Item 5.02.
Departure of Directors
or Certain Officers; Election of Directors; Appointment of Certain Officers; Compensatory Arrangements of Certain Officers
On September 16, 2016,
the Board of Directors (the “Board”) of Francesca’s Holdings Corporation (the “Company”) appointed
Mr. Steven P. Lawrence as President and Chief Executive Officer of the Company, effective as of October 10, 2016. On September
16, 2016, the Board also appointed Mr. Lawrence to serve as a Class II director of the Board, effective as of October 10, 2016.
At such time, Mr. Richard Kunes, who has been serving as the Company’s Interim Chairman of the Board, President and Chief
Executive Officer since May 16, 2016, will become the Company’s Chairman of the Board.
Prior to joining the
Company, Mr. Lawrence, 49, served as Chief Merchandising Officer of Stage Stores, Inc. since May 2012. Prior to such time,
Mr. Lawrence served as General Merchandising Manager, Executive Vice President Men’s of J.C. Penney Company from
September 2000 to March 2012.
The terms of Mr. Lawrence’s
employment are outlined in an employment letter agreement among the Company and its subsidiaries, Francesca’s Collections,
Inc. and Francesca’s Services Corporation, and Mr. Lawrence, effective as of Mr. Lawrence’s first day of employment
(the “Employment Letter”). The following summary of the Employment Letter is qualified in its entirety by the text
of the Employment Letter, a copy of which is attached hereto as Exhibit 10.1 and incorporated herein by reference.
The Employment Letter has
an indefinite term and provides for Mr. Lawrence to receive an annual base salary of $775,000 and to be eligible to participate
in the Company’s annual bonus plan as in effect from time to time, with a target annual bonus opportunity of 100% of Mr.
Lawrence’s annual base salary for the applicable fiscal year. In addition, Mr. Lawrence will receive a signing bonus of $300,000
that he will be required to repay to the Company if he voluntarily resigns or is terminated by the Company for “cause”
(as defined in the Employment Letter) within 12 months after his start date. He will also receive a “make-whole” payment
to compensate him for the annual bonus opportunity with his prior employer that he will forfeit in connection with his joining
the Company (to be determined based on a pro-rated target bonus amount and his prior employer’s actual performance for the
current fiscal year).
Mr. Lawrence will also be granted two performance-based stock awards. The first award will be subject
to the same performance vesting requirements as the awards granted to the Company’s other senior executives for fiscal year
2016 (i.e. achievement of specified performance targets over a period of three fiscal years), with the target number of shares
determined by pro-rating $1,500,000 for the period of Mr. Lawrence’s employment during fiscal year 2016 and dividing that
amount by the Company’s stock price as of the grant date. The second award will cover a number of shares determined by dividing
$1,500,000 by the Company’s stock price on the grant date, with one-third of the award vesting if Mr. Lawrence’s employment
continues through the first anniversary of his start date and the Company’s earnings per share is greater than $0.75 for
fiscal year 2017, and the remaining two-thirds of the award vesting if Mr. Lawrence’s employment continues through the third
anniversary of his start date and the Company’s earnings per share is greater than $0.75 for fiscal year 2019. Commencing
with fiscal year 2017, Mr. Lawrence will also be eligible for annual equity awards, with the grant levels and terms of the awards
to be determined by the Compensation Committee of the Board in its discretion and the expectation being that the grant date value
of these awards will not be less than $1,500,000. The Employment Letter also provides for Mr. Lawrence to participate in the Company’s
employee savings and welfare benefit plans made available to the Company’s employees generally, in accordance with the provisions
of such programs as in effect from time to time.
The Employment Letter also
includes certain restrictive covenants, including the provision that, during the period of Mr. Lawrence’s employment and
for a period of 12 months following a termination of his employment for any reason, he will not compete with the Company or its
affiliates or solicit any Company employees or customers. If Mr. Lawrence’s employment is terminated by the Company without
“cause” or by Mr. Lawrence for “good reason” (as defined in the Employment Letter), he will be entitled
to cash severance equal to his annual base salary at the rate in effect at the time of his termination, with such amount to become
payable in substantially equal monthly installments over the 12-month period following the termination date, subject to his providing
a release of claims in favor of the Company and compliance with his covenants under the Employment Letter noted above.
There was no arrangement
or understanding between Mr. Lawrence and any other person pursuant to which Mr. Lawrence was appointed Chief Executive Officer,
President or as a director. There are no family relationships between Mr. Lawrence and any director or executive officer of the
Company, and Mr. Lawrence has no direct or indirect material interest in any transaction required to be disclosed pursuant to Item
404(a) of Regulation S-K.
The Board also appointed
Mr. Kunes as a member of the Nominating and Corporate Governance Committee, effective October 10, 2016.