liquidity Event, the Performance Option will vest and become
exercisable in two equal annual installments on each of the first
two anniversaries of such
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(1) total of 1(a) and 2(a)
Measurement Date, provided that if a Change of Control occurs after
any such Measurement Date, any unvested installment shall become
fully vested immediately prior to the Change of Control, and (2) if
such Measurement Date is the date of a Claire's Investors Liquidity
Event, the Performance Option will become fully vested and
immediately exercisable at such time.
3. Termination of the Options. The Options shall terminate pursuant to the
provisions of Section 5 of the Plan, provided that a Performance Option
shall terminate no later than the date of a Claire's Investors Liquidity
Event to the extent the Performance Goal is not achieved at such time, or
was not previously achieved.
4. Representations. By accepting this award of Options, you represent to the
following, and understand that the Company would not have granted this
award to you but for your representations and acknowledgements below.
(a) Shares Unregistered; Investor Knowledge. You acknowledge and agree
that (i) neither the grant of the Options nor the offer to acquire
Shares upon exercise thereof has been registered under applicable
securities laws; (ii) there is no established market for the Shares
and it is not anticipated that there will be any such market for the
Shares in the foreseeable future; and (iii) your knowledge and
experience in financial and business matters are such that you are
capable of evaluating the merits and risks of any investment in the
Shares.
(b) Acknowledgement. You acknowledge and agree that: (i) this award is a
one-time benefit, which does not create any contractual or other
right to receive future awards, or benefits in lieu of awards; (ii)
all determinations with respect to any such future awards,
including, but not limited to, the times when awards shall be
granted, the number of shares subject to each award, the exercise or
purchase price, and the time or times when each award shall vest,
will be at the sole discretion of the Company; (iii) this award is
not part of normal or expected compensation for purposes of
calculating any severance, resignation, redundancy, end of service
payments, bonuses, long-service awards, pension or retirement
benefits or similar payments; and (iv) THAT THIS AWARD SHALL NOT
CREATE A RIGHT TO FURTHER EMPLOYMENT WITH THE COMPANY OR ITS
AFFILIATES AND SHALL NOT INTERFERE WITH THE ABILITY OF THE COMPANY
OR ANY OF ITS AFFILIATES TO TERMINATE YOUR EMPLOYMENT RELATIONSHIP
AT ANY TIME, AND UPON TERMINATION OF YOUR EMPLOYMENT FOR ANY REASON
WHATSOEVER, ANY RIGHTS IN RESPECT OF THE OPTIONS OR THE UNDERLYING
SHARES TO WHICH YOU WOULD HAVE BEEN ENTITLED HAD YOUR EMPLOYMENT NOT
TERMINATED SHALL LAPSE UPON THE DATE OF TERMINATION UNLESS EXPRESSLY
STATED OTHERWISE
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HEREIN OR THE PLAN, AND YOU SHALL NOT BE ENTITLED TO ANY
COMPENSATION IN RESPECT OF LOSS OF ALL OR ANY OF THE OPTIONS OR
UNDERLYING SHARES.
(c) Employee Data Privacy. You consent to the collection, use and
transfer of personal data as described in this paragraph 5(c). You
understand that the Company and its Affiliates hold certain personal
information about you including, but not limited to, your name, home
address and telephone number, date of birth, social security number,
salary, nationality, job title, common shares or directorships held
in the Company, details of all other entitlement to common shares
awarded, cancelled, exercised, vested, unvested or outstanding in
your favor, for the purpose of managing and administering this award
("Data"). You further understand that the Company and/or its
Affiliates will transfer Data among themselves as necessary for the
purposes of implementation, administration and management of this
award, and that the Company and/or any of its Affiliates may each
further transfer Data to any third parties assisting the Company in
such implementation, administration and management. You authorize
them to receive, possess, use, retain and transfer Data in
electronic or other form, for the purposes of implementing,
administering and managing this award, including any requisite
transfer of such Data as may be required for the administration of
this award and/or the subsequent holding common shares on your
behalf to a broker or other third party with whom the shares
acquired on exercise may be deposited. You understand that he or she
may, at any time, view the Data, require any necessary amendments to
it or withdraw the consent herein in writing by contacting the local
human resources representative.
(d) Confidentiality. You agree not to disclose or discuss in any way the
terms of this award to or with anyone other than members of your
immediate family, or your personal counsel or financial advisors
(and you will advise such persons of the confidential nature of this
offer).
5. Vesting upon Death/Disability. As to the Time Option, as well as the
Performance Option where the Performance Goal had previously been
achieved, a portion of each such Option will become vested and exercisable
upon termination of your employment with the Company and its Affiliates by
reason of your death or Disability, such portion to equal the portion of
each such Option that would have vested on the next scheduled vesting date
had your employment not so terminated, multiplied by a fraction, the
numerator of which is the number of days that elapsed from the most recent
vesting date to the date of such termination, and the denominator of which
is 365.
6. Definitions. For purposes of this letter:
(a) "Apollo" means Apollo Management VI, L.P. and its Affiliates or any
entity controlled thereby or any of the partners thereof.
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(b) "Board" means the board of directors of the Company, or any
committee thereof duly authorized to act on behalf of the Board.
(c) "Capital Stock" of any Person means any and all shares, interests,
rights to purchase, warrants, options, participations or other
equivalents of or interests in, however designated, equity of such
Person, including any Preferred Stock, but excluding any debt
securities convertible into such equity.
(d) "Change of Control" means:
(i) any event occurs the result of which is that any "Person," as
such term is used in Sections 13(d) and 14(d) of the Exchange
Act, other than one or more Permitted Holders or their Related
Parties, becomes the beneficial owner, as defined in Rules
l3d-3 and l3d-5 under the Exchange Act (except that a Person
shall be deemed to have "beneficial ownership" of all shares
that any such Person has the right to acquire within one year)
directly or indirectly, of more than 50% of the Voting Stock
of the Company or any successor company thereto, including,
without limitation, through a merger or consolidation or
purchase of Voting Stock of the Company; provided that none of
the Permitted Holders or their Related Parties have the right
or ability by voting power, contract or otherwise to elect or
designate for election a majority of the Board; provided
further that the transfer of 100% of the Voting Stock of the
Company to a Person that has an ownership structure identical
to that of the Company prior to such transfer, such that the
Company becomes a wholly owned Subsidiary of such Person,
shall not be treated as a Change of Control;
(ii) after an initial public offering of Capital Stock of the
Company during any period of two (2) consecutive years,
individuals who at the beginning of such period constituted
the Board, together with any new directors whose election by
such Board or whose nomination for election by the
stockholders of the Company was approved by a vote of a
majority of the directors of the Company then still in office
who were either directors at the beginning of such period or
whose election or nomination for election was previously so
approved, cease for any reason to constitute a majority of the
Board then in office;
(iii) the sale, lease, transfer, conveyance or other disposition, in
one or a series of related transactions other than a merger or
consolidation, of all or substantially all of the assets of
the Company and its Subsidiaries taken as a whole to any
Person or group of related Persons other than a Permitted
Holder or a Related Party of a Permitted Holder; or
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(iv) the adoption of a plan relating to the liquidation or
dissolution of the Company.
(e) "Claire's Investors Liquidity Event" means any transaction
(including, without limitation, a stock sale, redemption or buy
back, merger, consolidation or otherwise) immediately following
which all of the Shares held by all Claire's Investors have been
exchanged for or converted into consideration, all or substantially
all of which consists of cash or readily marketable securities that
the Claire's Investors can immediately resell for cash at prevailing
quoted prices without legal, contractual or market restrictions.
(f) "Exchange Act" means the Securities Exchange Act of 1934, as
amended.
(g) "Investor Sale" means of sale of Shares by a Claire's Investor in
connection with or following a Qualified Public Offering.
(h) "Investor Percentage" means the percentage derived by dividing (i)
the number of Shares of Common Stock held by all Claire's Investors
immediately following the applicable Investor Sale, by (ii) the
number of Shares held by all Claire's Investors as of the date
hereof (subject to adjustment for stock splits etc.).
(i) "Fully Diluted Shares" means, on any Measurement Date, the number of
Shares outstanding, plus the number of Shares subject to all
outstanding options, warrants and rights to acquire Shares, whether
or not exercisable.
(j) "Measurement Date" means (1) prior to a Qualified IPO, the last day
of any fiscal quarter, starting with the last day of the eighth full
fiscal quarter after May 29, 2007, (2) following a Qualified IPO,
each trading day, starting with the 90th trading day following the
Qualified IPO, or (3) the date of a Claire's Investors Liquidity
Event, whether before or after a Qualified IPO.
(k) "Net Equity Value" means (1) 8.5 multiplied by the Company's
consolidated earnings, before interest, income taxes, depreciation
and amortization ("EBITDA") for the four fiscal quarters ending upon
a Measurement Date, plus (2) the sum of cash, cash equivalents, and
the aggregate exercise price of all outstanding options or warrants
to purchase Shares, whether or not exercisable, in each case as of
the Measurement Date, less (3) all debt and capital leases
outstanding as of the Measurement Date. EBITDA, cash and debt shall
be determined by the Committee based on the Company's financial
statements for such period, subject to such adjustments to reflect
unusual, nonrecurring or extraordinary events as the Committee shall
deem equitable and appropriate.
(l) "Permitted Holder" means Apollo.
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(m) "Preferred Stock" as applied to the Capital Stock of any corporation
means Capital Stock of any class or classes, however designated,
that is preferred as to the payment of dividends, or as to the
distribution of assets upon any voluntary or involuntary liquidation
or dissolution of such corporation, over shares of Capital Stock of
any other class of such corporation.
(n) "Related Party" means:
(i) any controlling stockholder, 50% (or more) owned Subsidiary,
or immediate family member (in the case of an individual) of
any Permitted Holder; or
(ii) any trust, corporation, partnership, limited liability company
or other entity, the beneficiaries, stockholders, partners,
members, owners or Persons beneficially holding an 50% or more
controlling interest of which consist of any one or more
Permitted Holders and/or such other Persons referred to in the
immediately preceding clause (1).
(o) "Subsidiary" means, with respect to any specified Person:
(i) any corporation, association or other business entity of which
more than 50% of the total voting power of shares of Capital
Stock entitled (without regard to the occurrence of any
contingency and after giving effect to any voting agreement or
stockholders' agreement that effectively transfers voting
power) to vote in the election of directors, managers or
trustees of the corporation, association or other business
entity is at the time owned or controlled, directly or
indirectly, by that Person or one or more of the other
Subsidiaries of that Person (or a combination thereof); and
(ii) any partnership (a) the sole general partner or the managing
general partner of which is such Person or a Subsidiary of
such Person or (b) the only general partners of which are that
Person or one or more Subsidiaries of that Person (or any
combination thereof).
(p) "Target Stock Price" means $10.00, accumulated at an effective
annual rate of 22.5% from May 29, 2007 to the Measurement Date,
provided that the Committee shall make such adjustment to the Target
Stock Price as it determines is equitable and appropriate to reflect
changes to the outstanding Shares or capital structure of the
Company, including contributions and distributions of capital.
(q) "Value Per Share" means (1) prior to a Qualified IPO, the Net Equity
Value divided by the Fully Diluted Shares, (2) following a Qualified
IPO,
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the average closing price of a Share for the period of 90
consecutive trading days ending on the Measurement Date, or (3) upon
a Claire's Investors Liquidity Event, the price per Share realized
by the Claire's Investors.
(r) "Voting Stock" of an entity means all classes of Capital Stock of
such entity then outstanding and normally entitled to vote in the
election of directors or all interests in such entity with the
ability to control the management or actions of such entity.
7. Federal Taxes: The Options granted to you are treated as "nonqualified
options" for federal tax purposes, which means that when you exercise, the
excess of the value of the Shares issued on exercise over the exercise
price paid for the Shares is income to you, subject to wage-based
withholding and reporting. When you sell the Shares acquired upon
exercise, the excess (or shortfall) between the amount you receive upon
the sale and the value of the shares at the time of exercise is treated as
capital gain (or loss). State and local taxes may also apply. You should
consult your personal tax advisor for more information concerning the tax
treatment of your Options. The Company is not making any representations
concerning the tax treatment of the Options, and is not responsible for
any taxes, interest or penalties you incur in connection with your
Options, even if the taxing authorities successfully challenge any
position taken by the Company in respect of wage withholding and reporting
or otherwise.
We are excited to give you this opportunity to share in our future success.
Please indicate your acceptance of this option grant and the terms of the Plan
by signing and returning a copy of this letter.
Sincerely,
CLAIRE'S INC.
By:
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Name: Eugene S. Kahn
Title: Chief Executive Officer
Agreed to and Accepted by:
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