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
(Amendment No. )
Filed by Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[ ] Preliminary Proxy Statement
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Under Rule 14a-12
STEVEN MADDEN, LTD.
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(Name of Registrant as Specified in its Charter)
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(Name of Person(s) Filing Proxy Statement if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
1) Title of each class of securities to which transaction applies:
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2) Aggregate number of securities to which transaction applies:
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3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (set forth the amount on which the
filing fee is calculated and state how it was determined.):
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4) Proposed maximum aggregate value of transaction:
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5) Total fee paid:
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[ ] Fee paid previously with preliminary materials:
[ ] Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and date of its filing.
1) Amount Previously Paid:
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2) Form, Schedule or Registration Statement No.:
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3) Filing Party:
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4) Date Filed:
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STEVEN MADDEN, LTD.
52-16 BARNETT AVENUE
LONG ISLAND CITY, NY 11104
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NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON MAY 26, 2006
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To the Stockholders of Steven Madden, Ltd.:
NOTICE IS HEREBY GIVEN that the Annual Meeting of Stockholders (the
"Annual Meeting") of the Company will be held on May 26, 2006, at the Company's
showroom located at 1370 Avenue of the Americas, 14th Floor, New York, New York
at 10:00 a.m., local time, and thereafter as it may from time to time be
adjourned, for the purposes stated below.
1. To elect nine (9) directors to the Board of Directors of the
Company to serve until the next annual meeting of the
Company's stockholders or until their successors are duly
elected and qualified;
2. To approve the adoption of the Company's 2006 Stock Incentive
Plan;
3. To ratify the appointment of Eisner LLP as the Company's
independent auditors for the fiscal year ending December 31,
2006; and
4. To transact such other business as may properly come before
the Annual Meeting or any adjournments thereof.
All stockholders are cordially invited to attend the Annual Meeting.
Only those stockholders of record at the close of business on April 26, 2006 are
entitled to notice of and to vote at the Annual Meeting and any adjournments
thereof. A complete list of stockholders entitled to vote at the Annual Meeting
will be available at the Annual Meeting and for ten days prior to the meeting
for any purpose germane to the meeting, between the hours of 9:00 a.m. and 4:30
p.m. at our principal executive offices at 52-16 Barnett Avenue, Long Island
City, NY 11104, by contacting the Secretary of the Company.
BY ORDER OF THE BOARD OF DIRECTORS
April 28, 2006
/s/ JAMIESON A. KARSON
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Jamieson A. Karson
Chairman of the Board and Chief Executive Officer
WHETHER OR NOT YOU EXPECT TO BE PRESENT AT THE MEETING, PLEASE DATE AND SIGN THE
ENCLOSED FORM OF PROXY AND MAIL IT PROMPTLY IN THE ENCLOSED ENVELOPE TO AMERICAN
STOCK TRANSFER & TRUST COMPANY, 40 WALL STREET, NEW YORK, NEW YORK 10005.
STEVEN MADDEN, LTD.
52-16 Barnett Avenue
Long Island City, NY 11104
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PROXY STATEMENT
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INTRODUCTION
This Proxy Statement and the accompanying Notice of Annual Meeting of
Stockholders and form of proxy are being furnished to the holders of common
stock of Steven Madden, Ltd., a Delaware corporation (the "Company"), in
connection with the solicitation of proxies by the Board of Directors of the
Company (the "Board of Directors") for use at the 2006 Annual Meeting of
Stockholders of the Company (the "Annual Meeting") to be held at the Company's
showroom located at 1370 Avenue of the Americas, 14th Floor, New York, New York
on Friday, May 26, 2006 at 10:00 a.m., Eastern Daylight Time, and at any
adjournments thereof. These proxy materials are being sent on or about May 1,
2006 to holders of record of common stock, $.0001 par value (the "Common
Stock"), of the Company at the close of business on April 26, 2006 (the "Record
Date"). The Company's Annual Report for the fiscal year ended December 31, 2005,
including audited financial statements, is being sent to stockholders together
with these proxy materials.
The Annual Meeting has been called to consider and take action on the
following proposals: (i) to elect nine (9) directors to the Board of Directors
of the Company to serve until the next annual meeting of the Company's
stockholders or until their successors are duly elected and qualified, (ii) to
approve the adoption of the Company's 2006 Stock Incentive Plan, (iii) to ratify
the appointment of Eisner LLP as the Company's independent auditors for the
fiscal year ending December 31, 2006, and (iv) to transact such other business
as may properly come before the Annual Meeting or any adjournments thereof. The
Board of Directors knows of no other matters to be presented for action at the
Annual Meeting. However, if any other matters properly come before the Annual
Meeting, the persons named in the proxy will vote on such other matters and/or
for other nominees in accordance with their best judgment. The Company's Board
of Directors recommends that the stockholders vote in favor of each of the
proposals. Only holders of record of the Common Stock of the Company at the
close of business on the Record Date will be entitled to vote at the Annual
Meeting.
The principal executive offices of the Company are located at 52-16
Barnett Avenue, Long Island City, NY 11104 and its telephone number is (718)
446-1800.
INFORMATION CONCERNING SOLICITATION AND VOTING
As of the Record Date, there were outstanding 13,873,667 shares of
Common Stock (excluding treasury shares) held by approximately 67 holders of
record and 2,162 beneficial owners. Only holders of shares of Common Stock on
the Record Date will be entitled to vote at the Annual Meeting. The holders of
Common Stock are entitled to one vote on all matters presented at the meeting
for each share held of record. The presence in person or by proxy of holders of
record of a majority of the shares outstanding and entitled to vote as of the
Record Date shall be required for a quorum to transact business at the Annual
Meeting. If a quorum should not be present, the Annual Meeting may be adjourned
until a quorum is obtained. Each nominee to be elected as a director named in
Proposal 1 must receive a plurality of the votes cast by the holders of Common
Stock present in person or represented by proxy at the Annual Meeting with
respect to such proposal. The approval of the 2006 Stock Incentive Plan
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described in Proposal 2 and the ratification of the appointment of Eisner LLP as
the Company's independent auditors for the fiscal year ending December 31, 2006
described in Proposal 3 must be approved by the affirmative vote of the holders
of a majority of the total votes cast on such proposals in person or by proxy.
Abstentions and broker non-votes are counted as present and entitled to vote and
are, therefore, included for purposes of determining whether a quorum of shares
is present at the meeting. An abstention from a vote with respect to Proposal 1
will have no effect. An abstention from a vote with respect to Proposal 2 or
Proposal 3 will have the same practical effect as a vote against such proposal.
Broker "non-votes" are not deemed to be "votes cast." As a result, broker
"non-votes" are not included in the tabulation of the voting result on the
election of directors or issues requiring approval of a majority of the votes
cast and, therefore, do not have the effect of votes in opposition in such
tabulations and as such will have the practical effect of reducing the number of
affirmative votes required to achieve a majority vote for a matter by reducing
the total number of shares from which a majority is calculated. Brokers who hold
shares in street name may vote on behalf of beneficial owners with respect to
Proposals 1, 2 and 3. The approval of all other matters to be considered at the
Annual Meeting requires the affirmative vote of a majority of the eligible votes
cast at the Annual Meeting on such matters.
The expense of preparing, printing and mailing this Proxy Statement,
the exhibits hereto and the proxies solicited hereby will be borne by the
Company. In addition to the use of the mails, proxies may be solicited by
officers and directors and regular employees of the Company, without additional
remuneration, by personal interviews, telephone, telegraph or facsimile
transmission. The Company will also request brokerage firms, nominees,
custodians and fiduciaries to forward proxy materials to the beneficial owners
of shares of Common Stock held of record and will provide reimbursements for the
cost of forwarding the material in accordance with customary charges. The
Company has entered into an agreement with D.F. King & Co., Inc. to assist in
the solicitation of proxies and provide related advice and informational
support. The total expense of this engagement, including customary
disbursements, is not expected to exceed $10,000 in the aggregate.
Proxies given by stockholders of record for use at the Annual Meeting
may be revoked at any time prior to the exercise of the powers conferred. In
addition to revocation in any other manner permitted by law, stockholders of
record giving a proxy may revoke the proxy by an instrument in writing, executed
by the stockholder or his attorney authorized in writing, or, if the stockholder
is a corporation, under its corporate seal, by an officer or attorney thereof
duly authorized, and deposited either at the corporate headquarters of the
Company at any time up to and including the last business day preceding the day
of the Annual Meeting, or any adjournment thereof, at which the proxy is to be
used, or with the chairman of such Annual Meeting on the day of the Annual
Meeting or adjournment thereof, and upon either of such deposits the proxy shall
be revoked.
ALL PROXIES RECEIVED WILL BE VOTED IN ACCORDANCE WITH THE CHOICES
SPECIFIED ON SUCH PROXIES. PROXIES WILL BE VOTED IN FAVOR OF A PROPOSAL IF NO
CONTRARY SPECIFICATION IS MADE. ALL VALID PROXIES OBTAINED WILL BE VOTED AT THE
DISCRETION OF THE PERSONS NAMED IN THE PROXY WITH RESPECT TO ANY OTHER BUSINESS
THAT MAY COME BEFORE THE ANNUAL MEETING.
None of the matters to be acted on at the Annual Meeting give rise to
any statutory right of a stockholder to dissent and obtain the appraisal of or
payment for such stockholder's shares.
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MATTERS TO BE CONSIDERED AT ANNUAL MEETING
PROPOSAL ONE - ELECTION OF DIRECTORS
Under the Amended and Restated By-Laws of the Company (the "By-Laws"),
the Board of Directors of the Company is required to be comprised of a minimum
of one (1) director. Subject to the foregoing limitation, the number of
directors may be fixed from time to time by action of the directors. The
Company's board presently consists of nine directors whose terms expire at the
Annual Meeting.
The Nominating/Corporate Governance Committee of the Board of Directors
and the Board of Directors have nominated and are recommending the election of
each of the nine (9) nominees set forth below to serve as a director of the
Company until the next annual meeting of the Company's stockholders or until his
successor is duly elected and qualified. The names and biographical summaries of
the nine (9) persons who have been nominated by the Nominating/Corporate
Governance Committee of the Board of Directors and the Board of Directors to
stand for election at the Annual Meeting have been provided below for your
information.
Biographical Summaries of Nominees for the Board of Directors
Jamieson A. Karson has been the Chief Executive Officer of the Company
since July 1, 2001 and Chairman of the Board of Directors since July 22, 2004.
Mr. Karson was the Vice Chairman of the Board of Directors of the Company from
July 1, 2001 until such time that he became the Chairman of the Board of
Directors. Mr. Karson has been a director of the Company since January 2, 2001.
Prior to joining the Company as Chief Executive Officer, Mr. Karson practiced
law for over 17 years. He was a partner in the New York City law firm of
Tannenbaum Helpern Syracuse & Hirshtritt LLP from January 1, 1997 through June
30, 2001, where he served on the firm's three person Finance Committee. He was a
partner at the law firm of Karson McCormick from February 1992 through December
31, 1996. Prior to that, Mr. Karson was an associate attorney at the law firm of
Shea & Gould.
Jeffrey Birnbaum has been a director of the Company since June 2003.
Mr. Birnbaum has been the Product Development Manager of Dolphin Shoe Company
since August 1982. Dolphin is one of the Company's domestic suppliers.
Marc S. Cooper has been a director of the Company since July 2001. Mr.
Cooper has served as a Managing Director of Peter J. Solomon Company in its
Mergers and Acquisitions Department since May 1999. Previously, Mr. Cooper
worked at Barington Capital Group from March 1992 to May 1999, where he was a
founding member and Vice Chairman overseeing its investment banking operations.
Harold Kahn has been a director of the Company since December 2004. Mr.
Kahn currently heads HDK Associates, a consulting company that advises financial
and investment groups. Mr. Kahn served as the Chief Executive Officer of Macy's
East from January 1994 through March 2004. Currently, Mr. Kahn also serves as a
Director of The Wet Seal, Inc. and Ronco Corporation.
John L. Madden has been a director of the Company since the Company's
inception. From April 1998 through September 2003, Mr. Madden owned a branch
office of Tradeway Securities Group, Inc. in Florida. From May 1996 through
December 1996, Mr. Madden's consulting company, JLM Consultants, Inc., acted as
a branch office of Merit Capital, Inc. for several broker-dealers. From May 1994
to May 1996, Mr. Madden served as Vice President of Investments for GKN
Securities, Inc. From August 1993 to April 1994, Mr. Madden was employed by
Biltmore Securities, Inc. as Managing Director and registered sales
representative. Mr. Madden is the brother of Steven Madden, the Company's
founder and Creative and Design Chief.
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Peter Migliorini has been a director of the Company since October 1996.
Mr. Migliorini has served as Sales Manager for Greschlers, Inc., a supply
company located in Brooklyn, New York, since 1994. From 1987 to 1994, Mr.
Migliorini served as Director of Operations for Mackroyce Group. Mr. Migliorini
has previously served in a number of capacities, ranging from Assistant Buyer to
Chief Planner/Coordinator, for several shoe companies, including Meldisco Shoes,
Perry Shoes and Fasco Shoes.
Richard P. Randall has been a director of the Company since April 2006.
Mr. Randall was the Executive Vice President and Chief Financial Officer of
Direct Holdings Worldwide, LLC, the parent company of Lillian Vernon Corp. and
TimeLife, from 2002 until his retirement in June 2005. Previously, Mr. Randall
served as Senior Vice President and Chief Financial Officer of Coach, Inc. and
the Chief Operating Officer and Chief Financial Officer of Lillian Vernon Corp.
from 2000 to 2001 and 1998 to 2000, respectively. Currently, Mr. Randall serves
as a Director of The Burke Rehabilitation Hospital.
Thomas H. Schwartz has been a director of the Company since May 2004.
Mr. Schwartz has been a Managing Director of Helmsley-Spear, Inc. since 1984,
where he was also a salesman since 1973. As Managing Director, among other
things, Mr. Schwartz is responsible for the leasing and sales brokerage of real
estate, management of real estate leasing and supervising the managers of
properties in which he has ownership interests.
Walter Yetnikoff has been a director of the Company since May 2005. Mr.
Yetnikoff has served as Chief Executive Officer of Commotion Records, a company
he co-founded, since 2003. From 2001 through 2003, Mr. Yetnikoff was
self-employed as a researcher and writer. Mr. Yetnikoff served as President of
CBS Records from 1975 to 1990 and served on the Board of Directors of CBS, Inc.
from 1975 through 1988.
Required Vote
Proxies will be voted for the election of the nine (9) nominees as
directors of the Company unless otherwise specified on the proxy. A plurality of
the votes of shares of Common Stock present in person or represented by proxy at
the Annual Meeting will be necessary to elect the nominees as directors. If, for
any reason, any of the nominees shall be unable or unwilling to serve, the
proxies will be voted for a substitute nominee who will be designated by the
Board of Directors at the Annual Meeting. Stockholders may abstain from voting
by marking the appropriate boxes on the enclosed proxy. Abstentions shall be
counted separately and shall be used for purposes of calculating whether a
quorum is present at the meeting.
Recommendation of the Board of Directors
The Nominating/Corporate Governance Committee of the Board and the
Board unanimously recommend a vote FOR the election of Messrs. Jamieson A.
Karson, Jeffrey Birnbaum, Marc S. Cooper, Harold Kahn, John L. Madden, Peter
Migliorini, Richard P. Randall, Thomas H. Schwartz and Walter Yetnikoff. Unless
otherwise instructed or unless authority to vote is withheld, the enclosed proxy
will be voted FOR the election of the above listed nominees and AGAINST any
other nominees.
Director Independence
The Board of Directors is currently comprised of nine members. The
Board has determined that the following director nominees are "independent" for
purposes of The Nasdaq National Market listing standards: Messrs. Kahn,
Migliorini, Randall, Schwartz and Yetnikoff. If the nine nominees set forth
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above are elected, the Board will be comprised of a majority of independent
directors. The Board has adopted a policy whereby the independent directors have
regularly scheduled executive sessions at least twice a year. On February 28,
2005, the Board appointed Peter Migliorini to serve as Presiding Director of the
executive sessions.
Directors' Attendance at Annual Meetings
The Company encourages all of its directors to attend annual meetings
of the Company's stockholders. Three directors attended the Company's 2005
annual meeting of stockholders.
Communications with Directors
The Company has adopted a procedure by which stockholders may send
communications as defined within Item 7(h) of Schedule 14A under the Exchange
Act to one or more members of the Board of Directors by writing to such
director(s) or to the whole Board of Directors in care of the Corporate
Secretary, Steven Madden, Ltd., 52-16 Barnett Avenue, Long Island City, NY
11104. Any such communications will be promptly distributed by the Corporate
Secretary to such individual director(s) or to all directors if addressed to the
whole Board of Directors.
Director Compensation
Directors who are also employees of the Company are not paid any fees
or other remuneration for service on the Board or any of its committees. In
2005, each non-employee director received the following compensation: (i) a
grant of options to purchase 10,000 shares of Common Stock at an exercise price
per share equal to the fair market value of the Common Stock on the date of
grant and (ii) fifty thousand dollars ($50,000). In 2006, each non-employee
director shall receive the following compensation: (i) a grant of (A) 1,000
shares of Common Stock for independent directors or (B) 500 shares for
non-independent directors and (ii) forty thousand dollars ($40,000). In 2005,
members of the Audit Committee, Nominating/Corporate Governance Committee and
Compensation Committee each received an additional ten thousand dollars
($10,000) for service on such committees, except that the audit committee
financial expert received twenty-five thousand dollars ($25,000) and the
chairperson of the Compensation Committee received fifteen thousand dollars
($15,000). In 2006, members of the Audit Committee, Nominating/Corporate
Governance Committee and Compensation Committee each will receive an additional
ten thousand dollars ($10,000) for service on such committees, except that the
audit committee financial expert will receive fifteen thousand dollars ($15,000)
and the chairperson of the Compensation Committee will receive fifteen thousand
dollars ($15,000).
Meetings and Committees of the Board of Directors
The Board of Directors met seven times during the fiscal year ended
December 31, 2005. The Board of Directors has a standing Audit Committee,
Compensation Committee and Nominating/Corporate Governance Committee. In 2005,
each director attended at least 75% of the aggregate of the number of Board
meetings and the number of meetings held by all committees on which he then
served.
Audit Committee
At the beginning of the year ended December 31, 2005, the Audit
Committee of the Board of Directors consisted of directors Awadhesh Sinha,
Thomas H. Schwartz and Peter Migliorini. During fiscal year 2005, Mr. Sinha
became the Company's Chief Operating Officer and as a result resigned from his
position on the Audit Committee because he no longer qualified as independent
under The Nasdaq National Market independence requirements. Mr. Sinha was
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replaced on the Audit Committee by Marc S. Cooper. In February 2006, Marc S.
Cooper resigned from the Audit Committee because he no longer qualified as
independent under The Nasdaq National Market independence requirements and was
replaced by Harold Kahn. In April 2006, the Audit Committee was reconstituted
with its members being Richard P. Randall (Chairman), Peter Migliorini and
Harold Kahn. The Audit Committee is comprised of directors who are "independent"
for purposes of The Nasdaq National Market listing standards and who meet the
independence requirements contained in Exchange Act Rule 10A-3(b)(1). The Board
has determined that Richard P. Randall meets the SEC criteria of an "audit
committee financial expert" and he is currently serving as such. The Audit
Committee is primarily responsible for reviewing the services performed by the
Company's independent public accountants, evaluating the Company's accounting
policies and its system of internal controls, and reviewing significant finance
transactions. During 2005, the Audit Committee met nine times.
The Audit Committee is responsible for reviewing and helping to ensure
the integrity of the Company's financial statements. Among other matters, the
Audit Committee, with management and independent and internal auditors, reviews
the adequacy of the Company's internal accounting controls that could
significantly affect the Company's financial statements. The Audit Committee is
also directly and solely responsible for the appointment, retention,
compensation, oversight and termination of the Company's independent
accountants. In addition, the Audit Committee also functions as the Company's
Qualified Legal Compliance Committee (the "QLCC"). The purpose of the QLCC is to
receive, retain and investigate reports made directly, or otherwise made known,
of evidence of material violations of any United States federal or state law,
including any breach of fiduciary duty by the Company, its officers, directors,
employees or agents, and if the QLCC believes appropriate, to recommend courses
of action to the Company.
The Audit Committee meets with management periodically to consider the
adequacy of the Company's internal controls and the objectivity of its financial
reporting. The Audit Committee discusses these matters with the Company's
independent public accountants and with appropriate Company financial personnel.
Meetings are held with the independent public accountants who have unrestricted
access to the Audit Committee. In addition, the Audit Committee reviews the
Company's financing plans and reports recommendations to the full Board of
Directors for approval and to authorize action. The Board has adopted a written
charter setting out the functions the Audit Committee is to perform. A copy of
the Audit Committee Charter is attached as Annex A to the Company's 2004 Proxy
Statement and is available on the Company's website at www.stevemadden.com.
Management has primary responsibility for the Company's financial
statements and the overall reporting process, including the Company's system of
internal controls. The independent public accountants audit the annual financial
statements prepared by management, express an opinion as to whether those
financial statements present fairly the financial position, results of
operations and cash flows of the Company in conformity with accounting
principles generally accepted in the United States of America and discuss with
the Audit Committee any issues they believe should be raised with the Audit
Committee.
The following Audit Committee Report does not constitute soliciting
material and shall not be deemed filed or incorporated by reference into any
other Company filing under the Securities Act of 1933, as amended, or the
Securities Exchange Act of 1934, as amended, except to the extent the Company
specifically incorporates this Audit Committee Report by reference therein.
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AUDIT COMMITTEE REPORT
The Audit Committee reviewed the Company's audited financial statements
for the fiscal year ended December 31, 2005 and met with both management and
Eisner LLP, the Company's independent public accountants, to discuss such
audited financial statements. Management and the Company's independent public
accountants have represented to the Audit Committee that the financial
statements were prepared in accordance with accounting principles generally
accepted in the United States of America. The Audit Committee has received from
and discussed with Eisner LLP the written disclosure and the letter regarding
the independence of Eisner LLP as required by Independence Standards Board
Standard No. 1. The Audit Committee also discussed with Eisner LLP any matters
required to be discussed by Statement on Auditing Standards No. 61. Based on
these reviews and discussions, the Audit Committee recommended to the Board that
the Company's audited financial statements be included in the Company's Annual
Report on Form 10-K for the fiscal year ended December 31, 2005.
Submitted by the Audit Committee of the Company's Board of Directors:
Peter Migliorini
Thomas H. Schwartz
Harold Kahn
Nominating/Corporate Governance Committee
The Nominating/Corporate Governance Committee of the Board of Directors
for the year ended December 31, 2005 consisted of Peter Migliorini and Walter
Yetnikoff. The Nominating/Corporate Governance Committee is comprised of
directors who are "independent" for purposes of The Nasdaq National Market
listing standards. The Nominating/Corporate Governance Committee considers and
makes recommendations to the Board of Directors with respect to the size and
composition of the Board of Directors and identifies potential candidates to
serve as directors. The Nominating/Corporate Governance Committee identifies
candidates to the Board of Directors by introductions from management, members
of the Board of Directors, employees or other sources and stockholders that
satisfy the Company's policy regarding stockholder recommended candidates. The
Nominating/Corporate Governance Committee does not evaluate director candidates
recommended by stockholders differently than director candidates recommended by
other sources. A copy of the Nominating/Corporate Governance Committee Charter
is attached as Annex B to the Company's 2004 Proxy Statement and is available on
the Company's website at www.stevemadden.com.
Stockholders wishing to submit recommendations for the 2007 Annual
Meeting should write to the Corporate Secretary, Steven Madden, Ltd., 52-16
Barnett Avenue, Long Island City, NY 11104. Any such stockholder must (x) comply
with the director nomination provisions of the Company's By-Laws, (y) meet and
evidence the minimum eligibility requirements specified in Exchange Act Rule
14a-8 and (z) submit, within the same timeframe for submitting a stockholder
proposal required by Rule 14a-8: (1) evidence in accordance with Rule 14a-8 of
compliance with the stockholder eligibility requirements, (2) the written
consent of the candidate(s) for nomination as a director, (3) a resume or other
written statement of the qualifications of the candidate(s) for nomination as a
director, and (4) all information regarding the candidate(s) and the submitting
stockholder that would be required to be disclosed in a proxy statement filed
with the SEC if the candidate(s) were nominated for election to the Board of
Directors.
In considering Board of Directors candidates, the Nominating/Corporate
Governance Committee takes into consideration the Company's Board Candidate
Guidelines, attached as Annex C to the Company's 2004 Proxy Statement and
available on the Company's website at www.stevemadden.com, the Company's policy
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regarding stockholder recommended director candidates, as set forth above, and
all other factors that they deem appropriate, including, but not limited to, the
individual's character, education, experience, knowledge and skills. In
addition, the Nominating/Corporate Governance Committee develops and recommends
corporate governance principles for the Company; makes recommendations to the
Board of Directors in support of such principles; takes a leadership role in the
shaping of the corporate governance of the Company; and oversees the evaluation
of the Board of Directors and management.
During 2005, the Nominating/Corporate Governance Committee met three
times.
Compensation Committee
The Compensation Committee of the Board of Directors for the year ended
December 31, 2005 consisted of directors Peter Migliorini (Chairman) and Thomas
H. Schwartz. The Compensation Committee is comprised of directors who are
"independent" for purposes of The Nasdaq National Market listing standards. The
Compensation Committee is primarily responsible for approving salaries, bonuses
and other compensation for the Company's Chief Executive Officer and named
executive officers, reviewing management recommendations relating to new
incentive compensation plans and changes to existing incentive compensation
plans, and administering the Company's stock plans, including granting options
and setting the terms thereof pursuant to such plans (all subject to approval by
the Board of Directors). During 2005, the Compensation Committee met four times.
Code of Business Conduct and Ethics
All of the Company's employees, officers (including senior executive,
financial and accounting officers) and directors are held accountable for
adherence to the Company's Code of Business Conduct and Ethics (the "Code"). The
Code is intended to establish standards necessary to deter wrongdoing and to
promote compliance with applicable governmental laws, rules and regulations and
honest and ethical conduct. The Code covers all areas of professional conduct,
including conflicts of interest, fair dealing, financial reporting and
disclosure, protection of Company assets and confidentiality. Employees have an
obligation to promptly report any known or suspected violation of the Code
without fear of retaliation. Waiver of any provision of the Code for executive
officers and directors may only be granted by the Board of Directors or one of
its committees and any such waiver or modification of the Code relating to such
individuals will be disclosed by the Company. A copy of the Code is attached as
Annex D to the Company's 2004 Proxy Statement, is available on the Company's
website at www.stevemadden.com and may also be obtained by any stockholder
without charge upon request by writing to the Corporate Secretary, Steven
Madden, Ltd., 52-16 Barnett Avenue, Long Island City, NY 11104.
Section 16(a) Beneficial Ownership Reporting Compliance
Section 16(a) of the Securities Exchange Act of 1934, as amended,
requires that the Company's directors and executive officers, and persons who
own more than ten percent (10%) of a registered class of the Company's equity
securities, file with the Securities and Exchange Commission reports of initial
ownership of the Company's common stock and subsequent changes in that ownership
and furnish the Company with copies of all forms they file pursuant to Section
16(a). Form 4s were not filed on a timely basis to report (i) grants of stock
options on May 27, 2005 to each of Jeffrey Birnbaum, Marc S. Cooper, Peter
Migliorini, Harold Kahn, Thomas H. Schwartz, John L. Madden and Walter
Yetnikoff; (ii) a grant of stock options on June 30, 2005 to Arvind Dharia; and
(iii) the exercise of stock options and sale of Common Stock on November 7, 2005
by Marc S. Cooper. Each of these reports has now been filed. In making this
disclosure, the Company has relied solely on copies of the reports that they
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have filed with the SEC and written representations received from our directors
and executive officers that no annual Form 5 reports were required to by filed
for the 2005 fiscal year.
Equity Compensation Plan Information
The following table provides information as of December 31, 2005 with
respect to the Common Stock that may be issued under the Company's existing
equity compensation plans. The table shows the number of securities to be issued
under compensation plans that have been approved by stockholders and those that
have not been so approved. The footnotes and other information following the
table are intended to provide additional detail on the compensation plans.
Number of securities
Number of securities remaining available for
to be issued upon Weighted-average exercise future issuance under
exercise of price of outstanding equity compensation plans
outstanding options, options, warrants and (excluding securities
Plan category warrants and rights rights reflected in column (a))
----------------------------------- --------------------- ------------------------- --------------------------
Equity compensation plans
approved by security
holders (1) 1,300,100 $14.68 5,100
Equity compensation plans
not approved by security
holders -- -- --
Other (2) 20,000 -- --
--------------------- ------------------------- --------------------------
Total 1,320,100 $14.68 5,100
------------------
(1) Consists of the 1993 Incentive Stock Option Plan, the 1995 Stock Plan, the
1996 Stock Plan and the 1999 Stock Plan, as amended.
(2) In 2002 and 2003, the Company entered into agreements with eight employees
and one independent contractor, which agreements provide that, if such
individuals continue to be employed by, or in the case of the independent
contractor, provide services to, the Company through specified future dates
(ranging form January 1, 2004 through March 31, 2007), they each will be
entitled to receive shares of the Company's Common Stock in amounts ranging from
20,000 shares to 50,000 shares. Such shares were registered by the Company on
Form S-8 in August 2004. As of December 31, 2005, all but 20,000 of such shares
have been issued.
Certain Legal Proceedings
On or about January 23, 2006, the Company and Steven Madden,
Jamieson Karson, Arvind Dharia and Amelia Varela were named as defendants in a
lawsuit filed by Jojeli, Inc. ("Jojeli") and Alan Rick Friedman in the United
States District Court for the Southern District of New York. In their complaint,
Jojeli and Mr. Friedman assert claims arising from the Company's decision to
terminate Jojeli's services on or about November 28, 2005. Mr. Friedman,
Jojeli's principal, served as a senior salesperson for the Company, and provided
his services to the Company pursuant to an April 26, 2004 written agreement. In
their complaint, Jojeli and Mr. Friedman allege eight claims against the Company
and/or four of its executives, including breach of contract, violation of the
New York Labor Law, tortuous interference with contract, civil conspiracy,
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defamation, and prima facie tort. They seek damages on their various claims in
differing amounts, ranging from $500,000 to $5.0 million and they also seek a
declaration that they are not bound by the restrictive covenant in the parties'
contract. On or about March 1, 2006, the individual defendants and the Company
moved to dismiss the tort claims contained in the complaint and to strike Mr.
Friedman's claim for punitive damages in connection with his contract claims.
More specifically, the defendants moved to dismiss the claims alleging
defamation, interference with contract, prima facie tort and civil conspiracy.
If the motion is granted in its entirety, the individual defendants would be
dismissed from the suit and Mr. Friedman's remaining claims would consist of
breach of contract and alleged violations of the New York Labor Law. On or about
April 13, 2006, Mr. Friedman filed an amended complaint in the action. In his
amended complaint, Mr. Friedman (i) dropped his defamation claim against the
Company's Executive Vice President of Wholesale Sales, Amelia Newton Varela,
(ii) dropped all claim(s) against the Company's Chief Financial Officer, Arvind
Dharia, and (iii) supplemented certain allegations concerning the remaining
defendants in an effort to strengthen or preserve his remaining tort claims. On
April 13th, Mr. Friedman also filed his opposition to the motion to dismiss
previously filed by the Company and the individual defendants, who, under the
current court schedule, have until April 27, 2006 to respond, although the
Company's attorneys have asked the court for a brief extension.
On April 26, 2004, the SEC sent the Company a letter requesting
information and documents relating to, among other things, Steven Madden's
employment with the Company. The Company has responded to this request.
On September 12, 2001, the State of Florida, Department of Banking and
Finance, Division of Securities and Investor Protection (the "Department")
issued a Final Order adopting the Stipulation and Consent Agreement to Final
Order dated May 15, 2001 ("Stipulation and Consent Agreement") between John
Madden and the Department relating to the Department's investigation of alleged
sales of unregistered securities in 1997. Under the Stipulation and Consent
Agreement, Mr. Madden neither admitted nor denied the allegations against him;
however, Mr. Madden agreed to pay an administrative fine in the amount of $5,000
and agreed to abide by certain limitations related to his employment in the
securities or investment advisory industry for a period of five years, including
Mr. Madden's agreement to not act in any principal, supervisory, or managerial
capacity in the securities industry and to not exercise discretionary authority
in any account of any person.
Directors and Executive Officers
The Company's directors and executive officers as of the date hereof
are listed below:
Name Age Position(s) with the Company
-------------------------------------- --------------- -----------------------------------------------------
Jamieson A. Karson................... 48 Chief Executive Officer and Chairman of the Board
Arvind Dharia........................ 56 Chief Financial Officer
Awadhesh Sinha....................... 60 Chief Operating Officer
Robert Schmertz...................... 42 Brand Director
Amelia Newton Varela................. 34 Executive Vice President - Wholesale Sales
Jeffrey Birnbaum..................... 45 Director
Marc S. Cooper....................... 44 Director
Harold Kahn.......................... 60 Director
John L. Madden....................... 58 Director
Peter Migliorini..................... 57 Director
Richard P. Randall................... 68 Director
Thomas H. Schwartz................... 58 Director
Walter Yetnikoff..................... 72 Director
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See "Proposal 1: Election of Directors - Biographical Summaries of Nominees for
the Board of Directors" for the biographies of the Company's directors.
Arvind Dharia has been the Chief Financial Officer of the Company since
October 1992 and was a director of the Company from December 1993 through May
2004. From December 1988 to September 1992, Mr. Dharia was Assistant Controller
of Millennium III Real Estate Corp.
Awadhesh Sinha became the Chief Operating Officer of the Company in
July 2005. Mr. Sinha had been a director of the Company from October 2002 to
July 2005. Mr. Sinha was the Chief Operating Officer and Chief Financial Officer
of WEAR ME Apparel Inc., a company that designs, manufactures and markets
branded and non-branded children's clothing, from 2003 to July 2005. Prior to
that, Mr. Sinha worked for Salant Corporation, a company that designs,
manufactures and markets men's clothing, for 22 years, and held the position of
Chief Operating Officer and Chief Financial Officer of Salant Corporation from
1998 to 2003.
Robert Schmertz has been the Brand Director since January 2006. Mr.
Schmertz served as President of Steve Madden Womens Wholesale Division and Brand
Manager from September 2001 through January 2006. Additionally, Mr. Schmertz has
been the President of Shoe Biz, Inc., a wholly owned subsidiary of Steve Madden
Retail Inc. since May 1998 and the President of Diva Acquisition Corp. since
January 2001. Before joining the Company, Mr. Schmertz was President of Daniel
Scott Inc. from November 1995 to May 1998. Previously, Mr. Schmertz was the East
Coast Sales Manager for Impo International from January 1993 through November
1995. From April 1990 to December 1992, Mr. Schmertz served as a sales
representative for Espirit de Corp. based in San Francisco, California.
Amelia Newton Varela has been Executive Vice President of Wholesale
Sales since November 2004. Previously, she was Vice President of Sales for the
Steve Madden Women's division since January 2000. Prior to that, she was Account
Executive for the Women's division since 1998. Before joining the Company, Ms.
Varela was the sales assistant to the EVEP of Sales for Merrin Financial. She
graduated from the FIT in 1995.
COMPENSATION OF DIRECTORS AND EXECUTIVE OFFICERS
Summary Compensation Table
The following table sets forth for each of the last three fiscal years
ended December 31, 2005, December 31, 2004 and December 31, 2003 the
remuneration paid by the Company to its Chief Executive Officer and the four
most highly compensated executive officers (other than the Chief Executive
Officer):
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Annual compensation Long-term compensation
------------------------ -------------------------
Number of
Securities
Restricted Underlying
Name and principal Fiscal Stock Options/SARs All other
position year Salary Bonus Awards (1) compensation
--------------------------- ------ -------- --------- ----------- ------------ ---------------
Jamieson A. Karson, 2005 $467,500 $543,771 -- -- $ 494,509(2)
Chief Executive 2004 $467,500 -- -- -- $ 146,226(3)
Officer 2003 $467,500 $108,056 -- -- $ 287,963(4)
Arvind Dharia, 2005 $240,000 $253,914 -- 40,000 $ 312,986(5)
Chief Financial 2004 $234,000 $ 50,000 -- 40,000 $ 287,570(6)
Officer 2003 $220,000 $ 71,771 -- 40,000 $ 739,283(7)
Awadhesh Sinha, 2005(8) $187,981 $477,673(9) -- 7,500 $ 49,146(10)
Chief Operating 2004 -- -- -- 10,000 $ 80,000(11)
Officer 2003 -- -- -- 10,000 $ 65,139(11)
Robert Schmertz, 2005 $464,745 $250,000 -- -- $1,095,367(12)
Brand Director 2004 $432,649 $ 50,000 -- -- $ 205,769(13)
2003 $393,750 -- -- -- $ 342,000(14)
Amelia Newton Varela, 2005 $300,000 $260,765 $375,200(15) 23,000 $ 15,000(16)
Executive Vice 2004 $247,000 -- -- -- $ 15,000(16)
President - 2003 $205,557 $ 50,000 -- -- $ 46,911(17)
Wholesale Division
------------------
(1) Options to purchase shares of Common Stock.
(2) In 2005, Mr. Karson sold 100,000 shares of Common Stock for a gain of
$464,975 and $29,541 of expenses were paid by the Company on behalf of Mr.
Karson pursuant to his employment agreement.
(3) In 2004, the Company paid Mr. Karson $116,112 in lieu of granting him
the option to purchase 58,056 shares to purchase Common Stock that he was
entitled to under his employment agreement and $30,114 of expenses were
paid by the Company on behalf of Mr. Karson pursuant to his employment
agreement.
(4) In 2003, the Company paid expenses in the amount of $37,963 on behalf
of Mr. Karson pursuant to his employment agreement. In addition, in 2003
the Company paid Mr. Karson $250,000 in lieu of granting him the option to
purchase 100,000 shares to purchase Common Stock that he was entitled to
under his employment agreement.
(5) In 2005, Mr. Dharia sold 13,000 shares of Common Stock for a gain of
$225,290 and the Company paid expenses in the amount of $87,700 on behalf
of Mr. Dharia pursuant to his employment agreement.
-12-
(6) In 2004, Mr. Dharia sold 20,172 shares of Common Stock for a gain of
$192,349 and the Company paid expenses in the amount of $95,221 on behalf
of Mr. Dharia pursuant to his employment agreement.
(7) In 2003, Mr. Dharia sold 60,000 shares of Common Stock for a gain of
$625,840 and the Company paid expenses in the amounts of $113,443 on behalf
of Mr. Dharia pursuant to his employment agreement.
(8) Mr. Sinha has been the Chief Operating Officer of the Company since
June 15, 2005.
(9) In 2005, pursuant to his employment agreement, Mr. Sinha received a
one-time $100,000 signing bonus, as well as a $377,673 performance bonus.
(10) In 2005, the Company paid expenses in the amount of $6,646 on behalf
of Mr. Sinha pursuant to his employment agreement and $42,500 as
compensation for his service as a director on the Board of Directors and
for his membership on Board committees.
(11) In 2003 and 2004, the Company paid Mr. Sinha $65,139 and $80,000,
respectively, for his service as a director on the Board of Directors and
for his membership on Board committees.
(12) On April 2, 2002, the Company agreed to grant, subject to stockholder
approval, Mr. Schmertz 50,000 shares of Common Stock on June 30, 2005 if
Mr. Schmertz was employed by the Company on such date. The grant to Mr.
Schmertz was not approved by the Company's stockholders. Therefore, in
2005, the Company's paid Mr. Schmertz $888,000 in lieu of granting him the
option to purchase 50,000 shares of Common Stock. Additionally, in 2005,
Mr. Schmertz sold 20,000 shares of Common Stock for a gain of $201,367 and
the Company paid $6,000 of expenses on behalf of Mr. Schmertz pursuant to
employment agreement.
(13) In 2004, the Company paid expenses in the amount of $5,769 on behalf
of Mr. Schmertz pursuant to his employment agreement. In addition, in 2004,
the Company paid Mr. Schmertz $200,000 in lieu of granting him the option
to purchase 100,000 shares of Common Stock that he was entitled to under
his employment agreement.
(14) In 2003, Mr. Schmertz sold 12,500 shares of Common Stock for a gain of
$86,000 and the Company paid expenses in the amount of $6,000 on behalf of
Mr. Schmertz pursuant to his employment agreement. In addition, in 2003 the
Company paid Mr. Schmertz $250,000 in lieu of granting him the option to
purchase 100,000 shares to purchase Common Stock that he was entitled to
under his employment agreement.
(15) Represents 20,000 cliff vested shares granted in 2002; such shares
vested at the end of 2004 pursuant to Ms. Varela's employment agreement.
(16) In 2004 and 2005, the Company paid $15,000 of expenses on behalf of
Ms. Varela pursuant to her employment agreement.
(17) In 2003, Ms. Varela sold 3,000 shares of Common Stock for a gain of
$30,930 and the Company paid expenses in the amount of $15,981 on behalf of
Ms. Varela pursuant to her employment agreement.
-13-
The following table sets forth certain information with respect to
options granted during the last fiscal year to the persons named in the Summary
Compensation Table above.
Option/SAR Grants In Last Fiscal Year
Number of Percent of Total
Securities Options/SARS Exercise Potential Realizable Value
Underlying Granted to or Base at Assumed Annual Rates
Options/SARS Employees in Price of Stock Price Appreciation
Name Granted (#) Fiscal Year % ($/Sh) Expiration Date for Option Term
--------------------- ------------- ------------- ---------- ---------------- ---------------------------
5% 10%
----------- ------------
Jamieson A. Karson...... -- -- -- -- -- --
Arvind Dharia........... 40,000 12.5% $17.76 5/27/15 $1,203,427 $1,916,257
Awadhesh Sinha.......... 5,000 1.6% $18.47 7/6/15 $ 150,428 $ 239,532
2,500 0.8% $17.42 5/27/15 $ 75,214 $ 119,766
Robert Schmertz......... -- -- -- -- -- --
Amelia Newton Varela.... 23,000 7.2% $18.47 7/6/15 $ 691,971 $1,101,848
The following table sets forth certain information with respect to
options exercised during the last fiscal year by the persons named in the
Summary Compensation Table, and with respect to unexercised options held by such
persons at the end of the last fiscal year.
Aggregate Option/SAR Exercises In Last Fiscal Year And
Fiscal Year-End Option/SAR Values
Shares Value Number of Securities Value of Unexercised in the
Acquired on Realized Underlying Unexercised Money Options/SARs at
Name Exercise (#) $ Options/SARS at FY-End (#) FY-End ($) (1)
---------------------- --------------- ----------- ----------------------------- -----------------------------
Exercisable Unexercisable Exercisable Unexercisable
----------- ------------- ----------- -------------
Jamieson A. Karson...... 100,000 $464,975 45,000 -- $ 461,250 --
Arvind Dharia........... 13,000 $225,290 148,828 20,000 $1,573,535 $229,400
Awadhesh Sinha.......... -- -- 27,500 -- $ 287,325 --
Robert Schmertz......... 20,000 $208,600 80,000 -- $ 820,000 --
Amelia Newton Varela.... -- -- 23,000 -- $ 247,480 --
------------------
(1) Based upon a closing price on December 31, 2005 of $29.23 per share as
reported by The Nasdaq National Market.
-14-
1999 Stock Plan
As of March 15, 1999, the Board of Directors of the Company adopted the
1999 Stock Plan (the "1999 Plan"), and on June 4, 1999 the Company's
stockholders approved the adoption of the 1999 Plan. In May 2000, the Company's
stockholders approved an amendment to the 1999 Plan increasing the number of
shares of Common Stock subject to the plan from 400,000 to 975,000 shares. In
July 2001, the Company's stockholders approved an amendment to the 1999 Plan
increasing the number of shares of Common Stock subject to the plan from 975,000
to 1,600,000 shares. In May 2002, the Company's stockholders approved an
amendment to the 1999 Plan increasing the number of shares of Common Stock
subject to the plan from 1,600,000 to 2,280,000. In May 2003, the Company's
stockholders approved an amendment to the 1999 Plan (i) increasing the maximum
number of shares of the Company's common stock available for issuance under the
plan from 2,280,000 shares to 2,920,000 shares; (ii) providing that the exercise
price of an option granted under the plan shall be no less than the fair market
value of the Company's common stock on the date of grant (except to the extent
otherwise provided in agreements with the Company dated prior to the effective
date of the amendment); and (iii) prohibiting the Board from amending the terms
of any option granted pursuant to the plan to reduce the option price. In May
2004, the Company's stockholders approved an amendment to the 1999 Plan
increasing the maximum number of shares of the Company's common stock available
for issuance under the plan from 2,920,000 shares to 3,220,000 shares. As of the
Record Date, options to purchase 873,103 shares of Common Stock have been
granted pursuant to the 1999 Plan. The purpose of the 1999 Plan is to provide a
means whereby directors and selected employees, officers, agents, consultants,
and independent contractors of the Company, may be granted incentive stock
options and/or nonqualified stock options to purchase shares of common stock, in
order to attract and retain the services or advice of such directors, employees,
officers, agents, consultants, and independent contractors and to provide
additional incentive for such persons to exert maximum efforts for the success
of the Company by encouraging stock ownership in the Company. If the 2006 Stock
Incentive Plan is approved by stockholders, no additional options will be
granted under the 1999 Plan.
Employment and Consulting Agreements with Certain Executive Officers and
Significant Employees
In May 2001, the Company entered into an employment agreement with
Jamieson A. Karson pursuant to which Mr. Karson agreed to serve as the Company's
Chief Executive Officer and Vice Chairman of the Board. On July 22, 2004 at a
regularly scheduled meeting of the Board of Directors of the Company, Mr. Karson
was appointed Chairman of the Board of Directors. Mr. Karson's employment
agreement was amended and restated in January 2006. The term of Mr. Karson's
employment under his amended and restated employment agreement is three (3)
years commencing on January 1, 2006 and ending on December 31, 2008. The term
will be automatically extended for successive one-year periods unless the
Company timely notifies Mr. Karson of its intention not to extend the term. The
amended and restated agreement provides that the Company pay Mr. Karson an
annual salary of $500,000. In addition, the agreement provides that Mr. Karson
receive an annual bonus in such amount, if any, and at such time or times, as
the Board of Directors may determine in its absolute discretion. Subject to
approval by the Company's stockholders of the 2006 Stock Incentive Plan and
subject to availability of shares under such plan or any other plan designated
by the Board of Directors and approved by the Company's stockholders, Mr. Karson
is entitled to awards under such plan as may be determined by the Board of
Directors, or a committee thereof, from time to time in its absolute discretion.
In addition, in the event of Mr. Karson's total disability or his death, the
Company is obligated to continue to pay Mr. Karson (or Mr. Karson's estate) his
base salary for the twelve (12)-month period immediately subsequent to the date
of such total disability or death. In the event Mr. Karson's employment
agreement is terminated (or not extended) for any reason other than "for cause"
(as defined in the agreement) or due to his death or his total disability, the
Company is obligated to pay Mr. Karson (i) the amount of compensation that is
-15-
accrued and unpaid through the date of termination; plus (ii) an amount equal to
the lesser of (A) the sum of three (3) times Executive's highest "total
compensation" (as defined in the agreement) in any given fiscal year of his
employment with the Company and (B) Four Million Dollars ($4,000,000). In the
event that there is a "change of control" transaction, all unvested options to
purchase shares of the Common Stock or restricted stock awards or other
equity-related awards under the 1999 Plan and/or the 2006 Stock Incentive plan
held by Mr. Karson will vest on the date of the change of control and Mr. Karson
will be entitled to receive a lump sum cash payment equal to the amount
described above. Mr. Karson's employment agreement contains other customary
provisions, including provisions regarding confidentiality, solicitation and
competition.
In January 1998, the Company entered into an employment agreement with
Arvind Dharia, which has been amended from time to time, pursuant to which Mr.
Dharia agreed to serve as the Company's Chief Financial Officer. The term of Mr.
Dharia's employment under his agreement as amended commenced on January 1, 1998
and ends on December 31, 2009. The term will be automatically extended for an
additional one-year period unless either party timely notifies the other of its
intention not to extend the term. The amended agreement provides that the
Company pay Mr. Dharia an annual salary of $240,000 from January 1, 2005 through
December 31, 2005 and $425,000 per annum from and after January 1, 2006, subject
to the following increases: (i) on January 1, 2007, his base salary shall be
increased by 2.5% of the then-current base salary; (ii) on January 1, 2008, his
base salary shall be increased by 5% of the then-current base salary; and (iii)
on January 1, 2009, his base salary shall be increased by 5% of the then-current
base salary. In addition, the agreement provides that Mr. Dharia receive an
annual bonus in such amount, if any, and at such time or times, as the Board of
Directors may determine in its absolute discretion. Subject to approval by the
Company's stockholders of the 2006 Stock Incentive Plan and subject to
availability of shares under such plan or any other plan designated by the Board
of Directors and approved by the Company's stockholders, Mr. Dharia is entitled
to awards under such plan as may be determined by the Board of Directors, or a
committee thereof, from time to time in its absolute discretion. The agreement
provides for, in the event of Mr. Dharia's death, the payment to Mr. Dharia's
estate of his base salary for the 12-month period immediately subsequent to the
date of Mr. Dharia's death. In the event Mr. Dharia's employment agreement is
terminated due to Mr. Dharia's total disability (as defined in the agreement) or
"for cause" (as defined in the agreement), the Company is obligated to pay Mr.
Dharia the amount of compensation that is accrued and unpaid through the date of
termination. In the event Mr. Dharia's employment agreement is terminated for
any reason other than "for cause", due to his death or his total disability, the
Company is obligated to pay Mr. Dharia, in two installments, an amount equal the
product of (x) his base salary on the effective date of such termination plus
the bonus paid or payable, if any, for the fiscal year ended on the December
31st immediately preceding the termination date, multiplied by (y) the number of
years (and fraction of years) remaining in the term. If the Company decides not
to renew the agreement (other than "for cause" or total disability), then Mr.
Dharia shall be entitled to receive severance compensation in cash in an amount
equal to his then-current base salary for the 90-day period commencing on the
expiration of the term. In the event that there is a "change of control"
transaction and Mr. Dharia's employment has been terminated by the Company other
than "for cause" or by Mr. Dharia "for good reason" (as defined in the
agreement), Mr. Dharia shall receive an amount equal to three times the total
compensation he was entitled to receive under the agreement for the preceding
12-month period ending on the last previous December 31, except that in lieu of
the actual base salary component received during such period, there shall be
substituted the annual base salary to which Mr. Dharia was entitled to as of the
date of termination.
In June 2005, the Company entered into an employment agreement with
Awadhesh Sinha, pursuant to which Mr. Sinha agreed to serve as the Company's
Chief Operating Officer. The term of Mr. Sinha's employment under his employment
agreement is three (3) years commencing on July 1, 2005 and ending on June 30,
2008. The term will be automatically extended for successive one-year periods
unless either party timely notifies the other of its intention not to extend the
term. The agreement provides that the Company pay Mr. Sinha an annual salary of
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$425,000, subject to a 5% annual increase or a 10% annual increase if the
Company's EBIT for the 12-month period from July 1 to June 30 increases by at
least 5% over the preceding 12-month period. Upon entering the agreement, Mr.
Sinha received a signing bonus of $100,000. In addition, Mr. Sinha is entitled
to an annual bonus equal to the greater of (i) $50,000 and (ii) 3% of the
increase in the Company's EBIT for such fiscal year over the EBIT of the
immediately prior fiscal year. The agreement provides for, in the event of Mr.
Sinha's death, the payment to Mr. Sinha's estate of his base salary for the
12-month period immediately subsequent to the date of Mr. Sinha's death. In the
event Mr. Sinha's employment agreement is terminated due to Mr. Sinha's total
disability (as defined in the agreement), "for cause" (as defined in the
agreement) or due to Mr. Sinha's resignation, the Company is obligated to pay
Mr. Sinha the amount of compensation that is accrued and unpaid through the date
of termination. Mr. Sinha shall be required to repay to the Company the full
amount of his signing bonus if he is discharged "for cause" and a pro rata
portion of the signing bonus for the portion of the term that he did not fulfill
if he resigns. In the event Mr. Sinha's employment agreement is terminated for
any reason other than "for cause" or due to his death or his total disability,
the Company is obligated to pay Mr. Sinha an amount equal to the sum of (x) the
base salary that would have been paid by the Company pursuant to the agreement
for the longer of the remainder of the then-current term or 6 months and (y) the
cash bonus payable to Mr. Sinha prorated from the commencement of the
then-current term through the termination date. In the event that there is a
"change of control" transaction, the Company or Mr. Sinha may terminate the
agreement and Mr. Sinha shall be entitled to an amount equal to three times the
total compensation received by Mr. Sinha under the agreement for the preceding
12-month period ending on the last previous December 31st, except that in lieu
of the actual base salary component received during such period, there shall be
substituted the annual base salary to which Mr. Sinha was entitled to as of the
date of his termination.
In April 2002, the Company entered into an employment agreement with
Robert Schmertz pursuant to which Mr. Schmertz agreed to serve as President of
Steve Madden Wholesale Womens Division and Brand Manager for Steven Madden, Ltd.
The agreement was extended in March 2005. The term of Mr. Schmertz's employment
under his employment agreement (as extended) commenced on April 1, 2002 and ends
on June 30, 2007. Mr. Schmertz received a signing bonus of $50,000 upon the
execution of the extension. The Company agreed to pay Mr. Schmertz an annual
salary of $476,438.00 on July 1, 2005 and to be increased to $500,260.00 on July
1, 2006. Under the terms of the agreement as extended, the Company shall pay Mr.
Schmertz a discretionary bonus in an amount determined solely by the Company's
Board of Directors. In the event of a "change of control", Mr. Schmertz shall be
entitled to terminate the agreement and upon such termination will be entitled
to receive three times the compensation received in the prior year (capped at
the maximum allowed under Section 4999 of the Internal Revenue Code of 1986).
Mr. Schmertz's employment agreement contains other customary provisions.
In October 2004, the Company entered into an employment agreement with
Amelia Newton Varela, pursuant to which Ms. Varela agreed to serve as Executive
Vice President of Wholesale Sales. Ms. Varela's employment under her employment
agreement commenced on October 2004. The Company agreed to pay Ms. Varela an
annual salary of $300,000. Under the terms of the agreement, the Company shall
pay Ms. Varela an annual bonus in an amount equal to 2% of the increase in the
Company's wholesale divisions' EBIT of the fiscal year over the Company's
wholesale divisions' EBIT of the prior fiscal year. In addition, if Ms. Varela
is still employed by the Company on December 31, 2007, she is entitled to a cash
payment in the amount of $225,000. Ms. Varela's employment agreement contains
other customary provisions.
Effective as of July 1, 2005, the Company amended its employment
agreement with Steven Madden, pursuant to which Mr. Madden agreed to serve as
the Company's Creative and Design Chief. The term of Mr. Madden's employment
under his amended employment agreement commenced July 1, 2005 and ends on June
-17-
30, 2015. The agreement provides for an annual salary of $600,000, with a 7%
increase of base salary on a compound basis in each of the third, fifth, seventh
and ninth years of the agreement. The agreement also provides for an annual
bonus in an amount determined by the Board of Directors, which will be at least
2% of the Company's EBITDA (the "Annual Bonus"). Additionally, the Company shall
pay Mr. Madden an annual cash bonus in relation to new business (as defined in
the agreement) in an amount to be determined by the Board of Directors, which
will be at least (i) 2.5% of new business gross direct revenues and (ii) 10% of
all license or other fee income above $2,000,000.00 (the "New Business Bonus").
In addition, Mr. Madden is eligible to receive annually an option grant to
purchase shares of Common Stock in an amount equal to not less than 100% of the
largest aggregate amount of options granted to any other continuing full-time
employee of the Company during the annual period; provided, however, a grant in
excess of 150% of the options grant to such other continuing full-time employee
shall require shareholder approval. The agreement provides for, in the event of
Mr. Madden's death, the payment to Mr. Madden's estate of his base salary for
the 12-month period immediately subsequent to the date of Mr. Madden's death. In
the event that Mr. Madden's employment agreement is terminated due to Mr.
Madden's total disability (as defined in the agreement), "for cause" (as defined
in the agreement) or due to Mr. Madden's resignation, the Company is obligated
to pay Mr. Madden the amount of compensation that is accrued and unpaid through
the date of termination. In the event Mr. Madden's employment agreement is
terminated for any reason other than "for cause", due to his death or his total
disability or due to Mr. Madden's resignation, the Company is obligated to pay
Mr. Madden, in installments, the balance of his base salary that would have been
paid by the Company under the agreement for the full term of the agreement. In
the event that there is a "change of control" transaction, all unvested options
to purchase shares of the Common Stock held by Mr. Madden will vest on the date
of termination and Mr. Madden will be entitled to receive a lump sum cash
payment equal to (1) the amount of compensation that is accrued and unpaid
through the date of termination, (2) an amount equal to the product of (A) the
number of years remaining in the term of the agreement (but not less than 5) and
(B) the sum of (w) the base salary for the 12-month period ended on the
preceding December 31 (or for the 12-month period ending on December 31, 2002,
if greater), (x) the amount of the Annual Bonus earned (paid or accrued or which
should have been paid or accrued) for the 12-month period ended on the preceding
December 31 (or for the 12-month period ended on December 31, 2002, if greater),
(y) the non-accountable expense allowance provided for under the agreement for
the 12-month period ended on the preceding December 31, and (z) the amount of
the New Business Bonus earned (paid or accrued or which should have been paid or
accrued) for the 12-month period ended on the preceding December 31 (or for the
12-month period ending on December 31 during the agreement in which Mr. Madden
received the greatest New Business Bonus, if greater). Mr. Madden's employment
agreement contains other customary provisions, including provisions regarding
expenses reimbursement, confidentiality, solicitation and competition.
In March 2004, the Company entered into a consulting agreement with
Andrew Shames, pursuant to which Mr. Shames agreed to serve as President of the
Company's men's footwear business. The term of Mr. Shames' consultancy commenced
on March 8, 2004 and ends on March 31, 2007. The Company agreed to pay Mr.
Shames an annual base salary of $150,000. The agreement provides that Mr. Shames
is to receive options to purchase 25,000 shares of the Company's Common Stock on
March 31 of each year with a grant price based on the fair market value on such
date, during the term of the agreement (commencing March 31, 2004). The options
are to vest quarterly over a period of one (1) year from the grant date. If Mr.
Shames is employed by the Company through March 31, 2007, he will be entitled to
receive $100,000 on such date. Mr. Shames' employment agreement contains other
customary provisions.
In March 2004, the Company also entered into a commission agreement
between the Steven Madden Mens Wholesale Division and Hev Sales, Inc. Mr. Shames
is the President of Hev Sales Inc. The term of the commission agreement
commenced on March 8, 2004 and ends on March 31, 2007. Under the commission
agreement, Hev Sales serves as sales organization for the Steven Madden Mens
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Wholesale Division and receives commissions on sales by Hev Sales, Inc. in the
amount of (i) 0.75% of the first $35 million net sales of Madden Mens and 2% of
net sales of $35 million or greater, (ii) 1.25% of the net sales of Unionbay or
other men's mid-tier brands and (iii) 1.25% of the net sales of any private
label direct from the factory. Hev Sales, Inc. receives a biweekly draw in the
amount of $17,308 against commissions earned with an annual guaranteed
commission of $450,000. Commissions earned on the first sales generating
commission of $150,000 are not deemed earned commissions to Hev Sales, Inc.
Under the terms of the commission agreement Hev Sales, Inc. also received a
one-time start-up fee from the Company in the amount of $150,000.
In January 2006, the Company entered into a consulting agreement
between the Company and Joseph Masella, which amended and restated a consulting
agreement between the Company, Mr. Masella and T.J.M Sales Corporation. Mr.
Masella is the president of T.J.M Sales Corporation. Under the terms of the
amended and restated agreement, Mr. Masella agreed to serve as Co-President of
Adesso Madden, Inc. The term of Mr. Masella's consultancy under the agreement
commenced on January 1, 2006 and ends on December 31, 2007. Under the agreement,
Mr Masella receives commissions based on annual sales for (i) Adesso Madden in
the amount of 1% of net sales on his accounts, 0.5% on net sales on other
accounts (excluding sales in the children's department), (ii) the Rule division
of the Company in the amount of 1% of net sales and a one time $100,000 bonus if
the contribution margin of this division is greater than or equal to $5.0
million for four consecutive quarters during the term of the agreement, and
(iii) SM New York in the amount of 1% of net sales for sales to Famous Footwear,
Mervyns or Sears. In addition, T.J.M. Sales Corporation receives a biweekly draw
in the amount of $20,000 against commissions earned by Mr. Masella. In the event
of a change of control, Mr. Masella shall receive the compensation provided for
under the agreement for the duration of the agreement's term.
Certain Relationships and Related Transactions
In July 2001, the Company entered into a consulting agreement with
Peter J. Solomon & Company, a financial advisory firm of which Marc S. Cooper,
one of the Company's directors, is a managing director. Under this agreement,
the firm provided financial advisory and investment banking services to the
Company. This agreement was amended in March 2004. The amended agreement expired
on March 31, 2005, but pursuant to its terms has been automatically renewed
until such time that the Company terminates it. Pursuant to this agreement, the
Company paid fees and expenses to Peter J. Solomon & Company of $161,000,
$33,000 and $150,000 for 2004, 2003 and 2002 respectively. Under the amended
agreement, the Company paid fees to Peter J. Solomon & Company in the amount of
$161,000 during 2004 and $50,000 plus expenses incurred during 2005. In
addition, the Company retained Peter J. Solomon & Company as an advisor in
connection with the Company's acquisition of all the capital stock of each of
Daniel M. Friedman & Associates, Inc. and DMF International, Ltd. In February
2006, the Company paid Peter J. Solomon & Company an advisory fee in the amount
equal to $412,000 for services and expenses provided in connection with such
acquisition.
In October 2002, the Company entered into an agreement with Jeffrey
Birnbaum, one of the Company's directors. Under this agreement, Mr. Birnbaum
provided consulting services with respect to the designing and manufacturing of
shoes and general consulting services to the Company, pursuant to which, Mr.
Birnbaum received a fee of $200,000 in 2005. In addition, Mr. Birnbaum received
fees for service to the Company as a director in the amount of $50,000 in 2005.
Mr. Birnbaum has been a partner and the Product Development Manager of Dolphin
Shoe Company since August 1982. Dolphin Shoe Company is one of the Company's
domestic suppliers.
In January 2004, the Company entered into an agreement with John Madden
and JLM Consultants, a company wholly-owned by John Madden, one of the Company's
directors, which was amended in 2005. Under this agreement, Mr. Madden provided
consulting services with respect to the development of international sales of
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the Company. Under the agreement, in 2005, JLM Consultants received a monthly
draw with recourse in the amount of $20,000 against sales commissions earned by
Mr. Madden. Mr. Madden also received a $1,000 per month travel allowance and
$1,700 per month toward health insurance premiums. Pursuant to this agreement,
JLM Consultants received a total of $232,000 in 2005. In addition, in 2005 Mr.
Madden received fees for service to the Company as a director in the amount of
$50,000 and use of the Company's leased corporate apartment, a benefit valued at
$40,253. This agreement expired on December 31, 2005 but the parties have
continued the consulting arrangement under the same terms of the expired
agreement.
In January 2006, the Company entered into a consulting agreement with
Joseph Masella, which amended and restated a consulting agreement between the
Company, Mr. Masella and T.J.M Sales Corporation. Mr. Masella is the president
of T.J.M Sales Corporation. Under the amended and restated agreement, Mr.
Masella receives commissions on certain sales of Adesso Madden, Inc., the
Company and SM New York and T.J.M. Sales Corporation receives a biweekly draw in
the amount of $20,000 against these commissions. See "Employment and Consulting
Agreements with Certain Executive Officers." Mr. Masella, either directly or
through T.J.M. Sales Corporation, received commissions in the amount of
$1,545,391 in 2005.
In March 2004, the Company entered into a commission agreement between
the Steven Madden Mens Wholesale Division and Hev Sales, Inc. Mr. Andrew Shames
is the President of Hev Sales Inc. Under the agreement, Hev Sales serves as
sales organization for the Steven Madden Mens Wholesale Division and receives an
annual guaranteed commission of $450,000. Hev Sales, Inc. received commissions
in the amount of $450,008 in 2005.
COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
The Compensation Committee is responsible for reviewing and approving
the Company's compensation policies and the compensation paid to its executive
officers, including the Chief Executive Officer and the other named executive
officers. During 2005, the Compensation Committee was comprised of directors
Peter Migliorini (chairman) and Thomas H. Schwartz. Each member of the
Compensation Committee was a non-employee director of the Company during 2005.
The Compensation Committee's goal is to develop executive compensation
policies and practices that are consistent with and linked to the Company's
long-term goal of maximizing stockholder value. The program is designed to
facilitate the long-term success and growth of the Company through the
attraction, motivation, and retention of outstanding executives.
The objectives of the Company's executive compensation programs are to:
(i) attract and retain the highest quality executives, (ii) inspire and motivate
executive officers to increase Company performance, (iii) align executive
officers' financial interests with those of the Company's long-term investors,
and (iv) reward executive officers for exceptional individual contributions to
the achievement of the Company's objectives.
Executive compensation consists of three components: base salary,
annual incentive bonuses and long-term incentive awards (stock options and
restricted stock). While previous long-term incentive awards have been made in
the form of stock options, the Company intends to make its long-term incentive
awards in 2006 in the form of restricted stock under 2006 Stock Incentive Plan,
which is subject to stockholder approval. Each compensation component is offered
to executives in varying combinations, structured in each case, to meet varying
business objectives and to provide a level of total compensation comparable to
similarly situated public companies.
-20-
The total compensation of Jamieson A. Karson, the Company's Chief
Executive Officer, is determined pursuant to his employment agreement with the
Company. Mr. Karson was appointed Chief Executive Officer effective as of July
1, 2001. In 2005, Mr. Karson's compensation consisted of $467,500 in base salary
payments and a $543,771 bonus payment and $464,975 from the sale of options. In
addition, in 2004, the Company paid Mr. Karson $116,112 in lieu of granting him
the option to purchase 58,056 shares of Common Stock that he was entitled to
under his employment agreement. Under Mr. Karson's employment agreement, Mr.
Karson was entitled to receive certain stock option grants in 2005 based on
performance criteria that were met for the 2005 fiscal year. Instead, the
Company made a grant of 20,000 shares of restricted stock under the 2006 Stock
Incentive Plan (subject to stockholder approval of the plan) in lieu of such
stock options (1/5th of one share of restricted stock was granted under 2006
Stock Incentive Plan for each such stock option). On January 1, 2006, the
Compensation Committee approved an amendment to Mr. Karson's employment
agreement which extended the term of the agreement to December 31, 2008 and
raised his annual base salary to $500,000 with a discretionary bonus. The
Compensation Committee believes that Mr. Karson's compensation should be based
upon the Company's overall performance. See "Employment Agreements with Certain
Executive Officers."
The Company has negotiated agreements with respect to base salary,
annual incentive awards and long-term incentive awards for each of the Company's
named executive officers based upon the Company's performance and the individual
performance of such named executives.
The Internal Revenue Code of 1986 prohibits the Company from taking a
tax deduction in any year for compensation paid the persons who would be named
executive officers in that year in excess of $1 million unless such compensation
is "performance-based compensation." The Company did not pay in 2005 any officer
compensation which will be subject to the $1 million deduction limitation. The
Compensation Committee will take into consideration the $1 million deduction
limitation when structuring future compensation packages for the Company's
executive officers and, if appropriate and in the best interests of the Company,
will conform such packages to permit the Company to take a deduction for the
full amount of all compensation.
Submitted by the Compensation Committee of the Company's Board of
Directors:
Peter Migliorini (chairman)
Thomas H. Schwartz
Compensation Committee Interlocks and Insider Participation
During 2005, the following directors served on the Compensation
Committee: Peter Migliorini (chairman) and Thomas Schwartz. During the fiscal
year 2005, no interlocking relationship existed between the Company's Board of
Directors or Compensation Committee and the board of directors or compensation
committee of any other company.
-21-
STOCK PERFORMANCE GRAPH
The following graph compares the yearly percentage change in the
cumulative total stockholder return on the Common Stock during the period
beginning on December 31, 2000 and ending on December 31, 2005 with the
cumulative total return on the Russell 2000 Index and the S&P 500 Footwear
Index. The comparison assumes that $100 was invested on December 31, 2000 in the
Company's Common Stock and in the foregoing indices and assumes the reinvestment
of dividends.
[GRAPHIC OMITTED]
12/31/2000 12/31/2001 12/31/2002 12/31/2003 12/31/2004 12/31/2005
------------------------ ---------- ---------- ---------- ---------- ---------- ----------
Steven Madden, Ltd. $100.00 $ 73.82 $94.81 $107.03 $ 98.95 $397.43
Russell 2000 Index $100.00 $ 96.78 $75.90 $110.33 $129.09 $148.99
S&P 500 Footwear Index $100.00 $120.19 $98.66 $149.30 $194.23 $170.05
-22-
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL
OWNERS AND MANAGEMENT
The following table sets forth information as of the Record Date with
respect to the beneficial ownership of the outstanding shares of the Company's
Common Stock by (i) each person known by the Company to beneficially own five
percent or more of the outstanding shares; (ii) the directors and the persons
named in the Summary Compensation Table; and (iii) the Company's executive
officers and directors as a group. A person is deemed to be a beneficial owner
of any securities of which that person has the right to acquire beneficial
ownership within sixty (60) days. See "Compensation of Directors and Executive
Officers."
Name and Address of Amount and Nature of Percentage ($)
Beneficial Owner (1) Beneficial Ownership(2) of Class(2)
----------------------------------------------------------- -------------------------- ------------------
Jamieson A. Karson........................................ 55,000 (3) *
Arvind Dharia............................................. 161,828 (4) 1.16
Awadhesh Sinha............................................ 27,500 (5) *
Robert Schmertz........................................... 80,000 (6) *
Amelia Newton Varela...................................... 43,000 (7) *
Jeffrey Birnbaum.......................................... 50,000 (8) *
Marc S. Cooper............................................ 5,000 (9) *
Harold Kahn............................................... 8,500 (10) *
John Madden............................................... 30,000 (11) *
Peter Migliorini.......................................... 30,000 (12) *
Richard P. Randall........................................ -- *
Thomas Schwartz........................................... 20,000 (13) *
Walter Yetnikoff.......................................... 10,000 (14) *
Steven Madden ............................................ 1,704,000 (15) 11.86
BOCAP Corp................................................ 809,000 (16) 5.83
Wells Fargo & Company (17)................................ 925,600 6.76
Wells Capital Management Incorporated (18)................ 925,600 6.76
Systematic Financial Management, L.P. (19)................ 766,400 5.59
Directors and Executive Officers as a Group (13 persons).. 520,828 (20) 3.64
------------------
* indicates beneficial ownership of less than 1%.
(1) Unless otherwise indicated, the address of each beneficial owner is c/o
Steven Madden, Ltd., 52-16 Barnett Avenue, Long Island City, New York 11104.
(2) Beneficial ownership as reported in the table above has been determined in
accordance with Item 403 of Regulation S-K of the Securities Act of 1933 and
Rule 13d-3 of the Securities Exchange Act, and based upon 13,873,667 shares of
Common Stock outstanding (excluding treasury shares) as of the Record Date.
(3) Includes (i) 45,000 shares of Common Stock issuable upon the exercise of
options held by Mr. Karson and (ii) 10,000 shares of Common Stock held by Mr.
Karson's wife.
(4) Includes 128,828 shares of Common Stock issuable upon the exercise of
options held by Mr. Dharia.
-23-
(5) Includes 27,500 shares of Common Stock issuable upon the exercise of options
held by Mr. Sinha.
(6) Represents 80,000 shares of Common Stock issuable upon the exercise of
options held by Mr. Schmertz.
(7) Includes 23,000 shares of Common Stock issuable upon the exercise of options
held by Ms. Varela.
(8) Includes 20,000 shares of Common Stock issuable upon the exercise of options
held by Mr. Birnbaum.
(9) Includes 5,000 shares of Common Stock issuable upon the exercise of options
held by Mr. Cooper.
(10) Includes 5,000 shares of Common Stock issuable upon the exercise of options
held by Mr. Kahn.
(11) Includes 30,000 shares of Common Stock issuable upon the exercise of
options held by Mr. J. Madden.
(12) Includes 30,000 shares of Common Stock issuable upon the exercise of
options held by Mr. Migliorini.
(13) Includes 20,000 shares of Common Stock issuable upon the exercise of
options held by Mr. Schwartz.
(14) Includes 10,000 shares of Common Stock issuable upon exercise of options
held by Mr. Yetnikoff.
(15) Includes (i) 809,000 shares of Common Stock held by BOCAP, a corporation
wholly-owned by Mr. S. Madden, (ii) 405,000 shares of Common Stock held by Mr.
S. Madden and (iii) 490,000 shares of Common Stock issuable upon the exercise of
options held by Mr. S. Madden.
(16) BOCAP is wholly-owned by Steven Madden.
(17) Based upon a Schedule 13G filed with the SEC on February 2, 2006. The
address for such stockholder is 420 Montgomery Street, San Francisco, CA 94104.
As disclosed in the Schedule 13G, Wells Capital Management Incorporated is a
subsidiary of such stockholder.
(18) Based upon a Schedule 13G filed with the SEC on February 2, 2006. The
address for such stockholder is 525 Market Street, 10th Floor, San Francisco, CA
94105. As disclosed in the Schedule 13G, such stockholder is a subsidiary of
Wells Fargo & Company.
(19) Based on Schedule 13G filed with the SEC on February 14, 2006. The address
for such stockholder is 300 Frank W. Burr Boulevard, Glenpointe East, 7th Floor,
Teaneck, NJ 07666.
(20) Includes 424,328 shares issuable upon the exercise of options.
-24-
PROPOSAL TWO
PROPOSAL FOR THE APPROVAL OF THE
STEVEN MADDEN, LTD. 2006 STOCK INCENTIVE PLAN
Our board of directors (the "Board") has approved the Steven Madden,
Ltd. 2006 Stock Incentive Plan (the "Plan") in order to enhance the
profitability and value of the Company for the benefit of its stockholders by
enabling us to offer eligible employees, consultants and non-employee directors
cash and stock-based incentives in the Company to attract, retain and reward
such individuals and strengthen the mutuality of interests between such
individuals and the Company's stockholders. The Board's adoption of the Plan is
subject to the approval of the Company's stockholders, including the material
terms of the performance goals under the Plan.
The affirmative vote of the holders of at least a majority of the
outstanding shares of our common stock present or represented by proxy and
entitled to vote at the annual meeting is required to approve the Plan. The
Board recommends that the stockholders vote "for" the approval of the Plan.
The following description of the Plan is a summary and is qualified in
its entirety by reference to the Plan, a copy of which is attached as Exhibit A.
Administration
The Plan is administered by a committee, which is intended to consist
of two or more non-employee directors, each of whom will be, to the extent
required, a non-employee director as defined in Rule 16b-3 of the Exchange Act,
an outside director as defined under Section 162(m) of the Internal Revenue Code
and an independent director as defined under NASD Rule 4200(a)(15) (the
"Committee"); provided that with respect to the application of the Plan to
non-employee directors, the Plan will be administered by the Board (and
references to the Committee include the Board for this purpose). Currently, the
compensation committee of the Board serves as the Committee under the Plan.
The Committee has full authority to administer and interpret the Plan,
to grant discretionary awards under the Plan, to determine the persons to whom
awards will be granted, to determine the types of awards to be granted, to
determine the terms and conditions of each award, to determine the number of
shares of common stock to be covered by each award and to make all other
determinations in connection with the Plan and the awards thereunder as the
Committee, in its sole discretion, deems necessary or desirable. The Committee
has delegated to the Chief Executive Officer of the Company the authority to
grant awards under the Plan to eligible employees and consultants who are not
subject to Section 16(b) of the Exchange Act or Section 162(m) of the Code;
provided that in no event will the number of shares of common stock that may be
granted exceed 1,000 shares to any such individual during any fiscal year. The
terms and conditions of individual awards are set forth in written agreements
that are consistent with the terms of the Plan. Awards under the Plan may not be
made on or after March 20, 2016, except that awards (other than stock options or
stock appreciation rights) that are intended to be "performance-based" under
Section 162(m) of the Code will not be made after the fifth anniversary of the
Plan's approval by the Company's stockholders unless the performance goals are
re-approved by the stockholders.
Eligibility and Types of Awards
All of our employees, consultants and non-employee directors are
eligible to be granted nonqualified stock options, stock appreciation rights,
performance shares, restricted stock, other stock-based awards and
-25-
performance-based cash awards. In addition, our employees and employees of our
affiliates that qualify as subsidiaries or parent corporations (as defined under
Section 424 of the Internal Revenue Code) are eligible to be granted incentive
stock options under the Plan.
Available Shares
The aggregate number of shares of common stock which may be issued or
used for reference purposes under the Plan or with respect to which awards may
be granted may not exceed 800,000 shares, which may be either authorized and
unissued common stock or common stock held in or acquired for the treasury of
the Company; provided, however, that 420,000 shares of this aggregate limit may
be used for awards that are not "appreciation awards" (including restricted
stock, performance shares, stock-settled stock appreciation rights or certain
other stock-based awards). With respect to stock appreciation rights settled in
common stock, only the number shares of common stock delivered to a participant
(based on the difference between fair market value of the shares of common stock
subject to such stock appreciation right on the date such stock appreciation
right is exercised and the fair market value of the shares of common stock
subject to such stock appreciation right on the date such stock appreciation
right was awarded) will count against the aggregate and individual share
limitations set forth under the Plan. In general, if awards under the Plan are
for any reason cancelled, or expire or terminate unexercised, the shares covered
by such awards will again be available for the grant of awards under the Plan.
The maximum number of shares of common stock with respect to which any
stock option, stock appreciation right or shares of restricted stock that are
subject to the attainment of specified performance goals and intended to satisfy
Section 162(m) of the Internal Revenue Code and may be granted under the Plan
during any fiscal year to any eligible employee or consultant will be 400,000
shares (per type of award). The total number of shares of common stock with
respect to all awards that may be granted under the Plan during any fiscal year
to any eligible employee or consultant will be 500,000 shares. There are no
annual limits on the number of shares of common stock with respect to an award
of restricted stock that are not subject to the attainment of specified
performance goals to eligible employees or consultants. The maximum number of
shares of common stock with respect to any award of performance shares to an
eligible employee or consultant during any fiscal year is 200,000 shares. The
maximum number of shares of common stock with respect to which any stock option
(other than incentive stock options), stock appreciation right, performance
share or other stock-based award that may be granted under the Plan during any
fiscal year to any non-employee director will be 100,000 shares (per type of
award). The total number of shares of common stock with respect to all awards
that may be granted under the Plan during any fiscal year to any non-employee
director will be 200,000 shares. The maximum payment that may be made to an
eligible employee or consultant under any performance-based cash award during
any fiscal year and subject to the attainment of specified performance goals
will be $10,000,000.
The Committee may appropriately adjust the above individual maximum
share limitations, the aggregate number of shares of common stock available for
the grant of awards and the exercise price of an award to reflect any change in
our capital structure or business by reason of certain corporate transactions or
events.
The Company commits to limit its "burn rate" (i.e., the rate at which
it grants equity awards under the Plan) to a three- year annual average burn
rate limit of 3.26%, which is within industry norms and is intended to be
calculated using Institutional Shareholder Services methodology.
Awards Under the Plan
The following types of awards are available under the Plan:
-26-
Stock Options
The Committee may grant nonqualified stock options and incentive stock
options (only to eligible employees) to purchase shares of common stock. The
Committee will determine the number of shares of common stock subject to each
option, the term of each option (which may not exceed seven years (or five years
in the case of an incentive stock option granted to a 10% stockholder)), the
exercise price, the vesting schedule (if any), and the other material terms of
each option. No incentive stock option or nonqualified stock option may have an
exercise price less than the fair market value of the common stock at the time
of grant (or, in the case of an incentive stock option granted to a 10%
stockholder, 110% of fair market value).
Options will be exercisable at such time or times and subject to such
terms and conditions as determined by the Committee at grant and the
exercisability of such options may be accelerated by the Committee in its sole
discretion. Upon the exercise of an option, the participant must make payment of
the full exercise price, either (i) in cash, check, bank draft or money order;
(ii) solely to the extent permitted by law, through the delivery of irrevocable
instructions to a broker reasonably acceptable to the Company to deliver
promptly to the Company an amount equal to the purchase price; or (iii) on such
other terms and condition as a may be acceptable to the Committee.
Stock Appreciation Rights
The Committee may grant stock appreciation rights ("SARs") either with
a stock option which may be exercised only at such times and to the extent the
related option is exercisable ("Tandem SAR") or independent of a stock option
("Non-Tandem SARs"). A SAR is a right to receive a payment in common stock or
cash (as determined by the Committee) equal in value to the excess of the fair
market value of one share of common stock on the date of exercise over the
exercise price per share established in connection with the grant of the SAR.
The exercise price per share covered by a SAR will be the exercise price per
share of the related option in the case of a Tandem SAR and will be the fair
market value of the common stock on the date of grant in the case of a
Non-Tandem SAR. The Committee may also grant "limited SARs," either as Tandem
SARs or Non-Tandem SARs, which may become exercisable only upon the occurrence
of a change in control (as defined in the Plan) or such other event as the
Committee may, in its sole discretion, designate at the time of grant or
thereafter.
Restricted Stock
The Committee may award shares of restricted stock. Except as otherwise
provided by the Committee upon the award of restricted stock, the recipient
generally has the rights of a stockholder with respect to the shares, including
the right to receive dividends, the right to vote the shares of restricted stock
and, conditioned upon full vesting of shares of restricted stock, the right to
tender such shares, subject to the conditions and restrictions generally
applicable to restricted stock or specifically set forth in the recipient's
restricted stock agreement. The Committee may determine at the time of award,
that the payment of dividends, if any, will be deferred until the expiration of
the applicable restriction period.
Recipients of restricted stock are required to enter into a restricted
stock agreement with the Company which states the restrictions to which the
shares are subject, which may include satisfaction of pre-established
performance goals, and the criteria or date or dates on which such restrictions
will lapse.
-27-
If the grant of restricted stock or the lapse of the relevant
restrictions is based on the attainment of performance goals, the Committee will
establish for each recipient the applicable performance goals, formulae or
standards and the applicable vesting percentages with reference to the
attainment of such goals or satisfaction of such formulas or standards while the
outcome of the performance goals are substantially uncertain. Such performance
goals may incorporate provisions for disregarding (or adjusting for) changes in
accounting methods, corporate transactions (including, without limitation,
dispositions and acquisitions) and other similar events or circumstances.
Section 162(m) of the Internal Revenue Code requires that performance awards be
based upon objective performance measures. The performance goals for
performance-based restricted stock will be based on one or more of the objective
criteria set forth on Exhibit A to the Plan, included in Exhibit A hereto and
discussed in general below.
Performance Shares
The Committee may award performance shares. A performance share is the
equivalent of one share of common stock. The recipient of a grant of performance
shares will specify one or more performance criteria to meet within a specified
period determined by the Committee at the time of grant. The performance goals
for performance shares will be based on one or more of the objective criteria
set forth on Exhibit A to the Plan, included in Exhibit A hereto and discussed
in general below. A minimum level of acceptable achievement will also be
established by the Committee. If, by the end of the performance period, the
recipient has achieved the specified performance goals, he or she will be deemed
to have fully earned the performance shares. To the extent earned, the
performance shares will be paid to the recipient at the time and in the manner
determined by the Committee in cash, shares of common stock or any combination
thereof.
Other Stock-Based Awards
The Committee may, subject to limitations under applicable law, make a
grant of such other stock-based awards (including, without limitation,
performance units, dividend equivalent units, stock equivalent units, restricted
stock units and deferred stock units) under the Plan that are payable in cash or
denominated or payable in or valued by shares of common stock or factors that
influence the value of such shares. The Committee shall determine the terms and
conditions of any such other awards, which may include the achievement of
certain minimum performance goals for purposes of compliance with Section 162(m)
of the Internal Revenue Code and/or a minimum vesting period. The performance
goals for performance-based other stock-based awards will be based on one or
more of the objective criteria set forth on Exhibit A to the Plan, included in
Exhibit A hereto and discussed in general below.
Performance-Based Cash Awards
The Committee may, subject to limitations under applicable law, make a
grant of individual target awards either alone or in tandem with stock options,
SARs or restricted stock under this Plan that are contingent upon the
satisfaction of certain pre-established performance goals that are reached
within a specified performance period, each of which, together with any other
terms and conditions, shall be determined by the Committee in its sole
discretion at the time of grant. At the time the performance goals are
established, the Committee will prescribe a formula to determine the percentages
(which may be greater than 100%) of the individual target award which may be
payable based upon the degree of attainment of the performance goals during the
calendar year. The Committee may, in its sole discretion, elect to pay a
participant an amount that is less than the participant's individual target
award regardless of the degree of attainment of the performance goals; provided
that no such discretion to reduce a performance-based cash award earned based on
achievement of the applicable performance goals will be permitted for a calendar
year in which a change in control occurs. The performance goals for
performance-based cash awards will be based on one or more of the objective
criteria set forth on Exhibit A to the Plan, included in Exhibit A hereto and
discussed in general below.
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Performance Goals
The Committee may grant awards of restricted stock, performance shares,
performance-based cash awards and other stock-based awards that are intended to
qualify as "performance-based compensation" for purposes of Section 162(m) of
the Internal Revenue Code. These awards may be granted, vest and be paid based
on attainment of specified performance goals established by the Committee. These
performance goals will be based on the attainment of a certain target level of,
or a specified increase or decrease in, one or more of the following criteria
selected by the Committee:
o earnings per share, earnings before interest and taxes or
earnings before interest, tax, depreciation and
amortization;
o gross profit or gross profit return on investment;
o gross margin or gross margin return on investment;
o operating income, net income, cash flow or economic value
added;
o revenue growth;
o working capital;
o specified objectives with regard to limiting the level of
increase in all or a portion of, the Company's bank debt or
other long-term or short-term public or private debt or
other similar financial obligations of the Company, which
may be calculated net of cash balances and/or other offsets
and adjustments as may be established by the Committee;
o return on equity, assets or capital;
o total shareholder return;
o fair market value of the shares of the common stock;
o market share and/or market segment share;
o the growth in the value of an investment in the common stock
assuming the reinvestment of dividends;
o customer satisfaction, customer loyalty, brand recognition
and/or brand acceptance;
o style indexes;
o employee retention;
o number of new patents, new product innovation and/or
introduction;
o product release schedules and/or ship targets; or
o reduction in expenses and/or product cost reduction through
advanced technology.
To the extent permitted by law, the Committee may also exclude the
impact of an event or occurrence which the Committee determines should be
appropriately excluded, including:
o restructurings, discontinued operations, extraordinary items
and other unusual or non-recurring charges;
o an event either not directly related to the operations of
the Company or not within the reasonable control of the
Company's management; or
o a change in accounting standards required by generally
accepted accounting principles.
Performance goals may also be based on individual participant
performance goals, as determined by the Committee, in its sole discretion.
In addition, all performance goals may be based upon the attainment of
specified levels of Company (or subsidiary, division or other operational unit
of the Company) performance under one or more of the measures described above
relative to the performance of other corporations. The Committee may designate
-29-
additional business criteria on which the performance goals may be based or
adjust, modify or amend those criteria.
Change in Control
Unless otherwise determined by the Committee at the time of grant or in
a written employment agreement, awards subject to vesting and/or restrictions
will not accelerate and vest or cause the lapse of restrictions upon a change in
control (as defined in the Plan) of the Company. Instead, such awards will be,
in the discretion of the Committee, (i) assumed and continued or substituted in
accordance with applicable law, (ii) purchased by the Company for an amount
equal to the excess of the price of the Company's common stock paid in a change
in control over the exercise price of the award(s), or (iii) cancelled if the
price of the Company's common stock paid in a change in control is less than the
exercise price of the award. The Committee may also, in its sole discretion,
provide for accelerated vesting or lapse of restrictions of an award at any
time.
Amendment and Termination
Notwithstanding any other provision of the Plan, the Board may at any
time amend any or all of the provisions of the Plan, or suspend or terminate it
entirely, retroactively or otherwise; provided, however, that, unless otherwise
required by law or specifically provided in the Plan, the rights of a
participant with respect to awards granted prior to such amendment, suspension
or termination may not be adversely affected without the consent of such
participant and, provided further that the approval of our stockholders will be
obtained to the extend required by Delaware law, Sections 162(m) and 422 of the
Internal Revenue Code, The Nasdaq Stock Market or the rules of such other
applicable stock exchange, as specified in the Plan.
Miscellaneous
Awards granted under the Plan are generally nontransferable (other than
by will or the laws of descent and distribution), except that the Committee may
provide for the transferability of nonqualified stock options at the time of
grant or thereafter to certain family members.
Certain U.S. Federal Income Tax Consequences
The rules concerning the federal income tax consequences with respect
to options granted and to be granted pursuant to the Plan are quite technical.
Moreover, the applicable statutory provisions are subject to change, as are
their interpretations and applications which may vary in individual
circumstances. Therefore, the following is designed to provide a general
understanding of the federal income tax consequences. In addition, the following
discussion does not set forth any gift, estate, social security or state or
local tax consequences that may be applicable and is limited to the U.S. federal
income tax consequences to individuals who are citizens or residents of the
U.S., other than those individuals who are taxed on a residence basis in a
foreign country.
Incentive Stock Options
In general, an employee will not realize taxable income upon either the
grant or the exercise of an incentive stock option and the Company will not
realize an income tax deduction at either such time. In general, however, for
purposes of the alternative minimum tax, the excess of the fair market value of
the shares of common stock acquired upon exercise of an incentive stock option
(determined at the time of exercise) over the exercise price of the incentive
stock option will be considered income. If the recipient was continuously
employed on the date of grant until the date three months prior to the date of
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exercise and such recipient does not sell the common stock received pursuant to
the exercise of the incentive stock option within either (i) two years after the
date of the grant of the incentive stock option or (ii) one year after the date
of exercise, a subsequent sale of the common stock will result in long-term
capital gain or loss to the recipient and will not result in a tax deduction to
the Company.
If the recipient is not continuously employed on the date of grant
until the date three months prior to the date of exercise or such recipient
disposes of the common stock acquired upon exercise of the incentive stock
option within either of the above mentioned time periods, the recipient will
generally realize as ordinary income an amount equal to the lesser of (i) the
fair market value of the common stock on the date of exercise over the exercise
price, or (ii) the amount realized upon disposition over the exercise price. In
such event, subject to the limitations under Section 162(m) and 280G of the
Internal Revenue Code (as described below), we generally will be entitled to an
income tax deduction equal to the amount recognized as ordinary income. Any gain
in excess of such amount realized by the recipient as ordinary income would be
taxed at the rates applicable to short-term or long-term capital gains
(depending on the holding period).
Nonqualified Stock Options
A recipient will not realize any taxable income upon the grant of a
nonqualified stock option and the Company will not receive a deduction at the
time of such grant unless such option has a readily ascertainable fair market
value (as determined under applicable tax law) at the time of grant. Upon
exercise of a nonqualified stock option, the recipient generally will realize
ordinary income in an amount equal to the excess of the fair market value of the
common stock on the date of exercise over the exercise price. Upon a subsequent
sale of the common stock by the recipient, the recipient will recognize
short-term or long-term capital gain or loss depending upon his or her holding
period for the common stock. Subject to the limitations under Section 162(m) and
280G of the Internal Revenue Code (as described below), we will generally be
allowed a deduction equal to the amount recognized by the recipient as ordinary
income.
All Options
With regard to both incentive stock options and nonqualified stock
options, the following also apply: (i) any of our officers and directors subject
to Section 16(b) of the Exchange Act may be subject to special tax rules
regarding the income tax consequences concerning their stock options, (ii) any
entitlement to a tax deduction on the part of the Company is subject to the
applicable tax rules (including, without limitation, Section 162(m) of the
Internal Revenue Code regarding the $1,000,000 limitation on deductible
compensation), and (iii) in the event that the exercisability or vesting of any
award is accelerated because of a change in control, payments relating to the
awards (or a portion thereof), either alone or together with certain other
payments, may constitute parachute payments under Section 280G of the Internal
Revenue Code, which excess amounts may be subject to excise taxes and may be
nondeductible by the Company.
In general, Section 162(m) of the Internal Revenue Code denies a
publicly held corporation a deduction for federal income tax purposes for
compensation in excess of $1,000,000 per year per person to its chief executive
officer and four other executive officers whose compensation is disclosed in its
proxy statement, subject to certain exceptions. Options will generally qualify
under one of these exceptions if they are granted under a plan that states the
maximum number of shares with respect to which options may be granted to any
recipient during a specified period of the plan under which the options are
granted is approved by stockholders and is administered by a committee comprised
of outside directors. The Plan is intended to satisfy these requirements with
respect to options.
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The Plan is not subject to any of the requirements of the Employee
Retirement Income Security Act of 1974, as amended. The Plan is not, nor is it
intended to be, qualified under Section 401(a) of the Internal Revenue Code.
Future Plan Awards
Except as stated below under the section entitled "New Plan Benefits,"
no new equity-based awards have been approved at this time to any employee,
officer, non-employee director or consultant. We anticipate that other
equity-based awards may be granted to the named individuals as well as to other
employees, officers, non-employee directors and consultants under the Plan.
However, the amount of shares of common stock that may be granted to the named
individuals will be based upon various prospective factors, including, the
nature of services to be rendered by our employees, officers, non-employee
directors and consultants, and their potential contributions to our success.
Accordingly, actual awards cannot be determined at this time.
New Plan Benefits with respect to 2006
The table below presents certain information with respect to new shares
of restricted stock granted under the Plan (subject to approval by stockholders
of the Plan) with respect to the 2006 calendar year to certain of our executive
officers (for whom executive compensation information is provided under the
section entitled "Compensation of Directors and Executive Officers") as follows:
Number of
Shares
Subject to
Name and Position Dollar Value Restriction
----------------- ------------ -----------
Robert Schmertz - Brand Director.................................. $ 704,400(1) 20,000
Amelia Newton Varela - Executive Vice President of Wholesale
Sales............................................................. $ 704,400(1) 20,000
All Executive Officers as a Group................................. $1,408,800 40,000
Non-Employee Directors as a Group................................. $ 193,710 5,500
Non-Executive Officer Employees as a Group........................ $2,652,066 75,300
Total for all Participants under the Plan......................... $4,254,576 120,800
New Plan Benefits for Prior Awards
Under their respective employment agreements, the Company's Chief
Executive Officer, its Chief Financial Officer and its Design and Creative Chief
were entitled to receive certain option grants in 2005 (under a plan subject to
stockholder approval) based on performance criteria which were met for the 2005
fiscal year. Instead, the Company made the following grants of restricted stock
under the Plan in 2006 (subject to stockholder approval of the Plan) in lieu of
such options (1/5th of one share of restricted stock under the Plan was granted
for each such option):
-----------------------
(1) Calculated based upon the closing price of the Company's stock on March
20, 2006, the date of Board approval of the grant, subject to stockholder
approval of the Plan.
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Number of
Shares Subject
Name and Position Dollar Value to Restriction
----------------- ------------ --------------
Jamieson A. Karson - Chief Executive Officer and Chairman
of the Board............................................................. $721,200(2) 20,000
Arvind Dharia - Chief Financial Officer.................................. $288,480(2) 8,000
Steven Madden - Design and Creative Chief................................ $721,200(2) 20,000
THE AFFIRMATIVE VOTE OF THE HOLDERS OF AT LEAST A MAJORITY OF THE OUTSTANDING
SHARES OF OUR COMMON STOCK PRESENT OR REPRESENTED BY PROXY AND ENTITLED TO VOTE
AT THE ANNUAL MEETING IS REQUIRED TO APPROVE THE PLAN. THE BOARD RECOMMENDS THAT
THE STOCKHOLDERS VOTE "FOR" THE APPROVAL OF THE PLAN.
-----------------------
(2) Calculated based upon the closing price of the Company's stock on March
20, 2006, the date of Board approval of the grant, subject to stockholder
approval of the Plan.
-33-
PROPOSAL THREE
RATIFICATION OF THE APPOINTMENT OF EISNER LLP AS THE COMPANY'S
INDEPENDENT AUDITORS FOR THE FISCAL YEAR ENDING DECEMBER 31, 2006
The Audit Committee has appointed Eisner LLP as the Company's
independent auditors to conduct the audit of the Company's books and records for
the fiscal year ending December 31, 2006. Eisner LLP also served as the
Company's independent auditors for the previous fiscal year.
Although ratification by stockholders is not required by our
organizational documents or other applicable law, the Audit Committee has
determined that requesting ratification by stockholders of its appointment of
Eisner LLP as the Company's independent auditors is a matter of good corporate
practice. If stockholders do not ratify the selection, the Audit Committee will
reconsider whether or not to retain Eisner LLP, but may still retain them. Even
if the selection is ratified, the Audit Committee, in its discretion, may change
the appointment at any time during the year if it determines that such a change
would be in the best interest of the Company and its stockholders.
Representatives of Eisner LLP are expected to be present at the Annual
Meeting to respond to questions and to make a statement should they so desire.
Required Vote
The affirmative vote of the holders of a majority of the shares of
Common Stock represented and voting at the Annual Meeting is required to ratify
the Audit Committee's selection of Eisner LLP.
Recommendation of the Board of Directors
The Board of Directors unanimously recommends a vote FOR the
ratification of the appointment of Eisner LLP as the Company's independent
auditors for the fiscal year ending December 31, 2006. Unless marked to the
contrary, proxies received from stockholders will be voted in favor of the
appointment of Eisner LLP as the Company's independent auditors for the fiscal
year ending December 31, 2006.
Fees Paid To Independent Auditors
Audit Fees
The aggregate fees billed by Eisner LLP for professional services
rendered for the audit of the Company's annual financial statements for the
fiscal year ended December 31, 2005, for the reviews of the financial statements
included in the Company's Quarterly Reports on Form 10-Q for that fiscal year,
other statutory and regulatory filings, consents related to registration
statements filed with the SEC and the audit of the Company's internal controls
over financial reporting for the 2005 fiscal year were $460,000. The comparative
amount for the fiscal year ended December 31, 2004 was $625,000.
Audit-Related Fees
In addition to Audit Fees, Eisner LLP has billed the Company $93,000,
in the aggregate, for Audit Related Fees related to assurance and related
services for the fiscal year ended December 31, 2005. These services include,
among others, the audit of the Company's employee benefit plans and other
-34-
accounting related consultations. The comparative amount for the fiscal year
ended December 31, 2004 was $39,000.
Tax Fees
During the fiscal year ended December 31, 2005, Eisner LLP billed the
Company $122,000, in the aggregate, for services rendered to the Company for tax
compliance, tax advice and tax planning. Eisner LLP billed $116,000 for similar
services in the 2004 fiscal year.
All Other Fees
There were no fees billed by Eisner LLP for services rendered to the
Company, other than the services described above under Audit Fees, Audit Related
Fees and Tax Fees, for the fiscal years ended December 31, 2005 and 2004.
Audit Committee's Pre-Approval Policies and Procedures
Consistent with SEC policies regarding auditor independence, the Audit
Committee has responsibility for appointing, setting compensation and overseeing
the work of the independent auditor. In recognition of this responsibility, the
Audit Committee has established a policy to review and pre-approve all audit and
permissible non-audit services provided by the independent auditor. These
services may include audit services, audit-related services, tax services and
other services.
Prior to engagement of the independent auditor for next year's audit,
the Audit Committee will pre-approve all auditing services and all permitted
non-audit services (including the fees and terms thereof), except those excluded
from requiring pre-approval based upon the de minimus exception set forth in
Section 10A(i)(1)(B) of the Exchange Act.
The Audit Committee's pre-approval policies and procedures are as
follows: (a) prior to each fiscal year, the Audit Committee pre-approves a
schedule of estimated fees for proposed non-prohibited audit and non-audit
services and (b) actual amounts paid are monitored by financial management of
the Company and reported to the Audit Committee.
All work performed by Eisner LLP as described above under the captions
Audit Fees, Audit Related Fees, Tax Fees and All Other Fees has been approved or
pre-approved by the Audit Committee pursuant to the provisions of the Audit
Committee's charter. The Audit Committee has considered and concluded that the
provision of non-audit services is compatible with maintaining the principal
accountant's independence.
-35-
OTHER MATTERS
At the date of this Proxy Statement, the Company has no knowledge of
any business other than that described above that will be presented at the
Annual Meeting. If any other business should properly come before the Annual
Meeting in connection therewith, it is intended that the persons named in the
enclosed proxy will have discretionary authority to vote the shares which they
represent.
STOCKHOLDER PROPOSALS AND SUBMISSIONS FOR THE COMPANY'S 2007 ANNUAL MEETING
In accordance with rules promulgated by the SEC, any stockholder who
wishes to submit a proposal for inclusion in the proxy material to be
distributed by the Company in connection with the 2007 Annual Meeting must do so
no later than December 30, 2006.
In addition, in accordance with Article I, Section 7(f) of the
Company's Amended & Restated By-Laws, in order to be properly brought before the
2007 Annual Meeting, a matter must be (i) specified in the notice of such
meeting given by or at the direction of the Board of Directors (or any duly
authorized committed thereof), (ii) otherwise properly brought before such
meeting by or at the direction of the Board of Directors (or any duly authorized
committed thereof) or (iii) specified in a written notice given by a stockholder
of record on the date of the giving of the notice and on the record date for
such meeting, which notice conforms to the requirements of Article I, Section
7(f) of the Amended & Restated By-Laws and is delivered to, or mailed and
received at, the Company's principal executive offices not less than 120 days
nor more than 150 days prior to the first anniversary of the date of the
Company's 2006 Annual Meeting. Accordingly, any written notice given by or on
behalf of a stockholder pursuant to the foregoing clause (iii) in connection
with the 2007 Annual Meeting must be received no later than January 26, 2007 and
no earlier than December 28, 2006.
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WHETHER OR NOT YOU EXPECT TO BE PRESENT AT THE ANNUAL MEETING, PLEASE
SIGN AND RETURN THE ENCLOSED PROXY PROMPTLY. YOUR VOTE IS IMPORTANT. IF YOU ARE
A STOCKHOLDER OF RECORD AND ATTEND THE ANNUAL MEETING AND WISH TO VOTE IN
PERSON, YOU MAY WITHDRAW YOUR PROXY AT ANY TIME PRIOR TO THE VOTE.
STEVEN MADDEN, LTD.
April 28, 2006 By: /s/ JAMIESON A. KARSON
------------------------------
Jamieson A. Karson
Chief Executive Officer
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EXHIBIT A
STEVEN MADDEN, LTD.
--------------------------
2006 STOCK INCENTIVE PLAN
--------------------------
ARTICLE I
PURPOSE
The purpose of this Plan is to enhance the profitability and value of
the Company for the benefit of its stockholders by enabling the Company to offer
Eligible Employees, Consultants and Non-Employee Directors cash and stock-based
incentives in the Company to attract, retain and reward such individuals and
strengthen the mutuality of interests between such individuals and the Company's
stockholders.
ARTICLE II
DEFINITIONS
For purposes of this Plan, the following terms shall have the following
meanings:
2.1 "Acquisition Event" means a merger or consolidation in which
the Company is not the surviving entity, any transaction that results in the
acquisition of all or substantially all of the Company's outstanding Common
Stock by a single person or entity or by a group of persons and/or entities
acting in concert, or the sale or transfer of all or substantially all of the
Company's assets.
2.2 "Affiliate" means each of the following: (a) any Subsidiary;
(b) any Parent; (c) any corporation, trade or business (including, without
limitation, a partnership or limited liability company) which is directly or
indirectly controlled 50% or more (whether by ownership of stock, assets or an
equivalent ownership interest or voting interest) by the Company; (d) any
corporation, trade or business (including, without limitation, a partnership or
limited liability company) which directly or indirectly controls 50% or more
(whether by ownership of stock, assets or an equivalent ownership interest or
voting interest) of the Company; and (e) any other entity in which the Company
or any of its Affiliates has a material equity interest and which is designated
as an "Affiliate" by resolution of the Committee; provided that the Common Stock
subject to any Award constitutes "service recipient stock" for purposes of
Section 409A of the Code or otherwise does not subject the Award to Section 409A
of the Code.
2.3 "Appreciation Award" means any Award under this Plan of any
Stock Option, cash-settled Stock Appreciation Right or Other Stock-Based Award,
provided that such Other Stock-Based Award is based on the appreciation in value
of a share of Common Stock in excess of an amount equal to at least the Fair
Market Value of the Common Stock on the date such Other Stock-Based Award is
granted.
2.4 "Award" means any award under this Plan of any Stock Option,
Stock Appreciation Right, Restricted Stock, Performance Share, Other Stock-Based
Award or Performance-Based Cash Awards. All Awards shall be granted by,
confirmed by, and subject to the terms of, a written agreement executed by the
Company and the Participant.
2.5 "Board" means the Board of Directors of the Company.
2.6 "Cause" means with respect to a Participant's Termination of
Employment or Termination of Consultancy from and after the date hereof, the
following: (a) in the case where there is no employment agreement, consulting
agreement, change in control agreement or similar agreement in effect between
the Company or an Affiliate and the Participant at the time of the grant of the
Award (or where there is such an agreement but it does not define "cause" (or
words of like import)), termination due to: (i) a Participant's conviction of,
or plea of guilty or nolo contendere to, a felony; (ii) perpetration by a
Participant of an illegal act, or fraud which could cause significant economic
injury to the Company; (iii) continuing willful and deliberate failure by the
Participant to perform the Participant's duties in any material respect,
provided that the Participant is given notice and an opportunity to effectuate a
cure as determined by the Committee; or (iv) a Participant's willful misconduct
with regard to the Company that could have a material adverse effect on the
Company; or (b) in the case where there is an employment agreement, consulting
agreement, change in control agreement or similar agreement in effect between
the Company or an Affiliate and the Participant at the time of the grant of the
Award that defines "cause" (or words of like import), "cause" as defined under
such agreement; provided, however, that with regard to any agreement under which
the definition of "cause" only applies on occurrence of a change in control,
such definition of "cause" shall not apply until a change in control actually
takes place and then only with regard to a termination thereafter. With respect
to a Participant's Termination of Directorship, "cause" means an act or failure
to act that constitutes cause for removal of a director under applicable
Delaware law.
2.7 "Change in Control" has the meaning set forth in Section 13.2.
2.8 "Change in Control Price" has the meaning set forth in Section
13.1.
2.9 "Code" means the Internal Revenue Code of 1986, as amended.
Any reference to any section of the Code shall also be a reference to any
successor provision and any Treasury Regulation promulgated thereunder.
2.10 "Committee" means: (a) with respect to the application of this
Plan to Eligible Employees and Consultants, a committee or subcommittee of the
Board appointed from time to time by the Board, which committee or subcommittee
shall consist of two or more non-employee directors, each of whom shall be (i) a
"non-employee director" as defined in Rule 16b-3; (ii) to the extent required by
Section 162(m) of the Code, an "outside director" as defined under Section
162(m) of the Code; and (iii) an "independent director" as defined under NASD
Rule 4200(a)(15) or such other applicable stock exchange rule; and (b) with
respect to the application of this Plan to Non-Employee Directors, the Board. To
the extent that no Committee exists that has the authority to administer this
Plan, the functions of the Committee shall be exercised by the Board. If for any
reason the appointed Committee does not meet the requirements of Rule 16b-3 or
2
Section 162(m) of the Code, such noncompliance shall not affect the validity of
Awards, grants, interpretations or other actions of the Committee.
2.11 "Common Stock" means the Common Stock, $0.0001 par value per
share, of the Company.
2.12 "Company" means Steven Madden, Ltd., a Delaware corporation,
and its successors by operation of law.
2.13 "Consultant" means any natural person who provides bona fide
consulting or advisory services to the Company or its Affiliates pursuant to a
written agreement, which are not in connection with the offer and sale of
securities in a capital-raising transaction.
2.14 "Disability" means with respect to a Participant's
Termination, a permanent and total disability as defined in Section 22(e)(3) of
the Code. A Disability shall only be deemed to occur at the time of the
determination by the Committee of the Disability. Notwithstanding the foregoing,
for Awards that are subject to Section 409A of the Code, Disability shall mean
that a Participant is disabled under Section 409A(a)(2)(C)(i) or (ii) of the
Code.
2.15 "Effective Date" means the effective date of this Plan as
defined in Article XVII.
2.16 "Eligible Employees" means each employee of the Company or an
Affiliate.
2.17 "Exchange Act" means the Securities Exchange Act of 1934, as
amended. Any references to any section of the Exchange Act shall also be a
reference to any successor provision.
2.18 "Fair Market Value" means, unless otherwise required by any
applicable provision of the Code or any regulations issued thereunder, as of any
date and except as provided below, the last sales price reported for the Common
Stock on the applicable date: (a) as reported on the principal national
securities exchange in the United States on which it is then traded or The
Nasdaq Stock Market; or (b) if not traded on any such national securities
exchange or The Nasdaq Stock Market, as quoted on an automated quotation system
sponsored by the National Association of Securities Dealers, Inc. or if the
Common Stock shall not have been reported or quoted on such date, on the first
day prior thereto on which the Common Stock was reported or quoted. For purposes
of the grant of any Award, the applicable date shall be the trading day
immediately prior to the date on which the Award is granted. For purposes of the
exercise of any Award, the applicable date shall be the date a notice of
exercise is received by the Committee or, if not a day on which the applicable
market is open, the next day that it is open.
2.19 "Family Member" means "family member" as defined in Section
A.1.(5) of the general instructions of Form S-8.
2.20 "GAAP" has the meaning set forth in Section 11.2(c)(ii).
2.21 "Incentive Stock Option" means any Stock Option awarded to an
Eligible Employee of the Company, its Subsidiaries and its Parent (if any) under
this Plan intended to be and designated as an "Incentive Stock Option" within
the meaning of Section 422 of the Code.
3
2.22 "Non-Employee Director" means a director of the Company who is
not an active employee of the Company or an Affiliate.
2.23 "Non-Qualified Stock Option" means any Stock Option awarded
under this Plan that is not an Incentive Stock Option.
2.24 "Other Stock-Based Award" means an Award under Article X of
this Plan that is valued in whole or in part by reference to, or is payable in
or otherwise based on, Common Stock, including, without limitation, a restricted
stock unit or an Award valued by reference to an Affiliate.
2.25 "Parent" means any parent corporation of the Company within
the meaning of Section 424(e) of the Code.
2.26 "Participant" means an Eligible Employee, Non-Employee
Director or Consultant to whom an Award has been granted pursuant to this Plan.
2.27 "Performance-Based Cash Award" means a cash Award under
Article XI of this Plan that is payable or otherwise based on the attainment of
certain pre-established performance goals during a Performance Period.
2.28 "Performance Period" means the duration of the period during
which receipt of an Award is subject to the satisfaction of performance
criteria, such period as determined by the Committee in its sole discretion.
2.29 "Performance Share" means an Award made pursuant to Article IX
of this Plan of the right to receive Common Stock or cash of an equivalent value
at the end of a specified Performance Period.
2.30 "Person" means any individual, corporation, partnership,
limited liability company, firm, joint venture, association, joint-stock
company, trust, incorporated organization, governmental or regulatory or other
entity.
2.31 "Plan" means this Steven Madden, Ltd. 2006 Stock Incentive
Plan, as amended from time to time.
2.32 "Reference Stock Option" has the meaning set forth in Section
7.1.
2.33 "Restricted Stock" means an Award of shares of Common Stock
under this Plan that is subject to restrictions under Article VIII.
2.34 "Restriction Period" has the meaning set forth in Subsection
8.3(a).
2.35 "Retirement" means a voluntary Termination of Employment at or
after age 65 or such earlier date after age 50 as may be approved by the
Committee, in its sole discretion at the time of grant or thereafter provided
that the exercise of such discretion does not make the applicable Award subject
to Section 409A of the Code, except that Retirement shall not include any
Termination with or without Cause. With respect to a Participant's Termination
4
of Directorship, Retirement means the failure to stand for reelection or the
failure to be reelected on or after a Participant has attained age 65 or, with
the consent of the Board, before age 65 but after age 50.
2.36 "Rule 16b-3" means Rule 16b-3 under Section 16(b) of the
Exchange Act as then in effect or any successor provision.
2.37 "Section 162(m) of the Code" means the exception for
performance-based compensation under Section 162(m) of the Code and any
applicable Treasury regulations thereunder.
2.38 "Section 409A of the Code" means the nonqualified deferred
compensation rules under Section 409A of the Code and any applicable Treasury
regulations thereunder.
2.39 "Securities Act" means the Securities Act of 1933, as amended
and all rules and regulations promulgated thereunder. Any reference to any
section of the Securities Act shall also be a reference to any successor
provision.
2.40 "Stock Appreciation Right" means the right pursuant to an
Award granted under Article VII. A Tandem Stock Appreciation Right shall mean
the right to surrender to the Company all (or a portion) of a Stock Option in
exchange for cash or a number of shares of Common Stock (as determined by the
Committee, in its sole discretion, on the date of grant) equal to the difference
between (a) the Fair Market Value on the date such Stock Option (or such portion
thereof) is surrendered, of the Common Stock covered by such Stock Option (or
such portion thereof), and (b) the aggregate exercise price of such Stock Option
(or such portion thereof). A Non-Tandem Stock Appreciation Right shall mean the
right to receive cash or a number of shares of Common Stock (as determined by
the Committee, in its sole discretion, on the date of grant) equal to the
difference between (i) the Fair Market Value of a share of Common Stock on the
date such right is exercised, and (ii) the aggregate exercise price of such
right, otherwise than on surrender of a Stock Option.
2.41 "Stock Option" or "Option" means any option to purchase shares
of Common Stock granted to Eligible Employees, Non-Employee Directors or
Consultants granted pursuant to Article VI.
2.42 "Subsidiary" means any subsidiary corporation of the Company
within the meaning of Section 424(f) of the Code.
2.43 "Ten Percent Stockholder" means a person owning stock
possessing more than 10% of the total combined voting power of all classes of
stock of the Company, its Subsidiaries or its Parent.
2.44 "Termination" means a Termination of Consultancy, Termination
of Directorship or Termination of Employment, as applicable.
2.45 "Termination of Consultancy" means: (a) that the Consultant is
no longer acting as a consultant to the Company or an Affiliate; or (b) when an
entity which is retaining a Participant as a Consultant ceases to be an
Affiliate unless the Participant otherwise is, or thereupon becomes, a
5
Consultant to the Company or another Affiliate at the time the entity ceases to
be an Affiliate. In the event that a Consultant becomes an Eligible Employee or
a Non-Employee Director upon the termination of his or her consultancy, unless
otherwise determined by the Committee, in its sole discretion, no Termination of
Consultancy shall be deemed to occur until such time as such Consultant is no
longer a Consultant, an Eligible Employee or a Non-Employee Director.
Notwithstanding the foregoing, the Committee may, in its sole discretion,
otherwise define Termination of Consultancy in the Award agreement or, if no
rights of a Participant are reduced, may otherwise define Termination of
Consultancy thereafter.
2.46 "Termination of Directorship" means that the Non-Employee
Director has ceased to be a director of the Company; except that if a
Non-Employee Director becomes an Eligible Employee or a Consultant upon the
termination of his or her directorship, his or her ceasing to be a director of
the Company shall not be treated as a Termination of Directorship unless and
until the Participant has a Termination of Employment or Termination of
Consultancy, as the case may be.
2.47 "Termination of Employment" means: (a) a termination of
employment (for reasons other than a military or personal leave of absence
granted by the Company) of a Participant from the Company and its Affiliates; or
(b) when an entity which is employing a Participant ceases to be an Affiliate,
unless the Participant otherwise is, or thereupon becomes, employed by the
Company or another Affiliate at the time the entity ceases to be an Affiliate.
In the event that an Eligible Employee becomes a Consultant or a Non-Employee
Director upon the termination of his or her employment, unless otherwise
determined by the Committee, in its sole discretion, no Termination of
Employment shall be deemed to occur until such time as such Eligible Employee is
no longer an Eligible Employee, a Consultant or a Non-Employee Director.
Notwithstanding the foregoing, the Committee may, in its sole discretion,
otherwise define Termination of Employment in the Award agreement or, if no
rights of a Participant are reduced, may otherwise define Termination of
Employment thereafter.
2.48 "Transfer" means: (a) when used as a noun, any direct or
indirect transfer, sale, assignment, pledge, hypothecation, encumbrance or other
disposition (including the issuance of equity in a Person), whether for value or
no value and whether voluntary or involuntary (including by operation of law),
and (b) when used as a verb, to directly or indirectly transfer, sell, assign,
pledge, encumber, charge, hypothecate or otherwise dispose of (including the
issuance of equity in a Person) whether for value or for no value and whether
voluntarily or involuntarily (including by operation of law). "Transferred" and
"Transferrable" shall have a correlative meaning.
ARTICLE III
ADMINISTRATION
3.1 The Committee. The Plan shall be administered and interpreted
by the Committee.
6
3.2 Grants of Awards. The Committee shall have full authority to
grant, pursuant to the terms of this Plan, to Eligible Employees, Consultants
and Non-Employee Directors: (i) Stock Options, (ii) Stock Appreciation Rights,
(iii) Restricted Stock, (iv) Performance Shares; (v) Other Stock-Based Awards,
and (vi) Performance-Based Cash Awards. In particular, the Committee shall have
the authority:
(a) to select the Eligible Employees, Consultants and
Non-Employee Directors to whom Awards may from time
to time be granted hereunder;
(b) to determine whether and to what extent Awards, or
any combination thereof, are to be granted hereunder
to one or more Eligible Employees, Consultants or
Non-Employee Directors;
(c) to determine the number of shares of Common Stock to
be covered by each Award granted hereunder;
(d) to determine the terms and conditions, not
inconsistent with the terms of this Plan, of any
Award granted hereunder (including, but not limited
to, the exercise or purchase price (if any), any
restriction or limitation, any vesting schedule or
acceleration thereof, or any forfeiture restrictions
or waiver thereof, regarding any Award and the shares
of Common Stock relating thereto, based on such
factors, if any, as the Committee shall determine, in
its sole discretion);
(e) to determine whether, to what extent and under what
circumstances grants of Options and other Awards
under this Plan are to operate on a tandem basis
and/or in conjunction with or apart from other awards
made by the Company outside of this Plan;
(f) to determine whether and under what circumstances a
Stock Option may be settled in cash, Common Stock
and/or Restricted Stock under Section 6.3(d);
(g) to determine whether, to what extent and under what
circumstances Common Stock and other amounts payable
with respect to an Award under this Plan shall be
deferred either automatically or at the election of
the Participant in any case, subject to, and in
accordance with, Section 409A of the Code;
(h) to determine whether a Stock Option is an Incentive
Stock Option or Non-Qualified Stock Option;
(i) to determine whether to require a Participant, as a
condition of the granting of any Award, to not sell
or otherwise dispose of shares acquired pursuant to
the exercise of an Award for a period of time as
determined by the Committee, in its sole discretion,
following the date of the acquisition of such Award;
and
7
(j) to offer to buy out an Award previously granted,
based on such terms and conditions as the Committee
shall establish and communicate to the Participant at
the time such offer is made; provided that any such
purchase of an Award shall be limited to no more than
the fair market value of the Award on the date of
such purchase.
3.3 Guidelines. Subject to Article XIV hereof, the Committee
shall, in its sole discretion, have the authority to adopt, alter and repeal
such administrative rules, guidelines and practices governing this Plan and
perform all acts, including the delegation of its responsibilities (to the
extent permitted by applicable law and applicable stock exchange rules), as it
shall, from time to time, deem advisable; to construe and interpret the terms
and provisions of this Plan and any Award issued under this Plan (and any
agreements relating thereto); and to otherwise supervise the administration of
this Plan. The Committee may, in its sole discretion, correct any defect, supply
any omission or reconcile any inconsistency in this Plan or in any agreement
relating thereto in the manner and to the extent it shall deem necessary to
effectuate the purpose and intent of this Plan. The Committee may, in its sole
discretion, adopt special guidelines and provisions for persons who are residing
in or employed in, or subject to, the taxes of, any domestic or foreign
jurisdictions to comply with applicable tax and securities laws of such domestic
or foreign jurisdictions. This Plan is intended to comply with the applicable
requirements of Rule 16b-3 and with respect to Awards intended to be
"performance-based," the applicable provisions of Section 162(m) of the Code,
and this Plan shall be limited, construed and interpreted in a manner so as to
comply therewith.
3.4 Decisions Final. Any decision, interpretation or other action
made or taken in good faith by or at the direction of the Company, the Board or
the Committee (or any of its members) arising out of or in connection with this
Plan shall be within the absolute discretion of all and each of them, as the
case may be, and shall be final, binding and conclusive on the Company and all
employees and Participants and their respective heirs, executors,
administrators, successors and assigns.
3.5 Procedures. If the Committee is appointed, the Board shall
designate one of the members of the Committee as chairman and the Committee
shall hold meetings, subject to the By-Laws of the Company, at such times and
places as it shall deem advisable, including, without limitation, by telephone
conference or by written consent to the extent permitted by applicable law. A
majority of the Committee members shall constitute a quorum. All determinations
of the Committee shall be made by a majority of its members. Any decision or
determination reduced to writing and signed by all the Committee members in
accordance with the By-Laws of the Company shall be fully effective as if it had
been made by a vote at a meeting duly called and held. The Committee shall keep
minutes of its meetings and shall make such rules and regulations for the
conduct of its business as it shall deem advisable.
3.6 Designation of Consultants/Liability.
(a) The Committee may, in its sole discretion, designate
employees of the Company and professional advisors to
assist the Committee in the administration of this
Plan and (to the extent permitted by applicable law
and applicable exchange rules) may grant authority to
8
officers to grant Awards and/or execute agreements or
other documents on behalf of the Committee.
(b) The Committee may, in its sole discretion, employ
such legal counsel, consultants and agents as it may
deem desirable for the administration of this Plan
and may rely upon any opinion received from any such
counsel or consultant and any computation received
from any such consultant or agent. Expenses incurred
by the Committee or the Board in the engagement of
any such counsel, consultant or agent shall be paid
by the Company. The Committee, its members and any
person designated pursuant to sub-section (a) above
shall not be liable for any action or determination
made in good faith with respect to this Plan. To the
maximum extent permitted by applicable law, no
officer of the Company or member or former member of
the Committee or of the Board shall be liable for any
action or determination made in good faith with
respect to this Plan or any Award granted under it.
3.7 Indemnification. To the maximum extent permitted by applicable
law and the Certificate of Incorporation and By-Laws of the Company and to the
extent not covered by insurance directly insuring such person, each officer or
employee of the Company or any Affiliate and member or former member of the
Committee or the Board shall be indemnified and held harmless by the Company
against any cost or expense (including reasonable fees of counsel reasonably
acceptable to the Committee) or liability (including any sum paid in settlement
of a claim with the approval of the Committee), and advanced amounts necessary
to pay the foregoing at the earliest time and to the fullest extent permitted,
arising out of any act or omission to act in connection with the administration
of this Plan, except to the extent arising out of such officer's, employee's,
member's or former member's fraud. Such indemnification shall be in addition to
any rights of indemnification the officers, employees, directors or members or
former officers, directors or members may have under applicable law or under the
Certificate of Incorporation or By-Laws of the Company or any Affiliate.
Notwithstanding anything else herein, this indemnification will not apply to the
actions or determinations made by an individual with regard to Awards granted to
him or her under this Plan.
ARTICLE IV
SHARE LIMITATION
4.1 Shares.
(a) General Limitations. The aggregate number of shares
of Common Stock that may be issued or used for
reference purposes or with respect to which Awards
may be granted under this Plan shall not exceed
800,000 shares (subject to any increase or decrease
pursuant to Section 4.2), which may be either
authorized and unissued Common Stock or Common Stock
held in or acquired for the treasury of the Company
or both; provided, however, that only 420,000 shares
of the 800,000 shares of Common Stock available
hereunder may be issued or used for Awards that are
9
not Appreciation Awards. With respect to Stock
Appreciation Rights settled in Common Stock, only the
number shares of Common Stock delivered to a
Participant (based on the difference between Fair
Market Value of the shares of Common Stock subject to
such Stock Appreciation Right on the date such Stock
Appreciation Right is exercised and the Fair Market
Value of the shares of Common Stock subject to such
Stock Appreciation Right on the date such Stock
Appreciation Right was awarded) shall count against
the aggregate and individual share limitations set
forth under Sections 4.1(a) and (b). If any Award
granted under this Plan expires, terminates, is
canceled or is forfeited for any reason, the number
of shares of Common Stock underlying any such Award
shall again be available for the purpose of Awards
under the Plan, as provided in this Section 4.1(a).
If a Tandem Stock Appreciation Right or a Limited
Stock Appreciation Right is granted in tandem with an
Option, such grant shall only apply once against the
maximum number of shares of Common Stock which may be
issued under this Plan. Notwithstanding anything
herein to the contrary, other than with respect to
Incentive Stock Options, any share of Common Stock
subject to an Award that again becomes available for
grant pursuant to this Section 4.1(a) shall be added
back to the aggregate maximum limit.
(b) Individual Participant Limitations.
(i) The maximum number of shares of
Common Stock subject to any Award of Stock Options,
Stock Appreciation Rights or shares of Restricted
Stock for which the grant of such Award or the lapse
of the relevant Restriction Period is subject to the
attainment of Performance Goals in accordance with
Section 8.3(a)(ii) herein which may be granted under
this Plan during any fiscal year of the Company to
each Eligible Employee or Consultant shall be 400,000
shares per type of Award (which shall be subject to
any further increase or decrease pursuant to Section
4.2), provided that the maximum number of shares of
Common Stock for all types of Awards does not exceed
500,000 (which shall be subject to any further
increase or decrease pursuant to Section 4.2) with
respect to any fiscal year of the Company. If a
Tandem Stock Appreciation Right is granted or a
Limited Stock Appreciation Right is granted in tandem
with a Stock Option, it shall apply against the
Eligible Employee's or Consultant's individual share
limitations for both Stock Appreciation Rights and
Stock Options.
(ii) The maximum number of shares of
Common Stock subject to any Award of Stock Options
(other than Incentive Stock Options), Stock
Appreciation Rights, Performance Shares or Other
Stock-Based Awards which may be granted under this
Plan during any fiscal year of the Company to each
Non-Employee Director shall be 100,000 shares per
type of Award (which shall be subject to any further
increase or decrease pursuant to Section 4.2),
provided that the maximum number of shares of Common
10
Stock for all types of Awards does not exceed 200,000
(which shall be subject to any further increase or
decrease pursuant to Section 4.2) with respect to any
fiscal year of the Company. If a Tandem Stock
Appreciation Right is granted or a Limited Stock
Appreciation Right is granted in tandem with a Stock
Option, it shall apply against the Non-Employee
Director's individual share limitations for both
Stock Appreciation Rights and Stock Options.
(iii) There are no annual individual
Eligible Employee or Consultant share limitations on
Restricted Stock for which the grant of such Award or
the lapse of the relevant Restriction Period is not
subject to attainment of Performance Goals in
accordance with Section 8.3(a)(ii) hereof.
(iv) The maximum number of shares of
Common Stock subject to any Award of Performance
Shares which may be granted under this Plan during
any fiscal year of the Company to each Eligible
Employee or Consultant shall be 200,000 (which shall
be subject to any further increase or decrease
pursuant to Section 4.2) with respect to any fiscal
year of the Company. Each Performance Share shall be
referenced to one share of Common Stock and shall be
charged against the available shares under this Plan
at the time the unit value measurement is converted
to a referenced number of shares of Common Stock in
accordance with Section 9.1.
(v) The maximum payment under any
Performance-Based Cash Award payable with respect to
any fiscal year of the Company and for which the
grant of such Award is subject to the attainment of
Performance Goals in accordance with Section 11.2(c)
herein which may be granted under this Plan with
respect to any fiscal year of the Company to each
Eligible Employee or Consultant shall be $10,000,000.
(vi) The individual Participant
limitations set forth in this Section 4.1(b) shall be
cumulative; that is, to the extent that shares of
Common Stock for which Awards are permitted to be
granted to an Eligible Employee or a Consultant
during a fiscal year are not covered by an Award to
such Eligible Employee or Consultant in a fiscal
year, the number of shares of Common Stock available
for Awards to such Eligible Employee or Consultant
shall automatically increase in the subsequent fiscal
years during the term of the Plan until used.
4.2 Changes.
(a) The existence of this Plan and the Awards granted
hereunder shall not affect in any way the right or
power of the Board or the stockholders of the Company
to make or authorize (i) any adjustment,
recapitalization, reorganization or other change in
the Company's capital structure or its business, (ii)
11
any merger or consolidation of the Company or any
Affiliate, (iii) any issuance of bonds, debentures,
preferred or prior preference stock ahead of or
affecting the Common Stock, (iv) the dissolution or
liquidation of the Company or any Affiliate, (v) any
sale or transfer of all or part of the assets or
business of the Company or any Affiliate or (vi) any
other corporate act or proceeding.
(b) Subject to the provisions of Section 4.2(d), in the
event of any such change in the capital structure or
business of the Company by reason of any stock split,
reverse stock split, stock dividend, extraordinary
dividend (whether cash or stock), combination or
reclassification of shares, recapitalization, merger,
consolidation, spin-off, reorganization, partial or
complete liquidation, issuance of rights or warrants
to purchase any Common Stock or securities
convertible into Common Stock, any sale or transfer
of all or part of the Company's assets or business,
or any other corporate transaction or event having an
effect similar to any of the foregoing and effected
without receipt of consideration by the Company and
the Committee determines in its sole discretion that
an adjustment is necessary or appropriate under the
Plan to prevent substantial dilution or enlargement
of the rights granted to, or available for,
Participants under the Plan, then the aggregate
number and kind of shares that thereafter may be
issued under this Plan, the number and kind of shares
or other property (including cash) to be issued upon
exercise of an outstanding Award or under other
Awards granted under this Plan and the purchase price
thereof shall be appropriately adjusted consistent
with such change in such manner as the Committee may,
in its sole discretion, deem equitable to prevent
substantial dilution or enlargement of the rights
granted to, or available for, Participants under this
Plan, and any such adjustment determined by the
Committee shall be final, binding and conclusive on
the Company and all Participants and employees and
their respective heirs, executors, administrators,
successors and assigns. In connection with any event
described in this paragraph, the Committee may
provide, in its sole discretion, for the cancellation
of any outstanding Awards and payment in cash or
other property in exchange therefor. Except as
provided in this Section 4.2 or in the applicable
Award agreement, a Participant shall have no rights
by reason of any issuance by the Company of any class
or securities convertible into stock of any class,
any subdivision or consolidation of shares of stock
of any class, the payment of any stock dividend, any
other increase or decrease in the number of shares of
stock of any class, any sale or transfer of all or
part of the Company's assets or business or any other
change affecting the Company's capital structure or
business.
(c) Fractional shares of Common Stock resulting from any
adjustment in Awards pursuant to Section 4.2(a) or
(b) shall be aggregated until, and eliminated at, the
time of exercise by rounding-down for fractions less
than one-half and rounding-up for fractions equal to
or greater than one-half. No cash settlements shall
12
be made with respect to fractional shares eliminated
by rounding. Notice of any adjustment shall be given
by the Committee to each Participant whose Award has
been adjusted and such adjustment (whether or not
such notice is given) shall be effective and binding
for all purposes of this Plan.
(d) In the event of an Acquisition Event, the Committee
may, in its sole discretion, terminate all
outstanding and unexercised Stock Options or Stock
Appreciation Rights or any Other Stock Based Award
that provides for a Participant elected exercise
effective as of the date of the Acquisition Event, by
delivering notice of termination to each Participant
at least 20 days prior to the date of consummation of
the Acquisition Event, in which case during the
period from the date on which such notice of
termination is delivered to the consummation of the
Acquisition Event, each such Participant shall have
the right to exercise in full all of his or her Stock
Options or Stock Appreciation Rights that are then
outstanding (without regard to any limitations on
exercisability otherwise contained in the Award
agreements), but any such exercise shall be
contingent on the occurrence of the Acquisition
Event, and, provided that, if the Acquisition Event
does not take place within a specified period after
giving such notice for any reason whatsoever, the
notice and exercise pursuant thereto shall be null
and void.
If an Acquisition Event occurs but the Committee does not
terminate the outstanding Awards pursuant to this Section
4.2(d), then the provisions of Section 4.2(b) and Article XIII
shall apply.
4.3 Minimum Purchase Price. Notwithstanding any provision of this
Plan to the contrary, if authorized but previously unissued shares of Common
Stock are issued under this Plan, such shares shall not be issued for a
consideration that is less than as permitted under applicable law.
ARTICLE V
ELIGIBILITY - GENERAL REQUIREMENTS FOR AWARDS
5.1 General Eligibility. All Eligible Employees, Consultants,
Non-Employee Directors and prospective employees and consultants are eligible to
be granted Awards, subject to the terms and conditions of this Plan. Eligibility
for the grant of Awards and actual participation in this Plan shall be
determined by the Committee in its sole discretion.
5.2 Incentive Stock Options. Notwithstanding anything herein to
the contrary, only Eligible Employees of the Company, its Subsidiaries and its
Parent (if any) are eligible to be granted Incentive Stock Options under this
Plan. Eligibility for the grant of an Incentive Stock Option and actual
participation in this Plan shall be determined by the Committee in its sole
discretion.
13
5.3 General Requirement. The vesting and exercise of Awards
granted to a prospective employee or consultant are conditioned upon such
individual actually becoming an Eligible Employee or Consultant.
ARTICLE VI
STOCK OPTIONS
6.1 Options. Stock Options may be granted alone or in addition to
other Awards granted under this Plan. Each Stock Option granted under this Plan
shall be of one of two types: (a) an Incentive Stock Option or (b) a
Non-Qualified Stock Option.
6.2 Grants. The Committee shall, in its sole discretion, have the
authority to grant to any Eligible Employee (subject to Section 5.2) Incentive
Stock Options, Non-Qualified Stock Options, or both types of Stock Options. The
Committee shall, in its sole discretion, have the authority to grant any
Consultant or Non-Employee Director Non-Qualified Stock Options. To the extent
that any Stock Option does not qualify as an Incentive Stock Option (whether
because of its provisions or the time or manner of its exercise or otherwise),
such Stock Option or the portion thereof which does not qualify shall constitute
a separate Non-Qualified Stock Option.
6.3 Terms of Options. Options granted under this Plan shall be
subject to the following terms and conditions and shall be in such form and
contain such additional terms and conditions, not inconsistent with the terms of
this Plan, as the Committee, in its sole discretion, shall deem desirable:
(a) Exercise Price. The exercise price per share of
Common Stock subject to a Stock Option shall be
determined by the Committee at the time of grant,
provided that the per share exercise price of a Stock
Option shall not be less than 100% (or, in the case
of an Incentive Stock Option granted to a Ten Percent
Stockholder, 110%) of the Fair Market Value of the
Common Stock at the time of grant.
(b) Stock Option Term. The term of each Stock Option
shall be fixed by the Committee, provided that no
Stock Option shall be exercisable more than 7 years
after the date the Option is granted; and provided
further that the term of an Incentive Stock Option
granted to a Ten Percent Stockholder shall not exceed
five years.
(c) Exercisability. Stock Options shall be exercisable at
such time or times and subject to such terms and
conditions or as shall be determined by the Committee
at grant. If the Committee provides, in its
discretion, that any Stock Option is exercisable
subject to certain limitations (including, without
limitation, that such Stock Option is exercisable
only in installments or within certain time periods),
the Committee may waive such limitations on the
exercisability at any time at or after grant in whole
or in part (including, without limitation, waiver of
the installment exercise provisions or acceleration
of the time at which such Stock Option may be
14
exercised), based on such factors, if any, as the
Committee shall determine, in its sole discretion. In
the event that a written employment agreement between
the Company and a Participant provides for a vesting
schedule that is more favorable than the vesting
schedule provided in the form of Award Agreement, the
vesting schedule in such employment agreement shall
govern, provided that such agreement is in effect on
the date of grant and applicable to the specific
Award.
(d) Method of Exercise. Subject to whatever installment
exercise and waiting period provisions apply under
subsection (c) above, to the extent vested, Stock
Options may be exercised in whole or in part at any
time during the Option term, by giving written notice
of exercise to the Company specifying the number of
shares of Common Stock to be purchased. Such notice
shall be accompanied by payment in full of the
purchase price as follows: (i) in cash or by check,
bank draft or money order payable to the order of the
Company; (ii) solely to the extent permitted by
applicable law, if the Common Stock is traded on a
national securities exchange, the Nasdaq Stock Market
or quoted on a national quotation system sponsored by
the National Association of Securities Dealers, and
the Committee authorizes, through a procedure whereby
the Participant delivers irrevocable instructions to
a broker reasonably acceptable to the Committee to
deliver promptly to the Company an amount equal to
the purchase price; or (iii) on such other terms and
conditions as may be acceptable to the Committee
(including, without limitation, the relinquishment of
Stock Options or by payment in full or in part in the
form of Common Stock owned by the Participant based
on the Fair Market Value of the Common Stock on the
payment date as determined by the Committee, in its
sole discretion). No shares of Common Stock shall be
issued until payment therefor, as provided herein,
has been made or provided for.
(e) Non-Transferability of Options. No Stock Option shall
be Transferable by the Participant otherwise than by
will or by the laws of descent and distribution, and
all Stock Options shall be exercisable, during the
Participant's lifetime, only by the Participant.
Notwithstanding the foregoing, the Committee may
determine, in its sole discretion, at the time of
grant or thereafter that a Non-Qualified Stock Option
that is otherwise not Transferable pursuant to this
Section is Transferable to a Family Member in whole
or in part and in such circumstances, and under such
conditions, as determined by the Committee, in its
sole discretion. A Non-Qualified Stock Option that is
Transferred to a Family Member pursuant to the
preceding sentence (i) may not be subsequently
Transferred otherwise than by will or by the laws of
descent and distribution and (ii) remains subject to
the terms of this Plan and the applicable Award
agreement. Any shares of Common Stock acquired upon
the exercise of a Non-Qualified Stock Option by a
permissible transferee of a Non-Qualified Stock
Option or a permissible transferee pursuant to a
15
Transfer after the exercise of the Non-Qualified
Stock Option shall be subject to the terms of this
Plan and the applicable Award agreement.
(f) Incentive Stock Option Limitations. To the extent
that the aggregate Fair Market Value (determined as
of the time of grant) of the Common Stock with
respect to which Incentive Stock Options are
exercisable for the first time by an Eligible
Employee during any calendar year under this Plan
and/or any other stock option plan of the Company,
any Subsidiary or any Parent exceeds $100,000, such
Options shall be treated as Non-Qualified Stock
Options. Should any provision of this Plan not be
necessary in order for the Stock Options to qualify
as Incentive Stock Options, or should any additional
provisions be required, the Committee may, in its
sole discretion, amend this Plan accordingly, without
the necessity of obtaining the approval of the
stockholders of the Company.
(g) Form, Modification, Extension and Renewal of Stock
Options. Subject to the terms and conditions and
within the limitations of this Plan, Stock Options
shall be evidenced by such form of agreement or grant
as is approved by the Committee, and the Committee
may, in its sole discretion (i) modify, extend or
renew outstanding Stock Options granted under this
Plan (provided that the rights of a Participant are
not reduced without his or her consent and provided
further that such action does not subject the Stock
Options to Section 409A of the Code), and (ii) accept
the surrender of outstanding Stock Options (up to the
extent not theretofore exercised) and authorize the
granting of new Stock Options in substitution
therefor (to the extent not theretofore exercised).
Notwithstanding the foregoing, an outstanding Option
may not be modified to reduce the exercise price
thereof nor may a new Option at a lower price be
substituted for a surrendered Option (other than
adjustments or substitutions in accordance with
Section 4.2), unless such action is approved by the
stockholders of the Company.
(h) Buyout and Settlement Provisions. The Committee may
at any time offer to buy out an Option previously
granted, based on such terms and conditions as the
Committee shall establish and communicate to the
Participant at the time that such offer is made;
provided that such purchase of an Option shall be
limited to no more than the fair market value of the
Award on the date of such purchase.
(i) Early Exercise. The Committee may provide that a
Stock Option include a provision whereby the
Participant may elect at any time before the
Participant's Termination to exercise the Stock
Option as to any part or all of the shares of Common
Stock subject to the Stock Option prior to the full
vesting of the Stock Option and such shares shall be
subject to the provisions of Article VIII and treated
as Restricted Stock. Any unvested shares of Common
Stock so purchased may be subject to a repurchase
16
option in favor of the Company or to any other
restriction the Committee determines to be
appropriate.
(j) Other Terms and Conditions. Stock Options may contain
such other provisions, which shall not be
inconsistent with any of the terms of this Plan, as
the Committee shall, in its sole discretion, deem
appropriate.
ARTICLE VII
STOCK APPRECIATION RIGHTS
7.1 Tandem Stock Appreciation Rights. Stock Appreciation Rights
may be granted in conjunction with all or part of any Stock Option (a "Reference
Stock Option") granted under this Plan ("Tandem Stock Appreciation Rights"). In
the case of a Non-Qualified Stock Option, such rights may be granted either at
or after the time of the grant of such Reference Stock Option. In the case of an
Incentive Stock Option, such rights may be granted only at the time of the grant
of such Reference Stock Option.
7.2 Terms and Conditions of Tandem Stock Appreciation Rights.
Tandem Stock Appreciation Rights granted hereunder shall be subject to such
terms and conditions, not inconsistent with the provisions of this Plan, as
shall be determined from time to time by the Committee in its sole discretion,
and the following:
(a) Exercise Price. The exercise price per share of
Common Stock subject to a Tandem Stock Appreciation
Right shall be determined by the Committee at the
time of grant, provided that the per share exercise
price of a Tandem Stock Appreciation Right shall not
be less than 100% of the Fair Market Value of the
Common Stock at the time of grant.
(b) Term. A Tandem Stock Appreciation Right or applicable
portion thereof granted with respect to a Reference
Stock Option shall terminate and no longer be
exercisable upon the termination or exercise of the
Reference Stock Option, except that, unless otherwise
determined by the Committee, in its sole discretion,
at the time of grant, a Tandem Stock Appreciation
Right granted with respect to less than the full
number of shares covered by the Reference Stock
Option shall not be reduced until and then only to
the extent the exercise or termination of the
Reference Stock Option causes the number of shares
covered by the Tandem Stock Appreciation Right to
exceed the number of shares remaining available and
unexercised under the Reference Stock Option.
(c) Exercisability. Tandem Stock Appreciation Rights
shall be exercisable only at such time or times and
to the extent that the Reference Stock Options to
which they relate shall be exercisable in accordance
with the provisions of Article VI, and shall be
subject to the provisions of Section 6.3(c).
17
(d) Method of Exercise. A Tandem Stock Appreciation Right
may be exercised by the Participant by surrendering
the applicable portion of the Reference Stock Option.
Upon such exercise and surrender, the Participant
shall be entitled to receive an amount determined in
the manner prescribed in this Section 7.2. Stock
Options which have been so surrendered, in whole or
in part, shall no longer be exercisable to the extent
the related Tandem Stock Appreciation Rights have
been exercised.
(e) Payment. Upon the exercise of a Tandem Stock
Appreciation Right, a Participant shall be entitled
to receive up to, but no more than, an amount in cash
or a number of shares of Common Stock (as determined
by the Committee, in its sole discretion, on the date
of grant) equal in value to the excess of the Fair
Market Value of one share of Common Stock over the
Option exercise price per share specified in the
Reference Stock Option agreement, multiplied by the
number of shares in respect of which the Tandem Stock
Appreciation Right shall have been exercised.
(f) Deemed Exercise of Reference Stock Option. Upon the
exercise of a Tandem Stock Appreciation Right, the
Reference Stock Option or part thereof to which such
Stock Appreciation Right is related shall be deemed
to have been exercised for the purpose of the
limitation set forth in Article IV of the Plan on the
number of shares of Common Stock to be issued under
the Plan.
(g) Non-Transferability. Tandem Stock Appreciation Rights
shall be Transferable only when and to the extent
that the underlying Stock Option would be
Transferable under Section 6.3(e) of the Plan.
7.3 Non-Tandem Stock Appreciation Rights. Non-Tandem Stock
Appreciation Rights may also be granted without reference to any Stock Options
granted under this Plan.
7.4 Terms and Conditions of Non-Tandem Stock Appreciation Rights.
Non-Tandem Stock Appreciation Rights granted hereunder shall be subject to such
terms and conditions, not inconsistent with the provisions of this Plan, as
shall be determined from time to time by the Committee in its sole discretion,
and the following:
(a) Exercise Price. The exercise price per share of
Common Stock subject to a Non-Tandem Stock
Appreciation Right shall be determined by the
Committee at the time of grant, provided that the per
share exercise price of a Non-Tandem Stock
Appreciation Right shall not be less than 100% of the
Fair Market Value of the Common Stock at the time of
grant.
(b) Term. The term of each Non-Tandem Stock Appreciation
Right shall be fixed by the Committee, but shall not
be greater than 10 years after the date the right is
granted.
(c) Exercisability. Non-Tandem Stock Appreciation Rights
shall be exercisable at such time or times and
subject to such terms and conditions as shall be
18
determined by the Committee at grant. If the
Committee provides, in its discretion, that any such
right is exercisable subject to certain limitations
(including, without limitation, that it is
exercisable only in installments or within certain
time periods), the Committee may waive such
limitations on the exercisability at any time at or
after grant in whole or in part (including, without
limitation, waiver of the installment exercise
provisions or acceleration of the time at which such
right may be exercised), based on such factors, if
any, as the Committee shall determine, in its sole
discretion. In the event that a written employment
agreement between the Company and a Participant
provides for a vesting schedule that is more
favorable than the vesting schedule provided in the
form of Award Agreement, the vesting schedule in such
employment agreement shall govern, provided that such
agreement is in effect on the date of grant and
applicable to the specific Award.
(d) Method of Exercise. Subject to whatever installment
exercise and waiting period provisions apply under
subsection (c) above, Non-Tandem Stock Appreciation
Rights may be exercised in whole or in part at any
time in accordance with the applicable Award
agreement, by giving written notice of exercise to
the Company specifying the number of Non-Tandem Stock
Appreciation Rights to be exercised.
(e) Payment. Upon the exercise of a Non-Tandem Stock
Appreciation Right a Participant shall be entitled to
receive, for each right exercised, up to, but no more
than, an amount in cash or a number of shares of
Common Stock (as determined by the Committee, in its
sole discretion, on the date of grant) equal in value
to the excess of the Fair Market Value of one share
of Common Stock on the date the right is exercised
over the Fair Market Value of one share of Common
Stock on the date the right was awarded to the
Participant.
(f) Non-Transferability. No Non-Tandem Stock Appreciation
Rights shall be Transferable by the Participant
otherwise than by will or by the laws of descent and
distribution, and all such rights shall be
exercisable, during the Participant's lifetime, only
by the Participant.
7.5 Limited Stock Appreciation Rights. The Committee may, in its
sole discretion, grant Tandem and Non-Tandem Stock Appreciation Rights either as
a general Stock Appreciation Right or as a Limited Stock Appreciation Right.
Limited Stock Appreciation Rights may be exercised only upon the occurrence of a
Change in Control or such other event as the Committee may, in its sole
discretion, designate at the time of grant or thereafter. Upon the exercise of
Limited Stock Appreciation Rights, except as otherwise provided in an Award
agreement, the Participant shall receive in cash or Common Stock, as determined
by the Committee, an amount equal to the amount (a) set forth in Section 7.2(e)
with respect to Tandem Stock Appreciation Rights, or (b) set forth in Section
7.4(e) with respect to Non-Tandem Stock Appreciation Rights, as applicable.
19
ARTICLE VIII
RESTRICTED STOCK
8.1 Awards of Restricted Stock. Shares of Restricted Stock may be
issued either alone or in addition to other Awards granted under the Plan. The
Committee shall, in its sole discretion, determine the Eligible Employees,
Consultants and Non-Employee Directors, to whom, and the time or times at which,
grants of Restricted Stock shall be made, the number of shares to be awarded,
the price (if any) to be paid by the Participant (subject to Section 8.2), the
time or times within which such Awards may be subject to forfeiture, the vesting
schedule and rights to acceleration thereof, and all other terms and conditions
of the Awards. The Committee may condition the grant or vesting of Restricted
Stock upon the attainment of specified performance targets (including, the
Performance Goals specified in Exhibit A attached hereto) or such other factors
as the Committee may determine, in its sole discretion, including to comply with
the requirements of Section 162(m) of the Code.
8.2 Awards and Certificates. Eligible Employees, Consultants and
Non-Employee Directors selected to receive Restricted Stock shall not have any
rights with respect to such Award, unless and until such Participant has
delivered a fully executed copy of the agreement evidencing the Award to the
Company and has otherwise complied with the applicable terms and conditions of
such Award. Further, such Award shall be subject to the following conditions:
(a) Purchase Price. The purchase price of Restricted
Stock shall be fixed by the Committee. Subject to
Section 4.3, the purchase price for shares of
Restricted Stock may be zero to the extent permitted
by applicable law, and, to the extent not so
permitted, such purchase price may not be less than
par value.
(b) Acceptance. Awards of Restricted Stock must be
accepted within a period of 60 days (or such other
period as the Committee may specify) after the grant
date, by executing a Restricted Stock agreement and
by paying whatever price (if any) the Committee has
designated thereunder.
(c) Legend. Each Participant receiving Restricted Stock
shall be issued a stock certificate in respect of
such shares of Restricted Stock, unless the Committee
elects to use another system, such as book entries by
the transfer agent, as evidencing ownership of shares
of Restricted Stock. Such certificate shall be
registered in the name of such Participant, and
shall, in addition to such legends required by
applicable securities laws, bear an appropriate
legend referring to the terms, conditions, and
restrictions applicable to such Award, substantially
in the following form:
"The anticipation, alienation, attachment, sale,
transfer, assignment, pledge, encumbrance or charge
of the shares of stock represented hereby are subject
to the terms and conditions (including forfeiture) of
the Steven Madden, Ltd. (the "Company") 2006 Stock
Incentive Plan (the "Plan") and an agreement entered
into between the registered owner and the Company
20
dated __________. Copies of such Plan and agreement
are on file at the principal office of the Company."
(d) Custody. If stock certificates are issued in respect
of shares of Restricted Stock, the Committee may
require that any stock certificates evidencing such
shares be held in custody by the Company until the
restrictions thereon shall have lapsed, and that, as
a condition of any grant of Restricted Stock, the
Participant shall have delivered a duly signed stock
power, endorsed in blank, relating to the Common
Stock covered by such Award.
8.3 Restrictions and Conditions. The shares of Restricted Stock
awarded pursuant to this Plan shall be subject to the following restrictions and
conditions:
(a) Restriction Period. (i) The Participant shall not be
permitted to Transfer shares of Restricted Stock
awarded under this Plan during the period or periods
set by the Committee (the "Restriction Period")
commencing on the date of such Award, as set forth in
a Restricted Stock Award agreement and such agreement
shall set forth a vesting schedule and any events
which would accelerate vesting of the shares of
Restricted Stock. Within these limits, based on
service, attainment of performance goals pursuant to
Section 8.3(a)(ii) below and/or such other factors or
criteria as the Committee may determine in its sole
discretion, the Committee may condition the grant or
provide for the lapse of such restrictions in
installments in whole or in part, or may accelerate
the vesting of all or any part of any Restricted
Stock Award and/or waive the deferral limitations for
all or any part of any Restricted Stock Award. In the
event that a written employment agreement between the
Company and a Participant provides for a vesting
schedule that is more favorable than the vesting
schedule provided in the form of Award Agreement, the
vesting schedule in such employment agreement shall
govern, provided that such agreement is in effect on
the date of grant and applicable to the specific
Award.
(ii) Objective Performance Goals,
Formulae or Standards. If the grant of shares of
Restricted Stock or the lapse of restrictions is
based on the attainment of Performance Goals, the
Committee shall establish the Performance Goals and
the applicable vesting percentage of the Restricted
Stock Award applicable to each Participant or class
of Participants in writing prior to the beginning of
the applicable fiscal year or at such later date as
otherwise determined by the Committee and while the
outcome of the Performance Goals are substantially
uncertain. Such Performance Goals may incorporate
provisions for disregarding (or adjusting for)
changes in accounting methods, corporate transactions
(including, without limitation, dispositions and
acquisitions) and other similar type events or
circumstances. With regard to a Restricted Stock
Award that is intended to comply with Section 162(m)
of the Code, to the extent any such provision would
create impermissible discretion under Section 162(m)
of the Code or otherwise violate Section 162(m) of
21
the Code, such provision shall be of no force or
effect. The applicable Performance Goals shall be
based on one or more of the performance criteria set
forth in Exhibit A hereto.
(b) Rights as a Stockholder. Except as provided in this
subsection (b) and subsection (a) above and as
otherwise determined by the Committee, the
Participant shall have, with respect to the shares of
Restricted Stock, all of the rights of a holder of
shares of Common Stock of the Company including,
without limitation, the right to receive any
dividends, the right to vote such shares and, subject
to and conditioned upon the full vesting of shares of
Restricted Stock, the right to tender such shares.
The Committee may, in its sole discretion, determine
at the time of grant that the payment of dividends
shall be deferred until, and conditioned upon, the
expiration of the applicable Restriction Period.
(c) Lapse of Restrictions. If and when the Restriction
Period expires without a prior forfeiture of the
Restricted Stock, the certificates for such shares
shall be delivered to the Participant. All legends
shall be removed from said certificates at the time
of delivery to the Participant, except as otherwise
required by applicable law or other limitations
imposed by the Committee.
ARTICLE IX
PERFORMANCE SHARES
9.1 Award of Performance Shares. Performance Shares may be awarded
either alone or in addition to other Awards granted under this Plan. The
Committee shall, in its sole discretion, determine the Eligible Employees,
Consultants and Non-Employee Directors, to whom, and the time or times at which,
Performance Shares shall be awarded, the number of Performance Shares to be
awarded to any person, the Performance Period during which, and the conditions
under which, receipt of the Shares will be deferred, and the other terms and
conditions of the Award in addition to those set forth in Section 9.2.
Except as otherwise provided herein, the Committee shall condition the
right to payment of any Performance Share upon the attainment of objective
performance goals established pursuant to Section 9.2(c) below.
9.2 Terms and Conditions. Performance Shares awarded pursuant to
this Article IX shall be subject to the following terms and conditions:
(a) Earning of Performance Share Award. At the expiration
of the applicable Performance Period, the Committee
shall determine the extent to which the performance
goals established pursuant to Section 9.2(c) are
achieved and the percentage of each Performance Share
Award that has been earned.
22
(b) Non-Transferability. Subject to the applicable
provisions of the Award agreement and this Plan,
Performance Shares may not be Transferred during the
Performance Period.
(c) Objective Performance Goals, Formulae or Standards.
The Committee shall establish the objective
Performance Goals for the earning of Performance
Shares based on a Performance Period applicable to
each Participant or class of Participants in writing
prior to the beginning of the applicable Performance
Period or at such later date as permitted under
Section 162(m) of the Code and while the outcome of
the Performance Goals are substantially uncertain.
Such Performance Goals may incorporate, if and only
to the extent permitted under Section 162(m) of the
Code, provisions for disregarding (or adjusting for)
changes in accounting methods, corporate transactions
(including, without limitation, dispositions and
acquisitions) and other similar type events or
circumstances. To the extent any such provision would
create impermissible discretion under Section 162(m)
of the Code or otherwise violate Section 162(m) of
the Code, such provision shall be of no force or
effect. The applicable Performance Goals shall be
based on one or more of the performance criteria set
forth in Exhibit A hereto.
(d) Dividends. Unless otherwise determined by the
Committee at the time of grant, amounts equal to any
dividends declared during the Performance Period with
respect to the number of shares of Common Stock
covered by a Performance Share will not be paid to
the Participant.
(e) Payment. Following the Committee's determination in
accordance with subsection (a) above, shares of
Common Stock or, as determined by the Committee in
its sole discretion, the cash equivalent of such
shares shall be delivered to the Eligible Employee,
Consultant or Non-Employee Director, or his legal
representative, in an amount equal to such
individual's earned Performance Share.
Notwithstanding the foregoing, the Committee may, in
its sole discretion, award an amount less than the
earned Performance Share and/or subject the payment
of all or part of any Performance Share to additional
vesting, forfeiture and deferral conditions as it
deems appropriate.
(f) Accelerated Vesting. Based on service, performance
and/or such other factors or criteria, if any, as the
Committee may determine, the Committee may, in its
sole discretion, at or after grant, accelerate the
vesting of all or any part of any Performance Share
Award and/or waive the deferral limitations for all
or any part of such Award.
23
ARTICLE X
OTHER STOCK-BASED AWARDS
10.1 Other Awards. The Committee, in its sole discretion, is
authorized to grant to Eligible Employees, Consultants and Non-Employee
Directors Other Stock-Based Awards that are payable in, valued in whole or in
part by reference to, or otherwise based on or related to shares of Common
Stock, including, but not limited to, shares of Common Stock awarded purely as a
bonus and not subject to any restrictions or conditions, shares of Common Stock
in payment of the amounts due under an incentive or performance plan sponsored
or maintained by the Company or an Affiliate, performance units, dividend
equivalent units, stock equivalent units, restricted stock units and deferred
stock units. To the extent permitted by law, the Committee may, in its sole
discretion, permit Eligible Employees and/or Non-Employee Directors to defer all
or a portion of their cash compensation in the form of Other Stock-Based Awards
granted under this Plan, subject to the terms and conditions of any deferred
compensation arrangement established by the Company, which shall be intended to
comply with Section 409A of the Code. Other Stock-Based Awards may be granted
either alone or in addition to or in tandem with other Awards granted under the
Plan.
Subject to the provisions of this Plan, the Committee shall, in its
sole discretion, have authority to determine the Eligible Employees, Consultants
and Non-Employee Directors, to whom, and the time or times at which, such Awards
shall be made, the number of shares of Common Stock to be awarded pursuant to
such Awards, and all other conditions of the Awards. The Committee may also
provide for the grant of Common Stock under such Awards upon the completion of a
specified performance period.
The Committee may condition the grant or vesting of Other Stock-Based
Awards upon the attainment of specified Performance Goals set forth on Exhibit A
as the Committee may determine, in its sole discretion; provided that to the
extent that such Other Stock-Based Awards are intended to comply with Section
162(m) of the Code, the Committee shall establish the objective Performance
Goals for the vesting of such Other Stock-Based Awards based on a performance
period applicable to each Participant or class of Participants in writing prior
to the beginning of the applicable performance period or at such later date as
permitted under Section 162(m) of the Code and while the outcome of the
Performance Goals are substantially uncertain. Such Performance Goals may
incorporate, if and only to the extent permitted under Section 162(m) of the
Code, provisions for disregarding (or adjusting for) changes in accounting
methods, corporate transactions (including, without limitation, dispositions and
acquisitions) and other similar type events or circumstances. To the extent any
such provision would create impermissible discretion under Section 162(m) of the
Code or otherwise violate Section 162(m) of the Code, such provision shall be of
no force or effect. The applicable Performance Goals shall be based on one or
more of the performance criteria set forth in Exhibit A hereto.
10.2 Terms and Conditions. Other Stock-Based Awards made pursuant
to this Article X shall be subject to the following terms and conditions:
(a) Non-Transferability. Subject to the applicable
provisions of the Award agreement and this Plan,
shares of Common Stock subject to Awards made under
this Article X may not be Transferred prior to the
date on which the shares are issued, or, if later,
the date on which any applicable restriction,
performance or deferral period lapses.
24
(b) Dividends. Unless otherwise determined by the
Committee at the time of Award, subject to the
provisions of the Award agreement and this Plan, the
recipient of an Award under this Article X shall not
be entitled to receive, currently or on a deferred
basis, dividends or dividend equivalents with respect
to the number of shares of Common Stock covered by
the Award.
(c) Vesting. Any Award under this Article X and any
Common Stock covered by any such Award shall vest or
be forfeited to the extent so provided in the Award
agreement, as determined by the Committee, in its
sole discretion. In the event that a written
employment agreement between the Company and a
Participant provides for a vesting schedule that is
more favorable than the vesting schedule provided in
the form of Award Agreement, the vesting schedule in
such employment agreement shall govern, provided that
such agreement is in effect on the date of grant and
applicable to the specific Award.
(d) Price. Common Stock issued on a bonus basis under
this Article X may be issued for no cash
consideration; Common Stock purchased pursuant to a
purchase right awarded under this Article X shall be
priced, as determined by the Committee in its sole
discretion.
(e) Payment. Form of payment for the Other Stock-Based
Award shall be specified in the Award agreement.
ARTICLE XI
PERFORMANCE-BASED CASH AWARDS
11.1 Performance-Based Cash Awards. Performance-Based Cash Awards
may be granted either alone or in addition to or in tandem with Stock Options,
Stock Appreciation Rights, or Restricted Stock. Subject to the provisions of
this Plan, the Committee shall, in its sole discretion, have authority to
determine the Eligible Employees, Consultants and Non-Employee Directors to
whom, and the time or times at which, such Awards shall be made, the dollar
amount to be awarded pursuant to such Awards, and all other conditions of the
Awards. The Committee may also provide for the payment of dollar amount under
such Awards upon the completion of a specified Performance Period.
For each Participant, the Committee may specify a targeted performance
award. The individual target award may be expressed, at the Committee's
discretion, as a fixed dollar amount, a percentage of base pay or total pay
(excluding payments made under the Plan), or an amount determined pursuant to an
objective formula or standard. Establishment of an individual target award for a
Participant for a calendar year shall not imply or require that the same level
individual target award (if any such award is established by the Committee for
the relevant Participant) be set for any subsequent calendar year. At the time
the Performance Goals are established, the Committee shall prescribe a formula
to determine the percentages (which may be greater than 100%) of the individual
target award which may be payable based upon the degree of attainment of the
25
Performance Goals during the calendar year. Notwithstanding anything else
herein, the Committee may, in its sole discretion, elect to pay a Participant an
amount that is less than the Participant's individual target award (or attained
percentage thereof) regardless of the degree of attainment of the Performance
Goals; provided that no such discretion to reduce an Award earned based on
achievement of the applicable Performance Goals shall be permitted for the
calendar year in which a Change in Control of the Company occurs, or during such
calendar year with regard to the prior calendar year if the Awards for the prior
calendar year have not been made by the time of the Change in Control of the
Company, with regard to individuals who were Participants at the time of the
Change in Control of the Company.
11.2 Terms and Conditions. Performance-Based Awards made pursuant
to this Article XI shall be subject to the following terms and conditions:
(a) Vesting of Performance-Based Cash Award. At the
expiration of the applicable Performance Period, the
Committee shall determine and certify in writing the
extent to which the Performance Goals established
pursuant to Section 11.2(c) are achieved and the
percentage of the Participant's individual target
award has been vested and earned.
(b) Waiver of Limitation. In the event of the
Participant's Retirement, Disability or death, or in
cases of special circumstances, the Committee may, in
its sole discretion, waive in whole or in part any or
all of the limitations imposed hereunder (if any)
with respect to any or all of an Award under this
Article XI.
(c) Objective Performance Goals, Formulae or Standards.
(i) The Committee shall establish the
objective Performance Goals and the individual target
award (if any) applicable to each Participant or
class of Participants in writing prior to the
beginning of the applicable Performance Period or at
such later date as permitted under Section 162(m) of
the Code and while the outcome of the Performance
Goals are substantially uncertain. Such Performance
Goals may incorporate, if and only to the extent
permitted under Section 162(m) of the Code,
provisions for disregarding (or adjusting for)
changes in accounting methods, corporate transactions
(including, without limitation, dispositions and
acquisitions) and other similar type events or
circumstances. To the extent any Performance-Based
Award is intended to comply with the provisions of
Section 162(m) of the Code, if any provision would
create impermissible discretion under Section 162(m)
of the Code or otherwise violate Section 162(m) of
the Code, such provision shall be of no force or
effect. The applicable Performance Goals shall be
based on one or more of the performance criteria set
forth in Exhibit A hereto.
(ii) The measurements used in
Performance Goals set under the Plan shall be
determined in accordance with Generally Accepted
26
Accounting Principles ("GAAP"), except, to the extent
that any objective Performance Goals are used, if any
measurements require deviation from GAAP, such
deviation shall be at the discretion of the Committee
at the time the Performance Goals are set or at such
later time to the extent permitted under Section
162(m) of the Code.
(d) Payment. Following the Committee's determination and
certification in accordance with subsection (a)
above, the Performance-Based Cash Award amount shall
be delivered to the Eligible Employee, Consultant or
Non-Employee Director, or his legal representative,
in accordance with the terms and conditions of the
Award agreement.
ARTICLE XII
TERMINATION
12.1 Termination. The following rules apply with regard to the
Termination of a Participant.
(a) Rules Applicable to Stock Option and Stock
Appreciation Rights. Unless otherwise determined by the
Committee at grant (or, if no rights of the Participant are
reduced, thereafter):
(i) Termination by Reason of Death,
Disability or Retirement. If a Participant's
Termination is by reason of death, Disability or the
Participant's Retirement, all Stock Options or Stock
Appreciation Rights that are held by such Participant
that are vested and exercisable at the time of the
Participant's Termination may be exercised by the
Participant (or, in the case of death, by the legal
representative of the Participant's estate) at any
time within a one-year period from the date of such
Termination, but in no event beyond the expiration of
the stated term of such Stock Options or Stock
Appreciation Rights; provided, however, if the
Participant dies within such exercise period, all
unexercised Stock Options or Stock Appreciation
Rights held by such Participant shall thereafter be
exercisable, to the extent to which they were
exercisable at the time of death, for a period of one
year from the date of such death, but in no event
beyond the expiration of the stated term of such
Stock Options or Stock Appreciation Rights.
(ii) Involuntary Termination Without
Cause. If a Participant's Termination is by
involuntary termination without Cause, all Stock
Options or Stock Appreciation Rights that are held by
such Participant that are vested and exercisable at
the time of the Participant's Termination may be
exercised by the Participant at any time within a
period of 90 days from the date of such Termination,
but in no event beyond the expiration of the stated
term of such Stock Options or Stock Appreciation
Rights.
27
(iii) Voluntary Termination. If a
Participant's Termination is voluntary (other than a
voluntary termination described in Section
12.2(a)(iv)(2) below), all Stock Options or Stock
Appreciation Rights that are held by such Participant
that are vested and exercisable at the time of the
Participant's Termination may be exercised by the
Participant at any time within a period of 30 days
from the date of such Termination, but in no event
beyond the expiration of the stated terms of such
Stock Options or Stock Appreciation Rights.
(iv) Termination for Cause. If a
Participant's Termination: (1) is for Cause or (2) is
a voluntary Termination (as provided in sub-section
(iii) above) after the occurrence of an event that
would be grounds for a Termination for Cause, all
Stock Options or Stock Appreciation Rights, whether
vested or not vested, that are held by such
Participant shall thereupon terminate and expire as
of the date of such Termination.
(v) Unvested Stock Options and Stock
Appreciation Rights. Stock Options or Stock
Appreciation Rights that are not vested as of the
date of a Participant's Termination for any reason
shall terminate and expire as of the date of such
Termination.
(b) Rules Applicable to Restricted Stock, Performance
Shares, Other Stock-Based Awards and
Performance-Based Cash Awards. Unless otherwise
determined by the Committee at grant or thereafter,
upon a Participant's Termination for any reason: (i)
during the relevant Restriction Period, all
Restricted Stock still subject to restriction shall
be forfeited; and (ii) any unvested Performance
Shares, Other Stock-Based Awards or Performance-Based
Cash Awards shall be forfeited.
ARTICLE XIII
CHANGE IN CONTROL PROVISIONS
13.1 Benefits. In the event of a Change in Control of the Company,
and except as otherwise provided by the Committee in an Award agreement or in a
written employment agreement between the Company and a Participant, a
Participant's unvested Award shall not vest and a Participant's Award shall be
treated in accordance with one of the following methods as determined by the
Committee in its sole discretion:
(a) Awards, whether or not then vested, shall be
continued, assumed, have new rights substituted
therefor or be treated in accordance with Section
4.2(d) hereof, as determined by the Committee in its
sole discretion, and restrictions to which any shares
of Restricted Stock or any other Award granted prior
to the Change in Control are subject shall not lapse
upon a Change in Control and the Restricted Stock or
other Award shall, where appropriate in the sole
discretion of the Committee, receive the same
distribution as other Common Stock on such terms as
determined by the Committee; provided that, the
28
Committee may, in its sole discretion, decide to
award additional Restricted Stock or other Award in
lieu of any cash distribution. Notwithstanding
anything to the contrary herein, for purposes of
Incentive Stock Options, any assumed or substituted
Stock Option shall comply with the requirements of
Treasury Regulation ss. 1.424-1 (and any amendments
thereto).
(b) The Committee, in its sole discretion, may provide
for the purchase of any Awards by the Company or an
Affiliate for an amount of cash equal to the excess
of the Change in Control Price (as defined below) of
the shares of Common Stock covered by such Awards,
over the aggregate exercise price of such Awards. For
purposes of this Section 13.1, "Change in Control
Price" shall mean the highest price per share of
Common Stock paid in any transaction related to a
Change in Control of the Company.
(c) The Committee may, in its sole discretion, provide
for the cancellation of any Awards without payment,
if the Change in Control Price is less than the Fair
Market Value of such Award on the date of grant.
(d) Notwithstanding anything else herein, the Committee
may, in its sole discretion, provide for accelerated
vesting or lapse of restrictions, of an Award at the
time of grant or at any time thereafter.
13.2 Change in Control. Unless otherwise determined by the
Committee in the applicable Award agreement (or other written agreement approved
by the Committee including, without limitation, an employment agreement), a
"Change in Control" shall be deemed to occur following any transaction if: (a)
any "person" as such term is used in Sections 13(d) and 14(d) of the Exchange
Act (other than the Company, any trustee or other fiduciary holding securities
under any employee benefit plan of the Company, or any company owned, directly
or indirectly, by the stockholders of the Company in substantially the same
proportions as their ownership of Common Stock of the Company), becomes the
"beneficial owner" (as defined in Rule 13d-3 under the Exchange Act), directly
or indirectly, of 50% or more of the combined voting power of the then
outstanding securities of the Company (or its successor corporation); provided,
however, that a merger or consolidation effected solely to implement a
recapitalization of the Company shall not constitute a Change in Control of the
Company; or (b) the stockholders of the Company approve a plan of complete
liquidation of the Company or the consummation of the sale or disposition by the
Company of all or substantially all of the Company's assets other than (i) the
sale or disposition of all or substantially all of the assets of the Company to
a person or persons who beneficially own, directly or indirectly, at least 50%
or more of the combined voting power of the outstanding voting securities of the
Company at the time of the sale or (ii) pursuant to a spinoff type transaction,
directly or indirectly, of such assets to the stockholders of the Company.
29
ARTICLE XIV
TERMINATION OR AMENDMENT OF PLAN
14.1 Termination or Amendment. Notwithstanding any other provision
of this Plan, the Board or the Committee may at any time, and from time to time,
amend, in whole or in part, any or all of the provisions of this Plan (including
any amendment deemed necessary to ensure that the Company may comply with any
regulatory requirement referred to in Article XVI), or suspend or terminate it
entirely, retroactively or otherwise; provided, however, that, unless otherwise
required by law or specifically provided herein, the rights of a Participant
with respect to Awards granted prior to such amendment, suspension or
termination, may not be impaired without the consent of such Participant and,
provided further, without the approval of the stockholders of the Company in
accordance with the laws of the State of Delaware, to the extent required by the
applicable provisions of Rule 16b-3 or Section 162(m) of the Code, pursuant to
the requirements of NASD Rule 4350(i)(1)(A) or such other applicable stock
exchange rule, or, to the extent applicable to Incentive Stock Options, Section
422 of the Code, no amendment may be made which would:
(a) increase the aggregate number of shares of Common
Stock that may be issued under this Plan pursuant to
Section 4.1 (except by operation of Section 4.2);
(b) increase the maximum individual Participant
limitations for a fiscal year under Section 4.1(b)
(except by operation of Section 4.2);
(c) change the classification of Eligible Employees or
Consultants eligible to receive Awards under this
Plan;
(d) decrease the minimum option price of any Stock Option
or Stock Appreciation Right;
(e) extend the maximum option period under Section 6.3;
(f) alter the Performance Goals for the Award of
Restricted Stock, Performance Shares or Other
Stock-Based Awards subject to satisfaction of
Performance Goals as set forth in Exhibit A;
(g) award any Stock Option or Stock Appreciation Right in
replacement of a canceled Stock Option or Stock
Appreciation Right with a higher exercise price,
except in accordance with Section 6.3(g); or
(h) require stockholder approval in order for this Plan
to continue to comply with the applicable provisions
of Section 162(m) of the Code or, to the extent
applicable to Incentive Stock Options, Section 422 of
the Code. In no event may this Plan be amended
without the approval of the stockholders of the
Company in accordance with the applicable laws of the
State of Delaware to increase the aggregate number of
shares of Common Stock that may be issued under this
Plan, decrease the minimum exercise price of any
Stock Option or Stock Appreciation Right, or to make
any other amendment that would require stockholder
approval under NASD Rule 4350(i)(1)(A) or other such
30
rules of any exchange or system on which the
Company's securities are listed or traded at the
request of the Company.
The Committee may amend the terms of any Award theretofore granted,
prospectively or retroactively, but, subject to Article IV above or as otherwise
specifically provided herein, no such amendment or other action by the Committee
shall impair the rights of any holder without the holder's consent.
ARTICLE XV
UNFUNDED PLAN
15.1 Unfunded Status of Plan. This Plan is an "unfunded" plan for
incentive and deferred compensation. With respect to any payments as to which a
Participant has a fixed and vested interest but that are not yet made to a
Participant by the Company, nothing contained herein shall give any such
Participant any rights that are greater than those of a general unsecured
creditor of the Company.
ARTICLE XVI
GENERAL PROVISIONS
16.1 Legend. The Committee may require each person receiving shares
of Common Stock pursuant to a Stock Option or other Award under the Plan to
represent to and agree with the Company in writing that the Participant is
acquiring the shares without a view to distribution thereof. In addition to any
legend required by this Plan, the certificates for such shares may include any
legend that the Committee, in its sole discretion, deems appropriate to reflect
any restrictions on Transfer.
All certificates for shares of Common Stock delivered under the Plan
shall be subject to such stop transfer orders and other restrictions as the
Committee may, in its sole discretion, deem advisable under the rules,
regulations and other requirements of the Securities and Exchange Commission,
The Nasdaq Stock Market or any national securities exchange system upon whose
system the Common Stock is then quoted, any applicable Federal or state
securities law, and any applicable corporate law, and the Committee may cause a
legend or legends to be put on any such certificates to make appropriate
reference to such restrictions.
16.2 Other Plans. Nothing contained in this Plan shall prevent the
Board from adopting other or additional compensation arrangements, subject to
stockholder approval if such approval is required; and such arrangements may be
either generally applicable or applicable only in specific cases.
16.3 No Right to Employment/Directorship/Consultancy. Neither this
Plan nor the grant of any Option or other Award hereunder shall give any
Participant or other employee, Consultant or Non-Employee Director any right
with respect to continuance of employment, consultancy or directorship by the
Company or any Affiliate, nor shall they be a limitation in any way on the right
of the Company or any Affiliate by which an employee is employed or a Consultant
or Non-Employee Director is retained to terminate his or her employment,
consultancy or directorship at any time.
31
16.4 Withholding of Taxes. The Company shall have the right to
deduct from any payment to be made pursuant to this Plan, or to otherwise
require, prior to the issuance or delivery of any shares of Common Stock or the
payment of any cash hereunder, payment by the Participant of, any Federal, state
or local taxes required by law to be withheld. Upon the vesting of Restricted
Stock (or other Award that is taxable upon vesting), or upon making an election
under Section 83(b) of the Code, a Participant shall pay all required
withholding to the Company. Any statutorily required withholding obligation with
regard to any Participant may be satisfied, subject to the advance consent of
the Committee, by reducing the number of shares of Common Stock otherwise
deliverable or by delivering shares of Common Stock already owned. Any fraction
of a share of Common Stock required to satisfy such tax obligations shall be
disregarded and the amount due shall be paid instead in cash by the Participant.
16.5 No Assignment of Benefits. No Award or other benefit payable
under this Plan shall, except as otherwise specifically provided by law or
permitted by the Committee, be Transferable in any manner, and any attempt to
Transfer any such benefit shall be void, and any such benefit shall not in any
manner be liable for or subject to the debts, contracts, liabilities,
engagements or torts of any person who shall be entitled to such benefit, nor
shall it be subject to attachment or legal process for or against such person.
16.6 Listing and Other Conditions.
(a) Unless otherwise determined by the Committee, as long
as the Common Stock is listed on a national
securities exchange or system sponsored by a national
securities association, the issue of any shares of
Common Stock pursuant to an Award shall be
conditioned upon such shares being listed on such
exchange or system. The Company shall have no
obligation to issue such shares unless and until such
shares are so listed, and the right to exercise any
Option or other Award with respect to such shares
shall be suspended until such listing has been
effected.
(b) If at any time counsel to the Company shall be of the
opinion that any sale or delivery of shares of Common
Stock pursuant to an Option or other Award is or may
in the circumstances be unlawful or result in the
imposition of excise taxes on the Company under the
statutes, rules or regulations of any applicable
jurisdiction, the Company shall have no obligation to
make such sale or delivery, or to make any
application or to effect or to maintain any
qualification or registration under the Securities
Act or otherwise, with respect to shares of Common
Stock or Awards, and the right to exercise any Option
or other Award shall be suspended until, in the
opinion of said counsel, such sale or delivery shall
be lawful or will not result in the imposition of
excise taxes on the Company.
(c) Upon termination of any period of suspension under
this Section 16.6, any Award affected by such
suspension which shall not then have expired or
32
terminated shall be reinstated as to all shares
available before such suspension and as to shares
which would otherwise have become available during
the period of such suspension, but no such suspension
shall extend the term of any Award.
(d) A Participant shall be required to supply the Company
with any certificates, representations and
information that the Company requests and otherwise
cooperate with the Company in obtaining any listing,
registration, qualification, exemption, consent or
approval the Company deems necessary or appropriate.
16.7 Governing Law. This Plan and actions taken in connection
herewith shall be governed and construed in accordance with the laws of the
State of Delaware (regardless of the law that might otherwise govern under
applicable Delaware principles of conflict of laws).
16.8 Construction. Wherever any words are used in this Plan in the
masculine gender they shall be construed as though they were also used in the
feminine gender in all cases where they would so apply, and wherever any words
are used herein in the singular form they shall be construed as though they were
also used in the plural form in all cases where they would so apply.
16.9 Other Benefits. No Award granted or paid out under this Plan
shall be deemed compensation for purposes of computing benefits under any
retirement plan of the Company or its Affiliates nor affect any benefits under
any other benefit plan now or subsequently in effect under which the
availability or amount of benefits is related to the level of compensation.
16.10 Costs. The Company shall bear all expenses associated with
administering this Plan, including expenses of issuing Common Stock pursuant to
any Awards hereunder.
16.11 No Right to Same Benefits. The provisions of Awards need not
be the same with respect to each Participant, and such Awards to individual
Participants need not be the same in subsequent years.
16.12 Death/Disability. The Committee may in its sole discretion
require the transferee of a Participant to supply it with written notice of the
Participant's death or Disability and to supply it with a copy of the will (in
the case of the Participant's death) or such other evidence as the Committee
deems necessary to establish the validity of the transfer of an Award. The
Committee may, in its discretion, also require the agreement of the transferee
to be bound by all of the terms and conditions of the Plan.
16.13 Section 16(b) of the Exchange Act. All elections and
transactions under this Plan by persons subject to Section 16 of the Exchange
Act involving shares of Common Stock are intended to comply with any applicable
exemptive condition under Rule 16b-3. The Committee may, in its sole discretion,
establish and adopt written administrative guidelines, designed to facilitate
compliance with Section 16(b) of the Exchange Act, as it may deem necessary or
proper for the administration and operation of this Plan and the transaction of
business thereunder.
33
16.14 Section 409A of the Code. The Plan is intended to comply with
the applicable requirements of Section 409A of the Code and shall be limited,
construed and interpreted in accordance with such intent. To the extent that any
Award is subject to Section 409A of the Code, it shall be paid in a manner that
will comply with Section 409A of the Code, including proposed, temporary or
final regulations or any other guidance issued by the Secretary of the Treasury
and the Internal Revenue Service with respect thereto. Notwithstanding anything
herein to the contrary, any provision in the Plan that is inconsistent with
Section 409A of the Code shall be deemed to be amended to comply with Section
409A of the Code and to the extent such provision cannot be amended to comply
therewith, such provision shall be null and void.
16.15 Successor and Assigns. The Plan shall be binding on all
successors and permitted assigns of a Participant, including, without
limitation, the estate of such Participant and the executor, administrator or
trustee of such estate.
16.16 Severability of Provisions. If any provision of the Plan shall
be held invalid or unenforceable, such invalidity or unenforceability shall not
affect any other provisions hereof, and the Plan shall be construed and enforced
as if such provisions had not been included.
16.17 Payments to Minors, Etc. Any benefit payable to or for the
benefit of a minor, an incompetent person or other person incapable of receipt
thereof shall be deemed paid when paid to such person's guardian or to the party
providing or reasonably appearing to provide for the care of such person, and
such payment shall fully discharge the Committee, the Board, the Company, its
Affiliates and their employees, agents and representatives with respect thereto.
16.18 Headings and Captions. The headings and captions herein are
provided for reference and convenience only, shall not be considered part of the
Plan, and shall not be employed in the construction of the Plan.
ARTICLE XVII
EFFECTIVE DATE OF PLAN
The Plan shall become effective upon the date specified by the Board in
its resolution adopting the Plan, subject to the approval of the Plan by the
stockholders of the Company in accordance with the requirements of the laws of
the State of Delaware.
ARTICLE XVIII
TERM OF PLAN
No Award shall be granted pursuant to the Plan on or after the tenth
anniversary of the earlier of the date the Plan is adopted or the date of
stockholder approval, but Awards granted prior to such tenth anniversary may
extend beyond that date; provided that no Award (other than a Stock Option or
Stock Appreciation Right) that is intended to be "performance-based" under
Section 162(m) of the Code shall be granted on or after the fifth anniversary of
the stockholder approval of the Plan unless the Performance Goals set forth on
Exhibit A are reapproved (or other designated performance goals are approved) by
the stockholders no later than the first stockholder meeting that occurs in the
fifth year following the year in which stockholders approve the Performance
Goals set forth on Exhibit A.
34
ARTICLE XIX
NAME OF PLAN
This Plan shall be known as "The Steven Madden, Ltd. 2006 Stock
Incentive Plan."
35
EXHIBIT A TO THE 2006 STOCK INCENTIVE PLAN
PERFORMANCE GOALS
1. Performance goals established for purposes of the grant or
vesting of Awards of Restricted Stock, Other Stock-Based
Awards, Performance Shares and/or Performance-Based Cash
Awards, each intended to be "performance-based" under Section
162(m) of the Code, shall be based on the attainment of
certain target levels of, or a specified increase or decrease
(as applicable) in one or more of the following performance
goals ("Performance Goals"):
(a) earnings per share;
(b) operating income;
(c) net income;
(d) cash flow;
(e) gross profit;
(f) gross profit return on investment;
(g) gross margin return on investment;
(h) gross margin;
(i) working capital;
(j) earnings before interest and taxes;
(k) earnings before interest, tax, depreciation and
amortization;
(l) return on equity;
(m) return on assets;
(n) return on capital;
(o) revenue growth;
(p) total shareholder return;
(q) economic value added;
(r) specified objectives with regard to limiting the
level of increase in all or a portion of the
Company's bank debt or other long-term or short-term
public or private debt or other similar financial
A
obligations of the Company, which may be calculated
net of cash balances and/or other offsets and
adjustments as may be established by the Committee in
its sole discretion;
(s) the fair market value of the shares of the Company's
Common Stock;
(t) the growth in the value of an investment in the
Company's Common Stock assuming the reinvestment of
dividends;
(u) reduction in expenses;
(v) customer satisfaction;
(w) customer loyalty;
(x) style indexes;
(y) number of new patents;
(z) employee retention;
(aa) market share;
(bb) market segment share;
(cc) product release schedules;
(dd) new product innovation;
(ee) new product introduction;
(ff) product cost reduction through advanced technology;
(gg) brand recognition and/or acceptance; or
(hh) ship targets.
2. To the extent permitted under Section 162(m) of the Code, the
Committee may, in its sole discretion, also exclude, or adjust
to reflect, the impact of an event or occurrence which the
Committee determines should be appropriately excluded or
adjusted, including:
(a) restructurings, discontinued operations,
extraordinary items or events, and other unusual or
non-recurring charges as described in Accounting
Principles Board Opinion No. 30 and/or management's
discussion and analysis of financial condition and
results of operations appearing or incorporated by
reference in the Company's Form 10-K for the
applicable year;
B
(b) an event either not directly related to the
operations of the Company or not within the
reasonable control of the Company's management; or
(c) a change in tax law or accounting standards required
by generally accepted accounting principles.
3. Performance goals may also be based upon individual
Participant performance goals, as determined by the Committee,
in its sole discretion.
4. In addition, such Performance Goals may be based upon the
attainment of specified levels of Company (or subsidiary,
division, other operational unit or administrative department
of the Company) performance under one or more of the measures
described above relative to the performance of other
corporations. To the extent permitted under Section 162(m) of
the Code, but only to the extent permitted under Section
162(m) of the Code (including, without limitation, compliance
with any requirements for stockholder approval), the Committee
may:
(a) designate additional business criteria on which the
performance goals may be based; or
(b) adjust, modify or amend the aforementioned business
criteria.
C
TABLE OF CONTENTS
-----------------
ARTICLE I PURPOSE.............................................................1
ARTICLE II DEFINITIONS........................................................1
ARTICLE III ADMINISTRATION....................................................6
ARTICLE IV SHARE LIMITATION...................................................9
ARTICLE V ELIGIBILITY - GENERAL REQUIREMENTS FOR AWARDS......................13
ARTICLE VI STOCK OPTIONS.....................................................14
ARTICLE VII STOCK APPRECIATION RIGHTS........................................17
ARTICLE VIII RESTRICTED STOCK................................................20
ARTICLE IX PERFORMANCE SHARES................................................22
ARTICLE X OTHER STOCK-BASED AWARDS...........................................23
ARTICLE XI PERFORMANCE-BASED CASH AWARDS.....................................25
ARTICLE XII TERMINATION......................................................27
ARTICLE XIII CHANGE IN CONTROL PROVISIONS....................................28
ARTICLE XIV TERMINATION OR AMENDMENT OF PLAN.................................29
ARTICLE XV UNFUNDED PLAN.....................................................31
ARTICLE XVI GENERAL PROVISIONS...............................................31
ARTICLE XVII EFFECTIVE DATE OF PLAN..........................................34
ARTICLE XVIII TERM OF PLAN...................................................34
ARTICLE XIX NAME OF PLAN.....................................................35
EXHIBIT A PERFORMANCE GOALS...................................................A
i
STEVEN MADDEN, LTD. PROXY
STEVEN MADDEN, LTD.
THIS PROXY IS BEING SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
PLEASE CLEARLY INDICATE A RESPONSE BY CHECKING ONE OF THE BOXES ([FOR]
[WITHHOLD AUTHORITY] [AGAINST] OR [ABSTAIN]) NEXT TO EACH OF THE PROPOSALS
The undersigned stockholder of Steven Madden, Ltd. (the "Company")
hereby appoint(s) Jamieson A. Karson and Arvind Dharia, and each of them, as
attorneys and proxies, each with power of substitution and revocation, to
represent the undersigned at the Annual Meeting of Stockholders of the Company
to be held at the Company's showroom located at 1370 Avenue of the Americas,
14th Floor, New York, New York at 10:00 a.m., local time, on May 26, 2006, and
at any adjournments or postponements thereof, with authority to vote all shares
of Common Stock of the Company held or owned by the undersigned on April 26,
2006, in accordance with the directions indicated herein.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" ITEMS NO. 1, 2 and 3.
1) ELECTION OF DIRECTORS VOTE
--------------------------
VOTE
[ ] FOR ALL nominees listed below EXCEPT as marked to the contrary
below
[ ] WITHHOLD AUTHORITY to vote for ALL nominees listed below
(INSTRUCTION: To withhold authority to vote for any individual
nominee strike a line through the nominee's name below.)
Jamieson A. Karson, Jeffrey Birnbaum, Marc S. Cooper, Harold Kahn, John L.
Madden, Peter Migliorini, Richard P. Randall, Thomas H. Schwartz and Walter
Yetnikoff.
2) APPROVAL OF THE ADOPTION OF THE 2006 STOCK INCENTIVE PLAN
---------------------------------------------------------
[ ] FOR the adoption of the 2006 Stock Incentive Plan
[ ] AGAINST the adoption of the 2006 Stock Incentive Plan
[ ] ABSTAIN..
3) RATIFICATION OF THE APPOINTMENT OF EISNER LLP AS THE COMPANY'S
--------------------------------------------------------------
INDEPENDENT AUDITORS FOR THE FISCAL YEAR ENDING DECEMBER 31, 2006
-----------------------------------------------------------------
[ ] FOR the ratification of the selection of Eisner LLP
[ ] AGAINST
[ ] ABSTAIN
i
THIS PROXY WILL BE VOTED AS SPECIFIED ABOVE; UNLESS OTHERWISE
INDICATED, THIS PROXY WILL BE VOTED (1) FOR THE ELECTION OF THE NINE (9)
NOMINEES NAMED IN ITEM 1, (2) FOR THE ADOPTION OF THE 2006 STOCK INCENTIVE PLAN
IN ITEM 2, (3) FOR THE RATIFICATION OF THE APPOINTMENT OF EISNER LLP AS THE
COMPANY'S INDEPENDENT AUDITORS FOR FISCAL YEAR 2006 IN ITEM 3, AND (4) IN THE
DISCRETION OF THE PROXIES ON ANY OTHER MATTER THAT MAY PROPERLY COME BEFORE THE
MEETING.
In their discretion, the proxies are authorized to vote upon such other
business as may properly be presented at the meeting or any adjournments or
postponements thereof.
Please mark, sign, date and return this Proxy promptly using the
accompanying postage pre-paid envelope. THIS PROXY IS SOLICITED ON BEHALF OF THE
BOARD OF DIRECTORS OF STEVEN MADDEN, LTD.
Dated:
----------------
---------------------------------
Signature
---------------------------------
Signature if jointly owned:
---------------------------------
Print name:
Please sign exactly as the name appears on your stock certificate. When
shares of capital stock are held by joint tenants, both should sign. When
signing as attorney, executor, administrator, trustee, guardian, or corporate
officer, please include full title as such. If the shares of capital stock are
owned by a corporation, sign in the full corporate name by an authorized
officer. If the shares of capital stock are owned by a partnership, sign in the
name of the partnership by an authorized officer.
PLEASE MARK, DATE, SIGN AND RETURN THIS PROXY PROMPTLY
IN THE ENCLOSED ENVELOPE