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)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
----------------------------------------------25, 2007
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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, 2006,25, 2007, 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 ofan amendment to the Company's 2006 Stock
Incentive Plan;Plan to increase the maximum number of
shares of Common Stock available for issuance under
such plan from 1,200,000 shares to 1,550,000 shares;
3. To ratify the appointment of Eisner LLP as the
Company's independent auditorsregistered public accounting
firm for the fiscal year ending December 31, 2006;2007;
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, 20065, 2007 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., local time, at ourthe Company's 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, 200630, 2007
/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,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" or the "Board") for use at the 20062007 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, 200625, 2007 at 10:00 a.m., Eastern Daylight Time,local time, and at any
adjournments thereof. These proxy materials are being sent on or about May 1,
20063,
2007 to holders of record of common stock, $.0001$.000067 par value, of the Company
(the "Common Stock"), of the Company at the close of business on April 26, 20065, 2007 (the "Record
Date"). The Company's Annual Report for the fiscal year ended December 31, 2005,2006
("2006 Fiscal Year"), 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 ofan
amendment to the Company's 2006 Stock Incentive Plan to increase the maximum
number of shares of Common Stock available for issuance under such plan from
1,200,000 shares to 1,550,000 shares, (iii) to ratify the appointment of Eisner
LLP as the Company's independent auditorsregistered public accounting firm for the
fiscal year ending December 31, 2006,2007, 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 13,873,66720,453,888 shares of
Common Stock (excluding treasury shares) held by approximately 67126 holders of
record and 2,1623,934 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 matterseach matter presented at the meeting
for each share held of record.
1
The presence, in person or by proxy, of the holders of
record of a majority of
the shares outstanding and entitledeligible to vote as of the
Record Date shall be required foris necessary to constitute a quorum to transactin connection
with the transaction of business at the Annual Meeting. Abstentions and broker
non-votes (i.e., proxies from brokers or nominees indicating that such persons
have not received instructions from the beneficial owner or other persons
eligible to vote shares as to a matter with respect to which the brokers or
nominees do not have discretionary power to vote) are counted as present for
purposes of determining the presence or absence of a quorum for the transaction
of business. If a quorum should not be present, the Annual Meeting may be
adjourned until a quorum is obtained.
Each nomineeAbstentions and broker non-votes will have no effect on the election of
directors (Proposal 1), which is by plurality vote.
Abstentions will, in effect, be votes against the amendment 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 theCompany's 2006 Stock Incentive Plan -1-
described in Proposal 2(Proposal 2) and against the ratification of
the appointmentselection of Eisner LLPthe independent registered public accounting firm (Proposal 3),
as the Company's independent auditors for the fiscal year ending December 31, 2006
described in Proposal 3 must be approved bythese items require the affirmative vote of the holders of a majority of the totalshares present
and eligible to vote on such items. Broker non-votes will not be considered
votes cast on such proposals in personProposals 2 or 3 and the shares represented 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 1these proposals will have no effect. An abstention from abe considered present but not eligible to
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.these proposals.
Brokers who hold shares in street name may vote in their discretion on
behalf of beneficial owners from whom they have not received instruction with
respect to routine matters. Proposals 1 and 3 should be treated as routine
matters. Proposal 2 is not considered a routine matter and, 3. The approvalconsequently,
without voting instructions, brokers cannot vote in their discretion on behalf
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.beneficial owners from whom they have not received instruction.
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 by them 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 headquartersprincipal executive offices 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 prior to the vote upon such matters, 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 PROPERLY 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'sstockholders 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 boardBoard
of Directors 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 DirectorsBIOGRAPHICAL 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 ShoeFootwear
Company since August 1982. Dolphin is one of the Company's domestic and foreign
suppliers. Mr. Birnbaum graduated from Tulane University in 1982.
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 D. 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.
Since March 2007, Mr. Schwartz has been the Chief Executive Officer and sole
owner of Summer and Forge Investors LLC, a company that invests in real estate
and manages properties in which it has ownership interests. Previously, Mr.
Schwartz was a Managing Director of Helmsley-Spear, Inc. sincefrom 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.to March
2007.
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 VoteREQUIRED 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 cast by the holders 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 DirectorsRECOMMENDATION 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 D. 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 Independence4
DIRECTOR INDEPENDENCE
The Board of Directors is currently comprised of nine members. The
Board of Directors has determined that the following director nominees are
"independent" for purposes of the criteria of the Securities and Exchange
Commission ("SEC") and The Nasdaq NationalGlobal 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 of Directors has adopted a policy whereby the independent directors haveheld regularly scheduled executive
sessions, at least twice a year. On February 28,
2005, the Board appointedwith Peter Migliorini to serveserving as Presiding Director of thesuch executive
sessions.
Directors' Attendance at Annual MeetingsDIRECTORS' 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 20052006
annual meeting of stockholders.
Communications with DirectorsCOMMUNICATIONS 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 Securities
Exchange Act of 1934, as amended (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. AnyThe Board has instructed the Corporate
Secretary to review all communications so received and to exercise his
discretion not to forward to the Board correspondence that is inappropriate such
as business solicitations, frivolous communications will be promptly distributedand advertising, routine
business matters (i.e. business inquiries, complaints, or suggestions) and
personal grievances. However, any director may at any time request the Corporate
Secretary to forward any and all communications received by the Corporate
Secretary to such individual director(s) or to all directors if addressedbut not forwarded 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 Directorsdirectors.
MEETINGS AND COMMITTEES OF THE BOARD OF DIRECTORS
The Board of Directors met sevenfour 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.2006 Fiscal Year. In
2005,2006, 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. The Board of Directors has a standing Audit Committee, At the beginning ofCompensation
Committee and Nominating/Corporate Governance Committee.
AUDIT COMMITTEE
The Audit Committee for the year ended December 31, 2005, the Audit
Committee of the Board of Directors2006 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 D. Kahn. The Audit
Committee is comprised of directors who are "independent" for purposes of The
Nasdaq NationalGlobal 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 registered public accountants, evaluating the Company's accounting
policies and its system of internal controls, and reviewing significant finance
transactions. During 2005,2006, 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 registered
public 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.
5
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 registered public accountants and with appropriate Company financial
personnel. Meetings are held with the independent registered 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 registered 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, 20052006 Fiscal Year and met with both management and Eisner LLP, the
Company's independent registered public accountants, to discuss such audited
financial statements. Management and the Company's independent registered 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, 2005.2006 Fiscal Year.
Submitted by the Audit Committee of the Company's Board of Directors:
Richard P. Randall (Chairman)
Peter Migliorini
Thomas H. Schwartz
Harold D. Kahn
Nominating/Corporate Governance CommitteeNOMINATING/CORPORATE GOVERNANCE COMMITTEE
The Nominating/Corporate Governance Committee of the Board of Directors
for the year ended December 31, 20052006 consisted of Peter Migliorini and Walter
Yetnikoff. The Nominating/Corporate Governance Committee is comprised of
directors who are "independent" for purposes of The Nasdaq NationalGlobal 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
6
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 20072008 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
-7-
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 2005,2006, the Nominating/Corporate Governance Committee met threefour
times.
Compensation CommitteeCOMPENSATION COMMITTEE
The Compensation Committee of the Board of Directors for the year ended
December 31, 20052006 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 NationalGlobal Market listing standards.standards and
applicable tax and securities rules. The Compensation Committee is primarily
responsible for approving salaries, bonuses and other compensation for the
Company's ChiefNamed Executive Officer and named
executive officers,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 restricted stock and setting the terms thereof pursuant to
such plans (all subject to approval by the Board of Directors). During 2005,2006, the
Compensation Committee met four times. The Company does not currently have a
Compensation Committee charter.
7
COMPENSATION DISCUSSION AND ANALYSIS
COMPENSATION OBJECTIVES AND STRATEGY
The Company's executive officer compensation program is designed to
attract and retain the caliber of officers needed to ensure the Company's
continued growth and profitability and to reward them for their performance, the
Company's performance and for creating longer term value for stockholders. The
primary objectives of the program are to:
o align rewards with performance that creates stockholder value;
o support the Company's strong team orientation;
o encourage high-potential team players to build a career at the
Company; and
o provide rewards that are cost-efficient, competitive with other
organizations and fair to employees and stockholders.
The Company's executive compensation programs are approved and
administered by the Compensation Committee of the Board of Directors. Working
with management and outside advisors, the Compensation Committee has developed a
compensation and benefits strategy that rewards performance and reinforces a
culture that the Compensation Committee believes will drive long-term success.
The compensation program rewards team accomplishments while promoting
individual accountability. The executive officer compensation program depends in
significant measure on Company results, but business unit results and individual
accomplishments are also very important factors in determining each executive's
compensation. The Company has a robust planning and goal-setting process that is
fully integrated into the compensation system, enhancing a strong relationship
between individual efforts, Company results, and financial rewards.
A major portion of total compensation is placed at risk through annual
and long-term incentives. As shown in the Summary Compensation Table, in 2006
the sum of restricted stock awards, stock options and bonus represented between
60% and 84% of the Total Compensation for the Named Executive Officers (as
defined herein). The combination of incentives is designed to balance annual
operating objectives and Company earnings performance with longer-term
stockholder value creation.
The Company seeks to provide competitive compensation that is
commensurate with performance. The Company targets compensation at the median of
the market, and calibrate both annual and long-term incentive opportunities to
generate less-than-median awards when goals are not fully achieved and
greater-than-median awards when goals are exceeded.
The Company seeks to promote a long-term commitment to the Company by
its senior executives. The Company believes that there is great value to the
Company in having a team of long-tenure, seasoned managers. The Company's
team-focused culture and management processes are designed to foster this
commitment. In addition, the vesting schedules attached to restricted stock (4-
to 5-year vesting) reinforce this long-term orientation.
8
ROLE OF THE COMPENSATION COMMITTEE
General
The Compensation Committee provides overall guidance for the Company's
executive compensation policies and determines the amounts and elements of
compensation for the Company's executive officers. The Compensation Committee
currently consists of two members of the Company's Board of Directors, Messrs.
Migliorini and Schwartz, each of whom is an independent director under Nasdaq's
Rule 4200, a "non-employee director" as defined under the SEC's rules and an
"outside director" as defined under Section 162(m) of the Internal Revenue Code
(the "Code").
When considering decisions concerning the compensation of Business Conductexecutives,
other than the Chief Executive Officer, the Compensation Committee asks for Mr.
Karson's recommendations, including his detailed evaluation of each executive's
performance. No executive has a role in recommending compensation for outside
directors. With respect to the application of the 2006 Plan to non-employee
directors, the Board of Directors functions as the Compensation Committee.
Use of Outside Advisors
In making its determinations with respect to executive compensation,
the Compensation Committee has historically engaged the services of an
independent compensation consulting firm. In 2006, the Compensation Committee
retained the services of James F. Reda & Associates, LLC to assist with its
review of the compensation package of the Chief Executive Officer and Ethicsother
executive officers. In addition, James F. Reda & Associates, LLC was retained to
assist the Compensation Committee with several special projects, including
advice on director compensation, advice relating to the 2006 Stock Incentive
Plan including the use of restricted stock under the Company's long term
incentive program, and assistance with the preparation of Proposal 2 of this
Proxy Statement.
The Compensation Committee retains James F. Reda & Associates, LLC
directly, although in carrying out assignments, James F. Reda & Associates, LLC
also interacts with Company management when necessary and appropriate in order
to obtain compensation and performance data for the executives and the Company.
In addition, James F. Reda & Associates, LLC may, in its discretion, seek input
and feedback from management regarding its consulting work product prior to
presentation to the Compensation Committee in order to confirm alignment with
the Company's business strategy, identify data questions or other similar
issues, if any, prior to presentation to the Compensation Committee.
The Compensation Committee has the authority to retain, terminate and
set the terms of the Company's relationship with any outside advisors who assist
the Committee in carrying out its responsibilities.
COMPENSATION STRUCTURE
Pay Elements - Overview
The Company utilizes four main components of compensation:
o Base Salary
o Annual Performance-based Cash Bonuses
o Long-term Equity Incentives (consisting of stock options and
restricted stock)
o Benefits and Perquisites
9
Pay Elements - Details
Base Salary. The Company pays base salaries to each of the Named
Executive Officers to provide them with fixed pay that takes into account the
Named Executive Officer's role and responsibilities, experience, expertise and
individual performance. As more fully described in "--Employment Arrangements,"
the Company has employment agreements with each of the Named Executive Officers.
You should refer to that section of this Proxy Statement for a full description
of each Named Executive Officer's base salary. The Compensation Committee, as
constituted at the time the parties entered into the employment agreements,
reviewed and approved the salary established in each such agreement. The
Compensation Committee took into account each of the employee's historic salary,
value in the marketplace and performance (including at the Company and previous
employment). Under their respective employment agreements, the base salaries of
Messrs. Karson and Schmertz and Ms. Varela remain constant during the term of
their employment agreements. Under Mr. Dharia's employment agreement, his base
salary increased from $240,000 in 2005 to $425,000 in 2006 and is scheduled to
increase by 2.5% in 2007 and by 5% in each of 2008 and 2009. Under Mr. Sinha's
employment agreement, his base salary is subject to an annual 5% increase and if
the Company's earnings before interest and taxes ("EBIT") for a 12-month period
increases more than 5% over the Company's EBIT for the preceding 12-month
period, then he is entitled to a 10% increase of base salary in lieu of the
annual 5% increase. See "--Summary Compensation Table" and "--Employment
Arrangements." Salary increases for officers are generally consistent with those
of other management employees.
Annual Performance-based Cash Bonus. Each Named Executive Officer's
annual performance-based cash bonus is established in their respective
employment agreement. The Compensation Committee reviewed and approved the bonus
provisions set in each such employment agreement at the time the parties entered
into such agreements and generally provide for variable or discretionary bonuses
designed to reward attainment of business goals. The amount, if any, of the
annual performance-based cash bonuses of Messrs. Karson, Dharia and Schmertz is
entirely within the discretion of the Board of Directors or the Compensation
Committee. The Board of Directors and/or the Compensation Committee consider
various criteria. Mr. Sinha's and Ms. Varela's annual performance-based cash
bonuses are each tied to increases in the Company's EBIT from the preceding
year. Mr. Sinha is entitled to an annual performance-based cash bonus equal to
3% of the increase in the Company's EBIT for such fiscal year over the EBIT of
the immediately prior fiscal year. Ms. Varela is entitled to an annual
performance-based cash bonus for each fiscal year in an amount equal to 2% of
the increase in the Company's wholesale division's EBIT for such fiscal year
over the Company's wholesale division's EBIT for the prior fiscal year. Each of
Mr. Sinha's and Ms. Varela's annual performance-based cash bonus targets were
set to drive the business of their respective divisions. See "--Employment
Arrangements."
10
Long-term Equity Incentives. Management and the Compensation Committee
believe that equity based awards are an important factor in aligning the
long-term financial interest of the officers and stockholders. The Compensation
Committee continually evaluates the use of equity-based awards and intends to
continue to use such awards in the future as part of designing and administering
the Company's compensation program. Beginning in 2006, the Compensation
Committee replaced its practice of granting equity incentives solely in the form
of stock options with restricted stock awards in order to grant awards that
contain both substantial incentive and retention characteristics. These awards
are designed to provide emphasis on preserving stockholder values generated in
recent years while providing significant incentives for continuing growth in
stockholder value. All grants are issued on the date they are approved by the
Compensation Committee. With respect to stock options, the exercise price is
always the grant date closing market price per share. The restricted stock uses
time-based vesting and vests in four or five equal annual installments beginning
on the first anniversary of the grant date, provided that, with the exception to
grants to Mr. Karson or as may otherwise be indicated in individual grants, no
termination of service has occurred by each applicable vesting date. All shares
of restricted stock granted to Mr. Karson will vest and cease to be restricted
stock if the Company does not renew Mr. Karson's employment agreement or if Mr.
Karson is terminated by the Company without "cause." Any dividends paid on the
restricted stock are held by the Company uninvested and without interest until
delivered to the holder at the end of the restricted period of the underlying
shares of restricted stock that relates to such dividends.
Other Benefits and Perquisites. The Company's executive compensation
program also includes other benefits and perquisites. These benefits include
annual matching contributions to executive officers' 401(k) plan accounts,
company-paid medical benefits, automobile allowances and life insurance
coverage. The Compensation Committee annually reviews these other benefits and
perquisites and makes adjustments as warranted based on competitive practices,
the Company's performance and the individual's responsibilities and performance.
In addition to the executive benefits and perquisites provided to other senior
executives, Mr. Karson is reimbursed for, or the Company directly pays certain
membership dues for social or professional organizations that Mr. Karson chooses
to join. The Compensation Committee has approved these other benefits and
perquisites as a reasonable component of the Company's executive officer
compensation program. (See the "All Other Compensation" column and corresponding
footnotes in the Summary Compensation Table.)
Pay Mix
The Company utilizes the particular elements of compensation described
above because the Company believes that it provides a well-proportioned mix of
secure compensation, retention value and at-risk compensation which produces
short-term and long-term performance incentives and rewards. By following this
approach, the Company provides the executive a measure of security in the
minimum expected level of compensation, while motivating the executive to focus
on business metrics and other variables within their particular sector which
will increase sales and margins and at the same time lower costs so as to
produce a high level of short term and long term performance for the Company and
long-term wealth creation for the executive, as well as reducing the risk of
recruitment of top executive talent by competitors. The mix of metrics used for
the annual performance bonuses and the Company's long-term incentive program
likewise provides an appropriate balance between short-term financial
performance and long-term financial and stock performance.
For Named Executive Officers, the mix of compensation is weighted
heavily toward at-risk pay (annual incentives and long-term incentives).
Maintaining this pay mix results fundamentally in a pay-for-performance
orientation for the Company's executives, which is aligned with the Company's
stated compensation philosophy of providing compensation commensurate with
performance.
11
Pay Levels and Benchmarking
Pay levels for executives are determined based on a number of factors,
including the individual's roles and responsibilities within the Company, the
individual's experience and expertise, the pay levels for peers within the
Company, pay levels in the marketplace for similar positions and performance of
the individual and the Company as a whole. The Compensation Committee is
responsible for approving pay levels for the Named Executive Officers. In
determining the pay levels, the Compensation Committee considers all forms of
compensation and benefits.
The Compensation Committee assesses "competitive market" compensation
using a number of sources. The primary data source used in setting competitive
market levels for the Named Executive Officers is the information publicly
disclosed by a peer group of the Company, which will be reviewed annually and
may change from year to year. The peer group of companies is Nine West Group
Inc., Kenneth Cole Production, Inc., Guess?, Inc., bebe stores, inc., Brown Shoe
Company, Inc., Genesco Inc., The Stride Rite Corporation and SKECHERS USA, Inc.
After consideration of the data collected on external competitive
levels of compensation and internal needs, the Compensation Committee makes
decisions regarding the Named Executive Officer's target total compensation
opportunities based on the need to attract, motivate and retain an experienced
and effective management team.
Relative to the competitive market data, the Compensation Committee
generally intends that the base salary and target annual incentive compensation
for each Named Executive Officer will be at the median of the competitive
market.
As noted above, notwithstanding the Company's overall pay positioning
objectives, pay opportunities for specific individuals vary based on a number of
factors such as scope of duties, tenure, institutional knowledge and/or
difficulty in recruiting a new executive. Actual total compensation in a given
year will vary above or below the target compensation levels based primarily on
the attainment of operating goals and the creation of stockholder value.
Compensation Committee Discretion
The Compensation Committee retains the discretion to decrease all forms
of incentive payouts based on significant individual or Company performance
shortfalls, with the exception the bonuses paid to Mr. Sinha and Ms. Varela,
which are tied to the Company's EBIT for the preceding year pursuant to their
respective employment agreements. Likewise, the Compensation Committee retains
the discretion to increase payouts and/or consider special awards for
significant achievements, including but not limited to superior asset
management, investment or strategic accomplishments and/or consummation of
acquisitions, divestitures, capital improvements to existing properties, or
sales made by certain of the Company's divisions.
Conclusion
The level and mix of compensation that is finally decided upon is
considered within the context of both the objective data from the Company's
competitive assessment of compensation and performance, as well as discussion of
the subjective factors as outlined above. The Compensation Committee believes
that each of the compensation packages is within the competitive range of
practices when compared to the objective comparative data even where subjective
factors have influenced the compensation decisions.
12
POST TERMINATION, CHANGE IN CONTROL AND NON-COMPETE/NON-SOLICITATION
The Company's employment agreements with each of the Named Executive
Officers contain provisions governing severance payments and payments made upon
a change-in-control of the Company. You should refer to the section of this
Proxy Statement titled "Employment Arrangements" for a summary description of
the agreements and such provisions. The Company's employment agreements with the
Named Executive Officers generally provide for severance payments to the
executive if the Company terminates the executive's employment without cause or
if the Company gives the executive good reason to terminate employment. These
benefits are described and quantified in the section entitled "Post Termination
and Change in Control Arrangements" under Executive and Director Compensation.
The Company believes that the severance payments and payments made upon
change-in-control provisions in the employment agreements provide appropriate
protection to the Company's executives, comparable to that available at peer
companies, and, with regard to the enhanced severance following a
change-in-control, protects the Company from losing key executives during a
period when a change-in-control may be threatened or pending. These benefits are
described and quantified in the section entitled "Post Termination and Change in
Control Arrangements" under Executive and Director Compensation.
Mr. Karson has agreed in his employment agreement not to compete with
the Company for two years following the termination of employment and not to
hire Company employees during that same period. Mr. Schmertz and Ms. Varela have
agreed to the same restriction for a one-year period. In addition, Mr. Sinha has
agreed to the same restriction for a six month period, unless he is terminated
other than "for cause," death or due to total disability, in which case his
non-compete and non-solicitation period shall last the lesser of six months or
the number of months he is entitled to payment following such termination. Mr.
Dharia does not have a non-compete or non-solicitation provision in his
employment agreement.
IMPACT OF TAX AND ACCOUNTING
As a general matter, the Compensation Committee considers the various
tax and accounting implications of compensation vehicles employed by the
Company.
While the Compensation Committee reviews and considers both the
accounting and tax effects of various components of compensation, these effects
are not a significant factor in the Compensation Committee's allocation of
compensation among the different components. In general, the Company believes
that compensation paid to executive officers should be deductible for U.S. tax
purposes. In certain instances, however, the Compensation Committee also
believes that it is in the Company's best interests, and that of its
shareholders, to have the flexibility to pay compensation that is not deductible
under the limitations of Section 162(m) of the Code in order to provide a
compensation package consistent with the Company's objectives.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
During the 2006 Fiscal Year, the following directors served on the
Compensation Committee: Peter Migliorini (chairman) and Thomas H. Schwartz.
During the 2006 Fiscal Year:
o none of the members of the Compensation Committee was an officer
(or former officer) or employee of the Company or any of its
subsidiaries;
o none of the members of the Compensation Committee had a direct or
indirect material interest in any transaction in which the Company
was a participant and the amount involved exceeded $120,000;
13
o none of the Company's executive officers served on the
compensation committee (or another board committee with similar
functions or, if none, the entire board of directors) of another
entity where one of that entity's executive officers served on the
Company's Compensation Committee;
o none of the Company's executive officers was a director of another
entity where one of that entity's executive officers served on the
Company's Compensation Committee; and
o none of the Company's executive officers served on the
compensation committee (or another board committee with similar
functions or, if none, the entire board of directors) of another
entity where one of that entity's executive officers served as a
director on the Board of Directors.
COMPENSATION COMMITTEE REPORT
The Compensation Committee has reviewed and discussed the Compensation
Discussion and Analysis with management and based on the review and discussions,
the Compensation Committee recommended to the Board of Directors that the
Compensation Discussion and Analysis be included in this Proxy Statement.
Submitted by the Compensation Committee of the Company's Board of Directors:
Peter Migliorini (Chairman)
Thomas H. Schwartz
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""Conduct
Code"). The Conduct 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 Conduct 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 Conduct Code without fear of retaliation. Waiver of
any provision of the Conduct 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 Conduct Code relating to such individuals will be
disclosed by the Company. A copy of the Conduct 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.
SectionSECTION 16(a) Beneficial Ownership Reporting ComplianceBENEFICIAL 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%)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 stockCommon 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) grantsa grant of stock
optionsCommon Stock on May 27, 2005January 1, 2006 to each of Jeffrey Birnbaum, Marc S. Cooper, Peter
Migliorini, Harold Kahn, Thomas H. Schwartz, John L. Madden and Walter
Yetnikoff;Arvind Dharia; (ii) a grant of
stock optionsCommon Stock on June 30, 2005May 26, 2006 to Arvind Dharia; andHarold D. Kahn; (iii) the exercise of stock
options and sale of Common Stock on November 7,June 2, 2006 by Peter Migliorini; and (iv)
grants of stock
14
options to Awadhesh Sinha on May 23, 2003, May 21, 2004, May 27, 2005 by Marc S. Cooper.and July
6, 2005. Each of these reports has now been filed. In making this disclosure,
the Company has relied solely on copies of the reports that they -8-
have filed with
the SEC and written representations received from ourthe Company's directors and
executive officers that no annual Form 5 reports were required to by filed for
the 2005 fiscal year.
Equity Compensation Plan Information2006 Fiscal Year.
DIRECTORS AND EXECUTIVE OFFICERS
The following table provides information asdirectors, executive officers and certain significant employees 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,their ages and positions as of April 1, 2007, are:
NAME AGE POSITION
- ----------------------- --- --------------------------------------------------
Jamieson Karson, Arvind DhariaA. Karson..... 49 Chief Executive Officer 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, violationChairman of the New York Labor Law, tortuous interference with contract, civil conspiracy,
-9-
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'sBoard
Arvind Dharia.......... 57 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") betweenAwadhesh Sinha......... 61 Chief Operating Officer
Robert Schmertz........ 43 Brand Director
Amelia Newton Varela... 35 Executive Vice President-Wholesales Sales
Jeffrey Birnbaum....... 46 Director
Marc S. Cooper......... 45 Director
Harold D. Kahn......... 61 Director
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 BrandL. Madden......... 59 Director
Peter Migliorini....... 58 Director
Richard P. Randall..... 69 Director
Thomas H. Schwartz..... 59 Director
Walter Yetnikoff....... 73 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
-10-
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.
15
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'swomen's division since January 2000. Prior to that, she was Account
Executive for the Women'swomen's division since 1998. Before joining the Company, Ms.
Varela was the sales assistant to the EVEPExecutive Vice President of Sales for
Merrin Financial. She graduated from the FIT in 1995.
SUMMARY COMPENSATION OF DIRECTORS AND EXECUTIVE OFFICERS
Summary Compensation TableTABLE
The following table sets forth the compensation earned for each ofall services
rendered to us in all capacities in the last three fiscal years
ended December 31, 2005, December 31, 2004 and December 31, 2003 the
remuneration paid2006 Fiscal Year by the Company to itsCompany's Chief
Executive Officer, Chief Financial Officer and the fourthree most highly compensated
executive officers (otherother than the ChiefCEO and CFO who were serving at the end of
2006. In this Proxy Statement, the Company refers to this group of five people
as the Company's "Named Executive Officer):
-11-
Officers".
Following the table is a discussion of material factors related to the
information disclosed in the table.
Annual compensation Long-term compensation
------------------------ -------------------------
Number of
Securities
Restricted Underlying
Name and principal Fiscal Stock Options/SARs All other
position year Salary Bonus Awards NON-EQUITY
STOCK INCENTIVE PLAN ALL OTHER
SALARY BONUS AWARDS COMPENSATION COMPENSATION TOTAL
NAME AND PRINCIPAL POSITION YEAR ($) ($) ($) ($) ($)(1) compensation($)
- --------------------------- ------ -------------------------------------- ---- --------- -------------------- --------- -------------- ------------ -------------------------
Jamieson A. Karson
2005 $467,500 $543,771Chief Executive Officer .... 2006 500,000 450,000 1,081,800 -- 29,585(2) 2,061,385
Arvind Dharia
Chief Financial Officer .... 2006 425,000 350,000 432,720 -- 90,173(3) 1,297,893
Awadhesh Sinha
Chief Operating Officer .... 2006 446,250 -- -- $ 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)1,401,840 13,458(4) 1,861,548
Robert Schmertz
2005 $464,745 $250,000 -- -- $1,095,367(12)
Brand Director 2004 $432,649 $ 50,000............. 2006 488,350 -- 1,056,600 -- $ 205,769(13)
2003 $393,750 -- -- -- $ 342,000(14)5,769(5) 1,550,719
Amelia Newton Varela
2005 $300,000 $260,765 $375,200(15) 23,000 $ 15,000(16)
Executive Vice
2004 $247,000President-Wholesale
Sales ...................... 2006 300,000 -- -- -- $ 15,000(16)
President - 2003 $205,557 $ 50,000 -- -- $ 46,911(17)
Wholesale Division1,056,600 570,166 15,000(6) 1,941,766
------------------- ----------
(1) OptionsThe amounts in this column reflect the dollar amount recognized for
financial statement reporting purposes for the fiscal year ended December
31, 2006, in accordance with FAS 123(R). Assumptions used in the
calculation of these amounts are included in footnote 13 to purchase sharesthe Company's
audited financial statements for the fiscal year ended December 31, 2006,
included in the Company's Annual Report on Form 10-K filed with the
Securities and Exchange Commission on March 9, 2007.
(2) Includes the following: $6,271 automobile allowance and reimbursement of
Common Stock.
(2) In 2005, Mr. Karson sold 100,000 shares of Common Stock$23,314 for a gain of
$464,975 and $29,541 of expenses were paid by the Company on behalf of Mr.
Karsonmembership dues pursuant to hisMr. Karson's employment agreement.
(3) In 2004,Includes 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 agreementfollowing: $7,196 automobile allowance and $30,114 of expenses were
paid by the Company on behalf of Mr. Karson pursuant to his employment
agreement.$82,977 life
insurance premiums.
(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.Represents $13,458 automobile allowance.
(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-Represents $5,769 automobile allowance.
(6) Represents $15,000 automobile allowance.
16
(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 EmployeesEMPLOYMENT ARRANGEMENTS
Jamieson A. Karson. 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, or a committee thereof, may determine in its absolute
discretion. Subject to approval by the Company's stockholdersavailability of shares under 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)-month12-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'sMr. Karson'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).$4,000,000. In the event that
there is a "change of control" (as defined in the agreement) transaction, all
unvested options to purchase shares of the Common Stock or restricted stock awards
or other equity-related awards under the 1999 Stock Plan and/or the 2006 Stock
Incentive planPlan 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 also contains other customary
provisions, including
provisions regarding confidentiality, solicitation and competition.
Arvind Dharia. 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,for the
2006 subject
toFiscal Year, with the following increases:increases thereafter: (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 shallwill be increased by 5% of the
then-current base salary; and (iii) on January 1, 2009, his base salary shallwill 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 stockholdersavailability of shares under 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(other than
"for cause", or due to his death or his total disability,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)
17
remaining in the term. If the Company decides not to renew the agreement (other
than "for cause" or due to his total disability), then Mr. Dharia shallwill 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 such terms are defined in the agreement),
Mr. Dharia shallwill receive an amount equal to the lesser of (i) 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.termination or (ii) the maximum amount which is tax deductible
to the Company under Section 280G of the Code.
Awadhesh Sinha. 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 -16-
$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.period, a 10% annual increase in lieu of the annual 5%
increase. 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(other than "for cause" or due to his
death or his total disability,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
the lesser of (i) 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.termination or (ii) the maximum
amount which is tax deductible to the Company under Section 280G of the Code.
Robert Schmertz. 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 2005.2005 and again in March 2007.
The term of Mr. Schmertz's employment under his employment agreement (as
extended) commenced on April 1, 2002 and ends on June 30, 2007.December 31, 2009. Mr. Schmertz
received a signing bonus of $50,000$500,000 upon the execution of the extension.March 2007
extension and 100,000 shares of restricted stock, which shall vest in equal
parts on each of the next five anniversaries of February 27, 2007, pursuant to
the 2006 Stock Incentive Plan. 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.$600,000. Under the terms of the agreement as extended, the Company
shall pay
18
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" and the
termination of Mr. Schmertz thereafter other than "for cause" (as defined in the
agreement), Mr. Schmertz shall be
entitled to terminate the agreement and upon such termination will be entitled to receive an amount equal to the
lesser of (i) the average amount of total compensation actually received by
Mr. Schmertz for the preceding three times the compensation received in the prior year (capped atcalendar years multiplied by 3 or (ii) the
maximum allowedamount which is tax deductible to the Company under Section 4999280G of the
Internal Revenue Code of 1986).
Mr. Schmertz's employment agreement contains other customary provisions.Code.
Amelia Newton Varela. 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 onin 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 for each fiscal year
in an amount equal to 2% of the increase in the Company's wholesale divisions'division's
EBIT of thefor such fiscal year over the Company's wholesale divisions'division's EBIT offor 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
$225,000.
GRANTS OF PLAN-BASED AWARDS IN THE 2006 FISCAL YEAR
The following table sets forth information concerning awards under the
Company's equity and non-equity incentive plans granted to each of the Named
Executive Officers in the 2006 Fiscal Year, including performance-based awards
and those using time-based vesting.
Following the table is a discussion of material factors related to the
information disclosed in the table.
ALL
OTHER
STOCK ALL OTHER
AWARDS: OPTION
ESTIMATED FUTURE PAYOUTS ESTIMATED FUTURE PAYOUTS NUMBER AWARDS: EXERCISE
UNDER NON-EQUITY INCENTIVE UNDER EQUITY INCENTIVE OF NUMBER OF OR BASE GRANT DATE
PLAN AWARDS PLAN AWARDS SHARES SECURITIES PRICE OF FAIR VALUE
-------------------------- -------------------------- OF STOCK UNDERLYING OPTION OF STOCK
GRANT THRESHOLD TARGET MAXIMUM THRESHOLD TARGET MAXIMUM OR UNITS OPTIONS AWARDS AND OPTION
NAME DATE ($) ($) ($) (#) (#) (#) (#) (#) ($/SH) AWARDS
- ----------------- -------- --------- ------- ------- --------- ------ ------- -------- ---------- -------- ----------
Jamieson A.
Karson........... 03/24/06 -- -- -- -- -- -- 30,000 -- -- 1,081,800
Arvind Dharia.... 03/24/06 -- -- -- -- -- -- 12,000 -- -- 432,720
Awadhesh Sinha... -- -- 1,401,840(1) -- -- -- -- -- -- -- --
Robert Schmertz.. 03/20/06 -- -- -- -- -- -- 30,000 -- -- 1,056,600
Amelia Newton
Varela........... 03/20/06 -- 570,166(2) -- -- -- -- 30,000 -- -- 1,056,600
- -----------------
(1) Represents non-equity incentive payment made pursuant to a bonus formula in
Mr. Sinha's employment agreement. See "-Employment Arrangements." There is
no threshold, target or maximum in such bonus formula, so the amount
contained in the table above is payable as a target for these purposes
only.
(2) Represents non-equity incentive payment made pursuant to a bonus formula in
Ms. Varela's employment agreement. See "-Employment Arrangements." There is
no threshold, target or maximum in such bonus formula, so the amount
contained in the table above is payable as a target for these purposes
only.
Plan-Based Awards
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. Since its adoption, the
1999 Plan has been amended, with stockholder approval, to (i) increase the
number of shares subject to the plan (ii) provide that the exercise price of an
option granted under the 1999 Plan shall be no less than the fair market value
of the 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) prohibit the Board from amending the terms of any option
granted pursuant to the 1999 Plan to
19
reduce the option price. 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. As of April 25,
2007, options to purchase 1,395,985 shares of Common Stock were outstanding. No
additional options will be granted under the 1999 Plan.
2006 Stock Incentive Plan
As of March 10, 2006, the Board of Directors of the Company adopted the
2006 Stock Incentive Plan (the "2006 Plan"), and on May 26, 2006 the Company's
stockholders approved the adoption of the 2006 Plan. The purpose of the 2006
Plan is 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. Currently,
the maximum number of shares of Common Stock available for issuance under the
2006 Plan is 1,200,000 shares. The Company seeks to increase the maximum number
of shares available for issuance under the 2006 Plan to 1,550,000 shares,
subject to stockholder approval and to make certain other changes not subject to
stockholder approval (see "Proposal Two - Proposal for the Approval of Amendment
Number One to the Steven Madden, Ltd. 2006 Stock Incentive Plan"). As of April
25, 2007, 597,200 shares of Common Stock were outstanding and 602,800 shares of
Common Stock remained available for grant under the 2006 Plan.
OUTSTANDING EQUITY AWARDS AT END OF THE 2006 FISCAL YEAR
The following table sets forth information concerning unexercised stock
options, restricted stock that has not vested and stock awards outstanding for
each of the Named Executive Officers as of the end of the 2006 Fiscal Year.
OPTION AWARDS STOCK AWARDS
------------------------------------------------------------- ---------------------------------------------
EQUITY
EQUITY INCENTIVE
INCENTIVE PLAN
PLAN AWARDS:
AWARDS: MARKET
EQUITY NUMBER OR PAYOUT
INCENTIVE OF VALUE OF
PLAN NUMBER MARKET UNEARNED UNEARNED
AWARDS: OF VALUE OF SHARES, SHARES,
NUMBER OF NUMBER OF NUMBER OF SHARES SHARES UNITS OR UNITS OR
SECURITIES SECURITIES SECURITIES OR UNITS OR UNITS OTHER OTHER
UNDERLYING UNDERLYING UNDERLYING OF STOCK OF STOCK RIGHTS RIGHTS
UNEXERCISED UNEXERCISED UNEXERCISED OPTION THAT THAT THAT THAT
OPTIONS OPTIONS UNEARNED EXERCISE OPTION HAVE NOT HAVE NOT HAVE NOT HAVE NOT
(#) (#) OPTIONS PRICE EXPIRATION VESTED VESTED VESTED VESTED
NAME EXERCISABLE UNEXERCISABLE (#) ($) DATE (#) ($) (#) ($)
- ----------------- ----------- ------------- ----------- -------- ---------- -------- --------- --------- ---------
Jamieson A.
Karson........... 56,200 -- -- 12.6533 05/17/07 30,000(1) 1,052,700 -- --
Arvind Dharia.... 13,242 -- -- 6.3667 09/25/08 12,000(2) 421,080 -- --
60,000 13.9000 09/09/10
60,000 13.0533 07/06/11
60,000 11.8400 05/27/15
Awadhesh Sinha... -- -- -- -- -- -- -- -- --
Robert Schmertz.. 50,000 -- -- 12.6533 05/17/12 30,000(3) 1,052,700 -- --
Amelia Newton
Varela........... -- -- 30,000(4) 1,052,700
20
- ----------
(1) Mr. Karson was awarded 30,000 shares of restricted stock on March 24, 2006.
One-fourth of such shares of restricted stock shall vest and cease to be
restricted stock on each of the next four anniversaries of March 24, 2006.
(2) Mr. Dharia was awarded 12,000 shares of restricted stock on March 24, 2006.
One-fourth of such shares of restricted stock shall vest and cease to be
restricted stock on each of the next four anniversaries of March 24, 2006.
(3) Mr. Schmertz was awarded 30,000 shares of restricted stock on March 20,
2006. One-fourth of such shares of restricted stock shall vest and cease to
be restricted stock on each of the next four anniversaries of March 20,
2006.
(4) Ms. Varela was awarded 30,000 shares of restricted stock on March 20, 2006.
One-fourth of such shares of restricted stock shall vest and cease to be
restricted stock on each of the next four anniversaries of March 20, 2006.
OPTION EXERCISES AND STOCK VESTED IN THE 2006 FISCAL YEAR
The following table sets forth information concerning stock options
exercised and restricted stock vested during the 2006 Fiscal Year by each of the
Named Executive Officers. The value realized from exercised options is deemed to
be the market value of the Common Stock on the date of exercise, less the
exercise price of the option, multiplied by the number of shares underlying the
option. The value realized from vested restricted stock is deemed to be the
market value of the Common Stock on the date of vesting multiplied by the number
of shares.
OPTION AWARDS STOCK AWARDS
----------------------------- ------------------------------
NUMBER OF VALUE NUMBER OF VALUE
SHARES ACQUIRED REALIZED ON SHARES ACQUIRED REALIZED ON
ON EXERCISE EXERCISE ON VESTING VESTING
NAME (#) ($) (#) ($)
- ----------------------- --------------- ----------- --------------- ------------
Jamieson A. Karson .... 11,300 271,501 -- --
Arvind Dharia ......... 40,000 563,367 20,000 584,600
Awadhesh Sinha ........ 41,250 910,325 -- --
Robert Schmertz ....... 70,000 1,723,539 -- --
Amelia Newton Varela... 34,500 924,140 -- --
POTENTIAL PAYMENTS UPON TERMINATION OR CHANGE-IN-CONTROL
The Company's employment agreements with the Named Executive Officers
provide for payments to such persons upon termination or a change in control of
the Company. See "--Employment Arrangements."
The amounts set forth in the table below shall be paid to the Named
Executive Officers if such Named Executive Officer's employment was terminated
by the Company under the various scenarios set forth below.
21
CONTINUATION OF
MEDICAL/ WELFARE ACCELERATION AND
BENEFITS (PRESENT CONTINUATION OF TOTAL TERMINATION
CASH PAYMENT VALUE) EQUITY AWARDS BENEFITS
NAME AND PRINCIPAL POSITION ($) ($) ($) ($)
- ---------------------------------------- ------------ ------------------ ----------------- ------------------
TERMINATION DUE TO DEATH:
Jamieson A. Karson 500,000 -- 500,000
Arvind Dharia 425,000 10,000 435,000
Awadhesh Sinha 467,500 10,000 477,500
Robert Schmertz -- -- --
Amelia Newton Varela(1) -- -- --
TERMINATION DUE TO TOTAL DISABILITY:
Jamieson A. Karson 500,000 500,000
Arvind Dharia 425,000 425,000
Awadhesh Sinha 467,500 467,500
Robert Schmertz -- --
Amelia Newton Varela(1) -- --
TERMINATION FOR CAUSE; RESIGNATION:
Jamieson A. Karson -- --
Arvind Dharia -- --
Awadhesh Sinha(2) -- --
Robert Schmertz -- --
Amelia Newton Varela(1) -- --
TERMINATION OTHER THAN FOR CAUSE,
DEATH OR DUE TO TOTAL DISABILITY:
Jamieson A. Karson 4,000,000 -- 4,000,000
Arvind Dharia 1,275,000(3) 270,000(4) 1,545,000
Awadhesh Sinha 701,250(5) -- 701,250
Robert Schmertz -- -- --
Amelia Newton Varela(1) -- -- --
TERMINATION UPON A CHANGE-OF-CONTROL:
Jamieson A. Karson 4,000,000(6) -- 302,750 4,302,750
Arvind Dharia 2,036,742(7) 270,000(4) 2,306,742
Awadhesh Sinha 1,764,881(8) 40,500(9) 1,805,381
Robert Schmertz 2,531,941(10) -- 2,531,941
Amelia Newton Varela(1) -- -- --
- ----------
(1) Upon any termination, Ms. Varela shall forfeit and surrender any unpaid
compensation without further liability to the Company.
(2) If Mr. Sinha is terminated for Cause, he will have to repay to the Company
the full amount of his signing bonus and if he resigns for any reason, Mr.
Sinha will be required to repay to the Company a pro rata portion of his
signing bonus.
(3) Consists of three times Mr. Dharia's 2006 base salary ($425,000).
(4) Consists of three times the sum of Mr. Dharia's life insurance payment
($80,000 per year) plus medical benefits ($10,000 per year).
22
(5) Consists of 1.5x Mr. Sinha's salary at December 31, 2006 ($467,500).
(6) In the event of a termination upon a change of control, Mr. Karson's
employment agreement containsstates that the Company and Mr. Karson will use their
respective best efforts to work together so that Mr. Karson and the Company
will not be subject to adverse tax consequences under Sections 280G and
4999 of the Code, as applicable. The figure in the table does not reflect
any cutback or gross-up of the termination upon a change of control payment
owed to Mr. Karson under his employment agreement.
(7) Consists of three times Mr. Dharia's 2006 salary ($425,000) plus 2005 bonus
($253,914).
(8) Per Mr. Sinha's employment agreement, the termination payment is equal to
the lesser of (A) the amount due based on the calculation described below
and (B) the maximum amount which is tax deductible to the Company under
Section 280G of the Code. The bonus calculation under Mr. Sinha's
employment agreement is three times the sum of Mr. Sinha's (i) salary at
December 31, 2006 ($467,500), (ii) signing bonus ($100,000) and (iii) 2005
bonus ($377,673). This amount would equal $2,834,019, which exceeds the
maximum amount which is tax deductible to the Company under Section 280G of
the Code. The figure in the table reflects the amount that would be paid to
Mr. Sinha, as limited by Section 280G. This amount could be lower if there
is an actual change-in-control, because the estimate above does not reflect
a potential reduction associated with reasonable compensation for
restrictive covenants in Mr. Sinha's employment agreement.
(9) Consists of three times the sum of Mr. Sinha's life insurance payment
($3,500 per year) plus medical benefits ($10,000 per year).
(10) Per Mr. Schmertz's employment agreement, the termination payment is equal
to the lesser of (A) the amount due based on the calculation described
below and (B) the maximum amount which is tax deductible to the Company
under Section 280G of the Code. The bonus calculation under Mr. Schmertz's
employment agreement is three times Mr. Schmertz's 2005 compensation
($1,800,225). This amount would equal $5,400,675, which exceeds the maximum
amount which is tax deductible to the Company under Section 280G of the
Code. The figure in the table reflects the amount that would be paid to Mr.
Schmertz, as limited by Section 280G. This amount could be lower if there
is an actual change-in-control, because the estimate above does not reflect
a potential reduction associated with reasonable compensation for
restrictive covenants in Mr. Schmertz's employment agreement.
COMPENSATION OF DIRECTORS IN THE 2006 FISCAL YEAR
The following table sets forth information concerning the
compensation of the Company's non-employee directors in the 2006 Fiscal Year.
Following the table is a discussion of material factors
related to the information disclosed in the table.
CHANGE IN
PENSION VALUE
FEES AND
EARNED NON-EQUITY NONQUALIFIED
OR PAID STOCK OPTION INCENTIVE PLAN DEFERRED ALL OTHER
IN CASH AWARDS AWARDS COMPENSATION COMPENSATION COMPENSATION TOTAL
NAME ($) ($) ($) ($) EARNINGS ($) ($)
- -------------------- ---------- ---------- ---------- --------------- ------------- ------------ ----------
Jeffrey Birnbaum ... 44,167 26,318 -- -- -- 200,000(1) 270,485
Marc S. Cooper ..... 49,167 26,318 -- -- -- 615,000(2) 690,485
Harold D. Kahn ..... 52,917 52,635 -- -- -- 105,552
John L. Madden ..... 44,167 26,318 -- -- -- 904,876(3) 975,361
Peter Migliorini ... 79,167 52,635 -- -- -- 671,050(4) 802,852
Richard P
Randall ............ 36,667 52,635 -- -- -- -- 89,302
Thomas H
Schwartz ........... 57,500 52,635 -- -- -- -- 110,135
Walter Yetnikoff ... 54,167 52,635 -- -- -- -- 106,802
23
- ----------
(1) Includes $200,000 of fees paid to Mr. Birnbaum for consulting services with
respect to the designing and manufacture of shoes and general consulting to
the Company. See "--Certain Relationships and Related Transactions."
(2) Includes (a) $412,000 in fees paid to Peter J. Solomon & Company, a
financial advisory firm of which Mr. Cooper is a Managing Director, in
connection with the Company's acquisition of all the capital stock of
Daniel M. Friedman and Associates, Inc. and DMF, International, Ltd. and
(b) $203,000 from the exercise of options and the sale of the shares
underlying such options. See "--Certain Relationships and Related
Transactions."
(3) Includes (a) $478,865 in fees, travel and insurance allowance paid to JLM
Consultants, a company wholly owned by Mr. Madden, in connection with
consulting services for the development of the Company's international
business, (b) $393,817 in income from the exercise of options and the sale
of the shares underlying such options and (c) $32,194 for the use of a
corporate apartment. See "--Certain Relationships and Related
Transactions."
(4) Represents income from the exercise of options and the sale of the shares
underlying such options.
Directors who are also employees of the Company are not paid any fees
or other customary provisions.remuneration for service on the Board or any of its committees. In
2006, each non-employee director received 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) $40,000. In 2006, members of the
Audit Committee, Nominating/Corporate Governance Committee and Compensation
Committee each received an additional $10,000 for service on such committees,
except that the audit committee financial expert received $15,000 and the
chairperson of the Compensation Committee received $15,000. The Company
reimburses directors for any out-of-pocket expenses incurred by them in
connection with services provided in such capacity.
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 provides 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. The Company terminated the
agreement on July 11, 2006. During 2006, 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 provided
and expenses incurred in connection with such acquisition. No other fees were
paid to Peter J. Solomon & Company in 2006.
In October 2002, the Company entered into an agreement with Jeffrey
Birnbaum, one of the Company's directors. Under this agreement, Mr. Birnbaum
provides 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 2006. Mr. Birnbaum has been a partner and
the Product Development Manager of Dolphin Footwear Company since August 1982.
Dolphin Footwear Company is one of the Company's largest domestic and foreign
suppliers. In 2006, the Company paid Dolphin Footwear Company and Ming Well,
Dolphin's Hong Kong affiliate, approximately $77.7 million for the purchase of
goods.
24
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
the Company. This agreement expired on December 31, 2005 but the parties have
continued the consulting arrangement under the terms of the expired agreement.
Under the agreement, JLM Consultants receives a commission equal to 4% on
International Sales (as defined in the Agreement) up to $6.0 million and 3% on
International Sales in excess of $6.0 million. The agreement provides for a
monthly draw in the amount of $20,000 with recourse against such commissions, as
well as a $1,000 per month travel allowance and $1,700 per month toward health
insurance premiums. Pursuant to this arrangement, JLM Consultants received a
total of $478,865 in 2006.
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"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(other than "for cause", or due to his death or his total
disability or due to Mr. Madden's resignation,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" (as defined in the agreement)
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,For the Company entered intofiscal year ending December 31, 2006, Mr.
Madden
25
earned (i) $600,000 in base salary, (ii) $200,000 in non-accountable expense
allowance, (iii) a consulting agreement with
Andrew Shames, pursuant to which Mr. Shames agreed to serve as Presidentbonus of $1,700,060 representing 2% of the Company's men's footwear business. The termearnings
before interest, tax, depreciation and amortization (iv) a bonus of Mr. Shames' consultancy commenced$2,526,868
earned based 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 shares2.5% of the Company's Common Stock on
March 31new business and (v) a bonus of each year with a grant price$92,462
based on the fair market value on such
date, during the term10% of the agreement (commencing March 31, 2004). The options
are to vest quarterlyRoyalty/Licensing income 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
-18-
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.$2,000,000. 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
-19-
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 20,000awarded 30,000 shares of restricted stock underwith a market value of
$1,081,800 on the 2006 Stock
Incentive Plan (subject to stockholder approvaldate of the plan) in lieu of such
stock options (1/5th ofaward which vests one sharefourth per year over a four
year period and 135,000 shares of restricted stock was granted under 2006
Stock Incentive Plan for each such stock option). On January 1, 2006,with a market value of
$3,800,250 on the Compensation Committee approved an amendment to Mr. Karson's employment
agreement which extended the termdate of the agreementaward which vests one-fifth per year over a five
year period.
REVIEW, APPROVAL OR RATIFICATION OF TRANSACTIONS WITH RELATED PERSONS
The Company's Conduct Code and "Employee Handbook" prohibit all
conflicts of interest. Under the Conduct Code, conflicts of interest occur when
private or family interests interfere in any way, or even appear to December 31, 2008 and
raised his annual base salary to $500,000interfere,
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 eachinterests of the Company. The Company's named executive officers based uponprohibition on conflicts of
interest under the Company's performance andConduct Code includes any related person transaction.
Related person transactions must be approved by the individual
performanceBoard, or by a
committee of such named executives.
The Internal Revenue Codethe Board consisting solely of 1986 prohibitsindependent directors, who will
approve the Company from taking a
tax deduction in any year for compensation paid the persons who would be named
executive officers intransaction only if they determine that year in excess of $1 million unless such compensationit 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,Company. In considering the transaction, the Board or committee will
conform such packagesconsider all relevant factors, including as applicable (i) the Company's
business rationale for entering into the transaction; (ii) the alternatives to
permitentering into a related person transaction; (iii) whether the Companytransaction is on
terms comparable to take a deductionthose available to third parties or, in the case of
employment relationships, to employees generally; (iv) the potential for the
full amounttransaction to lead to an actual or apparent conflict of all compensation.
Submitted byinterest and any
safeguards imposed to prevent such actual or apparent conflicts; and (v) the
Compensation Committeeoverall fairness of the Company's Boardtransaction to the Company.
The Company has multiple processes for reporting conflicts of
Directors:
Peter Migliorini (chairman)
Thomas H. Schwartz
Compensation Committee Interlocks and Insider Participation
During 2005,interests, including related person transactions. Under the following directors served on the Compensation
Committee: Peter Migliorini (chairman) and Thomas Schwartz. During the fiscal
year 2005, no interlocking relationship existed betweenConduct Code, all
employees are required to report any actual or apparent conflict of interest, or
potential conflict of interest, to management. The chief financial officer
quarterly distributes a questionnaire to the Company's executive officers and
management personnel and annually distributes a questionnaire to the members of
the Board of Directors or Compensationrequesting certain information regarding, among other
things, their immediate family members, employment and beneficial ownership
interests, which information is then reviewed for any conflicts of interest
under the Conduct Code.
The Audit Committee, Disclosure Committee and Board of Directors
discuss the boardrelated party transactions and they are reviewed as part of directors or compensation
committee of any other company.
-21-
STOCK PERFORMANCE GRAPH
The following graph compares the
yearly percentage changeForms 10-K and 10-Q review process, including related party transaction
disclosures.
If a director is involved in the cumulative total stockholder return ontransaction, he will be recused from
all discussions and decisions about the Common Stock during the period
beginning on December 31, 2000transaction. The transaction must be
approved in advance whenever practicable, 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 $170.05
-22-if not practicable, must be
ratified as promptly as practicable.
26
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth information as of the Record
Date with respect to the beneficial ownership of the outstanding shares of the Company's
Common Stock by (i) each person
known by the Company to beneficially own five percent or more of the outstanding
shares; (ii) the directors and the persons
named in the Summary Compensation Table;Named Executive Officers; and (iii) the
Company's executive officers and directors as a group. A person is deemed to be
a beneficial owner of any securities of which that person has the right to
acquire beneficial
ownership within sixty (60)60 days. See "Compensation of Directors and Executive Officers."
Name and Address of Amount and Nature of Percentage ($)
Beneficial OwnerSHARES BENEFICIAL OWNED
---------------------------------------------
NAME AND ADDRESS OF AMOUNT AND NATURE OF PERCENTAGE
BENEFICIAL OWNER (1) Beneficial Ownership(2) of Class(2)BENEFICIAL OWNERSHIP(2) OF CLASS(2)
- ----------------------------------------------------------- -------------------------- ------------------------------------------------------------------------------ ------------------------- -------------
Jamieson A. Karson........................................ 55,000 (3)Karson ......................................... 121,200(3) *
Arvind Dharia............................................. 161,828 (4) 1.16Dharia .............................................. 225,243(4) 1.09
Awadhesh Sinha............................................ 27,500 (5) *Sinha ............................................. -- --
Robert Schmertz........................................... 80,000 (6)Schmertz ............................................ 180,000(5) *
Amelia Newton Varela...................................... 43,000 (7)Varela ....................................... 30,000 *
Jeffrey Birnbaum.......................................... 50,000 (8)Birnbaum ........................................... 45,750(6) *
Marc S. Cooper............................................ 5,000 (9)Cooper ............................................. 750 *
Harold Kahn............................................... 8,500 (10)D. Kahn ............................................. 9,000(7) *
John Madden............................................... 30,000 (11)Madden ................................................ 40,750(8) *
Peter Migliorini.......................................... 30,000 (12)Migliorini ........................................... 16,500(9) *
Richard P. Randall........................................ --Randall ......................................... 1,500 *
Thomas Schwartz........................................... 20,000 (13)H. Schwartz ......................................... 52,400(10) *
Walter Yetnikoff.......................................... 10,000 (14)Yetnikoff ........................................... 16,500(11) *
Steven Madden ............................................ 1,704,000 (15) 11.86.............................................. 2,271,500(12) 10.72
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 5.59Corp. ................................................ 1,214,000(13) 5.94
Directors and Executive Officers as a Group (13 persons).. 520,828 (20) 3.64 ... 739,593(14) 3.54
- ----------------------------
* 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
13,873,66720,453,888 shares of Common Stock outstanding (excluding treasury shares)
as of the Record Date.
(3) Includes (i) 45,00056,200 shares of Common Stock issuable upon the exercise of
options held by Mr. Karson and (ii) 10,00015,000 shares of Common Stock held by
Mr. Karson's wife.
(4) Includes 128,828193,243 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 80,00050,000 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)27
(6) Includes 30,000 shares of Common Stock issuable upon the exercise of
options held by Mr. Birnbaum.
(7) Includes 7,500 shares of Common Stock issuable upon the exercise of
options held by Mr. Kahn.
(8) Includes 40,000 shares of Common Stock issuable upon the exercise of
options held by Mr. J. Madden.
(12)(9) Includes 15,000 shares of Common Stock issuable upon the exercise of
options held by Mr. Migliorini.
(10) Includes 30,000 shares of Common Stock issuable upon the exercise of
options held by Mr. Migliorini.
(13)Schwartz.
(11) Includes 20,000 shares of Common Stock issuable upon the exercise of
options held by Mr. Schwartz.
(14) Includes 10,00015,000 shares of Common Stock issuable upon exercise of options
held by Mr. Yetnikoff.
(15)(12) Includes (i) 809,0001,214,000 shares of Common Stock held by BOCAP, a
corporation wholly-owned by Mr. S.Steven Madden, (ii) 405,000322,500 shares of Common
Stock held by Mr.
S.Steven Madden and (iii) 490,000735,000 shares of Common Stock
issuable upon the exercise of options held by Mr. S.Steven Madden.
(16)(13) 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)(14) Includes 424,328436,943 shares issuable upon the exercise of options.
-24-28
PROPOSAL TWO
PROPOSAL FOR THE APPROVAL OF AMENDMENT NUMBER ONE TO THE
STEVEN MADDEN, LTD. 2006 STOCK INCENTIVE PLAN
Our board of directors (the "Board") has approvedThe Company maintains the Steven Madden, Ltd. 2006 Stock Incentive
Plan, for the benefit of eligible employees, consultants and non-employee
directors of the Company. The proposed amendment number one to the 2006 Plan,
which was unanimously adopted by the Board of Directors of the Company by
written consent on April 25, 2007 subject to stockholder approval at the 2007
Annual Meeting, would increase the aggregate number of shares of the Common
Stock issuable under the 2006 Plan by 350,000 shares to a total of 1,550,000
shares, or approximately 7.6% of the currently outstanding shares of Common
Stock and to increase the number of aggregate shares that may be used for awards
that are not "appreciation awards" (including restricted stock, performance
shares or certain other stock-based awards) under this 1,550,000 share limit by
350,000 shares to 980,000 shares. The aggregate number of shares available under
the 2006 Plan reflects the 3-for-2 stock split that became effective May 25,
2006 (the "Plan""Stock Split"). The Board believes that it is desirable to increase
the total number of shares available under the 2006 Plan in order to attract,
motivate and retain employees and non-employee directors of, and consultants to,
the Company because the current share reserve under the 2006 Plan is expected to
be fully utilized in the near term.
Currently, the maximum number of shares of Common Stock that may be
issued under the 2006 Plan is 1,200,000 (adjusted to reflect the Stock Split)
shares of Common Stock of which a maximum of 630,000 (adjusted to reflect the
Stock Split) of such shares 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). Generally, each award
of restricted stock vests 25% per year beginning on the first anniversary of the
date of grant subject to the participant's continued service with the Company,
provided that such awards are subject to accelerated vesting in the event of
certain terminations of employment or upon a change in control of the Company
(each as provided in the applicable award agreement). Except in these limited
circumstances, awards will not vest during the first year following the date of
grant.
As of April 25, 2007, no stock options had been granted under the 2006
Plan. Pursuant to the Company's 1997 Stock Plan and the Company's 1999 Stock
Plan, as amended (together with the 1997 Stock Plan, the "Prior Plans"),
however, the Company previously granted stock options to certain of its then
directors and employees.
The following table sets forth certain information regarding the
options and shares available for grant and outstanding under the Prior Plans and
2006 Plan, respectively.
As of April 25, 2007
--------------------
Prior Plans:
Options available for grant ......... 0
Options outstanding ................. 1,395,985
Weighted average exercise price ..... $8.75
Weighted average term ............... 4.06 years
2006 Plan:
Shares available for grant .......... 597,200
Shares outstanding .................. 602,800
Unvested ......................... 562,973
Vested ........................... 39,827
In addition, the proposed amendment number one to the 2006 Plan deletes
the net share counting provision of the 2006 Plan with respect to stock-settled
stock appreciation rights, which currently provides that only the number of
shares of Common Stock that are delivered to a participant count against the
share limitations set forth under the 2006 Plan. As a result of the amendment to
the 2006 Plan, the total number of shares subject to an award of stock
appreciation rights will count against share limitations (both aggregate and
individual) set forth under the 2006 Plan. This provision of the proposed
amendment number one does not require stockholder approval.
29
The Board has also adopted certain other minor clarifying amendments to
the 2006 Plan, which do not require stockholder approval, to reflect
developments in applicable law and equity compensation practices.
In the event that the requisite stockholder approval of amendment
number one to the 2006 Plan is not obtained, the amendment to the 2006 Plan will
not take effect to the extent stockholder approval is required, but the Company
may continue to grant awards under the 2006 Plan in accordance with its terms
and the current share reserve under the 2006 Plan.
The following description of the 2006 Plan, which takes into account
the effect of the amendment, is a summary of its principal provisions and is
qualified in its entirety by reference to the 2006 Plan, a copy of which is
available as Exhibit 10.1 to the Company's Current Report on Form 8-K filed with
the Securities and Exchange Commission on July 3, 2006. A copy of the proposed
amendment number one to the 2006 Plan is appended hereto as Exhibit A.
DESCRIPTION OF THE 2006 STOCK INCENTIVE PLAN
The Board previously approved the 2006 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
amendment to the 2006 Plan to increase the aggregate number of shares under the
2006 Plan is subject to the approval of the Company's stockholders, including the material
terms of the performance goals under the Plan.stockholders.
The affirmative vote of the holders of at least a majority of the
outstanding shares of our common stockthe Common Stock present or represented by proxy and
entitled to vote at the annual meeting is required to approve the amendment to
the 2006 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 referenceamendment to the Plan, a copy of which is attached as Exhibit A.
Administration2006 Plan.
Administration. The 2006 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 2006 Plan to
non-employee directors, the 2006 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 2006 Plan.
The Committee has full authority to administer and interpret the 2006
Plan, to grant discretionary awards under the 2006 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 stockCommon Stock to be covered by each award and to make all
other determinations in connection with the 2006 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 2006 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 stockCommon 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 2006 Plan.
Awards under the 2006 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 2006 Plan's initial approval by the
Company's stockholders unless the performance goals are
re-approved by the stockholders.(i.e., May 26, 2011).
30
Eligibility and Types of AwardsAwards. All of ourthe Company's 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, ourthe
Company's employees and employees of ourthe Company's 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 2006 Plan.
Available SharesShares. The aggregate number of shares of common stockCommon Stock which
may be issued or used for reference purposes under the 2006 Plan, as amended, or
with respect to which awards may be granted may not exceed 800,0001,550,000 shares,
which may be either authorized and unissued common stockCommon Stock or common stockCommon Stock held in
or acquired for the treasury of the Company; provided, however, that 420,000980,000
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 2006 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 2006 Plan.
The maximum number of shares of common stockCommon 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 2006 Plan during any
fiscal year to any eligible employee or consultant will be 400,000600,000 shares (per
type of award). The total number of shares of common stockCommon Stock with respect to all
awards that may be granted under the 2006 Plan during any fiscal year to any
eligible employee or consultant will be 500,000750,000 shares. There are no annual
limits on the number of shares of common stockCommon 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 stockCommon Stock with respect to any award of performance shares to an eligible
employee or consultant during any fiscal year is 200,000300,000 shares. The maximum
number of shares of common stockCommon 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 2006 Plan during any
fiscal year to any non-employee director will be 100,000150,000 shares (per type of
award). The total number of shares of common stockCommon Stock with respect to all awards
that may be granted under the 2006 Plan during any fiscal year to any
non-employee director will be 200,000300,000 shares. The individual share limits
specified above have been adjusted to reflect the Stock Split. 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.
TheAs amended, the 2006 Plan requires that the Committee may appropriately
adjust the above individual maximum share limitations, the aggregate number of
shares of common stockCommon Stock available for the grant of awards and the exercise price
of an award to reflect any change in ourthe Company's 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 2006 Plan) to a three-three year annual average burn
rate limit of 3.26%3.09%, which is within industry norms and is intended to be
calculated using Institutional Shareholder Services methodology.
31
Awards Under the Plan2006 Plan. The following types of awards are available under
the 2006 Plan:
-26-
Stock OptionsOptions. The Committee may grant nonqualified stock options and
incentive stock options (only to eligible employees) to purchase shares of
common stock.Common Stock. The Committee will determine the number of shares of common stockCommon 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 stockCommon
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 RightsRights. 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 stockCommon Stock or cash (as determined by the Committee) equal in value
to the excess of the fair market value of one share of common stockCommon Stock on the date
of exercise over the exercise price per share established in connection with the
grant of the SAR. The term of each SAR may not exceed seven years. 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 stockCommon 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 2006 Plan) or such other event as the Committee may,
in its sole discretion, designate at the time of grant or thereafter.
Restricted StockStock. 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 2006 Plan included in Exhibit A hereto and discussed in general below.
32
Performance SharesShares. The Committee may award performance shares. A
performance share is the equivalent of one share of common stock.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 2006 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 stockCommon Stock or any combination
thereof.
Other Stock-Based AwardsAwards. 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
2006 Plan that are payable in cash or denominated or payable in or valued by
shares of common stockCommon 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 2006 Plan included in
Exhibit A hereto and discussed in general below.
Performance-Based Cash AwardsAwards. 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 thisthe
2006 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
2006 Plan included in Exhibit A hereto and discussed in general below.
-28-
Performance GoalsGoals. 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;
33
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;Common Stock;
o market share and/or market segment share;
o the growth in the value of an investment in the common stockCommon 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 ControlControl. 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 2006 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 stockCommon 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 stockCommon 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 TerminationTermination. Notwithstanding any other provision of the
2006 Plan, the Board may at any time amend any or all of the provisions of the
2006 Plan, or suspend or terminate it entirely, retroactively or otherwise;
provided, however, that, unless otherwise required by law or specifically
provided in the 2006 Plan, the rights of a participant with respect to awards
granted prior to such
34
amendment, suspension or termination may not be adversely affected without the
consent of such participant and, provided further that the approval of ourthe
Company's stockholders will be obtained to the extend required by Delaware law,
Sections 162(m) and 422 of the Internal Revenue Code, The Nasdaq StockGlobal Market or the rules of
such other applicable stock exchange, as specified in the 2006 Plan.
MiscellaneousMiscellaneous. Awards granted under the 2006 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 ConsequencesConsequences. The rules concerning the
federal income tax consequences with respect to options granted and to be
granted pursuant to the 2006 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 OptionsOptions. 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 stockCommon 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 -30-
exercise and such recipient does not sell
the common stockCommon 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 stockCommon
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 stockCommon 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 stockCommon 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 SectionSections 162(m) and 280G of the Internal Revenue Code (as
described below), wethe Company 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 OptionsOptions. 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 stockCommon Stock on the date of exercise over the exercise
price. Upon a subsequent sale of the common stockCommon 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.Common Stock. Subject to the limitations under
SectionSections 162(m) and 280G of the Internal Revenue Code (as described below), wethe Company will
generally be allowed a deduction equal to the amount recognized by the recipient
as ordinary income.
35
All OptionsOptions. With regard to both incentive stock options and
nonqualified stock options, the following also apply: (i) any of ourthe Company's
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 2006 Plan is intended to satisfy these requirements with respect to options.
-31-
The 2006 Plan is not subject to any of the requirements of the Employee
Retirement Income Security Act of 1974, as amended. The 2006 Plan is not, nor is
it intended to be, qualified under Section 401(a) of the Internal Revenue Code.
Future Plan AwardsAwards. Except as stated below under the section entitled
"New Plan Benefits with Respect to 2007," no new equity-based awards have been
approved at this time to any employee, officer, non-employee director or
consultant. We anticipateThe Company anticipates 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 2006 Plan. However, the amount
of shares of common stockCommon 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 ourthe Company's employees, officers, non-employee directors and
consultants, and their potential contributions to ourthe Company's success.
Accordingly, actual awards cannot be determined at this time.
New Plan Benefits with respect to 200636
NEW PLAN BENEFITS WITH RESPECT TO 2007.
The table below presents certain information with respect to new shares
of restricted stock granted under the 2006 Plan (subject to approval by stockholders
of the Plan) with respect to the 20062007
calendar year to certain of our executive
officers (for whom executive compensation information is provided under the section entitled "Compensation of Directors andCompany's Named Executive Officers")Officers as follows:
Number of
Shares
Subject to
Name and Position Dollar Value RestrictionNUMBER OF SHARES
SUBJECT TO
NAME AND POSITION DOLLAR VALUE RESTRICTION
- ----------------- ------------ --------------------------------------------------------- --------------- ----------------
Jamieson A. Karson $ 723,800(1) 20,000
Arvind Dharia $ 645,400(2) 20,000
Awadhesh Sinha $ 1,460,700(3) 30,000
Robert Schmertz - Brand Director.................................. $ 704,400(1) 20,000
Amelia Newton Varela - Executive Vice President of Wholesale
Sales............................................................. $ 704,400(1) 20,0003,184,000(4) 100,000
All Executive Officers as a Group................................. $1,408,800 40,000Group $ 6,013,900 170,000
Non-Employee Directors as a Group.................................Group $ 193,710 5,5000 0
Non-Executive Officer Employees as a Group........................ $2,652,066 75,300Group $ 1,574,510(5) 45,000
Total for all Participants under the Plan......................... $4,254,576 120,8002006 Plan $ 7,588,410 215,000
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, 2006,27,
2007, the date of Board approvalgrant.
(2) Calculated based upon the closing price of the grant, subject to stockholder
approvalCompany's stock on March 6,
2007, the date of grant.
(3) Calculated based upon the closing price of the Plan.
-32-
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
Company's stock on April 25,
2007, the date of the grant.
(4) Calculated based upon the closing price of the Company's stock on March 9,
2007, the date of grant.
(5) Calculated based upon the closing price of the Company's stock on March 9,
2007 for 38,000 shares and the closing price of the Company's stock on
April 24, 2007 for 7,000 shares.
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 AMENDMENT TO THE 2006 PLAN. THE BOARD OF
DIRECTORS RECOMMENDS THAT THE STOCKHOLDERS VOTE "FOR" THE APPROVAL OF AMENDMENT
NUMBER ONE TO THE 2006 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.
-33-37
PROPOSAL THREE
RATIFICATION OF THE APPOINTMENT OF EISNER LLP AS THE COMPANY'S
INDEPENDENT AUDITORSREGISTERED PUBLIC ACCOUNTANTS FOR THE FISCAL YEAR ENDING
DECEMBER 31, 20062007
The Audit Committee has appointed Eisner LLP as the Company's
independent auditorsregistered public accounting firm to conduct the audit of the
Company's books and records for the fiscal year ending December 31, 2006.2007. Eisner
LLP also served as the Company's independent auditorsregistered public accountants for
the previous fiscal year.
Although ratification by stockholders is not required by ourthe Company's
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 auditorsregistered public accountants 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 VoteREQUIRED VOTE
The affirmative vote of the holders of a majority of the shares of
Common Stock present or represented by proxy and votingentitled to vote at the Annual
Meeting is required to ratify the Audit Committee's selection of Eisner LLP.
Recommendation of the Board of DirectorsRECOMMENDATION 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
auditorsregistered public accountants for the fiscal year ending December 31, 2006.2007.
Unless marked to the contrary, proxies received from stockholders will be voted
in favor of ratifying the appointment of Eisner LLP as the Company's independent
auditorsregistered public accountants for the fiscal year ending December 31, 2006.
Fees Paid To Independent Auditors
Audit Fees2007.
FEES PAID TO INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM 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, 2005,2006
Fiscal Year, for the reviews of the financial statements included in the
Company's Quarterly Reports on Form 10-Q for that fiscal year,the 2006 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 year2006 Fiscal Year were $460,000.$436,000. The comparative
amount for the fiscal year ended December 31, 20042005 (the "2005 Fiscal Year") was
$625,000.
Audit-Related Fees$460,000.
AUDIT-RELATED FEES
In addition to Audit Fees, Eisner LLP has billed the Company $93,000,$26,000,
in the aggregate, for Audit Related Fees related to assurance and related
services for the fiscal year ended December 31, 2005.2006 Fiscal Year. 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, 20042005 Fiscal Year was $39,000.
Tax Fees$93,000.
38
TAX FEES
During the fiscal year ended December 31, 2005,2006 Fiscal Year, Eisner LLP billed the Company $122,000,$138,000, in
the aggregate, for services rendered to the Company for tax compliance, tax
advice and tax planning. Eisner LLP billed $116,000$122,000 for similar services in the
2004 fiscal year.
All Other Fees2005 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 31,2006 Fiscal Year or the 2005 and 2004.
Audit Committee's Pre-Approval Policies and ProceduresFiscal Year.
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.registered public accountants. 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.registered public accountants. 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-independence
of Eisner LLP.
THE AFFIRMATIVE VOTE OF THE HOLDERS OF A MAJORITY OF THE SHARES OF
COMMON STOCK PRESENT OR REPRESENTED BY PROXY AND ENTITLED TO VOTE AT THE ANNUAL
MEETING IS REQUIRED TO RATIFY THE APPOINTMENT OF EISNER LLP AS THE COMPANY'S
INDEPENDENT REGISTERED PUBLIC ACCOUNTANTS. THE BOARD OF DIRECTORS RECOMMENDS
THAT THE STOCKHOLDERS VOTE "FOR" THE RATIFICATION OF THE APPOINTMENT OF EISNER
LLP AS THE COMPANY'S INDEPENDENT REGISTERED PUBLIC ACCOUNTANTS FOR THE FISCAL
YEAR ENDING DECEMBER 31, 2007.
39
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 20072008 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 20072008 Annual Meeting must do so
no later than December 30, 2006.2007.
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 20072008 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 20062007 Annual Meeting. Accordingly,
any written notice given by or on behalf of a stockholder pursuant to the
foregoing clause (iii) in connection with the 20072008 Annual Meeting must be
received no later than January 26, 20072008 and no earlier than December 28, 2006.
-36-
27, 2007.
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, 200630, 2007
By: /s/ JAMIESON A. KARSON
------------------------------------------------------
Jamieson A. Karson
Chief Executive Officer
-37-40
EXHIBIT A
AMENDMENT NUMBER ONE
TO THE
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 followingDated: April 30, 2007
Capitalized terms used herein but not defined shall have the following
meanings:
2.1 "Acquisition Event" means a merger or consolidation in whichmeanings
attributed to such terms under 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(the "Plan").
WHEREAS, Steven Madden, Ltd. (the "Company") currently maintains the
Plan for the purpose of awarding cash and stock-based incentives 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)Directors;
WHEREAS, pursuant 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 election14.1 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 (ormay amend the Plan at any of its members) arising out of or in connection with this
Plan shall be within the absolute discretion of alltime, subject to stockholder approval under
certain circumstances; 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. IfWHEREAS, the Committee is appointed,now wishes to amend the Board shall
designate one of the members of the Committee as chairman and the Committee
shall hold meetings,Plan, 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 foregoingCompany's stockholders at the earliest timeCompany's 2007 Annual Meeting of
Stockholders, to increase the aggregate share reserve under the Plan and to make
certain other administrative modifications (which are not subject to stockholder
approval).
NOW, THEREFORE, the fullest extent permitted,
arising outPlan is hereby amended effective as of any act or omissionApril 30,
2007, subject to actthe approval of the Company's stockholders at the Company's
2007 Annual Meeting of Stockholders, except with respect to the FIRST, THIRD,
FOURTH and FIFTH Paragraphs hereof (which are not subject to stockholder
approval). Except as specifically modified herein, the Plan shall continue in
connectionfull force and effect in accordance with all of the terms and conditions
thereof.
1. The definition of "Appreciation Award" in Section 2.3 of the Plan
is hereby amended to delete the words "cash-settled," which
immediately precede "Stock Appreciation Right."
2. The first sentence of Section 4.1(a) of the Plan is hereby
deleted in its entirety and replaced 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. Thefollowing sentence
as follows:
"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 800,0001,550,000
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 420,000980,000 shares of the
800,0001,550,000 shares of Common Stock available hereunder may be
issued or used for Awards that are 9
not Appreciation Awards. With"
3. The second sentence of Section 4.1(a) of the Plan, as follows, is
hereby deleted in its entirety.
"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"
4. 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 term4.2(b) of the Plan until used.
4.2 Changes.
(a) The existence of this Plan and the Awards granted
hereunder shall not affectis hereby amended in any way the right or
power of the Board or the stockholders of the Companyits entirety to
make or authorize (i) any adjustment,
recapitalization, reorganization or other changeread 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) Subjectfull as follows:
"Subject to the provisions of Section 4.2(d), in the
event ofif there shall
occur 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),subdivision, combination or reclassification of shares that may
be issued under the Plan, any recapitalization, any merger, any
consolidation, spin-off,any spin off, any reorganization or any 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,(a "Section 4.2
Event"), then (i) the aggregate number andand/or kind of shares that
thereafter may be issued under thisthe Plan, (ii) the number andand/or
kind of shares or other property (including cash) to be issued
upon exercise of an outstanding Award or under other Awards
granted under thisthe Plan, and(iii) the purchase price thereof, and/or
(iv) the individual Participant limitations set forth in Section
4.1(b) (other than those based on cash limitations) shall be
appropriately adjustedadjusted. In addition, subject to Section 4.2(d),
if there shall occur any change in the capital structure or the
business of the Company that is not a Section 4.2 Event (an
"Other Extraordinary Event"), including by reason of any
extraordinary dividend (whether cash or stock), any conversion,
any adjustment, any issuance of any class of securities
convertible or exercisable into, or exercisable for, any class of
stock, or any sale or transfer of all or substantially all the
Company's assets or business, then the Committee, in its sole
discretion, may adjust any Award and make such other adjustments
to the Plan. Any adjustment pursuant to this Section 4.2 shall be
consistent with such changethe applicable Section 4.2 Event or the
applicable Other Extraordinary Event, as the case may be, and in
such manner as the Committee may, in its sole discretion, deem
appropriate and equitable to prevent substantial dilution or
enlargement of the rights granted to, or available for,
Participants under this
Plan, and anythe Plan. 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 permitted 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 expressly 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 Acquisition4.2 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 asExtraordinary
Event."
2
5. Section 7.4(b) of the date ofPlan is hereby amended to reduce the
Acquisition Event, by
delivering notice of terminationmaximum term thereunder from ten (10) years to each Participant
at least 20 days prior toseven (7) years .
3
IN WITNESS WHEREOF, 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 toCompany has caused 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 eligibleamendment 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 effectexecuted 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 givingfirst 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
above.
STEVEN MADDEN, LTD.
By: /s/ JAMIESON A. KARSON
------------------------------
Jamieson A. Karson
Chief Executive Officer
4
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, 2006,25, 2007, 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,
2006,5,
2007, in accordance with the directions indicated herein.
THE BOARD(Continued and to be signed on the reverse side.)
ANNUAL MEETING 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 DIRECTORSSTOCKHOLDERS OF
STEVEN MADDEN, LTD.
Dated:
----------------
---------------------------------
Signature
---------------------------------
Signature if jointly owned:
---------------------------------
Print name:MAY 25, 2007
Please date, sign exactly as the name appears onand mail
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, signproxy card in the
full corporate name by an authorized
officer. If the shares of capital stock are owned by a partnership, signenvelope provided as soon
as possible.
Please detach along perforated line and mail in the name of the partnership by an authorized officer.
PLEASE MARK, DATE, SIGN AND RETURN THIS PROXY PROMPTLY
IN THE ENCLOSED ENVELOPEenvelope provided.
- ------------------------------------------------------------------------------------------------------------------------------------
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" ITEMS NO. 1, 2 AND 3.
PLEASE SIGN, DATE AND RETURN PROMPTLY IN THE ENCLOSED ENVELOPE. PLEASE MARK YOUR VOTE IN BLUE OR BLACK INK AS SHOWN HERE [X]
- ------------------------------------------------------------------------------------------------------------------------------------
FOR AGAINST ABSTAIN
1. ELECTION OF DIRECTORS 2. APPROVAL OF AN AMENDMENT TO THE 2006 STOCK [ ] [ ] [ ]
INCENTIVE PLAN TO INCREASE THE MAXIMUM NUMBER
NOMINEES: OF SHARES OF COMMON STOCK AVAILABLE FOR
[ ] FOR ALL NOMINEES ( ) Jamieson A. Karson ISSUANCE UNDER SUCH PLAN FROM 1,200,000 SHARES
( ) Jeffrey Birnbaum TO 1,550,000 SHARES.
( ) Marc S. Cooper
[ ] WITHHOLD AUTHORITY ( ) Harold D. Kahn
FOR ALL NOMINEES ( ) John L. Madden
( ) Peter Migliorini 3. RATIFICATION OF THE APPOINTMENT OF EISNER LLP [ ] [ ] [ ]
( ) Richard P. Randall AS THE COMPANY'S INDEPENDENT AUDITORS FOR THE
[ ] FOR ALL EXCEPT ( ) Thomas H. Schwartz FISCAL YEAR ENDING DECEMBER 31, 2007
(See instructions below) ( ) Richard P. Randall
( ) Walter Yetnikoff 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.
THIS PROXY WILL BE VOTED AS SPECIFIED ABOVE; UNLESS OTHERWISE
INDICATED, THIS PROXY WILL BE VOTED (1) FOR THE ELECTION OF THE NINE
INSTRUCTION: To withhold authority to vote for any (9) NOMINEES NAMED IN ITEM 1, (2) FOR THE APPROVAL OF AN AMENDMENT TO
individual nominee(s), mark "FOR ALL EXCEPT" THE 2006 STOCK INCENTIVE PLAN TO INCREASE THE MAXIMUM NUMBER OF SHARES
and fill in the circle next to each nominee OF COMMON STOCK AVAILABLE FOR ISSUANCE UNDER SUCH PLAN FROM 1,200,000
you wish to withhold, as shown here: (.) SHARES TO 1,550,000 SHARES, (3) FOR THE RATIFICATION OF THE
- ------------------------------------------------------------- APPOINTMENT OF EISNER LLP AS THE COMPANY'S INDEPENDENT AUDITORS FOR
FISCAL YEAR 2007 IN ITEM 3, AND (4) IN THE DISCRETION OF THE PROXIES
ON ANY OTHER MATTER THAT MAY PROPERLY COME BEFORE THE MEETING.
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.
To change the address on your account, please check the
box at right and indicate your new address in the
address space above. Please note that changes to the
registered name(s) on the account may not be submitted
via this method. [ ]
- -------------------------------------------------------------
Signature of Stockholder _______________________ Date: __________ Signature of Stockholder _______________________ Date: __________
Note: Please sign exactly as your name or names appear on this Proxy. When shares are held jointly, each holder should sign.
When signing as executor, administrator, attorney, trustee or guardian, please give full title as such. If the signer
is a corporation, please sign full corporate name by duly authorized officer, giving full title as such. If signer is
a partnership, please sign in partnership name by authorized person.